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41-819 PDF 2008

CHARTING A CLEAN ENERGY 

FUTURE FOR THE INSULAR AREAS 

JOINT OVERSIGHT FIELD HEARING 

BEFORE THE

SUBCOMMITTEE ON INSULAR AFFAIRS 

JOINT WITH THE

SUBCOMMITTEE ON ENERGY AND 

MINERAL RESOURCES 

OF THE

COMMITTEE ON NATURAL RESOURCES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

Saturday, April 12, 2008, in Frederiksted, St. Croix, U.S. Virgin Islands 

Serial No. 110-66 

Printed for the use of the Committee on Natural Resources 

( 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 

or 

Committee address: http://resourcescommittee.house.gov 

(II) 

COMMITTEE ON NATURAL RESOURCES 

NICK J. RAHALL, II, West Virginia, Chairman 

DON YOUNG, Alaska, Ranking Republican Member 

Dale E. Kildee, Michigan 

Eni F.H. Faleomavaega, American Samoa 

Neil Abercrombie, Hawaii 

Solomon P. Ortiz, Texas 

Frank Pallone, Jr., New Jersey 

Donna M. Christensen, Virgin Islands 

Grace F. Napolitano, California 

Rush D. Holt, New Jersey 

Rau ́l M. Grijalva, Arizona 

Madeleine Z. Bordallo, Guam 

Jim Costa, California 

Dan Boren, Oklahoma 

John P. Sarbanes, Maryland 

George Miller, California 

Edward J. Markey, Massachusetts 

Peter A. DeFazio, Oregon 

Maurice D. Hinchey, New York 

Patrick J. Kennedy, Rhode Island 

Ron Kind, Wisconsin 

Lois Capps, California 

Jay Inslee, Washington 

Mark Udall, Colorado 

Joe Baca, California 

Hilda L. Solis, California 

Stephanie Herseth Sandlin, South Dakota 

Heath Shuler, North Carolina 

Jim Saxton, New Jersey 

Elton Gallegly, California 

John J. Duncan, Jr., Tennessee 

Wayne T. Gilchrest, Maryland 

Chris Cannon, Utah 

Thomas G. Tancredo, Colorado 

Jeff Flake, Arizona 

Stevan Pearce, New Mexico 

Henry E. Brown, Jr., South Carolina 

Luis G. Fortun ̃ o, Puerto Rico 

Cathy McMorris Rodgers, Washington 

Louie Gohmert, Texas 

Tom Cole, Oklahoma 

Rob Bishop, Utah 

Bill Shuster, Pennsylvania 

Bill Sali, Idaho 

Doug Lamborn, Colorado 

Mary Fallin, Oklahoma 

Adrian Smith, Nebraska 

Robert J. Wittman, Virginia 

James H. Zoia, Chief of Staff 

Rick Healy, Chief Counsel 

Christopher N. Fluhr, Republican Staff Director 

Lisa Pittman, Republican Chief Counsel 

(III) 

SUBCOMMITTEE ON INSULAR AFFAIRS 

DONNA M. CHRISTENSEN, Virgin Islands, Chairwoman 

LUIS G. FORTUN ̃ O, Puerto Rico, Ranking Republican Member 

Eni F.H. Faleomavaega, American Samoa 

Rau ́l M. Grijalva, Arizona 

Madeleine Z. Bordallo, Guam 

Nick J. Rahall, II, West Virginia, ex officio 

Elton Gallegly, California 

Jeff Flake, Arizona 

Don Young, Alaska, ex officio 

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES 

JIM COSTA, California, Chairman 

STEVAN PEARCE, New Mexico, Ranking Republican Member 

Eni F.H. Faleomavaega, American Samoa 

Solomon P. Ortiz, Texas 

Rush D. Holt, New Jersey 

Dan Boren, Oklahoma 

Maurice D. Hinchey, New York 

Patrick J. Kennedy, Rhode Island 

Hilda L. Solis, California 

Nick J. Rahall, II, West Virginia, ex officio 

Louie Gohmert, Texas 

Bill Shuster, Pennsylvania 

Bill Sali, Idaho 

Adrian Smith, Nebraska 

Steve Scalise, Louisiana 

Don Young, Alaska, ex officio 

(V) 

CONTENTS 

Page 

Hearing held on Saturday, April 12, 2008 ............................................................. 1 

Statement of Members: 

Christensen, Hon. Donna M., a Delegate in Congress from the Virgin 

Islands ............................................................................................................ 1 

Prepared statement of ............................................................................... 3 

Costa, Hon. Jim, a Representative in Congress from the State of 

California ....................................................................................................... 4 

Prepared statement of ............................................................................... 5 

Shuster, Hon. Bill, a Representative in Congress from the State of 

Pennsylvania ................................................................................................. 6 

Statement of Witnesses: 

Blaylock, Frazier, Director of Federal Government Affairs, Covanta Holding Corporation ............................................................................................. 51 

Prepared statement of ............................................................................... 53 

Bond, D. Drew, Acting Director of Commercialization and Deployment, 

Office of Energy Efficiency and Renewable Energy, U.S. Department 

of Energy ....................................................................................................... 69 

Prepared statement of ............................................................................... 71 

Cole, Donald G., Vice Chair, Virgin Islands Public Services Commission .. 23 

Prepared statement of ............................................................................... 24 

Hodge, Hugo, Jr., Executive Director, Virgin Islands Water and Power 

Authority ....................................................................................................... 16 

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

Miller, Darryl E., President, St. Croix Alliance to Protect Utility 

Ratepayers ..................................................................................................... 26 

Prepared statement of ............................................................................... 28 

Nicholson, Robert J., III, President, Sea Solar Power International, LLC .. 40 

Prepared statement of ............................................................................... 42 

Powell, James R., Senior Policy Advisor, Southern States Energy Board ... 54 

Prepared statement of ............................................................................... 57 

Pula, Nikolao, Acting Deputy Assistant Secretary for Insular Affairs, 

U.S. Department of the Interior .................................................................. 65 

Prepared statement of ............................................................................... 67 

Resor, James P., Chief Financial Officer, groSolar ........................................ 43 

Prepared statement of ............................................................................... 45 

Richards, Hon. Usie R., Senate President, 27th Legislature of the Virgin 

Islands ............................................................................................................ 7 

Prepared statement of ............................................................................... 9 

Smith,, Bevan R., Jr., Director, Virgin Islands Energy Office ...................... 11 

Prepared statement of ............................................................................... 13 

Additional materials supplied: 

List of documents submitted for the record ................................................... 79 

(1) 

JOINT OVERSIGHT FIELD HEARING ON 

‘‘CHARTING A CLEAN ENERGY FUTURE FOR 

THE INSULAR AREAS.’’ 

Saturday, April 12, 2008 

U.S. House of Representatives 

Subcommittee on Insular Affairs, joint with the 

Subcommittee on Energy and Mineral Resources 

Committee on Natural Resources 

Frederiksted, St. Croix, U.S. Virgin Islands 

The Subcommittees met, pursuant to call, at 10:05 a.m., at Frits 

E. Lawaetz Conference Room, Legislature of the Virgin Islands, 

Frederiksted, St. Croix, U.S. Virgin Islands. Hon. Donna 

Christensen [Chairwoman of the Subcommittee on Insular Affairs] 

Presiding. 

Present: Representatives Christensen, Costa and Shuster. 

STATEMENT OF THE HON. DONNA M. CHRISTENSEN, A 

DELEGATE IN CONGRESS FROM THE VIRGIN ISLANDS 

Mrs. CHRISTENSEN. Good morning. The oversight hearing by the 

Subcommittee on Insular Affairs and the Subcommittee on Energy 

and Mineral Resources will come to order. The Subcommittees are 

meeting today to hear testimony on Charting a Clean Energy 

Future for the Insular Areas. 

Let me welcome everyone here this morning to this hearing. As 

we have done in Guam, the Commonwealth of the Northern 

Mariana Islands, and American Samoa, the Subcommittees today 

are making history by having the first congressional hearing in 

Frederiksted, St. Croix. 

Thank you, Senate President Richards and the 27th Legislature 

for making the St. Croix chambers available to us. 

I want to also begin by welcoming my colleagues who join me on 

the dais: The Chairman of the Subcommittee on Energy and Minerals, Congressman Jim Costa from California, and Representative 

Bill Shuster from Pennsylvania. I am grateful that they have taken 

time away from their own districts to be here for this important 

hearing. 

And I want to acknowledge Chairman Costa’s leadership of his 

Subcommittee in working to maintain a healthy balance between 

energy needs and conserving our nation’s natural resources. I 

believe we can all agree that the leadership that he and the 

2 

Subcommittee provides is more important than ever in today’s 

world of rising oil prices. 

I am also very pleased to welcome my colleague, Representative 

Bill Shuster. This is Mr. Shuster’s fourth term in Congress representing Pennsylvania’s 9th District. In addition to his membership on the Energy and Minerals Subcommittee, Mr. Shuster 

serves on the Transportation and Infrastructure Committee where 

he is the Ranking Member of the Subcommittee on Railroads, Pipelines and Hazardous Materials. 

The people of the Virgin Islands welcome both of you and thank 

you for your interest in addressing these issues faced by your fellow Americans living in the U.S. territories. And as we go through 

this hearing, you will recognize that the residents of the territories, 

in our case the Virgin Islands, will voice concerns which are very 

similar to those of your own constituents in California and Pennsylvania. And while the entire country is feeling the pinch of increased utility costs, you will also find that nowhere is it as severe 

as here in the United States Virgin Islands and our fellow offshore 

areas. 

I also want to welcome our witnesses, thank them for taking 

time on this Saturday morning to present testimony at what I expect to be the first in a series of hearings on the unique energy 

challenges facing the insular territories. 

In 2005, my colleagues and I worked with Natural Resources 

Chairman, Nick Rahall, to update a 20-year-old energy assessment 

done for the insular areas. The Department of the Interior, together with the Department of Energy and representatives of public power, completed that new assessment in 2006. 

This report should be viewed by all, as Congress has renewed interest in seeing how well the challenges of reducing energy cost to 

insular areas can be addressed. No one should believe that Congress wishes for this report to sit for another 20 years before action 

is taken to lessen our territories’ reliance on imported fuel. Thus, 

our hearing this morning is meant to further this process. Chairman Costa and I brought local leaders, residents, industry representatives and nongovernmental organizations together with 

Federal government expertise to lay the groundwork in developing 

a plan which would create a clean energy policy that can be implemented in the future to benefit our U.S. territories. 

To be frank, many in the U.S. mainland still view our U.S. territories solely through sunglass lenses, but as we look toward the future with clean and renewable energy in mind, the attributes 

which bring tourists to our shores should also be our sources of 

energy. Island breezes could power turbines, our bright sun could 

charge batteries, our ocean and surf could be the driving engines 

which bring unlimited energy out from our sea onto our shores and 

into our homes. 

I’m pleased that this hearing has generated a lot of interest from 

my constituents. I want to thank Senator Ronnie Russell of WSTX 

for carrying it live on radio so that it can reach a broader audience. 

I’m also pleased that we have had the active and meaningful engagement of our government industry, NGO’s and the Federal 

agencies. 

3 

And before I close, I just want to point out that despite all of the 

obstacles and challenges that we do face, both WAPA and the V.I. 

Energy Office have had their efforts recognized nationally—and the 

Virgin Islands Department of Energy a few years ago for its educational program for the NEED Project. A few weeks ago, I was 

privileged to join Mr. Hodge, Mr. Rhymer, and Ms. Dunn from 

WAPA as they received the Energy Star Partner of the Year Award 

for Excellence in Energy Star Promotion. Congratulations to both 

of you. 

At this time the Chair would like to recognize Chairman Costa, 

Chair of the Subcommittee on Energy and Mineral Resources, for 

any statement that he might have. 

[The prepared statement of Mrs. Christensen follows:] 

Statement of The Honorable Donna M. Christensen, Chairwoman, 

Subcommittee on Insular Affairs 

Good morning. 

I want to begin by welcoming all of our witnesses who agreed to present testimony at this oversight field hearing convened jointly by the Subcommittee on Insular Affairs and the Subcommittee on Energy and Mineral Resources. I am joined on 

the dais by my colleagues, Energy and Minerals Chairman Jim Costa (from California) and Representative Bill Shuster (from Pennsylvania). 

I want to acknowledge Chairman Costa’s leadership of his subcommittee to maintain a healthy balance between energy needs and conserving our nation’s natural 

resources. I believe that we can all agree that the leadership he and his subcommittee provides is more important than ever in today’s world of rising oil prices. 

I am also very please to welcome my colleague, Representative Bill Shuster. This 

is Mr. Shuster’s fourth term in Congress, representing Pennsylvania’s 9th District. 

In addition to his membership on the Energy and Minerals Subcommittee, Mr. Shuster serves on the Transportation and Infrastructure where he is the Ranking Member of the Subcommittee on Railroads, Pipelines, and Hazardous Materials. 

The people of the Virgin Islands welcome you to the Caribbean and thank you 

for your interest in addressing the energy issues faced by your fellow Americans living in U.S. territories. I believe that throughout this hearing you will recognize that 

residents of the territories, in our case the Virgin Islands, will voice concerns which 

are similar to your own constituents in California and Pennsylvania. 

However, the obvious challenges that residents of this and other territories must 

overcome are isolation which prevents interconnectivity or economies of scale; the 

lack of indigenous sources of fossil fuels which has led to complete dependence of 

imported fuel; and the ocean’s corrosive environment which makes upkeep of energy 

equipment difficult and costly. 

In 2005, my colleagues and I worked with Natural Resources Chairman Nick Rahall to update a twenty year old energy assessment done for our insular areas. The 

Department of the Interior, together with the Department of Energy and representatives of public power completed the new assessment in 2006. This report should 

be viewed by all as a Congress’s renewed interest in seeing how well the challenges 

of reducing energy costs to insular areas can be addressed. No one should believe 

that Congress wishes for this report, to sit for another twenty years before action 

is taken to lessen our territories’ reliance on imported fuel. 

Thus, our hearing this morning is meant to further this process. Chairman Costa 

and I have brought local leaders, residents, industry representatives, and non-governmental organizations together with federal government expertise to lay groundwork in developing a plan which could create a clean energy policy that can be implemented in the future to benefit our U.S. territories. 

To be frank, many in the U.S. mainland view our U.S. territories solely through 

sunglass lenses. But as we look toward the future with clean and renewable energy 

in mind, the attributes which bring tourists to our shores should also be our sources 

for energy. Islands breezes could power turbines, our bright sun could charge batteries, our ocean and surf could be the driving engines which bring unlimited energy 

out from the sea—onto our shores, and into our homes. 

I am pleased that this hearing has generated a lot of interest from my constituents, but I am even more pleased that we have had the active and willful engagement by industry, NGO’s, and our federal agencies. 

4 

STATEMENT OF THE HON. JIM COSTA, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. COSTA. Thank you very much, Madame Chairwoman. It is 

indeed our pleasure to be here this morning in the U.S. Virgin Islands on the wonderful island of St. Croix to join with you in focusing on a very important issue to not only the U.S. Virgin Islands 

but to other insular territories that have similar problems. I would 

go beyond and indicate that this is also a matter of national security, especially when we look at the importance of the refinery that 

is here in St. Croix, and the role that it plays in providing energy 

to many of the states in the mainland. 

These islands truly are beautiful, and I have been most welcomed since I’ve arrived, notwithstanding my head cold. The fact 

is that we appreciate the Governor, and the President of the Legislature, as well as other witnesses who will testify before both Subcommittees here today and with our colleague, Mr. Shuster, from 

Pennsylvania. 

Your representative is a tenacious advocate on behalf of the constituents of the U.S. Virgin Islands. I know because I hear it on 

a weekly basis, and you should be proud of the hard work that she 

does. She asked if we would be willing to bring both Subcommittees 

together to come here to St. Croix for the purpose of trying to deal 

with the challenges that we are facing and the extremely high cost 

of energy rates that U.S. citizens are facing here in the U.S. Virgin 

Islands, as was noted by the Chairwoman, the second highest in 

the entire United States—only exceeded by American Samoa. 

So truly, when you look at the percentage of cost that residents 

pay here as a part of their costs, their monthly costs, a larger percentage of the family’s monthly budget goes to pay for the utilities. 

So, obviously, it’s a pressing issue that we must try to address. 

It’s important that we note that obviously these energy challenges that we are facing are not just facing the U.S. Virgin 

Islands, but they are facing the entire country of ours. And at $100 

a barrel of oil, it impacts our ability to deal with our deficit; it impacts our ability to deal with international issues. I submit that 

this war on terrorism that we are fighting today, we are in fact financing both sides of this war when we look at the costs that we 

are faced with in Iraq and Afghanistan at $100 a barrel for oil because, of course, countries that are not friendly to us are benefiting 

from the high cost of that resource. There are a multitude of reasons why we need to figure out strategies to reduce the cost of 

energy for all U.S. citizens. 

It’s important that we look at the fact that the insular territories’ 

sky-high electrical rates and cost of foreign oil are among the 

issues that are affecting these islands. While these islands are not 

endowed as we know with an abundance of natural—other types of 

natural resources—coal, oil or gas as they have in Pennsylvania or 

they have in California—they are blessed with some resources that 

the good Lord has shown a willingness to provide and that, as the 

Chairwoman mentioned, is this wonderful sun, the wind power, 

and the ocean power. These if harnessed properly, I believe, can 

make major improvements to the energy situation of these islands. 

The second panel that we are going to hear from this morning, 

as I understand, is going to provide testimony in those areas of 

5 

how we can reduce the dependency of oil as being the sole source 

of electricity for the U.S. Virgin Islands. 

And while there is a lot of work that is being done to provide 

cleaner and more independency for the energy future of the Virgin 

Islands, it’s important that no matter how active the government 

of the U.S. Virgin Islands is, and how tenacious an advocate Representative Christensen is—because she certainly is—you can’t do 

it alone. And that’s why she wanted the Subcommittees to come 

here. 

Our Subcommittees have different jurisdictions in natural resources. We have the difficult challenge with the Subcommittee on 

Energy and Mineral Resources, which I chair, to protect public 

lands but, at the same time, try to take advantage of the energy 

and the wealth that comes from them. And that oftentimes is a difficult balancing act to perform. But if we do our work well, it’s essential to ensure that the Federal government, the Department of 

Energy, look at all the options. 

One of the questions that I am going to continue to raise this 

morning is the Memorandum of Understanding with Hawaii that 

was established earlier this year, in January, to ensure that Hawaii, which has a similar set of circumstances as the U.S. Virgin 

Islands, obtain 70 percent of their energy from renewable sources 

by the year 2030. I think a similar sort of goal ought to be addressed as we look at the U.S. Virgin Islands. I believe a similar 

partnership between the Governor, the government in Washington 

and the insular areas is practical and necessary. 

The third panel we will be listening to this morning has people 

from the Department of Energy and the Department of the Interior 

who were instrumental in making that Hawaii partnership happen. 

I am going to be addressing many of these questions to them. 

I look forward again to listening to all of you. I am pleased to 

be in St. Croix. As I told your representative, when I have come 

here in the past, it’s strictly as a civilian with my baseball cap on 

and my little sunglasses she talked about earlier, as a sailor. One 

of my passions is to come to the Caribbean and to kind of hide for 

a week or two and sail these beautiful islands. Today I am here 

in an official capacity and pleased to be so. 

I thank you again, Madame Chairwoman, for allowing us to be 

a part of your hearing. I yield back. 

[The prepared statement of Mr. Costa follows:] 

Statement of The Honorable Jim Costa, Chairman, 

Subcommittee on Energy and Mineral Resources 

Thank you very much, Chairwoman Christensen, and thank you for inviting me 

to your beautiful islands for this hearing, where I have experienced the most tremendous hospitality from everyone. I look forward to the rest of my stay on the Virgin Islands, and in particular hearing more about some of the challenges that you 

face with respect to energy, and what we in Congress can do to try to ease some 

of those burdens. 

Because there is no doubt about it—those burdens are significant. The energy 

problems that we face as a country are magnified in the insular areas. The mainland produces about two-thirds of the energy that it uses. But on the insular areas, 

you import essentially 100%. Electricity prices are rising across the country, but 

here they are over three times the national average. This situation is simply not 

sustainable for the residents of the Virgin Islands and the other insular areas. It 

is not sustainable for economic growth on these islands. And, it is not sustainable 

6 

for our environment or national security. Guam, for example, hosts some of our most 

important military assets in the Pacific, but it is entirely dependent on imported oil. 

That’s why we are here to talk about charting a clean energy future for the insular areas ‘‘a future that uses indigenous sources of energy to lessen your dependence 

on imported oil and reduce your electricity prices, while being friendlier to the environment at the same time. 

I like the fact that we’ve titled this hearing ‘‘Charting a Clean Energy Future’’ 

because I’m an avid sailor. But the title is more than just an allusion to sailing. 

It also emphasizes that the reason the Virgin Islands has such tremendous sailing— 

your beautiful ocean and the winds that pass over it—can also hold the answer to 

your most pressing energy challenges. 

As Chairwoman Christensen pointed out, the same factors that make this a paradise on earth—the sun, the breezes, the ocean—bless you with a tremendous opportunity for generating energy from these resources cleanly and sustainably. And 

whereas the small size of your islands creates challenges, is also allows modestly 

sized renewable energy projects to make a major impact. 

I believe the Department of Energy recognized this when they signed a Memorandum of Understanding to get the State of Hawaii to 70% renewable power in just 

over twenty years. That is an incredibly ambitious goal, but it is achievable. If the 

Department of Energy is willing to come together with the governments of the insular areas, then we can try to achieve similar goals for the U.S. Virgin Islands, 

Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. 

The energy situation faced by Hawaii and the insular areas are similar, although 

in many ways the insular area challenges are even more severe—a smaller infrastructure, higher electricity prices, and even more frequent tropical storms. But if 

Hawaii can reach their clean energy goals, then the insular areas can meet their 

energy goals as well, and I look forward to hearing from our witnesses on how we 

can best accomplish that together. 

Mrs. CHRISTENSEN. Thank you, Chairman Costa. 

The Chair now recognizes Representative Shuster for any opening statement he might have. 

STATEMENT OF THE HON. BILL SHUSTER, A REPRESENTATIVE 

IN CONGRESS FROM THE STATE OF PENNSYLVANIA 

Mr. SHUSTER. Thank you, Chairwoman. It’s a pleasure to be here 

back in the Virgin Islands. I’ll start off just as Mr. Costa ended. 

This is my first official visit here, but I’ve been to the Virgin Islands many times. In fact, the last time I was in St. Croix was in 

1970. I was a young kid. We stayed at the Grape Tree Bay Hotel. 

The second time to the Virgin Islands was to St. Croix, but many 

times to St. Thomas and St. John over the years. And for me I always have a warm spot in my heart, if not on my skin, when I am 

in the beautiful sun here in the Virgin Islands. 

You have a very strong advocate in Washington in Chairwoman 

Christensen in what she does. Not only is she an aggressive, strong 

arm but, most importantly, effective in making sure that the voice 

of the Virgin Islands is heard in the U.S. Congress. So you should 

really appreciate all the efforts and work she does—and she does 

a great job of it. 

I am not going to repeat a lot of what my colleague said. It’s obviously critical, not only to the U.S. Virgin Islands, but to the world 

what we are doing in energy, how we are going to solve the crisis 

I believe we face in energy. I know that in reading on the Virgin 

Islands the high cost of your electricity here and what we need to 

do and what you have been doing trying to reduce and conserve 

energy to help reduce those costs. 

But in looking at new energy sources, I think it’s absolutely critical, not only the renewables, wind and solar, but clean coal techVerDate Aug 31 2005 14:49 Dec 19, 2008 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 L:\DOCS\41819.TXT Hresour1 PsN: KATHY
7 

nology. I come from Pennsylvania, which is a large coal producing 

state, and we want to find ways and we do have ways today available to us and that we can use coal and burn it clean and use it 

because we have a great source of it. Coal gasification, turning coal 

into oil and gas to be able to utilize that, it’s something we must 

get serious about and produce that in this country. And, of course, 

nuclear energy is something we look at other countries around the 

world that’s producing—the French, for instance, produce 80 percent of their electricity through nuclear power. It’s safe, it’s clean, 

and we really need to pursue the development of a more robust nuclear sector in this country. 

And I know on these islands looking at smaller types of facilities, 

talking briefly before about is it possible to build a nuclear facility 

that’s smaller. I know there are folks out there looking at that. The 

Virgin Islands can be a laboratory to develop those types of facilities, whether it’s a smaller coal-fired electric plant, whether it’s a 

nuclear facility that can be utilized, because there have been places 

in the country that were able to develop it, we’ll be able to put that 

into practice. 

And as Mr. Costa said, this is not just about the economy and 

what it’s doing to our economy, but it’s a national security issue. 

It should be very high, if not the highest on our list of how we are 

tackling this challenge we have. 

So I am pleased to be here. I look forward to learning a lot today, 

look forward to hearing all our witnesses. With that yield back. 

Thank you. 

Mrs. CHRISTENSEN. Thank you, Congressman Shuster. 

I would now like to recognize the first panel of witnesses, The 

Honorable Usie Richards, President of the 27th Legislature of the 

Virgin Islands; Mr. Bevan Smith, Director of the Virgin Islands 

Energy Office; Mr. Hugo Hodge, Executive Director of the Virgin 

Islands Water and Power Authority; Mr. Donald Cole, Vice Chair 

of the Public Services Commission; and Mr. Darryl Miller, President of the St. Croix Alliance to Protect Utility Ratepayers. 

Mrs. CHRISTENSEN. Thank you. The Chair now recognizes Senate 

President Richards for his testimony. 

STATEMENT OF HON. RAYMOND ‘‘USIE’’ RICHARDS, 

PRESIDENT, 27TH LEGISLATURE OF THE VIRGIN ISLANDS 

Mr. RICHARDS. Pleasant good morning to one and all. It is indeed 

a pleasure for me on behalf of the members of the 27th Legislature 

to bring greetings to our Honorable Delegate, Donna M. 

Christensen, in her position as Chairwoman of the Subcommittee 

of Insular Affairs, along with your distinguished Subcommittee 

members. And equally so, greetings are bestowed upon The Honorable Jim Costa, Chairman of the Subcommittee on Energy and 

Mineral Resources and his distinguished Subcommittee members. 

I want to also say a pleasant good morning to Representative 

Shuster. It’s a pleasure to have you here from Pennsylvania. 

I believe that today it’s most fitting that the Joint Oversight 

Hearing on Charting a Clean Energy Future for the Insular Areas 

be convened in the U.S. Virgin Islands, where energy costs, existing resources, alternate sources and revenues generated are paramount concerns for the Virgin Islands and its residents. 

8 

I must therefore elaborate for a brief moment, because in the 

Territory our most major concern is the factor that I am sure will 

be discussed by the representatives of the Water and Power Authority, the Levelized Energy Adjustment Cost, the LEAC factor. 

Simply put, LEAC is the fuel charge, the cost to the Virgin Islands 

Water and Power Authority to produce electricity and water that 

is consumed by its customers. According to WAPA, it does not profit from LEAC. The LEAC amount paid by each WAPA customer is 

passed on directly to HOVENSA, the local oil refinery formally 

HOVIC, a full subsidiary of Hess Oil. 

Any Virgin Islander would tell you that LEAC makes up in excess of one half of his or her monthly WAPA bill. The cost of LEAC 

is ever-increasing. It’s the foremost quandary affecting the energy 

future of the Territory. Thus, it remains difficult to chart the progression of LEAC costs and the projected future impact on Virgin 

Islanders. This is due primarily to the fact that as the cost of fuel 

increases worldwide, increases to the LEAC becomes inevitable. At 

present, as all of us know, fuel costs are well over $100 a barrel. 

In December of 2007, the Virgin Islands Public Services Commission approved WAPA’s request for a LEAC increase for electricity 

use from 19 cents per kilowatt hour to 25 cents per kilowatt hour, 

resulting in a 34 percent increase in LEAC electricity costs for 

every Virgin Islander. This means that for every kilowatt hour a 

WAPA customer uses, WAPA charges 25 cents. LEAC costs for 

water use remained unchanged at 7.58 cents per kilowatt hour. 

WAPA’s average customer uses approximately 500 kilowatt hours 

monthly, and the average customer’s bill went up by 22 percent. 

The question is what is being done today? There is discussion on 

alternative sources of energies being explored. WAPA is encouraging its customers to lower consumption of electricity and water. 

Whether we speak of the alternative sources that are existing 

today, charting a clean energy future suggests that we should look 

toward alternative energy sources which would, one, reduce pollution that is a by-product of energy use; conserve non-renewable 

energy sources; help preserve the ecological balance of the planet; 

help preserve natural resources; and most importantly, promote 

the use of renewable energy sources. 

However, viable alternate energy sources must be researched 

thoroughly before a commitment to use is made in the Territory. 

Here I use the term ‘‘viable’’ because an alternate source of energy 

has to be cost effective to the Territory. This would include reasonable costs for start-up as well as reasonable costs for required longterm maintenance. Moreover since the Virgin Islands is now four 

distinct islands geographically, the alternate source of energy must 

consider its capacity to be applied on widespread basis to meet the 

needs of the Territory’s infrastructure and WAPA’s residential and 

business customers. Whether we speak of the alternate sources of 

wind power, petroleum coke, solar power, and geothermal energy, 

these are the ideas I think that we ought to consider. 

But the proposal before WAPA to reduce the cost of energy in the 

Territory are inclusive of some of these and possibly in addition to 

those that I have mentioned. But at the end of 2007, they had released a request for proposals for alternate sources of energy, according to WAPA and pre-qualified bid responses were received 

9 

from companies for wind, solar, biomass, and ocean thermal 

energy. I believe approximately 18 companies expressed an interest. 

But it should be made evidently clear by now that all of the 

aforementioned proposed alternative sources of energy are surely 

long term and have no impact on the current impact of the pocketbooks of our residents. Today the most important question to be addressed in the Virgin Islands is our ability to immediately access 

the capital required to reduce the cost of energy in the Virgin Islands. 

This brings to me the often discussed and debated item of gasoline excise tax. As you are aware, the HOVENSA oil refinery on 

this island of St. Croix is one of the largest refineries in the Western Hemisphere and has continuously served as a major supplier 

of gasoline and various oil products to the U.S. mainland. In turn, 

taxes collected from states on gasoline sold within their states are 

collected by both the state and Federal governments. A great percentage of these taxes are returned to the states to support and finance their infrastructure development. This act is of no controversy with the people of the Virgin Islands. 

What is of consequence to our people? It’s heart wrenching to acknowledge that existing Federal law mandates that products produced in the Virgin Islands, shipped to the U.S. mainland, where 

taxes are collected on this product, that the Virgin Islands Government is reimbursed a percentage, if not all of the taxes collected 

on these oil products. 

It is evident that we must establish a mechanism to finance the 

development, production, and distribution of clean energy in the 

Virgin Islands. The Virgin Islands Government, despite its willingness, does not possess the necessary capital to assure a reduction 

in the current cost of energy, much less the necessary capital to ascertain and retain clean, renewable and sustainable energy. The 

time is now to begin the discussion and take action on the return 

of gasoline excise taxes to the Government of the Virgin Islands. 

I thank you for this opportunity and look forward to a healthy 

discussion on this matter. And, Madame Chairwoman, today I 

thought that I should wear brown, because in our local vernacular, 

things in the Virgin Islands are very brown, but I wore green just 

like you today to hope that it’s a bright beginning so we could 

begin to address some of the problems that are facing the people 

of Virgin Islands. Again, thank you for this opportunity. 

[The prepared statement of Mr. Richards follows:] 

Statement of The Honorable Usie R. Richards, 

Senate President—27th Legislature of the Virgin Islands 

On behalf of the members of the 27th Legislature of the Virgin Islands, I am honored in my capacity as Senate President to bring greetings to The Honorable Donna 

M. Christensen, the Territory’s Delegate to Congress who is here today in her position as Chairwoman of the Subcommittee on Insular Affairs along with her distinguished Subcommittee Members. Equally so, greetings are bestowed upon The Honorable Jim Costa, Chairman, Subcommittee on Energy and Mineral Resources and 

his distinguished Subcommittee Members. I welcome each of you to our beautiful 

Island of St. Croix! Enjoy its splendor and while here, you are encouraged to contribute to our local economy by dining and shopping in our hospitable establishments. 

It is most fitting that a Joint Oversight Field Hearing on, ‘‘Charting a Clean 

Energy Future for the Insular Areas’’ be convened in the U.S. Virgin Islands, where 

10 

energy costs, sources, alternate sources and revenues generated are paramount concerns for the Territory and its residents. Please allow me the opportunity to elaborate a moment. 

LEVELIZED ENERGY ADJUSTMENT CLAUSE (the LEAC Factor): 

Simply put, LEAC is the fuel charge: the cost to the U.S. Virgin Islands Water 

and Power Authority (WAPA) to produce electricity and water that is consumed by 

its customers. According to WAPA, it does not profit from LEAC; the LEAC amount 

paid by each WAPA customer is passed on directly to HOVENSA, the local oil refinery. 

Any Virgin Islander would tell you that LEAC makes up in excess of one half of 

his or her monthly WAPA bill. The cost of LEAC is ever-increasing. It is the foremost quandary affecting the energy future of the Territory. Thus, it remains difficult to chart the progression of LEAC costs and the projected future impact on Virgin Islanders. This is due primarily to the fact that as the cost of fuel increases 

worldwide, LEAC likewise increases. At present, fuel cost is now over $100 per 

barrel!! 

On December 1, 2007, the U.S. Virgin Islands Public Services Commission approved WAPA’s request for a LEAC increase for electricity use from 19 cents per 

kilowatt hour to 25 cents per kilowatt hour, resulting in a 34% increase in LEAC 

electricity costs for every Virgin Islander. This means that for every kilowatt hour 

a WAPA customer uses, WAPA charges 25 cents! LEAC costs for water use remained unchanged at 7.58 cents per kilowatt hour. WAPA’s average customer uses 

500 kilowatt hours monthly, and the average customer’s bill went up by 22%. 

What is being done? 

• Alternate sources of energy are being explored 

• WAPA is encouraging its customers to lower consumption of electricity and 

water 

ALTERNATE SOURCES OF ENERGY: 

‘‘Charting a Clean Energy Future’’ suggests that we should look towards alternative energy sources which would 1) reduce pollution that is a by-product of energy 

use; 2) conserve non-renewable energy sources; 3) help preserve the ecological balance of the planet, and 4) help preserve natural resources. However, viable alternate 

energy sources must be researched thoroughly before a commitment to use is made 

in the Territory. Here, I use the term ‘‘viable’’ because an alternate source of energy 

has to be cost-effective to the Virgin Islands. This would include reasonable costs 

for start-up as well as reasonable costs for required long-term maintenance. Moreover, since the U.S. Virgin Islands is now four distinct islands geographically (St. 

Croix, St. John, St. Thomas and Water Island), the alternate source of energy must 

have the capacity to be applied on a widespread basis to meet the needs of the Territory’s infrastructure and WAPA’s residential and business customers. 

Some alternate sources of energy being explored presently include: 

• Wind Power: Wind-powered generators are used to produce wind energy. It is 

a renewable source of energy; as long as there is wind, this source of energy 

can be generated. No pollution is produced from wind power therefore the environment is not contaminated. 

• Petroleum Coke: Petroleum Coke is a waste-product of the Hovensa Oil Refinery that is the result of the process utilized to refine oil using the catalytic 

cracking plant. This material when efficiently burned provides an opportunity 

to produce clean energy. Currently this material is in demand by off-island entities and thereby is collected and shipped off-island. 

• Solar Power: Solar energy is obtained when the sun’s rays are collected into 

solar cells or solar thermal panels for conversion into electricity. Solar power 

also is a renewable source of energy and is non-pollutant. I am aware that a 

St. Croix family on the East End (Jan Mitchell and Steffen Larsen) was recently 

honored for use of solar power in their home. 

• Geothermal Energy: Geothermal power is derived from heat energy beneath 

the earth. GeoNet BioFuels is a company recently established on St. Croix as 

an alternate source to gasoline. 

PROPOSALS BEFORE WAPA TO REDUCE THE COST OF ENERGY IN THE 

VIRGIN ISLANDS: 

At the end of November 2007, WAPA released a request for proposals for alternate sources of energy. According to WAPA, pre-qualified bid responses were received from companies for wind, solar, bio-mass and ocean thermal energy. Eighteen 

(18) companies expressed an interest and financial capability to sell power to 

WAPA. The respondents’ proposals are due by May 1, 2008. 

11 

GASOLINE EXCISE TAX: 

As you are aware, the HOVENSA Oil Refinery, on this island of St. Croix, is one 

of the largest refineries in the Western Hemisphere and has continuously served as 

a major supplier of gasoline and various oil products to the U.S. mainland. In turn 

taxes collected from states on gasoline sold within their states are collected by both 

the state and federal governments. A great percentage of these taxes are returned 

to States to support and finance their infrastructure development. This act is of no 

controversy with the people of the Virgin Islands. What is of consequence to our people? It is heart wrenching to acknowledge that existing Federal Laws mandates that 

products produced in the Virgin Islands and shipped to the U.S. mainland, where 

taxes are collected on this product, that the Virgin Islands Government is reimbursed a percentage, if not all of the taxes collected on the oil products shipped to 

the mainland. It is evident that we must establish a mechanism to finance the development, production and distribution of clean energy in the Virgin Islands. Our 

territorial government, despite its willingness, does not possess the necessary capital to ascertain and retain clean, renewable and sustainable energy. I thank you 

for this opportunity and look forward to a healthy discussion on this matter. 

Mrs. CHRISTENSEN. Thank you, Senate President Richards. That 

is the purpose for which we are being here today, to look for better 

days. 

I did not state at the beginning of Senator Richards testifying 

that the timing light on the table indicates when time is concluded. 

But I didn’t feel that I could come into his own chamber and cut 

him off before he was finished, so we allowed you to go over. Thank 

you for your testimony. 

The Chair now recognizes Mr. Smith to testify. Mr. Smith, in addition to being the Director of the V.I. Energy Office, is testifying 

on behalf of the Governor is my understanding as well. We invite 

you to testify for five minutes. 

STATEMENT OF BEVAN SMITH, DIRECTOR, 

VIRGIN ISLANDS ENERGY OFFICE 

Mr. SMITH. Thank you. 

Good morning, Madame Chairwoman Christensen, Chairman 

Costa, Representative Shuster, other members of the Subcommittees, members in the audience and those listening on radio. My 

name is Bevan Smith, Jr., and I have been working with the Virgin 

Islands Energy Office for 25 years and served in the capacity of the 

Director since 2004. It is a pleasure to appear before you today to 

offer testimony on such a timely subject matter, Charting a Clean 

Energy Future for the Insular Areas. 

The Virgin Islands is an unincorporated territory of the United 

States located in the Lesser Antilles islands group between the Atlantic Ocean and the Caribbean Sea. 

The Territory faces many of the same problems encountered by 

all small island nations with our relatively small electric power 

system, limited interconnection, and generation units that are 

based on older petroleum fueled technology with relatively poor 

heat rates. This is further complicated by the reliability criteria 

that require online generation to maintain high spinning reserve 

margins in the absence of a supply grid. These conditions lead to 

excessive costs for the sole electric utility which are further increased by the recent upturn in petroleum prices. 

The U.S. Virgin Islands currently relies on virtually 100 percent 

imported petroleum as its source of its energy. The Territory’s generating facilities are included in that slim minority of just 1.6 perVerDate Aug 31 2005 14:49 Dec 19, 2008 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 L:\DOCS\41819.TXT Hresour1 PsN: KATHY
12 

cent of the total electricity generated nationwide that utilizes oilfired plants. Due to the concentration of the majority of the world’s 

oil reserve in countries that are unfriendly to the United States, 

the growing international demand for oil and the associated increase in the price of oil, the economy of the U.S. Virgin Islands 

is highly vulnerable to supply disruptions and energy price increases. This vulnerability is further exacerbated since much of the 

petroleum is imported from PDVSA, the state-owned petroleum 

company of Venezuela. The current political instability of that region of the world could result in a severe disruption or curtailment 

of petroleum shipments from HOVENSA refinery on St. Croix, 

which is partially owned by PDVSA. 

Furthermore, the reliance on imported energy sources creates a 

large financial burden on the United States Virgin Islands economy. Typically, two-thirds of the price of electricity in the U.S. Virgin Islands is attributed to the fuel adjustment charges, all of 

which are derived from the escalating cost of purchasing petroleum. The dependence on imported fossil fuel forces our residents 

to pay a higher percentage of their disposable income for energy 

than residents of the mainland United States. An increasing number are faced to make decisions to either pay for the food, medicine 

or utility bill. 

High energy costs are driving up the cost of living in the Territory by fueling inflation. It serves as the deterrent to business development, and is perhaps the greatest threat to the Virgin Islands 

economy. It is imperative that this reality is taken into consideration throughout all testimonies to the Joint Oversight Field Hearing on Charting a Clean Energy Future for the Insular Areas. 

The United States Department of Energy has been instrumental 

in the Territory’s development of energy programs over the past 34 

years through its formula-driven Energy Extension Service, State 

Energy Conservation Program, Institution Conservation Program 

and the State Energy Program grants. The former three grants 

have been phased and SEP continues to supplement funding to the 

Territorial State Energy Plan. 

Over the past decade, the U.S. Virgin Islands has been awarded 

an average of $235,000 annually in the U.S. Department of Energy 

formula grant funds, which represents 8 percent of the total budget. Program year 2008 will bring $174,000 to the Territory to assist 

with the mission of the Virgin Islands Energy Office. Low Income 

Heating and Energy Assistance Program, LIHEAP, funds are 

awarded directly to the local Department of Human Services, and 

that’s to the tune of some $122,000. Significantly, our focus on general education programs earned the U.S. Virgin Islands the 2003 

National Energy Education Development State Program Award 

from the NEED Project. 

In charting a clean energy future for the insular areas, we need 

both the Insular Affairs and the Energy and Mineral Resources 

Subcommittees to address on behalf of all the territories of the 

United States of America the funding challenges, program priorities, and our unique energy issues. An adequate resolution will 

bring self-sufficiency through increased utilization of renewable 

energy technology and energy sufficient measures. As it pertains to 

the funding issues, the U.S. Virgin Islands is often inappropriately 

13 

compared to the continental U.S. when it comes to allocation of 

energy funds. This comparison is grossly unfair since the United 

States Virgin Islands is not as densely populated as the continental 

U.S., therefore distributing electricity generation costs among fewer 

utility customers. 

Electricity rates in the southeast continental U.S. averages between 5 to 10 cents a kilowatt hour, while electricity in the U.S. 

Virgin Islands is currently at 35 cents a kilowatt hour heading to 

42 cents in the near future. Additionally, the U.S. Virgin Islands 

is often compared to Hawaii when it comes to energy. While the climates of the Pacific and Caribbean islands are somewhat similar, 

demographics are starkly different. Hawaii is densely populated 

and has a highly sophisticated energy infrastructure. 

Mrs. CHRISTENSEN. I am going to ask you to wrap up. We are 

going to get to some of your other points in the question and answer. 

Mr. SMITH. Thank you. I just say that Section 251 of the 2005 

Energy Policy Act authorizes the Secretary of the Interior among 

other items to make grants to governments of insular areas of the 

United States for project plans that include an analysis of a range 

of options to address energy security projects such as protecting 

electric power transmission distribution lines or significantly reducing dependence on an insular area on imported fossil fuel. 

The Office of the Governor has taken a lead by example posture 

by instituting an energy demand reduction program for the central 

Government. 

In closing, I would like to thank both Chairs of the Subcommittees, and I would like to reiterate that the driving factor in the 

economy of the U.S. Virgin Islands is the high cost of energy. We 

are hoping that clean energy technologies can be that solution. 

However, there are significant impediments to the implementation, 

and the U.S. Virgin Islands may not be able to overcome without 

assistance from the Federal Government. This requires immediate 

Congressional action. Thank you. 

Mrs. CHRISTENSEN. Thank you, Mr. Smith. 

[The prepared statement of Mr. Smith follows:] 

Statement of Bevan R. Smith, Jr., Director, 

Virgin Islands Energy Office 

Good Morning Madame Chairwoman Christensen, Chairman Costa and other 

members of the two Subcommittees. My name is Bevan Smith Jr. and I have been 

working with the Virgin Islands Energy Office for 25 years and served in the capacity as Director since 2004. It is a pleasure for me to appear before you today to offer 

testimony on such a timely subject matter: 

Charting a Clean Energy Future for the Insular Areas 

The U.S. Virgin Islands is an unincorporated territory of the United States located in the Lesser Antilles islands group between the Atlantic Ocean and the Caribbean Sea. 

The Territory faces many of the same problems encountered by all small island 

nations with our relatively small electric power system, limited interconnection, and 

generation units that are based on older petroleum-fueled technology with relatively 

poor heat rates. This is further complicated by reliability criteria that require online 

generation to maintain high spinning reserve margins in the absence of a supply 

grid. These conditions lead to excessive costs for the sole electric utility which are 

further increased by the recent upturn in petroleum prices. 

The U.S. Virgin Islands (USVI) currently relies on virtually 100% imported petroleum as the source of its energy. The Territory’s generating facilities are included 

14 

in that slim minority of just 1.6% of the total electricity generated nationwide that 

utilizes oil-fired plants. Due to the concentration of the majority of the world’s oil 

reserves in countries unfriendly to the US, the growing international demand for 

oil and the associated increase in the price of oil, the economy of the USVI is highly 

vulnerable to supply disruptions and energy price increases. This vulnerability is 

further exacerbated since much of the petroleum is imported from PDVSA—the 

state-owned petroleum company of Venezuela. The current political instability in 

that region of the world could result in a severe disruption or curtailment of petroleum shipments to the Hovensa refinery on St. Croix, which is partially owned by 

PDVSA. 

Furthermore, the reliance on imported energy sources creates a large financial 

burden on the USVI economy. Typically two-thirds of the price of electricity in the 

USVI is attributed to fuel adjustment charges, all of which is derived from the escalating cost of purchasing petroleum. The dependence on imported fossil fuels forces 

our residents to pay a higher percentage of their disposable income for energy than 

residents of the mainland United States. An increasing number are forced to make 

decisions to either pay for food, medicine, or their utility bill. High energy cost is 

driving up the cost-of-living in the Territory by fueling inflation; it serves as a deterrent to business development, and is perhaps the greatest threat to the Virgin Islands economy. It is imperative that this reality is taken into consideration throughout all testimonies to this Joint Oversight Field Hearing on ‘‘Charting a Clean 

Energy Future for the Insular Areas’’. 

The U.S. Department of Energy has been instrumental in the Territory’s development of energy programs over the past 34 years through its formula driven Energy 

Extension Service, State Energy Conservation Program, Institutional Conservation 

Program and State Energy Program (SEP) grants. The former three grants have 

been phased out and the SEP continues to supplement funding to the Territorial 

State Energy Plan. Over the past decade, the USVI has been awarded an average 

of $235,000 annually in USDOE formula grant funds, which represents eight percent of each fiscal year’s total budget. Program year 2008 will bring $174,000 to the 

Territory to assist with the mission of the Virgin Islands Energy Office. Low Income 

Heating and Energy Assistance Program (LIHEAP) funds are awarded directly to 

the local Department of Human Services to supplement their Energy Crisis Assistance Program. Significantly, our focus on general energy education programs earned 

the USVI the 2003 National Energy Education Development State Program Award 

from the NEED Project. 

In charting a clean energy future for the Insular Areas, we need both the Insular 

Affairs and the Energy and Minerals Resources Subcommittees to address on behalf 

of all Territories of the United States of America, funding challenges, program priorities, and our unique energy issues. An adequate resolution will bring self-sufficiency through increased utilization of renewable energy technologies and energy efficiency measures. As it pertains to funding issues, the USVI is often inappropriately compared to the continental U.S. when it comes to allocation of energy funds. 

This comparison is grossly unfair since the USVI is not as densely populated as the 

continental US, therefore distributing electricity generation costs among fewer utility customers. Electricity rates in the Southeast continental U.S. averages between 

$0.05—$0.10/kWh while electricity in the USVI is presently $0.35/kWh and forecasted to be $0.42 in the near future. Additionally, the USVI is often inappropriately 

compared to Hawaii when it comes to energy. While the climates of the Pacific and 

Caribbean islands are somewhat similar, the demographics are starkly different. 

Hawaii is densely populated and has a highly sophisticated energy infrastructure 

and a large industrial base. The USVI is not as densely populated and has an increasingly antiquated energy infrastructure. The State Energy Program formula for 

allocation of funds to the States and Territories has not been updated in over 20 

years. The formula was developed when energy costs in the Territory were much 

lower. To discontinue this inadvertent discrimination the formula needs to be updated to include changes in energy costs, insular location, climate, demographics, 

etc. 

The U.S. Department of Energy’s Weatherization Assistance Program (WAP) is 

the nation’s largest residential energy efficiency program. Its mission is to insulate 

the dwellings of low-income persons, particularly the elderly, persons with disabilities, families with children, high residential energy users, and households with a 

high energy burden, in order to conserve needed energy and to aid those persons 

least able to afford higher utility costs. While the USVI does not require funding 

to insulate against cold winter temperatures, low-income citizens of the Territory 

can increase energy efficiency through the insulation of conventional water heater 

tanks or the installation of domestic solar water heaters to reduce electricity costs. 

The latter program was successfully implemented by the sunshine State of Florida 

15 

using Weatherization Assistance Program funds. However, under current law, the 

USVI cannot participate in the WAP. Even if we were made eligible through an act 

of Congress, the USVI’s portion would be approximately $25,000 based on the existing formula. Here again is another example of inadvertent discrimination against 

the Territories when it comes to the allocation and distribution of Federal Funds. 

This disparity should be corrected and the allocation formula for both LIHEAP and 

WAP should be updated. 

There are specific program priorities that must be addressed in charting a clean 

energy future for the Territories. We need every opportunity available to improve 

our energy efficiency, increase the use of renewable energy and to reduce our 100% 

dependence on imported fossil fuels. As previously mentioned, the USDOE formula 

grant makes up a relatively small percentage of the overall SEP Territorial State 

Plan’s budget; therefore, participation in the USDOE Competitive Solicitations is 

necessary. In many instances when the USDOE issues solicitations the Territories 

are either excluded from competition or the program areas for funding are not applicable or relevant to energy priorities within the particular insular area. 

Despite the difficulties of acquiring private partnerships, matching non-federal 

grant funds, and competing with the 50 states, the USVI has been successful in winning a handful of USDOE Special Projects Solicitation grant awards. We formed 

partnerships and conducted technical building audits through a Rebuild American 

Paradise grant; the Building Energy Codes grant was instrumental in the Territory’s adoption of the 2003 International Building Codes. Plans are currently underway for an upgrade to a tropical building energy code through a grant to Hawaii 

on behalf of the Territories; a grant for the development of a distributed generation 

policy led to a Net Metering policy for the Territory; and a grant to conduct a Wind 

Energy Case Study provided data that supplemented Wind Mapping efforts of the 

National Renewable Energy Laboratory and the USDOE Wind Powering America in 

a recent wind workshop with record breaking attendance by residents of the USVI. 

The technical assistance was beneficial in showing the potential of each category of 

the grant award, but due to the lack of funding for actual implementation, no 

energy or cost savings were realized. 

Section 251 of the 2005 Energy Policy Act authorizes the Secretary of the Interior 

among other items, to make grants to governments of insular areas of the United 

States for project plans that include an analysis of a range of options to address 

energy security projects such as protecting electric power transmission and distribution lines or significantly reducing the dependence of an insular area on imported 

fossil fuel. There are authorized in the Act, but not yet appropriated, $6,000,000 for 

each fiscal year after the enactment. Similar authorization existed in previous 

EPACTs but no appropriations have actual been made even though the Territorial 

Energy Assessment Plan has been completed with its findings and recommendations. The Virgin Islands Energy Office and the Water and Power Authority (WAPA) 

have already employed many of the strategies or projects identified by the Secretary 

of Energy as having the greatest potential for reducing the dependence on imported 

fossil fuels. Through the appropriation of these grants, the recommendations in the 

recently updated Energy Assessment report and other subsequent reports can serve 

as the roadmap towards reducing the Territories dependence on imported fossil fuel 

and begin to chart a clean energy future for all. 

The Office of the Governor has taken a lead by example posture by instituting 

an energy demand reduction program for the central Government. This project aims 

to reduce energy consumption in government facilities and vehicles by at least 5 

percent per year over the next four years. The program will implement the best 

practices in order to advance energy-efficiency throughout government, improve utility management decisions in government facilities, and promote the use of renewable and advanced vehicle technologies and/or alternative fuel blends. 

The Virgin Islands Energy Office was recently relocated to the Office of the Governor to bring a serious focus on energy issues in the USVI by commissioning the 

development of a comprehensive energy strategy for the Territory with the collaboration of the Southern States Energy Board, USDOE National Energy Technology 

Laboratory, and Virgin Islands energy stakeholders. 

The goal of the comprehensive energy strategy is to develop a comprehensive 

energy strategy for the USVI that will increase the standard of living of the citizens 

of the Territory by assuring the long-term availability of affordable, secure supplies 

of energy. A secondary goal is to become a Caribbean and worldwide showcase for 

the development and use of renewable energy. 

In closing, I thank both chairs of the subcommittees, and would like to reiterate 

that the driving factor in the economy of the USVI is the high cost of energy. We 

are hoping that clean energy technologies can be the solution. However, there are 

significant impediments to their implementation and the USVI may not be able to 

16 

overcome without assistance from the Federal Government. This will require immediate Congressional action. 

Mrs. CHRISTENSEN. The Chair now recognizes the Executive Director of V.I. WAPA, Mr. Hodge for 5 minutes. 

STATEMENT OF HUGO HODGE, JR., EXECUTIVE DIRECTOR, 

VIRGIN ISLANDS WATER AND POWER AUTHORITY 

Mr. HODGE. Good morning, Madame Chairwoman Christensen, 

Chairman Costa, Representative Shuster and members of the two 

Subcommittees. My name is Hugo Hodge, Jr. I am the Executive 

Director of the Virgin Islands Water and Power Authority. Let me 

begin by thanking both Subcommittees on behalf of the Authority 

for the attention to this extremely important topic and for affording 

us the opportunity to inform you folks of Virgin Islands Water and 

Power Authority’s extended effort to bring clean and economical 

energy to the islands and the critical role that it believes the Federal government has to play in this endeavor. 

To this end, the Authority would like to describe for you its considerable and ongoing efforts to control and reduce the exorbitant 

costs of power and water to the citizens of the Virgin Islands in 

this very difficult economic environment, and to reduce our dependence on imported oil; outline some of the more significant impediments that have made this goal so difficult to achieve; and identify 

ways in which we believe the Federal government and Congress in 

particular can provide assistance that is critical to our success. 

As you will see shortly from my presentation, I believe that, 

while we have undertaken a number of powerful initiatives and are 

actively exploring a broad range of alternatives to our current generating system, assistance from Washington will be critical in our 

ultimate success in these endeavors. 

To begin, the Authority believes that it is extremely important 

to understand the truly unique circumstances that govern its efforts to secure clean and economical energy for the residents of the 

islands, and to recognize that they are far more constraining, both 

economically and geographically, than anything that stateside 

United States face in these endeavors. Unlike most stateside systems, the Authority is in essence a nonprofit government owned 

utility that is the sole source of public power and water in the island. 

One of WAPA’s most distinguishing characteristics is that it operates in an insular environment where there is no power grid from 

which it can gain access to electricity generated by other utilities, 

or even generated by its own separate generating plants on St. 

Thomas and St. Croix. 

Among other things, this prevents the Authority from being able 

to purchase power generated elsewhere by others that might provide a variety of alternative, and possibly much less expensive, 

sources of power. It also means that we must have more generating 

units per megawatt of capacity, and incur the high operating costs 

that entails in order to provide the necessary on-site backup generating capacity that is typically provided stateside by the regional 

power grids. 

17 

Our insular character and limited geographical resources eliminates a number of other options that are available to stateside utilities. For example, natural gas, hydroelectric and nuclear power 

generation are simply resources not readily available here. Similarly the absence of large areas for crop production make reliance 

on biofuels impractical in the islands. 

Because the islands do not have any significant natural sources 

of potable water, our power generating system must also provide 

the power necessary for the operation of the Authority’s large desalination plants, which provide the vast majority of the drinking 

water for the islands. Because of this, anything that adversely impacts the cost of electricity in the islands also increases the cost of 

drinking water. 

It is also critically important to recognize that our limited financial resources create major obstacles to our efforts to develop and 

implement alternative sources of energy that are environmentally 

sound, less costly and might significantly reduce our dependence on 

imported oil. 

Given that the Authority is funded 100 percent by its customers, 

it’s important to recognize the difficult economic conditions facing 

the residents of the islands. The cost of electricity to our residential 

customers is currently running an exorbitant 34 cents per kilowatt 

hour. That is almost 350 percent above the U.S. national average 

of 10.8 cents per kilowatt hour. The huge increases in the price of 

oil in recent years and months have caused our rates to increase 

by over 118 percent since 2002. Consequently, stateside concerns 

about increased power costs attributable to the increased price of 

oil pale in comparison to what Virgin Islands residents already experience, while further increases loom in the horizon. 

We estimate that for every dollar increase in the cost of a barrel 

of oil, the cost to our residential customers for a kilowatt hour of 

power will increase by at least 1.75 cents. 

Even though our citizens pay far more for electricity than stateside customers, they are far less able to afford these enormous 

prices. It often goes unrecognized that the per capita income in the 

Virgin Islands is about $19,000, which is over 34 percent below the 

per capita income in the poorest of the 50 states. 

The combined impact of extremely high energy costs and limited 

financial resources can be seen in the dramatically low power consumption rates of our citizens. Whereas stateside households consume an average of 1,000 kilowatt hours per month, the average 

in the Virgin Islands is a dramatic 50 percent lower, at only 500 

kilowatt hours per month. 

You want me to conclude? 

Mrs. CHRISTENSEN. You got about a minute. 

Mr. HODGE. WAPA has been aggressively evaluating potential alternative sources of energy and changes in the Authority’s system 

infrastructure that could reduce power costs and dependence on oil. 

On February 28 R.W. Beck, a consultant firm under contract 

with the Authority, in collaboration with the Public Service Commission, completed a major update of WAPA’s plan for power generation expansion. Wind power resources, efficiency improvements, 

waste to energy options, utilization of slow-speed diesels, increased 

implementation of combined cycle generation, the use of liquefied 

18 

natural gas, petroleum coke, and ocean thermal technology are all 

being considered. 

In conclusion, I want to thank the Subcommittees once again for 

allowing us the opportunity to make this presentation. I hoped that 

I have helped to increase your understanding of the very unique 

circumstances that constrain our efforts to reduce our dependency 

on oil, to reduce our exorbitant costs for electric power generation, 

and to develop alternative sources of energy in the Virgin Islands. 

I also hope that you appreciate how hard we have been working 

to achieve those goals, and how much we are in need of Federal 

assistance to supplement the extremely limited resources we are 

able to devote to this critically important effort. Thank you. 

Mrs. CHRISTENSEN. Thank you, Mr. Hodge. 

[The prepared statement of Mr. Hodge follows:] 

Statement of Hugo Hodge, Jr., Executive Director-CEO, 

Virgin Islands Water & Power Authority 

I. Introduction 

Good morning, Chairwoman Christensen, Chairman Costa, and members of the 

two Subcommittees. 

My name is Hugo Hodge, Jr. I am the Executive Director of the Virgin Islands 

Water & Power Authority. I am joined here this morning by the Authority’s Chief 

Operating Officer, Mr. Gregory Rhymer, who will be available to assist me in addressing any question you might have at the conclusion of my prepared remarks. 

Mr. Rhymer was specifically responsible for the Territorial Energy Assessment update in 2006 and has been the Authority’s guide for the past 18 years in its compliance with environmental requirements relating to its many past modifications and 

future expansion projects. As you know, we provided the subcommittees in advance 

with a detailed written statement, which I will try to summarize for you now within 

the 5-minute time period allotted for each of the oral presentations. For those in 

the audience who might like to see our full written presentation, we have brought 

a number of copies and will make them available when the hearing has concluded. 

As you may know, I assumed the leadership of the Authority on January 1. Before 

that I was the Director of Griffin Power in Georgia, where I was in charge of strategic planning, and led management teams in all aspects of electric utility 

operations—including the evaluation of alternative sources of power generation. 

Born and raised in the Virgin Islands, I hold a bachelor of science degree in mechanical engineering, have an MBA from Georgia State University, and am nationally certified as a Power Quality Professional and as a Public Manager. 

Let me begin, by thanking both subcommittees on behalf of the Authority for their 

attention to this extremely important topic, and for affording us the opportunity to 

inform you of both VIWAPA’s extensive efforts to bring clean and economical energy 

to the Islands, and the critical role that it believes the federal government has to 

play in this endeavor. 

To this end, the Authority would like to—— 

1. Describe for you its considerable, and ongoing, efforts to control and reduce the 

exorbitant costs of power and water to the citizens of the Islands in this very 

difficult economic environment, and to reduce our dependence on imported oil; 

2. Outline some of the more significant impediments that have made this goal so 

difficult to achieve; and 

3. Identify ways in which we believe the federal government, and Congress in 

particular, can provide assistance that is critical to our success. 

As you will see shortly from my presentation, I believe that, while we have undertaken a number of powerful initiatives, and are actively exploring a broad range of 

alternatives to our current generating system, assistance from Washington will be 

critical to our ultimate success in these endeavors. 

II. Our Critically Important Insular Setting 

TO BEGIN, the Authority believes that it is extremely important to understand 

the truly unique circumstances that govern its efforts to secure clean and economical energy for the residents of the Islands, and to recognize that they are far more 

constraining, both economically and geographically, than anything that state-side 

utilities face in these endeavors. 

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VIWAPA is a quasi-public entity that is the sole source of public electricity and 

water in the Islands. Unlike most state-side systems, it is, in essence, a non-profit 

government-owned utility. It is run by a governing Board that is appointed by the 

Governor (with the advice and consent of the Legislature). That Board, both monitors its operations, and selects its Executive Director—who, with his staff and Authority employees, manages and conducts its widespread and complex operations on 

a daily basis. 

One of WAPA’s most distinguishing characteristics is that it operates in an insular environment where there is no power grid from which it can gain access to electricity generated by other utilities, or even generated by its own separate generating 

plants on St. Thomas and St. Croix. This island isolation imposes significant operational constraints on the Authority that are not shared by state-side facilities. 

1. Among other things, this prevents the Authority from being able to purchase 

power generated elsewhere by other utilities or by private entities that might 

provide a large variety of alternative, and possibly much less expensive, 

sources of power. 

2. It also means that, unlike state-side utilities, we must have more generating 

units per MW of capacity (and incur the higher operating costs that entails) 

in order to provide the necessary on-site backup generating capacity that is 

typically provided state-side by the regional power grids to which almost all 

other electric utilities have ready access. 

Geographic Limitations 

Because of our insular situation, and limited geologic resources, there are certain 

options available to other utilities that are simply unavailable to the Authority. For 

example: 

1. The use of less expensive and less polluting natural gas is simply not an option, here. The same is true for coal. 

2. Similarly, the absence of large areas for crop production makes reliance on 

biofuels impractical in the Virgin Islands 

3. Hydroelectric and nuclear power generation are also not options here. 

4. In addition, our insularity and remote location limits the potential use of a 

number of emission control options that are under active consideration elsewhere—like carbon sequestration that might be used with the combustion of 

cheap coal for the control of greenhouse gas emissions. 

5. Water Supply—Because the Islands do not have any significant natural 

sources of potable water, our power generating system must also provide the 

power necessary for the operation of the Authority’s large desalinization 

plants—which provide the vast majority of the drinking water for the Islands. 

Because of this, anything that adversely impacts the cost of electricity in the 

islands also increases the cost of drinking water. 

Economic Constraints 

It is also critically important to recognize that our limited financial resources create major obstacles to our efforts to develop and implement alternative sources of 

energy that are environmentally sound, less costly and might significantly reduce 

our dependence on imported oil. 

Given that the Authority is funded 100% by its customers, through its charges 

for power and water, it is important to recognize the difficult economic conditions 

facing the residents of the Islands. 

1. The Already Exorbitant Cost of Electricity—The cost of electricity to our residential customers is currently running about 38 cents per kilowatt hour (kwh). 

To put this in stark perspective, that is almost 400% above the U.S. national 

average of 10.8 cents per kilowatt hour. Due to our heavy dependence on oil 

for power generation, and the huge increases in the price oil in recent years 

(and months), our rates have increased by over 118% in just the last 6 years. 

While there are very legitimate concerns among U.S. mainland citizens about 

increasing power costs attributable to the increased price of oil, they pale in 

comparison to what Virgin Island residents already experience, with further increases looming on the horizon. 

We estimate that for each $1 increase in the cost of a barrel of oil, the 

cost to our residential customers for a kilowatt hour of power will increase 

by at least $0.0175. 

2. Low Per Capita Income—Even though our citizens pay far more for electricity 

than state-side customers, they are far less able to afford these enormous 

prices. It often goes unrecognized that the per capita income in the Virgin Islands is about $19,000, which is over 34% % below the per capital income in 

the poorest of the 50 states. 

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3. Severely Reduced Household Consumption of Electricity—The combined impact 

of extremely high energy costs and limited financial resources can be seen in 

the dramatically low power consumption rates of our citizens, in comparison 

to state-side customers. Whereas state-side households consume an average of 

1,000 kilowatt hours per month, the average in the Virgin Islands is a dramatic 50% lower, at only 500 kilowatt hours per month. 

Unique Dependence On Oil 

State-side, only a minuscule percentage of the generated electricity comes from 

the burning of oil. Consequently, while the recent drastic increases in the price of 

oil have had some impact on the state-side cost of electricity, is has been trivial in 

comparison to the impact in the Virgin Islands. 

State-Side, the breakdown in power generation is as follows: 

48.6% Coal 

21.5% Natural Gas 

19.4% Nuclear 

6.0% Hydroelectric 

3.0% Other 

Only 1.6% Oil 

It is particularly noteworthy that the predominant state-side sources of electric 

power (the first four I just listed—comprising over 95% of the total) are not now, 

and never will be, available in the Virgin Islands—due to the remote location and 

geographic features of the Islands. 

In stark contrast, literally 100% of power generation in the Virgin Islands is currently derived from the combustion of oil. 

Consequently, the dramatic increases in the price of oil over the past several 

years (and particularly in the last several months), have had a 60 times greater impact on the average cost of power generation here than in the states. 

The result is that the recent increases in the price of oil have had a far more dramatic impact in the Islands than they have elsewhere, and that the adverse impacts 

will only be further magnified as oil prices continue to rise. 

Under these circumstances, it is obvious that we have a tremendous incentive to 

improve the efficiency of our power generation, to encourage power conservation by 

our citizens, and to otherwise reduce our dependence on imported oil by identifying 

and developing alternative sources of energy that are both environmentally beneficial and significantly less costly. 

III. VIWAPA’s Broad and Aggressive Initiatives To Achieve These 

Important Goals 

A. Improving the Efficiency of the Authority’s Power Generation from Oil. 

Increases in Combined Cycle Operations—Obviously, to the extent we can extract 

more power production from each gallon of oil we burn, the more efficient we are, 

and the less it will cost our customers for each kilowatt hour of electricity they purchase. To that end, the Authority has invested a great deal in the addition of waste 

heat recovery generators (sometimes called ‘‘HRSG’s or waste heat boilers) to its facilities in recent years. 

Waste heat boilers make use of the otherwise ‘‘wasted’’ heat that is released from 

the burning of oil in its combustion turbine generators, by converting it to steam 

which is then utilized in either the production of electricity or the production of 

water by our desalinization plants. This reduces the amount of oil that it would be 

necessary to purchase in the absence of the waste heat boilers. 

This mode of efficient operation is called ‘‘combined cycle operation.’’ We currently 

have 2 waste heat boilers, which operate in combined cycle mode with four of our 

combustion turbine generators. 

Moreover, we are in the process of installing another waste heat boiler on St. 

Croix, and are evaluating the addition yet another one on St. Thomas. 

Future Installation of More Efficient Combustion Turbines—In addition, we have 

also taken steps via a Condition Assessment and Power Supply Study update to 

identify and evaluate more efficient primary combustion turbines when replacing 

older units or adding to our overall generating capacity. 

B. Improved Efficiency in the Use of Electricity by Our Residents 

As part of its major effort to improve efficiency in the use of electricity by our 

citizens, the Authority has been very active for several years with its energy conservation public education program. In 2006, VIWAPA became an EPA-recognized 

ENERGY STAR partner in order to better leverage the available tools and resources 

to enlighten our residents and visitors on the importance of energy efficiency. Our 

vigorous efforts in this regard earned us EPA’s ENERGY STAR Partner of the Year 

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2008 Award for Excellence in Energy Star Promotion, which was presented to the 

Authority at an awards ceremony on April 1 in Washington, D.C.. 

The goal of our energy efficiency program is to reduce energy consumption, reduce 

associated greenhouse gas emissions, and reduce demand on our power generation 

capabilities. As one example, we have taken significant steps to increase consumer 

awareness of the benefits of CFL lighting fixtures and other energy-efficient technologies and practices. In 2006, the Authority purchased 60,000 Energy Star qualified CFLs, and have already distributed most of them free of charge in well-publicized educational events to our individual customers and a broad array of public 

institutions. Our extensive educational outreach program has included CFL distribution at our offices, at over 40 other convenient locations via ‘‘CFL Caravans,’’ 

and at heavily populated community events. Ads and other educational messages in 

local print media, on local radio and tv stations, in our own newsletter and in presentations to our employees, community groups, businesses, government agencies, 

churches and schools have also helped to convey the energy-efficiency message to 

our citizens, and to increase consumer awareness of the link between energy production and greenhouse gas emissions. 

IV. Aggressive Evaluations of Potential Alternative Sources of Energy and 

Changes in the Authority’s System Infrastructure That Could Reduce 

Power Costs and Dependence on Oil 

The Recent R.W. Beck Power Supply Study 

On February 28, the R.W. Beck power industry consulting firm, under a contract 

with the Authority, and in collaboration with the Public Service Commission, completed a major update of VIWAPA’s plans for power generation expansion. The overarching objective of its Power Supply Study was to provide an understanding of 

near- and long-term power supply options that might reduce the Authority’s cost of 

electric power production and simultaneously reduce its dependence on fuel oil. It 

provided a detailed assessment of the potential economic, geographic and environmental compliance feasibility of a broad array of potential technologies, including: 

• wind powered resources; 

• efficiency improvements; 

• waste to energy options; 

• utilization of slow-speed diesels; 

• increased implementation of combined cycle generation; 

• the use of imported Liquified Natural Gas (LNG); 

• the direct combustion of petroleum coke generated as a by-product of the 

Hovensa refinery on St. Croix; 

• the combustion of methanol generated locally from the gasification of petroleum 

coke; 

• Ocean Thermal Energy Conversion (OTEC); and 

• the interconnection of the St. Thomas and St. Croix electric systems via a highvoltage submarine direct current transmission line. 

B. The Resulting RFP Process 

Based on the analysis and recommendations in the Beck Power Supply Study, the 

Authority moved aggressively to develop and publish a Request For Proposals, that 

solicited proposals from well-qualified companies for the implementation of one or 

more of the non-oil based alternatives that were identified as potentially viable in 

the Beck Study. Bidding was open on all such generation technologies, and proposals were invited that would displace as much of our current source of power as 

possible, under power purchase agreements that could last as long as 20 years. 

The RFP was communicated to relevant trade associations and was advertized in 

a number of trade journals. Among other things, it specifically referenced interest 

in power generation based on wind, solar, ocean thermal, biomass, tidal, wave geothermal, and petroleum coke technologies, and suggested that alternatives might include the submarine cable interconnection of our plants on St. Thomas and St. 

Croix, and LNG and methanol fuel options, most of which were recommended in the 

Territorial Energy Assessment Report. 

Twenty firms submitted pre-qualification forms, and were evaluated by a technical committee consisting of a representative from Boston Pacific Company, independent expert technology and financial consultants, and the Authority’s Chief Operating Officer, Mr. Gregory Rhymer. In order to pre-qualify, bidders had to demonstrate experience designing, constructing and operating generating facilities similar to those they would be proposing. They had to demonstrate the ability to obtain 

the financing for their proposals, and they had to demonstrate that their non-oil 

based solutions are commercially feasible. Eighteen bidders were pre-qualified by 

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the technical committee, and we are anxiously awaiting the final proposals, which 

are due on May 1. 

Although we have not yet received the final detailed proposals under the RFP, 

we know from the R.W. Beck analysis, and the other information we have received 

to-date, that all of the potential initiatives are extremely expensive, and will, at a 

minimum, severely strain the Authority’s limited resources (and the resources of our 

citizens). In some cases, it appears almost certain that the Authority will not be able 

to pursue promising approaches without significant financial help—either because 

it has inadequate resources to invest, or because the risks are just too great for it 

to assume on its own. For some of the more promising alternatives, it appears all 

but certain that we will not be able to pursue them without significant assistance 

from the federal government. 

V. Federal Assistance Is Critical 

A. Financial Assistance 

Due to the general economic conditions in the Islands, the high cost of maintaining our generators and distribution systems in our remote locations, and the already 

exorbitant cost of energy shouldered by our citizens, the Authority has extremely 

limited resources to devote to the exploration and development of viable alternatives 

to oil. Our economic plight is exemplified by the fact that our largest customer (the 

Government of the Virgin Islands) has had chronic difficulties over the years in 

making timely payments for the power it must consume on behalf of our citizens. 

Consequently, we are in urgent need of financial assistance from Washington. 

It is our understanding that in the Energy Security Act of 2005, the Department 

of the Interior was obligated to fund power generation initiatives in the insular territories of the type that VIWAPA is currently trying to pursue. We understand that 

while Congress appropriated money for that program, and Interior made promises 

that it would be distributed, none of it was ever released. Congress obviously recognized that financial assistance for this sort of program was necessary and appropriate. Consequently, we would urgently request any assistance you could provide 

in helping us to secure funding under that legislation, or in securing future appropriations under new legislation that would help to finance these important initiatives. 

We would point to our potential development of an undersea connection between 

St. Thomas and St. Croix as a good example of a project that might be particularly 

appropriate for federal financial assistance. The Beck study indicated that such a 

connection could significantly reduce the redundancy in our systems due to the current need for substantial on-site back-up capacity on both islands, and would enable 

both of our facilities to install larger, more efficient, generators, and to operate them 

more frequently at their most efficient load levels. It might also serve as a pilot 

demonstration for submerged connections that could be applied elsewhere in the Insular Areas. 

B. Other Legislative Assistance- Global Warming Legislation 

In the Clean Air Act Amendments of 1990, Congress and EPA recognized (in the 

adoption of special provisions in what is now § 325 of the Act) that the unique geographical and economic conditions in the Virgin Islands and other territories could 

make it unreasonable to require them to comply with all of the emission control requirements that are applicable state-side. Under that provision, EPA has exercised 

its authority to grant relief on several occasions. 

Both houses of Congress are currently considering legislation that is likely to establish major requirements for the control and reduction of emissions of greenhouse 

gases like carbon dioxide. Some of those proposals would include requirements that 

emitters of carbon dioxide either substantially reduce their emissions (through increased use of alternative sources of power), or purchase costly emission reduction 

credits. While we do not believe that it is intended that requirements of this type 

be applied to small territorial facilities like those of the Authority, we are concerned 

that language might ultimately be adopted that could inadvertently sweep the Authority into such a program. We hope that our presentation helps you to understand 

why that should be avoided at all costs. 

Due to the extremely high electricity costs borne by our citizens, there is already 

far more than enough financial incentive than is necessary for the Authority to reduce its greenhouse gas emissions as much as it can. More importantly, due to its 

remote locations and limited economic and geographic resources, the Authority simply does not have the broad array of options for reducing greenhouse emissions that 

is available to state-side utilities. And, of course, to the extent it is not able to reduce its greenhouse gas emissions, neither the Authority, nor the citizens of the Virgin Islands (who would have to pay for any emission credits through increased utilVerDate Aug 31 2005 14:49 Dec 19, 2008 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6621 L:\DOCS\41819.TXT Hresour1 PsN: KATHY
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ity bills), would have the financial resources to purchase any credits that might be 

required. Under these circumstances, and given the extremely small contribution 

that the territories make to greenhouse emissions generally, we would solicit your 

assistance in making sure that federal greenhouse gas legislation does not require 

the Authority to purchase emission credits that the citizens of the Virgin Islands 

will never be able to afford. 

CONCLUSION 

In conclusion, I want to thank the subcommittees once again for allowing us the 

opportunity to make this presentation. I hope that I have helped to increase your 

understanding of the very unique circumstances that constrain our efforts to reduce 

our dependence on oil, to reduce our exorbitant costs for electric power generation, 

and to develop alternative sources of energy in the Virgin Islands. I also hope that 

you appreciate how hard we have been working to achieve those goals, and how 

much we are in need of federal assistance to supplement the extremely limited resources we are able to devote to this critically important effort. 

Mrs. CHRISTENSEN. The Chair now recognizes Mr. Cole to testify 

on behalf of PSC. 

STATEMENT OF DONALD COLE, VICE CHAIR, 

PUBLIC SERVICES COMMISSION 

Mr. COLE. Thank you, Madame Chair Delegate Christensen, 

members of the Subcommittees on Insular Affairs, Energy and 

Mineral Resources and the listening audience. On behalf of the 

Public Services Commission of the Virgin Islands, I thank you on 

your attention to these important issues affecting the residents and 

the economy of the United States Virgin Islands. The Public Services Commission is the U.S. Virgin Islands’ regulatory authority 

with jurisdiction over all public utilities, including electricity, 

water, waste management, and ferry transportation. I’m the Vice 

Chair of the Commission, and I have members of my Commission 

and my legal team sitting in the audience. 

We have submitted written testimony, Madame Chair, which we 

kept brief. I have brought additional copies of that testimony for 

your convenience. In keeping with your request, I will only summarize our testimony in my comments. 

The Public Services Commission is charged with balancing the 

interest of the ratepayers with those of the regulated utilities. For 

the past five years the Virgin Islands’ dependence on fuel oil for 

transportation and electrical energy and even for water production 

has imbalanced the scale. The only way these utilities survived has 

been to impose unending increases in fuel on the ratepayers. The 

burden has become unsustainable, and it does not yet appear to 

have peaked. Our residents are paying 34 cents per kilowatt hour 

and 40 cents appear to be on the near horizon. Compare those 

rates with mainland rates from 7 to 15 cents per kilowatt hour, 

and the extraordinary burden is obvious. The Water and Power Authority is strapped for cash even at these rates. 

As the maintenance suffers, the aging infrastructure becomes 

less efficient, and the downward spiral worsens. Meanwhile, our 

annual fuel oil bill at the Authority would be more than $260 million on today’s oil prices just for electricity and water. And that 

burden is imposed on the population of less than 120,000 people. 

Families, the poor, and elderly simply cannot afford these continuing extraordinary costs, and the very sustenance of life is in 

danger. Conservation can only help reduce costs so far, and Virgin 

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Islanders already consume only about half of the national average 

in electricity. Rates must be reduced to maintain affordability. 

The burden goes beyond individual suffering. Commercial ratepayers are already paying even higher rates. Studies done elsewhere, such as in Hawaii, indicate the damaging economic effects 

of such high rates—extracting money that could be reinvested and 

discouraging new investment. 

The Commission has worked with WAPA over the past four years 

to ensure that the existing infrastructure is examined and new options evaluated. An updated studies on those issues is on the way 

and it’s due within weeks. 

The Virgin Islands are well placed to replace much of its existing 

infrastructure with more efficient and greener technology. We are 

well placed to take advantage of wind and solar power, and it may 

even be possible to connect with other islands where geothermal 

resources will be present. 

We now must move from studies to planning and implementation 

of changes. WAPA currently has an RFP for new power, but that 

is only the start. We must move rapidly in a manner that can afford both short-term and long-term relief to the ratepayers. 

In doing so, we are seeking to fulfill the mandates of the 2005 

Energy Policy Act, and the Energy Independence and Security Act 

of 2007. We will be seeking assistance in reducing our reliance on 

oil, as all of our oil is imported, and moving toward power that is 

both economical and environmentally sensitive. To do so, we will 

need your assistance, Madame Chair, and the Congress. 

The ratepayers are already incredibly burdened, which financing 

will be critical to get the technologies in place. We will be seeking 

assistance on the both of these acts, and we require new appropriations. The economy of the Virgin Islands is at stake, and we will 

continue to seek your assistance in moving these islands forward 

to a clean and efficient, affordable future. 

Thank you very much, Madame Chair. 

Mrs. CHRISTENSEN. Thank you, Mr. Cole. 

[The prepared statement of Mr. Cole follows:] 

Statement of Donald G. Cole, Vice Chair, 

Virgin Islands Public Services Commission 

Dear Delegate Christensen, members of the Subcommittees on Insular Affairs and 

Energy and Mineral Resources, and the Listening Public: 

The Public Services Commission of the Virgin Islands thanks you for your attention to these important issues affecting the residents and the economy of the United 

States Virgin Islands. The Public Services Commission is the U.S. Virgin Islands’ 

regulatory authority with jurisdiction over all public utilities, including electricity, 

water, waste management, and ferry transportation. 

The Virgin Islands are experiencing a serious energy crisis. It is a crisis not of 

our making, but is the result of federal government monetary and fiscal policies, 

international events, and other factors, far beyond our control. Unlike the mainland, 

there are no indigenous sources of oil, coal or natural gas energy available for use 

here in the Virgin Islands. Neither are there large rivers which can be tapped for 

hydro-electric power. And, nuclear energy, while in wide-spread use on the mainland, is cost prohibitive given our size and isolation. Accordingly, we are today totally dependent on imported oil. Because oil had been relatively stable and economical until 2003, the Virgin Islands had come to rely on this resource, not only for 

transportation, but for electrical generation and water production have—all have 

been powered by fuel oil here in the Virgin Islands. Oil prices have increased fivefold, from $22/bbl to $110/bbl, in just five years. The days of cheap oil appear to 

be irretrievably over, and changes must occur and quickly. 

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The Commission has for several years worked with the Virgin Islands Water and 

Power Authority (‘‘WAPA’’) to diversify its energy sources and to increase its use of 

renewable energy. Today, WAPA is in the final stages of completing studies on its 

current power generation and water production facilities, its options for replacement 

and/or rehabilitation of existing equipment, and the preparation of a long-term plan. 

That process was initiated in 2004 and completion is anticipated in a matter of 

weeks. The first study, the Condition Assessment Study, was conducted based on 

$33/bbl oil; however, oil continued its climb throughout the study period and by the 

time the study was finished oil was above $50/bbl. As everyone is well aware, that 

increase has only continued, and oil today is above $110. WAPA has conducted an 

initial review of the 2005 study (called a ‘‘Fatal Flaw Analysis’’), reviewing alternatives for new power generation, and is presently working to complete the updated 

Condition Assessment Study. We are happy to provide you with any of these documents. 

At the present time, Virgin Islands residents pay nearly 34 cents/kWh for power— 

to our knowledge, the highest rate in the nation. The majority of consumer’s cost 

is fuel oil, totaling more than 25 cents or approximately 74% of the residential electric rate. It is important to note that this rate is based on $92/bbl fuel—so we already know that the rate will continue to climb even further. Moreover, as the Virgin Islands do not have substantial surface or ground water, the majority of our 

water supplies are through rooftop catchment and desalination. Desalination is an 

energy intensive process, and the Virgin Islands currently rely on an older distillation technology that requires steam for the desalination process. As water is the 

very essence of life, its cost is a matter of grave concern to the public welfare, and 

one to which the Commission is paying acute attention. Currently, the Virgin Islands spend more than $200,000,000 per year just for fuel 

oil for its electricity and water. This staggering cost is compounded by several additional factors which include the relatively small size of the Islands’ population, at 

just over 110,000 and the low per capita income and higher cost of goods and services to Virgin Islands residents. This combination of factors creates a burden that 

is simply not sustainable. On average, Virgin Island residents consume less than 

half the electricity of mainland residents, yet an average residential bill now exceeds $170 per month. To put this into further perspective, mainland power costs 

for residential consumers range from 6¢/kWh to 15¢/kWh—comparatively, Virgin Island consumers pay more than twice that amount. Since the Virgin Islands per capita income is well below the U.S. average, the extraordinary cost of energy imposes 

a tremendous burden that simply cannot be continued for the long term. Additionally, the Commission finds these costs especially worrisome for those members of 

our community who are most affected by these rates, particularly the high level of 

families with children living in poverty and the numbers of seniors for whom these 

costs may present an insurmountable burden. 

In the Department of Energy’s Memorandum of Understanding with the State of 

Hawaii on the Clean Energy Partnership, the parties note the enormous burden 

placed on the local economy by the increases in world oil prices. Hawaii is estimated 

to suffer a 0.5 percent reduction in GDP for every 10 percent increase in the price 

of oil—and given the greater percentage reliance on oil here, there is no reason to 

think that the Virgin Islands suffer less. 

In addition to relying solely on oil-fired generation for the generation of electricity 

and the production of water, the Virgin Islands also suffer from an aged and outdated infrastructure, with much of the Islands’ electrical generation capacity being 

twenty-five years or more old. The Commission views this both negatively and positively. While antiquated plants presents a near term problem, in that our generation facilities are not as efficient as newer equipment, it also means that we are 

in an excellent position to develop a modern, environmentally sensitive, and efficient 

electrical generation and water production plan for the future. 

While the Territory is currently dependent on oil-fired processes, the Virgin Islands is ripe for receiving and implementing renewable and environmentally sensitive power production. However, there are additional challenges that must be 

taken into consideration in addition to the overall need and desire for moving to alternative energy sources. For example, while these Islands are located within the 

trade winds and can produce steady wind power much of the year this benefit must 

be weighed against the potential conflict with the Islands’ major source of revenue 

which is tourism. St. Thomas and St. John have little available land that is not already occupied, and are tourist based economies. There is a justifiable concern about 

the visual impact and potential effects on tourism that are associated with wind 

energy. Additionally, on St. Croix some of the prime sites for wind generation are 

also highly visible and in environmentally sensitive areas. Moreover, our location 

within the tropics also makes these islands vulnerable to hurricanes and tropical 

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storms, and the relative isolation of the Virgin Islands creates additional concerns 

regarding over-reliance on wind power. Performance guarantees and storm insurance would make wind power a substantially more attractive option for investment. 

Solar power would also appear to be a logical addition to the power generation 

options in the Virgin Islands but, until very recently, it has been cost prohibitive, 

at least as to photovoltaic power. Solar thermal, which has been successfully used 

in the desert Southwest also carries some concerns about vulnerability to storm 

damage, and land area requirements. Because it is so reliably sunny, and well within the tropics, the Virgin Islands should be a prime candidate for any demonstration 

project for large scale distributed solar project. 

Only Hawaii and the Pacific Islands can offer anything comparable to the Virgin 

Islands’ ability to reach both warm tropical waters and cold deep water; in fact, our 

surface waters are substantially warmer than those surrounding Hawaii, resulting 

in an even greater temperature differential. But ocean thermal technology does not 

appear to have reached commercially viable status, and is unlikely to do so without 

further research and support. The Virgin Islands is the best location for a demonstration Ocean Thermal Energy (OTEC) project in the Atlantic basin. 

The Virgin Islands also have a problem addressing waste disposal, which is not 

surprising given our limited land and many visitors. Waste-to-energy would seem 

to be a logical response for a limited portion of our energy needs, and this would 

assist in the resolution of another environmental issue for the islands. 

Finally, the Virgin Islands are home to the largest petroleum refinery in the Caribbean, the HOVENSA facility on St. Croix. The presence of this refinery provides 

a steady supply of petroleum coke, which is a low cost fuel, but with a very high 

carbon footprint. The Virgin Islands should be a prime candidate for a demonstration pet coke plant with carbon recapture. 

Concluding Remarks: 

In order to make progress and overcome the dire energy needs of the Territory, 

the Virgin Islands could benefit tremendously from federal assistance with and 

guarantees for long term debt. The Virgin Islands must replace aging plants that 

are cost effective to retire. This will have the added benefit of retiring aging plants 

with new and greener technologies that may make carbon credits available. 

In addition, the Virgin Islands may require waivers from certain standards—for 

example, diesel generators may be economically and environmentally sound as back 

up generators in complement with solar and wind power, but are difficult to permit 

within the United States. Such units are however, vastly more fuel efficient than 

the current generators within the Virgin Islands. 

The Virgin Islands could also benefit from assistance in making our current system more efficient as we transition to new technologies. 

On behalf of the Public Services Commission, I thank you for creating this important forum, wherein the dialogue on the challenges and solutions of our present 

energy crisis could be discussed. It is our greatest hope that the fruits of this discussion will mean a true transformation for the territory, its infrastructure, and the 

people of the Virgin Islands. 

Thank you, 

Mrs. CHRISTENSEN. The Chair now recognizes the final panelist, 

Mr. Miller, to testify on behalf of the St. Croix Alliance to Protect 

Utility Ratepayers. 

STATEMENT OF DARRYL MILLER, PRESIDENT, 

ST. CROIX ALLIANCE TO PROTECT UTILITY RATEPAYERS 

Mr. MILLER. Good morning, Chairman Costa, Chairwoman and 

Delegate Donna M. Christensen and other distinguished members 

of the Committee on Natural Resources Subcommittee on Insular 

Affairs and Subcommittee on Energy and Mineral Resources. 

On behalf of the hard working ratepayers of the Virgin Islands, 

I am privileged to appear before you to speak as the voice of the 

ratepayers and to express in the most urgent manner possible, the 

need for immediate and tangible solutions to our extremely high 

and inefficient power production and distribution system in the 

Territory. 

27 

The ratepayers of the Territory look forward with great anticipation toward the results of this hearing in an effort to alleviate the 

burden placed on us daily by the inefficiency of our Water and 

Power Authority. 

The extremely high cost of water and power production has exponentially increased our cost of living. It greatly affects every single 

commodity we purchase and consume on a daily basis. As a result, 

an economic burden has been placed squarely on the backs of each 

and every ratepayer territory wide. 

On August 31, 2005, I testified before the 26th Legislature’s 

Committee of the Whole on this very same relevant and critical 

issue at hand today—developing and implementing immediate solutions to the problem of an inefficient and extremely high electric 

and water production system in the Territory. Needless to say, 

three years into the future, the ratepayers of the Territory still face 

the exact same dilemma of 2005, with additional increases in both 

water and power costs, with no solutions in sight from the Governor, the Legislature, the Public Services Commission, and the 

Water and Power Authority. 

To date there is absolutely no definite or clearly intelligible sense 

of urgency to this problem. As a result, ratepayers implore you, the 

oversight committee on Insular Affairs, not to follow suit in inaction, but to posthaste use all your resources and power to mitigate 

corrective solutions to our outdated water and power production 

and distribution system. 

Corrective solutions must result in an implemented dynamic 

energy strategy that will help us meet our energy needs based on 

highly informed decisions about how our energy is purchased, consumed, and managed. This requires a robust energy management 

system with data analysis and reporting capabilities to proactively 

manage energy production, consumption, and cost. 

No longer should it be allowed for our Water and Power Authority, with the assistance of the Public Services Commission, to pass 

the cost of inefficiency on to the ratepayers of the Territory without 

accountability. Business intelligence must replace party politics if 

corrective measures are to be implemented. 

In the past, our Territory has been burdened by elected officials 

who lack competence in understanding the modernization of energy 

production and distribution. These officials would then appoint 

board members to the Water and Power Authority who similarly 

lack the knowledge of modernizing energy production and distribution. This has resulted in limited knowledge of how to wisely invest, plan and forecast in the most effective and cost-effective 

energy efficiency portfolios for overcoming common marketplace 

barriers to energy efficiency. The solution is business intelligence. 

Business intelligence is the most effective way to continue successfully negating change. This translates into energy efficiency. 

Utilities, states, and others across the United States have decades of experience in delivering energy efficiency to their customers. Thus, it is the duty of this oversight committee of Insular 

Affairs to work with our government and Legislature to enact policies and programs to capture the benefits of energy efficiency and 

address underinvestment in energy efficiency. This can only be 

done by providing the funding necessary to deliver these programs, 

28 

and by examining policies governing our Water and Power Authority to ensure that these policies facilitate, not impede, cost-effective 

programs for energy efficiency. 

Our power production infrastructure is overburdened and outdated. Overburdened and outdated systems significantly limit the 

availability of low-cost electricity, and our sole reliance on fossil 

fuel raises energy prices and potentially compromises energy system reliability, resulting in frequent outages with no compensation 

for damaged goods to the ratepayers. 

The ratepayers of the U.S. Virgin Islands hereby respectfully request the Committee on Insular Affairs to take immediate visible 

action to establish a timeline of implementation and completion to 

modernize the Water and Power Authority; to establish a team of 

competent individuals to recover, analyze, and implement existing 

studies already done by both the Public Services Commission and 

the Water and Power Authority with taxpayers’ money that have 

clearly expressed solutions and corrective measures to our current 

energy crisis. 

In conclusion, the past four years has resulted in nothing but 

higher utility cost to the ratepayers of the territory with no visible, 

tangible signs of sense of urgency to mitigate the problems of high 

energy cost by our elected officials. Charting the future requires 

complete understanding of the precise problem of energy production and distribution, then implementing solutions unique to the 

Virgin Islands. It is said that the solution to our high energy cost 

and inefficiency would take at least two years. Chairman Costa, 

ratepayers cannot simply afford two more years without relief. 

The St. Croix Alliance to Protect Utility Ratepayers would like 

to thank you, Chairman Jim Costa and Chairman and Delegate 

Donna M. Christensen, for this opportunity to appear before the respected Committee on Insular Affairs and on the Subcommittee on 

Energy and Mineral Resources. Thank you for your attention and 

time. 

Mrs. CHRISTENSEN. Thank you, Mr. Miller. 

[The prepared statement of Mr. Miller follows:] 

Statement of Darryl E. Miller on behalf of the Ratepayers of the U.S. Virgin 

Islands and the St. Croix Alliance to Protect Utility Ratepayers—SCAPUR 

Good Morning, Chairman Nick J. Rahall, Chairwoman and Delegate Donna M. 

Christensen, and other distinguished members of the Committee on Natural Resources Subcommittee on Insular Affairs and Subcommittee on Energy and Mineral 

Resources. 

On behalf of the hard working Ratepayers of Virgin Islands, I am privileged to 

appear before you to speak as the voice of the Ratepayers, and to express in the 

most urgent manner possible, the need for immediate and tangible solutions to our 

extremely high and inefficient power production and distribution system in the Territory. 

The Ratepayers of the Territory look forward with great anticipation, towards the 

results of this hearing in an effort to alleviate the burden placed on us daily by the 

inefficiency of our Water and Power authority. 

Members of the Committee on Natural Resources Subcommittee on Insular Affairs 

and Subcommittee on Energy and Mineral Resources, let me inform you if you do 

not already know, we the Ratepayers of the U.S. Virgin Islands are currently paying 

the highest cost per kilowatt for electricity under the U.S. flag, coupled with the additional high cost of water production. 

The extremely high cost of water and power production has exponentially increased our cost of living here in the Territory, as it pertains to every single comVerDate Aug 31 2005 14:49 Dec 19, 2008 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6621 L:\DOCS\41819.TXT Hresour1 PsN: KATHY
29 

modity we consume on a daily basis, resulting in nothing short of a burden on the 

backs of each and every Ratepayer territory wide. 

Members of the Committee and Subcommittee, on August 31, 2005, I testified before the 26th Legislature’s Committee of the Whole, as it pertained to the very same 

relevant and critical issue at hand today, developing and implementing immediate 

solutions to the problem of an inefficient and extremely high electric and water production system in the Territory. Needless to say, three years into the future, the 

Ratepayers of the Territory still face the exact same dilemma of 2005, with additional increases in both water and power costs, with no solutions in sight from the 

Governor, the Legislature, the Public Services Commission, and the Water and 

Power Authority. 

To date, there is absolutely no definite or clearly intelligible ‘‘sense of urgency’’ 

to this problem, and as a result, the Ratepayers of the Territory implore you the 

Oversight Committee on Insular Affairs, not to follow suit in inaction, but to post 

haste use all your resources and power to mitigate corrective solutions to our outdated water and power production and distribution system. 

Corrective solutions must result in an implemented dynamic energy strategy that 

will help us meet our energy needs based on highly informed decisions about how 

our energy is purchased, consumed and managed. This requires a robust energy 

management system with data analysis and reporting capabilities to proactively 

manage energy production, consumption, and cost. 

An investment in the latest computer software the energy industry has to offer 

to track energy use, would enable our Water and Power Authority the ability to 

build a comprehensive energy database, over a period of years, to collect and analyze historical utility data to proactively manage energy production, consumption, 

and cost. ‘‘The historical energy data also play a pivotal role in performing a host 

of energy management operations; particularly load forecasting for procurement 

purposes.’’ The result is the ability to forecast daily, weekly, monthly, and yearly 

energy needs, as well as potential peak demand periods and associated energy costs, 

increasing efficiency. 

No longer should it be allowed for our Water and Power Authority, with the assistance of the Public Services Commission, to pass the cost of inefficiency onto the 

Ratepayers of the Territory without accountability. ‘‘Business Intelligence’’ must replace party politics if corrective measures are to be implemented. 

In the past, our Territory has been burdened by elected officials who lack competence in understanding the modernization of energy production and distribution. 

These officials would then appoint board members to the Water and Power Authority who similarly lack the knowledge of modernizing energy production and distribution. This would result in limited knowledge of how to wisely investment, plan, and 

forecast in the most effective and cost-effective energy efficiency program portfolios 

and programs for overcoming common marketplace barriers to energy efficiency. The 

solution is ‘‘Business intelligence’’. 

‘‘Business intelligence is a combination of technology and management 

practices that prioritizes collecting, providing access to, and analyzing large 

amounts of unstructured data in ways that help people make better 

decisions.’’ 

‘‘The key to effective energy intelligence is transforming the large amount of 

energy and enterprise data into information and knowledge that can help achieve 

specific business objectives, such as: 

• Avoiding surprises in energy costs and management 

• Recovering costs through end user rebilling 

• Reducing costs through identifying inefficiencies 

• Reducing costs through demand response 

• Reducing price risk through hedging and sourcing strategies 

• Creating a culture of conservation through increased energy accountability.’’ 

‘‘Business intelligence is the most effective way to keep successfully navigating 

change’’, this translates into energy efficiency. 

‘‘Recognizing energy efficiency as a high-priority energy resource is an important 

step in efforts to capture the benefits it offers and lower the overall cost of energy 

services to ratepayers.’’ 

Utilities, states, and others across the United States have decades of experience 

in delivering energy efficiency to their customers. Thus, it is the duty of this oversight committee of Insular Affairs, to work with our Government and Legislature 

to enact policies and programs to capture the benefits of energy efficiency and address underinvestment in energy efficiency. This can only be done by providing the 

funding necessary to deliver these programs, and by examining policies governing 

our Water and Power Authority to ensure that these policies facilitate, not impede, 

cost-effective programs for energy efficiency. 

30 

Our power production infrastructure is overburdened and outdated. Overburdened 

and outdated systems significantly limit the availability of low-cost electricity; and 

our sole reliance on fossil fuel raises energy prices and potentially compromises 

energy system reliability, resulting in frequent outages with no compensation for 

damaged goods. 

The Ratepayers of the U.S. Virgin Islands hereby respectfully request the Committee on Natural Resources Subcommittee on Insular Affairs and Subcommittee on 

Energy and Mineral Resources take immediate and visible action and establish a 

timeline of implementation and completion in order to: 

• Modernize the Water and Power Authority; it’s water/electrical energy production and distribution, and other assets, to drastically improve overall water/electrical systems efficiency 

• Establish a team of competent individuals to recover, analyze, and implement 

existing studies already done (by both PSC and WAPA) with taxpayers money 

that have clearly expressed solutions and corrective measures to our current 

energy crisis 

• Establish an Energy Management Division with a robust energy management 

system and a comprehensive energy database 

• Develop a comprehensive and dynamic energy strategy/plan that establishes 

how energy from 2008 and in the future is Purchased, Consumed, and Managed 

in the U.S. Virgin Islands 

• Manage WAPA’s electrical and water production and distribution by improving 

meter reading efficiencies and implementing automatic meter reading technology and data collection 

• Manage outage response, by implementing outage detection technologies to reduce the frequency of outages, improve response and restore times for outages 

• Subsidize the Water and Power Authority for the expressed purpose of eliminating substantial rate increases 

• Audit the Water and Power Authority to correctly assess financial inefficiencies 

and determine the true financial picture. Apply ‘‘business intelligence’’ to control our energy costs 

• Once and for all, direct the Water and Power Authority to negotiate the RFP 

to secure Alternative Energy Solution, in accordance with the Public Utility 

Regulatory Policies Act, no more stalled talks 

• Allocate money that would liquidate outstanding Government Water and Power 

Authority bills owed, set clearly defined and stable energy budgets, and mandate that government agencies pay their utility bills annually 

• Develop investment strategies and planning that would convert government 

buildings into ‘‘green buildings’’ that utilizes solar technology 

• Place technologically competent people on the boards of the Water and Power 

Authority and the Public Services Commission 

• Establish and mitigate safe, reliable, efficient, and affordable services and rates 

for the ratepayers of the U.S. Virgin Islands to reduce consumption and cost 

• Restore Ratepayers faith in the oversight of the Water and Power Authority, 

and all other utilities of the Territory, that our trust and tax dollars are being 

well spent 

• Establish the National Action Plan for Energy Efficiency Recommendations and 

Options in the U.S. Virgin Islands (see figure ES-2) 

In conclusion, the past four years has resulted in nothing but higher utility cost 

to the Ratepayers of the Territory, with no visible or tangible ‘‘sense of urgency’’ to 

mitigate the problem of high energy cost, by our elected officials. The St. Croix Alliance to Protect Utility Ratepayers would like to thank you Chairman, Nick J. Rahall, and Chairwoman, and Delegate, Donna M. Christensen, for this opportunity 

to appear before the respected, Committee on Natural Resources Subcommittee on 

Insular Affairs and Subcommittee on Energy and Mineral Resources. 

Thank you for your attention and time. 

Figure ES-2. 

National Action Plan for Energy Efficiency Recommendations & Options 

Recognize energy efficiency as a high priority energy resource. 

Options to consider: 

• Establishing policies to establish energy efficiency as a priority resource. 

• Integrating energy efficiency into utility, state, and regional resource planning 

activities. 

31 

• Quantifying and establishing the value of energy efficiency, considering energy 

savings, capacity savings, and environmental benefits, as appropriate. 

Make a strong, long-term commitment to implement cost-effective energy 

efficiency as a resource. 

Options to consider: 

• Establishing appropriate cost-effectiveness tests for a portfolio of programs to 

reflect the long-term benefits of energy efficiency. 

• Establishing the potential for long-term, cost-effective energy efficiency savings 

by customer class through proven programs, innovative initiatives, and cuttingedge technologies. 

• Establishing funding requirements for delivering long-term, cost-effective 

energy efficiency. 

• Developing long-term energy saving goals as part of energy planning processes. 

• Developing robust measurement and verification (M&V) procedures. 

• Designating which organization(s) is responsible for administering the energy 

efficiency programs. 

• Providing for frequent updates to energy resource plans to accommodate new 

information and technology. 

Broadly communicate the benefits of and opportunities for energy 

efficiency. 

Options to consider: 

• Establishing and educating stakeholders on the business case for energy efficiency at the state, utility, and other appropriate level addressing relevant customer, utility, and societal perspectives. 

• Communicating the role of energy efficiency in lowering customer energy bills 

and system costs and risks over time. 

• Communicating the role of building codes, appliance standards, and tax and 

other incentives. 

Provide sufficient, timely, and stable program funding to deliver energy efficiency where cost-effective. 

Options to consider: 

• Deciding on and committing to a consistent way for program administrators to 

recover energy efficiency costs in a timely manner. 

• Establishing funding mechanisms for energy efficiency from among the available options such as revenue requirement or resource procurement funding, system benefits charges, rate-basing, shared-savings, incentive mechanisms, etc. 

• Establishing funding for multi-year periods. 

Modify policies to align utility incentives with the delivery of cost-effective 

energy efficiency and modify ratemaking practices to promote energy 

efficiency investments. 

Options to consider: 

• Addressing the typical utility throughput incentive and removing other regulatory and management disincentives to energy efficiency. 

• Providing utility incentives for the successful management of energy efficiency 

programs. 

• Including the impact on adoption of energy efficiency as one of the goals of retail rate design, recognizing that it must be balanced with other objectives. 

• Eliminating rate designs that discourage energy efficiency by not increasing 

costs as customers consume more electricity or natural gas. 

• Adopting rate designs that encourage energy efficiency by considering the 

unique characteristics of each customer class and including partnering tariffs 

with other mechanisms that encourage energy efficiency, such as benefit sharing programs and on-bill financing. 

Sources: 

Itron White Paper, Business Intelligence for Enterprise Energy Management 

National Action Plan for Energy Efficiency, July 2006 

Mrs. CHRISTENSEN. I’d like to thank all of the panelists. We are 

also under a five minute limit for questions, and I am going to 

begin my questions, and I would ask for as concise responses as 

32 

possible so that I can get at least three questions in my five minutes. 

One of the reasons of course we scheduled this hearing is to establish a record which would serve as a basis for my being able to 

request assistance, and all of you have spoken to that. 

Mr. Smith, there are a number of programs out there to assist, 

as you mentioned, but some are being funded, some are not, some 

we are eligible for, some we are not eligible for. What, in your opinion, would be the most useful thing the Federal government could 

do—increase funding to state energy programs or, under Sections 

251 or 252 of Energy Policy, a partnership similar to Hawaii, the 

financing program? Maybe you could start with your recommendations as to the grants that are available that you might have some 

recommendations on. 

Mr. SMITH. Most definitely, Madame Chairwoman Christensen, 

we can definitely see an increase in the overall SEP formula. I urge 

Members of Congress to look at the formula for the Territory and 

really consider updating them. This formula has not been updated 

for over 20 years. 

When it comes to special solicitation, the territories are usually 

inadvertently discriminated against because many of the program 

priorities of the United States mainland are not the same for the 

insular areas. So, therefore, I suggest having a solicitation that let 

the territories compete among each other, if it must be competitive 

grants. For instance, there is a Solar America Initiative. These initiatives start where the population must be 250,000. From the very 

start, we can’t qualify. 

Our programs in the Territory as it relates to solar has been very 

successful. The report—as most people referenced—said that the 

Virgin Islands is in the best position to move these programs. 

Therefore, I think a program such as a Solar America Initiative 

should start with the territories and funding adequately should be 

available. 

Mrs. CHRISTENSEN. Thank you. 

Senator Richards, you have already heard about the Hawaiian 

Clean Energy Initiative—mentioned by Chairman Costa—and it is 

expected that the State of Hawaii would have to take some legislative and regulatory actions in order to make them more attractive 

to renewable energy investors. If the Department of Energy were 

to enter into a similar partnership maybe uniquely tailored to Virgin Islands, would you be willing to consider the legislative and 

regulatory changes that might be recommended? 

Mr. RICHARDS. Thank you, Madame Chair. I think at this particular point in time, at least as a member of the body, it would 

be premature for me to respond to that without knowing what the 

contents and the commitment is that would be required in the 

legislation. 

Mrs. CHRISTENSEN. But I’m sure that you—if it meant helping 

the Territory, that the Legislature would—and I think you have already started to address some issues by I think—did I read that 

you are providing some funding to seniors and low income. 

Mr. RICHARDS. Yes, we have. I can simply respond to you that 

if in the majority of the members mind that it is going to help the 

33 

energy crisis, I suspect that would be something the Legislature 

can address. 

Mrs. CHRISTENSEN. Thank you for your answer. I think they are 

currently reviewing that in Hawaii, and we wouldn’t expect you to 

give a blanket OK. 

Mr. Hodge, question to you. We’ve heard you make reference to 

inefficiencies at WAPA. Could you tell the Subcommittees a little 

about what WAPA has been doing to reduce those inefficiencies. 

Mr. HODGE. Yes, Madame Chair. Currently WAPA is embarked 

on efforts to achieve the efficiency, not only on the generation but 

on the distribution side and on the metering throughout the broad 

spectrum of the Authority. We invested in some waste heat boilers 

on St. Croix. The new one is being built on St. Thomas. We are refurbishing the one that was off line for the last several months. 

The one on St. Thomas alone, we are able to fast track the repairs 

of it and it will be coming back on line somewhere in late June, 

early July, which is about six months ahead of schedule. That itself 

allows for a combined cycle effort, which means it will be able to 

power a third unit by the exhaust from this waste heat boiler, 

which is a unit being spun without burning oil. 

It’s about 1.2 to 1.4 million dollars of savings when that unit is 

running, and by it coming on line in July, June, six months ahead 

of schedule, you are looking at 14 to 18 million dollars of savings 

in oil purchases. The one that is being built in St. Croix is also the 

same, and that’s based on today’s prices of oil. 

So, you know, the infrastructure needs to be maintained. There 

is a cash flow problem. The government has indicated that they are 

intent on satisfying their debt to the Authority, and with that we 

will be able to maintain the equipment and dispatch the units in 

the most efficient manner. 

Mrs. CHRISTENSEN. Thank you. 

My time is up. I will now recognize Mr. Costa for his questions. 

Mr. COSTA. Thank you very much, Madame Chairwoman. And 

thank all the witnesses for your testimony. You obviously caused 

myself and I think members of the committee to ask a lot of questions, but time is limited. 

Mr. Smith, why do you believe that there was—the insular areas 

were left out of the weatherization program? 

Mr. SMITH. As a colleague of mine said, it seems to be some time 

of folklore. They said in the initial program when the territories 

were asked, we declined. I checked every Energy Director prior to 

me, and no one has such recollection. 

Mr. COSTA. Let’s try to follow up on that. The comprehensive 

energy strategy that has been discussed with the Department of 

Energy, I was looking here in our handouts, and there seems to be 

a plan that’s at least been partially focused on. And I would like 

to get a better idea of where you are on that effort that talks about 

a staged approach, the work plan; it talks about project funding 

and planning, assessing the future U.S. VI energy situation. It goes 

on and it has six tasks. It seems to be a logical way in which to 

pursue this effort. Where would you describe you are in this process? 

Mr. SMITH. If my recollection serves me right, I think project 

funding was one of the first tasks in the work plan. And we have 

34 

had some meetings. We have met with all the stakeholders that we 

have identified to include HOVENSA, the Water and Power Authority, we have met with the Alliance, Mr. Darryl Miller’s group, 

we have met with the St. Croix Environmental Association, and we 

have taken their recommendations of what they can see as to be 

very profitable and viable within an energy strategic plan. We have 

catalogued those suggestions, and we kind of run out of money. 

And two days ago we did get an award from the Department of the 

Interior to continue that study. So we are moving—— 

Mr. COSTA. I think that plan is important in terms of helping get 

all the, for lack of a better term, the ducks in order in terms of how 

to proceed. I mean, you have a very tenacious and passionate representative in my colleague, Congresswoman Christensen, but she 

has to have a plan in place to say, look, we got our act together, 

this is what we think we can do to reduce these horrific rates that 

our citizens are paying, but we need help in implementing the 

plan. 

Let me ask you about landfill issues and gas. There was, I guess, 

a state energy program for grants—I mean in landfill. How many 

tons of trash does the Virgin Islands—— 

Mr. SMITH. Our numbers say that territorially we generate about 

400 tons per day. I hear recent numbers we can get up 500 tons 

a day. 

Mr. COSTA. Has serious waste to energy been considered as a 

part of a solution? 

Mr. SMITH. Yes, it has. We are in the process of reviewing some 

proposals from several companies who are offering to provide waste 

to energy solutions. The Energy Office is also doing a demonstration project with the Waste Management Authority to extract some 

of the methane from Bovinity landfill. 

Mr. COSTA. Because we are doing that a lot. I would like to go 

back to that, but my time is going quickly. 

Mr. Hodge, you talked in your testimony—not in your oral statement—about an electrical cable between St. Thomas and St. Croix 

to help reduce the distributive cost of power. How much would that 

cost and how serious is that proposal? 

Mr. HODGE. There is a study being done right now, I believe, 

through the Department of the Interior as to tell you what the actual cost would be to develop such a conductor between those islands. The benefits are a reduction in the amount of spending reserve that you have to run independently by each plant, and reliability by having the systems connected. In the event the FPI 

comes up with a possibility of a large generating facility, you could 

have it on St. Croix where it has land space and would benefit all 

the Virgin Islands. It’s critical to determine where the future 

should go for the Virgin Islands. The price is being determined as 

we speak. 

Mr. COSTA. You haven’t determined the cost effectiveness yet? 

Mr. HODGE. No. 

Mr. COSTA. It strikes me as the percentage of electricity that you 

are currently using to desalinize your water. What percentage of 

the electricity usage here in the islands go strictly for desalination 

of water? Can you give me that breakdown? 

35 

Mr. HODGE. It’s hard to say strictly because the units that are 

spinning to produce power, steam is extracted to run the desal 

units. I would guess somewhere in the neighborhood of steam for 

maybe 60 percent of the unit is going toward the desal plants. It’s 

a conjunction, while it’s generating electricity, we are using the extracted steam for water at the same time. 

Mr. COSTA. My time is expired, Madame Chairwoman, but there 

are a couple of questions, if we have a second round, I would like 

to come back to. And because of the water issues we have in California, I would like to get it separate from this hearing, but I would 

like to find out how much it cost per acre foot for you to desal 

water, because something we need to look at in greater effort in 

California. 

Mrs. CHRISTENSEN. Do you have an answer for that question? 

Mr. HODGE. Per acre cost I have to get that, but we can determine it. 

Mrs. CHRISTENSEN. The Chair now recognizes Mr. Shuster for his 

questions. 

Mr. SHUSTER. Thank you, Chair, and thank all the witnesses for 

testimony today. 

First question, Mr. Hodge, you talked about the efficiency, the 

things you are doing to increase the efficiencies of the plant. Can 

you spend enough money to really make that more efficient, or is 

it just the cost of oil so expensive that you are going to get little 

benefit out of those efficiencies? 

Mr. HODGE. The cost is simply prohibitive for a lot to happen, 

but you have to get efficient with what you have while you release 

your dependency from oil. If you have a combined effort, increase 

your efficiency, get rid of your dependency on oil all at the same 

time. 

Mr. SHUSTER. With the current plant you can’t get the tremendous increase in efficiency that you really need? 

Mr. HODGE. There is a lot that can be gained from the current 

plant, because there are some units that aren’t running due to lack 

of maintenance and need. Some of them have actually new parts 

that can be refurbished and perform in a better manner. If you can 

dispatch the units in an efficient manner and utilize both the No. 

6 and No. 2 oil in a manner that’s best for the plant, you can see 

a significant savings. 

The problem is you have units down, so you are running your 

most expensive units, and the larger ones aren’t running as well, 

and you are using more units to achieve the same amount of 

power. With the influx of revenue of cash, we will be able to get 

the units in a situated dispatched more efficiently. 

Mr. SHUSTER. Even with a older plant, you can see some efficiency? 

Mr. HODGE. That’s correct. The plant is older, but you do have 

a lot of units that have new generators, new turbines. There is a 

lot of new parts in those old units. 

Mr. SHUSTER. This LIHEAP program, coming from the northeast, 

Pennsylvania, we benefit greatly, our low income seniors especially 

with the LIHEAP. Do you receive any of that LIHEAP money down 

here in the Virgin Islands? I don’t know who, maybe, Mr. Smith, 

I don’t know if you know the answer to that. 

36 

Mr. SMITH. Yes, we do receive LIHEAP to the tune of roughly $122,000, and we have matched I think a million dollars to help 

with our Energy Crisis Assistance Program. What happens with 

the lack of funding, we usually have to take off a lot of qualifying 

people and only focus on the elderly and senior citizens. 

Mr. SHUSTER. There was some talk by some of you about solar 

and wind. Solar power, what percentage of the territory generates 

electricity through solar power presently? 

Mr. SMITH. I’d say less than 2 percent. 

Mr. SHUSTER. Even if you had a significant increase in solar, you 

are doubling, it would still only be 4 percent. 

Mr. SMITH. We do have a net peering program which is helping 

to increase that. The cost of solar panels is still very high for the 

average citizen. 

Mr. SHUSTER. What about wind? 

Mr. SMITH. Wind is growing very much. We are working with our 

permitting, and there is strong interest. I think there are at least 

a dozen people right now ready for the sky streams and similar 

turbines. 

Mr. SHUSTER. What percentage of wind produced electricity? 

Mr. SMITH. Even less than solar. 

Mr. SHUSTER. That brings me to my question, I see you put an 

RFP out on small power providers, and I read that’s soon to come 

in. 

Mr. HODGE. May 1. 

Mr. SHUSTER. As I mentioned the statement about coal producing 

electric plants and nuclear power, are those alternatives that have 

been considered? I know they are long-term. I know you talked a 

little bit short-term and long-term. These are long-term solutions. 

What are the prospects of coming up with a design for a smaller 

coal-fired and electric plant or taking the technology out of a nuclear sub, a smaller nuclear generator? Is that something to be considered or would it be something feasible here in the Virgin Islands? 

Mr. HODGE. There is a respondent that is proposing a coal solution to the territory’s needs, so that is one option. There is an existing facility in the Virgin Islands that has a coal-fired unit. So they 

are responding to the RFP. 

As far as nuclear, the economies of scale are a little tricky when 

you get to this size for a nuclear reactor. It has to be something 

that incorporates both the Virgin Islands and Puerto Rico for it to 

make sense from my knowledge of nuclear facilities, and that 

would still require an interconnection under water between the 

Virgin Islands and Puerto Rico. It has been mentioned and we are 

trying to get a alliance with PREPA right now in Puerto Rico to 

see where we could further evaluate those scenarios. 

Mr. SHUSTER. The grid right now doesn’t connect to Puerto Rico? 

Mr. HODGE. No, sir. St. Thomas is connected to St. John, and 

that’s the extent of the connection of the grid in the Virgin Islands. 

Mr. SHUSTER. I’m sorry. 

Mr. HODGE. St. Thomas and St. John are connected, but that’s 

the extent of any interconnection in the area. 

Mr. SHUSTER. The question is how difficult is that? How expensive is that? Is that prohibitive or is it something that can be done? 

37 

Mr. HODGE. St. Thomas and St. Croix the problem with the connection there is that those are some of the deepest waters and the 

undulating at the bottom of the floor of the water there as well. 

There is a study being done right now of the topography of the 

seafloor to see if it can actually be done at a decent price. St. 

Thomas and Puerto Rico might be even more affordable than the 

one through St. Thomas and St. Croix. It’s all being done through 

a study right now so we can get accurate numbers on it. The benefit would be tremendous. 

Mr. SHUSTER. Thank you. I see my time has expired. 

Mrs. CHRISTENSEN. Thank you. 

As requested by Chairman Costa, we are going to have a brief 

second round of questions. 

Senator Richards, as you listed possible alternative energy, you 

didn’t list voltaic. Was there a reason, or was it just an oversight? 

Mr. RICHARDS. No, Madame Chair, it’s not a particular reason. 

My sole purpose of being here is regard to the statement that I 

made that we can speak about all these other alternative energies, 

until we get to the bottom point of finding some time and some 

energy, getting the financial capital that we believe should be returned to the Virgin Islands, we are looking farther down in the 

future not dealing with today’s crisis that the residents and our 

constituents are faced with today in the Virgin Islands. 

Mrs. CHRISTENSEN. I think it’s a matter that we can also take 

up in another hearing, but part of the purpose for this hearing is 

looking at what is needed so that the capital—so that we can go 

back to Congress and see where we can capitalize the needs of 

WAPA and the territory in general. 

Mr. Miller, you spoke at one of my town meetings a couple of 

years ago, and I was—can you point to couple of areas where you 

seen some improvement? 

Mr. MILLER. Congress Lady, to be honest with you, when I— 

when we as ratepayers look at improvement by our Authority, we 

want to see or feel it in our pockets. And there is—feeling it in our 

pocket is where we would assess improvement, and we don’t see— 

we don’t feel it in our pockets, so we are not saying the improvement has been, if any, significant enough for us to say that improvement is working. 

Mrs. CHRISTENSEN. That is the bottom line. That is the bottom 

line. As you said in your testimony, it is severely impacting the 

quality of life here in the territory. 

Mr. Hodge, just to follow up a little on the coal issue. In your 

testimony I think you mentioned that coal would really not be an 

option for the Virgin Islands, but you did have a request for proposals for coal on the petcoke or dual fire units, and we have the 

availability of petcoke here in the territory. With the environmental problems that come from coal and coke burning and the 

likelihood that Congress is going to be enacting more climate 

change legislation, is that a viable solution for the territory? 

Mr. HODGE. It’s viable, especially if we can get through your help 

some relief from any possible carbon tax that might come in the future, if we can get the insular areas exempted from such a program, it’s even more viable at that point. So we look forward to 

your help and your efforts to help us with that. 

38 

But coal is a viable option. And I apologize, but I did resubmit 

my testimony for you having made some changes to it. You should 

have it in your presence by now. The clerk has received it. But coal 

is a viable option for us. 

Mrs. CHRISTENSEN. Thank you. Your answer allowed you to bring 

in the other issue about the credits. Thank you. 

I now recognize Mr. Costa for his questions. 

Mr. COSTA. Thank you very much. That was one of the areas I 

wanted to follow up with regards to petcoke, which is a by-product 

with regard to the refinery capability here and how carefully and 

cost effective that might be as part of the solution. 

It seems to me—and I’m new to the challenges that you are facing here, but you are the experts, and while Congresswoman 

Christensen has indicated at great length the challenges and the 

difficulty, the great difficulty it’s causing for citizens of the U.S. 

Virgin Islands on these utility rates, that like the strategies that 

we are attempting to pursue in the states, that there is no one silver bullet. Just seems to me that there is a combination of strategies that you are going to have to try to employ here as you look 

at renewable sources of energy, as you look at what you are currently using and how the refinery that exist here might be a part 

of that solution as you look on transitioning with other technologies. I know we haven’t even begun to talk about the potential 

for waste technology. 

But speaking of renewables, Mr. Cole, I know among other wonderful islands that I enjoy frequenting when I can get some free 

time, in Hawaii they have done a great deal with wind power, and 

I’d like to get your take as to the acceptance and utilization here. 

One of the things that the islands have in abundance it seems to 

me is wind power, and I would like to know what studies have 

been done and what the current view is from the Public Services 

Commission on the availability of wind power and its applicability. 

Mr. COLE. Thank you, Mr. Costa. Mr. Smith, Bevan Smith, who 

is the Director of the Energy Office held a conference about a 

month and a half ago where it was a wind energy conference, and 

the statistics have shown that here on the island of St. Croix, on 

the south shore of St. Croix and in St. Thomas that wind can be 

a viable renewable energy. The thing is the cost going into getting 

this energy up and running. 

The Public Services Commission has always advocated with the 

Water and Power Authority through a regulatory authority that 

RFPs went out, and wind was one of the winners in the RFP that 

went out earlier, but it’s an avoided cost issue. I’m sure Mr. Smith 

can speak more to the facts of the study on wind, and Mr. Hodge 

in terms of the avoided cost in terms of that type of energy. 

Mr. COSTA. Mr. Smith, you care to comment briefly? 

Mr. SMITH. Yes, sure. As Mr. Cole said, we did conduct a wind 

energy workshop, and the attendance was overwhelming. It was 

one of the best workshops I have seen on energy. We had some 251 

very interested attending. 

With wind, we have steady marginal winds. However, the strong 

interest in the territory is for small wind, unlike most of the states, 

and because of that we have to really look at the balance of our 

tourism product and putting up small wind turbines throughout 

39 

downtown Charlotte Amalie or Christiansted, St. Croix. So the Department of Planning and Natural Resources are carefully trying 

to see what areas, how we are going to go about putting small 

wind. 

Definitely wind is an option at the utility scale, and I know for 

sure WAPA is considering utility scale wind in the RFP. 

Mr. COSTA. I would just from my own experience suggest that 

the concern about tourism and the impacts, Maui is a wonderful island like St. Croix is, as well as St. Thomas or St. John, but they 

have been experiencing—not just on Maui but other islands of the 

Hawaiian chain—wind. And they’ve got a series of large scale generation wind plants down one of the ridges of the mountain there 

between the heel valley between Makawao and on the way over to 

Lo’ihi, and I don’t think it has one impact on the level of tourism 

for the people wanting to go to Hawaii. 

In California, we are blessed with much of course, but tourism, 

believe it or not, is one of our major industries in California, and 

we have series of regions where we have wind farms that, some 

would think they are rather ostentatious. I am not suggesting you 

put it here, but they are very productive. Almost excess of 4 percent of California’s energy needs now are from wind. 

So I think that it’s not going to solve all your problems, but it 

does provide I think an important balance and mix. I don’t think 

it’s going to—I would be very doubtful that it would impact tourism 

here in the islands. 

Mr. SMITH. May I respond? 

Mr. COSTA. I agree with you, and I think the Office of the 

Governor does also, but they were very surprised that our interest 

here is small wind. Therefore, we are talking about residential and 

small commercial areas putting individual towers on their property. 

When we look to the states, there are not many districts that 

deal with small wind. We are trying to really see how we can still 

satisfy the individual residences and protect our tourism product. 

But we do want to see wind power here in the territory. We are 

working very hard to see that happen. Thank you. 

Mrs. CHRISTENSEN. The Chair recognize Mr. Shuster for his 

questions. 

Mr. SHUSTER. Thank you. 

One brief question, this is follow up to grid. You said the water 

is very deep between St. Croix and St. Thomas. What about the 

other islands in the Caribbean, are there other islands—I got to 

believe they have similar type problems. Can you connect to any 

of those other islands? 

I think sometimes we all sit here and think, well, we are all the 

U.S., we got to connect to a U.S. territories and states, but in Europe, the grid is all connected throughout Europe. The French sell 

to Germans and the British sell to Dutch. Is there another island 

or other islands that are close enough without the deepwater problem? 

Mr. HODGE. There is a long-term plan that is out there that discusses the connection of underwater grid between the Caribbean island that goes down the same route as the communication cables. 

So there has been some discussions and talks about it. 

40 

We used to be a member of CARILEC, which is the organization 

for all the Caribbean electric companies, and previously the Authority had removed itself from the membership, and I have recently reapplied for membership. So that would again foster that 

kind of discussion again to see if we could get some kind of agreement worked out between all the islands. 

Mr. SHUSTER. Is my assumption correct that all these islands 

throughout the Caribbean have this energy situation? 

Mr. HODGE. That’s correct. We all generate pretty much the 

same way. Some of the islands have subsidy from the government, 

and that’s how they combat their problems. And then you have 

other islands that some are blessed with geothermal, some are 

blessed with different resources; but pretty much most of the Caribbean islands generate using oil in the same way. 

Mr. SHUSTER. Thank you. 

Mrs. CHRISTENSEN. Thank you. I want to thank the first panel 

for their valuable testimony. And members of the Subcommittees 

will likely have additional questions which will be submitted in 

writing, which we will ask for you to respond in writing as well. 

Thank you very much. 

I would like to now recognize the second panel of witnesses: Mr. 

Robert Nicholson of Sea Solar Power International; Mr. James 

Resor, the Chief Financial Officer of groSolar; Frazier Blaylock, the 

Director of the Federal Government Relations, Covanta Holding 

Corporation; and Mr. Jim Powell, Senior Policy Advisor to the 

Southern States Energy Board. 

Mrs. CHRISTENSEN. We are ready to resume our testimony with 

the second panel. The Chair now recognizes Mr. Nicholson to 

testify for five minutes. 

STATEMENT OF ROBERT NICHOLSON, 

SEA SOLAR POWER INTERNATIONAL 

Mr. NICHOLSON. Madame Chairwoman Christensen, Mr. Chairman Costa, Representative from the Commonwealth from Pennsylvania, Mr. Shuster, staff of the Subcommittee, listening audience, 

renewable energy enthusiasts, my name is Robert Nicholson. I am 

President of Sea Solar Power International, and we are a leading 

firm in the commercial development of OTEC. 

OTEC takes advantage of the solar energy that’s stored in the 

upper layers of the ocean and surrounds the various islands of the 

Caribbean. St. Croix, for example, can be supplied entirely with 

OTEC 100 percent of the time with about 30 megawatts of installed power. 

The ocean is the largest solar collector in the world. It absorbs 

the sun 24 hours a day. The energy is stored. We use the surface 

water as the heat source, we use the cold bottom water which is 

40 degrees, 3,000 feet below the surface as a heat sink, and we can 

develop 10 megawatts of electricity. 

This power plant is designed specifically for small tropical islands. It will produce 3 million gallons of desalinated water per 

day. It will produce a whole variety of fish, vegetables that could 

be grown with the upper lining of the nutrient rich water from the 

bottom of the ocean. It would support 500 acres of mariculture. St. 

41 

Croix, the tropical islands throughout the equatorial zone can become energy rich with this technology. 

We have our own financing. We are proposing to build, own and 

operate and install these plants. We have proposals in ten other 

small islands. We have proposals for the Hawaiian Electric Company, Puerto Rico, and the Persian Gulf for 100 megawatt floating 

plants. We are convinced that we can supply most of the tropical 

world equatorial zone with low cost clean energy using only solar 

energy, producing enormous quantities of freshwater. 

Each 100 megawatt power plant would support an annual fish harvest of $100 million a year. This is a technology that is ready 

for today. We have a team that we have assembled that can design, 

build, own and operate each plant. We have full funding from private investors, and we are in the position to provide St. Croix with 

a proposal May 1st for a 10 megawatt land base plant. 

Once the island becomes renewable energy dependent, it can 

then convert its automobiles to electric plug-ins, and at that point 

you become energy rich, energy self-sufficient, and no longer do you 

have a goal vein on your treasury for money going to import foreign 

oil. We can do this in American Samoa. This can be applied to 

Guam, all the territories, all the islands throughout the tropical 

equatorial zone. 

At the moment we have a proposal to the Hawaiian electric company for 100 megawatt plant. The whole idea for the future is to 

build eight 200 megawatt power plants, surround Oahu with these 

solar energy generating facilities, and at that point again convert 

to electric plugs-in. They become energy rich. 

One of the best examples to site in the Caribbean and everyone 

knows this, and you think you have problems in St. Croix, St. 

Thomas, St. John, Haiti is in dire straits. It is a country in ruin. 

This technology can make them very energy independent. 

The lower the cost of energy in any given economy, the higher 

the standard of living for its citizens. So now is the time to take 

advantage of this unusual situation. You are surrounded by energy, 

you are rich in your own natural resource. We have the technology 

that can convert that solar energy into electricity 24 hours a day, 

enormous quantities of fish and food production and automobile 

transportation as well. 

We are currently working with research laboratories, and we 

have two ways to generate liquid fuel from the seawater using only 

solar energy. We believe that from a national security standpoint, 

we can make our country, United States, energy rich, energy independent. We don’t have to be relying on foreign produces who are 

not our friends. This is a fantastic opportunity for everyone. 

We’ve been working with WAPA. We realize that this is a tremendous opportunity now with the new director who’s fresh, who 

has new vision. We have dynamic leadership with Donna 

Christensen, the representative to the islands. And I am pleased 

that Chairman Costa with his interest in renewable energy just 

makes it a fantastic opportunity to move this forward. 

So in conclusion we are getting ready to submit the proposal May 

1st. We will have a very attractive competitive price. This will I’m 

sure get the attention of everyone. We have our own financing. 

There is no risk to the host client. We bear that risk. However, in 

42 

the future at any time should the WAPA, the U.S. Virgin Islands 

want to purchase the power plant from us, we will sell it to them. 

So we are not a threat to oil or coal or to the operation that’s now 

underway. This is just an incredible opportunity to ease in to renewable energy and get off in a phased out manner with fossil fuel. 

Thank you. 

Mrs. CHRISTENSEN. Thank you, Mr. Nicholson. 

[The prepared statement of Mr. Nicholson follows:] 

Statement of Robert J. Nicholson III, President, SEA SOLAR POWER 

INTERNATIONAL, LLC, Owned by the Abell Foundation 

‘‘FEED THE PEOPLE—SAVE THE WORLD’’ 

WHAT IS OTEC? 

OCEAN THERMAL ENERGY CONVERSION

• OTEC is an economically and environmentally efficient means to convert the 

solar energy of the tropical oceans into low-cost electricity. 

• A large floating vessel similar to an ocean drilling rig or large tanker houses 

the power cycles. Small, land based plants are also available. 

• Warm 80 degree F surface water is pumped through heat exchangers in order 

to boil the working fluid, propylene, into a vapor. Propylene boils under pressure at 67 degrees F. The vapor then expands through vapor turbines which 

drive generators. 

• Cold 40 Degree F bottom water is pumped up from 3,000 feet below the surface 

to condense the vapor back into its liquid state. The liquid propylene returns 

to the evaporators where the cycle starts all over again. 

OTEC 

RENEWABLE ENERGY

• Oceans are largest solar collectors on earth 

• They are already built and paid for 

• Manmade solar collectors only work when the sun shines 

• OTEC - base load power operates 24 hours per day 

• Stored solar energy throughout the equatorial zone could provide 300 times the 

world’s consumption of electricity 

THERMAL ENERGY 

• A pound of water raised one degree is lifted to an equivalent height of 778 feet 

• OTEC operates on a delta-T of 40 Degrees F 

• 40 degrees x 778 feet = 31,120 feet 

• Best possible Carnot cycle designed by SSP is 3.25% 

• 3.25% x 31,120= 1,011 feet 

• Warm water, cold water—divide 1,000 by 2 = 500 feet of head—constant heat 

source 

TWO STANDARD OTEC MODELS 

• 10 MW land based OTEC plant—3 million gallons of fresh water per day 

• 100 MW floating OTEC plantship—32 million gallons of fresh water per day 

• Both small and large plants can be dedicated to produce only fresh water 

• Small land based plant: 10 million gallons of fresh water per day—large 

plantship—130 million gallons of fresh water per day 

• Large quantities of ammonia for fertilizer 

STUDIES CONFIRM TECHNICAL FEASIBILITY 

• Fluor Daniel 

• Lehigh University Energy Research Center 

• EA Engineering / Abell Foundation 

• Indian Government Appraisal 

• Southern States Energy Board’s Special Report to Puerto Rico 

• Stone & Webster / Kvaerner- John Brown 

43 

SEA SOLAR POWER INT., LLC, TEAM 

• Sea Solar Power International, LLC: OTEC cycle designed by J. Hilbert 

Anderson 

• Abell Foundation: equity funding 

• AON Risk Insurance: guarantee performance of each SSP-OTEC plant 

• Burns & Roe Enterprises, Inc: mechanical engineers—design OTEC cycle 

• Whiting-Turner Contracting Company: construction of complete OTEC plant 

• Mele Associates, Inc: environmental permits 

• Loria Emerging Energy Consulting: OTEC expert 

• Dr. Pierce Linaweaver: OTEC expert 

• Alion Science & Technology: marine architects—design marine platforms 

• Healy Tibbitts Builders, Inc., Division of Weeks Marine, Inc: install cold water 

pipe 

PROPOSAL 

• SSPI is prepared and eager to install OTEC plants throughout the equatorial 

zone 

• SSPI has the most advanced OTEC design, the team in place to deliver and the 

financing from private investors to begin now 

• SSPI is seeking sincere clients to enter into signing contracts for both power 

and water 

• This includes both the land based OTEC for small islands and the large floating 

OTEC plantships for continental applications 

ACTION 

• Identify decision makers—coordinate with their technical advisors 

• Select ideal site 

• Negotiate power and water contracts 

• Secure operating permits 

• Install OTEC plant—3 years 

• Additional plants as desired 

Mrs. CHRISTENSEN. The Chair recognizes Mr. Resor to testify for 

five minutes. 

STATEMENT OF JAMES RESOR, CHIEF FINANCIAL OFFICER, 

GROSOLAR 

Mr. RESOR. Thank you. First, thank you to Honorable Chairwoman Christensen and Chairman Costa, Representative Shuster, 

and particularly I note staff has worked hard to pull together these 

hearings. 

My name is James Resor. I’m the Chief Financial Officer of 

groSolar. We are a distributor and installer of photovoltaic systems 

for residences and also commercial enterprises. We operate in 

about 40 states, and we are based in Vermont but obviously have 

field offices throughout the mainland. In our experience we also 

work with a lot of different utilities, so I very much appreciate 

hearing the perspectives of WAPA earlier today. 

A couple of comments. One is when we look at solar, since we 

are involved in solar projects throughout many different situations 

from the northeast to California to Colorado, there are a couple 

variables that we look at that make it more compelling than other 

places. Probably the most important is, what are the electricity 

rates that ratepayers have to pay from a conventional source of 

electricity. 

So clearly, as we have heard many testify, when you are paying 

more than 30 cents a kilowatt hour right off the bat, regardless of 

your sun quality, even if that was 35 cents in Massachusetts or 

44 

Alaska, it would still be a relatively compelling opportunity for 

solar. Clearly here when you add an addition that you have ample 

sunlight, the opportunity for solar as a true distributed source of 

energy in small doses for residences or commercial enterprises is 

compelling. 

In addition, there are certain site characteristics that are important. A very important feature is the cooperation with the local 

utility. And fortunately there is a lot of data and experience that 

you can draw from other parts of the United States in terms of net 

metering and how those programs are implemented to make 

streamline the implementation so it doesn’t become a barrier, but 

it really encourages the installation of solar. 

The other aspect terms of net metering, which I understand has 

recently been put in place for the Virgin Islands, which is very 

positive, is to be careful that you don’t exclude commercial enterprise. Sometimes if the cap is only 10 kilowatts, you may effectively 

exclude some opportunities for solar for food distributors and hotels 

and other commercial enterprises which have the same—are feeling the same pinch of the high electricity prices. 

In our experience a lot of our clients in the commercial sector are 

big box retail stores, food distributors that have a lot of air conditioning and food refrigeration electricity uses and are often very attractive customers for solar solution. 

One other piece which I addressed in my written testimony I 

think the timing of this hearing is very critical, and that as you 

probably all know, last week the Senate passed a bill particularly 

for solar and wind renewing the investment tax credit and other 

features that have been discussed in the House already, in fact 

passed in the House under different forms. But the bill under— 

that was introduced by Senator Cantwell did pass the Senate I 

believe 88 to 8. Again, showing strong bipartisan support. Now the 

interest will turn back to the House. 

I think your Subcommittees taking up this issue—and that’s a 

bill that helps the U.S. Virgin Islands as it does any part of United 

States because it basically allows businesses to have that longer 

term horizon to drive the commercial investment tax credit. In addition, it helps at the residential level by extending the 30 percent 

tax credit that’s available to the residence owner and removing the 

cap. Right now it’s capped at $2,000 per system. So I think those 

are both—and there is more detail of that in my written testimony, 

but again I think the extent that the hearings from these Subcommittees can provide additional momentum and support for 

those discussions in the House, that will be extremely timely. 

And then last, again I will be happy to take any questions on 

solar, but we feel there is a tremendous opportunity here in the 

U.S. Virgin Islands, and I think as Chairman Costa pointed out, 

there is no one silver bullet. You really need to look at a mixed 

strategy over time that you can start to address the acute needs 

that the people of U.S. Virgin Islands are experiencing. Thank you. 

Mrs. CHRISTENSEN. Thank you, Mr. Resor. 

[The prepared statement of Mr. Resor follows:] 

45 

1See Appendix 1 for overview of PV, solar thermal and other solar technologies 

Statement of James Resor, Chief Financial Officer, groSolar 

Introduction: 

Thank you, Mr. Chairman and Members of the Committees, for providing me the 

opportunity to testify today. 

My name is James Resor. I am the Chief Financial Officer of groSolar, Inc. 

groSolar (www.grosolar.com) is a national distributor, integrator and installer of 

solar photovoltaic systems for residences and commercial enterprises. We are active 

in more than forty states and Canada with offices and distribution centers in several northeastern states, New Jersey, Colorado, California, Oregon and Canada. 

In addition to our diverse residential solar experience, groSolar has designed and 

installed solar systems for a wide range of commercial and government enterprises 

and other property owners. These installations include: food distribution centers, agricultural operations, schools, municipal buildings, general office buildings, multiunit residential complexes, sports stadiums and resort properties. These solar installations are tied to the local electric utility (‘‘grid-tied’’). Customers retain access 

to their electric utility while generating electricity from solar power. 

Solar energy systems (photovoltaic for electricity or solar thermal for water heating) can be used in most places throughout the United States. Photovoltaic (PV) and 

solar water heating systems are distributed generation (DG) technologies. Like 

other DG technologies, they provide energy at the point of consumption rather than 

at a central power plant hundreds of miles away. As such, DG does not rely on vulnerable regional transmission lines and local distribution networks. By producing 

energy at the source of consumption, solar power alleviates stress and vulnerability 

on the grid. It also ensures power generation should transmission facilities or generating stations fail due to terrorism, accidents or natural disaster. Solar power is a 

very flexible solution that can be added in targeted or widespread doses for residential and commercial purposes to meet the needs of consumers and utility grid reliability. 1

Where Solar Energy Makes Sense: 

The relative attractiveness of solar installations depends upon three sets of variables: (I) geographic/economic factors, (ii) site characteristics, (iii) and program objectives: 

1. Geographic/Economic Factors: 

• Utility prices for conventional electricity vary greatly among different parts of 

the country. High cost areas like the Northeast, much of California, Hawaii and 

Insular Areas such as the U.S. Virgin Islands make solar systems look relatively more attractive than in low cost areas such as parts of the Southeast 

or certain Western states. When electricity prices are approaching $0.20 per 

kwh or even higher (versus the U.S. mainland average of $0.13 per kwh), this 

makes solar energy that much more attractive. Thus, in places like the U.S. 

Virgin Islands or Hawaii, prices greater than $0.30 per kwh offering a compelling opportunity to install solar energy systems. 

• Favorable local regulations such as the existence of ‘‘net metering’’, which allows customers to sell excess power back to the grid at the same price as they 

purchase power, are critical. 

• Local/utility financial incentives provided by the state or local government or 

utility company that can augment federal incentives. An example of this can be 

where the local utility is willing to provide incentives to homeowners or businesses to install solar in order to address peak demand or grid congestion 

issues. This can help the utility mitigate risks of brownouts and/or avoid expensive grid or generation capacity enhancements. For example, groSolar is working with several utilities to provide ‘‘distributed generation’’ near the demand 

points to work around grid congestion points and thus avoid expensive grid upgrades. 

• Amount of sunlight. While Arizona is obviously better than Massachusetts in 

terms of sunlight, other variables such as relative utility prices and local regulations are more critical and usually outweigh the significance of the amount 

of sunlight. Consider the fact that Germany and Japan have been the leaders 

in solar capacity with far less solar resources than the U.S. Acceptance of solar 

energy in southern California has more to do with high electric rates and supportive local incentives than plentiful sunlight. 

46 

2 EIA, Net Generation by Energy Source by Type of Producer, October 2006. 

2. Site Characteristics: 

• Various site-specific characteristics affect the productivity and/or installation 

costs of solar systems. It is preferable to have: 

Æ Unobstructed southerly site exposure 

Æ Flat roof or low-angle slope (or nearby fields or parking lots for groundmounted or canopy arrays) 

Æ Less than 60 feet above ground for roof mounted systems (preferably 1-2 stories) 

Æ Structurally sound roof to bear weight of solar array without significant obstruction from dormers, mechanical equipment, vents or shading from sunlight 

3. Program Objectives (some of these apply more to commercial opportunities): 

• Property owner/manager objectives 

Æ Lock in long-term, predictable energy costs to mitigate risks of electric rate 

increases, particularly for those areas that are highly dependent upon petroleum-based sources for electric generation. 

Æ Reduce carbon emissions 

Æ Use solar energy as part of broader energy conservation measures (e.g. with 

efficient lighting, recycling, etc.) to reduce overall energy costs 

Æ Public relations value to residents, employees, customers and other constituents 

• Sufficient scale of project to provide economies of scale for design, permitting, 

financing, installation of multi-residential sites or office buildings. A portfolio of 

smaller projects or residential installations, which share a common owner/manager and other characteristics, can also provide attractive economies of scale 

and reduce the all-in cost of solar installations. 

• Long-term financing potential 

Æ Good credit quality of owner/user of power (or use of 3rd-party credit enhancements/guarantees) to facilitate long-term financing 

Æ Ability of owner or third-party to use commercial investment tax credits 

which are currently 30% in year one 

Current Legislation: 

I would now like to direct my testimony to current discussions within Congress. 

The timing of this joint hearing is excellent. Earlier this month, Senators Cantwell 

and Ensign proposed the Energy Tax Stimulus Act of 2008 (S. 2821). It contains 

key items that are necessary for continued rapid growth of solar energy in the U.S., 

including Insular Areas such as the U.S. Virgin Islands. The proposed legislation 

draws on strong bipartisan support for solar. For example, two important provisions 

are: 

1. the extension of the 30% Investment Tax Credit (ITC) for commercial solar investments for eight years (and allowing electric utilities to claim the ITC) 

2. the extension of the 30% personal tax credit for one year for residential solar 

investments while also repealing the current $2,000 cap 

Further information on the components of this important legislation is included 

in Appendix 2. The short and long-term benefits of enacting this legislation would 

be significant. The benefits include: 

• Increased energy security: Solar energy is a domestic and abundant energy 

source in the U.S. The U.S. has the best solar resources of any developed country in the world. Proportionally, U.S. solar energy resources exceed those of fossil, nuclear or other renewable energy resources. Despite this tremendous advantage, the U.S. has failed to capture and harness this free and readily available energy. In 2006, solar energy produced just 1/30th of one percent of all 

electricity in the U.S.; Germany in contrast, with the solar resources no better 

than those of Alaska, installed seven times more solar energy property than the 

entire U.S. 2 Solar technologies help stabilize the nation’s electricity grid, provide clean, reliable power, and reduce the impact of natural disasters and terrorist acts. By generating electricity at the point of consumption, the effects of 

natural disaster or terrorist attacks can be mitigated. Producing these homegrown technologies in the U.S. will reduce our dependence on foreign sources 

of energy, while simultaneously lowering the cost of energy to consumers. 

47 

3Solar Energy Industries Association Natural Gas Displacement Model 

• Reduction in the use of high cost natural gas (and other petroleum-based fuels): 

In most parts of the U.S., peak electricity demand occurs when solar electricity 

is near optimal efficiency (9 AM—6 PM). This demand load is almost exclusively 

served by central station gas generation (or other petroleum-based fuels) that 

can be easily cycled on and off and is often highly inefficient. Given the high 

price of natural gas to key industrial sectors and consumers, the U.S. can no 

longer afford to neglect its abundant solar resources. Analysis conducted by the 

Solar Energy Industries Association (SEIA) concludes that an eight-year extension and expansion of investment tax credits for solar energy will displace over 

5.5 trillion cubic feet (Tcf) of natural gas, providing an economic value to consumers in excess of $50 billion. 3 This is enough energy to displace the need for 

all new LNG terminals by 2012. 

• Hedge against rising energy prices: In the last five years, consumers have seen 

electricity prices escalate between 20 and 78 percent. At the same time, we 

have seen the price of natural gas triple and the price of gasoline routinely exceed $3.00 per gallon. Each year the cost of energy is taking a larger percentage 

of a family’s income than at any other time in U.S. history. This energy inflation vulnerability especially impacts the poor and elderly on fixed incomes. 

Solar can help address this vulnerability because it requires no fuel to operate. 

Although a solar system is more expensive up front in many cases, there are 

no additional costs for operating a system once installed. Furthermore, solar 

panels are guaranteed for 20-25 years, allowing consumers to ‘‘lock in’’ their 

electricity prices for decades. 


41819.001.eps 41819.002.eps
48 

4 NREL report, ‘‘Distributed Energy Resources for the California Local Government Commission,’’ October 2000. 5Sandia National Laboratories, Energy-Water Nexus, http://www.sandia.gov/news-center/ 

news-releases/2006/environ-waste-mgmt/mapwest.html 

• Job creation: Solar systems require high-tech manufacturing facilities and 

produce well paying, high-quality jobs. Extending the tax credit will create an 

estimated 55,000 new jobs in the solar industry and over $45 billion in economic 

investment. groSolar has doubled its workforce in the last 12 months, including 

some hires who had been recently laid off from construction related employment 

due to the downturn in the U.S. housing market. 

• Clean energy and environmental benefits: Solar energy is the cleanest method 

of energy generation, in terms of avoided air, waste and noise pollution, energy 

payback, water conservation, radiation, harm to wildlife, or environmental risk 

in the event of an accident. Solar energy produces no greenhouse gases, no acid 

precipitation or toxic emissions, and no other air pollution of any kind. Over the 

40-50 year life of a solar electric system, every kilowatt (kW) of solar electric 

power reduces 217,000 pounds of carbon dioxide, 1500 pounds of sulfur dioxide, 

and 830 pounds of nitrogen oxides emissions as compared to electricity produced 

by conventional generation. 4 Photovoltaic solar energy generates electricity 

without using any water. In contrast, fossil fuel and nuclear based electricity 

generation use substantial amounts of water to run steam turbines. Across the 

U.S., approximately 40% of fresh water withdrawals are used for electric generation. 5 If water-starved communities like Phoenix and Las Vegas are to continue growing, we must place greater emphasis on water-free electricity generating technologies. 

APPENDIX 1 

OVERVIEW OF SOLAR ENERGY TECHNOLOGIES 

PHOTOVOLTAICS (PV)

Technology 

Photovoltaic (PV) devices generate electricity directly from sunlight via an electric 

process that occurs naturally in certain types of material. Groups of PV cells are 

configured into modules and arrays, which can be used to power any number of electrical loads. 

Crystalline silicon—the same material commonly used by the semiconductor industry—is the material used in approximately 90% of all PV modules today. PV 

modules generate direct current (DC) electricity. For residential use, the current is 

then fed through an inverter to produce alternating current (AC) electricity that can 

power the home’s appliances. 

The majority of PV systems today are installed on homes and businesses that remain connected to the electric grid. Consumers use their grid-connected PV system 

to supply some of the power they need and use utility-generated power when their 

power usage exceeds the PV system output (e.g., at night). In 41 U.S. states, when 

the owner of a grid-connected PV system uses less power than their PV system creates, they can sell the electricity back to their local utility, watch their meter spin 

backwards, and receive a credit on their electric bill—a process called net metering. 

The electric grid thus serves as a ‘‘storage device’’ for PV-generated power. Net metering is a critical requirement to facilitate adoption of PV systems. 

Markets 

The global PV market has averaged 38% annual growth over the last five years. 

Yet PV still accounts for a small percentage of electricity generation worldwide and 

less than 1/30th of 1% in the U.S. Furthermore, the U.S. lags behind Germany and 

Japan in installations as well as in manufacturing. Germany and Japan have 

surged to the lead with coherent, long-term national incentive policies, despite dramatically inferior amounts of sunshine. 

The U.S. possesses the best solar resources in the world, and yet Germany installs 

seven-times as much PV as the U.S. Germany and Japan have taken the lead in 

solar manufacturing and installations because of long-term national incentive policies designed to make solar power mainstream. Japan instituted a carefully designed rebate program that lasted over ten years, while Germany incentivizes solar 

installations by paying 3-4 times retail electric rates for the electricity generated 

from PV systems for 20 years. The surging player in the industry, China, has gone 

49 

from having no PV industry to manufacturing twice the level of the U.S. in just 

three years. While California is the dominant U.S. market for PV, with 73% of the 

grid-tied installations in 2006, there is substantial activity in other states. 

SOLAR THERMAL SYSTEMS

Technology 

Solar thermal systems provide environmentally friendly heat for household water 

and space heating. The systems collect the sun’s energy to heat either air or a fluid. 

The air or fluid then transfers solar heat to your home or water. In many climates, 

a solar heating system can provide a very high percentage (50 to 75%) of domestic 

hot water energy. In many northern European countries, combined hot water and 

space heating systems are used to provide 15 to 25% of home heating energy. 

Active solar water heating systems can be either ‘‘open loop,’’ in which the water 

to be heated flows directly through the rooftop collector, or ‘‘closed loop,’’ in which 

the collector is filled with an antifreeze solution that passes through a heat exchanger mounted in or around your normal water heater. During the day, in good 

weather, your water can be heated entirely by the sun. In any weather, the heating 

system can back up your existing heater, reducing overall energy costs. 

Markets 

In the absence of coherent national policies, from 1997 until 2005, the U.S. solar 

water heating and solar space heating market showed little growth, averaging about 

6,000 installations per year. In the past couple years, numerous states have created 

or expanded incentives to complement the new federal tax credits. Accordingly, the 

market is has increased quite a bit. Solar water heating can be done at same time 

as PV. 

CONCENTRATING SOLAR POWER

Technology 

Concentrating solar power (CSP) plants are utility-scale generators that produce 

electricity by using mirrors or lenses to efficiently concentrate the sun’s energy. Two 

principal CSP technologies are parabolic troughs and dish-Stirling engine systems. 

Using curved mirrors, parabolic trough systems concentrate sunlight to drive conventional steam turbines. The mirrors focus the sun’s energy onto a receiver pipe 

or heat collection element. From there, a high temperature heat transfer fluid picks 

up the thermal energy and uses the heat to make steam. The steam drives a conventional steam-Rankine power cycle to generate electricity. A typical collector field 

contains many parallel rows of troughs connected in series. 


41819.003.eps
50 

THIN FILM SOLAR

Technology 

There are four basic categories of thin film PV based on the materials used to convert light into electricity. They are: i) Amorphous Silicon (• α-Si ), ii) Cadmium Telluride (CdTe), iii) Copper Indium (Gallium) di-Selenide (CIS/CIGS) and iv) Emerging (Dye-sensitized, Organic or Nano-materials) 

Not only can different materials be used to create the PV effect, but they can also 

be deposited on different substrates. Currently, most production technologies use 

glass as the substrate, as in the case of all CdTe technologies, and many emerging 

α-Si technologies. But some α-Si solutions use a flexible metal foil as the substrate, 

and many emerging and CIGS technologies can be deposited on glass or metal foil 

as well as lower temperature substrates like plastic. 

Unlike today’s traditional solar photovoltaic (crystalline PV) technology, thin film 

PV uses very little or no silicon and other material to build a solid state electricity 

generation device. Thus, a whole new range of applications otherwise not possible 

using traditional solar cells are enabled because thin film materials can be applied 

to a multitude of surfaces such as glass, plastic and flexible metal foils. Thin film 

PV can be manufactured using various deposition and packaging methods that offer 

flexibility in scaling production and addressing applications. Currently, commercial 

applications of thin film PV are limited due to lower efficiencies and used predominantly for large utility-scale PV projects where space is not a constraint. 

APPENDIX 2 

THE CLEAN ENERGY TAX STIMULUS ACT OF 2008

On April 3, 2008 Senators Cantwell and Ensign announced the Clean Energy Tax 

Stimulus Act of 2008 (S. 2821). It contains key items that are necessary for continued rapid growth of solar energy in the U.S. Here is a summary of key sections of 

the proposed legislation. 

Purpose: To provide for the limited continuation of clean energy production incentives and incentives to improve energy efficiency in order to prevent a downturn in 

these sectors that would result from a lapse in the tax law. 

Title I—Extension of Clean Energy Production Incentives 

Section 101. Extension and modification of the renewable energy production tax credit (IRC Section 45). Under current law, an income tax credit is allowed for the production of electricity using renewable energy resources, like wind, 

biomass, geothermal, small irrigation power, landfill gas, trash combustion, and hydropower facilities. A taxpayer may generally claim a credit for 10 years, beginning 

on the date the qualified facility is placed in service. In order to qualify, however, 

facilities must be placed in service by December 31, 2008. The bill extends the placed 

in service date for one year (through December 31, 2009). It also redefines small irrigation power to include marine and hydrokinetic energy, and enables the credit to 

help reduce the cost of renewable electricity that is ultimately sold to utility customers when the utility itself is also a part owner of the renewable facility. 

Section 102. Extension and modification of the solar energy and fuel cell 

investment tax credit (‘‘ITC’’) (IRC Section 48). Under current law, taxpayers 

can claim a 30 percent business energy credit for purchases of qualified solar energy 

property and qualified fuel cell power plants. In addition, a 10 percent credit for 

purchase of qualifying stationary microturbine power plants is available. The credit 

for qualified fuel cell power plant property is capped at $500 per 0.5 kilowatt of capacity. Credits apply to periods after December 31, 2005 and before January 1, 

2008. The bill enables taxpayers to claim the 30 percent business credit for the purchase of fuel cell power plants and solar energy property and the 10 percent credit 

for stationary microturbines, through December 31, 2016. In addition, the bill repeals 

the $500 per .5 kilowatt of capacity cap for qualified fuel cell power plant property, 

and allows electric utilities to claim the ITC. 

Section 103. Extension and modification of the residential energy-efficient property credit (IRC Section 25D). Under current law, taxpayers can 

claim a personal tax credit for the purchase of property that uses solar energy to 

generate electricity for use in a dwelling unit and qualified solar water heating 

property that is used exclusively for purposes other than heating swimming pools 

and hot tubs. The credit is equal to 30 percent of qualifying expenditures, with a 

maximum $2,000 credit for each of these systems of property. Section 25D also provides a 30 percent credit for the purchase of qualified fuel cell power plants. The 

credit for any fuel cell may not exceed $500 for each 0.5 kilowatt of capacity. The 

51 

credit applies to property placed in service prior to January 1, 2009. The bill extends 

the credit for residential solar property for one year (through December 31, 2009) and 

repeals the $2,000 credit cap for qualified solar electric property. The bill also allows 

the tax credit to offset Alternative Minimum Tax (‘‘AMT’’) liability. 

Section 104. Clean Renewable Energy Bonds (‘‘CREBs’’) (IRC Section 54). 

Under current law, public power and consumer-owned utilities that cannot benefit 

from tax credits can issue Clean Renewable Energy Bonds (CREBs) to help them 

reduce the cost of renewable energy investments. Under current law, there is a national CREB limitation of $1.2 billion in bonding authority and CREBs must be 

issued before December 31, 2008. This bill authorizes an additional $400 million of 

CREBs that may be issued and extends the authority to issue such bonds through 

December 31, 2009. In addition, the bill allocates 1/3 of the additional bonds for 

qualifying projects of State/local/tribal governments; 1/3 for qualifying projects of 

public power providers; and 1/3 for qualifying projects of electric cooperatives. 

Section 105. Extension of the special rule to implement FERC restructuring policy (IRC section 451(i)). The bill extends through December 31, 2009, 

the present-law deferral provision that enables qualified electric utilities to recognize 

gain from certain transmission transactions over an 8-year period. 

Title II—Extension of Incentives to Improve Energy Efficiency 

Section 201. Extension and modification of the credit for energy-efficiency improvements to existing homes (IRC section 25C). 1Current law 

provides a 10 percent investment tax credit for purchases of advanced 

main air circulating fans, natural gas, propane, or oil furnaces or hot water 

boilers, windows and other qualified energy-efficient property. The credit 

applies to property placed in service prior to January 1, 2008. The bill extends the credit for one year (through December 31, 2009), and specifies that certain 

pellet stoves are included as qualified energy-efficient building property. 

Section 202. Extension of the tax credit for energy-efficient new homes 

(IRC section 45L). 1Current law provides a tax credit to an eligible contractor equal to the aggregate adjusted bases of all energy-efficiency property installed in a qualified new energy-efficient home during construction. 

The bill extends the energy-efficient new homes credit for two years (through December 31, 2010), and permits the eligible contractor to claim the credit on a home built 

for personal use as a residence. 

Section 203. Extension of the energy-efficient commercial buildings deduction (IRC section 179D). 1Current law allows taxpayers to deduct the 

cost of installing energy-efficient improvements in a commercial building. 

The deduction equals the cost of energy-efficient property installed during 

construction, with a maximum deduction of $1.80 per square foot of the 

building. In addition, a partial deduction of 60 cents per square foot applies to certain subsystems. The deduction applies to property placed in 

service prior to January 1, 2009. The bill extends the deduction to property 

placed in service through December 31, 2009, increases the maximum deduction to 

$2.25 per square foot, and allows a partial deduction of 75 cents per square foot for 

building subsystems. 

Section 204. Modification and extension of the energy-efficient appliance 

credit (IRC section 45M). 1Current law provides a credit for the eligible 

production of certain energy-efficient dishwashers, clothes washers, and 

refrigerators. The credit for dishwashers applies to dishwashers produced 

in 2006 and 2007 that meet the Energy Star standards for 2007. The bill extends the credit to appliances produced in 2008, 2009, and 2010 and updates the 

qualifying efficiency standards in accordance with the Energy Independence and Security Act of 2007. 

Mrs. CHRISTENSEN. The Chair now recognizes Frazier Blaylock to 

testify for five minutes. 

STATEMENT OF FRAZIER BLAYLOCK, DIRECTOR, FEDERAL 

GOVERNMENT RELATIONS, COVANTA HOLDING CORPORATION 

Ms. BLAYLOCK. Thank you, Chairwoman Christensen, Chairman 

Costa, Mr. Shuster. We greatly appreciate your having us here this 

morning. My name is Frazier Blaylock. I am the Director the Federal Government Affairs for Covanta Energy Corporation. Thanks 

52 

for the opportunity to speak to you about how we could help in restoring a clean energy future for the insular areas. 

Covanta operates 34 energy-from-waste facilities in the United 

States including three in Pennsylvania, one in Stanislaus County, 

California. We also operate one in Honolulu, four in Florida, and 

three on Long Island in New York. And I mention those communities in particular because the geographic similarities they share 

with insular areas we are discussing today. 

Energy from waste is a specially designed energy generation 

process that uses household waste as a fuel and help solve some 

of society’s biggest challenges, including dependence on foreign oil, 

solid waste management, climate change, and land use, all of 

which have already been raised today. 

Covanta serves the disposable needs of approximately twelve million people in communities across the United States and reduces 

the need for fossil fuels by generating over 1,200 megawatts of renewable energy and saving the equivalent of 15 million barrels of 

oil each year. 

Every ton of trash processed at energy-from-waste facilities generates between 500 and 700 kilowatt hours of renewable electricity 

on a 24/7 base load basis, and our operations recycle over 350 million tons of recovered metals every year. 

One key benefit of the energy-from-waste process is the use of an 

indigenous, sustainable fuel called trash, which itself creates management challenges for insular communities and communities 

throughout the country. Unlike fossil fuel, garbage is readily available and within short transportation distances from these energy 

facilities and from the energy consumers. For each ton of trash 

processed in energy-from-waste facility enough electricity is generated to offset one barrel of oil. 

It is particularly relevant for Covanta to be addressing the 

energy future of the insular areas because of other environmental 

benefits that we offer. Energy from waste is a safe, reliable waste 

disposal method that generates renewable energy, reduces greenhouse gas emissions, recovers metals from recycling and reduces 

reliance on landfills. The energy-from-waste process reduces the 

volume of solid waste received in our facilities by 90 percent, and 

displaces one ton of greenhouse gas emissions for every one ton of 

trash we process. 

According to the Department of Energy, who is here today, 

energy from waste makes important contributions to the overall effort to achieve increased renewable energy use. And in 2003 the 

EPA stated that energy from waste produces electricity with less 

environmental impact than almost any other source of electricity. 

I mentioned Hawaii, New York, and Florida earlier and that’s because island and peninsula communities share some similar characteristics that present—share some similar characteristics that 

are relevant to your island communities. Limited drinking water 

supplies, a limited ability to import power and export waste and finite land space are among those challenges. Energy from waste, in 

addition to having a potential to contribute significantly to energy 

independence and renewable energy, has the benefit of positively 

impacting those challenges. 

53 

Insular peninsula areas, they’re depending on energy from waste 

as part of their growing energy environmental infrastructure. 

Hillsborough and Lee Counties in Florida has expanded their existing energy-from-waste facility because of population growth and 

limited landfill space. The city of Honolulu is planning a 900 ton 

per day expansion of their existing energy-from-waste facility, 

which we operate. That expansion will increase the contribution of 

energy generated in that Honolulu plant by 8 percent of all the 

power generated on the island of Oahu. In addition, Florida and 

Long Island communities also moved to energy from waste because 

it avoids stress to drinking water supplies that landfilling presents. 

More locally, Puerto Rico’s solid waste management plan calls for 

the construction of two energy-from-waste plants with the combined capacity of 2900 tons per day. 

Finally, another critical benefit these communities will realize by 

generating renewable energy, energy-from-waste plants is a net reduction in their greenhouse gas production, the avoidance of methane gas generation from landfills, avoidance of fossil fuel production, and minerals recycling all contribute to energy-from-waste 

greenhouse gas avoidance. 

We believe we would be an excellent choice for renewable power 

for insular communities like the U.S. Virgin Islands for all these 

reasons and be delighted to take any questions from the committee. 

Thank you very much. 

Mrs. CHRISTENSEN. Thank you, Ms. Blaylock. 

[The prepared statement of Ms. Blaylock follows:] 

Statement of Frazier Blaylock, Covanta Energy Corporation 

Good morning Chairman Christensen, Chairman Costa and members of the committee. My name is Frazier Blaylock and I am the Director of Federal Government 

Affairs for Covanta Energy Corporation. Thank you for the opportunity to come 

speak to you today about the benefits of Energy-from-Waste (EfW) in pursuing a 

clean energy future for the insular areas. 

Covanta Energy operates 34 Energy-from-Waste facilities in the United States, including one in Honolulu, 4 in Florida and 3 on Long Island in New York. I highlight 

these seven locations because of the geographic similarities they share with the insular areas we are discussing today. We also have a worldwide presence, with facilities in Europe and China. 

Energy-from-Waste is a specially designed energy generation process that uses 

household waste as fuel and helps solve some of society’s biggest challenges including dependence on fossil fuels, solid waste management, climate change, and land 

use. Covanta serves the disposal needs of approximately 12 million people in communities across the United States and reduces the need for fossil fuels by generating 1,265 megawatts of renewable energy, and saving the equivalent of 15 million 

barrels of oil each year. Every ton of trash processed at an EfW facility generates 

a significant 500-700 Kwh of renewable electricity on a 24/7, base-load basis. And, 

our operations recycle over 350 million tons of recovered metals each year. 

A key benefit of the EfW process is the use of an indigenous, sustainable fuel 

which in and of itself creates management challenges for insular communities. Unlike fossil fuels, garbage is readily available and within short transportation distances from these energy generating facilities and the energy consumers. For each 

ton of trash processed at an EfW facility, enough electricity is generated to offset 

one barrel of oil. 

It is particularly relevant for Covanta to be addressing the energy future of the 

insular areas because of the unique environmental benefits that we offer. EfW is 

a safe, reliable waste disposal method that generates renewable energy, reduces 

greenhouse gas emissions, recovers metals for recycling, and reduces reliance on 

landfills. The EfW process reduces the volume of solid waste received at a facility 

by 90% and displaces one ton of greenhouse gas emissions for every ton of trash 

we process. According to the U.S. Department of Energy, EfW makes ‘‘important 

contributions to the overall effort to achieve increased renewable energy use and the 

54 

many associated positive environmental benefits.’’ In 2003, the EPA stated that EfW 

produces electricity ‘‘with less environmental impact than almost any other source 

of electricity.’’ 

I mentioned Hawaii, New York and Florida earlier, and that is because Island 

and peninsula communities share some similar characteristics that can present infrastructure challenges to government. Limited drinking water supplies, a limited 

ability to import power and export waste, and finite land space are among those 

challenges. EfW, in addition to having the potential to contribute significantly to 

energy independence and renewable energy, has the benefit of positively impacting 

those challenges. 

Insular and peninsula areas today are depending upon EfW as part of their growing energy and environmental infrastructure. Hillsborough and Lee Counties in 

Florida have expanded their existing EfW facilities because of population growth 

and limited landfill space. The City of Honolulu is also planning a 900 ton per day 

expansion of their existing EfW facility. That expansion will increase the contribution of energy generated by that renewable facility to approximately 8% the amount 

of all the power generated on the Island of Oahu. In addition, Florida and Long Island communities also look to EfW because it avoids threats to drinking water supplies that landfilling presents. More locally, Puerto Rico’s solid waste management 

plan calls for the construction of two EfW plants with a combined capacity of 2,910 

tons per day. 

Another critical benefit that these communities will realize by generating renewable energy at EfW plants is a net reduction in their greenhouse gas production. 

The avoidance of methane gas generation from landfills, avoidance of fossil fuel production, and metals recycling all contribute to EfW’s greenhouse gas avoidance. 

Energy from Waste is an excellent choice for renewable power for insular communities because it can not only provide clean, reliable, base load renewable power, but 

it does so by solving a second insular infrastructure challenge which is uniquely met 

by EfW. 

Thank you for the opportunity to speak with you today. I am more than happy 

to answer any questions the Members may have. 

Mrs. CHRISTENSEN. And the Chair now recognizes Mr. Powell 

representing the Southern States Energy Board for five minutes. 

STATEMENT OF JIM POWELL, SENIOR POLICY ADVISOR, 

SOUTHERN STATES ENERGY BOARD 

Mr. POWELL. Madame Chairwoman, Mr. Chairman, Mr. Shuster, 

and other members of this committee, and I thank you very much 

for the opportunity to be here today to testify on Charting a Clean 

Energy Future For the Insular Territories. Special thanks to the 

committee staff for arranging this. 

The Southern States Energy Board is a nonprofit interstate compact organization that was created in 1960 and established under 

public law. I am here today representing the Southern States 

Energy Board. The board’s mission is to enhance economic development and the quality of life in the South through innovations in 

energy and environmental policies, programs and technologies. 16 

southern states and two territories including the U.S. Virgin Islands are members of the Southern States Energy Board. 

We talked a lot today about the energy dilemma is what I would 

like to call it. I am not going to repeat examples that people have 

provided that preceded me. But the citizens of the insular areas, 

including the Virgin Islands are currently experiencing some of the 

highest energy costs in our nation, perhaps even the world. Because of this, because of the high prices, citizens of the insular territories are forced to spend a higher percentage of their disposable 

income on energy as compared to people in other parts of the continental U.S. 

55 

Energy dollars are leaving the insular areas. Every barrel of oil 

that’s brought into the insular territories is money going out to politically unstable parts of the world that some of us don’t like to 

talk about. By using indigenous renewable resources that are located here in this insular areas, energy dollars stay in insular 

areas thus benefiting the local economies by creating clean energy 

jobs not to mention the benefits that it does to the environment. 

Many of the citizens in the insular areas are forced to make quality 

of life decisions such as purchasing food and medicine or paying a 

utility bill. It’s not the case in all parts of the U.S. 

The Energy Policy Act, Section 251 of the Energy Policy Act of 

2005 produced the Insular Areas Energy Assessment Report, which 

was prepared by the Pacific Power Association for the Department 

of the Interior and released in the summer of 2006. This important 

report is a comprehensive assessment totaling 453 pages that contains numerous recommendations designed to reduce the insular 

areas dependence on imported petroleum and to increase the use 

of renewable energy resources while improving energy efficiency 

measures. The broad base assessment should be used as the basis 

for all the insular areas to develop a comprehensive energy strategy for the future. 

Section 252 of EPACT 2005 directed the Secretary of Energy in 

consultation with the Secretary of Interior to assess and report to 

Congress on projects with the greatest potential for reducing dependence on fossil fuels used to generate electricity and to promote 

distributed energy. 

DOE was authorized to provide technical and financial assistance 

for feasibility studies and for implementation of projects. Funding 

was authorized at 500,000 per year for feasibility studies and 44 

million for project implementation. Unfortunately, Congress has 

not provided funding for the implementation of this important 

EPACT provision. 

The Southern States Energy Board urges Congress to fully fund 

this EPACT provision so that insular areas would be able to conduct studies of projects and strategies identified in the assessment 

report that would significantly reduce their dependence on imported fossil fuels. The economic future of the insular areas depends on their ability to reduce their reliance on costly fossil fuels 

by increasing the efficiency with which we use such fuels and by 

exploiting the local renewable energy resources. 

In August 2007, Governor deJongh asked the Southern States 

Energy Board to assist in the development and implementation of 

a Comprehensive Energy Strategy that will be designed to increase 

the standard of living for the citizens of the U.S. Virgin Islands by 

assuring long-term availability of affordable, secure supplies of 

energy. 

A secondary goal of that study—of that strategy, the Virgin Islands will be poised to be a Caribbean and worldwide showcase for 

the development and use of renewable energy. The Insular Areas 

Energy Assessment Report has proven to be an important resource 

for the project team. 

A bit on the State Energy Program. DOE’s State Energy Program provides grants for the states and territories for energy efficiency and renewable energy programs and projects. States and 

56 

territories use the State Energy Program grant funding to address 

their energy priorities and to adopt emerging renewable energy and 

energy efficiency technologies. 

State Energy Program is the only Federally funded energy program that provides financial and technical assistance directly to 

the states and territories. The State Energy Program funding allocations to the states and territories is based on an antiquated formula that needs to be updated to reflect the current world energy 

and economic realities. 

The insular areas receive only a minimal amount of funding 

under the State Energy Program. For example, in 2007, Fiscal 

Year 2007, the Virgin Islands received 259,000, while the State of 

Texas received $2,782,000. In fact, the total insular area SEP formula allocation for 2007 was $974,000 vice a total of $44,456,000 

for the states. 

The Weatherization Assistance Program is another Department 

of Energy program. Under current Federal statute, the insular 

areas do not participate in that program. However, if they did participate and used the same formula that’s there now, without an 

update they only receive a small amount of funding and probably 

wouldn’t make a worthwhile program in the insular areas. That 

funding formula is very old as well and needs to be updated. 

The Southern States Energy Board urges Congress to include the 

insular areas in the weatherization program and direct DOE to update the allocation formula to include criteria such as current 

energy costs, demographics and climate. And the Southern States 

Energy Board also encourage Congress to provide a minimum allocation of at least $2 million to the insular areas for this program. 

This amount of funding will ensure operation of a meaningful program. 

The territorial energy offices are an important part of the equation of the insular areas quest to reduce their dependence on imported petroleum and to establish a clean energy economy. The 

energy policies and programs of the territorial energy offices are 

vital to ensure economic growth, increased energy efficiency, and 

an increased reliance on clean—— 

Mrs. CHRISTENSEN. I am going to have to ask you to wrap up. 

Mr. POWELL. Real quick. Thank you, Congresswoman. Just a 

brief mention of the Hawaii Clean Energy Initiative. This is exactly 

the type of effort that the insular areas need. We are concerned 

that the insular areas have been left out of this effort and why the 

effort was focused on Hawaii without considering other insular 

areas. The insular areas need the same type of attention. We are 

interested as to how Hawaii actually got this award without the 

additional areas being considered. 

In conclusion, the Southern States Energy Board is proud of the 

strong relationship we have enjoyed with the Virgin Islands over 

the years. We are proud of the relationship with Mr. Smith. He has 

done a marvelous job in the Energy Office in his capacity as Director. Under his leadership, it’s an award winning office, and he’s a 

great asset for the Virgin Islands. Thank you for your leadership. 

Mrs. CHRISTENSEN. We allowed you to go over so that you can 

speak highly of Mr. Smith. Thank you. 

[The prepared statement of Mr. Powell follows:] 

57 

Statement of James R. Powell, Senior Policy Advisor, 

Southern States Energy Board, Norcross, Georgia 

Madame Chairwoman, Mr. Chairman and members of the Subcommittees, thank 

you for this opportunity to testify on ‘‘Charting a Clean Energy Future for the Insular Areas.’’ Mr. Nemeth would very much like to have been testifying today, but he 

had a previous commitment outside of the country and requested that I serve as 

his surrogate. 

The Southern States Energy Board (SSEB) is a non-profit interstate compact organization created in 1960 and established under Public Laws 87-563 and 92-440. 

The Board’s mission is to enhance economic development and the quality of life in 

the South through innovations in energy and environmental policies, programs and 

technologies. Sixteen southern states and two territories comprise the membership 

of SSEB: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Maryland, 

Mississippi, Missouri, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, U.S. Virgin Islands, Virginia and West Virginia. Each jurisdiction is 

represented by the governor and a legislator from the House and Senate. Governor 

Joe Manchin of West Virginia currently serves as the chair. The U.S. Virgin Islands 

(USVI) is a member and Governor John deJongh is a member of the Executive Committee. 

On December 23rd, 1992, Governor Alexander A. Farrelly, signed Executive Order 

Number 338-1992 authorizing the USVI to become a member of SSEB. Executive 

order Number 341-1993 was signed on November 12th, 1993 and then Executive 

Order 364-1995 was signed on November 16th, 1995 by Governor Roy Schneider. 

SSEB was created by state law and consented to by Congress with a broad mandate to contribute to the economic and community well-being of the citizens of the 

southern region. The Board exercises this mandate through the creation of programs 

in the fields of energy and environmental policy research, development and implementation, science and technology exploration and related areas of concern. SSEB 

serves its members directly by providing timely assistance designed to develop effective energy and environmental policies and representing members before governmental agencies at all levels. 

SSEB’s long-term goals are to: 

• perform essential services that provide direct scientific and technical assistance 

to state governments; 

• develop, promote and recommend policies and programs on energy, environment 

and economics that encourage sustainable development; 

• provide technical assistance to executive and legislative policy makers and the 

private sector in order to achieve synthesis of energy, environment and economic issues that ensure energy security and supply; 

• facilitate the implementation of energy and environmental policies between federal, state and local governments and the private sector; 

• sustain business development throughout the region by eliminating barriers to 

the use of efficient energy and environmental technologies; and 

• support improved energy efficient technologies that pollute less and contribute 

to a clean global environment, and protect indigenous natural resources for future generations. 

The USVI clearly has opportunities today to move forward in reducing dependence 

on foreign resources for its energy supply. Over the past ten years, SSEB has provided the USVI with funding to conduct numerous projects related to bioenergy. 

Most recently, SSEB funded work in the amount of $48,000 to assess the feasibility 

of collection and cleaning of the landfill biogas to insure the greatest possible use 

of available biogas resources in the territory. 

As all the Nation moves forward, it is important to realize that the insular areas 

represent an important role and the USVI needs assistance from Congress to work 

toward a sustainable and clean energy future. Please refer to attachment A for comprehensive description of the work that SSEB with the U.S. Virgin Islands. 

Energy Dilemma. The citizens of the Insular areas, including the USVI are currently experiencing some of the highest energy costs in our Nation, perhaps the 

world. For example, citizens in the USVI are currently paying around 35 cents per 

kilowatt hour for electricity while citizens in most of the Southeast region of the 

U.S. pay between 5 to 10 cents per kilowatt hour. Gasoline sells for around $4.15 

per gallon on St. Thomas while the price per gallon in the metropolitan Atlanta, 

Georgia area is around $3.25. With the world price of oil hovering around $106 per 

barrel these high costs appear to be increasing. Citizens of the Insular areas are 

forced to spend a higher percentage of their disposable income on energy as compared to people in parts of the continental U.S. Accordingly, many of the citizens 

58 

of the Insular areas are forced to make quality of life choices such as purchasing 

food and medicine or paying a utility bill. 

Energy Policy Act and Insular Areas Energy Assessment Report. Section 

251 of the Energy Policy Act of 2005 (EPACT) directed the Secretary of Interior, in 

consultation with the Secretary of Energy and the head of government of each insular area, to update insular area energy plans to reflect findings, with the goals of 

reducing energy imports by 2012, increasing energy conservation and energy efficiency, and maximizing the use of indigenous resources. The Insular Areas Energy 

Assessment Report was prepared by the Pacific Power Association for the Department of the Interior and released in the summer of 2006. This report is a comprehensive assessment totaling 453 pages that contains numerous recommendations 

designed to reduce the Insular areas dependence on imported petroleum and to increase the use of renewable energy resources while improving energy efficiency 

measures. This broad based assessment should be used as the basis for the Insular 

areas to develop a comprehensive energy strategy for the future. 

Section 252 of EPACT 2005 directed the Secretary of Energy, in consultation with 

the Secretary of the Interior to assess and report to Congress on projects with the 

greatest potential for reducing dependence on fossil fuels used to generate electricity, and to promote distributed energy, in the insular areas. DOE was authorized 

to provide technical and financial assistance, on a matching basis with local utilities, for feasibility studies and for implementation of projects the Secretary of 

Energy determines are feasible and appropriate. Funding is authorized at $500,000 

per year for feasibility studies and $44 million per year for project implementation. 

Unfortunately, Congress has not provided funding for the implementation of this 

important EPACT provision and should act to do so in an expeditious manner. In 

a letter to Congress this month, the heads of government of some Insular areas 

have requested Congress to ‘‘fund feasibility studies of projects and strategies identified in the Assessment that would significantly reduce our dependence on imported 

fossil fuels, or provide needed distributed generation in remote insular areas. The 

economic future of our communities depends on our ability to reduce our reliance 

on costly fossil fuels by increasing the efficiency with which we use such fuels and 

by exploiting local renewable energy resources.’’ 

Comprehensive Energy Strategy. In August 2007, Governor John deJongh 

asked SSEB to assist in the development and implementation of a Comprehensive 

Energy Strategy that will be designed to increase the standard of living of the citizens of the Territory by assuring the long-term availability of affordable, secure supplies of energy. A secondary goal is to become a Caribbean and worldwide showcase 

for the development and use of renewable energy. The Insular Areas Energy Assessment Report has proven to be an important resource for the project team. 

Integral to this direct service to the USVI is adequate funding to truly implement 

an effective comprehensive energy strategy that is sustainable for the future. As 

part of this service, SSEB works with Mr. Bevan Smith, Director of the VIEO and 

others as designated to establish clear, realistic goals. As a first step, the USVI has 

assessed current and future types, amounts and sources of energy imported into the 

Territory. Additionally, this work will assist in identifying the amount of energy 

used by various sectors, the cost of energy to the end users and to the extent possible an analysis of how this energy is being used within each sector (e.g. domestic 

hot water, diesel highway and off-highway use). The intent is also to project the 

types and amounts of energy that will be required over the next 20 to 30 years in 

the USVI. Important to implementing the strategy is identification of all potential 

energy options with a primary focus on renewable energy, energy efficiency and conservation. Once data is collected and analyzed the intent is that potential energy 

solutions will result in a number of options for implementation in the future. Of 

course, the implementation of energy plan requires resources and most likely, policy 

incentives to achieve success. 

State Energy Program. DOE’s State Energy Program (SEP) provides grants to 

states and territories for energy efficiency and renewable energy programs and 

projects. States and territories use SEP grant funding to address their energy priorities and to adopt emerging renewable energy and energy efficiency technologies. 

SEP is the only federally funded program that provides financial and technical resources directly to the states and territories. With SEP funds and the resources leveraged by them, the state and territory energy offices develop and manage a variety of programs geared to increase energy efficiency, reduce energy use and costs, 

develop alternative energy and renewable energy sources, promote environmentally 

conscious economic development, and reduce reliance on imported oil. The program 

was funded at $36.6 million in FY 2006, $49.4 million for FY 2007 and at S44.5 

million for FY2008. However, DOE plans to include on $33 million in the competitive allocations. 

59 

SEP funding allocations to states and territories are based on an antiquated formula that needs to be updated to reflect the current world energy and economic realities. The Insular areas receive only a minimal amount of SEP funding under the 

current allocation formula. For example, in FY 2007 the USVI received $259,000 in 

SEP funding while Texas received $2,782,000. In fact, the total Insular area SEP 

funding formula allocation for FY2007 was $974,000 vice $44,456,000 for the states 

and the District of Columbia. 

The Insular areas need every opportunity available to improve energy efficiency, 

increase of use of renewable energy and to reduce our 100% dependence on imported 

fossil fuels. 

Weatherization Assistance Program. Under current Statue, the Insular areas 

do not participate in the DOE’s Weatherization Assistance Program (WAP). The reasons why the Insular areas were not included when the program began in 1976 is 

akin to folklore. However, if the Insular areas were included in the program and 

received a funding allocation under the current formula it would likely be a small 

amount. In fact, some would question if the funding would be adequate to even operate an Insular area WAP. 

The formula used to allocate WAP funding is antiquated and needs to be updated 

to reflect the current world energy and economic realities. Legislation is required 

to include the Insular areas in WAP. Congress should consider including the Insular 

areas in the WAP and direct DOE to update the allocation formula to include criteria such as current energy costs, demographics and climate, Congress should also 

require DOE to provide a minimum allocation of at least $2 million to the Insular 

areas. This amount funding would ensure the operation of a meaningful and robust 

program. 

DOE did not request any funding for the WAP in the FY2009 budget request. This 

reduces heating and cooling costs for low-income families, particularly for the elderly, people with disabilities, and children, by improving the energy efficiency of their 

homes while ensuring their health and safety. It is essential that Congress fully 

fund this critical energy assistance program at the FY2008 amount of $227.2 million. 

Territorial Energy Offices. The Territorial Energy Offices are an important 

part of equation in the Insular areas quest to reduce their dependence on imported 

petroleum and to establish a clean energy economy. The energy policies and programs of the Territorial Energy Offices are vital to ensuring economic growth, increased energy efficiency and an increased reliance on clean renewable energy 

sources. These offices have become experts on researching, demonstrating and deploying emerging clean energy technologies. 

Under the leadership of Mr. Bevan Smith, Director, the VIEO has grown into an 

award winning organization that manages a multitude of meaningful energy efficiency and renewable energy programs that directly benefit the citizens of the USVI. 

Some of these popular programs are: building energy program, discretionary grants, 

energy rebates, and solar energy. In addition, the VIEO holds a number of education 

outreach events throughout the year that are designed to increase the awareness 

of the general public on energy efficiency and renewable energy programs and practices. Also, Mr. Smith was instrumental in bringing the best practice of net metering to the USVI. He worked in a collaborative manner with the utility and the Public Services Commission to develop and implement a successful program. At the request of Governor deJongh and the concurrence of the Senate, the VIEO was recently relocated from the Department of Planning and Natural Resources to the Office of the Governor. This important organizational relocation sends a strong message to the Insular areas that the Governor is keenly interested in USVI energy 

issues. 

Hawaii Clean Energy Initiative. According to a DOE press release dated January 28, 2008, DOE and Hawaii joined in a Memorandum of Understanding (MOU) 

establishing the Hawaii Clean Energy Initiative (HCEI), a long-term partnership designed to transform Hawaii’s energy system to one that utilizes renewable energy 

and energy efficient technologies for a significant portion of its energy needs. The 

partnership aims to put Hawaii on a path to supply 70% of its energy needs using 

clean energy by 2030, which could reduce 72% of Hawaii’s current crude oil consumption. While a specific amount of funding was not identified, DOE committed 

to the provision of technical and policy expertise and capabilities to help demonstrate reliable, affordable and clean energy technologies in Hawaii. 

DOE agreed to immediately engage experts in clean energy technology development to help Hawaii to launch several projects with public and private sector partners that target early opportunities and critical needs for Hawaii’s transition to a 

clean energy economy, including: 

60 

• Designing cost-effective approaches for the exclusive use of renewable energy on 

smaller islands; 

• Designing systems to improve stability of electric grids operating with variable 

generating sources, such as wind power plants on the islands of Hawaii and 

Maui; 

• Minimizing energy use while maximizing energy efficiency and renewable 

energy technologies at new large military housing developments; 

• Expanding Hawaii’s capability to use locally grown crops and byproducts for 

producing fuel and electricity; and 

• Assisting in the development of comprehensive energy regulatory and policy 

frameworks for promoting clean energy technology use. 

The HCEI is the type of attention and dedication that the Insular areas desperately need to help reduce their dependence on imported petroleum and to establish a clean energy economy. Congress should inquire as to why Hawaii was selected 

non-competitively for this initiative and why the Insular areas were not provided 

an opportunity to compete. Congress should require DOE to engage the Insular 

areas with an effort similar to HCEI. The same amount of attention and resources 

should also be provided to the Insular areas. 

Conclusion. SSEB is proud of the strong relationship we have enjoyed with the 

USVI for over 16 years. We are committed to doing everything within our ability 

to help the USVI attain a stronger economy and improve the quality of life for its 

citizens. As mentioned previously, we are working closely with Mr. Bevan Smith, 

Director of the VIEO. We commend Mr. Smith for his outstanding accomplishments 

with limited resources. We thank the committee for asking us to participate in this 

hearing. We believe with Congresswoman Christiansen’s leadership equitable opportunities will enable the Insular areas to work toward a sustainable clean energy future that will strengthen the USVI’s economy and improve the quality of life for all 

future generations. 

Mrs. CHRISTENSEN. I’d like to thank everyone for their testimony. 

I will recognize myself for five minutes of questions. 

Mr. Nicholson, let me start with you. Some people would say that 

OTEC is still an unproven technology and maybe that’s something 

that ought to be considered maybe not now but later on. How 

would you respond to that? 

Mr. NICHOLSON. Well, that’s true, it is unproven. However, we 

have our own financing, so the risk is placed on us, not the host 

client, and the rewards are so great. For example, in Hawaii where 

we have a proposal for 100 megawatt plant, the investment is $500 

million. So the risk is much greater than the one proposed here, 

which is a smaller plant. But we are going forward with that, and 

that will probably happen before the plant goes into St. Croix or 

could go into St. Croix. 

I don’t think that really should be a factor. I think the decision 

makers should really try to plan and go forward. We have an insurance company that would guarantee the performance of our first 

plant. The fact that we have private investors that would put up 

all the money, that in itself is a confirmation of confidence. 

Mrs. CHRISTENSEN. Thank you. 

Mr. Resor, one of the maps in your testimony shows parts of Hawaii with less sun than parts of Maine, which is kind of surprising. 

Do we have similar information for the insular areas? 

Mr. RESOR. Yeah. It wasn’t included in that particular map. Generally the insulation for the U.S. Virgin Islands is very good. I’m 

sure that data is available for the third party. 

Mrs. CHRISTENSEN. I am going to need everybody to speak a little 

closer to the mike. I think we were able to hear you, but just—— 

61 

Mr. RESOR. Just repeat. The same data I’m sure is available from 

the same third party sources that would show it for each of the insular areas. 

Mrs. CHRISTENSEN. Thank you. 

Ms. Blaylock, I think the first panel said that the Virgin Islands 

produces about 400 to 500 tons of trash per day. Does that make 

waste energy feasible for us? 

Ms. BLAYLOCK. That’s about the threshold that a waste to energy 

facility would need in terms of trash volume. Ideally you would— 

600 tons per day is really the true threshold. The reason for this 

economies of scale, the more garbage that you bring into the facility, the more energy you can generate, and therefore the more electricity can be sold and offset the cost of the facility’s operation. 

Mrs. CHRISTENSEN. I would also imagine in that 4 to 500 tons 

there might be some kinds of trash that would not be able to be 

used, or do you burn everything? 

Ms. BLAYLOCK. We can safely burn all municipal solid waste. In 

the communities where Covanta has waste to energy facilities, the 

recycling rates tend to be 20 percent higher than communities that 

don’t have waste to energy. Most of our communities separate their 

recyclables; however, not all do. And any of the materials that are 

disposed of at a restaurant or at a private home would be safely 

handled at an energy-to-waste plant. It’s a much better place to 

send it than to a landfill, certainly. 

Mrs. CHRISTENSEN. Absolutely. Thank you for your answer. 

Mr. Powell, thank you for Southern States’ partnership and support of the U.S. Virgin Islands. We really appreciate it. You mentioned in your letter that some insular areas are sent to Congress 

asking for funding feasibility studies. Are there specific feasibility 

studies that have been requested, do you know, and what areas? 

What kinds of feasibility studies? 

Mr. POWELL. Madame Chairman, no, I’m not aware of specific 

studies that have been requested. I’m aware of a letter that some 

of the Governors of insular areas actually sent to Congress requesting funding of that EPACT provision. 

Mrs. CHRISTENSEN. Is your knowledge of why the territories were 

excluded from the weatherization program the same as Mr. Smith’s 

or—— 

Mr. POWELL. Yes, ma’am. Very much, I have been around the 

Weatherization Assistance Program since the early ’90s, and folklore is probably the best way to describe it. The Weatherization Assistance Program when it was initiated was focused on cold weather states. Since then it includes warm weather states. And there 

is a formula that’s designed for both cold weather and warm 

weather states and which is more reason why the territories should 

be included. 

Mrs. CHRISTENSEN. We will get to work on that. Thank you. 

I now recognize Mr. Costa for his questions. 

Mr. COSTA. Thank you again, Madame Chairwoman. 

Let me begin with Mr. Resor. What does it cost to implement a 

solar system on the roof of an average family house? In California 

we are doing a lot of this. As in other western states, the utility 

companies are providing rebates, as you know, for that purpose. 

62 

With $19,000 per capita income here in the U.S. Virgin Islands, obviously it would be more difficult, but give me the breakdown. 

Mr. RESOR. Sure. It varies a bit on the scale operation. Rough 

rule of thumb, if you do a 3 kilowatt system, which is a pretty 

standard size of residence, you are probably looking at $25,000 to 

$27,000 dollars for that. Now, if you are doing that—that’s the retail price. That’s before any Federal tax credit comes into play. If 

there is a state incentive, or utility incentive, that price is reduced 

significantly, as it is in California. 

Mr. COSTA. The Federal tax credit being? 

Mr. RESOR. Right now the Federal tax credit for the residence is 

only $2,000. 

Mr. COSTA. It’s 25,000—— 

Mr. RESOR. 23. But in California, Massachusetts you are often 

getting another 8 to 10 knocked off. 

Mr. COSTA. Knocks it down to about 15? 

Mr. RESOR. Right. 

The other piece for the U.S. Virgin Islands in your comment 

about the lower per cap income is I think an obstacle here that 

would need to be addressed is if that can be financed upfront, 

where the homeowner wasn’t expected to shell that all out, let’s 

call it net $18,000 for the system on day one. And if the same way 

that could be financed over time, the economics worked out very 

well, if the electricity you are replacing is costing you more than 

35 cents a kilowatt and rising. 

Mr. COSTA. So then you would have a system in place for 3 kilowatt. If you implemented that, it will provide all the electricity 

needs that you would have for your home? 

Mr. RESOR. It depends on the—— 

Mr. COSTA. The system. 

Mr. RESOR. The electricity needs of that home. The idea is typically the size of the system not to produce 100 percent of the 

home’s needs. With net metering you can provide the excess factor 

in the day. Often you look to provide anywhere from 35 to 85 percent. And that just depends on the exact pattern usage how you 

want to size it. 

Mr. COSTA. You speak a lot about net metering. Recently I understand that the U.S. Virgin Islands have implemented a net metering program. How do you think that program would work 

with—— 

Mr. RESOR. I think a lot of what we are experiencing working 

with probably 30, 40 different utilities is the net metering you have 

to be very careful to the implementation details. What you want to 

avoid is inadvertently throwing up roadblocks for the consumer, 

the business in terms of application they have to fill out, how the 

metering is done. On the surface the net metering looks fine. I 

don’t know the particulars of how it is implemented. 

Mr. COSTA. If you could get back to us on that. My time is—— 

Mr. RESOR. OK. 

Mr. COSTA. Ms. Blaylock, you talked about your efforts in other 

parts of the country and the world. How far along is Puerto Rico’s 

plan to go to an energy-from-waste plant? 

63 

Ms. BLAYLOCK. Their solid waste management plan has suggested that that should be part of the future. There are not bids 

out for—— 

Mr. COSTA. Those projects that you are involved in, I assume 

they are private/public partnerships? 

Ms. BLAYLOCK. Yes, sir, in every case. 

Mr. COSTA. We know what the challenge is economically that the 

territories here have. How would you pursue or propose a plan or 

have you for a private/public partnership on waste to energy? 

Ms. BLAYLOCK. We haven’t proposed one yet, but if we were to 

do one, it would be a regional approach, which would take trash 

from all the three islands and potentially depending on the transportation costs from other sources, and—— 

Mr. COSTA. Are you considering doing so? 

Ms. BLAYLOCK. We will be delighted to do so. Right now the RFP 

that came out recently was just for a 12 megawatt facility and was 

just looking at 200 tons per day. 

Mr. COSTA. I would suggest, in terms of the submission of testimony today, that’s one of the takeaways. You will be delighted to 

provide a proposal? 

Ms. BLAYLOCK. Yes. 

Mr. COSTA. Very good. 

Mr. Nicholson, where has your company successfully implemented a plant? Obviously, it sounds wonderful the description in 

your testimony. Where have you successfully implemented one? 

Mr. NICHOLSON. There has not been an installation of this technology. 

Mr. COSTA. That’s kind of problematic, don’t you think? 

Mr. NICHOLSON. First of all, the technology that was invented in 

1881. 

Mr. COSTA. No. No. I am very familiar with all of these technologies, but you hate to have an area like this with limited resources to be the first experience, because they don’t have the resources in terms of the R&D. 

Mr. NICHOLSON. They don’t need the resources. 

Mr. COSTA. I think they do need the resources. $19,000 per capita and the constraints that they are facing, it’s important—I’m always looking for best management practices, someone who has actually paved the way, if you understand. 

Mr. NICHOLSON. We are putting up the $80 million. We will own 

and operate the plant. 

Mr. COSTA. Have you submitted a proposal? 

Mr. NICHOLSON. It’s due May 1st. 

Mr. COSTA. To the U.S. Virgin Islands? 

Mr. NICHOLSON. Yes. And the same thing is true in Hawaii, it’s 

a $500 million investment. We are putting up that money. It’s our 

money. There is no burden or risk to the host client. 

Mr. COSTA. It will be interesting to follow up on that. My time 

has expired clearly. 

Mrs. CHRISTENSEN. The Chair recognizes Mr. Shuster for questions. 

Mr. SHUSTER. I would like to follow up on, Mr. Nicholson, if you 

have not built any facilities and you say there is no risk with the 

capital that you are going to outlay, you are going to have to genVerDate Aug 31 2005 14:49 Dec 19, 2008 Jkt 000000 PO 00000 Frm 00069 Fmt 6633 Sfmt 6602 L:\DOCS\41819.TXT Hresour1 PsN: KATHY
64 

erate revenue, and you are going to do that within the public utilities commission operation. I mean, are you going to be able to get 

the return? 

Mr. NICHOLSON. Yes. For an example, in Hawaii it’s about $109 

million a year revenue stream. There is no energy cost. In the Virgin Islands, it’s about $10 million revenue stream for water and— 

I’m sorry, for power, and about a $8 million a year revenue stream 

for water. Plus, the island can benefit with diversity by having 500 

acres or less, whatever is desirable, of mariculture. They can grow 

fish, they can grow vegetables. They can become really energy selfsufficient and reduce dramatically their importation of food. There 

are so many benefits to this technology. 

Mr. SHUSTER. I, unlike Mr. Costa, am not familiar with these 

technologies, but I think I have a clear amount of skepticism. Why 

hasn’t one been built somewhere in the world to date? 

Mr. NICHOLSON. First of all, we are the modern-day pioneer in 

the development of this technology on the commercial basis. It was 

invented in York, Pennsylvania. We presented it to the U.S. Government before the U.S. Department of Energy was even established. This technology is over 40 years old. We had no political 

representation or credibility. Senator Sparky Matsunaga from Hawaii grasped the opportunity and hundreds of millions of dollars 

went to Hawaii. U.S. Department of Energy and Hawaii attempted 

to compete with our design and failed. We lost 30 years. 

We have continued to operate supporting ourselves, funding our 

ourselves, and we have now raised the money to build these plants 

throughout the equatorial zone. We don’t need government support. 

We are a private company, we have a private funding, and we are 

going forward on a commercial basis. And St. Croix has excellent 

operating conditions for this type of technology. 

Mr. SHUSTER. That’s music to my ears to hear that you don’t require government support. You have small scale testing that’s been 

out there? What have you built that is designed? That always 

makes me skeptical when it’s in design, when it’s not in practical 

application—even on a small scale. 

Mr. NICHOLSON. That’s a fair question. And the same inventor 

invented the world’s first commercial binder cycle geothermal 

power plant, just went ahead and built it, and that works on a 

commercial basis. The Eagle Foundation, which owns my company, 

has spent millions of dollars developing to come up with the components that go into this cycle. We built and tested those components. 

We have a complete team of professionals, large engineering firms, 

one of the largest construction companies in the United States, 

Naval architectural design firms, insurance companies that guarantee the performance of the first plant. 

The people who should be skeptical or worried are the investors. 

They spent millions of dollars confirming that our technology is 

sound. They are ready and eager to go forward. 

It’s so much larger than the small islands throughout the equatorial zone. This is a major opportunity for shipbuilding. For example, we are working with the Governor of Maryland. We have 

shown the City of Baltimore shipbuilding industry where building 

six plants per year in Baltimore creates 25,000 jobs. We can do 

65 

that in California shipyards; we can do that in Philadelphia. We 

can revitalize the American shipbuilding industry. 

Mr. SHUSTER. It sounds exciting. I look forward to watching closely what you do. The $80 million investment here in the Virgin 

Islands, what percentage of the electricity would that produce or 

generate? 

Mr. NICHOLSON. I don’t know that I have that for sure, but it’s 

probably a third. I am not suggesting—I mean, I have suggested 

and I think it’s possible and realistic to have 30 megawatts of 

OTEC in St. Croix. But, also, I think the trash is a great idea, recycled trash, and Jaime’s technology. It’s not a silver bullet for St. 

Croix or St. Thomas or St. John, but I think OTEC can play a very 

significant role for this community. It plays a much larger role in 

the world market and on the national market. 

Mr. SHUSTER. I see my time is winding down. I would like to 

have an opportunity to submit questions. 

Mrs. CHRISTENSEN. I think that we would submit questions in 

writing, unless you have a real burning one that you want—— 

Mr. SHUSTER. I do have one quick one. 3 kilowatts how big a 

house is that? 3,000 square feet, how much energy would that—I 

know it’s going to vary from house to house. 

Mr. RESOR. 2,000 square foot house or even smaller, you can 

have it on the roof or it could be ground level. It’s very flexible. 

Ms. Blaylock, I will submit. 

Mrs. CHRISTENSEN. I want to again thank this panel for their 

testimony and members for their questions, and we are very likely 

to have additional questions that we will submit in writing and ask 

for you to respond in writing. Thank you. 

The Chair would now like to recognize the third panel, Mr. 

Nikolao Pula, the Acting Deputy Assistant Secretary for Insular Affairs, the U.S. Department of the Interior, and Mr. Drew Bond, the 

Director of Commercialization, Office of Energy Efficiency and Renewable Energy at the U.S. Department of Energy. 

Mrs. CHRISTENSEN. I know folks are very interested in learning 

more about the renewable forms of energy, but we need to get 

started. Thank you. 

The Chair now recognizes Mr. Pula for his testimony. 

STATEMENT OF NIKOLAO PULA, ACTING DEPUTY ASSISTANT 

SECRETARY, INSULAR AFFAIRS, U.S. DEPARTMENT OF THE 

INTERIOR 

Mr. PULA. Good afternoon, Madame Chairwoman Christensen, 

Chairman Costa, and Mr. Shuster and members of the Subcommittees. This is a subject of overriding importance for the insular 

areas. Well, thank you for the opportunity to testify on charting a 

clean energy future for the insular areas. This is a subject of overriding importance for the insular areas and the free associated 

states. 

In island communities we see very little air pollution. The wind 

blows it away. What does not blow away is the escalating cost of 

fossil fuels. When faced with the need to purchase large-scale electric capacity, officials in the islands however have found it more 

economic to continue to rely on oil based fuel. Not any more. The 

high cost of oil means that alternative sources of energy are inVerDate Aug 31 2005 14:49 Dec 19, 2008 Jkt 000000 PO 00000 Frm 00071 Fmt 6633 Sfmt 6602 L:\DOCS\41819.TXT Hresour1 PsN: KATHY
66 

creasingly attractive from an economic point of view. High energy 

prices are currently the greatest threat to all of the economies of 

the insular areas. 

I think the last two panelists have said a lot already, so I am 

going to really cut my testimony short. Besides the potential for alternatives to oil, a second avenue for energy improvement is focused on the management and maintenance practices for existing 

electric generation facilities. Potential efficiencies could be gained 

by, one, improving operations and maintenance standards; second, 

improving load balancing and distribution; and, three, replacing 

transformers and other distribution systems with more efficient 

models. 

The 2006 report identified steps to reduce overall consumption 

including adoption and enforcement of building code provisions 

used by Guam and the Virgin Islands; metered power rates that reward savings and lower usage; promotion of the use of energy efficient appliances and light bulbs; and extension of publicity for the 

Energy Star programs and maybe more. 

We encourage the insular governments and utilities to explore 

new concepts that may alter energy consumption. For instance, 

local retailers and wholesalers could arrange bulk purchases of 

proven alternative systems with financing and repay loans through 

the utilities’ billing processes. 

The Department of the Interior has supported efforts to build the 

capacity and improve the efficiencies that lead to lower costs and 

lower emissions for delivered electricity. For example, our Operations and Management Improvement Program has invested over 

$4.7 million in the last three years in the Pacific Lineman Training 

Program. 

Our Capital Improvement Program has supported numerous 

power projects in the four United States territories. Under Compact II funding, the free associated states are eligible to spend infrastructure sector funds on power projects. Our Technical Assistance program has been the source of funding in the past for resource surveys similar to those outlined in the 2006 report. 

The Energy Assessment Report contains valuable data and ideas. 

A sustained effort is now required to ensure that the options outlined in the study are more fully reviewed and the residents of the 

insular areas receive any potential benefit as quickly as possible. 

In order to stretch the island energy dollar as far as possible, officials from my office of Insular Affairs will be visiting the other 

territories, including the free associated states to discuss ways to 

implement the most promising energy options. 

On Thursday we met with Governor deJongh and presented him 

with a $50,000 grant to aid investigation of realistic energy measures that would benefit the Virgin Islands. Our Interior team also 

yesterday met with and discussed promising technology with government officials in the Virgin Islands to more aggressively see 

these ways to help out. 

Because of initiative shown by the Governor and with some of his 

staff, we met with Bevan Smith and Carl Knight, and other colleagues, including my colleague from the Energy Department here, 

Drew Bond, and we had a very good meeting yesterday discussing 

these issues. 

67 

We believe that effort expended in the energy area can bring significant energy pay off in the form of lower utility costs for residents and businesses, and may possibly pave a way for new industry in some of the islands. As Co-Chairs you are to be applauded 

for your leadership you have shown on this critical issue on energy. 

And I thank you for your effort and support and for inviting me 

to testify today. 

Mrs. CHRISTENSEN. Thank you, Acting Deputy Assistant Secretary. 

[The prepared statement of Mr. Pula follows:] 

Statement of Nikolao I. Pula, Acting Deputy Assistant Secretary 

of the Interior for Insular Affairs 

Co-chairs and members of the Subcommittees on Insular Affairs and Energy and 

Mineral Resources, thank you for the opportunity to testify on Charting a Clean 

Energy Future for the Insular Areas. The Insular Areas include the United States 

territories of the United States Virgin Islands, Guam, American Samoa, and the 

Commonwealth of the Northern Mariana Islands (CNMI); and the freely associated 

states of the Republic of the Marshall Islands, the Federated States of Micronesia 

(FSM), and the Republic of Palau. 

In island communities, we see very little air pollution. The wind blows it away. 

What does not blow away is the escalating cost of fossil fuels. Most people in the 

islands would like to utilize clean energy. When faced with the need to purchase 

large-scale electric capacity, officials in the islands, however, have found it more economic to continue to rely on oil based fuel. Not any more. The high cost of oil means 

that alternative sources of energy are increasingly attractive from an economic point 

of view. 

High energy prices are currently the greatest threat to all of the economies of the 

United States and affiliated insular areas. The high cost of electricity depletes the 

wallets of island residents and the finances of local governments and businesses. In 

those islands where the cost of electricity is subsidized by the local government, we 

are approaching a crisis. Increasingly substantial portions of the local government 

budgets are being siphoned off for fuel to run their electric power plants. In the 

CNMI, for example, where the annual budget is approximately $160 million, $80 

million is spent on fuel for its power plants. 

The rising price of oil has made alternative sources of power more economic. It 

has also highlighted the long-standing need for existing equipment to give us its 

best performance and efficiency. 

Pursuant to the Energy Policy Act of 2005, the Department of the Interior published the United States of America Insular Areas Energy Assessment Report in 

2006. Copies of the report were made available to the Congress. The report analyzes 

the energy situation in each United States territory and freely associated states, in 

detail. The report deals with both the supply and the demand sides of the energy 

equation. 

ENERGY SUPPLY 

On the supply side, some alternative technologies already have been proven to be 

commercially viable; others may be available in the future. 

• Solar. Given current power costs, solar can be cost effective for small scale and 

individual residential use. Solar sets are already in use on isolated islands in 

the Pacific to power small scale activities such as dispensaries and offices. Residential customers everywhere in the insular areas could purchase solar sets to 

place on their homes or property and connected to the local power grid through 

a ‘‘net metering’’ system. The Virgin Islands and American Samoa have already 

begun exploring such systems. 

• Wind. With constant wind, the islands hold a great deal of potential for wind 

generation of electricity. This is a proven technology that can be cost effective. 

There are, however, two issues that must be addressed before pursuing wind 

generation projects in the United States-affiliated insular areas. The first is a 

concern about tropical cyclones; all four United States territories experience 

these powerful storms, and careful consideration should be given to hardening 

any wind generation project against them. The second issue to consider is the 

need for detailed wind resource studies prior to embarking on any deployment 

of the technology. This is explained in the 2006 report. 

68 

• Geothermal. Geothermal is a technology that is coming of age for volcanic 

areas. The United States Navy uses geothermal power for some of its installations. Northern California, Iceland, and the Philippines all have major geothermal installations that are producing electricity. What California, Iceland 

and the Philippines all have in common are active volcanoes that power their 

geothermal energy production. The CNMI, and possibly Guam, may be able to 

benefit from geothermal power over in the future. Feasibility studies are under 

way to quantify the geothermal resource in the region. 

• OTEC. Ocean Thermal Energy Conversion (OTEC) is a technology that, in the 

future, may play a significant role in providing electricity on a large scale for 

our islands. Three of the four territories and parts of the freely associated states 

are in locations where the undersea topography is favorable for the development 

of such systems. This technology, however, has not been deployed on an industrial scale for power production. Until a commercial project is completed, questions remain about the costs associated with the development of these systems. 

• Biofuels and Biogas. Although the islands lack the land area necessary for 

large-scale biomass production, several areas in the Pacific already use copra 

oil to fuel vehicles and machinery. The 2006 report also noted that there was 

some potential in certain areas for biogas recovery from solid waste and wastewater plants, and that recovery systems should be considered for inclusion in 

future upgrades and construction of these facilities. 

• Coal. It has been over 100 years since the chiefs of Tutuila and Manu’ua ceded 

their islands to the United States, enabling the United States Navy to use 

American Samoa as a coaling station. While the energy assessment did not 

focus on coal, it may be time to reconsider it. 

• Nuclear. The generation of electricity in nuclear power plants is quite large 

scale but may not be cost effective for any of our islands with their small populations. 

Besides the potential for alternatives to oil, a second avenue for energy improvement is a focus on the management and maintenance practices for existing electric 

generation facilities. Most of the insular areas have paid considerable attention to 

these issues in recent years. 

Potential efficiencies could be gained by (1) improving operations and maintenance operations standards, (2) improving load balancing and distribution on the existing grids, and (3) replacing transformers and other distribution systems with 

more efficient models. The CNMI, for example, is in the midst of an overhaul of 

most of its generating base. When the overhaul is complete, CNMI officials estimate 

that they will save over $2 million a month in fuel and lubrication costs. 

ENERGY DEMAND 

The 2006 report identified a range of steps that can be taken by the insular areas 

to reduce overall consumption and create long-term savings for utility customers. 

These suggested steps include: 

• Adoption and enforcement of building code provisions used by Guam and the 

Virgin Islands. 

• Modification or institution of metered power rates that reward savings and 

lower usage. 

• Promotion of the use of energy-efficient appliances and light bulbs, which collectively represent some of the largest sources of consumer usage. 

• Promotion of the use of systems, such as solar water heaters, to replace electrically-heated systems, including the possible financing of bulk purchases of 

systems that electric utility customers could finance over time as they pay lower 

utility bills. 

• Expansion of publicity for the Energy Star program to bring great savings to 

citizens in the insular areas because of the exceedingly high cost of electricity. 

Outreach and education will be critical. Some may balk at the up-front costs associated with adopting alternative energy solutions, even if the longer-term savings 

far outweigh the up-front costs. We encourage the insular governments and utilities 

to explore new concepts that may alter energy consumption. For instance, local retailers and wholesalers could arrange bulk purchases of proven alternative systems 

with financing and repay loans through the utilities’ billing processes. 

INTERIOR SUPPORT FOR ENERGY INNOVATION 

The Department of the Interior has long supported electricity producers in the islands in their efforts to build the capacity and improve the efficiencies that lead to 

lower costs and lower emissions for delivered electricity. 

• Our Operations and Management Improvement Program (OMIP) has invested 

over $4.7 million in the last three years in the Pacific Lineman Training ProVerDate Aug 31 2005 14:49 Dec 19, 2008 Jkt 000000 PO 00000 Frm 00074 Fmt 6633 Sfmt 6621 L:\DOCS\41819.TXT Hresour1 PsN: KATHY
69 

gram and the efforts of the Pacific Power Association to develop a cadre of 

knowledgeable, professional linemen that provide their communities with safe 

and efficient electricity transmission. 

• Our Capital Improvement Program (CIP) has supported numerous power 

projects in the four United States territories. We are currently reprogramming 

unused CIP funds, a good deal of which will be used for power-related projects 

including the refurbishment of the generators in the CNMI. 

• Under Compact II funding, the freely associated states of the Marshall Islands 

and the Federated States of Micronesia are eligible to spend infrastructure sector funds on power projects. 

• Our Technical Assistance (TA) program has been a source of funding in the past 

for resource surveys similar to those outlined in the 2006 report. Early this 

year, CNMI Governor Benigno Fitial requested and received a TA grant (supported by the CNMI Washington Representative Pedro Tenorio) for $300,000 to 

continue research on fresh water production for agriculture by using the cold 

thermal properties of deep ocean water. In March, the CNMI submitted a 

$500,000 TA request to undertake assessment of geothermal resources on the 

islands of Pagan and Saipan that could yield low-cost electricity and industrial 

potential for the territory. 

FOLLOW-THROUGH 

The Energy Assessment Report contains valuable data and ideas for addressing 

the energy challenges that we are currently experiencing. A sustained effort is now 

required to ensure that the options outlined in the study are more fully reviewed 

and the residents of the insular areas receive any potential benefit as quickly as 

possible. 

In order to stretch the island energy dollar as far as possible, officials from the 

Office of Insular Affairs will visit each of the United States territories and freely 

associated states to discuss ways to implement the most promising energy options 

outlined in the Energy Assessment Report. 

On Thursday, Secretary Kempthorne’s Deputy Chief of Staff, Doug Domenech, 

and I met with Governor John P. de Jongh, Jr., in St. Thomas to present him with 

a $50,000 grant from the Office of Insular Affairs to aid investigation of realistic 

energy measures that will benefit the residents of the Virgin Islands. The grant was 

made in response to a request from the Governor. Our Interior team then met with 

other local government officials to discuss the Insular Areas Energy Assessment Report and promising technology. The Government of the Virgin Islands is to be 

praised for moving aggressively on the energy issue. Because of the initiative shown 

by the Governor and his staff, we look forward to a good working relationship as 

we seek out practical energy solutions. 

At the end of this month, staff and I fly to the CNMI to discuss the CNMI portion 

of the report. OIA officials will later visit Guam, American Samoa, and the freely 

associated states. 

We believe that effort expended in the energy area can bring significant economic 

pay off in the form of lower utility costs for residents and businesses, and may possibly pave the way for new industry in some of the islands. 

We appreciate the leadership the co-chairs have shown on this critical issue of 

energy. Thank you for your effort and your support. I would be happy to answer 

any questions you may have for me. 

STATEMENT OF DREW BOND, DIRECTOR, COMMERCIALIZATION, OFFICE OF ENERGY EFFICIENCY AND RENEWABLE 

ENERGY, U.S. DEPARTMENT OF ENERGY 

Mr. BOND. Thank you, Madame Chairwoman, Mr. Chairman, 

members of the Subcommittee. Thank you for the opportunity to 

testify on behalf of the Department of Energy’s Office of Energy Efficiency and Renewable Energy. It’s an honor to be here. 

My name is Drew Bond, and I am the Director of our Commercialization and Deployment activities within DOE’s Office of Efficiency and Renewable Energy. First, let me give a brief explanation 

of the commercialization team that I lead within EERE, as we call 

ourselves. In 2006, Assistant Secretary Karsner assembled for the 

first time a team of individuals reporting directly to him, that foVerDate Aug 31 2005 14:49 Dec 19, 2008 Jkt 000000 PO 00000 Frm 00075 Fmt 6633 Sfmt 6602 L:\DOCS\41819.TXT Hresour1 PsN: KATHY
70 

cuses on aggressive commercialization and deployment of our technologies. Briefly what this means is that we are charged with the 

responsibility of increasing the pace, the success rate, and the scale 

in which renewable energy and efficient energy technologies move 

from the R&D to the market changing products and processes. 

Among our many initiatives, this is a consorted effort to expand the 

use of clean energy in island communities. 

My testimony today will discuss the Energy Policy Act of 2005 

provisions relative to insular areas, as well as the department’s recent announcement of the Hawaii Clean Energy Initiative, which 

is a model for the type of focused commitment necessary to change 

the predominant source of energy in islands and territories, 

nations, and insular areas from imported oil to clean sustainable 

energy sources. 

As you well know, Section 251 of the Energy Policy Act of 2005 

required that the Secretary of Interior in consultation with the Secretary of Energy and the head of the government of each insular 

area to update the 1982 Territorial Energy Assessment. The implementation of this EPACT requirement resulted in an updated report developed and made available by the Department of the 

Interior in the fall of 2006. 

The report reaffirmed the original finding that insular areas face 

unique challenges in the reliance of imported energy as well as 

high fuel and energy prices. Island’s coping with these problems 

stand to benefit greatly from the end use efficiency measures and 

the expansion of renewable energy production. Territories can use 

the information from Section 251 assessment to develop an advanced energy plan, and use the DOE State Energy Program grant 

funds to act on these findings. 

I would like to share with the committee our work in Hawaii, 

which serves as a possible example that could be translated for use 

in insular areas. On January 28, 2008, of this year, the Department of Energy and the State of Hawaii signed a memorandum of 

understanding that launched the Hawaii Clean Energy Initiative 

and put Hawaii on the path to supply 70 percent of its energy 

needs with renewable sources by 2030. 

While this is a dramatic increase compared to the state’s legal 

renewable portfolio standard requirement of 20 percent by 2020. 

Hawaii is uniquely positioned to achieve the accelerated goal because of its high electricity prices and dependence on oil for energy. 

Oil supplies approximately 90 percent of Hawaii’s total energy and 

84 percent of energy generation. 

DOE’s approach to performing its role in this partnership is 

threefold. First, working groups; second, partnership projects; 

third, clean energy transformation. First, the working groups strive 

to integrate the department’s technical and policy expertise with 

Hawaii based knowledge and project relation resources. 

Second, partnership projects test and validate concepts laid out 

by the working groups such as solving grid integration and financing challenges for wind, solar, geothermal and ocean thermal 

energy resources. 

Third and most importantly, lessons learned through the working groups and partnership projects will guide what new regulations and laws may be needed to incentivize intelligent investments 

71 

by capital markets, by energy suppliers and by energy consumers. 

Transforming Hawaii to have a cleaner more diverse and sustainable energy portfolio. 

These efforts are expected to help Hawaii progress toward increased use of cleaner energy as well as to help demonstrate existing and new technology at a significant scale, to help stimulate 

new investment to promote rapid asset turnover, and to help improve standards of service, energy service delivery and energy security. Likewise, this model could be replicated for territories. 

Underpinning all of these efforts is the need for the State of Hawaii to redefine its regulatory policy framework in a way that 

transforms its own energy infrastructure. Current utility regulations and rules in Hawaii and elsewhere make it difficult for investor owned utility or co-ops to profit from things like non-utility renewable generation from customer owned distributed generation 

and from energy efficiency. All of which are critical to the success 

of this partnership. 

Achieving Hawaii’s Clean Energy Initiative goals would require 

reconsideration of how Hawaii’s electric system is regulated, redesigning electricity and gas rates and tariffs, and changing the regulation and opportunities for electricity substitutes, including energy 

efficient solar hot water heaters, solar photovoltaic, and future 

grid-affecting technologies, such as plug-in hybrid electric vehicles. 

Cooperation between the Department of Energy and Hawaii to 

achieve the objectives of this partnership will mean that many people that visit the state for the scenic beauty that only islands can 

provide will also be able to see a functional, renewable energy economy. If successful, the Hawaii Clean Energy Initiative would serve 

as an integrated demonstration model for insular areas, for U.S. 

territories, and for other island communities globally. 

Madame Chairwoman, Mr. Chairman, this concludes my prepared statement. I am happy to answer any questions. 

[The prepared statement of Mr. Bond follows:] 

Statement of D. Drew Bond, Acting Director of Commercialization and 

Deployment, Office of Energy Efficiency and Renewable Energy, U.S. 

Department of Energy 

Madame Chairwoman, Mr. Chairman, Members of the Subcommittees; thank you 

for the opportunity to testify on behalf of the Department of Energy’s (DOE) Office 

of Energy Efficiency and Renewable Energy (EERE) regarding our efforts that contribute to Charting a Clean Energy Future for the Insular Areas. 

First, let me give the Committee a brief explanation of the commercialization 

team that I lead in EERE. In 2006, Assistant Secretary Karsner assembled for the 

first time a team of individuals reporting directly to him that focuses on commercialization and deployment of our technologies as part of the Department’s balanced 

approach achieving its goals and meeting its mission. Briefly, what this means is 

that our program is targeted to help increase the pace, success rate, and scale at 

which renewable and efficient energy technologies move from R&D to market-changing products and processes. Among our many activities is a concerted effort to help 

expand the use of clean energy in island communities. My testimony today will discuss the Energy Policy Act of 2005 provisions relative to insular areas. In addition 

I will discuss the Department’s recently established Hawaii Clean Energy Initiative. 

Although Hawaii is not an insular area, DOE believes this is an example of a type 

of focused effort that could be translated to help change the predominant source of 

energy in island territories, nations, and insular areas from oil to renewable or alternative energy sources. 

As you know, Section 251 of the Energy Policy Act of 2005 (EPACT) required the 

Secretary of the Interior, in consultation with the Secretary of Energy and the head 

of government in each insular area, to update the 1982 Territorial Energy AssessVerDate Aug 31 2005 14:49 Dec 19, 2008 Jkt 000000 PO 00000 Frm 00077 Fmt 6633 Sfmt 6621 L:\DOCS\41819.TXT Hresour1 PsN: KATHY
72 

1Sources: Energy Information Administration and State of Hawaii Strategic Industries Division. 

ment. The implementation of this EPACT requirement resulted in an updated report developed and made available by the Department of the Interior in the fall of 

2006. The report reaffirmed the original finding that insular areas face unique challenges in their reliance on imported energy as well as high fuel and energy prices. 

Islands coping with these problems stand to benefit from end-use efficiency measures and the expansion of renewable energy production. Territories can use the information from the Section 251 Assessment to develop an advanced energy plan, 

and use DOE State Energy Program (SEP) grant funds to act on the findings. SEP 

provides grants to the states and territories to design and carry out their own renewable energy and energy efficiency programs and to fund energy projects managed by state energy offices. 

I would like to share with the Committee our work in Hawaii, which could serve 

as a possible example that could be translated for use in insular areas. The Department’s work with the State of Hawaii is an example of a collaborative effort to combat the energy issues characteristic of insular areas. On January 28, 2008, The Department of Energy and the State of Hawaii signed a Memorandum of Understanding (MOU) that launched the Hawaii Clean Energy Initiative (HCEI) and put 

Hawaii on a pathway to supply 70 percent of its energy needs with renewable 

energy sources by 2030. Achieving this objective could reduce the State’s crude oil 

consumption significantly. Though not legally binding, the HCEI significantly increases the commitment of Hawaii beyond the State’s legal renewable portfolio 

standard requirement of 20 percent by 2020. Hawaii is uniquely positioned to 

achieve the accelerated goal and help demonstrate technologies that, once demonstrated in a fully integrated way, could be used elsewhere. 

Pocketbook issues are foremost in making Hawaii the ideal test bed for a renewable energy economy. Islands are often hit the hardest by high oil prices. Oil supplies approximately 90 percent of Hawaii’s total energy and approximately 84 percent of its electricity generation. 1 Hawaii also has some of the highest electricity 

prices in the nation, making it an apt proving ground for clean energy technologies 

that are not fully cost-competitive elsewhere in the country. 

The Department of Energy’s role in the HCEI is to provide expertise, third-party 

objectivity, and resources to the process. DOE provides expertise through Department staff, national labs, and private partners dedicated to R&D in renewable 

energy, energy efficiency, and electricity delivery; and most importantly, in the 

emerging area of system level integration of clean energy technologies. DOE expects 

that Hawaii will need to employ an integrated systems approach if it is to achieve 

the HCEI goals. The Department can also assist in convening and facilitating public/private sector collaborations that could help address barriers to renewable and 

efficiency technology advancement in the State. 

DOE’s approach to performing its HCEI roles is based on three areas: working 

groups, partnership projects, and clean energy transformation. First, the working 

groups are small, collaborative teams focused on long-term, intelligent energy solutions. Convened around topics of energy generation, energy delivery, transportation, 

and end-use efficiency, these groups strive to integrate the Department’s technical 

and policy expertise with Hawaii-based knowledge and project resources. Second, 

partnership projects test and validate concepts laid out by the working groups, such 

as solving grid integration and financing challenges for wind, solar, geothermal, and 

ocean thermal energy sources. Third and concurrently, lessons learned through the 

working groups and partnership projects are expected to help Hawaii in its consideration of potential changes to state-level regulations and laws, with the goal of promoting a clean energy transformation that could help incentivize intelligent investment by capital markets, energy suppliers, and energy consumers. These efforts are 

expected to help Hawaii progress toward increased use of cleaner energy as well as 

help demonstrate existing and new technology at scale, help stimulate new private 

sector investment to promote asset turnover, and help improve standards of service, 

energy service delivery, and energy security. 

To put the HCEI into action, immediately following the MOU signing, DOE staff 

held meetings with utilities’ and island co-ops’ senior management, business leaders, military officials, and policy and regulatory leaders. These meetings were part 

of the effort to engage experts in clean energy technology development to help Hawaii launch several projects with public and private sector partners that target 

early opportunities and critical needs for Hawaii’s transition to a cleaner energy 

economy, including: • Designing cost-effective approaches for the exclusive use of renewable energy on 

smaller islands; 

73 

• Designing systems to improve stability of electric grids operating with variable 

generating sources, such as wind power plants on the islands of Hawaii, Kauai 

and Maui; 

• Minimizing energy use while maximizing energy efficiency and renewable 

energy technologies at new large military housing developments; 

• Expanding Hawaii’s capability to use locally grown crops and byproducts for 

producing fuel and electricity; and 

• Assisting in the development of comprehensive State energy regulatory and policy frameworks for promoting clean energy technology use. 

DOE believes that underpinning all of these efforts is the need for the State of 

Hawaii to change its regulatory and policy framework to drive the necessary 

changes throughout its energy infrastructure. Current utility regulation and rules 

in Hawaii make it difficult for an investor-owned utility or a co-op to profit from 

non-utility generation, extensive renewable and distributed (customer-owned) generation development, and energy efficiency—all of which are critical to the success 

of the HCEI. Achieving HCEI goals will require not only reconsideration of how Hawaii’s electric system is regulated, but also a redesign of electricity and gas rates 

and tariffs, and changes in the state’s regulation and opportunities for electricity 

substitutes including energy efficiency, solar hot water heating, solar photovoltaics, 

and future grid-affecting technologies such as plug-in hybrid vehicles. Governor 

Lingle elevated the issue of advantageous regulatory and policy changes in her 

State of the State Address, and announced a separate cabinet agency to address Hawaii’s energy future. 

Cooperation between the Department of Energy and Hawaii to achieve the objectives of the HCEI will mean that the many people who visit the State for the scenic 

beauty that only islands can provide will be able to see a functional renewable 

energy economy as well. Employing renewable technologies at scale, in an integrated manner is an important step toward attaining advanced energy goals. The 

HCEI takes a preliminary step in the pursuit of clean, sustainable energy solutions 

for an island setting. If successful, the HCEI could serve as an integrated example 

for insular areas, U.S. territories and other island communities globally. 

Madame Chairwoman, Mr. Chairman—this concludes my prepared statement, 

and I am happy to answer any questions the Committee Members may have. 

Mrs. CHRISTENSEN. Thank you both for your testimony. And I 

recognize myself for questions. 

Mr. Bond, maybe you could answer the question about why— 

what was it about Hawaii that made this initiative start there? 

How did it come about? 

Mr. BOND. That’s a great question. The short answer is the leadership at the state level. The Governor has been very progressive 

in pushing for changes within the state, not only at the policy level 

but at the State Regulatory Commission, working with the legislature on a great bipartisan basis, and also pushing the state utility 

to change its way of thinking. Because what this really involves is, 

it requires the existing state monopoly to change its business model 

so it actually can make money off of the things that it’s not use 

to making money off of, things like using less energy. 

Mrs. CHRISTENSEN. And have there been any discussions about 

changing the state’s energy program formulas or including the territories in the WAA program? And would Department of Energy 

support that change? And are you in agreement—is that the reasons that we heard, are those the only reasons that we might have 

at some point said we did not want to participate as far as, you 

know, those would be the only reasons why we would not be in the 

program? 

Mr. BOND. Madame Chairman, that’s my understanding. With 

my focus as Director of Commercialization and Deployment, that’s 

not really in my purview. I do understand that ESA 2007 did apparently change the definition of the state and how—whether or 

74 

not a territory would be eligible for the programs. My understanding is that that legislative fix has now happened to allow territories to be able to apply. 

Mrs. CHRISTENSEN. And in many instances I tried to get Homeland Security to put state and territories. They insisted that when 

they put state, it meant state and territories. What you are saying 

is in recent legislation state includes territories? 

Mr. BOND. That is my understanding, yes. 

Mrs. CHRISTENSEN. So we just need to work on the formula. 

Mr. Pula, can we realistically expect more funding from the Department of Energy to help in the development of alternatives? 

With the Department of the Interior. 

Mr. PULA. I was just going to say, absolutely yes. 

Mrs. CHRISTENSEN. Is the Department of the Interior prepared to 

help the territories financially to a greater extent of the development? 

Mr. PULA. Thank you, Congresswoman. I think lately, as you 

probably well know, our focus have been on economic development 

and accountability; but with the energy situation, which is basically kind of a crisis come up in the last year or so, in my testimony I mentioned about, for example, in CNMI, their budget was 

for ’08 was 160 million, and cost of fuel for them alone was 80 million. And so we’ve now received requests from the areas. I am really thinking seriously of focusing the resources that we have on the 

energy crisis. 

As I also mentioned, that’s why we had the meeting yesterday. 

This is a great hearing, beginning of hearings, as mentioned in 

your earlier statement. We are going to go over to the other areas. 

Really Mr. Bond and I discussed yesterday that when we get back 

to Washington, we are going to try to bring our resources together, 

both departments to see what we can do and help out. 

Mrs. CHRISTENSEN. That addresses the long-term problem, but as 

you heard from Mr. Miller, the issue is lowering the cost. Do either 

of you have any recommendations or in your opinion what else can 

be done to help residents with the cost of paying for this utility? 

Mr. PULA. Let me yield to my colleague. 

Mr. BOND. I guess one comment I would make, part of the 

mindset change that’s needed at the utility level is looking beyond 

the first initial cost of investment in technology and looking to the 

life cycle cost of technology. In other words, renewable energy technologies, particularly wind and solar, geothermal, even ocean 

energy, they—the feedstock is virtually free once you make the initial investment of the capital. And so I think you do have to be 

careful to make promises that this will result in cheaper energy in 

the near term future. But I think what’s more important in the 

near term is diversifying the energy mix to a securing reliability, 

and then lower cost to energy certainly can come with the right investment. 

Mrs. CHRISTENSEN. Mr. Pula. 

Mr. PULA. The only thing I would like to add, as you emphasize 

on the word ‘‘realistically’’ and ‘‘time,’’ on any budget cycle, as we 

know, if I were asked the question to bring forward something that 

will go to the administration budget process, I will have to work 

really hard with all the insular areas, the territories to come up 

75 

with a plan. If I was going to propose something for the administration’s plan through OMB in the process, as you well know, we 

got to have something from our areas that justifies being able to 

do that. And I think that’s the focus in my mind. So a lot relies 

on our relationship in working with the folks in energy. 

Mrs. CHRISTENSEN. Thank you. My time is up. 

I now recognize Chairman Costa for his questions. 

Mr. COSTA. Thank you very much, Madame Chairwoman. 

Mr. Pula, the Office of Insular Affairs has a number of grant programs for insular areas. Do you know roughly what percentage of 

those grants has gone to power projects in recent years and how 

they spread out over the territories? 

Mr. PULA. I don’t have the number off the top of my head, but 

I can provide that for you. 

Mr. COSTA. Please find that information for the committee. 

You talked about the necessity of developing a plan. Of course, 

I have an interest of what I think are a host of options that are 

available in terms of looking at renewable resources. I do believe 

you have to have a plan first. I understand that you been with the 

department for most of your career, and that means you are not 

an appointee, so you are going to be around after next year; correct? 

Mr. PULA. Correct. 

Mr. COSTA. I believe you’re happy as well. 

But that means that you have some consistency. Don’t you think 

we really ought to be working with all the insular territories to 

deal with this? I mean, we know that energy is not going to get 

cheaper. We know that they have a host of renewable resources, 

and as was spoken about a moment ago, the Hawaii plant seems 

to really meet what we need to be doing for the other insular territories. 

Mr. PULA. Absolutely. I myself haven’t heard of the Hawaii plant 

until yesterday in our meeting. It was a great meeting—— 

Mr. COSTA. We need to coordinate, and I will be happy to do that 

with the Subcommittee Chairwoman to see how we can get that 

same sort of comprehensive effort, so we could look at, for example, 

whether or not the detailed resources of wind studies have been 

performed here. You think they have been? 

Mr. PULA. Over here? 

Mr. COSTA. Yes. 

Mr. PULA. In our meeting yesterday, yes, there are some, very 

little. 

Mr. COSTA. What about the unused Capital Improvement Program, what funds are there and when do you reprogram? And do 

you do that with the consent of the territories in which those funds 

were originally intended for? 

Mr. PULA. For the Capital Improvement? 

Mr. COSTA. Right. 

Mr. PULA. There is a set amount. It’s only 27 million for the four 

territories. 

Mr. COSTA. If they are not used, how do you reprogram? 

Mr. PULA. If they are not used? 

Mr. COSTA. Yes. 

76 

Mr. PULA. Primarily it goes sort of like a competitive way that 

we have done in the last three years, and goes to the four territories. Usually when they get it, then they use it for their projects, 

but it’s no year money. 

Mr. COSTA. What you are saying it’s always used then? There is 

never any unused funds? 

Mr. PULA. In some of the territories, for example, CNMI, they 

don’t spend it as fast as they can, because of many other problems. 

What we are trying to do—right now I just meant, for example, in 

CNMI I met with the Governor in February and basically told him 

that’s where they need to spend their money prioritizing, is power 

and water with their situation. 

Mr. COSTA. I think the old plan is what we got to get back to, 

because it’s how you integrate a comprehensive plan that you ultimately find solutions. My time is moving here. 

Mr. Bond, you ever think about changing your first name? 

Mr. BOND. Several times. I tried to slip it in one of my children. 

Mr. COSTA. My name is James. Maybe I need to change my last. 

I noticed that the Energy Information Administration doesn’t 

keep data for insular areas the way it does for states. Why is that? 

Mr. BOND. It’s a good question. 

Mr. COSTA. I mean, you treat them almost like they are foreign 

countries. I don’t want to go too far down that road, because I am 

sure I would be fighting for the home folks. I am not running for 

election here. Please explain. 

Mr. BOND. I would love to be able to explain. However, I don’t 

have an explanation just given my role. 

Mr. COSTA. Don’t you think we ought to change that? 

Mr. BOND. I think it’s something I will be happy to explore and 

report back to you with the energy division of the agency. 

Mr. COSTA. I think you ought to report to the Chairperson of the 

Subcommittee. I will be willing to sign a letter and add to that, because, frankly, it doesn’t make any sense to me. These are U.S. citizens we are talking about. 

Maybe I might come down and run. 

Wouldn’t it be helpful if the EIA treated—I don’t want to belabor 

this point, but it seems to me frankly the Department of Energy 

has a responsibility here, and we ought to pursue the multi-strategy just as you explained in Hawaii. I mean, that’s what I would 

like to see as one of the primary takeaways from today’s hearing. 

When do you think we need to do that. 

Mr. BOND. I think in terms of the partnership that we had in 

Hawaii from the beginning, we have marked the success of that 

partnership with how we are able to replicate that success. So it 

doesn’t benefit the rest of the United States, and all of our citizens 

if it only benefits Hawaii. So to find ways to further replicate that, 

we are happy to be able to work with the committee and with any 

of the insular areas to do that. 

Mr. COSTA. I just want to commit every resource that we have 

within our Subcommittee on Energy and Mineral Resources to 

working with the Chairwoman with her Subcommittee to see that 

that happens. 

And I want to thank you, Congresswoman Christensen, for this 

hearing today and for allowing us the opportunity to be better inVerDate Aug 31 2005 14:49 Dec 19, 2008 Jkt 000000 PO 00000 Frm 00082 Fmt 6633 Sfmt 6602 L:\DOCS\41819.TXT Hresour1 PsN: KATHY
77 

formed. I think it’s clear what we need to do on our part to try to 

better enhance our insular territories to deal with these challenges 

and give my commitment to do whatever we possibly can together. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. 

The Chair now recognizes Mr. Shuster. 

Mr. SHUSTER. Thank you very much. My question is to Mr. Bond. 

Your view on sea solar power technology, what’s your view on that? 

It sounds promising. Your view on that type of technology, the 

OTEC technology we heard about earlier, what’s the Energy Department’s view of that is? 

Mr. BOND. It’s actually an area where the Department of Energy 

is just setting up its program as a result of the Omnibus Bill that 

funded our ’08 budget. There is $10 million allocated for further research and development within this area. Where I would come 

down is to say that our goal really is to create an environment 

where any renewable and alternative form of energy can be competitive. 

And so we don’t view our role as picking winners in technology. 

We view our role as more trying to further the commercialization 

of the technologies and ensuring that the market exists. So rather 

than the Department of Energy commenting specifically of which 

technology will and wouldn’t work, it really depends on many circumstances, and there is a lot of factors that go into that. 

Mr. SHUSTER. I guess, I don’t know what to take away from that. 

Is there a positive view toward that technology? 

Mr. BOND. I think the potential within that sector is tremendous, 

and studies have shown this in terms of where you look at the different technologies and where they are in the commercialization 

time frame. It’s clearly when it’s furthest along the line of all the 

technologies. Solar is moving quickly behind that, and so in terms 

of getting the technologies cost competitive, which is our real goal 

within our programs, there certainly are some technologies that 

have been out there, tested and proven in the marketplace longer, 

that are farther in the R&D stage, and more in the commercialization stage. The potential is tremendous. 

Mr. SHUSTER. Thank you. 

Question to Mr. Pula on the grid we talked earlier a little bit and 

I asked the question. And I don’t know if you—probably your department will be involved, but if we are talking about attaching— 

connecting the grid with other Caribbean islands and which means 

other countries, other locations. How would that process work 

though? Because it just seems to me the economies of scale, if you 

can band together, you can build one facility and it will power 

seven islands, twenty islands. What’s the process for doing that, 

and is that something you are looking at the Office of Insular Affairs to be considered? 

Mr. PULA. Thank you for the question. Let me just say, recently 

I was approached by the folks in CNMI, and they are really interested in geothermal because in the Northern Islands they have the 

volcanoes, and there is about 300 miles, if they were to lay a cable 

to get, you know, the source, it cost about a million dollars a mile. 

That’s what they were telling me, in that area. 

And yesterday we kind of discussed the potential here with some 

other islands that may have some geothermal energy. I was asking 

78 

those kind of questions. I think we don’t have the answers. We are 

looking into those kinds of things and seeing, of course, with the 

limited resource we will have to look into this. 

And to answer your question, I mean, if the potential is there, 

it is there and it could be worked in coordination with the other 

areas, because I think the Navy was thinking about an interest in 

Guam in getting their energy from CNMI, from the northern volcanoes. That would be something to do. Here if there is available 

energy in the same form from other islands, we will be happy to 

look into that. 

Mr. SHUSTER. Speaking of geothermal energy, in the territories 

here—I am stepping out of bounds of myself and knowledge. I have 

to stick closely to my script here. The geothermal energy typically 

you think of larger plants, binary plants. I understand there is— 

you can tap into geothermal heat exchange system by drilling 

holes. Is that something that’s being explored here in the territories? 

Mr. PULA. I haven’t had time to ask those questions of our folks 

here. But, again, they were drilling for water and they came upon 

one of the holes and that steam came up, and they always thought 

that volcanic line trenches were farther away. So now the scientists 

at USGS are saying, well, maybe it is closer and there is possibility 

to have that. Again, we are asking people at USGS, we will be talking to our colleagues here at Energy and see what we can come up 

with. 

Mr. SHUSTER. Thank you very much. 

Mrs. CHRISTENSEN. I thank the witnesses for their testimony. We 

will have questions submitted in writing, and we will ask for you 

to respond to those questions in writing as well. 

I want to take this opportunity to thank all of the witnesses for 

their valuable testimony and the members for their questions. 

In closing, I’d like to just make a brief closing statement. Of 

course, the reason for this hearing is to be able to establish a 

record in the Congress. This is a formal hearing of the Congress 

of the United States in Frederiksted, St. Croix. And this record will 

serve as the basis for our being able to request the assistance from 

our colleagues in Congress to help you, my constituents, as well as 

the residents of the other insular territories to cope with the very 

high cost of electricity, and many of course of who are on fixed incomes and have to decide between buying food or paying their electric bills. 

There is really nothing like hearing from the leaders in the field 

and the representatives of the constituents themselves. So I want 

to again thank Chairman Costa and Congressman Shuster for 

being willing to come and to listen, and to thank those who testified for putting a face on the issues here in the territory and helping to point out not only some of the unique challenges that we face 

but some of the equities that the territories face as we try to address the needs and concerns of our constituents. 

The record for this hearing will remain open—let me see how 

long—for ten days. As you might recall from previous hearings, we 

welcome written testimony, and that written testimony if received 

within those ten days, becomes just as much as an official part of 

this hearing record as the testimony you heard this morning. 

79 

And so then if there is no further business, this hearing stands 

adjourned. 

[Whereupon, at 12:43 p.m., the Subcommittee was adjourned.] 

[List of additional material submitted for the record follows:] 

List of Documents Submitted for the Record 

Statements submitted for the record by the following individuals and 

organizations have been retained in the Committee’s official files. 

• Mr. Jason Budsan 

• Mr. Malcolm W. Ford 

• St. Croix Renaissance Group, LLP 

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