[Senate Hearing 108-32]
[From the U.S. Government Publishing Office]


                                                         S. Hrg. 108-32

 
                   ENERGY EFFICIENCY AND CONSERVATION

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

 TO RECEIVE TESTIMONY REGARDING FEDERAL PROGRAMS FOR ENERGY EFFICIENCY 
                            AND CONSERVATION

                               __________

                             MARCH 11, 2003


                       Printed for the use of the
               Committee on Energy and Natural Resources


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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
DON NICKLES, Oklahoma                JEFF BINGAMAN, New Mexico
LARRY E. CRAIG, Idaho                DANIEL K. AKAKA, Hawaii
BEN NIGHTHORSE CAMPBELL, Colorado    BYRON L. DORGAN, North Dakota
CRAIG THOMAS, Wyoming                BOB GRAHAM, Florida
LAMAR ALEXANDER, Tennessee           RON WYDEN, Oregon
LISA MURKOWSKI, Alaska               TIM JOHNSON, South Dakota
JAMES M. TALENT, Missouri            MARY L. LANDRIEU, Louisiana
CONRAD BURNS, Montana                EVAN BAYH, Indiana
GORDON SMITH, Oregon                 DIANNE FEINSTEIN, California
JIM BUNNING, Kentucky                CHARLES E. SCHUMER, New York
JON KYL, Arizona                     MARIA CANTWELL, Washington

                       Alex Flint, Staff Director
                     James P. Beirne, Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                    Brian Hannegan, Staff Scientist
                   Deborah Estes, Democratic Counsel

                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Blum, Jared O., Chair, Federal Energy Productivity Task Force....    41
Garman, David K., Assistant Secretary, Energy Efficiency and 
  Renewable Energy, Department of Energy.........................     2
Keith, Erbin, Senior Vice President, Sempra Energy Solutions.....    24
Lynch, Paul, Assistant Commissioner of Business Operations, 
  Public Buildings Service, General Services Administration, 
  accompanied by Mark Ewing, Director, National Energy Center....     8
McGuire, Joseph M., President, Association of Home Appliance 
  Manufacturers, on behalf of the High Tech Energy Working Group.    19
Murkowski, Hon. Lisa, U.S. Senator from Alaska...................     1
Nemtzow, David M., President, Alliance to Save Energy............    11

                                APPENDIX

Responses to additional questions................................    47

                   ENERGY EFFICIENCY AND CONSERVATION

                              ----------                              


                        TUESDAY, MARCH 11, 2003

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m. in room 
SD-366, Dirksen Senate Office Building, Hon. Lisa Murkowski 
presiding.

           OPENING STATEMENT OF HON. LISA MURKOWSKI, 
                    U.S. SENATOR FROM ALASKA

    Senator Murkowski. Calling to order the Committee on Energy 
and Natural Resources. Good morning.
    This hearing will take testimony this morning on energy 
efficiency and conservation programs at both the Federal and 
State levels. Energy efficiency and conservation are important 
elements of any national energy strategy. In the past 30 years, 
the U.S. economy has grown by 126 percent while our energy 
needs have only grown by one-fifth that rate.
    Had we not become more efficient over the past three 
decades, we would need nearly 80 percent more energy to power 
today's economy than we do now. Federal Government programs and 
policies play an important role in making the Government more 
efficient through the Federal Energy Management Program, 
setting efficiency standards for appliances and other consumer 
products, and providing funding to States and local communities 
to improve their efficiency and conservation efforts. And we 
will hear about these programs this morning.
    In last year's energy bill conference, the conferees agreed 
to a number of energy efficiency and conservation provisions. I 
think the committee will also be interested in hearing from 
today's witnesses their thoughts on that proposed agreement.
    We have five witnesses with us today: The Honorable David 
Garman, the Assistant Secretary of Energy for Energy Efficiency 
and Renewable Energy--and I understand you will provide an 
overview of DOE's efficiency and conservation programs--Mr. 
Paul Lynch, Assistant Commissioner of Business Operations, GSA 
Public Buildings, to describe how the GSA is improving energy 
efficiency in Federal buildings and efficiencies; Dr. David 
Nemtzow, president of the Alliance to Save Energy, who will 
provide the Alliance's priorities in the area of energy 
efficiency and conservation--good morning--Mr. Joseph McGuire, 
president of the Alliance of Home Appliance Manufacturers, to 
discuss its views on the energy efficiency provisions agreed to 
in last year's energy conference; and Mr. Erbin Keith, senior 
vice president, Sempra Energy Solutions, to describe the Energy 
Savings Performance Contracting program and its use in 
improving Federal energy efficiency.
    I thank all of the witnesses for attending today and look 
forward to your comments. I will forgo an opening statement so 
that we can hear from the witnesses. And if any of my 
colleagues would like to make an opening statement, you are 
welcome to do so as part of your first round of questions.
    Before we begin, I would like to inform members that the 
record will be open until 6 p.m. today in order to allow for 
members to submit questions to witnesses and provide statements 
for the record.
    With that, Senator Bingaman, if you would care to make some 
opening remarks.
    Senator Bingaman. Madam Chairman, I do not have opening 
remarks. I think it is an important hearing, an important set 
of issues. There is a lot we can do to improve energy 
efficiency and particularly in the Federal sector, and I look 
forward to hearing from the witnesses about what still remains 
to be done.
    There are a lot of things we tried to do in last year's 
energy bill, when we were working on it on a bipartisan basis, 
and I hope very much we can enact those provisions that related 
to energy efficiency. I think there was good consensus to do so 
last year. And maybe we can improve on them based on this 
testimony.
    Thank you.
    Senator Murkowski. Great. Thank you.
    Well, with that then, we will go to the Honorable David 
Garman. Mr. Garman, your testimony please. Welcome.

   STATEMENT OF DAVID K. GARMAN, ASSISTANT SECRETARY, ENERGY 
     EFFICIENCY AND RENEWABLE ENERGY, DEPARTMENT OF ENERGY

    Mr. Garman. Thank you, Madam Chair, members of the 
committee. I appreciate this opportunity to appear today to 
discuss the Federal programs for energy efficiency and 
conservation within the purview of my office.
    An entire chapter of the President's National Energy Plan 
was devoted to the topic of energy efficiency and conservation. 
We believe that the easiest and least expensive place to find 
new energy resources for the Nation is to look first to areas 
where energy is currently wasted.
    From 1972 to 2000, the energy used per dollar of GDP in the 
U.S. economy fell by roughly 40 percent. Had our energy 
intensity remained at 1972 levels, the United States would have 
used 171 quadrillion Btus of energy in 2000, rather than the 99 
quads that we used. We estimate that 36 to 48 quads of the 
savings were attributable to energy efficiency improvements.
    My office at the Department of Energy is working to 
continue this progress through a variety of approaches. For 
example, we manage important research and development. In 
partnership with industry, we have developed or advanced a 
number of important technologies ranging from low-e glass and 
highly efficient refrigerators to fuel cells. Second, we 
established minimum appliance standards. We have developed 
performance standards for a variety of products including 
refrigerators, washing machines, and air conditioners.
    Third, we promote energy-saving through the Energy Star 
Program. We use that program to build consumer awareness and 
develop technical criteria for products--a variety of products, 
working jointly with the Environmental Protection Agency. 
Fourth, we partner with States. We have established strong 
partnerships with the 50 States, the territories, the District 
of Columbia, including financial incentives and grant programs 
to promote the deployment of energy efficient technologies.
    And finally we are leading by example through Federal 
actions. The Federal Government is the Nation's largest single 
energy user. We spend almost $8 billion annually on energy 
costs, and we operate over 500,000 buildings and 600,000 
vehicles worldwide. Therefore, our Federal Energy Management 
Program or FEMP focuses on energy use by the Federal 
Government.
    Between 1985 and 1999, the Federal Government as a whole 
reduced its energy use in buildings by more than 20 percent, 
thereby reaching and achieving its goal for the year 2000. The 
Government also saved more than $1.3 billion in 2001 in energy 
costs relative to 1985 and--much of which can be attributed to 
energy improvements.
    But there is clearly more that we can and should do. For 
example, when we build new Federal buildings, we want to do a 
better job of incorporating smart design and energy-efficient 
technologies and more cost-effective renewable energy 
technologies.
    Second, we must continue to make improvement in the Federal 
Government's existing building stock. Because agency budgets 
often have a tough time financing energy improvement projects, 
we support the use of privately-financed energy savings 
performance contracts and utility contracts to replace 
inefficient building systems with state-of-the-art equipment 
that will save both energy and money.
    Alternative financing through the Energy Saving Performance 
Contracting, however, is in jeopardy because the statutory 
authority for that contracting will sunset on September 30, 
2003 without legislative action. So we urge Congress in 
consideration of a comprehensive energy bill to extend this 
important authority.
    We also need to promote greater efficiency in the products 
that the Federal Government purchases. The President 
highlighted an important energy saving opportunity when he 
personally became aware of the potential impacts of reducing 
so-called standby power, in many products that are being 
purchased by both consumers and the Federal Government. As a 
result, he issued an Executive Order requiring the Federal 
Government to purchase products that use minimal standby power.
    As a result of this order and the purchasing power of the 
Federal Government, product manufacturers are subsequently 
introducing significant design changes that dramatically reduce 
standby power of products used by consumers and businesses 
throughout the world.
    We also need to continue the progress we have made in 
improving the efficiency of the Federal transportation fleet 
and to promote the use of alternative fuels in those fleets. 
Executive Order 13149 directs the Federal agencies to reduce 
overall petroleum consumption in fleets by 20 percent by the 
year 2005. Some agencies--all agencies are taking that mandate 
very seriously. Some are even beginning to order advanced 
technology vehicles and are planning to order vehicles such as 
hybrids that do provide sufficient or significant energy 
efficiency benefits.
    We will continue and improve these efforts in the years 
ahead and look forward to working with this committee and the 
Congress as we develop a comprehensive energy bill that touches 
on these efforts and many others.
    Thank you for that opportunity, and I will be pleased to 
answer any questions that the committee has either now or in 
the future.
    Senator Murkowski. Thank you, Mr. Garman.
    [The prepared statement of Mr. Garman follows:]
      Prepared Statement of David K. Garman, Assistant Secretary, 
      Energy Efficiency and Renewable Energy, Department of Energy
    Mr. Chairman and Members of the Committee, I appreciate the 
opportunity to appear today to discuss the Federal programs for energy 
efficiency and conservation within the purview of the Office of Energy 
Efficiency and Renewable Energy at the Department of Energy.
    An entire chapter of the President's National Energy Policy was 
devoted to the topic of energy efficiency and conservation. The 
President has challenged us to continue the progress in improving 
energy efficiency in vehicles, in manufacturing and other industries, 
in appliances, in buildings, and in electricity power generation and 
transmission.
    We have made tremendous progress in increasing the efficiency of 
energy used in our economy over the past 30 years. From 1972 to 2000, 
the energy used per dollar of GDP produced fell by roughly 40 percent. 
(In comparison, from 1949 to 1972, energy used per dollar of GDP only 
fell by about 10%). One-half to two-thirds of this reduction in energy 
intensity was due to improvements in energy efficiency, with the 
remaining one-third to one-half related to changes in the structure of 
the economy. Had our energy intensity remained at 1972 levels, the 
United States would have used about 171 quads of energy in 2000, rather 
than 99 quads, with energy efficiency improvements accounting for about 
36-48 quads of the savings.
    These savings are greater than the increase in energy supply since 
1972, totaling about 26 quads, including changes in domestic production 
of coal (+8.9 quads), natural gas (-2.5 quads), oil (-7.6 quads), 
nuclear (+7.4 quads), and renewables (+2.2 quads); and increased 
imports of natural gas (+2.6 quads) and oil (+11.8 quads). Assuming the 
current average energy price of $6 billion per quad remained the same, 
these 36-48 quads correspond to savings of roughly $200-$300 billion 
per year. A recent National Academy of Sciences report notes that the 
EERE programs played a dominant or influential role in three of the 
technologies the considered to be among the most important energy 
efficiency innovations since 1978 (low-e glass, advanced refrigerators, 
and electronic ballasts).
    Over the years, the private sector and state and local governments 
have demonstrated successes at improving energy efficiency on their own 
or with support from the federal government. I believe this is why the 
President's National Energy Plan wisely instructs us to rely on the 
combined efforts of industry, consumers, and federal, state, and local 
governments to improve energy efficiency, nationally.
    The President's Energy Policy envisions six general strategies to 
guarantee America's continued growth and prosperity:

   First, we will aggressively reduce demand by employing 
        energy efficiency technologies and encourage sound conservation 
        measures as essential components of our energy policy.
   Second, we accept the fact that even the most aggressive 
        energy efficiency and conservation programs will not, by 
        themselves bring domestic supply and demand closer into 
        balance. We must also increase energy supply, with special 
        emphasis on domestic supply.
   Third, to enhance energy security, we must maintain a 
        diversity of primary energy sources.
   Fourth, we must dramatically upgrade our national energy 
        infrastructure to deliver energy from the source to the 
        consumer.
   Fifth, we must accomplish these strategies while 
        simultaneously building on our successful record of 
        environmental protection.
   And sixth, we realize that our energy challenges will extend 
        beyond 20 years. Therefore, we need to prepare for a future 
        that moves us beyond current thinking about the sources and 
        uses of energy.

    The Federal Government, including the Department of Energy, is 
working to do its part. In my office, we are working to improve energy 
efficiency in a variety of important areas. For instance:

   In partnership with industry, we are making significant 
        investments in research and development toward new energy 
        efficiency products and processes.
   We have developed appliance standards that create reasonable 
        but challenging efficiency guidelines for various products.
   We have worked to establish consumer awareness programs such 
        as Energy Star that help market, promote, and create a demand 
        for efficient products.
   We have established strong partnerships with the states; 
        including financial incentives and federal grant programs to 
        support states and localities.
   And we have lead by example in striving to meet energy 
        efficiency targets that Congress has established for federal 
        buildings and transportation fleets.

    Today, I will elaborate on a few of our ongoing and new activities 
that will help promote greater energy efficiency and conservation. 
Before I begin, I'd like to highlight how the President's Management 
Agenda has helped us focus our resources and become better stewards of 
the taxpayers' dollars. For example, the R&D investment criteria help 
us guide budget decisions to ensure we fund only activities that can 
provide real public benefits and that the private sector would not 
undertake without our help. And the budget-performance integration 
initiative, through the Program Assessment Rating Tool (PART), has 
helped us to focus on continuing to improve our performance goals, and 
to identify program planning and management strengths and challenges.
    Two years ago, the President's Management Agenda pointed out that 
Federal government R&D programs in general ``do not link information 
about performance to our decisions about funding. Without this 
information, decisions about programs tend to be made on the basis of 
anecdotes, last year's funding level, and the political clout of local 
interest groups.'' This year, our funding request is in better 
alignment with what it will take to achieve our goals.
                 promoting efficiency in transportation
    A top priority of my office is to work to dramatically reduce or 
eventually even end our Nation's dependence on foreign oil. The 
centerpiece of this effort is, of course, the FreedomCAR partnership 
and the President's Hydrogen Fuel Initiative. Because that was a 
subject of a hearing before this Committee last week I need not repeat 
my testimony from last week.
    As important as we believe hydrogen is for the long term, however, 
we are still working, in cooperation with other federal agencies, to 
maintain a robust, and in some areas growing, research and development 
program in non-hydrogen transportation technologies.
    Under the FreedomCAR partnership we have proposed a funding 
increase in fiscal year 2004 for our hybrid (gasoline-electric and 
diesel-electric) technology, as well as increases in materials 
technology. We believe many of these technologies will deliver fuel 
savings both prior to and after the introduction of fuel cell vehicles, 
since lightweight materials and hybrid technologies are expected to be 
incorporated into fuel cell vehicle designs. Therefore, these 
investments are expected to pay off in the interim, as well as over the 
long term.
    In addition, we had a number of interim strategies in mind as we 
established specific, measurable performance goals for our program. And 
our FY 2004 budget is aligned with these goals. For example:

   We are working to develop technologies for heavy vehicles by 
        2006 that will enable reduction of parasitic energy losses, 
        including losses from aerodynamic drag, from 39 percent of 
        total engine output in 1998 to 24 percent;
   The 2006 goal for Transportation Materials Technologies R&D 
        activities is to reduce the production cost of carbon fiber 
        from $12 per pound in 1998, to $3 per pound; and
   The 2010 goal for Hybrid and Electric Propulsion R&D 
        activities is to reduce the production cost of a high power 
        25kW battery for use in light vehicles from $3,000 in 1998 to 
        $500, with an intermediate goal of $750 in 2006. Achieving 
        these goals will enable hybrid vehicles to be more cost 
        competitive with conventional vehicles in the marketplace.

    Automakers are introducing technologies that have resulted in part 
from DOE's work in this area. At the recent North American 
International Auto Show in Detroit, the major U.S. automakers announced 
that they will have a variety of new hybrid gasoline-electric models 
entering the market in the 2004 to 2008 timeframe.
    Of course, hybrid vehicles are still more expensive compared to 
conventional vehicles, which is why the President proposed a tax credit 
for hybrid vehicles in his National Energy Plan, and subsequent to that 
in his 2004 budget submission. We urge that Congress adopt this 
important incentive for more efficient vehicles.
             improving energy use in our federal buildings
    The Federal Government is the nation's largest single energy user. 
We spend almost $8 billion annually on energy costs and operate over 
500,000 facilities and almost 600,000 vehicles worldwide. Therefore, 
our Federal Energy Management Program (FEMP) focuses on energy use in 
federal government buildings and complexes.
    The President's National Energy Policy recognized the role that the 
Federal government can play in helping make the United State the world 
leader in energy efficiency in the 21st century by directing that 
Federal agencies to conserve energy and to reduce energy use during 
peak hours, particularly in areas where outages are likely.
    Federal agencies have already accomplished tremendous success in 
energy management. In response to Executive Order 13123, between 1985 
through 1999, the federal government as a whole reduced its energy use 
in its buildings by more than 20 percent thereby reaching its goal for 
2000, one year early. The Government also saved more than $1.3 billion 
in 2001 relative to 1985, in reduced energy bills, much of which can be 
attributed to energy improvements. But there is still much we can do. 
Let me highlight a few of the opportunities we have to lead by example.
    It is much easier to incorporate and finance energy-saving 
technology in new construction compared to retrofits. So with every new 
building we build, we should incorporate smart design and energy 
efficient and renewable technologies. These buildings will show our 
commitment to saving energy, saving money, and protecting the 
environment.
    The Federal government's existing building stock offers another 
opportunity for tremendous energy savings. We provide Federal agencies 
with access to technical assistance so that agencies can make wise 
choices as they consider options for retrofitting and upgrading their 
buildings. In some cases, when cost-effectiveness can be demonstrated, 
FEMP may recommend private sector financing, through energy savings 
performance contracts and utility contracts, to pay for these upgrades. 
FEMP provides agencies with easier access to these unique contracting 
vehicles. However, alternative financing through Energy Saving 
Performance Contracting (ESPC) is in jeopardy because the statutory 
authority will sunset on September 30, 2003 without legislative action.
    The Federal government can also make a difference by making smart 
purchasing decisions. The Federal government spends more than $10 
billion each year on energy-using equipment. According to a recent 
study conducted by Lawrence Berkeley National Laboratory, the Federal 
government could save at least $120 million in annual energy costs by 
2010 just by buying energy efficient products that are readily 
available.
    Executive Order 13221, issued by President Bush in July 2001, 
offers a compelling example of how, by working with industrial 
partners, the federal government's purchasing decisions can pull the 
market for energy efficient products. To help implement E.O. 13221, 
which requires the federal government to purchase products that use 
minimal standby power, FEMP initiated negotiations with office product 
manufacturers. As a result, office product manufacturers are 
introducing significant design changes that dramatically reduce the 
standby power of products used by consumers and businesses throughout 
the world. Through prudent product specifications and purchasing 
criteria, the federal government is encouraging the development of more 
energy efficient and renewable energy products and services.
    Responding to E.O. 13221 the federal government will save 
approximately $10 million in annual energy cost savings. U.S. consumers 
will save approximately $210 million in annual energy costs. The 
federal government will save electricity equivalent to the amount 
needed to power approximately 18,000 homes. U.S. consumers will save 
electricity equivalent to the amount needed to power approximately 
270,000 homes. Savings are expected to grow as low standby products 
become standard in the market.
    The Federal Government can also reduce energy use through a 
continued focus on the supply side of the equation. Federal agencies 
invest in distributed energy resources to provide power closer to the 
point of use. These distributed energy technologies include fuel cells, 
microturbines, and biomass systems, to name a few. Using distributed 
generation, we increase the available supply, improve reliability, and 
reduce demand on our constrained power system. Many of these 
technologies can be used as combined heat and power systems--in other 
words, they can recapture heat that is otherwise wasted.
    And, Mr. Chairman, we are also pursuing significant efforts to 
increase the energy efficiency of Federal fleet operations. One driver 
for this is Executive Order 13149, which directs Federal agencies to 
reduce overall petroleum consumption in fleets by 20 percent by the 
year 2005. To meet this goal, we are working with other agencies to 
improve the efficiency of fleet operations, increase the use of 
alternative fuel, and encourage the purchase of energy efficiency 
vehicles. Some agencies are ordering advanced technology vehicles such 
as hybrids. The Administration has also requested that agencies reduce 
the size of their fleets. While fleets for some agencies performing law 
enforcement and security activities are expected to increase, these 
increases will be more than offset by decreases in other agencies' 
fleets, as agencies begin to manage their fleet resources more 
efficiently.
                        buildings for the future
    Energy use by residential and commercial buildings accounts for 
over one-third of the Nation's total energy consumption--including two-
thirds of the electricity generated in the U.S.--and costs the Nation 
about $240 billion annually. Improving the energy efficiency of 
buildings and equipment reduces energy consumption--especially during 
critical peak demand periods--which also reduces America's 
vulnerability to energy supply disruptions, energy price spikes and 
constraints on the Nation's electricity infrastructure. In addition, 
since energy for buildings also contributes one-third of urban air 
pollution and roughly a third of our carbon emissions, new energy 
efficiency technologies can have significant economic and environmental 
benefits.
    With a growing population and increased amenities that require more 
energy, building energy consumption will grow from 34 to over 40 
quadrillion Btu by 2020. Therefore, we are working on technologies 
needed for new generations of buildings that will be more efficient, 
comfortable and simpler to operate and maintain. Our office buildings, 
Federal buildings, homes, and stores can be more self reliant, less 
vulnerable to outages, adaptable to changing work requirements, and 
more responsive to users needs. Many could actually produce more energy 
than they consume by combining highly efficient design with solar, 
geothermal, and other distributed energy and cogeneration technologies.
    Our Building Technologies Program, in partnership with industry, 
government agencies, universities and national laboratories, develops 
technologies, techniques and tools to make residential and commercial 
buildings more energy efficient, productive and affordable. Its 
portfolio includes improving the energy efficiency of building 
components and equipment as well as developing highly-efficient, whole-
building, system-design techniques. The program also supports the 
development of building energy efficiency codes and national energy 
efficiency standards for appliances and building equipment; integrates 
renewable energy systems into building design and operation; and 
conducts technology transfer, education and information exchange. The 
program works to forge consensus on research directions and priorities, 
and industry-wide codes and standards.
    Within our buildings research portfolio we have a new focus in 
2003--solid state lighting--a new technology being developed to advance 
more efficient lighting systems. Consider the lights that illuminate 
this room. They are a major consumer of electricity. Nationwide, 
lighting consumes seven quadrillion BTUs or more in a given year, or 7 
percent of all energy usage. Less efficient incandescent bulbs produce 
large amounts of heat that our climate control systems must manage, so 
we pay an additional energy penalty.
    While modern florescent bulbs with electronic ballasts are more 
efficient, they remain glass nodules filled with gas not unlike the 
vacuum tubes of the last generation of electronics. The time has come 
to take the next step toward solid state lighting. The inorganic light 
emitting diode is to florescent lamps what transistors were to vacuum 
tubes, or what the automobile was to the horse-and-buggy. It's a 
revolutionary technological innovation that promises to change the way 
we light our homes and businesses.
                      appliance standards program
    Over the last year, the Department undertook a major analysis to 
respond to the National Energy Policy which directed continued support 
and expansion of the scope of the program for covered products, setting 
higher standards where technologically feasible and economically 
justified. We completed a review of the standards program and 
identified residential furnaces and boilers, commercial central air 
conditioners and heat pumps and electric distribution transformers as 
high priority standards rulemaking activities. Further work in these 
areas is presently underway.
    In addition, the Department identified energy savings opportunities 
for incandescent reflector lamps, torchieres, commercial refrigerators, 
vending machines, and ceiling fans and are assessing whether to expand 
the scope to include any of these products in the program.
          distributed energy and electric reliability program
    Distributed energy involves the use of relatively small-scale and 
modular energy generation devices installed onsite or near the 
customer's premise. Electric reliability involves the use of electric 
energy systems for addressing electricity transmission and distribution 
problems, including grid congestion, outages, power quality 
disturbances, and line losses. Technologies include industrial gas 
turbines, microturbines, reciprocating engines, chillers, desiccants 
(for humidity control), integrated energy systems and CHP, energy 
storage devices, utility interconnection equipment, transmission and 
distribution systems, communication and control systems, and high 
temperature superconducting materials and equipment.
    To address regulatory and institutional barriers to the use of 
distributed energy and electric reliability technologies, the program 
conducts analysis, and education, and outreach activities in 
partnership with industry groups and Federal and State government 
agencies. The aim is to streamline siting, permitting, and 
interconnection procedures, accelerate distributed energy project 
development timetables, and lower installation costs.
    The Distributed Energy and Electric Reliability Program works to 
strengthen America's electric energy infrastructure and provide 
utilities and consumers with a greater array of energy efficient 
technology choices for the generation, transmission, distribution, 
storage, and demand management of electric power and thermal energy.
    The program contributes to several national energy and 
environmental goals. For example, expanding the use of distributed 
energy and electric reliability technologies upgrades America's aging 
electric power infrastructure, relieves congestion on transmission and 
distribution systems, reduces the use and increases the supply of 
electricity during periods of peak demand, and reduces environmental 
emissions, including greenhouse gases. The program supports EERE's 
strategic goal to increase the reliability and efficiency of 
electricity generation, delivery, and use.
    Mr. Chairman, the Grid Study published last year called for the 
establishment of a new office of Electricity Reliability. We are now in 
the process of implementing that recommendation, and expect to be able 
to provide details on the structure and functions of this new office in 
the months ahead.
    Mr. Chairman, I hope I have conveyed some of the elements of our 
vision of the future and how our programs are working to attain that 
vision. I will be pleased to answer any questions you may have.

    Senator Murkowski. Let us next go to Mr. Paul Lynch.
    Mr. Lynch, your testimony, please.

  STATEMENT OF PAUL LYNCH, ASSISTANT COMMISSIONER OF BUSINESS 
    OPERATIONS, PUBLIC BUILDINGS SERVICE, GENERAL SERVICES 
 ADMINISTRATION, ACCOMPANIED BY MARK EWING, DIRECTOR, NATIONAL 
                         ENERGY CENTER

    Mr. Lynch. Good morning. Madam Chairman, thank you for the 
opportunity to present testimony regarding Federal programs for 
energy efficiency and conservation.
    The General Services Administration has a long history of 
supporting Federal energy efficiency in our facilities. We also 
recognize the importance of our unique leadership role as the 
Government's landlord in demonstrating energy efficiency and 
sound asset management. GSA's actions in the area of efficiency 
closely follow mandates set forth in public law and numerous 
Executive Orders; most recently President Bush's Executive 
Order 13221, and Executive Order 13123, Greening the Government 
through Energy Efficiency.
    In fact, GSA annually develops an implementation plan to 
ensure that all the energy management strategies identified in 
the Executive Order are being pursued. Energy reduction and 
utility cost reduction goals are tracked as part of GSA's 
performance evaluation to the President on an annual basis. 
Results are also reported to GSA senior management on a 
quarterly basis. Senior management and regional senior 
management executives have energy performance included as part 
of their performance evaluation as well.
    We believe we are making good progress. Since 1985, GSA has 
reduced energy in our facilities classified as standard by 
about 21 percent compared with the 1985 base year. This agency 
achieved this reduction by directly investing in Federal 
conservation opportunities with paybacks of 10 years or less. 
From 1990 through 2002, GSA has invested approximately $316 
million in energy projects.
    GSA has also reduced energy in our energy-intensive-type 
buildings, industrial and laboratory. We have actually reduced 
consumption by 37.2 percent compared with the 1990 baseline 
that was established.
    GSA also benchmarks our performance with the private 
sector. We use a utility benchmark, established by the Building 
Owners and Managers' Association, and that index actually shows 
PBS is operating Federal facilities 34 percent below comparable 
commercial facilities for the same period ending fiscal year 
2002.
    GSA is also proud of our efforts to earn the Energy Star 
Building Label. To date, GSA has earned the Energy Star 
Building Label for 93 of its owned facilities and 1 leased 
facility. That approximates 28 million square feet, which is 
about 19 percent of our eligible square footage and 15 percent 
of our facilities agencywide.
    GSA also has a well-developed strategy for providing 
leadership to energy efficiency. GSA's actions can be broken 
down into two key categories, leadership and management; and, 
secondly, energy efficiency performance and implementation 
strategies.
    Under the management and administration piece, GSA created 
an energy management infrastructure, designated a senior agency 
official responsible for meeting the goals; that is me. We have 
also formed a technical team to--consisting of appropriate 
personnel to expedite and encourage the use of strategies 
identified in the various Executive orders and law.
    GSA also utilizes a wide variety of management tools 
including such things as award programs for our associates, 
performance evaluations, training and education workshops and 
designation of our buildings as showcase energy facilities.
    GSA activities in energy conservation are implemented and 
managed by a national Energy Center of Expertise. The Center, 
supported directly by GSA associates from all of our GSA 
regions across the country, are responsible for coordinating 
energy activities. The Center monitors and coordinates energy 
usage. They develop and implement energy savings projects. They 
leverage our purchasing power through national contracts and 
buys. They establish and manage Energy Savings Performance 
Contracts; and they develops annual implementation plans and 
strategies to achieve our goals.
    I would like to take a minute to introduce Mark Ewing. Mark 
is the Director of the National Energy Center, and he really 
makes a whole lot of things happen at the Public Building 
Service.
    The second broad category pertains to energy efficiency 
performance and implementation strategies. To know our 
portfolio and what our needs are, GSA maintains a 10-year audit 
plan in which we look at 10 percent of our space each and every 
year.
    These audits identify energy conservation measures that may 
lead to future energy conservation projects or other viable 
alternatives, in addition to an energy conservation proposal. 
GSA associates have a wide array of tools to take action. They 
include energy projects, use of renewable energy, and 
sustainable building design.
    Direct appropriations for energy savings projects in 
today's world are difficult to count on. I think everyone 
agrees with that. GSA is maximizing the use of available 
alternative financing contracting mechanisms as a strategy. To 
give you some sense, in 2002 GSA awarded a total of seven 
alternatively financed projects, all seven, which were ESPs. 
This brings the total to 23 ESPs and 19 service savings 
contracts with utilities currently active and in place.
    We also have an additional 13 projects in various stages 
that will be awarded some time this year. The total dollars 
associated with this effort are approximating $179 million of 
private sector money.
    GSA also considers opportunities for solar and other 
renewable energy in building design and retrofits. In fiscal 
year 2002, GSA received an estimated 3,200 million Btus in 
energy use from self-generated projects. Approximately 156 
megawatt hours of this coming from 6 of our 6 Photovoltaic 
installations, 1,779 million Btus coming from GSA's 5 solar 
thermal projects.
    We have also had very good success in purchasing renewable 
energy. In fiscal year 2002, GSA purchased a total of 24,306 
megawatt hours of electricity from renewable energy through 
competitive power contracts and the use of green power.
    Looking toward the future in our capital program, GSA 
requires all new buildings and all new major repairs and 
alterations of existing buildings to conform to the Leadership 
in Energy and Environmental Design, the LEED, rating, Silver 
requirements. The LEED, established by the Green Building 
Rating System, is a voluntary, consensus-based national 
standard for developing high-performance, sustainable 
buildings.
    Members of the Green Building Council, representing all 
segments of the building industry, developed LEED and continue 
to contribute to its evolution. Our ultimate goal with the LEED 
program is to bring new buildings into our inventory that are 
energy-efficient, while optimizing the energy performance of 
our existing building inventory.
    To close, GSA is committed to providing leadership to 
energy efficiency and conservation. Meeting the 30 percent 
reduction goal in our buildings by the year 2005 and 35 percent 
by 2010 is definitely hard work. We are in the process right 
now of issuing a national business strategy. It contains four 
tenets that will help our associates across the portfolio, 
actually make us successful in meeting our 2005 and 2010 goals.
    With that Madam Chair, I would be pleased to answer any 
questions you or other members of the committee may have on 
this matter.
    Senator Murkowski. Thank you, Mr. Lynch.
    Next, let us go to Mr. Nemtzow. Welcome.

           STATEMENT OF DAVID M. NEMTZOW, PRESIDENT, 
                    ALLIANCE TO SAVE ENERGY

    Mr. Nemtzow. Thank you. Thank you, Madam Chairman and 
Senator Bingaman, and members of the committee for the 
opportunity for the Alliance to Save Energy to testify today.
    We are a bipartisan, nonprofit coalition of business, 
government, consumer, and environmental leaders who promote 
energy efficiency.
    Over 70 businesses belong to the Alliance to Save Energy 
because they understand that energy efficiency is the quickest, 
the cleanest, and the cheapest solution to our Nation's energy 
problems.
    The U.S. Congress is faced with debating another energy 
bill, as you did in the last Congress, but things have 
certainly changed in the 2 years that this debate started. As 
you meet today, Madam Chairman, oil prices are at the highest 
levels we have seen since the Persian Gulf War and are probably 
headed higher. Gasoline prices have cracked $2 a gallon in most 
of the country for many of your constituents. And we are facing 
an oil problem as we have not seen in a decade.
    And there are many reasons for that, but one of the 
underlying reasons, of course, is that our Nation's demand and 
supply are just out of sync with each other. The United States 
uses 40 percent of the world's gasoline. And that kind of 
pressure is changing the marketplace throughout the world.
    The energy bill that the 107th Congress almost produced 
that you asked us to comment on is a good bill. The provisions 
in that that Senator Bingaman and that Senator, now Governor, 
Murkowski and the other committee members worked on together 
are all good provisions.
    What is notable about that bill is not what is in it but, 
of course, what is missing. That bill failed to deal with fuel 
economy, and that failure will haunt the Nation for years to 
come, unless this Congress addresses it.
    Senator Dorgan and President Bush and others have called 
for a major investment in hydrogen and fuel cells. That makes a 
lot of sense. That bill, S. 461, deserves this committee's 
attention.
    But in addition to dealing with fuel cells and hydrogen, 
you need to deal with the shorter term problems. In addition to 
the defeat CAFE faced in the 107th Congress, the alternative 
approach that Senators Carper and Specter proposed, setting a 
blanket goal of saving 1 million barrels per day in the 
transportation sector was also defeated. That is unfortunate.
    There are a variety of ways for the Senate to improve fuel 
economy without changing CAFE. I recommend we change CAFE. Even 
Business Week--if you have not seen this cover story from 2 
weeks ago, I highly commend it. And even Business Week writes 
that this is completely doable. They write, ``Raise car and 
truck MPGs, boost that fuel economy to 40 miles per gallon, and 
oil savings will top 2 million barrels a day.'' Detroit says 
that is too high a goal, but the technology already exists to 
get there.
    Business Week is right. But if the politics are not there, 
if the votes are not there, there is still a variety of 
measures that you can take to improve fuel economy. You can 
improve the efficiency of tires or set up a labeling system so 
that consumers can choose efficient tires. You can mend the 
dual fuel loophole, so that it is not continually abused. You 
can improve truth in CAFE testing, and certainly you can close 
the light truck loophole.
    Beyond CAFE there are a variety of provisions, the clear 
tax incentives that Senator Hatch and others have introduced. 
Beyond that, there are additional tax incentives that you 
should consider, the R&D that we have heard about. And on the 
non-vehicle side, there are tax incentives, the Energy Star 
program, and let me add program education.
    We are facing a national security--a homeland security 
crisis right now. And rightfully, Secretary Ridge is on TV and 
radio doing public service ads educating the public about those 
dangers.
    We are facing an oil crisis in this country, an energy 
crisis, but Secretary Abraham is not doing public service ads 
to educate the public. They should be doing that. They should 
be increasing their public education effort to help consumers. 
They, consumers, already know about high oil prices. They need 
to know what to do about it.
    Beyond oil, there are a lot of provisions. I want to just 
generally endorse the provisions that were worked out in the 
107th Congress on Federal energy management, on appliance and 
equipment standards, the various new authorizations, and the 
tax incentives that came from Senate Finance. There are a few 
provisions you should consider this year.
    I submit one is on the Federal energy side. Right now, 
energy service companies, like Mr. Keith's company, can bring 
in innovative contracts to buildings, to improve buildings with 
their private capital.
    They are not authorized to do that outside the building 
sector. You should allow them to do it for transportation and 
for high energy facilities. So, for example, a Navy ship that 
wants to get new generators can use Mr. Keith's company or the 
many others in that industry, to swap that out.
    They will lay out the capital. They will get paid back over 
time with the savings. That reform to get beyond the building 
sectors to the mobility sector deserves your attention and 
support.
    Secondly, there is a matter on Federal energy management 
that has nothing to do with legislation, Madam Chairman. It is 
plain old oversight. When you are not having hearings, the 
managers at the Federal facilities--and I am not referring just 
to GSA, but throughout the Government, VA and Defense and 
Housing and Urban Development, they like to forget about this 
issue.
    When the Executive Order goes away, when the President goes 
away, they forget about the Executive Orders. You need to have 
periodic oversight, send them letters, hold hearings, hold them 
accountable.
    Federal energy management is a war of attrition. It is not 
a war that you will win with a single legislative change. So I 
encourage you to do that.
    Again, thank you for allowing the Alliance to Save Energy 
to testify. We hope that you will pass the provisions that you 
passed in the 107th Congress and then add the missing 
provisions, particularly regarding fuel economy. Thank you.
    Senator Murkowski. Thank you. I appreciate your testimony.
    [The prepared statement of Mr. Nemtzow follows:]
          Prepared Statement of David M. Nemtzow, President, 
                        Alliance to Save Energy
                              introduction
    Mr. Chairman, Senator Bingaman, and Members of the Committee, thank 
you very much for the opportunity to testify before you today about the 
role of energy efficiency in serving as the foundation of national 
energy policy.
    My name is David Nemtzow. I am President of the Alliance to Save 
Energy, a bi-partisan, non-profit coalition of business, government, 
environmental, and consumer leaders dedicated to improving the 
efficiency with which our economy uses energy. Senators Charles Percy 
and Hubert Humphrey founded the Alliance in 1977; it is currently 
chaired by Senator Byron Dorgan and former CEO of Osram Sylvania, Dean 
Langford, with Senators Susan Collins and Jeff Bingaman serving as Vice 
Chairs.
    Over seventy companies and organizations currently belong to the 
Alliance to Save Energy. If it pleases the Chairman, I would like to 
include for the record a complete list of the Alliance's Board of 
Directors and Associate members, which includes many of the nation's 
leading energy efficiency firms, electric and gas utilities, and other 
companies providing economic savings and pollution reduction to the 
marketplace.
    The Alliance has a long history of researching and evaluating 
federal energy efficiency efforts. We also have a long history of 
supporting and participating in efforts to promote energy efficiency 
that rely not on mandatory federal regulations, but on partnerships 
between government and business and between the federal and state 
governments. Federal energy efficiency programs at the Department of 
Energy (DOE), the Environmental Protection Agency (EPA), and other 
agencies are largely voluntary programs that further the national goals 
of environmental protection, as well as broad-based economic growth, 
national security and economic competitiveness.
    Mr. Chairman, one thing that nearly everyone agrees on is that an 
energy bill should be a balance between measures to increase energy 
supply and demand, energy production and energy efficiency. President 
Bush again led the energy section of the State of the Union address 
with efficiency. House and Senate leaders have been unanimous in their 
call for strong efficiency measures as a cornerstone of an energy bill. 
There seems to be no argument.
    The only problem, Mr. Chairman, is that neither the President's 
Energy Plan, the House Energy Bill of 2001, nor the Senate bill of 2002 
includes adequately strong energy efficiency measures. Each of those 
efforts amounted to missed opportunities whose great failing is that 
they aren't really going to change things significantly. There were 
good provisions that we strongly support, such as tax incentives for 
efficient products and practices, new products for which DOE is to set 
minimum standards, and better guidance for saving energy in federal 
facilities. But in the larger picture, the potential of energy 
efficiency to help our economy, our environment, and our national 
security was largely left untapped.
    Mr. Chairman, my testimony will focus on what last year's Senate 
energy bill did right, and where it failed. I recognize that you are 
holding separate hearings on transportation, electricity, fuel cells 
and other topics that I will discuss in this testimony; I include them 
because it is impossible to discuss energy efficiency without 
discussing these and other issues.
                     oil dependence and the economy
    Mr. Chairman, last year, even if the Conference Committee had 
successfully finished negotiations on the energy bill, it would have 
failed to propose any meaningful solution to our deadly dependence on 
foreign oil.
    I know that no one in the United States today needs to be reminded 
of the --and growing--increase in oil prices that we're experiencing 
today (nor of our stubbornly high natural gas prices). Unfortunately, 
Americans may also soon be reminded of the simple fact of economic 
history that every significant oil price shock in our history has been 
followed by a recession.
    A study by Oak Ridge National Laboratory estimates losses to the 
United States due to oil market turmoil--and the subsequent 
macroeconomic losses--at $7 trillion as of 1998. Such an 
incomprehensible figure doesn't even include the downturn that began 
with the gasoline price shock of 2000, nor does it count the losses 
that are mounting daily as prices at the pump and fuel oil terminals 
have shot to all-time highs throughout the nation.
    While the uncertainty in Iraq and the Venezuela situation are the 
leading immediate causes of these increases, the key underlying cause 
is that over time U.S. and world petroleum demand is outstripping oil 
supply, pushing up crude and product prices for all oil consumers and 
depressing overall economic growth. That is why, Mr. Chairman, if--as 
holds a basic tenet of market economics--people acted truly in their 
rational economic self-interest, every CEO of a non-auto industry 
company would be in Washington, D.C. lobbying hard for an increase in 
fuel economy standards. They would be lead by airline and petrochemical 
firms, and followed by all others with a stake in our overall economic 
growth with the clear message that unnecessary and excessive oil 
dependence leads to oil price shocks which in turn slow the economy and 
send consumer confidence plummeting. They cut profits, put Americans 
out of work, and endanger the well-being of families and children.
    The Alliance to Save Energy applauds President Bush's initiative to 
accelerate research into hydrogen fuel cells. It is potentially a long-
term solution that can help wean us from this cruel addiction to oil. 
It is not, however, a sure thing. President Bush sounded hopeful that 
we would have fuel cell cars on the market in 16 years. That may be 
very optimistic. Mr. Chairman, in the late 1970s, scientists told us 
that large scale use of fusion energy was 40 years away. The common 
estimate is that it is still 40 years away. We sincerely hope that 
widespread use of hydrogen does not turn out to be another ``fusion.'' 
But we cannot rely on that gamble.
    Just last month, Senator Dorgan introduced S.461, the Hydrogen Fuel 
Cell Act of 2003 a plan that would not only invest $6.5 billion over 10 
years to develop hydrogen fuel cells, stationary cells, and the 
necessary infrastructure, but also set bold targets and timetables for 
bringing those vehicles to market with the tax credits to help make 
that happen. Senator Dorgan's bill offers an aggressive Apollo-like 
program for a hydrogen and fuel cell future. But in the meantime, we 
must still ask the tough questions: what will it take to lessen U.S. 
oil dependence?
    How do we get the auto industry to the table in a meaningful way? 
Congress can't seem to force them to do anything meaningful on fuel 
economy. Do we take $50 billion out of the multi-hundred billion dollar 
stimulus package to make their vehicles more efficient? Can the 
industry be coaxed--dare I say ``bribed''--with such an incentive? Are 
there other things that can be done beyond CAFE standards to make a 
dent? Are the tax credits for hybrid and fuel cells cars big enough? 
Should they also promote super-high efficiency traditional internal 
combustion vehicles?
    What will it take to solve the problem?
    This great nation restructured its economy to win World War II and 
rebuild Europe. We built the atomic bomb and won the Cold War. We put 
men on the moon. We're the world's only superpower--not just militarily 
but in IT and medical technology.
    Surely we can reduce demand for oil, and thus help to grow our 
economy, and that of the entire world. Lessening pollution and our 
deadly dependence on Middle East oil would seem a mere sideshow.
                    fuel economy and oil dependence
    The fuel efficiency of America's vehicles is at a 22-year low and 
slipping, while our oil consumption continues to increase--rising 15 
percent in the last decade.\1\ Much of our oil comes from unstable, 
undemocratic regimes in the Middle East, many who have made the news 
lately as often as has Michael Jordan.
---------------------------------------------------------------------------
    \1\ 1990 U.S. Oil consumption = 16,988 thousand barrels per day. 
1999 U.S. Oil Consumption = 19,519 thousand barrels per day, World 
Petroleum Consumption, 1980-1999, Energy Information Administration, 
DOE.
---------------------------------------------------------------------------
    It has--once again--become apparent that OPEC is driving our oil 
dependence, and we gave them the keys.
    As you know Mr. Chairman, last year, the Senate stripped out the 
only section of the energy bill that would have significantly saved oil 
an increase in the Corporate Average Fuel Economy (CAFE) standards. 
Then, when Senators Carper and Specter introduced legislation that 
would have saved one million barrels a day by 2015, the Senate again 
denied Americans the chance to wean ourselves from our growing 
dependence on oil. But rather than go back and try to tackle this 
problem another way, Congress effectively chose to walk away from what 
is a bull's eye on our nation's economic and national security. Today, 
the auto companies just say no while Americans take the economic hit, 
despite the fact that enormous gains in fuel economy could be made 
affordably and safely just by better deploying existing technologies, 
as documented by the National Academy Sciences (NAS). Why?
    The winning opposition to fuel economy standards says that they are 
listening to market forces--which consumers care more about false 
safety claims and onboard entertainment than the connection between 
their engines and our national security. National security and 
environmental protection may not be a top priority for American's when 
purchasing a vehicle. After all, Americans elect Congress to make 
decisions on these public issues, to make the tough decisions that will 
strengthen our hand against the oil-producing nations who hold us 
hostage and to protect us against the longer term problem of global 
climate change. Tough decisions that take many forms--CAFE is one 
proven effective way of reducing our oil dependence. In fact, the 
National Academy of Sciences said that the current fuel economy 
standards currently save America 2.8 million barrels of oil each 
day.\2\ While some members of the Senate are clearly loathe to ask the 
automakers of this country to take any additional strides to protect 
this country, there are others who will. The Alliance to Save Energy 
continues to respectfully urge Members of this body to increase fuel 
economy standards.
---------------------------------------------------------------------------
    \2\ Effectiveness and Impact of Corporate Average Fuel Economy 
Standards, National Research Council, July, 2001
---------------------------------------------------------------------------
    Mr. Chairman, there are other means of increasing the efficiency of 
our fuel use and reducing our oil dependence without touching the fuel 
economy standard but by fixing the system upon which the standard runs.
    One, Congress should establish standards for tires so replacement 
tires are as efficient as the tires are on a new car that drives off 
the lot, or even just a tire efficiency labeling system that would give 
consumers the information they need when they purchase replacement 
tires.
    Two, Congress should ensure that the fuel economy credits for dual 
fuel vehicles actually represent dual fuel usage. Because these credits 
are currently provided to vehicles that rarely see alternative fuels, 
they have increased the consumption of oil 18.4 million barrels beyond 
what would have been consumed in the absence of the credit.\3\ That 
loophole should be mended, or if not, ended.
---------------------------------------------------------------------------
    \3\ U.S. Department of Transportation, U.S. Department of Energy, 
U.S. Environmental Protection Agency. "Report to Congress: Effects of 
the Alternative Motor Fuels Act CAFE Incentives Policy," March 2002, 
Table V-4.
---------------------------------------------------------------------------
    Three, Congress should require the testing procedures for the fuel 
economy of vehicles to represent real-world driving and call for 
``truth in testing'' of the mileage ratings on vehicles.
    Four, and perhaps most importantly, Congress should consider 
allowing automakers greater flexibility by ending the light truck 
loophole, as Senators Feinstein and Snowe and others have called for, 
and adopting a single standard for all of a manufacturers' vehicles.
    Mr. Chairman, we are certainly not asking automakers to stop 
selling SUVs--just put the technologies currently available into these 
vehicles so that consumers who want to purchase a light truck can 
purchase an efficient one. It's that simple. Manufacturers are 
currently using high efficiency technologies that could significantly 
and cost-effectively increase the fuel economy of their passenger cars 
and light trucks. Over the past few years, we have seen more hybrid 
electric vehicles on the road, and more manufacturers are finding an 
increase in consumer demand. Sport utility vehicles and other light 
trucks are incorporating this new technology. In January 2003, General 
Motors Corp. announced that it will offer optional hybrid powertrains 
on several of its most popular models including trucks, SUVs and mid-
size sedans starting in late 2003.\4\ In the same month, Toyota 
announced the first hybrid luxury vehicle in America, the Lexus RX SUV, 
will be offered in about two years and will play a role in Toyota's 
plan to ``bring 300,000 new hybrid vehicles to market annually by mid-
decade'' \5\ Ford is testing their Escape hybrid, an SUV hybrid with a 
fuel economy of ``nearly 40 miles per gallon'' that will ``offer the 
same functionality and performance of the base product, including 
ensuring that the hybrid's unique regenerative braking system delivers 
the same functionality and feel that have made Escape's brakes best in 
their class,'' according to Mr. Pahokee Patel, chief engineer for the 
Escape hybrid.\6\ With this new light truck surpassing most passenger 
cars in fuel economy, there is no technological reason not to require a 
significant increase in fuel economy standards for all light trucks.
---------------------------------------------------------------------------
    \4\ http://www.gm.com/company/gmability/environment/road--to--
future/adv--tech--vehicles/tomorrows--hybrids
    \5\ http://129.33.47.206/about/environment/news/index.html
    \6\ http://www.hybridford.com/index.asp
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    Unfortunately, without higher CAFE standards such technological and 
marketplace progress will be intermittent at best, and will not lead to 
improvements across the fleet of cars, SUVs, pickups and minivans.
    There are also vehicle, engine, and transmission technologies that 
can boost traditional internal combustion engines fuel economy, both 
safely and cost-effectively. There is a great deal of improvement that 
can be made to increase the energy efficiency of today's cars and light 
trucks. About two-thirds of fuel energy is lost in the operation of our 
vehicles, much of that waste can be curtailed through efficient design 
and technology. In fact, the NAS report notes over two-dozen current 
and emerging technologies that can help to increase vehicle fuel 
economy. Many of these--such as variable valve control engines, 
lightweight aluminum engines, five-speed automatic transmissions, 
continuously variable transmission, and light weight materials--are 
being used in some cars and light trucks today. In addition, there are 
other technologies, such as turbochargers,\7\ which could make 
significant improvements in fuel economy if used more widely to 
increase fuel efficiency while lowering emissions and providing more 
power. Turbochargers can increase fuel economy and results in emissions 
reductions in CO2 and NOX of approximately 20 
percent. An engine with a turbocharger may have a power output that's 
as much as 40 percent higher than it would be without a turbocharger--
delivering the same power with a smaller engine without having to 
reduce vehicle size.
---------------------------------------------------------------------------
    \7\ Honeywell's Garrett Engine Boosting Systems, http://
www.egarrett.com
---------------------------------------------------------------------------
    Of course, rather than set standards for auto companies it is 
possible to directly affect consumers' calculus through price signals, 
such as by applying higher gasoline taxes. A gas tax--incorporating the 
externalities or the cost to the environment, our national security, 
and health impacts into the fuel--would force the consumer of the fuel 
in question to pay the consequences of its consumption. Yet, gas taxes 
are far more popular with economists than politicians, as Americans 
have been spoiled by artificially low gas prices. In the U.S., a gallon 
of gas is still cheaper than a gallon of milk and about half the price 
of a large latte in the ``CUPS'' coffee shop in the basement of 
Russell--yet as gas prices go over $1.50 and perhaps even $2, cries are 
heard around the country. And those cries will be heard this spring as 
retail gasoline prices are expected to set an all-time high with the 
U.S. Energy Information Administration predicting a peak of $1.76 a 
gallon as a national average next month beating the May 2001 record.
    Rather than making automakers to do the right thing through 
standards or convincing consumers through price signals, we can entice 
their progress through tax credits. This is not, in anyway a 
replacement for standards. Unless otherwise legislated, auto companies 
will still be taking fuel economy credits for making the vehicles on 
which consumers get a tax break. Senator Hatch and others reintroduced 
the bi-partisan CLEAR Act this year to provide tax credits for the 
purchase of high efficiency, advanced technology and alternative fuel 
vehicles. Not only did this legislation receive support from members of 
the environmental community and auto companies, but it was bi-partisan 
legislation largely incorporated into the Senate-passed version of H.R. 
4 last year at a cost of a mere $1 billion over five years.\8\  Mr. 
Chairman, can't we do more? With a national oil import bill of over 
$100 billion dollars per year,\9\ we seem to be sending money overseas 
to purchase oil rather than putting it into the pockets of Americans to 
spend or invest closer to home. Mr. Chairman, I encourage you and your 
colleagues to pass a tax credit for high-efficient, environmentally 
friendly vehicles this year.
---------------------------------------------------------------------------
    \8\ http://www.house.pov/ict/x-44-02.pdf.
    \9\ Alliance to Save Energy estimate based U.S. Department of 
Energy, Monthly Energy Outlook.
---------------------------------------------------------------------------
              product standards and various authorizations
    Mr. Chairman, the federal appliance energy efficiency standards 
program began in 1987 and has been tremendously successful in saving 
energy, reducing pollution, and saving consumers money. At a cost of 
roughly $10 million annually to the federal government, the standards 
program, through the year 2000 had reduced U.S. electricity use by 2.5 
percent (88 billion kwh annually) and reduced peak generating demand by 
approximately 21,000 megawatts. Even greater energy savings potential 
remains. By the year 2020, projected savings are expected to reduce 
U.S. electricity consumption by 7.8 percent enough to displace 240 
large (500 MW) fossil fuel power plants and reduce carbon emissions by 
75 million metric tons. At the same time, consumers will save $186 
billion about $1,750 per household.
    We urge the Committee to include the package of standards agreed to 
last year by the House-Senate Conference Committee on H.R. 4. That 
package was composed of consensus energy-efficiency standards 
negotiated between energy efficiency interest groups, including the 
Alliance to Save Energy, and the manufacturers of the products proposed 
for regulation. The agreement would have established standards, in law, 
for: torchiere lamps, dry-type transformers, exit signs, and traffic 
lights. It would also have required DOE to establish standards through 
rulemakings for: ceiling fans, commercial refrigerators, vending 
machines, unit-heaters, and so-called ``vampire'' or ``stand-by'' 
energy use by certain products that consume energy even when they are 
turned off. It was estimated that enactment of this package would 
result in cumulative energy savings from 2002-2020 of 12.8 Quads,\10\ 
making it the single most powerful energy savings element agreed to in 
last year's conference. The annual savings in the year 2020 were 
estimated to be 100 Trillion Btu, and the resulting reduction in carbon 
emissions were estimated at 21.4 million metric tonnes.
---------------------------------------------------------------------------
    \10\ Analysis by the American Council for an Energy-Efficient 
Economy, Washington D.C.
---------------------------------------------------------------------------
    There are several additional standards that are currently under 
discussion with manufacturers, such as a standard for compact 
fluorescent lamps. These lamps have dramatically reduced the amount of 
electricity needed for lamps designed to accept the standard screw-in 
incandescent bulb. However, further work may be needed to assure that 
products meet acceptable quality and reliability standards. 
Negotiations are underway between energy efficiency advocates and 
manufacturers to develop standards to resolve these concerns on a 
consensus basis. We ask the Committee to be open to including any 
agreement that may be reached in the coming months so that consumers 
can be assured not only of energy savings but of quality and 
reliability.
    Finally, we fully support and urge your inclusion of the other 
related provisions agreed to last year that would:

   authorize the Next Generation Lighting Initiative and the 
        Energy Star Program;
   improve energy efficiency in the industrial sector by 
        establishing voluntary reduction targets in industrial energy 
        intensity;
   establish a program for consumer education on the benefits 
        of air conditioning, heating and ventilation maintenance;
   authorize federal support for energy efficient appliance 
        rebate programs;
   direct a rulemaking on the effectiveness of consumer product 
        labeling by the FTC;
   direct a study by the National Academy of Sciences on 
        whether the goals of energy efficiency are best served by 
        measurement of energy savings at the site of energy consumption 
        or through the full fuel-cycle; and
   encourage federal participation in state and regional demand 
        reduction programs.
                       federal energy management
    Since 1995, the Alliance to Save Energy has brought together 
private-sector companies and organizations with an interest in cutting 
federal government energy waste as the Federal Energy Productivity Task 
Force. I have already submitted the full testimony of the Chairman of 
the Task Force, Mr. Jared Blum, for the record and to summarize those 
views that also represent the position of the Alliance.It is important 
that the federal government lead the nation in energy efficiency by 
setting an example for wise energy use in its own facilities and 
operations. Few federal programs have been as cost-effective as the 
U.S. Department of Energy's Federal Energy Management Program (FEMP). 
At an average cost of $20 million per year, FEMP has helped cut federal 
building energy waste by nearly 21 percent from Fiscal Year 1985 to 
Fiscal Year 1999 a reduction that now saves federal taxpayers roughly 
$1 billion each year in reduced energy costs. Again, we urge the 
Committee to include the package of provisions that were agreed to in 
last year's Conference Committee on H.R. 4 including:

          1. updating agency energy reduction targets;
          2. extending and expanding Energy Savings Performance 
        Contract (ESPC) authority and including water savings and new 
        replacement buildings;
          3. requiring cost-effective metering so that federal energy 
        officials can know what to measure and manage;
          4. increasing performance standards for new federal 
        buildings;
          5. strengthening federal procurement requirements; and
          6. increasing federal fleet fuel-economy requirements.

    We commend Senator Bayh for his introduction of S. 1358 last 
Congress, the ``Federal Facility Energy Management Act'' and Senator 
Bingaman for including many of its provisions in the Chairman's mark.
    In addition, the Alliance and the Task Force respectfully urge the 
Committee to include a provision to further expand the authority for 
ESPCs. Since 1992, nearly $1.1 billion in private-sector capital has 
been invested in energy improvement projects in federal government 
buildings. Given this success, it is now time to determine whether the 
ESPC model can be applied to projects outside of federal buildings--to 
transportation, where over half of federal energy use occurs, as well 
as to energy-intensive operations.
    There are uncertainties in how ESPC contracts would need to be 
modified in response to the differences between building and 
transportation (or ``mobility'') energy efficiency projects. 
Accordingly, we urge the Committee to authorize a pilot program that 
could gauge the level of interest in such expanded ESPC authority and 
that would allow agencies and private-sector partners to work-through 
the necessary contract modifications for a range of typical non-
building projects. The testimony of Mr. Blum sets forth this proposal 
in detail, including draft legislative language.
    The potential savings and benefits of the proposal are enormous. In 
a recent article, Amory Lovins, who was a member of the Department of 
Defense Science Board Task Force on Increased Fuel Efficiency,\11\ 
stated that the potential for DOD fuel savings alone are ``upwards of 
ten billion dollars a year . . .'' Given the success of the ESPC 
program, and the potential benefits from its expansion, we look forward 
to working with the Committee to determine its feasibility through this 
proposed pilot program.
---------------------------------------------------------------------------
    \11\ More Capable Warfighting Through Reduced Fuel Burden, The 
Defense Science Board Task Force, Washington D.C. January 2001.
---------------------------------------------------------------------------
                              electricity
    The other big ticket area that Congress failed to incorporate 
energy efficiency is in the electric sector. Senator Bingaman had a 
provision in his original energy bill that could have saved upwards of 
100,000 megawatts and drastically reduced the number of new power 
plants that will need to be built over the next 20 years to meet 
spiraling demand for power. It would have created a fund that would 
help more states invest in efficiency as more than twenty are doing on 
their own. But again, many utilities and others just ``said no'', and 
huge potential savings in the electric sector with significant 
reductions in carbon emissions will go unrealized because Congress 
ceased to consider energy efficiency in the debate over an electricity 
title.
    Again we need to keep asking the question, what will it take? If we 
do truly believe in energy efficiency--as nearly all say they do--we 
must keep working to find a mechanism that will help capture the 
potential saving that are available. How do we continue to change out 
end use technology that is wasteful and obsolete? Would a standard of 
increasing energy efficiency by 1 percent per year by utilities be 
unreasonable? How do we accelerate the adoption of new, more efficient 
generation and transmission technologies? Can't we simultaneously 
stimulate investments in the grid that would make it ``smarter'', more 
demand responsive, more energy-efficient in moving electricity--and all 
the while more reliable? How do we capture available efficiency gains 
in the electric system?
    Mr. Chairman, I hope this is an oversight we can correct in the 
energy bill expected from your Committee.
                             tax incentives
    As I mentioned earlier, Mr. Chairman, the Alliance to Save Energy 
is strongly supportive of the package of tax incentives for energy 
efficient products and practices put forward by the Senate Finance 
Committee last year. We commend and thank the leadership last year of 
three Members of the Senate Finance Committee in particular, Senators 
Bingaman, Snowe and (Frank) Murkowski. We are confident that these 
provisions will help transform markets particularly in the homes 
sector--to greater embrace energy efficient technologies and practices.
    Tax credits for highly efficient new homes will show home builders 
across the nation that incorporating energy-efficient technologies into 
homes is neither as difficult nor as expensive as they now think it is. 
Tax credits to upgrade the efficiency of existing homes will get 
homeowners back into the business of plugging leaky houses and help 
them cope with severe volatility in natural gas and heating oil 
markets. Tax credits for highly efficient refrigerators and clothes 
washers will encourage the manufacture and purchase of energy and 
water-saving appliances. The commercial buildings deduction will give 
business owners the incentive to outfit their commercial space with 
energy efficient equipment, and thus save money in the process. The 
list goes on, including highly efficient appliances, fuel cells, 
combined heat and power, advanced meters, vehicles, and others.
                               conclusion
    A comprehensive national energy policy must seize the opportunity 
to exploit energy efficiency in each of these critical areas. Public 
opinion is overwhelming that a true effort to increase efficiency is 
desired by the nation. Many times, Mr. Chairman, I have sat in hearings 
and listened to Senators and Representatives say that, despite our best 
efforts at energy efficiency, we still need to focus on production. I 
do not now, nor have I ever said that energy-efficiency can do all that 
needs to be done to provide for the energy needs of this country. I 
will say, however, that--as a nation--we have not even begun to give 
our best effort to make our economy more efficient.
    We will need new energy production in this nation but not before 
improved energy efficiency. A balanced, comprehensive energy policy 
must take aggressive steps to save energy wherever it is cost-effective 
and feasible. Energy-efficiency is our second largest energy resource, 
but it should be our first energy priority.
    Thank you again for the opportunity to testify before your 
Committee today. And I thank you Mr. Chairman for your career-long 
commitment to energy policy and for this and the extensive series of 
hearings that you are holding this year. I am happy to address any 
questions you might have.

    Senator Murkowski. Mr. McGuire.

STATEMENT OF JOSEPH M. MCGUIRE, PRESIDENT, ASSOCIATION OF HOME 
  APPLIANCE MANUFACTURERS, ON BEHALF OF THE HIGH TECH ENERGY 
                         WORKING GROUP

    Mr. McGuire. Thank you, Madam Chair, members of the 
committee.
    My name is Joe McGuire, and I am president of the 
Association of Home Appliance Manufacturers. We represent 
manufacturers of major, portable, and floor care appliances. I 
am here today on behalf of a broad-based coalition of consumer, 
business, and technology product manufacturing associations and 
companies.
    Our members include AHAM, the Air-Conditioning and 
Refrigeration Institute, the American Electronics Association, 
the Association for Competitive Technology, the Consumer 
Electronics Association, the Electronic Industries Alliance, 
the Gas Appliance Manufacturers Association, the National 
Electrical Manufacturers Association, the Information 
Technology Industry Council, and many of our individual member 
companies.
    We are here today to testify about the energy efficiency 
title that the committee will consider in the emerging energy 
legislation. We support strong, national energy legislation, 
and many of our groups have worked hard for its enactment.
    We are pleased to report that as the process moved forward 
last year, the Congress developed mostly balanced and 
appropriate provisions with a mix of voluntary, incentive and 
regulatory programs. We are also pleased to report that in 
general, with the exceptions I will discuss, we are supportive 
of the energy efficiency provisions adopted in the House-Senate 
Conference last year. However, there are important improvements 
which will protect the technology and manufacturing sectors of 
our economy while enhancing overall energy efficiency.
    The balance to be struck is to motivate and move these 
sectors to improve energy efficiency, where it can be done on a 
cost-effective basis and benefit consumers.
    Let me specifically discuss how last year's conference 
agreement on energy efficiency met those criteria in part and 
where it can be improved.
    The first area concerns standby power. There are 
undoubtedly opportunities for improving energy efficiency in 
some product applications, but the significance of standby 
energy use and opportunities for improvements have been grossly 
exaggerated. Many standby modes for products are situations 
where the product is engaged in a secondary but nonetheless 
significant function such as timing, monitoring and recharging.
    Arbitrary limitations to 1 watt or any other level threaten 
the functionality, reliability, and economies of these 
products. The standby provision adopted by the conference last 
year was essentially that developed by this committee on a 
bipartisan basis, and we believe that it is reasonable and 
useful.
    Let me turn to energy standards. The appropriate level for 
energy regulation of products manufactured for and distributed 
on a national basis should be at the Federal level, if at all. 
The essence of legislation such as the National Appliance 
Energy Conservation Act, EPACT, is that Federal standards were 
either legislated or required to be developed by DOE in 
exchange for virtual absolute preemption of State standards 
except under extremely narrow circumstances.
    The committee's legislation last year contained a number of 
new product standards and rulemakings for product standards, 
mostly supported by industry as well as advocates. The 
Coalition proposes to add to that list some additional products 
and to specify standards.
    Legislation is pending in a number of States to impose 
standards, testing, paperwork and other requirements on those 
products thereby impeding interstate commerce. It is 
economically disruptive for manufacturers to meet diverse State 
standards. In order to avoid severe ruptures or balkanization 
of interstate commerce, it is necessary for the Federal 
Government to preempt the field.
    When the Congress enacts a legislative standard, it is 
appropriate that preemption be immediate and absolute upon the 
date of enactment of the legislation. Where DOE is undertaking 
a rulemaking and is clearly moving towards filling a regulatory 
vacuum, we propose that preemption occur on the date in which 
an advance notice of proposed rulemaking is issued.
    In this way, national economies of scale can be maintained 
for product manufacturer, distribution and sale but the 
benefits of energy efficiency through regulation can be 
achieved.
    With regard to Energy Star, we support the first-time 
statutory authorization and expansion of Energy Star, which has 
become a powerful market force in many product segments and has 
been incorporated into Federal and State procurement, utility 
incentive programs and tax credits. However, we are concerned 
that as Energy Star has grown up, it has not enhanced its 
procedures for public and partner input into decisions.
    We support language which would require the Energy Star 
agencies, namely EPA and DOE, to develop public plans, 
including those establishing criteria for expansion and program 
implementation, and to solicit stakeholder input on new and 
revised product categories, and to respond to those comments.
    We have been troubled about undue reliance on contractors 
and lack of transparency and responsiveness. The program can 
remain agile and flexible while allowing for more 
accountability. I will note that DOE has made some important 
adjustments in the past year in moving Energy Star toward a 
more sophisticated program that deals with a much broader 
constituent base.
    Let me lastly turn to energy labels. We recommend that in 
addition to considering what new products should use energy 
labels and whether the current labels should be revised, that 
FTC also be asked to consider whether the labels have become 
obsolete for certain product categories. Where Energy Star has 
become predominant in the marketplace, it may be that the 
yellow labels are no longer effective or needed.
    Lastly, a new, modest but potentially significant program 
was developed in the Senate legislation and adopted by the 
conferees last Congress. Under this program, DOE would match to 
specified levels, State funding of qualified appliance rebate 
programs to encourage the purchase of highly efficient 
products.
    We support this market-oriented approach in light of a 
number of active State programs, which could be even more 
effective with Federal partnership assistance.
    I thank you for your time and would be happy to answer any 
questions.
    Senator Murkowski. Thank you. I appreciate your time this 
morning.
    [The prepared statement of Mr. McGuire follows:]
          Prepared Statement of Joseph M. McGuire, President, 
              Association of Home Appliance Manufacturers
    Mr. Chairman and Members of the Committee, thank you for providing 
us the opportunity to testify. My name is Joe McGuire and I am 
President of the Association of Home Appliance Manufacturers (AHAM). We 
represent manufacturers of major, portable and floor care products. I 
am here today on behalf of a broad-based coalition of consumer, 
business and technology product manufacturing associations and 
companies. Our members include AHAM, the Air-Conditioning and 
Refrigeration Institute, the American Electronics Association, 
Association for Competitive Technology, the Consumer Electronics 
Association, the Electronic Industries Alliance, the Gas Appliance 
Manufacturers Association, the National Electrical Manufacturers 
Association, the Information Technology Industry Council and many of 
our member companies.
    We are here today to testify about the energy efficiency title that 
the Committee will consider in the emerging energy legislation. We 
support strong, national energy legislation and many of our groups have 
worked hard for its enactment.
    Our working group was formed in 2002 when it became clear that a 
coordinated product manufacturer voice was important to help develop 
balanced legislation. We are pleased to report that as the process 
moved forward last year the Congress developed mostly balanced and 
appropriate provisions with a mix of voluntary, incentive and 
regulatory programs to improve the overall energy efficiency of 
products offered to American consumers and businesses without impairing 
product utility or restricting developing technology. In general, with 
the exceptions I will discuss, we are supportive of the energy 
efficiency provisions adopted in the House-Senate Conference last year. 
However, there are important improvement, which will protect the 
technology and manufacturing sectors of our economy while enhancing 
overall energy efficiency.
    We are guided by the principle that all sectors of the American 
economy should share in improving energy efficiency. The industries and 
companies represented here have been promoting energy efficiency for 
many decades and have invested heavily to make dramatic improvements in 
their products. These improvements have been driven by the marketplace, 
voluntary initiatives and incentives, Energy Star, and, in some cases, 
standards. The balance to be struck is to motivate and move these 
sectors to improve energy efficiency where it can be done on a cost-
effective basis but not overburden sectors which already are suffering 
in a poor economy, adversely impacting their economic well being, 
competitiveness and the critical benefits that their products bring to 
the world and the U.S. economy today and in the future. Let me 
specifically discuss how last year's Conference agreement on energy 
efficiency met those criteria in part and where it can be improved.
             energy standards restricting standby power use
    Advocates and consultants, looking for fresh ideas to stimulate 
regulatory mandates as well as new consulting contracts, have promoted 
globally in the last three years the idea that there are huge amounts 
of energy being consumed in so called standby power mode which can be 
easily and without much cost eliminated. This ``one size fits all'' 
thinking has resulted in mantra-like cries for limiting so-called 
standby power losses to one Watt for literally thousands of product 
categories.
    There are undoubtedly opportunities for improving energy efficiency 
in some product applications but the significance of standby energy use 
and opportunities for improvements have been grossly exaggerated. Many 
standby modes for products are situations where the product is engaged 
in a secondary but nonetheless significant function such as timing, 
monitoring and recharging and is not actually in standby at all. For 
example, an air conditioner or furnace thermostat is monitoring the 
temperature of conditioned space when the unit is not operating.
    Arbitrary limitations to one Watt or any other level, applying to 
everything from baby monitors, smoke detectors to complicated computing 
functions, threaten the functionality, reliability and economics of 
these products. A dishwasher in standby, for example, may be waiting 
until non-peak load periods to initiate operation, thereby helping to 
shave peak load.
    This Committee is to be commended for recognizing the irrationality 
of the calls for across-the-board new regulations and for developing 
last year a well-balanced provision which allows DOE, in consideration 
of its other priorities, to evaluate rationally where there may be 
opportunities to reduce standby use. Any possible regulation, for 
example, must account for the consumer interest that cordless, 
rechargeable vacuum cleaners recharge quickly and maintain that charge 
constantly before use. The standby provision adopted by the Conference 
was essentially that developed by this Committee on a bipartisan basis, 
and we believe that it is reasonable and useful.
                   new federal standards for products
    It has been recognized in the Energy Policy and Conservation Act 
and in all its revisions that the appropriate level for energy 
regulation of products manufactured for and distributed on a national 
(usually North American or even international) basis should be at the 
federal level, if at all. The essence of legislation such as the 
National Appliance Energy Conservation Act of 1987 and EPACT in 1992 is 
that federal standards were either legislated or required to be 
developed by DOE in exchange for virtual absolute preemption of state 
standards except under extremely narrow circumstances.
    The Committee's legislation last year contained a number of new 
product standards and rulemakings for product standards, mostly 
supported by industry as well as environmental advocacy groups. The 
Coalition proposes to add to that list some additional products and to 
specify standards. Legislation is pending in a number of states to 
impose standards, testing, paperwork and other requirements on those 
products thereby impeding interstate commerce. It is economically 
disruptive for manufacturers to meet diverse state standards. In order 
to avoid severe ruptures or ``balkanization'' of interstate commerce, 
it is necessary for the federal government to preempt the field.
    In particular, we recommend that those commercial clotheswashers 
used in laundromats and laundry rooms, which are similar to federally 
regulated residential clotheswashers, be required in the legislation to 
meet the DOE standards which will apply to residential products in 2004 
and 2007. This will result in significant energy and water savings.
    Certain distribution transformers would meet legislated standards 
based on well-recognized industry standards. Exit signs would be 
required to meet specified Energy Star levels. Torchieres would meet a 
legislated federal standard to consume not more than 190 watts of 
power. Traffic signals would comply with standards at levels already 
set by the Energy Star program. NEMA and AEEE are proposing to add 
standards for medium base compact fluorescent lamps (CFL's) based on 
Energy Star levels. These CFL's are direct replacements for 
incandescent ``light bulbs'' and consume about one-fourth the 
electricity.
    Similarly, a wide variety of commercial refrigeration products and 
packaged air conditioning equipment would meet legislated standards. 
Commercial refrigeration product offerings are complex and 
manufacturers will be offering standards for the equipment with the 
highest shipment volumes and largest consumers of energy. In the case 
of packaged air conditioning units equal to or exceeding twenty tons of 
cooling capacity, products would meet the American Society of Heating, 
Refrigerating, and Air Conditioning Engineers' consensus standard, 
90.1-2001. For unit heaters, we propose that DOE undertake rulemakings 
rather than have Congress set the standards.
    Where the Congress enacts a legislative standard it is appropriate 
that preemption be immediate and absolute upon the date of enactment of 
the legislation. Where DOE is undertaking a rulemaking and is clearly 
moving toward filling a regulatory vacuum, we propose that preemption 
occur on the date in which an advance notice of proposed rulemaking is 
issued. In this way, national economies of scale can be maintained for 
product manufacturer, distribution and sale but the benefits of energy 
efficiency through regulation can be achieved.
                              energy star
    We support the first-time statutory authorization and expansion of 
Energy Star, which has become a powerful market force in many product 
segments and has been incorporated into federal and state procurement, 
utility incentive programs and tax credits. However, we are concerned 
that as Energy Star has ``grown up'' it has not enhanced its procedures 
for public and partner input into decisions affecting products into 
which manufacturers have collectively invested billions of dollars to 
develop and market and that consumers have come to rely on as the most 
efficient.
    We support language which would require the Energy Star agencies, 
EPA and DOE, to develop public plans, criteria for expansion and 
program implementation, solicit public comments on new and revised 
product categories, and respond to these comments. The agencies should 
consider the cost-effectiveness of Energy Star compared to other 
programs and whether labeling works for all product categories. They 
need to become more concerned about product design and production lead 
times and provide adequate notice for new programs. The agencies should 
take care not to drown participants in paperwork. This is basic good 
government and the responsibility of any government agency and program.
    Energy Star was conceived as a voluntary program and public/private 
partnership. As such, it has achieved worldwide prominence and, 
according to DOE and EPA, produced significant reductions in carbon 
emissions. Accordingly, we do not want or think that the program needs 
all the requirements of the Administrative Procedure Act, including 
judicial review, to apply to Energy Star actions. But, we have been 
troubled about undo reliance on contractors and lack of transparency 
and responsiveness. DOE has made some first efforts in the stakeholder 
consultation that we ask be incorporated in statute. The program can 
remain agile and flexible while allowing for more accountability, 
commensurate with its increasing power in the marketplace and tie in 
with other programs.
                                labeling
    We support FTC revisiting the existing energy guide label and 
program. However, the Congress should make clear that FTC, in addition 
to considering expansion and revisions to the programs, should consider 
whether some of the labels serve any further useful purpose in light of 
other means of communication of energy use, such as the voluntary 
Energy Star label.
    The FTC labeling program was developed at a time when Energy Star 
did not exist. Energy Star may have supplanted the FTC label in the 
marketplace for certain product categories in terms of impact, and 
there may be no need for dual and confusing labels. It also should be 
made clear that there is no preconception by the Congress that the 
existing label needs to be changed but you are looking for a fresh and 
unbiased review.
       federal matching funds for state appliance rebate programs
    A new, modest but potentially significant program was developed in 
the Senate legislation and adopted by the Conferees in the last 
Congress. Under this program DOE would match to specified levels, state 
funding of qualified appliance rebate programs to encourage the 
purchase of highly efficient products. We support this market-oriented 
approach in light of a number of active state programs which could be 
even more effective with federal partnership assistance.
    As you can see Mr. Chairman, the members of our coalition are not 
reflexively anti-regulatory or opposed to all federal intrusions but 
rather seek to maintain an appropriate balance so that consumer energy 
economics are enhanced, national security interests protected and 
climate change mitigated. We urge you to consider our modest but 
important proposed revisions to the legislation. I would be delighted 
to answer any questions.

    Senator Murkowski. Mr. Keith.

STATEMENT OF ERBIN KEITH, SENIOR VICE PRESIDENT, SEMPRA ENERGY 
                           SOLUTIONS

    Mr. Keith. Madam Chair, members of the committee, my name 
is Erbin Keith. I am with Sempra Energy Solutions. Today, I am 
speaking on behalf of the Federal Performance Contracting 
Coalition. I thank you for the opportunity to discuss this and 
the options of the Energy Savings Performance contracts, which 
are known as ESPCs.
    The program was created by Congress in 1992 in response to 
two major national challenges. Conflict in the Middle East made 
energy security a high----
    Senator Bingaman. You might want to use that microphone a 
little better there. If you push the button, that will work.
    Mr. Keith. Oh, I am sorry. Is this better?
    Senator Murkowski. Thank you.
    Mr. Keith. Okay. Conflict in the Middle East made energy 
security a high priority. Congress realized that any program 
aimed at reducing our energy dependence has to address the 
Federal Government's own use of energy, as the largest energy 
consumer in the Nation.
    The Government has half a million buildings, whose average 
age is about 50 years. And these buildings waste a lot of 
energy and taxpayer money. But getting at that energy waste 
requires money up front, which leads to the second problem 
confronting Congress a decade ago.
    The Nation in 1992 was facing an energy crisis at the time 
of budget deficits and tough pressure on spending. 
Appropriating the money needed to upgrade all these facilities 
would have been a major drain on the Federal budget. Congress 
came up with an answer in the Energy Policy Act of 1992 that 
allowed the Government to tap private expertise and private 
capital through these ESPCs.
    In an ESPC contract, the private contractor analyzes and 
designs the systems for a Federal facility, and then finances 
and implements the work. The ESPC contractor gets repaid out of 
the energy savings they generate. No savings, no repayment.
    The Agency gets modern energy-efficient facilities at no 
up-front cost and gets a share of the savings over the life of 
the contract. Once the contract is over, the Agency gets all 
the savings and ownership of all the improvements.
    To date, over $1.2 billion in private capital has been 
leveraged to upgrade Federal facilities through ESPCs. In 
fiscal year 2001, every dollar spent by DOE to manage its own 
super ESPC program resulted in $16 in private investment, and 
$33 in operating savings.
    This program has proven its effectiveness and value. Let me 
show you some quick examples on these charts that detail the 
benefits of the facilities. For the sake of time, I will just 
focus on the cost savings.
    The first project, Hill Air Force Base, is a Sempra Energy 
Solutions project covering over 1,400 buildings at the base. We 
financed $22 million in upgrades, and the Air Force base is 
seeing $2.3 million a year in energy savings.
    Hill is the largest energy consumer in Utah. And this 
project reduced energy consumption by over 20 percent. The 
savings for this project and other projects are not in the 
margins. They are typically in the range of 10 to 30 percent at 
these facilities.
    The second project, Fort Bragg--Honeywell, another FPCC 
member, has a project covering 6,000 buildings. They have 
financed $51.6 million to date, and are--we are seeing annual 
energy savings of $8.4 million per year at the Fort.
    The next project is Twenty-Nine Palms Marine Base. FPCC 
member Johnson Controls has financed $62 million in upgrades 
that are showing $6.9 million in savings per year for the 
Marines.
    The final project is the Veterans Administration Medical 
Centers project for Ameresco, another FPCC member. It covers 
eight medical facilities in four States. The $28 million 
investment is producing $2.3 million in energy savings a year.
    These are just a few examples of projects that are 
providing hundreds of millions of dollars in taxpayer savings 
annually. And they are providing substantial improvements in 
working and living conditions for the personnel in the 
facilities.
    But the program authorization is set to sunset in just 7 
months. Given the lengthy process involved in these contracts, 
this has meant the program is effectively ending already. And 
we are seeing a drop in contracting activity.
    Recently, Congress acted on an appropriations bill to 
extend the sunset. Last year, both Houses of Congress included 
language in the energy bill to eliminate the sunset. That 
language must be added now. And if the energy bill's passage is 
delayed, then that language should be pulled out and moved 
independently.
    Last June, you also went a step further and added language 
to expand the reach of the program by including water savings 
projects. For many facilities, these added savings can make the 
project workable, and they can open up yet more savings for 
Federal agencies.
    The crises confronting you this year echo those in 1992 
when the program was created. These projects are just as 
important this year as they were then for much of the same 
reasons.
    Taking these actions will keep the program alive and also 
send a clear signal to the agencies that Congress continues to 
see this as a critical program for them to pursue.
    Thank you, and I am pleased to answer any questions.
    Senator Murkowski. Thank you, Mr. Keith.
    [The prepared statement of Mr. Keith follows:]
       Prepared Statement of Erbin Keith, Senior Vice President, 
                        Sempra Energy Solutions
                            i. introduction
    Mr. Chairman and members of the Subcommittee, thank you for 
inviting me to address the Committee today on energy efficiency policy. 
I am Erbin Keith, Senior Vice President of Sempra Energy Solutions, 
overseeing operations. I also serve as a member of the Secretary of 
Energy's Federal Energy Management Advisory Committee. I am here to 
testify on behalf of the Federal Performance Contracting Coalition 
(FPCC), which is composed of Energy Savings Performance Contractors who 
provide the capital and expertise to upgrade federal facilities.\1\ 
After a brief review of the Federal Government's Energy Savings 
Performance Contract program, I will concentrate my remarks on 
potential legislative proposals that affect private sector financing of 
energy improvements in federal government facilities.
---------------------------------------------------------------------------
    \1\ Members of the Federal Performance Contracting Coalition 
include Sempra Energy Solutions, Johnson Controls, Honeywell, and 
Ameresco.
---------------------------------------------------------------------------
    Based in San Diego, Sempra Energy is a Fortune 500 company with 
more than 12,000 employees. My part of the company, Sempra Energy 
Solutions, offers commercial and industrial businesses outsourcing 
services that help them thrive in the changing energy environment. The 
company provides its customers an integrated mix of services such as 
facility management, supply and price risk management, energy 
efficiency, energy asset management, performance contracting, 
infrastructure ownership, energy information and billing management.
    Like other energy service companies that are members of the FPCC, 
we design, install and service new energy efficient equipment, such as 
monitoring and control systems, HVAC systems, chillers and lighting--
all done so that buildings use less energy. Included in our service 
offering is energy savings performance contracting.
     ii. the federal energy savings performance contracting program
    The largest single consumer of energy in the United States is the 
federal government, spending $4 billion a year for energy use in its 
500,000 buildings. The federal government's three billion square-feet 
of floor space consumes over 60 billion kilowatt-hours of electricity 
each year. A significant amount of this is wasted money. The average 
age of these buildings is around 50 years, and being older, makes many 
of them substantial energy wasters. Addressing this problem in a 
meaningful and a lasting manner cannot be done by fiddling with the 
thermostat, but rather requires retrofitting existing buildings with 
energy-efficient equipment. That requires up-front capital spending.
    In 1992, Congress and then-President Bush recognized that the 
nation was facing a dual challenge. Conflict in the Middle East 
heightened our awareness of the need for energy security. Since the 
government was using the largest share of energy, this meant that it 
must find ways to use energy more efficiently. At the same time, the 
federal government was facing the problem of budget deficits that 
diminished its ability to finance the needed facility upgrades. The 
solution was to create a mechanism that could leverage private capital 
and private expertise to upgrade facilities and enhance government 
operations in a manner that would protect and benefit the taxpayer. 
That is where the Energy Savings Performance Contracting (ESPC) process 
really began.
    Under an ESPC, an energy services company (ESCO) like Sempra Energy 
Solutions, Johnson Controls, Honeywell, Ameresco, and others, privately 
finance the investment of installing energy efficient equipment with no 
up-front costs to the government agency. The investment includes 
identifying a building's energy requirements and then financing, 
acquiring, installing, operating, and maintaining the energy-efficient 
improvements to the facility. The ESCO is repaid for these 
improvements, over time, from a portion of the dollars saved by the 
agency on its energy and maintenance bills. This means that for the 
duration of the contract, the agency does not pay any more for utility 
costs than they would have paid without the ESPC and the new equipment. 
The agency, and ultimately the taxpayer, is protected since the ESCO 
only is repaid if they produce the promised energy savings. After the 
investment is paid off, the agency gets ownership of the improvements 
and all of the subsequent savings--without having spent federal dollars 
to achieve these improvements. It's a win-win situation.
    Essentially, a federal agency has two choices. The agency can 
continue routinely paying its utility bill, and in the end, all it will 
have is a paid-up, current account. Or the agency can go with an ESPC, 
and in the end, have a rebuilt infrastructure as a part of 
comprehensive energy upgrade--all paid for by the savings actually 
realized by the agency. This result is guaranteed by the ESCO.
                      iii. the espc success story
    The creation of ESPC's by Congress has been a unique success story. 
Energy service companies are helping federal agencies all over the 
country save hundreds of millions of dollars per year in reduced energy 
costs through ESPC's. These federal facilities now have critically 
needed infrastructure improvements, without having to seek direct 
appropriations from Congress. In the so-called DOE ``Super ESPC'' 
regional contracts, alone, private contractors have invested over $325 
million in federal facilities--money that has not been drained from the 
federal budget. These Super ESPC projects have life cycle cost savings 
for the government of nearly $1 billion. A summary of the ESPC program 
is set forth in the table below.

                         GOVERNMENT-WIDE ENERGY EFFICIENCY PROJECT INVESTMENTS BY SOURCE
                                         [Millions of As-Spent Dollars)
----------------------------------------------------------------------------------------------------------------
                                       FY 1988-                                            FY 2002    Cumulative
                                         1997     FY 1998   FY 1999   FY 2000   FY 2001  preliminary  since 1998
----------------------------------------------------------------------------------------------------------------
Site-Specific ESPC...................  $  112.7    $ 72.4    $ 92.4    $  8.0                           $  285.5
----------------------------------------------------------------------------------------------------------------
DOE Super ESPC.......................                 6.6     41.10      62.0     121.3         96.9       327.7
----------------------------------------------------------------------------------------------------------------
DOD/Other Super ESPC.................                10.2     151.2     217.0     126.0        200.2       704.6
----------------------------------------------------------------------------------------------------------------
UESC.................................     138.9      53.4     110.7     191.2     230.4         94.1       818.7
----------------------------------------------------------------------------------------------------------------
Private Sector Investment............     251.6     142.6     395.3     478.2     477.7        391.3     2,136.6
----------------------------------------------------------------------------------------------------------------
Appropriations.......................   1,455.4     261.3     205.2     121.1     131.3        130.2     2,304.5
----------------------------------------------------------------------------------------------------------------
    Total............................  $1,707.0    $403.9    $600.5    $599.3    $609.0       $521.5    $4,441.1
----------------------------------------------------------------------------------------------------------------


                                       DOE/FEMP SUPER ESPC PROGRAM METRICS
                                         [Millions of As-Spent Dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                      Cumulative
                                                     FY 1998   FY 1999   FY 2000   FY 2001   FY 2002  since 1998
----------------------------------------------------------------------------------------------------------------
FEMP Budget for Super ESPC Program................     $ 6.9     $ 8.3    $  7.9    $  7.7     $ 6.9      $ 37.7
----------------------------------------------------------------------------------------------------------------
Private Sector Investment from DOE Super ESPCs....       6.6      41.0      62.0     121.3      96.9       327.7
----------------------------------------------------------------------------------------------------------------
Total Cortract Price ($ Returned to the Economy)..      15.0      91.8     123.2     251.4     306.9       788.3
----------------------------------------------------------------------------------------------------------------


                                                             Guaranteed Average Annual Cost Savings        $48.5
                                                  --------------------------------------------------------------
                                                                 Cumulative Guaranteed Cost Savings       $794.8
                                                  --------------------------------------------------------------
                                                        \1\ Project Estimated Annual Energy Savings    2,621,745
                                                  --------------------------------------------------------------
                                                        \2\ Project Estimated Annual Energy Savings      450,085
                                                  --------------------------------------------------------------
                                                            \1\ Cumulative Projected Energy Savings   42,948,956
                                                  --------------------------------------------------------------
                                                            \2\ Cumulative Projected Energy Savings    7,373,211
----------------------------------------------------------------------------------------------------------------
\1\ Million Btu.
\2\ Barrels of Oil Equivalent.

    Let me provide you with a few specific examples that show how these 
projects actually work.
1. Hill Air Force Base
    FPCC member Sempra Energy Solutions implemented the first base-
wide, ESPC at Hill Air Force Base. The base houses 1,400 buildings and 
is home to many operational and support Air Force missions. Sempra 
implemented base-wide retrofits and replacements to lighting systems, 
chillers, boilers, cooling towers, motors, steam system components, and 
irrigation controls. The total investment by Sempra in this federal 
facility was approximately $22 million. The annual savings realized by 
Hill Air Force Base are approximately $2.3 million per year.
2. Fort Bragg Army Post
    FPCC member Honeywell has an ESPC covering one of the largest Army 
bases in the world, with over 6,000 buildings. The total contract 
amount to date is $51,600,000, and the annual energy savings are 
$8,400,000 per year, with ancillary savings of $2,900,000 per year. The 
project involved installation of a new natural gas distribution system, 
central plant upgrades with full system maintenance, new steam and hot 
water boilers, base energy metering, and post-wide high-efficiency 
lighting technology, among other technologies. The project has 
increased comfort and security for base personnel, and provided greater 
energy security to the base.
3. Twenty-Nine Palms Marine Base
    FPCC member Johnson Controls has an ESPC with the Twenty-Nine Palms 
Marine Base in California. The $62 million private sector investment in 
this project produces $6.9 million in annual savings to the Marines. 
Included in the benefits are three chilled water plants and air 
conditioning upgrades to 30 buildings, improving the quality of life on 
base; a seven megawatt, dual fuel cogeneration plant to increase power 
reliability and security for the base; solar photo-voltaic arrays, and 
an energy management system and day lighting to reduce on-peak energy 
demand.
4. Veterans Administration Medical Centers
    FPCC member Ameresco has an ESPC with eight VA medical centers in 
four states. The $28 million private sector investment produces $2.3 
million in savings per year, reducing energy use by over 41 million 
BTUs per year. The project includes a broad spectrum of technologies, 
including separate water meter and service, new boilers, boiler 
economizers, laundry equipment replacement, heat pipe recovery, steam 
trap replacement, chiller plant upgrades, lighting system upgrades, and 
energy efficient motors upgrades, among other items.
  iv. these are the kinds of projects that work--why aren't we doing 
                                 more?
    There is no debate about whether the ESPC program is producing 
meaningful results. As these examples demonstrate clearly, ESPC is a 
great tool for the federal government. Yet our companies are seeing a 
noticeable drop-off in contracting activity by federal agencies. The 
last two or three years have seen reductions in the use of ESPC and 
other alternative financing options across the federal government. From 
2001 to 2002 we saw the number of ESPC projects reduced by almost half 
while the cumulative investment was reduced by more than 25 percent. 
This does not reflect a shift to direct financing through 
appropriations, the alternative option, since it comes at a time when 
direct appropriations for energy upgrades are not available.
    We believe a number of factors are at work:

   Lack of adequate agency funding for the management of ESPC 
        implementation. As noted in the chart above, in the last five 
        years of the DOE's Super ESPC program every dollar spent by the 
        agency on the management of the ESPC program has resulted in 
        nearly $9 in private investment in federal facilities and 
        nearly $21 in energy and operating savings to the federal 
        government. In FY 2001 every dollar spent by DOE on management 
        of the ESPC program resulted in nearly $16 in private 
        investment in federal facilities and nearly $33 in energy and 
        operating savings to the federal government. (Query: where does 
        the federal government receive a better, more verifiable, 
        return on its appropriated dollars?) DOE funding of ESPC has 
        been largely flat over the last few years. Funding for ESPC 
        management activities by most other federal agencies has 
        declined. This has resulted in a significant reduction in ESPC 
        activity for most agencies along with the resulting reduction 
        in private sector investment in federal facilities.
   Alternative financing is just that: alternative. It is 
        different from the way things are usually done within the 
        federal bureaucracy, and therefore needs extra support and 
        encouragement from a high level.
   The change in leadership at a high level in the various 
        agencies with a new Administration, however, has meant a 
        reduction in the institutional knowledge about these innovative 
        programs. And that has been reflected in less support from the 
        top of the government.
   Federal energy managers are losing their jobs in an effort 
        to tighten our fiscal belts; therefore, the managers with 
        institutional memory on how to do ESPCs are not present, in 
        many cases.
   Ironically, the pressure to reduce costs to the government, 
        in the absence of such clear signals of support, has had a 
        perverse impact on the use of third party financing. Since they 
        are being pushed to demonstrate reduced costs, some within the 
        agencies feel that the ``cost'' of financing projects with the 
        private sector is more than the ``cost'' of directly 
        appropriating dollars. This has led to a de-emphasis on private 
        financing--even though those directly appropriated dollars are 
        not actually available.

    This unfortunate loss of momentum on this important program is 
happening at a time when the need for ESPCs is just as clear and 
significant as it was in 1992 when the program was created. We are, 
again, confronting the need to address energy security, as your focus 
on an energy bill makes clear, and we must do it under tough federal 
fiscal constraints. Indeed, in the past several years as energy supply 
problems visited parts of our country, we also learned the additional 
value of reducing energy consumption in many of these facilities as a 
mean of helping address regional infrastructure adequacy and 
reliability.
                        v. fpcc recommendations
    Your committee advocated important provisions related to ESPCs in 
the energy bill last year; provisions that won consensus approval in 
the Conference Committee. With enactment of these provisions we can 
continue to provide the important benefits that flow from ESPCs. The 
most obvious and urgent need, of course, is to address the impending 
sunset of the program. Without action by Congress, this program is in 
its final months. Other steps that were taken by the committee last 
year would go beyond preserving the program, and seek to help expand 
its potential reach. Your action on these provisions will send a clear 
signal to the agencies that will help reverse the recent erosion of 
contract activity. Let me highlight two of these provisions, which we 
feel are critical:
1. Remove the sunset to ESPC contractual authority
    ESPC authority in the federal government ceases at the end of this 
fiscal year, less than seven months from now. Extension of authority 
needs to happen immediately. Experience has shown that when the sunset 
date approaches, some agencies become concerned to begin developing 
projects for fear the authority may not last long enough to process the 
project.
    When the program was created it was a bold experiment in addressing 
federal energy use while avoiding a drain on available appropriations. 
Experience has shown clearly, and without question, the value of these 
projects. ESPCs are a proven, reliable method to save energy, reduce 
operations and maintenance costs, provide new equipment for federal 
agencies and reduce pollution. For the program to continue providing 
its benefits, it is essential that any comprehensive energy bill 
include language similar to that agreed to by both the House and Senate 
last year that removed the sunset provision from the law altogether. 
Given the extremely time-sensitive nature of this problem, we also urge 
this committee to support separate ESPC legislation that, at a minimum, 
extends or repeals the sunset provisions. We believe other improvements 
to the program can be made, but none is more important that simply 
extending the program's statutory authority.
2. Expand the authority of ESPCs to include water conservation, in 
        addition to energy
    Currently water saving projects are not available to civilian 
agency ESPC programs. Consequently, many federal facilities miss out on 
tremendous potential cost savings and water resources continue to be 
wasted by the government. DOE General Counsel has ruled that water 
savings are limited under the statute governing ESPCs at civilian 
agencies (42 USC 8287).
    In contrast, water savings have been allowed for years at DOD 
facilities. A different defense statute (Title 10, Sections 2865 & 
2866) authorizes ESPCs for DOD facilities and it allows water savings. 
When the Defense Department originally passed Section 2865, it quickly 
realized that water savings were not allowed under the legislation. One 
year later Congress, through the Armed Services Committees, approved 
DOD's request to add water cost savings to ESPC under Section 2866.
    In some areas of the country, such as the southwest where my 
company is headquartered, water savings are as significant, if not more 
important, than energy savings and contribute greatly to the facility's 
monetary savings.
3. FPCC recommended enhancements to ESPC legislation
    In addition to the language in last year's Conference Committee, 
there are other steps Congress should consider to boost this important 
program. Examples of such steps would include:

          a. Allow replacement and new construction facilities to be 
        eligible for ESPCs.

    We support the expansion of ESPC authority to allow application of 
ESPC to replacement facilities and new construction. Having this new 
authority could open new opportunities for energy savings. This option 
was included in the Senate proposals last year, and is in the House 
this year. However, there were concerns about the baseline energy data 
that would be used for comparison. We still believe the obstacles can 
be worked out to everyone's satisfaction and the potential energy and 
cost savings to the federal government are significant.

          b. Mandate that federal agencies report on reasons they do 
        not use alternative financing.

    Currently, agencies must report to DOE on the number and value of 
the alternative financing projects they complete. They should also be 
accounting for the facilities in which they opt not to use alternative 
financing and enumerate the reasons why. This type of reporting was 
requested by the VA Subcommittee on Appropriations for VA facilities 
and led to a great increase in the number of ESPCs completed.

          c. Require that agencies report alternative financing 
        activities to Congress.

    Currently, agencies must report ESPC and alternative financing use 
to the Office of Management and Budget. They should also be required to 
report to Congress, including their individual appropriations 
subcommittee. Additionally, they should be reporting on the buildings 
in which they opt not to use alternative financing. This will encourage 
greater accountability than currently exists.

          d. Stabilize the term of Army and Air Force contracts.

    Due to the way the military has set up their contracting system, 
what began as a 25-year term for individual projects has shrunk over 
the last eight years to only 17 years. Unlike the DOE contracting 
approach, under the Army and Air Force approach, each year their 
authority continues, a year is taken off the potential term of projects 
that can be negotiated. Fairly soon, this will lead to missed 
opportunities for large scale energy reductions based on central power, 
space conditioning and other expensive, yet high value energy 
improvements. The legislation or regulation should be made clear that 
ESPC projects can last for a term of up to 25 years, no matter when 
they are executed during the term of the overall contracting mechanism.

          e. Encourage interagency cooperation and confirm ordering 
        authority between agency ESPC contracts.

    The Energy Policy Act of 1992 designated the DOE as the lead agency 
for ESPC. The DOE has developed efficient contracting mechanisms, 
staffing and expertise in implementing ESPC projects. Many agencies, 
civilian and DOD, make use of the DOE's expertise and contracts in 
implementing ESPC projects. However, one DOD agency has made a 
determination that the Economy Act (31 U.S.C. 1535) precludes the 
agency from ordering ESPC services off the DOE's Super ESPC contract. 
No other DOD agency reached this conclusion and most use the DOE 
``Super ESPC'' contract. Nevertheless, Congress can remedy this concern 
by clarifying that the Economy Act does not preclude any DOD agency 
from ordering off another agency's ESPC contract.

          f. ESPC's should be expanded to include transportation and 
        power generation applications.

    ESPCs could be expanded to include shipboard energy improvements 
and other transportation applications. Some of the FPCC members 
participate in the Alliance to Save Energy and support their efforts to 
have ESPCs expanded to both transportation and power generation 
applications.
                             vi. conclusion
    We commend the Committee for its efforts to illuminate the issues 
that will be discussed today. It is critical that the government 
supports a sustained effort in meeting its energy conservation goals, 
if these efforts are to continue to have a positive impact. In the 
private sector, through the ESPC program, we have demonstrated our 
willingness to invest in the government's effort. Indeed, the private 
sector has already invested over $1.2 billion in the federal ESPC 
program. However, we cannot continue to engage our best people in these 
endeavors without the commitment of the federal government to: (i) 
remove the sunset to ESPC contracting authority, (ii) provide ``top-
down'' executive and legislative support for the ESPC program, and 
(iii) provide adequate agency funding to manage the governments 
obligations under the ESPC program. We seek your support in securing 
this commitment.
    This concludes my testimony. Thank you for the opportunity to 
testify today and I would be happy to answer any questions.

    Senator Murkowski. And I thank you to all of you this 
morning for appearing and giving your testimony before the 
committee.
    As Mr. Keith has pointed out, this energy savings 
performance contract has been a very useful mechanism for 
improving the Federal energy efficiency. And I--apparently, 
there has been a suggestion that it be expanded--the authority 
be expanded to include the non-building uses.
    And I would ask you, Secretary Garman: Does the Department 
support the expansion of the ESPC authority to the non-building 
uses?
    Mr. Garman. We are very intrigued by the concept and would 
welcome some method of a pilot program on a limited basis to 
explore it further. There are some interesting procurement 
issues and some other issues. And it might involve a completely 
different set of players that would need to be educated, but it 
is something that we would enjoy exploring with both the 
committee and the Congress, were we to be given that kind of 
authority, and the stakeholders and potential participants in 
such a program.
    Senator Murkowski. And when you suggest a pilot program, do 
you have anything in mind that you might be able to----
    Mr. Garman. A limited number of projects, say 10, that 
could be tried and evaluated as a potential model for whether 
or not the authority should be fully expanded. It is a new and 
innovative idea, and I would not want to close the door to it.
    Senator Murkowski. What about the Department's position on 
a permanent extension of the ESPC program?
    Mr. Garman. We do support an extension. We might quibble 
over whether it is a 5-year extension or a permanent extension. 
But we would like to have an extension that gives some 
certainty in the ESPC market among the energy service 
companies, so that they can have the confidence that this is 
authority that is going to be in place for some time.
    Senator Murkowski. How do you determine which programs 
then--and this is still these energy service companies. How 
does the Department determine who is eligible for them?
    Mr. Garman. There are a couple of different ways that a 
Federal agency can approach the use of an energy savings 
performance contract. They can either go it alone and do their 
own procurement and open the door to a number of energy service 
companies to come in and do this kind of work for them. Or they 
can use something we call super ESPCs or super energy savings 
performance contracts. And what we have tried to do to make it 
easier for Federal procurement officials to come in and use 
this tool is to make it as absolutely simple for them as we 
can. And so we have on a regional basis set up these, what we 
call, super ESPCs where the Agency really does not have to do 
much other than sign up. And this eases their load.
    Currently, any energy service company is free to team up 
with an agency if they are doing it alone. If they are going it 
on one of these established super ESPC programs, they need to 
use an energy service company on the list of approved energy 
service companies that were given authority to do this work 
when the super ESPC was first set up.
    For us to expand the list of service companies eligible for 
super ESPCs, it would, frankly, eat up some--we would have to 
recompete. And so we are hesitant to do that, because that 
could take away a lot of resources that could otherwise be used 
to actually perform these contracts and get the work done.
    But today any Federal agency is free to sign up with--for 
ESPCs--the energy services company of their choice.
    Senator Murkowski. Now, are you adding more energy service 
companies, recognizing that the statutory authority is due to 
sunset this year? Are more companies being added?
    Mr. Garman. We are not envisioning adding more companies to 
what we call the super ESPCs. But we are not constraining 
companies from participating outside of that arrangement.
    Senator Murkowski. Okay. All right.
    And then this would be a question to you, Mr. Lynch. As the 
ESPC projects relate to the Department of Veterans Affairs, I 
understand that Veterans Affairs has cancelled some of the 
pending ESPC projects at apparently costs of hundreds of 
millions of dollars to the participating companies. Do you know 
what Veterans Affairs plans to do about these projects for 
which notices of intent to award have been issued?
    Mr. Lynch. Madam Chair, I am not aware of that situation at 
the Veterans Administration, and I would actually defer to my 
good friend David from the Department of Energy.
    Senator Murkowski. Thank you.
    Mr. Garman. This is an issue that has arisen, I think, when 
the Veterans Affairs Department determined that they had 
special authority under their law, and their law alone, called 
Extended Service Lease Contracting, or something like that. 
They cancelled a number of ESPCs they had in the pipeline. I 
was concerned enough about this to go and actually seek a 
meeting with the Deputy Secretary of Veterans Affairs to 
encourage them to be fair to those that they had in the 
pipeline.
    It is something that I think they still have under some 
consideration, but they have a special authority that, once 
they discovered it, they found that they could probably achieve 
some energy savings at lower costs than going outside to the 
energy service companies. So they have a balance they are 
trying to strike there.
    Senator Murkowski. Well, I will probably have some more 
questions on that, but I would like to at this point in time go 
to Senator Bingaman.
    Senator Bingaman. Well, I thank you very much.
    Let me ask Mr. Nemtzow if he would just elaborate on this 
idea of expanding the authority for using ESPCs so that they 
could be applicable to things other than buildings. If you 
could, just elaborate on what you would intend there. You 
mentioned one example. If you could give us any others, that 
would be great.
    Mr. Nemtzow. Certainly, Senator. As you know so well, the 
U.S. Federal Government is the largest energy consumer on 
planet Earth. The Federal Government spends $8 billion per year 
on energy. That is before the recent price increases, so we 
will shudder to think what the new tab is.
    Of that $8 billion, a little under half is spent on 
stationary objects. Most of those are buildings, as Assistant 
Secretary Garman said, the Social Security Office and all of 
these, this building, all of the others.
    The next category are high-energy-use facilities that are 
not regular office buildings, but have special uses, perhaps 
irrigation and other uses.
    But the bigger piece, more than half, a little over $4 
billion is transportation, that fleet of vehicles from F16 
fighters all the way to the cars around town. Currently, ESPC 
authority is only for that first category, only for regular 
buildings. That covers a wide range, military housing to Social 
Security offices, but that total misses well over half of the 
total bill.
    And so it is to get those next two categories, the high 
energy facilities and transportation. The example I gave is 
auxiliary power. Every Navy ship of any size has auxiliary 
power when they are not running their main propulsion, so that 
they have power throughout the ship. Those are old facilities. 
They are not part of the actual military use of it, so they do 
not keep them up-to-date. So we can switch those out.
    I do not know who those players are. I would imagine 
companies like G.E. or Siemens, the ones who made them in the 
first place--lighting onboard ships. Think how many light bulbs 
there are on them, on a modern huge ship. That can be swapped 
out, just as lighting in a building like this, on an ESPC 
basis.
    We could even perhaps go further, and this, as Assistant 
Secretary has said, has not been tested, but think how old the 
engines are. Senator Dorgan, you have a pretty large fleet of 
B52s, I believe, in your home State, and, as you know, some of 
those--that fleet is aging and some components such as the 
engines, perhaps, could be swapped out for better performance 
and better fuel efficiency.
    For the military, the military spends 60 gallons of fuel 
for--to get a gallon of fuel into a combat zone, because of the 
logistical pipeline. So the efficiency of the actual aircraft 
has enormous positive implications.
    So that is why we want to experiment. I support Assistant 
Secretary Garman's suggestion that this be a pilot program. I 
think that is fair and fine for a new idea. And we would 
support that.
    Senator Bingaman. Let me ask you, Secretary Garman. I think 
Mr. Keith said in his testimony the number of ESPC projects has 
been reduced by almost half from 2001 to 2002. What explains 
that?
    Mr. Garman. I think there is probably a variety of factors. 
First of all, a lot of the low-hanging fruit has been plucked, 
meaning that a lot of the clear energy savings opportunities, 
for instance, changing T12s lamps to T8s and other types of 
things that you do with fluorescence, changing old ballast to 
new, a lot of that work has been done in many Federal 
buildings. That is one constraint. I am not saying there is not 
a lot more that can be done.
    Another constraint is the low price of energy that the 
Federal Government often pays for energy. The Department of 
Energy's electricity purchase price is remarkably low. In some 
facilities, it is 3 cents, 4 cents a kilowatt hour.
    I think even at headquarters, we are paying around 5 cents 
a kilowatt hour and managing to get 17 percent renewable energy 
at that low cost. I do not want to take anything away from the 
folks we have that negotiate these power purchase contracts 
because they do a very good job, but when energy prices are 
low, it is often difficult to get a lot of these deals--using 
the alternative financing. So it is a combination of factors.
    Senator Bingaman. Let me ask one other question. The Energy 
Star program, I think each of you on the panel have talked 
about that and how useful that program has been. Why is the 
administration proposing to cut that budget by 40 percent?
    Mr. Garman. Well, actually, we are not proposing to cut the 
budget by 40 percent. Energy Star is a shared program between 
the Department of Energy and the Environmental Protection 
Agency. Between the two agencies last year, the appropriated 
amount was $53.9 million. This year the requested amount is $52 
million, so there is a slight decrease.
    I think the 40 percent you are referring to is in the 
Department of Energy's part of that budget. We received last 
year a little over $4 million after the final appropriation 
reductions were done. And we have asked for $3.7 million.
    In the division of responsibility between DOE and EPA, EPA 
does most of the promotional work. We do some of the criteria 
setting. And we have a sufficient amount of money with our 
request this year for the criteria that we have outlined for 
the coming year. We want to finish up work on residential 
windows and we want to undertake what I think will be a pretty 
daunting challenge with residential water heaters on Energy 
Star.
    Senator Bingaman. Thank you very much.
    Senator Murkowski. Senator Dorgan.
    Senator Dorgan. Madam Chairman, thank you very much.
    Mr. Nemtzow, let me ask you to talk just for a moment about 
the SEER standards for air conditioners. As you know, we had 
some work in Congress on that issue, and some disagreement on 
it, as a matter of fact. Talk to me about that, if you would.
    Mr. Nemtzow. That was also one of the great missing pieces 
of the bill that came through the 107th Congress. Air 
conditioners represent an enormous part of electricity load in 
certain parts of the country.
    In California, in summertime, air conditioning represents 
30 percent of peak load. In Texas, it is closer to 70 percent. 
In North Dakota and Alaska it is obviously considerably less, 
but for most of the country, including parts of the country 
that have the greatest stress on their grid, air conditioning 
is a big part of the action on those hot, sweaty days, when the 
grid is having the most trouble. This is why the SEER 13 
standards proposed under the Clinton administration was the 
right answer.
    If you look at the calculus of this and you look at the 
energy savings, the improvement to the environment, and, of 
course, the improvement to the reliability of the grid, it 
would call for the 13 standard.
    When the Bush administration came in, they redid the 
numbers. They did not sufficiently, I think, account for the 
role of the liability, and they have proposed a SEER 12 
standard, a lower standard, losing almost half the savings from 
the current baseline. The matter is now in the courts, for the 
courts to settle.
    Senator Dorgan. Now, for someone that does not understand 
much about SEER standards that might be listening in to your 
answer, they say, ``Well, what is the difference between 12 and 
13? It does not sound very significant.'' Tell us the energy 
savings that would result.
    Mr. Nemtzow. The savings are significant. I do not have 
those numbers available, Senator. I would be happy to provide 
that for you and for the committee. But the reason the savings 
are significant is the current legislative standard that was 
adopted by this committee in legislation is SEER 10. But that 
standard might have been aggressive at the time in the early 
nineties, but now all the manufacturers beat it. The national 
average--even though the standard is 10, the national average 
is almost 11. It is about 10.9.
    Senator Dorgan. Were there some manufacturers that 
supported the 13 standard?
    Mr. Nemtzow. The number two manufacturer, Goodman, who 
sells under the Amana air conditioning label supported it, as 
well as some smaller ones. So the industry was divided, because 
they all make these higher products. This is not some out-there 
technology. They all make them. They are all capable of it. 
They just do not want to.
    Senator Dorgan. Mr. Garman, what is your impression of the 
SEER 13 standard debate we had last year in Congress?
    Mr. Garman. Well, of course, I did take note of the fact 
that the Senate opted for the 12 when it did come for a vote in 
the bill.
    Senator Dorgan. What was your position on it?
    Mr. Garman. Our position was that--and just to clarify, the 
administration raised the SEER 10 to a SEER 12, as our 
proposal. David and some of the other advocates were, of 
course, favoring that we raise it to a 13. But we opted that 
using the criteria that we are told to use in the law, the 
Energy Policy Act--12 was the right number from a cost 
effectiveness point of view.
    Senator Dorgan. Without respect to the law in terms of what 
you were told to use, do you personally believe that moving to 
a SEER 13 would be advantageous from an efficiency standpoint?
    Mr. Garman. What we try to do is to try to differentiate 
between the minimum national standard that has to be applied 
nationwide and the opportunity that other consumers have to go 
beyond that. And I think that is the magic of the Energy Star 
program.
    Senator Dorgan. I do not understand that answer.
    Mr. Garman. Well----
    Senator Dorgan. Tell me, I mean----
    Mr. Garman [continuing]. What we do is we said----
    Senator Dorgan. My direct question is: Notwithstanding all 
the other issues, would you think--the technology exists. Would 
you think going to the higher standard would make sense?
    Mr. Garman. It would not make sense for every consumer. If 
you are a consumer----
    Senator Dorgan. But we are talking about public policy. I 
am asking your opinion on public policy in terms of the 
efficiency and the national savings that result from it.
    Mr. Garman. If the only relevant criteria that we were to 
use were the energy savings, and we were not to concern 
ourselves with cost-effectiveness for the consumer, or the 
price that a consumer was going to pay or whether the consumer 
would ever get a payback from the use of the technology--if 
energy efficiency were the only criteria, then a higher 
standard would be better.
    Senator Dorgan. Mr. Nemtzow, the point that Mr. Garman just 
made is the point that those who opposed, particularly the air 
conditioning manufacturers who opposed the SEER 13 standards, 
this is the point they made last year. Respond, if you will, to 
that question of the effect on the consumer.
    Mr. Nemtzow. Well, Mr. Garman is right. There are examples 
where it is not cost-effective. If you have a vacation home in 
Vermont that you use a few days in the summer, that air 
conditioning may have a very long payback. But those are the 
exceptions.
    The bulk of the U.S. population uses air conditioning. In 
fact, 83 percent of new homes in this country now have central 
air conditioners in them, so this is prevalent, and especially 
in the parts of the country, Texas, California, Florida, where 
there is growth in population, there is strain on the grid.
    And so this program is a national program, just as the grid 
is becoming increasingly a national grid as the administration 
supports. So you have to take a national answer to it.
    The number of ``losers'' who will have a longer payback is 
minuscule compared to the number of winners. And even people 
who do not have air conditioners, Senator, especially the 
elderly, will benefit the most, because they are the--at the 
greatest health risk when there is a blackout.
    Senator Dorgan. Yes. I did not intend to use most of my 
time talking about efficiency of air conditioners. We have had 
precious little need for air conditioners in recent months in 
my State, but because of the debate we had last year, both on 
this committee and on the floor of the Senate, this is one of 
those pieces of efficiency standards that I think is important.
    Let me ask one additional question, if I might, perhaps of 
any on the panel that wish to respond, and of Mr. Garman first.
    As you look at the major areas of accomplishment with 
respect to improving energy efficiency, I notice that 19 
percent of the Government's eligible square footage, as you 
indicate in your testimony, has earned the Energy Star award. 
That seems low. I am wondering what can be done to increase 
that.
    And second, you mention that low-hanging fruit has been 
plucked, but there must be many other promising areas of 
efficiency. What do you assess those to be?
    Mr. Garman. I agree with you that 18 or 19 percent of 
Federal building square footage under the Energy Star label is 
not enough, and we would like to raise that. And I think it is 
going to take a concerted effort on all of our parts, Congress 
and the executive branch and the public to try to change the 
culture, if you will, of a Federal procurement official and 
underscore the fact that this is important, this is part of 
their jobs, to do what they can, whether they are designing a 
new building or retrofitting an existing one, to incorporate 
energy efficiency into their thinking.
    We are trying to do that. In fact, as an example, we had a 
meeting scheduled--it had been scheduled for the day of the big 
snow, but of all of the agencies, senior agency officials to 
come to the White House and essentially receive their report 
card on how well they are doing--and some are doing better than 
others--and to have administration officials and officials from 
the Office of Management and Budget and others kind of say, 
``Listen, here is how you are doing. Here is how you need to do 
better'' and to try to encourage from within.
    I think David's suggestion of continued congressional 
oversight on the agencies to underscore the fact that this is 
very important is something else that the Congress can do as 
well.
    Senator Dorgan. I am wondering whether it might not be 
valuable for you to do a scorecard, or a grading sheet on the 
agencies, since you are the one who would be able to take a 
look at agencies and tell the public and us which agencies are 
not doing well with respect to efficiency.
    After all, we are the largest purchaser of energy in the 
world, as the Federal Government, so it might be helpful to all 
of us if you would give us a scorecard; which agencies should 
we compliment when they come up here, and which agencies should 
we light a fire under.
    Mr. Garman. I will take that as a question that you are 
asking us for the scorecard that we are providing the agencies, 
and we will do that just as soon as we provide them to the 
agencies.
    Senator Dorgan. I think that would be very helpful.
    Anyone else want to respond to the question of where the 
obvious early additional targets are for efficiency?
    Mr. McGuire. Senator, you mentioned the low-hanging fruit 
that has been plucked. It is true that in the equipment----
    Senator Dorgan. Well, I was simply quoting Mr. Garman. I do 
not necessarily subscribe to that.
    Mr. McGuire. Well, let me associate myself with his remarks 
then. Most of it was in terms of appliances, and products, and 
equipment. One of the areas where, I think, manufacturers and 
advocates have come together to try to go to the next step is 
to combine the national minimum standards with incentives.
    And there are two examples I would point out. One is in the 
State of Maryland. Sales tax was waived on products that meet 
the Energy Star designation and has been successful in moving 
more of those products into a consumer's home.
    The second is legislation that was included in the energy 
bill last Congress, introduced in the Senate by Senators 
Lincoln and Grassley, which would provide a tax credit to 
manufacturers of super-efficient appliances, appliances that go 
beyond the national minimums and Energy Star to get those 
products stimulated into the marketplace. So I think there is a 
lot of agreement among advocates and industry on those types of 
things.
    Senator Dorgan. Do you have something?
    Mr. Keith. Mr. Dorgan--oh, go ahead.
    Mr. Nemtzow. May I respond? Let me agree with Mr. Garman 
and Mr. McGuire for that list, and add three items of low-
hanging fruit that are out there. One is new cars and light 
trucks. This is mature technology that needs to be deployed 
throughout the fleet.
    Two is existing homes, that stock of over 100 million 
residences in this country, some of which is quite old, Joe 
just talked about getting newer appliances into them through 
incentives. That is right. We need Energy Star. We need tax 
incentives. In addition to that one, we need tax incentives to 
upgrade existing homes and we need public education, so that 
consumers will know what to do.
    The third area is powerplants. The powerplants fleet in 
this country is embarrassing. Even with the new independent 
power projects, the new combined cycle gas turbines, it is 
still a very inefficient fleet. And there is no legislative or 
Federal pressure on them right now, direct pressure to be more 
efficient.
    Powerplants in this country waste more energy--just the 
powerplants waste more energy than the entire country of Japan 
uses in a year for all purposes. And that waste can be cut, and 
that is low-hanging, cost-effective fruit.
    Senator Dorgan. Mr. Keith.
    Mr. Keith. Perhaps, I can also address the low-hanging 
fruit issue. As representing the groups of folks that go out 
and look at Federal facilities to identify these opportunities, 
we feel certainly there is much more out there that we can 
harvest. We are--this program is somewhat unique in that we 
take a lot of that development risk as an ESCO. So we are 
tasked with going out at our expense and locating these 
opportunities at Federal facilities.
    What we are looking for is repeal of the sunset, so that we 
can continue to do this and provide adequate funding for 
agencies to manage this ESPC program.
    One of the issues that was raised earlier is: Why is there 
a decline in the program? Part of that is the reduced funding 
to manage these programs, particularly at the Department of 
Defense area.
    Secondly, we need top-down support from Congress and the 
executive branch, too, for this program. And then finally, we 
need accountability. And I do support reporting to Congress as 
to ESPC activities as well as OMB and the Department of Energy.
    When folks are coming to you all seeking appropriations to 
do energy efficiency improvements, I think it begs the 
question: Have you explored other opportunities? And then why 
have you not taken advantage of them prior to appropriating 
that money?
    Senator Dorgan. Mr. Lynch.
    Mr. Lynch. Senator, I think I was the one that first said 
the word that you called into question. I guess I would like to 
say a couple of points. We really took it seriously in the 
first year I think, when EPA first came up with the Energy Star 
label. I think we constituted something like 25 percent of all 
the buildings in that portfolio.
    One of the things that we are doing--and I guess I would 
caution everyone not to look at buildings, because we have 
1,800 buildings in our portfolio. Some of them are cow sheds. I 
would encourage folks to look at square footage. And basically, 
what we are doing is we are trying to key in on 61 key 
buildings in our portfolio that have the most square footage at 
stake. And I think it is probably half the square footage. It 
is almost the 80/20 rule. So I think you are going to see some 
dramatic changes, at least from the public building service in 
the future in the Energy Star perspective.
    Again, the other thing that we are focusing on, these new 
courthouses we are bringing online, we need to make sure that 
they are attaining Energy Star consensus as well. So I mean we 
are working at it, and we do have a plan to really get those 
numbers up from a square footage----
    Senator Dorgan. I think what we are paying for these new 
courthouses that are being built, if they are not complying 
with everything in the free world, there is something wrong. I 
would like to know if there is a problem with complying with 
these matters, because these courthouses are enormously 
expensive.
    I have overstayed my time for questions. Thank you very 
much.
    Senator Murkowski. Thank you, Senator Dorgan.
    Well, thanks to all of you on the panel this morning. I 
think the issues that have been raised, the suggestions that 
have been brought up have been helpful. Certainly, the ideas of 
a scorecard, greater oversight, and accountability, and just 
the education, as you have noted, Mr. Nemtzow, I mean, all of 
this is critical. All of this is important as we must work 
towards greater efficiencies. So I appreciate your input this 
morning.
    And if there are those that have questions that need to be 
submitted, we will make sure that you receive them, so that we 
can enter those into the records.
    So with that, we will close for the day, and thank you.
    [Whereupon, at 11:10 a.m., the hearing was adjourned.]

    [Subsequent to the hearing, the following statement was 
received for the record:]
Prepared Statement of Jared O. Blum, Chair, Federal Energy Productivity 
                               Task Force
    I am Jared O. Blum, President of the Polyisocyanurate Insulation 
Manufacturers Association (PIMA) and current Chair of the Alliance to 
Save Energy's Federal Energy Productivity Task Force. Since 1995, the 
Task Force has brought together private-sector companies and 
organizations with an interest in cutting Federal government energy 
waste (list of members attending the past two Task Force meetings 
attached). The Task Force:

   monitors the status of DOE's Federal Energy Management 
        Program (FEMP);
   develops and articulates positions on Federal energy 
        management policies;
   provides guidance and input to the FEW program and the 
        Federal Energy Management Advisory Committee (FEMAC); and
   encourages and Federal agencies to meet the energy reduction 
        requirements set forth in Federal law, regulations, and 
        executive orders.

    In 1998, the Task Force and the Alliance published, Leading By 
Example, (copy enclosed) which discussed many of the current issues and 
problems related to Federal energy management and outlined a series of 
recommendations from the Task Force for improvements. As a direct 
result of these recommendations, Executive Order 13123 was issued, 
setting new goals for Federal agencies to reduce energy use. Over the 
past two years, our Task Force has worked with members of Congress and 
their staffs to develop legislation to revise the Federal government's 
energy management objectives and to strengthen the ability of agencies 
to meet those goals.
    We appreciate this opportunity to provide our views to the 
Committee as you gather input for developing comprehensive energy 
legislation. As the largest coalition of private-sector advocates for 
improved Federal energy management, and in recognition of the economic, 
environmental and energy security benefits of cutting Federal energy 
waste, we urge the Committee to include the provisions regarding 
Federal energy management that were agreed to during last year's 
Conference Committee on H.R. 4. In addition, we urge the Committee to 
include language (draft attached) that would expand authority, on a 
pilot basis, for Federal agencies to enter into Energy Savings 
Performance Contracts to include non-building energy savings projects.
                 h.r. 4 conference committee agreement
    Last Fall, the House and Senate conferees on H.R. 4 agreed to a 
package of Federal energy management provisions that would have:

          1. Updated agency energy reduction targets. Established each 
        agency's energy reduction goal at 2 percent per year from 2003 
        thru 2012, as compared to energy use in 2000; and required DOE 
        to recommend, in 2011, the percentage reduction goals for 2013 
        thru 2022.
          2. Extended and expanded Energy Savings Performance Contract 
        (ESPC) authority. Repealed the October 1, 2003 ``sunset'' on 
        ESPC authority. Expanded the definition of the benefits under 
        an ESPC to include savings resulting from: improvements in 
        operations and maintenance, increased use of cogeneration, a 
        reduction in the cost of water, and replacement buildings. 
        Required DOE, within 180 days, to review the ESPC program to 
        identify obstacles that prevent Federal agencies from fully 
        utilizing the program.
          3. Required cost-effective metering. By 2010, all Federal 
        buildings shall be metered or submetered and, to the maximum 
        extent practicable, each agency shall use advanced meters. 
        Within 180 days, DOE shall, in consultation with DOD, GSA, and 
        representatives of the metering industry and others, issue 
        metering guidelines based on cost-effectiveness criteria. 
        Required agencies to submit a Metering Plan to DOE within 6 
        months of enactment.
          4. Increased Federal building performance standards. Directed 
        DOE to revise Federal building energy performance standards 
        within 1 year to 30 percent below consumption in ASHRAE 90.1 
        for commercial buildings, or 30 percent below IECC for new 
        residential buildings, if cost-effective. It further directed 
        DOE to determine, within one year, whether amendments to these 
        codes should trigger further revision of the Federal standards. 
        Required that agencies, in their annual budget requests, 
        Include lists of new buildings and a statement on whether they 
        meet the revised standards.
          5. Strengthened Federal procurement requirements. Required 
        procurement of Energy Star or FEMP designated products unless 
        they are not cost-effective or are not reasonably available. 
        Required GSA and DLA to clearly display Energy Star and FEMP 
        designated products in their catalogs and, after existing 
        inventories are exhausted, shall only replace with Energy Star 
        or FEMP designated products. Within 120 days, DOE shall 
        designate electric motors of 1 to 500 horsepower for use by 
        agencies.
          6. Increased Federal fleet fuel economy requirements. Each 
        agency shall determine its baseline fuel economy based on 
        automobiles purchased in 1999 and shall manage procurement to 
        increase average fuel economy by 1 mpg by September 30, 2003; 
        and by 3 mpg by September 30, 2005.

    While last year's agreement does not represent anyone's ideal 
legislative package, it is a strong and balanced set of provisions 
which deserves the consensus support it gained last year. Enactment of 
these provisions is vitally important to the continued, successful 
efforts of the FEMP program to reduce Federal energy use and save 
taxpayer dollars. For example, DOE would be better able to monitor 
agency progress toward energy savings targets and agencies would be 
less able to ``game'' the measurement of their performance if energy 
reduction targets are updated from the fiscal year 1985 to the fiscal 
year 2000 baseline. Federal procurement of energy consuming products 
and the construction of energy-efficient buildings will be strengthened 
by updating these Federal standards to reflect the most recent energy-
efficient technologies, and the most recent industry and government 
consensus efficiency standards. Finally, advances in metering and a 
commitment to energy savings demands that the Federal government 
require metering where it is cost-effective. After all, how can 
agencies manage something they cannot measure?
    Enactment of these provisions would revitalize a program that has a 
remarkable history of success. DOE's most recent report to Congress on 
Federal energy management, dated January 11, 2001, stated that energy 
consumption per gross square foot in Federal buildings had declined 
20.7 percent from Fiscal Year 1985 to Fiscal Year 1999. This reduction 
in energy intensity saves the federal government on the order of $1 
billion every year in reduced utility costs. Additional savings of this 
magnitude remain achievable if Congress enacts the provisions that were 
carefully negotiated last year. Enactment of these provisions would 
also demonstrate Congress's continuing commitment to Federal energy 
savings, and would send a powerful message to government managers that 
cutting energy waste remains a national priority.
                     repealing the espc ``sunset''
    One essential factor in reducing Federal energy use is obtaining 
the funding needed to implement energy savings projects. This funding 
may be available from three sources: direct appropriations, through 
utility programs, and from private-sector sources under ESPCs. In 
recent years, ESPC funding has become increasingly important because 
less funding is available from direct appropriations and utility 
programs. Appropriations have been curtailed as a result of overall 
pressure on Federal spending, and utility funding has been reduced as a 
consequence of electricity market restructuring. The ESPC program has 
been extraordinarily successful in tapping private-sector funding and 
expertise to achieve energy savings. Since 1992, nearly $1.1 billion in 
private-sector capital has been invested in Federal energy improvement 
projects under ESPCs, resulting in hundreds of millions of dollars in 
permanent savings to the U.S. taxpayer--and the creation of private-
sector jobs.
    With the ``sunset'' date of October 1 approaching, Federal 
agencies, and their potential private-sector partners, are beginning to 
lose the incentive to negotiate new ESPCs. If the authorization 
extending ESPC authority is not enacted before October 1, then Federal 
agencies will lose the ability to tap into a stream of investment that 
currently averages over $200 million per year. We not only urge that 
you include this provision in the Committee's energy bill, but that you 
remain open to working with us to explore other ways to enact this 
provision if it appears the bill cannot be enacted by the October 1, 
2003 deadline.
                             espc expansion
    Given the tremendous success of ESPCs in attracting private-sector 
investment in energy efficiency projects in Federal buildings, it is 
now appropriate to determine whether ESPCs can be applied to non-
building projects--where most Federal energy consumption occurs.
    Thirty-three percent of the Federal government's energy consumption 
occurs in Federal buildings and 60 percent occurs in government 
vehicles such as cars, trucks, ships and aircraft (so-called 
``mobility'' fuel use). The other 7 percent occurs in ``energy 
intensive operations'' such as irrigation, energy intensive government 
manufacturing operations, and research and development activities.
    While no specific estimates are available of the potential energy 
savings from such ``non-building'' ESPC projects, a recent article by 
Amory Lovins, stated that the potential for DOD fuel savings alone are 
``upwards of ten billion dollars a year, because the few billion 
dollars of direct annual fuel savings can trigger far larger avoided 
fuel delivery costs.'' \1\ He also states that, ``The Army uses about 
$0.2 billion worth of fuel a year, but pays about 16 times as much, 
$3.2 billion a year, just to maintain 20,000 active and 40,000 reserve 
personnel to move that fuel.''
---------------------------------------------------------------------------
    \1\ Battling Fuel Waste in the Military, Amory B. Lovins, 
www.rmi.org, 2002.
---------------------------------------------------------------------------
    A recent Department of Defense Science Board Task Force report \2\ 
found that ``Ten years after the Cold war, over 70 percent of the 
tonnage required to position today's U.S. Army into battle is fuel''; 
and that, ``The Air Force . . . spends approximately 85 percent of its 
fuel budget to deliver, by airborne tankers, just 6 percent of its 
annual jet fuel usage.'' The Task Force further found that ``High 
payoff, fuel-efficient technologies are available now,'' and 
recommended that DOD, ``specifically target fuel efficiency 
improvements . . .''
---------------------------------------------------------------------------
    \2\ The Defense Science Board Task Force on Improving Fuel 
Efficiency of Weapons Platforms, More Capable Warfighting Through 
Reduced Fuel Burden, January 2001.
---------------------------------------------------------------------------
    The expansion of ESPC authority we propose would create 
opportunities for private-sector investment in Federal energy 
efficiency projects, create jobs, reduce oil demand, save taxpayer 
dollars, and reduce pollution. As stated in the DOD report, increased 
fuel efficiency would ``also improve military capability by reducing 
the size of the fuel logistics system, reducing the burden of high fuel 
consumption on agility, reducing costs and dampening the budget impact 
from volatile oil prices.''
    There are uncertainties in how ESPC contracts would need to be 
modified to respond to the differences that exist between building and 
non-building energy efficiency projects. For example, there are 
differences in how energy savings would be measured and verified, and 
how payments to private-sector partners would be made. While most of 
these potential uncertainties appear resolvable, agencies and their 
potential energy service company partners cannot be expected to work-
through these issues and negotiate ESPCs for non-building projects 
unless they can eventually enter into contracts. Accordingly, we urge 
the Committee to authorize a pilot program. Authorization for 10 pilot 
projects should be adequate to gauge the level of interest in such 
expanded authority by Federal agencies and the private sector, and for 
them to work-through contract modifications for a range of typical non-
building projects. The results from those 10 projects could then be 
reported to the Congress along with recommendations on whether to 
extend the authority. Attached is draft language that would:

   authorize DOD and the heads of other Federal agencies to 
        enter into up to ten non-building ESPC projects;
   require the Secretary of Energy, in consultation with the 
        heads of Federal agencies, to select up to 10 ESPCs projects to 
        demonstrate the applicability and benefit of energy savings 
        performance contracting to a range of non-building energy 
        efficiency improvement projects; and
   require the Secretary to report to Congress, by December 31, 
        2005, on the results of the pilot program, including the energy 
        and cost savings resulting from the projects, their cost 
        effectiveness, and recommendations as to whether the authority 
        to enter into such contracts should be continued.

    Energy efficiency has direct benefits for the Federal government. 
It reduces costs and environmental impact, saves taxpayer dollars and 
enhances energy security. As representatives of the private-sector, the 
Alliance's Federal Energy Productivity Task Force supports Improved 
Federal energy efficiency because it also creates jobs and 
opportunities for Federal/private-sector partnerships. While the 
Federal government uses only 1 percent of the nation's energy, its' 
actions have a substantial impact on the attitudes and behavior of 
others in recognizing and acting to gain the benefits of increased 
efficiency.
    We urge you to include last year's Conference Committee agreement 
on Federal energy management, and our proposal for a pilot program to 
expand ESPC authority to non-building projects, not only for the direct 
economic, environmental and security benefits to the Federal 
government, but also to demonstrate--by example--the continuing 
commitment of Congress and the Federal government to achieving the 
benefits that energy efficiency offers to the nation.
    Thank you again for the opportunity to contribute to the 
Committee's deliberations on national energy legislation.

SEC.----. PILOT PROJECT TO EXPAND ENERGY SAVINGS PERFORMANCE 
CONTRACTING TO NON-BUILDING INVESTMENTS.

    (a) Title VIII of the National Energy Conservation Policy Act (42 
USC 8287) is amended by adding the following new section at the end:

``SEC. 805. PILOT PROGRAM FOR ENERGY SAVINGS PERFORMANCE CONTRACT 
INVESTMENTS IN NON-BUILDING ENERGY SAVINGS PROJECTS.

    ``(a) Authorization. The Secretary of Defense and the heads of 
other interested Federal agencies are authorized, on a pilot basis, to 
enter into up to ten energy savings performance contracts under this 
Title for the purpose of achieving savings, secondary savings, and 
benefits incidental to those purposes, in non-building energy 
efficiency improvement projects.
    ``(b) Selection of Projects. The Secretary of Energy, in 
consultation with the Secretary of Defense and the heads of other 
interested Federal agencies, shall select up to ten contract projects 
for this pilot program. The projects shall be selected to demonstrate 
the applicability and benefit of energy savings performance contracting 
to a range of non-building energy efficiency improvement projects.
    ``(c) Definitions. For the purposes of this section,

          ``(1) the term `non-building' means any vehicle, device, or 
        equipment that is transportable under its own power by land, 
        sea, or air and consumes energy from any fuel source for the 
        purpose of such transportability, or to maintain a controlled 
        environment within such vehicle, device or equipment; or any 
        Federally owned equipment used to generate electricity or 
        transport water.''
          ``(2) the term `secondary savings' means additional energy or 
        cost savings that are a direct consequence of the energy 
        savings that result from the energy efficiency improvements 
        that were financed and implemented pursuant to the energy 
        savings performance contract. Such `secondary savings' may 
        include, but are not limited to, energy and cost savings that 
        result from a reduction in the need for fuel delivery and 
        logistical support. In the case of electric generation 
        equipment, secondary savings may include the benefits of 
        increased efficiency in the production of electricity.

    ``(d) Report. No later than three years after the enactment of this 
section, the Secretary of Energy shall report to the Congress on the 
progress and results of this program. Such report shall include: a 
description of all projects undertaken; the energy and cost savings, 
secondary savings, other benefits and problems resulting from such 
projects; and the overall cost-benefit of such projects. The report 
shall also include recommendations, developed in consultation with 
those agencies that undertook projects under the program, as to whether 
the authorization to enter into energy savings performance contract for 
non-building projects should be extended, expanded, or otherwise 
modified.''
    (b) Section 547(c)(3) of the National Energy Conservation Policy 
Act (42 USC 8256) is amended by striking the word ``facilities'', and 
inserting the words ``facilities, equipment and vehicles'', in lieu 
thereof.
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

                                   Alliance to Save Energy,
                                    Washington, DC, April 25, 2003.
Hon. Pete V. Domenici,
Chairman, Senate Committee on Energy and Natural Resources, Dirksen 
        Senate Office Building, Washington, DC.
    Dear Mr. Chairman: Please find attached my replies to questions 
submitted for the record from the March 11, 2003 hearing of the Senate 
Committee on Energy and Natural Resources. Thank you again for giving 
the Alliance to Save Energy this opportunity to contribute as you 
consider this important legislation.
            Sincerely,
                                          David M. Nemtzow,
                                                         President.
              Responses to Questions From Senator Domenici
                          appliance standards
    Question 1. Is it your sense that the participants in last year's 
negotiations on efficiency standards still support the package placed 
before the energy bill conference?
    Answer. Yes, the package of efficiency standards agreed to in the 
conference committee last year was a good package that we continue to 
support. We remain hopeful, and urge, that additional consensus 
agreements that have been made, and that are expected to be made in the 
coming weeks or months, will be added to the Senate's energy bill 
before its final passage and that they will be enacted.
    Question 2. What new products have been discussed for legislated 
standards, and where have you found consensus?
    Answer. Consensus has been reached with respect to standards for 
unit heaters and for compact fluorescent lamps, and I'm pleased that 
those agreements have since been adopted by the Committee. Negotiations 
are ongoing with respect to commercial clothes washers, and commercial 
refrigerators/freezers and freezers and large packaged HVAC equipment.
    Question 3. Should new Federal standards enacted by legislation 
``pre-empt'' State standards on those same products that may exist as 
of the date of enactment.
    Answer. No, we believe that pre-emption of state standards should 
occur upon the effective date of the new federal standard. There is 
always the possibility that an administrative or legal issue could 
delay the federal effective date. In that case, the state standard 
would be pre-empted without the federal standard actually coming into 
effect.
    Question 4. How should we handle those products for which a 
rulemaking process is ordered by statute? Should Federal preemption 
extend to the period between the enactment of the law and the 
conclusion of the rulemaking?
    Answer. We believe that preemption should occur when the federal 
standard actually becomes effective, not before, because there is 
always the possibility that an administrative or legal issue could 
delay the federal effective date. In that case, the state standard 
would be preempted without the federal standard actually coming into 
effect.
                  energy savings performance contracts
    Question 1. What are the major impediments to the expanded use of 
ESPCs? Are those addressed by the provisions in last year's energy 
conference agreement?
    Answer. We believe that the most immediate impediment to the 
expanded use of ESPCs is the looming ``sunset'' date of September 2, 
2003. Last year's bill agreement would solve this problem by repealing 
that date.
    Beyond that, ESPCs cannot now be used for non-building projects, 
where two-thirds of federal energy use occurs, because of the 
limitation of the existing authority to projects in federal buildings. 
It is for this reason that we have proposed that the authority be 
expanded to non-building projects, such as air conditioning systems on 
Navy ships, on a pilot basis, in order to determine whether the ESPC 
model can be adapted to non-building projects. Such a pilot program was 
not included in either the House or Senate bill last year, but we urge 
its consideration and inclusion this year.
    Question 2. How do other alternative financing programs such as 
Utility area-wide contracts and Enhanced Use Leasing Compare to ESPCs?
    Answer. Utility area-wide contracts, Enhanced-use leasing and ESPCs 
all serve specific markets for private financing of energy efficiency 
projects in the Federal government that, for the most part, do not 
overlap. ESPCs are the most flexible approach with several pre-selected 
vendors available to competitively serve all federal agencies' energy 
efficiency project financing needs. Utility area-wides can only be used 
in those cases where there are utilities with active demand management 
programs that offer this service to their non-federal customers. 
Moreover, the exact structure of these programs differs among the 
utilities that offer the service. Enhanced-use leases can only be used 
in those cases where two conditions are met. One, the federal agency is 
authorized to use such leases; two where there are energy savings 
opportunities under such a lease, such as the installation or 
improvement in co-generation facilities.
    Question 3. How would expiration of the ESPC authority affect 
pending contracts and contract negotiations? How has the impending 
expiration affected your ESPC opportunities?
    Answer. The impending expiration date has caused a sharp drop in 
ESPC investment. ESPC contracts typically take over a year to 
negotiate, the approaching expiration date is increasing the risk of, 
and therefore is undermining, pending contracts. It has effectively 
stopped the initiation of new contracts that are unlikely to be 
concluded before the deadline.
                 corporate average fuel economy (cafe)
    Question 1. Given the Administration's effort of hydrogen vehicles, 
should we consider CAFE credits for these vehicles as a way to 
encourage their manufacture and sale?
    Answer. It may be appropriate to offer CAFE credits for vehicles 
that use hydrogen for fuel. However, these credits should be applied 
for vehicles going onto the roads and available to consumers that are 
using hydrogen.
    Question 2. How would you propose to fix the problems you see with 
the ``dual-fuel'' vehicle credits?
    Answer. We oppose the extension of the dual-fuel vehicle incentives 
as currently written because it will not benefit America's oil 
dependence, national security, consumers, or the environment. It is our 
judgment that the current program design, which provides a bonus 
formula for rating vehicles for CAFE credits when they are capable of 
running on alternative fuels, offers an incentive for vehicle 
manufacturers to add dual-fuel capabilities in lieu of further 
increasing the efficiency of their fleet in order to meet fuel economy 
requirements.
    For this program to succeed, the amount of CAFE credits must be 
linked to the actual amount of alternative fuel used. We urge that the 
dual fuel CAFE credit program be modified in this manner, in the 
interest of both improved fuel economy and reduced gasoline 
consumption.
    The dual-fuel vehicle incentive established by the Alternative 
Motor Fuels Act of 1988, has resulted in consequences counter to the 
original laudable intent of the law. While AMFA was successful in 
bringing more vehicles that had alternative fuel capabilities onto the 
roads, the lack of alternative fueling stations meant that most of 
these vehicles never used these fuels--though their manufacturers used 
the AMFA credits to meet their fuel economy requirements. In fact, the 
National Academy of Sciences 2001 report on fuel economy standards 
addresses this issue and recommends the eliminations of the dual-fuel 
program because the program failed to produce the intended benefits.\1\
---------------------------------------------------------------------------
    \1\ National Research Council, Effectiveness and Impact of the 
Corporate Average Fuel Economy Standards, July 2001.
---------------------------------------------------------------------------
    The AMFA program does not reduce oil consumption nor help protect 
national security. According to a joint report to Congress by DOT, DOE, 
and EPA, there are only 5,236 alternative refueling sites (121 that 
offer E85) of the 176,000 gasoline stations nationwide although there 
are currently some 1.2 million dual-fuel vehicles on the road.\2\ 
Furthermore, the joint report notes extending the program through 2008 
will increase petroleum use by an additional 1.2 billion gallons a 
year, further increasing our dependence on foreign oil.
---------------------------------------------------------------------------
    \2\ U.S. Department of Transportation, U.S. Department of Energy, 
U.S. Environmental Protection Agency. Report to Congress: Effects of 
the Alternative Motor Fuels Act CAFE Incentives Policy, March 2002, 
Table V-4. A new path for alternative fuels is needed. As the AMFA 
credits and dual-fuel vehicles have not successfully encouraged a 
significant increase in alternative fueling stations, the Alliance 
suggests fixing the program so that it provides credits for vehicles 
which actually run on alternative fuels. Additional focus on programs 
that help develop the infrastructure for alternative fuels may be 
necessary. This would prevent auto manufacturers from using these 
credits to circumvent increasing vehicle fuel efficiency, and prevent 
the desire for alternative and renewable fuels to compete with the need 
for increased energy efficiency.
---------------------------------------------------------------------------
    Modifications to the program could help increase the consumption of 
alternative fuels. Highlights of these modifications include:

   A new vehicle labeling requirement to ensure that consumers 
        are fully aware of the dual fuel capabilities of their vehicle 
        at the time of sale.
   A new requirement for the permanent marking of vehicles to 
        ensure that operators of the vehicles are aware of the dual 
        fuel capabilities when refueling.
   A requirement that any fueling of dual fuel vehicles at or 
        prior to time of sale be exclusively with E85--potentially 
        tripling E-85 sales by the end of MY 2005.
   A stable, multi-year program.

    Question 3. Is ``miles per gallon of gasoline'' an appropriate 
efficiency metric if we are using hydrogen instead of gasoline in the 
future?
    Answer. Yes, it is appropriate.
    Question 4. Is the CAFE program ``broken''? Do you recommend 
replacement with a gasoline tax or other similar measure?
    Answer. CAFE standards are a proven means of increasing the fuel 
economy of the fleet of vehicles on America's roads. The National 
Academy of Sciences report, issued in July of 2001, concludes that the 
current CAFE standards save 2.8 million barrels of oil a day.\3\
---------------------------------------------------------------------------
    \3\ National Research Council, Effectiveness and Impact of the 
Corporate Average Fuel Economy Standards, July 2001.
---------------------------------------------------------------------------
    In fact, increasing vehicle fuel economy standards would decrease 
oil consumption, help consumers, and protect the environment. The 
Alliance to Save Energy recommends a significant increase in vehicle 
fuel economy as numerous studies have shown that America's fleet could 
reach 40 miles per gallon in the next decade by using current and 
emerging technologies. This would not only save Americans billions of 
dollars annually, but also help protect the environment and stem global 
warming pollution.
    While politically difficult, a gasoline or carbon tax on fuel would 
make the most polluting fuels more expensive, thus making alternative 
fuels and high fuel economy more attractive to consumers. The Alliance 
to Save Energy has been a long-supporter of including externalities--
national security, environmental, health impacts--into the cost of 
energy. In 1998, the Alliance called for a phased-in carbon tax in the 
study Price It Right, Energy Pricing and Fundamental Tax Reform. The 
1993 Alliance to Save Energy Study, Federal Energy Subsidies: Energy, 
Environmental, and Fiscal Impacts, documented that the federal 
government provided $35 in subsidies to traditional energy supplies 
(coal, petroleum, natural gas, and nuclear) for every $1 provided 
energy-efficient and renewable energy sources. The 1994 Alliance study, 
State and Local Taxation: Energy Policy by Accident, showed that 80 
percent of the states effectively tax energy at rates below the tax 
rate they apply to sales of goods and services. Subsidizing fossil 
energy and taxing energy at lower rates than other goods makes little 
economic sense in light of fossil energy's environmental externalities.
                                 ______
                                 
              Responses to Questions From Senator Bingaman
                  energy savings performance contracts
    Question 1. In response to testimony that the agency activity on 
ESPCs is declining, DOE attributed the fall off to the probability that 
the ``low hanging fruit'' has been picked by the agencies already. Do 
you agree with that assessment?
    Answer. We do not believe that this is the reason ESPC investment 
is declining. Rather, we see the looming ``sunset'' date of September 
30, 2003 as the cause of the slowdown. The typical ESPC takes over a 
year to negotiate and we are now well within a year of that termination 
date. Therefore, it is now unlikely that companies or agencies for that 
matter can initiate new contracts and have them enter into force before 
the deadline. The program is, in effect, shutting down.
    Question 2. Questions were raised in the hearing as to the current 
level of activity on ESPCs by the Veterans Administration. Have your 
member companies seen a decline in VA activity?
    Answer. Companies tell us that the VA has terminated processing all 
ESPCs, even those for which there were letters of intent to proceed. We 
have inquired with the DOE, as the federal coordinating agency for 
ESPCs, whether they know the reasons for the VA's apparent new policy 
not to enter into ESPCs. We have been told by DOE that the VA has 
suspended ESPC activity while they conduct an internal review. While 
requests have been made to be involved in this process, the VA is 
unresponsive.
    Question 3. What is your reaction to DOE's mention of a 5-year 
extension of the sunset on ESPCs, as opposed to a repeal of the sunset 
as both Houses of Congress proposed in last year's energy bill?
    Answer. We support repeal of the sunset, not an extension, because 
DOE has not given any reason why there should not be a full repeal. 
After ten years, the ESPC program has grown to be very successful, 
tapping over $1 billion in private-sector investment for federal energy 
efficiency projects. At this time, its greatest problem is the looming 
sunset date that is cutting off new investment. To us, it does not make 
sense to establish another relatively short termination date that 
would, in several years, again undermine the incentive for private-
sector partners to initiate new contracts.
                                 ______
                                 
              Responses to Questions From Senator Bunning
    Question 1. Why has the DOE stated a preference for a change to the 
program which appears to stifle competition and lessens choices for 
consumers? Does the DOE believe that its preference for a 3-zone map 
will ultimately lead to loss of jobs for workers in the industry?
    Answer. We cannot speak for DOE, but we can give you the reasons 
why the Alliance to Save Energy supports the 3-zone map. This 
alternative offers the potential to reduce cooling demand--and 
consequently to reduce greenhouse gas emissions and to provide summer 
peak energy savings. In addition, the simplicity of the 3-zone 
alternative is beneficial for consumers. We believe that the 3-zone 
alternative will promote low solar heat gain window products in 
cooling-dominated climate zones where reducing air-conditioning load is 
important.
    It is important to note that Energy Star is a voluntary program, so 
that pyrolitic technology can continue to compete throughout the U.S. 
Additionally, there are other government-sponsored programs working to 
create demand for pyrolitic coatings and other efficient window 
technologies. One of these programs is the Efficient Windows 
Collaborative which educates consumers about all of the different 
energy-efficient technologies available in the market, and helps 
consumers to make the best choice based on a host of considerations 
including climate, design, energy prices, etc.
    Question 2. What criteria will DOE be using as it makes its 
selection?
    Answer. This question can only be answered by the DOE.
    Question 3. Given the current surplus in peak energy supply, high 
price of natural gas and its impact on home heating costs, is DOE 
rethinking its decision to support the 3-zone alternative?
    Answer. We continue to support the 3-zone alternative. Although 
there are a number of benefits for consumers of Energy Star products--
such as saving money through energy savings--the purpose of the Energy 
Star program as stated on the program's web site is to provide a 
``voluntary labeling program designed to identify and promote energy-
efficient products to reduce greenhouse gas emissions.'' The 3-zone 
alternative offers the potential to reduce cooling demand which depends 
on electricity, while the 4-zone proposal provides potentially greater 
heating savings which depends primarily on natural gas. Consequently, 
the 3-zone proposal has greater potential to reduce greenhouse gas 
emissions and to provide summer peak energy savings. Support for the 3-
zone alternative is consistent with the Alliance to Save Energy's goals 
of working to achieve a cleaner environment and energy security through 
energy efficiency.
                                 ______
                                 
                                   Sempra Energy Solutions,
                                     San Diego, CA, April 25, 2003.
Hon. Pete V. Domenici,
Chairman, Senate Committee on Energy and Natural Resources, Dirksen 
        Senate Office Building, Washington, DC.
    Dear Mr. Chairman: Please find attached my replies to questions 
submitted for the record from the March 11, 2003 hearing of the Senate 
Committee on Energy and Natural Resources. Thank you again for giving 
the Federal Performance Contracting Coalition this opportunity to 
contribute as you consider this important legislation.
            Sincerely,
                                   Erbin B. Keith,
                                           Senior Vice President,
                                             Operations & Commercial 
                                               Pricing.
[Enclosure]
                    Responses to Committee Questions
    Question 1. Can ESPCs be used by the Department of Defense? What 
are the issues involved in doing so?
    Answer. Yes, the Department of Defense (DOD) has the statutory 
authority to enter into ESPCs. In addition to using Department of 
Energy, Indefinite Delivery Indefinite Quantity (IDIQ), ESPC contracts 
(``Super ESPCs''), the DOD has the authority to enter into its own 
stand-alone ESPC or IDIQ ESPC contracts. Early on in the ESPC program, 
the DOD generated considerable ESPC activity [in comparison to other 
Federal agencies]. In recent years the DOD ESPC activity has 
significantly diminished. In my written testimony, I cited a number of 
factors for this, including, lack of funding for the management of ESPC 
programs and the lack of support and encouragement from high levels 
within the Department of Defense and the executive branch.
    Question 2. What are the major impediments to the expanded use of 
ESPCs? Are these addressed by the provisions in last year's energy 
conference agreement?
    Answer. The provisions of last year's energy conference agreement 
addressed some of the specific impediments. For example, the conference 
agreement dealt with the repeal of ESPC sunset provisions and the 
addition of water conservation to civilian ESPC projects. However, 
significant impediments and untapped ESPC opportunities remain that 
could be addressed. In my written testimony I recommended a number for 
additional measures that will serve to preserve and reinvigorate the 
program as well as expand its potential reach. In summary, those 
recommendations were:

          i. Allow replacement and new construction facilities to be 
        eligible for ESPCs;
          ii. Mandate that Federal agencies report reasons they do not 
        use alternative financing for capital improvement projects;
          iii. Require that agencies report alternative financing 
        activities to Congress;
          iv. Stabilize the term of Army and Air Force ESPC contracts;
          v. Encourage interagency cooperation and confirm ordering 
        authority between agency ESPC contracts;
          vi. Expand ESPC to include transportation and power 
        generation applications.

    Question 3. How do other alternative financing programs such as 
Utility area wide contracts and Enhanced Use Leasing compare to ESPCs?
    Answer. The implementation of capital improvement projects under 
utility area wide contracts is often referred to as a utility energy 
services contract (UESC). Setting aside the fact that there is no 
explicit authority for implementing capital improvement projects under 
UESC, UESC and ESPC programs have several common characteristics, yet 
differ in important ways. Under both programs, a Federal agency 
contracts with the private sector to implement projects that reduce 
energy demand and consumption at the agency's facility. Under the UESC, 
the private sector entity is the local utility company. Under ESPC, the 
private sector entity is an energy services company (ESCO) that has 
been pre-qualified to perform energy services by the Department of 
Energy. Under both programs, the private sector entity provides the 
funding for the project.
    The differences between UESC and ESPC programs become more 
significant in the details. First, ESPC program management services are 
competitively procured. UESC program services are not. The legislation 
and rules governing ESPC require competitive procurement of ESPC 
services. Under UESC, an agency contracts directly with the local 
utility company. The UESC contract is procured without competition from 
ESCOs or other private sector entities that have the capability and 
interest in performing the services.
    Second, energy savings resulting from ESPC services are guaranteed 
by the ESCO. Energy savings resulting from UESC services are not. The 
legislation and rules governing ESPC require the ESCO to guarantee the 
agency that the realized energy savings will pay for the project. There 
is no legislation or rule requiring that energy savings resulting from 
a UESC pay for the project.
    Third, if guaranteed energy savings resulting from the ESPC are not 
realized by the agency, the agency is not obligated to pay (dollar-for-
dollar) the ESCO for the project. Under UESC, there is no legislation 
or rule that allows to government to withhold payment for services that 
do not generate expected savings.
    Fourth, ESPCs have contract terms of up to 25 years. UESC contract 
terms may not exceed ten years. In some cases, longer contract terms 
enhance the project scope and energy-savings opportunities. It is the 
risk that is transferred from the government to the ESCO, through the 
energy savings guarantee and other ESPC requirements, that justifies 
longer contract terms for ESPC projects.
    Enhanced-use leasing (EUL) is a venture arrangement for the 
development of government property, under which that property is made 
available to a public or private entity through a long-term lease. The 
leased property may be developed for non-agency and/or agency uses, and 
in return for the lease, the agency receives consideration for the use 
of the property. Consideration may be revenue or consideration in-kind. 
Consideration in-kind may include the provision of goods or services of 
benefit to the agency, including construction, repair, remodeling, or 
other physical improvements of agency facilities, maintenance of agency 
facilities, or the provision of office, storage, or other usable space.
    EULs can involve energy or non-energy related leases. For example, 
a commercial storage firm decides to lease a former warehouse located 
at an agency installation. The parties could enter into an ESL that 
leases the warehouse to the storage firm. The lease generates rental 
income for the agency and provides use of an otherwise unneeded 
facility. Energy related leases involve cogeneration opportunities at 
agency facilities. Such an example is when a developer and agency enter 
into a EUL, in which the agency leases land to the developer for the 
installation oft he developer's cogeneration system. In consideration 
for the lease, the developer provides output (electricity, hot water, 
steam) from the cogeneration system to the agency. Under the lease the 
developer may also provide energy conservation services to the agency 
as part of the in-kind consideration for the lease. The cogeneration 
system also may sell output to third parties. The availability of a 
third-party purchaser of the output is often critical to the viability 
of a EUL involving cogeneration.
    The EUL is more closely related to ESPC than UESC. The EUL shares 
the ESPC's characteristics of competitive procurement, risk shifting 
and guaranteed results. However, the viability of energy related EULs 
are limited by the viability of cogeneration or some other supply side 
opportunity (e.g., district cooling and/or heating plants). ESPC does 
not have this constraint, thus, has much broader application to Federal 
facilities.
    Question 4. How would expiration of the ESPC authority affect 
pending contracts and contract negotiations? How has the impending 
expiration affected your ESPC opportunities?
    The looming expiration of ESPC authority already is having an 
impact on ESPC opportunities. ESPC projects take a number of months to 
implement. Due to the sunset of ESPC, some agencies are reluctant to 
commence projects that may not come to conclusion before the sunset 
deadline.
    ESPC projects already under a ``notice of intent to award'' that 
are not awarded prior to the sunset likely will result in contractual 
claims for the abandoned ESPC services. ESPC projects under way that 
have not received a notice of intent to award may result in equitable 
claims for the abandoned services.
    Question 5. In response to testimony that the agency activity on 
ESPCs is declining, DOE attributed the fall off to the probability that 
the ``low hanging fruit'' has been picked by the agencies already. Do 
you agree with that assessment?
    Answer. No. DOE's own analysis demonstrates that the opportunity 
for additional ESPC activity and investment to be between $2 and $3 
billion. In September of 2000, Pacific Northwest National Laboratory 
(PNNL) issued the report, ``Economic Energy Savings Potential in 
Federal Buildings.'' The report was prepared for the DOE to estimate 
the available economic energy savings potential in Federal facilities. 
Among other things, the report concluded that the potential annual 
energy savings were estimated to be 25 MBtu/ksf/yr or 0.066 Quads/yr. 
The report estimated that the capital investment required to achieve 
the energy savings to be $5.2 billion, and the annual dollar savings to 
be $0.95 billion. The report goes on to state that between 0.040 and 
0.048 Quads/yr of the 0.066 Quads/yr in annual energy savings could be 
achieved through cost-effective alternative financing [ESPC] through 
private investment of $2 and $3 billion. In summary, the drop in ESPC 
activity is related to the factors cited in my testimony, the potential 
for a robust ESPC remains.
    Question 6. Questions were raised in the hearing as to the current 
level of activity on ESPCs by the Veterans Administration. Have your 
member companies seen a decline in VA activity?
    Answer. Yes, this past year the Veterans Administration placed a 
hold on ongoing ESPC activity pending an internal review of the ESPC 
program. The VA retained a consultant to prepare a report critical of 
the VA's ESPC program. Notably, the report did not receive critical 
input or commentary from ESCOs or the Department of Energy. The report 
has not been widely distributed outside the VA and has not been 
officially shared with ESCOs. It is alleged that the report is baseless 
and full of rhetoric bent on reaching an unfavorable conclusion of 
ESPC. We would look forward to the opportunity to review and comment on 
the VA report.
    Question 7. What is your reaction to DOE's mention of a 5-year 
extension of the sunset oil ESPCS, as opposed to a repeal of the sunset 
as both Houses of Congress proposed in last year's energy bill?
    Answer. We are surprised and disappointed. The ESPC program has 
demonstrated that it can make a substantial and cost-effective 
contribution to meeting the Federal government's energy goals and 
infrastructure improvement needs. The ESPC program is no longer the 
pilot program that was contemplated by EPACT. Indeed, despite a slow 
start through the rulemaking process, private sector investment in the 
DOE's Super ESPC program alone exceeded $360 million from 1998-2002. 
This will lead to a total energy savings to the government of over $836 
million in energy costs. Total private sector investment in the Federal 
ESPC program exceeds $1.2 billion. The DOE's position on ESPC is 
inexplicably inconsistent with its involvement in the UESC program. 
UESC authority does not provide for competitive procurement of services 
or guaranteed results that exist under ESPC authority. However, UESC 
``enjoys'' perpetual, albeit dubious, authority. It is illogical to 
suggest that ESPC should remain under a sunset while UESC remains a 
perpetual program.
                                 ______
                                 
               Association of Home Appliance Manufacturers,
                                    Washington, DC, April 29, 2003.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Chairman Domenici: Enclosed are answers to questions from the 
Committee on Energy and Natural Resources generated from my testimony 
on Tuesday, March 11, 2003. Thank you for this opportunity to respond 
to the Committee.
            Sincerely,
                                         Joseph M. McGuire,
                                                         President.
                    Responses to Committee Questions
                 appliance energy efficiency standards
    Question 1. Is it your sense that the participants in last year's 
negotiations and efficiency standards still support the package placed 
before the Energy Bill conference?
    Answer. In general, AHAM and industry support last year's 
conference agreement on energy efficiency. However, since that time, 
events have developed which require some revisions. For example, there 
has been state activity on regulating the energy efficiency of 
commercial, residential-style clotheswashers used in laundromats and 
multi-family housing. There is an effort under way to develop a 
proposal to be contained in this Congress' energy bill.
    Question 2. What new products have been discussed for legislative 
standards and where have you found consensus?
    Answer. Since the hearing, the Committee's markup of the energy 
bill has added specified standards for several products. There are 
still discussions under way and efforts to add additional products, 
such as commercial clotheswashers, mentioned above.
    Question 3. Should new federal standards in legislation preempt 
state standards on those same products that may exist as of the date of 
enactment?
    Answer. Preemption should occur as early as possible. Where there 
are legislative standards, preemption should occur on date of enactment 
and where standards are set by regulation, preemption should occur as 
early as possible after a concrete step of the regulatory process.
                          appliance standards
    Question 1. You have made a number of suggestions for changes and 
additions of provisions on appliance efficiency. Please provide the 
record of separate summary and justification of those changes and 
suggestive legislative language.
    Answer. AHAM and its industry coalition allies suggest several 
changes to last year's conference agreement.
    First, we believe that the authorization of the Energy Star Program 
should include strong and clear language requiring justification of EPA 
or DOE proposals for new or revised categories and opportunities for 
stakeholder comment. The agencies should be required to respond to 
issues raised by stakeholders and justify different views. These should 
be sufficient lead-in when qualification levels change.
    This proposal to add procedural and due process provisions Energy 
Star recognizes that although it is not strictly a mandatory program it 
has such substantial and direct linkage and impact on federal and state 
procurement and public and private incentive programs as well as the 
marketplace in general that agencies must show a higher level of 
responsibility in developing and revising programs. Too much work in 
Energy Star is delegated to contractors and decisions are made 
arbitrarily and without consideration of proper lead times before 
categories are added and changed. We do not seek Administrative 
Procedure Act application, or OMB or judicial review for Energy Star 
program actions but transparency and responsiveness.
    AHAM and the coalition also recommended a number of legislated 
product standards to be added to the bill, most of which have been 
added by the Committee in subsequent markup. There are still some 
products, such as commercial clotheswashers, for which industry 
requests the legislative standard, hopefully on a consensus basis.
                                 ______
                                 
                                                       May 5, 2003.
Shane Perkins,
Staff Assistant, Committee on Energy and Natural Resources, U.S. 
        Senate, Washington, DC.
    Dear Shane: Please find attached below the responses to the 
questions submitted to Paul Lynch, Assistant Commission, Office of 
Business Performance, Public Buildings Service, from the hearing held 
on March 11 regarding Federal Program for Energy Efficiency and 
Conservation.
    If you need additional information, please contact me on 202-501-
3956.
            Thanks,
                                                       Wanda Simms.
      Responses to Committee Questions From Paul Lynch, Assistant 
 Commissioner, Office of Business Performance, Public Buildings Service
    Question. What is your overall budget this year for federal energy 
management? How does that compare with GSA's total budget?
    Answer. GSA's budget in Fiscal Year 2003 for energy efficiency 
projects is $3.457 million. That money is divided among training 
($49,000), Energy Savings Performance Contracts and/or Utility Energy 
Service Contracts negotiation/administration ($650,000), and ``green 
power'' purchases ($2.758 million).
    Even including the salaries for the staff members of GSA's Energy 
Center of Expertise, the total budget for energy management in 
comparison with GSA's overall budget of over $18 billion, federal 
energy management programs account for a very small amount of the 
overall agency budget.
    Question. GSA is the landlord for many federal agencies. You either 
own the buildings and lease them to the agencies or you lease them from 
the private sector and sublease to the agency. I understand the split 
is about 55% owned to 45% leased. I have a chart from FEMP that 
indicates GSA controls 6% of the square footage of federal facilities. 
Does that include the buildings leased from the private sector?
    Answer. No, this does not include buildings leased from the private 
sector. The 6% figure accounts for the percentage of federally-owned 
space that GSA oversees (approximately 182 million square feet of GSA-
owned space out of the 3 billion square feet of total federal-owned 
space).
    GSA actions account for approximately 44% of all federally leased 
space from the private sector (153 million square feet of GSA leased 
space out of the 347 million square feet of total federal leased 
space).
    If the leased and owned properties by GSA were combined on a square 
foot basis, then GSA would control approximately 10% of the square 
footage of federal facilities (335 million square feet of GSA feet out 
of the 3.3 billion square feet of total federal space).
    Question. Can you explain to the committee how the Federal Energy 
Management Program works in the case of a privately owned building 
leased to GSA? Are some of those buildings built specifically to be 
leased to GSA? Are there any efficiency goals or requirements with 
respect to any of your leases? If not, why not?
    Answer. The guidance issued by DOE for reporting progress toward EO 
13123 states that if an agency controls its Federally-owned building 
space or directly pays the utilities in its leased space then the 
agency must report its aggregate energy consumption for the site. The 
majority of GSA's leases are fully serviced leases in which the lessor 
is responsible for utility costs. Consequently, the energy usage of 
these sites is not included in our annual report to Congress and does 
not count toward our reduction goals mandated under EO 13123.
    There are some privately owned buildings that are specifically 
built to be leased to federal agencies. However, it depends on who is 
responsible for the payment of the energy costs as to whether or not 
the consumption would be included in agency consumption figures. If GSA 
were responsible for the utility costs then the efficiency goals under 
EO 13123 would apply.
    EO 13123 guidance does not include any goals for leased locations 
where the lessor is responsible for the utilities because the tenant 
agency has little control in managing the costs at the site and does 
not see a return on investment (i.e. lower utility costs from 
implementing an efficiency project for the site). Often these sites are 
locations where the federal agency does not occupy the entire building 
and if the energy is not submetered, monitoring the energy usage is 
difficult.
    Question. How about the buildings that you own and lease to other 
agencies? Who is responsible for meeting the goals of Executive Order 
13123 or the FEMP statute?
    Answer. GSA is responsible for reporting energy data for all space 
that we own that is leased to other agencies and is also responsible 
for meeting the goals of EO 13123 for these sites. However, if an 
agency has been delegated responsibility by GSA for operation and 
maintenance of the building it occupies, then that agency is 
responsible for reporting its energy consumption and for meeting the 
appropriate efficiency goals under EO 13123.
    Question. How do you track savings when agencies move or 
reorganize? For example, how will the energy efficiency of the 
buildings occupied by the agencies that are now part of the Department 
of Homeland Security be accounted for?
    Answer. Most of the sites GSA deals with are office buildings. GSA 
manages a portfolio of buildings in which it strives to minimize 
vacancy rates. GSA tracks the energy usage of the entire building and 
is responsible for all of the energy costs. When one agency vacates a 
space, it is generally backfilled with another tenant agency very 
quickly. Unless the new tenant has very different hours of operation, 
the overall energy usage of the building will not vary much. There are 
justifications for moving a site to energy-intensive category under EO 
13123 or even for exemptions from the goals.
    Question. (FEMP Baseline) The energy conference agreement on 
federal energy management would amend current law to establish energy 
reduction goals at 2 percent a year from 2003 through 2012 as compared 
to energy use in 2000. Would it make sense to move the baseline to 2002 
or 2003 in order to improve the accuracy of the data on energy use?
    Answer. The selected baseline year should be one for which a 
reasonably complete set of energy consumption data is already 
available. Selection of a different baseline year other than the year 
2000 would have no impact on the accuracy of the energy use data.
    Question. (Alternative Financing/ESPCs) Are there other alternative 
financing programs for funding energy efficiency available to federal 
agencies (Utility AreaWide Contracts or Enhanced use Leasing)? How do 
they compare with ESPCs in terms of energy savings and cost?
    Answer. The primary difference/benefit with Utility Financing is 
that Utility Companies typically are willing to finance a smaller 
project. Most contractors under the Super ESPC program are not 
interested in projects that are not at least $1.5 million.
    Question. (Equipment Procurement) The federal government spends 
over $10 billion/year for energy-related products. Is non-defense 
procurement centralized at GSA? How does GSA ensure that these are the 
most energy efficient products available? What is the Department of 
Energy role?
    Answer. Yes--non-defense procurement is centralized at GSA. GSA's 
Federal Supply Service has various contracting centers that contract 
for energy-related products. These contracts and products are made 
available to the entire Federal community.
    The Department of Energy and EPA (Energy Star) determine the 
criteria for energy efficiency. GSA's Federal Supply Service implements 
the criteria into its contracting language to ensure contractors are 
aware of the minimum criteria which their respective products must meet 
to qualify.
    A number of factors go into the awarding of contracts: In the 
multiple award situation--which is the scenario for these energy 
related items--a number of contracts are awarded and the customer 
agencies determine the item(s) that best meet their needs with energy 
efficiency being only one among other best value factors.
    Question. (Energy Star Buildings) I note that GSA has earned the 
Energy Star building label for 15% of its buildings. Can you explain 
for the record what that designation means in terms of energy 
performance? How does that compare with the rest of the government? Is 
this a goal we should establish for the rest of the federal government?
    Answer. EPA and DOE have established criteria for commercial office 
buildings, hospitals, grocery stores and K-12 school buildings. The 
basis for these criteria is benchmarking building energy consumption on 
a 1 to 100 scale. Buildings that are among the top 25% nationwide in 
terms of energy performance (earning a benchmark score of 75 or 
greater) and maintain an indoor environment that conforms to industry 
standards can qualify to receive the Energy Star label for buildings.
    There are also some eligibility requirements that have kept some 
GSA locations ineligible for applying for the Energy Star label. Many 
of these criteria, which are listed below, would also prohibit other 
facilities owned by other Federal Agencies from applying for the label 
as well:

          1. Gross building area greater than or equal to 5,000 square 
        feet;
          2. Building must have been occupied for 11 or more of the 
        last 12 months;
          3. Building has 50% or more gross square feet designated as 
        primary office space (This sometimes eliminates courthouses 
        from being eligible);
          4. Building has 10% or less of its gross square feet as 
        secondary space designated as computer data center space. (Data 
        centers are often eliminated with this requirement);
          5. The average annual vacancy rate of the primary space is 
        less than 20%.

    Applying for the Energy Star label is probably the least expensive 
of the options (ASHRAE standard, LEED rating system, Energy Star) and 
certainly is more user friendly. Searching the Energy Star website for 
labeled federal buildings, the only other Federal agency listed other 
than GSA was the Department of Veterans Affairs. Since the Energy Star 
label is currently only available for offices, hospitals, schools and 
grocery stores, this would probably prohibit federal buildings such as 
courthouses, labs and DoD sites from being eligible for the label.
    Question. (New Federal Buildings) One of the provisions in the 
energy bill conference agreement requires that new federal buildings 
mee4rg building energy-performance requirements that are 30% more 
efficient that the ASHRAE 90.1 building code energy consumption levels. 
How does this ASHRAE based standard compare with the Energy Star rating 
or the LEED rating system? Which standard will result in the most 
energy efficient federal buildings?
    Answer. ASHRAE Standard 90.1--1999 establishes minimum requirements 
for the energy efficient design of buildings. This standard sets out 
design criteria for energy efficiency.
    The Energy Star rating for buildings is a relative rating among 
other existing buildings in the national building market. Energy Star 
candidates are benchmarked against other properties' energy performance 
in existing buildings; being rated on the history of energy bills while 
factoring out local climatic differences that bias energy use data for 
certain locations.
    The LEED Green Building Rating System focuses on energy efficiency 
in the Energy & Atmosphere section of its scorecard. As a prerequisite 
to earning LEED points in this section, the ASHRAE standard must be 
met. Within the LEED 2.1 rating system, points are only awarded to 
those building projects that exceed ASHRAE Standard 90.1--1999 for 
energy efficiency.
    ASHRAE is a building standard. The Energy Star rating and the LEED 
rating system are both voluntary programs; there is no requirement to 
use either of these systems in building design or construction.
    Within the LEED rating system, it is the project team's choice as 
to how efficient to make the building. Once the ASHRAE standard is met, 
LEED points are awarded for efficiency levels above the ASHRAE 
standard. The following chart shows the number of LEED 2.1 points that 
can be earned by exceeding the ASHRAE standard for both new buildings 
and existing buildings:

------------------------------------------------------------------------
           Exceed ASHRAE standard by:
-------------------------------------------------     LEED 2.1 Points
     New buildings          Existing buildings
------------------------------------------------------------------------
        20%                      10%                        2
------------------------------------------------------------------------
        30%                      20%                        4
------------------------------------------------------------------------
        40%                      30%                        6
------------------------------------------------------------------------
        50%                      40%                        8
------------------------------------------------------------------------
        60%                      50%                       10
------------------------------------------------------------------------

    The new LEED for Existing Buildings pilot is offering an option for 
earning energy performance points; the building can either exceed the 
ASHRAE standard by a certain percentage (as above), or it can achieve a 
particular Energy Star label.
    If new federal buildings are to meet building energy performance 
requirements that are 30% more efficient than the ASHRAE 90.1 Standard, 
then the conference agreement provision will be the most stringent. 
Both LEED and Energy Star have the flexibility to go above this 30% 
target, but neither of these is a building design requirement.
    Question. (Metering) The Energy conference agreement requires that 
all federal buildings be metered, with advanced meters if possible, by 
2010. The bill that passed the Senate included a provision that would 
have required metering by 2004. It seems logical to me that an energy 
manager for a federal agency should know how much energy his buildings 
are using so that he can understand his costs and design the most 
effective energy efficiency improvements. Is there any reason we can't 
expedite the metering process so that the end date is 2004 instead of 
2010?
    Answer. Accelerating the installation of advanced meters in this 
manner would likely create concerns regarding the added costs of 
installation that may result and the practicability of meeting such a 
requirement, given the actual time and resources available to carry out 
installation.
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