[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




 
                   FULL COMMITTEE HEARING ON THE COST
                     AND AVAILABILITY OF ENERGY AND
                     THE EFFECT ON SMALL BUSINESSES

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

                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            AUGUST 31, 2007

                               __________

                          Serial Number 110-43

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


HEATH SHULER, North Carolina         STEVE CHABOT, Ohio, Ranking Member
CHARLIE GONZALEZ, Texas              ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington              SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona               TODD AKIN, Missouri
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas                 STEVE KING, Iowa
DAN LIPINSKI, Illinois               JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin                LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa                   DEAN HELLER, Nevada
YVETTE CLARKE, New York              DAVID DAVIS, Tennessee
BRAD ELLSWORTH, Indiana              MARY FALLIN, Oklahoma
HANK JOHNSON, Georgia                VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             JIM JORDAN, Ohio

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

               Kevin Fitzpatrick, Minority Staff Director

                                 ______

                         STANDING SUBCOMMITTEES

                    Subcommittee on Finance and Tax

                   MELISSA BEAN, Illinois, Chairwoman


RAUL GRIJALVA, Arizona               DEAN HELLER, Nevada, Ranking
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana              STEVE KING, Iowa
HANK JOHNSON, Georgia                VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             JIM JORDAN, Ohio

                                 ______

               Subcommittee on Contracting and Technology

                      BRUCE BRALEY, IOWA, Chairman


HENRY CUELLAR, Texas                 DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania             TODD AKIN, Missouri
                                     MARY FALLIN, Oklahoma

        .........................................................

                                  (ii)

  
?

           Subcommittee on Regulations, Health Care and Trade

                   CHARLES GONZALEZ, Texas, Chairman


RICK LARSEN, Washington              LYNN WESTMORELAND, Georgia, 
DAN LIPINSKI, Illinois               Ranking
MELISSA BEAN, Illinois               BILL SHUSTER, Pennsylvania
GWEN MOORE, Wisconsin                STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          MARILYN MUSGRAVE, Colorado
JOE SESTAK, Pennsylvania             MARY FALLIN, Oklahoma
                                     VERN BUCHANAN, Florida
                                     JIM JORDAN, Ohio

                                 ______

            Subcommittee on Urban and Rural Entrepreneurship

                 HEATH SHULER, North Carolina, Chairman


RICK LARSEN, Washington              JEFF FORTENBERRY, Nebraska, 
MICHAEL MICHAUD, Maine               Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana              DEAN HELLER, Nevada
HANK JOHNSON, Georgia                DAVID DAVIS, Tennessee

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, PENNSYLVANIA, Chairman


CHARLIE GONZALEZ, Texas              LOUIE GOHMERT, Texas, Ranking
RAUL GRIJALVA, Arizona               LYNN WESTMORELAND, Georgia

                                 (iii)

  
?

                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Shuler, Hon. Heath...............................................     1
Davis, Hon. David................................................     3

                               WITNESSES

Eggers, Dr. Dolores, University of North Carolina-Asheville......     5
Snowden, Stanley, Seven Wheels Trucking, Inc.....................     7
Hutchinson, John, Powell Construction............................     9
Lamberts, Dr. Frances, Co-Chair, Natural Resources, League of 
  Women Voters of Tennessee......................................    11
Tiller, Dr. Kelly, Agricultural Policy Analysis Center, The 
  University of Tennessee........................................    14
Keiffer, Jim, Tennessee Valley Authority.........................    22
White, Robert, Johnson City Power Board..........................    24
Elkins, Larry, Holston Electric Cooperative......................    26

                                APPENDIX


Prepared Statements:
Shuler, Hon. Heath...............................................    33
Davis, Hon. David................................................    36
Eggers, Dr. Dolores, University of North Carolina-Asheville......    38
Snowden, Stanley, Seven Wheels Trucking, Inc.....................    42
Hutchinson, John, Powell Construction............................    44
Lamberts, Dr. Frances, Co-Chair, Natural Resources, League of 
  Women Voters of Tennessee......................................    67
Tiller, Dr. Kelly, Agricultural Policy Analysis Center, The 
  University of Tennessee........................................    71
Keiffer, Jim, Tennessee Valley Authority.........................    75
White, Robert, Johnson City Power Board..........................    79
Elkins, Larry, Holston Electric Cooperative......................    81

                                  (v)

  


                       FULL COMMITTEE HEARING ON
                        THE COST AVAILABILITY OF
                        ENERGY AND THE EFFECT ON
                            SMALL BUSINESSES

                              ----------                              


                        Friday, August 31, 2007

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:04 a.m., in the 
Auditorium, the Johnson City Power Board, 2600 Boones Creek 
Rd., Johnson City, Tennessee, Hon. Heath Shuler [Chairman Pro-
tempore of the Subcommittee], presiding.
    Present: Representatives Shuler and Davis.

                OPENING STATEMENT OF MR. SHULER

    Chairman Shuler. I now call this hearing to order.
    I would like to first thank the Johnson City Power Board 
for their hospitality in allowing us to hold a Congressional 
hearing here. And I want to extend an absolute special thanks 
to my good friend Congressman David Davis here in the First 
District of Tennessee.
    We are both freshman members, we are back to be freshmen 
all over again. And he has done an outstanding job and we have 
been able to work together on a lot of issues. And really as 
you can tell to truly start making--to cross the party lines to 
do what is right for America. And I think that is the most 
important thing.
    We are here today to hear from a panel of witnesses that 
can educate the two of us to go back to Washington and send 
that message what happens in western North Carolina and east 
Tennessee, we can send that message to Washington that the 
people there can listen to the testimony that will be today and 
they can educate us on being able to serve you better in our 
district and serve America.
    So we want to--I want a special thanks to Congressman Davis 
and what he has been able to accomplish in a very short time, 
he has certainly made a very good name for himself in 
Washington.
    Today's hearing will focus on the cost and availability of 
energy and the effects on small businesses.
    Here in Tennessee we will examine the matter of energy 
prices and how it impacts small businesses. It is an issue that 
affects nearly every industry, whether it is a retailer coping 
with the higher energy rates or small trucking companies that 
are dealing with the spiking gasoline prices. It is one of the 
most critical economic challenges facing our country today.
    The increasing cost of energy is making it difficult for 
small business owners to manage and survive. According to a 
recent survey published by the PNC, financial service groups, 
the rise in energy price is the leading concern among small and 
medium sized business owners. While gasoline prices have dipped 
recently, the cost of energy remains high for oil and natural 
gas as well as electricity. While gas prices have--unlike the 
large competitors, small businesses often lack the cash 
reserves to cope with a spike in prices.
    Here in Tennessee and in my home state North Carolina the 
manufacturing sector has taken a tremendous hit. Manufacturing 
jobs have gone oversees for a variety of factors and the cost 
of energy is adding to these problems. That is one of the 
reasons that Congress needs to act sooner than later as the 
energy must become another factor in this--must not become 
another factor in deciding to move good paying jobs oversees.
    I am proud to say that the Committee has worked to 
highlight the urgent and the significant impacts facing small 
business when it comes to energy. In our Committee, we have 
worked for both immediate and long term solutions for these 
challenges.
    The Committee has considered measures for helping and 
dealing with some of these issues. Earlier this spring, I 
introduced a Small Energy Effective Business Act, which was 
included in the comprehensive energy legislation we recently 
passed in the House.
    My bill helped small businesses acquire energy efficient 
technologies by providing more flexible loans through the SBA's 
7A and the 504 lending program. The legislation also requires 
the SBA to develop a national strategic for education educating 
small firms about energy efficiency.
    The bill will create renewable fuel capital investment 
programs that invest in research and the production of 
renewable energy sources for small businesses. This includes 
the development of bio-diesel, ethanol, and related research 
considering other than more biomass fuels. While this is a 
start, I believe that we can do more to address this issue of 
energy prices. That includes making sure that we are 
encouraging the creation of energy supplies here in America 
while helping small businesses deal with the current situation.
    In the short term, small businesses must deal with the 
reality that they are going to pay higher prices for 
electricity, gas, and oil.
    To help them cope, I believe that we need to ensure that 
companies here in America are able to compete in light of these 
costs. Small businesses often lack the resources to identify 
equipment and techniques that would save their businesses money 
down the line through reducing energy consumption. I believe 
that there is a need for a greater tax incentive for small 
business to invest in energy efficient equipment. These 
policies would assist them in decreasing the overall energy 
consumption without harming their business growth.
    We also need to do more to promote more domestic supplies 
of energy production from organic material and that would 
otherwise be discarded. The State of Tennessee has obviously 
been a leader in this forefront. I am please that my alma 
mater, the University of Tennessee, is working to develop new 
techniques for these clean energies. This investment will pay 
off in a number of ways. It will not only help rural economics, 
but it will help the potential for long-term energy solutions. 
Quick action is needed to help small businesses contain their 
costs, remain competitive, and play the necessary role in 
reducing carbon emissions in the U.S. This Committee looks 
forward to working with you to continue solving energy issues 
important to our nation and small businesses.
    And at this time I would like to recognize Congressman 
Davis, the distinguished gentleman from the State of Tennessee 
who serves as a ranking member on the Subcommittee on 
Contracting and Technology, for his opening remarks.

                 OPENING STATEMENT OF MR. DAVIS

    Mr. Davis. Good morning. Thank you all for being here to 
examine the availability and cost of energy and how it has an 
effect on small business. I am very appreciative of each of our 
witnesses who have taken time out of their undoubtedly busy 
schedules to be with us today. Thank you for being here.
    Before we begin, I would like to sincerely thank my good 
friend Congressman Heath Shuler for making the short trip 
across the Blue Ridge mountains. Heath and I were actually 
together yesterday on the other side of the mountain, to talk 
about healthcare. And I cannot think of two more important 
things facing small business right now than the availability 
and access to good quality healthcare and the availability and 
access of energy costs and energy products. Heath and I may 
come different states, be members of different parties, only 
one of us can still throw a 12 yard out pattern on the road, 
and you can probably guess who that is.
    [Laughter.]
    Mr. Davis. But we both care passionately about the survival 
and prosperity of our small businesses.
    Being back here in Tennessee is probably a little bit like 
a homecoming for you, Heath. I certainly hope that it is. For 
those of you who may not know, and there are probably not many 
of you who do not, before he was Congressman Heath Shuler he 
was Heath Shuler, the 1993 SEC player of the year and NCAA male 
athlete of the year while playing quarterback at the University 
of Tennessee-welcome back.
    Chairman Shuler. Thank you.
    Mr. Davis. What many of you may not know is that following 
his playing days in the NFL he became a successful entrepreneur 
and small business owner. He began a real estate brokerage firm 
and several other successful real estate companies. I consider 
Heath to be a strong asset to the small business community as 
he brings real world experience to the Committee as he, like 
myself, have owned small businesses. He knows the pressures of 
meeting a payroll, finding affordable health insurance for his 
employees and complying with government regulations.
    Across the United States, small businesses make up more 
than 99 percent of all non-governmental employees. They also 
lead our economic growth by creating anywhere between 60 and 80 
percent of our new jobs created in the economy. Small 
businesses are dynamic and continually changing to meet 
consumer demands and market needs. Almost 700,000 small firms 
with employees start up every year in America.
    Today we are addressing on of the most significant problems 
faced by small business, the rising cost of energy. In recent 
years, it has become painfully clear that America is too far 
dependent on foreign oil. We import nearly two-thirds of the 
oil that we consume. With gas prices in east Tennessee and 
throughout the country hovering around $3 a gallon at times, it 
is important for Congress to continue to explore ways that we 
can produce more energy domestically rather than relying on oil 
from the volatile Middle East.
    It is quite apparent that the United States must work 
toward a balanced and diversified energy policy, including 
locating and developing our own domestic sources of fossil 
fuels, such as those located in the Arctic National Wildlife 
Refuge and in the ocean off of our shores. Exacerbating our 
dependence on foreign oil is the fact that new refineries have 
not been built in the United States for over 30 years. I 
believe we must take a long hard look at refining capacity as 
part of the solution.
    Due to the astounding technological advances in recent 
years, we can now look to the immense potential of renewable 
energy as alternatives to fossil fuels. Bio-diesel and ethanol 
are fast becoming household names and their prevalence in the 
marketplace has increased dramatically in a very short time. 
There can be little doubt that the increased demand for 
renewable fuels has had a positive impact on our nation's 
economy, including small businesses.
    When one considers the contributions of wind, solar, and 
nuclear power, we can begin to see that we have taken great 
strides in reducing our foreign oil dependence. Diversifying 
and improving our nations energy production and consumption 
increases competition, which we all know drives prices down, 
spurs innovation, and creates opportunities for niche 
industries to crop up and begin to thrive. In fact, more than 
70 percent of renewable fuel producers are small businesses.
    With that said, there is still more that needs to be done, 
including examining more immediate fixes to help businesses and 
homeowners alike to cope with rising fuel prices. We have asked 
our distinguished panel to discuss both long and short term 
solutions to this pressing problem and I am very eager to hear 
their testimony this morning.
    Again, thank you all for being here today and now I would 
like to yield to the gentleman from North Carolina to introduce 
his guess Dr. Eggers.
    Chairman Shuler. Thank you, Congressman Davis.
    Again, we are faced with lots of adversity for small 
businesses and at this time, I would like to introduce our 
first panel. But before I do that, I ask unanimous consent that 
the record be held open for five days for all members to submit 
their statement. Hearing no objection so ordered.
    At this time I would like to introduce Dr. Dee Eggers as an 
assistant professor of environmental studies at the University 
of North Carolina at Asheville.
    Dr. Eggers previously worked for the Environmental 
Protection Agency as well as the North Carolina Department of 
Environment and Natural Resources.
    Dr. Eggers, you are recognized for five minutes.

STATEMENT OF DR. DOLORES EGGERS, UNIVERSITY OF NORTH CAROLINA, 
                           ASHEVILLE

    Ms. Eggers. Thank you, very much. Congressman Shuler and 
Congressman Davis, thank you both for your service and, 
Congressman Shuler, especially for inviting me here today to 
speak on energy issues and opportunities as they relate to 
small businesses.
    I am an associate professor now, I got a promotion, but I 
am an associate professor in the environmental studies 
department at UNC Asheville and I also serve on the North 
Carolina legislative commission on climate change and I teach 
classes in policies, resource management, basic environmental 
science and strategies for sustainability.
    We are all feeling the effects of rising energy costs as 
global demand for energy increases. Unfortunately, those costs 
will continue to rise for the foreseeable future. So how can we 
address that growing impact on our local economy and small 
businesses? I think the best help you can give small businesses 
is to make energy efficiency and renewables more affordable and 
available.
    So why efficiency? The most affordable energy is the energy 
we do not use. According to research done for the North 
Carolina Utilities Commission, the cost of generating a new 
kilowatt hour from the least expensive source which is coal, is 
about seven cents. Whereas, the cost to save a kilowatt hour 
through an efficiency program is about three cents per kilowatt 
hour. And in the handout, there is a bar chart that shows the 
various cost of different sources of energy.
    One of the best things about investments in efficiencies is 
that the savings are usually permanent. A building with extra 
insulation will save money for that user year after year after 
year. And with the payback period on many of these investments 
being pretty short, like one to five years, six months even, 
those saving soon become additions to the bottom line.
    Now most of us--this is the part that you should really pay 
attention to. Most of us are steeped in the old design 
mentality of increasing marginal cost, that is for every 
additional kilowatt hour we conserve, it costs us more than the 
last kilowatt hour we conserve.
    But what we are finding is this effect that Amory Levens 
calls tunneling through the cost barrier--and there a graph 
representing that in the handout as well. With this effect, 
what happens is when we combine many approaches at once, like 
more efficient HVAC systems, better HVAC controls, efficient 
windows, better insulation, shading, et cetera, all of a sudden 
something transformational happens and we see new opportunities 
emerge for cost savings, because we can downsize certain 
systems and omit systems all together. So we can put in a more 
efficient smaller HVAC system and have fewer east and west 
facing windows while still having great natural light on the 
inside.
    Because of the cost savings from the smaller systems, the 
total investment decreases. In the example I included in 
supporting material, total investment in a new building for 
energy efficiency went from 26,200 down to $4330 and the 
payback period for some of those things, which may have been 
like for shading on the order of 17 years--the payback period 
for the entire package went to less than one year for a highly 
efficient building.
    Now this is a familiar concept, we call it the whole is 
greater than the sum of the parts. Everybody who has played on 
team knows how that works. But people do not expect to see it 
in efficiency. So this is an opportunity that we need to take 
advantage of. In some cases it actually costs less to build a 
highly efficient structure than it does cost to build a 
conventional structure. And these are some synergies we get to 
take advantage of and our small businesses get to benefit from 
these opportunities.
    It is a foreign idea for most places or most people in the 
United States, but it is not a foreign idea in other places. We 
are seeing this rapid emergence of these technologies applied 
in Japan, Germany, Holland, Denmark, and even China is coming 
on board with this. But in the U.S. right now only a handful of 
architecture and engineering schools are teaching their 
students those design techniques. For folks in existing 
structures or who want to build traditionally, we have known 
for a long time that various investments and individual 
efficiency projects can provide significant savings. I invested 
in retrofitting insulation in a house that I have as a rental, 
that paid back in less than two years.
    Most people do not know what the opportunities are for them 
though and they do not know what projects would be most cost 
effective for them and we need to bridge those gaps. So what 
can you do to help small businesses?
    I recommend that you support the following types of 
legislation, I have seven recommendations:
    The first one is to establish national goals for renewables 
and efficiencies to drive the development of this technology, 
the accessibility of information, et cetera.
    Number two, make sure that small businesses have access to 
tax credits for renewables and efficiencies. The tax credits 
need to be extended existing tax credits for at least a decade; 
because of financial planning, we have got to push it a lot 
farther out. They need to be available for much small projects 
so that small business owners can really take advantage. They 
also probably need to be transferrable or available to renters 
so that businesses that rent space and pay their own utility 
bills, but do not own the building can actually use the tax 
credit themselves or be able to transfer them back to the 
building owners, sell them to the building owner in some way.
    Number three, improve the availability of technical support 
programs. We have some good existing programs at HUD, DOE, and 
EPA, but they are separated and not coordinated, a lot of 
duplication of effort and because of that we do not have one 
that is really good enough at providing technical assistance at 
the level that we need to support small businesses.
    Number four--this is a big one, I recommend that you 
require all states to decouple utility profits from energy 
sales. In many places utilities can only make profit by selling 
electricity, they need to be able to make profit by having 
energy efficiency programs as well. We need a national carbon 
cap to simulate markets, address climate change, and meet our 
1992 Real Earth Summit commitment. We need to require or 
encourage better training programs--this is the key--better 
training programs for architects, engineers, plumbers, 
electricians, builders, contractors, et cetera, so they know 
how to put these systems in place.
    And finally I would say we could use some moral authority 
of Congress to call for a change at the state and local level 
and perhaps even create a national challenge program, because 
Americans love a challenge. We really rise to a challenge.
    I want to thank you for listening and thank you very much 
for coming to the people and please let us know how we can help 
you.
    [The prepared statement of Dr. Eggers may be found in the 
Appendix on page 35.]

    Chairman Shuler. Thank you, so much. Now I yield to the 
ranking member, for the introduction of the remaining 
witnesses.
    Mr. Davis. Thank you, Mr. Shuler. The next witness will be 
Stanley Snowden. Stanley Snowden is the president of Walker 
Supply Company, which has locations in Alcoa, Morristown and 
Danridge, Tennessee. The company employs approximately 100 
people and distributes plumbing, lighting, and cabinets to 
contractors primarily in new construction.
    He graduated from the University of Tennessee in 1970 and 
is past president of the Morristown Area Chamber of Commerce. 
Mr. Snowden, welcome.

STATEMENT OF STANLEY SNOWDEN, PRESIDENT, SEVEN WHEELS TRUCKING, 
                              INC.

    Mr. Snowden. Thank you very much and thank you Congressman 
Davis and Congressman Shuler. After listening to Dr. Eggers I 
feel totally inadequate to be here. I do not make a living 
speaking, but I do appreciate the opportunity to be asked and 
to participate.
    As Congressman Davis said, I am president of Walker Supply 
Company, I am also president of Wallace Hardware Company in 
Morristown, Tennessee, which is a wholesale hardware 
distributor that employs approximately 250 people and I am 
representing today Seven Wheels Trucking, Incorporated, which 
is a Subchapter S corporation of Wallace Hardware Company. Our 
primary business at Seven Wheels is we provide transportation 
for both Wallace Hardware and Walker Supply Company. We have 
approximately 35 tractor trailers and 150 trailers on the road 
every day and obviously fuel is a huge concern to us.
    The biggest challenge that we have to face is the same 
challenge that the average consumer has to face and that is the 
spikes on the cost. When fuel goes from $1.97 a gallon to $3.25 
a gallon within the same 12-month period of time, very few 
people can adjust to that without making some substantial 
changes in their life styles. And those changes in their life 
style result in economic depression upon our business. There 
are only so many discretionary dollars to be spent and when gas 
goes up as much as it has or diesel fuel, those dollars gets 
squeezed.
    From our standpoint, it really affects our customers, which 
our customers are primarily small independent retail hardware 
stores and building supply places. Now fortunately some of 
those are located in Congressman Shuler's area and they do not 
know that there is a depression going on or any economic 
slowdown or anything. But there is a lot of places when you go 
into in eastern Kentucky and southwest Virginia and West 
Virginia that are feeling the effects of it quick heavily.
    Our fuel cost at Seven Wheels in one year, from 2004 to 
2005, increased 40 percent, while the miles driven increased 
three percent. In real dollars that was a difference of almost 
$300,000 just in fuel cost from one year to the next. And we do 
not make the kind of profits to be able to absorb those kinds 
of additional cost. We try to pass on as much as we can to our 
customers, but then that creates problems for them, because 
that adds to their cost of goods sold or adds to their expense. 
And then they try to pass it on to their customers in the form 
of higher prices or they get squeezed, and usually it is a 
combination of both. And that is the battle we have all been 
facing for the last three years is how much do we try to pass, 
how much can we pass, how much do we have to absorb and then 
trying to find other measures to maintain profitability because 
of those things.
    One of the things that I would hope could come out of this 
is two things, anything that can help us to promote energy 
savings, to identify those savings that are out there and that 
are available to us, and as Congressman Shuler alluded to, the 
technology that is available that might help us in conserving 
energy, many times it is hard to know what is out there. If you 
know what is there then you can do something with it, but the 
lack of knowledge and the lack of a common place to go to get 
that information is very difficult.
    And one example I will give, we are in the process of 
building a new building and we were looking at the lighting and 
we found out that there is lighting available now that will 
probably save us about $50,000 a year just in energy used, just 
in lighting in our warehouse. Well, obviously that got our 
attention and then we find out that there is a an Energy Act of 
2005 that provides a tax benefit on that also. But getting the 
information on the how to do that is virtually impossible. Very 
few people know the mechanics of how that works or at least the 
people that we have tried to contact to find out how this truly 
works, it is very difficult to do.
    So one of the things that I would strongly urge is the 
availability of information, whether it would be a common 
source or one source or whatever, be made easier to the average 
person, because most people--we are much busier every day in 
fighting the battles of keeping people happy and taking care of 
customers. And if we can find ways to get that information 
easier and know specifically how to apply that information to 
where it is beneficial to us, then it also benefits all of us, 
because anything we do has a ripple effect, just as anything 
you all do has a ripple effect. And there is only so much that 
you can pass on and there is only so much that you can absorb.
    And while there is 700,000 small businesses starting up 
every day I think you alluded to, there is probably close to 
that many closing up every day too. Because the failure rate is 
extremely high in small businesses, exceptionally in the first 
three years.
    So again, thank you for allowing me to be here and I look 
forward to seeing the results of this work. Thank you.
    Mr. Davis. Thank you for presenting today and you did a 
great job. Our next witness is Mr. John Hutchinson. John is a 
graduate of West Virginia University and spent the first 50 
years of his life in the hard West Virginia coal fields. He has 
over 38 years of experience in the coal industry working with 
construction of underground slopes and ventilation shafts, 
above ground in the construction of coal preparation plants and 
material handling and laying systems. Currently Mr. Hutchinson 
serves as Vice President of finance for Powell Company right 
here in Johnson City, Tennessee. He also serves on the board of 
director for the Johnson City, Jonesborough, Washington County 
Chamber of Commerce. John, welcome to the hearing.
    [The prepared statement of Mr. Snowden may be found in the 
Appendix on page 90.]


STATEMENT OF JOHN HUTCHINSON, VICE PRESIDENT - FINANCE, POWELL 
             CONSTRUCTION, JOHNSON CITY, TENNESSEE

    Mr. Hutchinson. Thank you very much, Congressman. It is an 
honor to be here today. Like Mr. Snowden said, I am new to 
this.
    I was asked to make a presentation today on coal and the 
coal industry of which I have spent my life in. From West 
Virginia I grew up with it, I lived it, I felt it, I learned it 
every day. I guess I could start out with a comment about our 
Powell companies and Mr. Snowden has touched on that. We offer 
a huge fleets of cranes, boom trucks, lot of Low-Boy equipment, 
a lot of pick-up trucks, in the hundreds and obviously we feel 
the impact every minute of the energy crisis; particularly 
gasoline, diesel fuel, oils and so forth. And as he said, many 
of those we are unable to pass on in our pricing to our 
customers. We absorb the upswings and do the best that we can, 
but that is obviously a major part of our cost.
    But that is not really why I was here today, I wanted to 
speak with you regarding coal. I feel that it is our most 
important and most abundant source of energy in this country 
for the past, the current days, and the future.
    In my handout--and I would encourage everybody to pick one 
up, if they have not already. I put in a lot of data there and 
I am not going to bore you with that at this time. But I would 
encourage you to go through and read some of the statistics, I 
provided some charts and graphs. But basically just to give you 
some information today, currently coal is providing about 23 
percent of our energy sources in the U.S. today with oil at 39, 
natural gas at 24, and nuclear, hydropower and the other making 
up the balance.
    Worldwide, coal is at about 23 percent also, we are right 
in line with the world market. Oil is 35 internationally and 
natural gas is 21 percent internationally. So we are some where 
in line with the world, but the U.S. has the largest supplies, 
reserves of coal in the world. And there is a pyramid in the 
handout I would like for you to take a look at. Basically we 
are looking today at active mines, so this is the ones that are 
being worked, about 19 billion tons of coal with active mines. 
Keep in mind we use about one billion tons of coal per year in 
the U.S. So there is 19 billion tons there, but there is a 
total of 275 billion tons that are mineable and identified in 
this country. If you want to look totally at the reserves you 
can see somewhere near four billion tons, the balance are tons 
of coal that are probably not economically feasible to get out. 
So if we use a billion tons a year and we have a 275 billion 
tons reserve, we have about 275 or 280 tons at the current 
consumption available for use in this country.
    And most of you may not know this, our federal government 
is the largest owner of coal reserves in this country, most of 
that is out west, they lease those properties to coal companies 
for money.
    One of the of the points I would like for you to go away 
with today, is coal gasification. This is not a new concept, it 
has been around a lot of years, but I think it is pretty much 
new to the mainstream today. Basically what that means and I 
learned a lot with this study, is they take the coal, they 
react it at high temperatures with oxygen and out of that 
process comes a new fuel, a syn-fuel. It is available for use 
in internal combustion engines and it is used for methane gas 
and it can be used as others syn-fuel uses. So that is a new 
word and a new concept and a new use for coal that we all 
should consider strongly going forward.
    Also in my handout you will see more detail on the coal 
reserves; obviously, the eastern coal fields, the Appalachia 
coal fields produce bituminous coal, that is a very high 
quality coal. The coal fields in the west produce a lesser 
quality but greater tonnages and easier to mine and more 
economically mined. But certainly here in Appalachia we are 
more familiar with what we call bituminous coal reserves.
    In the U.S. coal-fired power plants account for over 50 
percent of the electricity generated in this country. Coal 
provides 90 percent of that coal; and again, it is a billion 
tons per year that we are currently mining and using.
    Regionally, we have the TVA, it operates 11 coal-fired 
power plants producing 60 percent of TVA's total power outgo. 
And that is roughly 15,000 megawatts of electricity sold to 158 
locally owned distributors, Johnson City Power Board I believe 
is one.
    I have given you some information in the handout on types 
of mining and you can review that on your own time. Just a 
comment, a couple of things, in a 30-year period, coal 
productivity has increased from two tons per man hour to today 
about seven tons per man hour. The workforce has gone from 
about 152,000 in 1973 to roughly half of that, 71,000 today. 
But the total production has gone from about 600 million tons 
to over a billion tons, less man power, more tons per hour.
    Again the world coal reserves, the United States is at 275 
billion, Russia is next at 173 billion and China, India, and 
Australia are also big coal reserve areas.
    Coal is also used in the production of chemicals and 
fertilizers, not many people understand that. Another point I 
am going to make about Appalachia coal mines is that during 
World War II their coal supplies was used in the production of 
steel to make guns and planes and tanks, et cetera. And without 
that coal I would fear where we would be today.
    Coal use has grown in recent years, because of the secure 
abundant domestic reserves and relatively low prices. They have 
maintained the demand in both for the domestic and the 
international markets through increased productivity, larger 
mines and mega mines is the terms, new technology and all the 
while the fewer mine personnel.
    The coal mining industry as a whole provides many jobs in 
east Tennessee, southwest Virginia and eastern Kentucky. These 
jobs are in the form of not only coal mine jobs, but also 
construction, such as the Powell Companies, manufacturing, 
engineering, sales, marketing, and consulting.
    I am going to brag about the Powell Companies right now. We 
have over 500 jobs regionally to this coal industry and 
according to some statistics, I think there are about 4600 coal 
miners office worker type jobs in this area creating an 
estimated 11,500 additional jobs.
    History indicates that each significant action of 
government was accomplished with immediate and negative effect 
on production. However, the reverse is also true. That is, 
positive governmental encouragement will likely resulted in the 
capital investment necessary to sustain future production at or 
above current levels. This is what we should all strive for.
    In closing, it is essential that we as elected officials, 
business men and women, state and local officials, and 
everybody in this room today, should do all we can to sustain 
this eastern U.S. coal production.
    I want to thank you for inviting me to be here today. 
Again, I would encourage everybody to pick up a handout. I have 
included also some pictures in there of some coal preparation 
plants that the Powell Companies have been involved in and I 
think they are impressive. I hope everybody does too. I will 
try to answer any questions anybody has.
    Thank you, very much.
    Mr. Davis. Thank you for being here today.
    Our next witness is Dr. Frances Lamberts. She co-chairs the 
National Resource Committee for the League of Women Voters in 
northeast Tennessee and the State League of Women Voters. 
Previously Dr. Lamberts taught at East Tennessee State 
University and is a licensed psychologist and director of 
psychological services at the Green Valley Developmental 
Center. She has organized several regional educational forums 
on ground water protection ambient air health standards, 
endangered species for East Tennessee State University Lung 
Association League of Women Voters Education Fund. Dr. 
Lamberts, welcome.
    [The prepared statement of Mr. Hutchinson may be found in 
the Appendix on page 39.]


    STATEMENT OF DR. FRANCES LAMBERTS, COMMUNITY ACTIVIST, 
                    JONESBOROUGH, TENNESSEE

    Ms. Lamberts. Thank you. Thank you, Congressman Davis for 
inviting me to speak for the League of Women Voters on energy 
matters. Those have been a concern to the League of Women 
Voters for a very long time. In order to protect our natural 
resources, in order to make ourselves strategically more 
independent with regard to energy availability and in order to 
keep costs down, the League has for a long time promoted energy 
efficiency and thriftiness and conservation in energy use and 
expansion of renewable resources as our wisest course in energy 
policy.
    In my written testimony, I had highlighted a personal 
example to show how little we think the energy resource of 
efficiency investment has been capped in our area; namely, 
support for energy efficiency investments are not very 
available here. They are in other areas and for other 
utilities. Our major utility, the TVA, for quite some time has 
not had a serious program in energy efficiency.
    I have highlighted a small business, very close by here, a 
very modern recently opened meat packing facility that provides 
an enormously important service to hundreds of families in our 
area who when they modernized that plant took great pain to 
invest in insulation to reduce energy cost, but are still 
finding because they must meet high standards, health-related 
standards for processing and cooling, et cetera, and they 
conscientiously do meet these standards, their electric bill, 
their electric burden is very, very high, potentially putting 
them their viability at risk as a small business.
    I am very happy to hear therefore these efforts in the 
Congress to provide more incentives to small business and 
homeowners with regard to investments in efficiency and in 
renewable technology, which some generation in renewables this 
particular company is now looking to see if they can provide 
that.
    We think this is a very opportune time for us to work on 
efficiency investments, because the State of Tennessee, our 
legislature, just passed a bill asking the state to develop a 
comprehensive energy plan. We would hope that the TVA and state 
government would work together to put some very high energy 
efficiency goals and performance standards into that plan. I 
outlined a number of realizable concrete examples of how this 
can be done. One of which, relates to what Mr. Snowden was 
talking about namely, we recommend creation of energy 
consultant teams that go to homeowners and businesses and do 
baselines on energy use and then make technical recommendations 
like he was talking about and then do monitoring. We would 
recommend obviously for businesses and homeowners that should 
be a voluntary thing. But we think for public buildings that 
should be an obligatory measure, you know, for us to improve 
ourselves and also please be aware that Tennesseans, shame on 
us, at this time our per capita energy consumption is among the 
two or three highest in the whole country. So we have a long 
way to go. Energy efficiency and energy reduction can be 
accomplished very quickly and concretely.
    We would urge--we hope for an initiative between state, 
government and the TVA and hopefully our Congressional leaders 
so that energy growth demand in electricity be met at least for 
the foreseeable future in energy efficiency improvements.
    We do note with some concern the apparent steps or plans by 
TVA for a significant expansion in traditional energy, you 
know, in capacity through traditional sources; we would point 
out these sources, critical and must reduce dependence on our 
waters, to the extent that 83 percent according to the 
statistical abstract of our daily withdraws of fresh water from 
our rivers and lakes; namely, more than eight billion gallons a 
day, go to electricity production from the traditional coal-
fired and nuclear power plants. And the latter particularly are 
especially vulnerable we think when we know and have already 
seen both in TVA recently and in other countries that in a 
climate changed world, water itself is becoming a threatened 
resource. And so we think that this is not a wise way to go 
when we have alternatives that are totally independent of water 
and we would like for us very seriously to think about this. We 
would urge a predominant redirection by the TVA of the plan for 
electricity expansion into the renewable resource program that 
they now have under the good green power switch program, which 
is however, very, very, small.
    At the federal level, the League of Women Voters supports 
adoption of a renewable portfolio standards for the very many 
benefits that it has with regard to protection of our 
environment, with regard to job creation and many other aspects 
with regard to that diversification of the fuel mix and some 
more competition in the industry, et cetera, et cetera. There 
are many, many advantages to this.
    Finally we would like to bring to your attention what we 
see as lack of public oversight in the TVA and we would like to 
see some accounting from the agency on how it can work on 
increased energy efficiency and expansion of its renewables. We 
know in Congressman Shuler's state, there is a Public Utility 
Commission, we do not have this for TVA. Perhaps some 
accounting in the form of quarterly reports to the 
Congressional TVA Caucus could accomplish something like this 
and we would like to have that accessible to the public.
    Thank you very much for your concern and for your interest 
and for your efforts in these regards.
    Mr. Davis. Thank you, Dr. Lamberts. You did a wonderful 
job. You mentioned the state legislature passing some 
legislation. I see at least two of my colleagues from the state 
legislature. I see Dale Ford, Dale, thank you, for being here. 
Eddie Oakley, thank you for both being here. Are there any 
other members of the State Legislature. I see some county 
commissioners, good friends out in the audience. Thanks to 
everyone at all levels of government for your willingness to 
participate in this Congressional hearing.
    Now it is indeed a pleasure for me to introduce Dr. Kelly 
Tiller. And thank you for bringing that mic to yourself there. 
Dr. Kelly Tiller, this will actually be the second time I have 
had her testify before a Congressional hearing and I know you 
have done that even before I took office. Dr. Tiller is the 
director of internal operations for the University of Tennessee 
Office of Bio-energy Programs.
    In this role she is coordinating a state and university 
commitment to more than $70 million to develop a cellulosic 
bio-fuels industry in Tennessee.
    Dr. Tiller also holds a faculty appointment in the 
Agricultural Policy Analysis Center at the University of 
Tennessee where she has been a faculty member of the Department 
of Agricultural Economics since 1999. She received her Ph,D 
from the University of Tennessee in Agriculture Economics. Dr. 
Tiller, thank you again for being with us today.
    [The prepared statement of Ms. Lamberts may be found in the 
Appendix on page 63.]


      STATEMENT OF DR. KELLY TILLER, ASSISTANT PROFESSOR, 
    AGRICULTURAL POLICY ANALYSIS CENTER, THE UNIVERSITY OF 
                TENNESSEE, KNOXVILLE, TENNESSEE

    Ms. Tiller. Thank you very much, Representative Davis, 
Representative Shuler, for the opportunity to be here today and 
talk to you about our countries energy needs. And the new 
domestic renewable energy opportunities and the effects on 
small businesses.
    The U.S. is the world's largest consumer of energy. The 
entire economy of the U.S. is designed to revolve around the 
availability of safe, reliable, abundant and affordable energy. 
In our energy supply picture, a reliance on petroleum as a base 
source of liquid transportation fuels is particularly 
problematic.
    Petroleum products account for 97 percent of our 
transportation fuel market. The U.S. holds less than three 
percent of the world's proven oil reserves, but account for 25 
percent of the world's oil consumption. In fact, petroleum 
consumption in the U.S. is greater than in the next five 
leading countries combined.
    Today 60 percent of that petroleum is from imported 
sources, much of it from unstable and even hostile nations. 
America's dependence on petroleum, not only jeopardizes its 
national security, but drains billions of dollars from the U.S. 
economy and creates environmental concerns. The economic 
benefits of breaking this addiction to oil would be immense and 
widespread. Fortunately there is a commercially viable and 
sustainable way for the U.S. to transition to a low oil and 
high growth bio-based economy.
    The University of Tennessee and the State of Tennessee have 
made a significant commitment to developing a cellulosic 
biofuels industry. In July, Tennessee's Governor and 
legislature committed more than $70 million in funding for 
renewable biofuels research and programs including an 
investment of $49 million in the Tennessee biofuels initiative. 
Led by UT's Institute of Agriculture, the initiative is a 
synergistic partnership among the University of Tennessee, the 
Oak Ridge National Laboratory and our private industrial 
partners to construct and operate a five million gallon per 
year, cellulosic bio refinery in east Tennessee.
    Importantly, the initiative also includes a farm component 
to develop 8000 acres of switchgrass as a dedicated energy 
crop. The initiative focuses on research necessary to refine 
the conversion process, optimize the use of local farm and 
forest resources and generally improve the economics of the 
systems to allow commercial scale up and expansion throughout 
the state and regions.
    Businesses and farmers across the state and nation are 
watching with enthusiastic, yet cautious optimism, as Tennessee 
actively invests in this new paradigm for fuel production in 
the new bio-economy. There are several benefits of the 
cellulosic bio-economy approach that resonate with small 
businesses.
    First the potential for the U.S. farm and forest sectors to 
supply more than a billion tons annually of biomass feed stock 
for a mature cellulosic industry bears significant economic 
opportunities for the farm businesses, equipment dealers, 
service providers, and input suppliers that would form the 
backbone of the biomass feed stock supply chain.
    Second, on the second anniversary of Hurricane Katrina we 
are again reminded of the fragility of the system that has 
evolved to meet our seemingly endless energy demands. The 
economics of cellulosic biofuel suggests a highly dispersed 
system that is more secure and resilient with new opportunities 
for small businesses to participate in the energy sector.
    Third, small businesses are often particularly sensitive as 
we have heard today to wide and rapid price swings in energy 
cost and overall higher energy costs. Our research suggests 
that within three to four years we could be commercially 
producing cellulosic ethanol at a cost that is very competitive 
with gasoline and in line with corn based ethanol. Within five 
years, we could feasibly produce cellulosic ethanol at a 
wholesale price of a $1.50 per gallon or less. This is 
certainly good news for small businesses.
    In closing I believe that we are on the verge of a dramatic 
transformation from a hydrocarbon economy to a carbohydrate 
economy. As an economist, I know that the business economics of 
cellulosic biofuels industries will ultimately drive this 
development and expansion. But as a policy economist, I also 
know, that there are innovative system wide policy measures 
that can accelerate the growth of the cellulosic ethanol 
industry while protecting farm income, ensuring market 
discipline and supporting the sustainability of small 
businesses.
    Thank you, again, for the opportunity to be here today.
    [The prepared statement of Dr. Tiller may be found in the 
Appendix on page 67.]

    Mr. Davis. Thank you, Dr. Tiller, for your wonderful 
testimony. You did a great job today as always. Thank you for 
what you do.
    I would like to start with some questions if I may.
    Dr. Eggers, you brought up the point that we need to have a 
better system at the federal level to communicate what is 
available to bring down energy costs. Could you expand on that 
somewhat, who do you think would be the best department of 
government to do that? The SBA, the Department of Energy, 
Department of Commerce, do you think it would be better if 
there were a web site? What is your vision for that?
    Ms. Eggers. It is kind of a question where I will alienate 
most of government no matter what I say I guess, if I identify 
one branch. I think there are a lot of ways to get it right and 
there are also ways to get it wrong and there definitely needs 
to be significant resources on the Internet. And there needs to 
be live people with good technical backgrounds on the phone.
    Instead of giving a kind of magic bullet answer, my answer 
is that there are many ways to get it right and I would leave 
it up to thoughtful people who put a lot of time into thinking 
about where that should be housed. It should be in cooperation 
with some of the leading institutions, like the Rocky Mountain 
Institute who can help us provide what is now in this country 
cutting edge technical support, but is really just the very 
basic technical support that people at this table are asking 
for.
    Mr. Davis. Thank you for that. I heard most of what you had 
to say and I am sure my staff got the rest of it.
    Mr. Snowden, you mentioned that you had just put in some 
energy efficient lighting into your warehouse. Paul Chapman, my 
district director, and I have just had the opportunity to visit 
a warehouse last week and it was interesting. In this large 
warehouse, most of the building was dark until we walked down 
an aisle and as we would walk down the aisle the lights will 
come on. And as we passed through that area, lights would turn 
off automatically. Is that the type of system that you put in 
and if so, how did you find out about it?
    Mr. Snowden. Well, yes, it is a combination though. We have 
put it in one of our facilities and we are in the process of 
putting it in a new facility that we are building also and we 
are looking very strongly at retrofitting all of our existing 
facilities.
    We heard about it through a lighting supplier and it is 
basically T5 high bay lighting that replaces the current T12s 
and T8s that typically have been used. And basically what it 
does, it drives a tremendous amount of light from a high 
distance, which our ceilings are like 35 feet, down to the 
floor level where people are picking orders and things like 
that and they need a large amount of light. It gives a lot more 
light and it uses much less electricity in doing so. I do not 
really understand all the mechanics of how it does it. But it 
is very, very efficient. And that is one of the reason that the 
tax credit of 2005 is allowing, you know, that to be utilized 
as part of the lighting--there are three components of that 
package as we understand it. One of it has to deal with wall 
structures and roof structures and one of them has to deal with 
HVAC and the third component has to deal with the lighting. And 
all three of them enable you to qualify for certain tax credits 
if you meet the criteria. But again, getting the particulars on 
how that works is not easily done.
    But basically it is that type of lighting that you spoke of 
and also with electronic sensors so that the electronic sensors 
sense when somebody goes in and activates the lights. And then 
if somebody has been--if there has been no activity within that 
region within say five minutes, then the lights go off. So the 
electronic sensors allow the lights to be on when there is 
someone in the area and allow them to go off when they are not 
in the area. And both of those components are part of what I 
was referring to, yes.
    Ms. Eggers. How did you find out about it?
    Mr. Snowden. I found out about it through a lighting 
manufacturer, Lithonia Lighting manufacturer, is how we found 
out about it. And to be honest with you, one of their 
representatives out of Atlanta is the only person that we found 
that knows very much about it. And we had a meeting with him 
and our accountant and our CPA and our contractor to make sure 
that everybody was on the same page before we, you know, made 
the expenditure to do it.
    Mr. Davis. I think you make a very good point. And it goes 
sort of back to my question to Dr. Eggers. The government is 
always not the answer to every problem. Sometimes, as Ronald 
Reagan once said, they are the problem, they just shuffle 
problems around. It is good to know that there are other 
businesses that are helping your business to learn about new 
products and that is usually what makes America great, is we 
have a system of capitalism in America and people are willing 
to share great ideas and everybody does better.
    Have you had that system in place long enough to actually 
see how much savings you will receive?
    Mr. Snowden. No we have not. We have done the analysis on 
it based upon the usage of energy of the new fixtures versus 
what we are presently experiencing and that is where we arrived 
at our computed savings, we estimate a $50,000 in our existing 
facilities. We just put the first section of lighting in about 
two months ago in an addition that we did on our existing 
facility. It has been in effect about two months.
    Mr. Davis. Thank you for sharing that with me.
    Mr. Hutchinson, thank you again, for being here today. 
Coal, as you testified, is one of the products that we have 
domestically more of than anybody else in the world. Can you 
tell me how long you perceive the coal reserves actually 
holding out in number of years into the future?
    Mr. Hutchinson. Well, I think as I stated there earlier and 
this is, you know, based on estimation certainly, with the 
known and recoverable reserves today, we see about 285 years 
worth of reserves. There are other reserves out there that are 
maybe not attainable and maybe in the future with new 
technology would be, but at least 285 years worth.
    Mr. Davis. I have been told--and I do not know if it is 
true, maybe someone on the panel would know--I have been told 
that if we continue to rely on foreign oil for our energy 
policy, there is only about 30 years supply of oil. And can you 
imagine what that would do to our economy and our economic 
development here in northeast Tennessee, across the mountains 
in western North Carolina and across America, if we have to 
worry about energy. And we worry about it now, can you imagine 
where we would be 30 years from now. I do not know if that is a 
true figure or not.
    Mr. Hutchinson. Well, you know, here is my estimation and I 
am just going to off-the-cuff here. But, you know, I was around 
in the early 1970s when we had the gasoline situation and some 
of these younger ladies were not. But we were in lines and we 
were, you know, we were on alternate days and we were on 
license numbers and we were on all kinds of crazy things, that 
was 1972, 1973, 1974, in that area. And here we are in 2007 and 
unfortunately we, all of us, are in the same situation that we 
were back then. The only situation that is different is that we 
do now have the money to pay the higher prices and bring the 
product in. But we have not replaced that situation. That is 
just a situation that still exists. Now whether it be coal or 
natural gas or some of this new technology that we are hearing 
about today, we have got to do something. We have got to make a 
move, we have got to commit ourselves to doing something to 
replace this oil situation. Because as we all know, whether it 
is 30 years or three years or a war in Iran, we have got a 
serious issue on our hands in this country today; one that I 
feel that we have not approached properly in my life time, so I 
guess that is a concern I have. We talk and we meet and we hear 
and so forth, but when it comes to driving our automobiles and 
operating our trucks and our cranes, you know, I think there is 
a real issue out there for fuel. I would hope that this would 
spur some changes that helped us deal with this in the very, 
very near future.
    Mr. Davis. You mentioned that coal is producing about 500 
jobs in east Tennessee and the surrounding area right now. Let 
me take that a little further, I am going to ask you what would 
happen to that number of jobs. Back in World War II Germany was 
taking coal, turning it into a liquid and running basically its 
war machine, over 50 years ago. So the technology was available 
then to turn coal into liquid and gas, do we still have that 
technology? Do we have it in America and do we have the 
opportunity to take coal that is abundant in these mountains 
and then turn it into gas and then what would that do to our 
economy in northeast Tennessee, southwestern Virginia, even 
over in the mountains of western North Carolina?
    Mr. Hutchinson. Certainly the technology for coal 
gasification is there. And let me back up, you know, I said 500 
jobs, that is our company, that is the Powell Companies. I 
think that number for the region is about 4600 jobs.
    But, yes, the technology is there and it is a matter of 
having the capital to put into the plants to build the 
facilities. There is some underway in southern West Virginia 
right now and that is what we would like to see more of 
obviously that means another source for Appalachian coal and, 
you know, that is what is near and dear to us.
    Mr. Davis. One last question for you. There are some 
members of Congress that seem to be moving away from coal, want 
to discourage the use of coal, would in some instances not 
allow the use of coal, what would happen to our economy if coal 
was taken out of the energy equation?
    Mr. Hutchinson. Well, you know, if you go back to my 
handout, you look, we are right now providing 23 percent. I do 
not think that can do anything but go up. So if you remove 
that, then there is more dependence on foreign oil and natural 
gas which I guess, you know, the reserves there are kind of an 
unknown. Basically what they say about natural gas is they are 
not sure about the reserves until they mine them or pump them. 
So, you know, I think if we took coal out of the equation, you 
know, we have got major problems. We have got more dependence 
on the foreign oil right off the bat.
    Mr. Davis. Very scary to me.
    Mr. Hutchinson. Absolutely.
    Mr. Davis. Dr. Lamberts, thank you again, for being here. 
And you and I have talked several times about the green power 
switch. You have convinced me that was good for me to do. I am 
a member of that. Could you allude a little bit more to the 
green power switch and what it does for our environment?
    Ms. Lamberts. The green power switch program was initiated 
by TVA and I think on Earth Day 2000, and in 2001 our local 
utility was able to join it. It is a program under which the 
TVA through methane capture at sewage treatment at the sewage 
treatment plant that supplies the Allen Plant near Memphis and 
through wind turbines and through some solar installations 
provide electricity from these three, at this time, renewable 
resources. It is a voluntary program that subscribers need to 
pay additionally for, in order to obtain it. It has grown far 
too slowly, it is very small and we would hope that this would 
be a strong impetus to expanding that relative to additional 
generations.
    Mr. Davis. Thank you. Dr. Tiller, you and I have discussed 
this often. In my opening testimony, I talked about that we 
really have not had a new petroleum refinery in over 30 years 
in America. As we start this move over to biofuels and 
switchgrass and those type of things, I understand that there 
is going to be new refineries, but they are not going to be in 
the Gulf. They have the potential of being all across 
Tennessee. What do you think will be the economic impact in 
northeast Tennessee and across the state as we go to those and 
how will that work from the farmer up through the refinery and 
out to the consumer?
    Ms. Lamberts. I think we are looking at a totally different 
system than the one that we have become accustomed to. So 
rather than a very highly centralized and very large system, 
this is a very diverse and dispersed system. I think it brings 
tremendous opportunities for especially rural economic 
development, for ag development and for general economic 
development and even keeping that. Right now, we are sending 
not only money outside our state to those regions, but even 
outside our country to regions that are not particularly 
friendly to us. So it is an opportunity to not only generate 
those products in -- within our borders and within our region, 
but to keep that money and income and economic development 
opportunities inside our borders as well.
    As far as kind of how the chain works, there would be a 
very large number of farmers within about a 30 to 50 mile 
radius of a bio-refinery that would be producing dedicated 
energy crops and other biomass resources that would be creating 
job to transport and the logistics associated with getting that 
material to the bio-refinery, jobs inside the bio-refinery. 
They are not huge employers but at a large scale several 
hundred employees to a couple of thousands per those 
facilities.
    There also would be jobs with the transportation and local 
use and distribution. You cannot transport this very far since 
it does not go in pipelines today and so it would be more jobs 
in that distribution process. Also a lot of development of co-
products that would lead to satellite industries that would be 
either collocated or located near those bio-refineries that 
would take some of those high values but low volume chemicals, 
the chemical building blocks, the lignin and other sources, and 
use those to make value added bio-products that today are 
largely petroleum based.
    Mr. Davis. Thank you so much. I would like to yield to my 
good friend, Mr. Shuler.
    Chairman Shuler. I guess I am probably one of the folks 
that probably disagree on the coal issue, as my colleague has 
probably alluded to. If you look at coal, you are talking about 
liquid coal, obviously has been a topic. Dr. Lamberts has 
obviously talked extensively about fresh water. Do you know how 
many gallons of water it takes in order to produce one gallon--
fresh water does it take to produce one gallon of liquid coal?
    Mr. Hutchinson. I do not.
    Chairman Shuler. Six to seven gallons. So what are we going 
to with the storage of this water after, because we cannot put 
it back in our streams?
    Mr. Hutchinson. For one thing, it is recycled in the 
process and filtered and put back into the system. And 
hopefully it is not discharged into the streams.
    Chairman Shuler. Hopefully.
    Mr. Hutchinson. But it is a closed system.
    Chairman Shuler. Sure.
    Mr. Hutchinson. Intended to be a closed system, yes, sir.
    Chairman Shuler. Dr. Tiller, if you were looking at, and we 
have obviously talked about that we have so many--you know, if 
we do not increase our production of coal that we may lose some 
jobs or if we lessen our dependence upon coal that we may lose 
jobs. You know, you obviously alluded to it. I mean if you look 
at our whole entire region. If you look at the state of 
Tennessee alone and we went into more biodiesel and biofuels, 
biomasses, you know, what kind of jobs--are we putting our 
farmers back into the economic structure again?
    Ms. Tiller. Absolutely, we estimate that within 20 years, 
we could have about 20,000 farmers in the state of Tennessee 
growing a million acres of switchgrass or other dedicated 
energy crops producing hundreds of millions of dollars in new 
farm revenue that is not there today. This is also not a zero 
sum game where it is either corn or soybeans, but since this 
fits very well on some marginal land, these are new 
opportunities. That is in addition to the economic 
opportunities within the facilities and jobs those would 
support as well.
    Chairman Shuler. And then from the environment standpoint 
which has a better impact on the environment, coal versus the 
biomass?
    Ms. Tiller. Well, that is a pretty complex question, but 
the simple answer is that the process that we are talking about 
which is an enzymatic hydrolysis technology for conversion of 
cellulose to ethanol or other biofuels is a very green process, 
very low impact, very environmentally friendly.
    Chairman Shuler. Dr. Eggers, one of the most important 
things that we talk about, you know, how does it benefit, what 
benefits are we going to have, small business benefits on a 
healthy environment, you know, if we have a healthier 
environment how will that impact our small businesses?
    Ms. Eggers. And that is another very complex question, but 
a good one, because there is definitely a relationship. I think 
the relationship that most people can easily see and find most 
tangible is that small businesses will be helped by cleaner air 
because of reduced healthcare costs and healthcare are--you 
know, we could all be sitting here talking about healthcare 
costs pretty easily and their effect on small businesses and 
everybody else.
    But just as an example, our local power utility, Progress 
Energy, had wanted to put in a peaking plant, about 120 
megawatt plant, not very big. It would run 10 percent of the 
time outside of Asheville and just in Buncombe County alone, 
the federal government models estimated the county at the 
county health department would spend another $1.9 million a 
year on respiratory illness caused by the emissions from that 
plant. And so respiratory illness whether we are talking about 
asthma or heart attacks which can be stimulated by small, fine 
particulate matter, strokes which also can be caused by air 
pollution events, they cost us mightily through insurance, so a 
clean environment really helps us all out and fattens up our 
wallet, you know, a greener world, a greener wallet. And that 
is very tangible. But also there is a lot of aesthetic benefits 
and things like that.
    I did want to respond also that there is a tremendous 
opportunity to gain thousands and thousands jobs nationwide for 
increases in efficiency and if we have federal programs that 
are stimulating energy efficiency, we are going to be creating 
a lot more jobs so Mr. Snowden does not have to call Atlanta. 
Ideally everywhere in the U.S. people would be able to open up 
the Yellow Pages and find all kinds of local service providers 
to do energy audits and to provide renewable energy services. 
And while I agree the federal government usually is very much 
an inefficient service provider, the opportunity right now to 
help stimulate that market development and stimulate that job 
creation is one that I think is morally in the hands of the 
federal government.
    Chairman Shuler. And to refer back to Mr. Snowden's 
information, the Small Energy Efficient Business Act, which was 
my bill that we put through the House, which was passed, we 
will be able to gain that knowledge of these type of energy 
efficient tax credits if you will through our local chamber and 
our small business development areas throughout our region. So 
once it passes and it is signed off on by the President, 
hopefully it will be more--our local chambers will be more 
actively involved and talk about the tax credits that are 
available.
    I certainly would like to thank this first panel for your 
testimony and I think it has been very encouraging. We can take 
so much information back to us and I will yield to the 
gentleman from Tennessee, Mr. Davis for his closing remarks and 
actually also an introduction of our second panel.
    Mr. Davis. Thank you, first panel, you have been very 
informative, well prepared. Thank you for being here today.
    And now the Committee staff will actually switch panels and 
while we are doing that, I would like to thank Gary Mayberry 
with the Johnson City, Washington County Chamber of Commerce 
for helping putting this together.
    I would like to thank Homer G'Fellers and his staff at the 
Johnson City Power Board for your hard work in making this 
possible. Thank you for what you do. I know that we have been 
joined by Major Dick Grayson, thank you for being here from 
Johnson County, we have Mayor Lynch from Unicoi County. Thank 
you, Mayor Lynch for being here and we have Mayor Crockett Lee 
from Hawkins County. Thank you each and every one of you for 
being here today. And if we could we will go ahead and switch 
panels.
    [Brief pause.]
    Mr. Davis. If we could get the second panel and have 
everyone take their seats.
    Well I hope everyone found the first panel to be as 
informative as Mr. Shuler and I did. And I would like to 
welcome the second panel. And we are going to start out the 
second panel with Mr. Jim Keiffer. Jim is the senior vice 
president of marketing for the Tennessee Valley Authority, TVA, 
has over 30 years of experience in both natural gas and 
electric utility industries. He is responsible for partnering 
with the distributors of TVA power, to develop strategies to 
promote energy efficiency as well as efficient consumption 
electricity in homes and businesses.
    Jim holds a bachelor of science degree in civil engineering 
from West Virginia Institute of Technology and an MBA from West 
Virginia University.
    Jim thank you for your willingness to testify today. 
Welcome to East Tennessee.

 STATEMENT OF JIM KEIFFER, SENIOR VICE PRESIDENT OF MARKETING, 
        TENNESSEE VALLEY AUTHORITY, KNOXVILLE, TENNESSEE

    Mr. Keiffer. Good morning and thank you both. Thank you 
Congressman Davis and Congressman Shuler for the chance to be 
here. I am Jim Keiffer. My title is Senior Vice President of 
Marketing with our company TVA. I am responsible for TVA'S 
energy efficiency and conservation efforts in our renewable 
energy program that is known under the trademark of Green Power 
Switch.
    On behalf of TVA I would like to thank you for the 
opportunity to discuss the role that energy efficiency is 
paying in our strategy and how it can affect homes and 
businesses.
    TVA is the nation's largest public power company, about 
33,000 megawatts of capacity to supply electricity wholesale to 
those 158 power distributors that have been discussed this 
morning. They serve the 8.7 million people in our service 
region. It is also our responsibility that we generate and give 
our electricity at the lowest feasible cost and that we support 
and encourage our customers to use that energy wisely.
    The customers know and as the first panel mentioned that 
the cheapest kilowatt is the one that you do not use and that 
conserving energy can help TVA reduce the investments that are 
needed to build new generating plants. Ultimately energy 
efficiency and conservation is in everyone's best interest, 
especially the small business sector where it is essential that 
we keep those costs low.
    Earlier this year the new TVA board adopted a plan that 
makes energy efficiency and conservation a key part of our 
business plan for keeping TVA power rates competitive. We have 
set a goal to help make our service region a national leader in 
energy efficiency over the next five years. It is a goal that 
will produce economic and environmental benefits for everyone. 
But we cannot do it alone. It requires a cooperative effort 
with TVA, certainly with our 158 power distributors, with those 
62 directly served customers and federal installations and by 
everyone who uses TVA electricity.
    To achieve our goal, we developed a three part approach. 
The three elements are first, conservation which we define as 
using less energy. And then there is energy efficiency which 
simply means using energy smarter and reducing the daily peak 
demand, which is the brief period each day when electricity is 
demanded at its highest. For us for TVA in the winter, that 
peak occurs in the early morning hours and in the summer it is 
in the mid to late afternoon. The process we are undergoing 
began this summer with a pilot program launched in cooperation 
with distributor customers in Chattanooga, Nashville, and 
Huntsville, Alabama. Through arrangements largely with small 
commercial users, we are employing what is known as demand 
response.
    In this program participants cut their energy use during 
critical peak periods in return for incentives. The results of 
the pilots will be used to determine if we can and should 
develop a broader program as part of our overall efforts to 
reduce peak demand growth by at least 700 megawatts during the 
next five years and make the region a leader in energy 
efficiency.
    TVA has always worked in the past with our distributor 
customers to provide energy efficiency programs and services 
for homeowners and for small business customers. We have an 
existing program called Energy Right where they can access 
energy management tools to help them reduce those overall 
energy costs. We also provide small businesses access to 
affordable financing to enable them to install high efficiency 
heat pumps as one of the programs. Today, we continue to work 
with our customers to identify, evaluate, and implement new 
cost effective initiatives to help consumers to use energy 
smarter and reduce the amount they use. These initiatives will 
give energy efficiency, conservation, and reducing peak demand 
as well as on site generation a greater role in the mix of 
resources that we use to meet the demand.
    Renewable energy is also important. Our efforts to 
responsibly control the need for new generation include the 
renewable program known as Green Power Switch, which was also 
mentioned by the prior panel. Green Power Switch was one of the 
first renewable energy programs offered by a utility in the 
southeast. It gives everyone--business, industry, and the 
homeowners--an opportunity to support the development and 
growth of green power and our energy portfolio. All of the 
money generated by this program is used to develop more 
renewable energy and to fund research aimed at making it even 
more cost effective.
    Currently about 12,000 residential users and almost 500 
businesses are participating in Green Power Switch. It is 
marketed through 100 of the local utilities served by TVA 
including both the Johnson City Power Board and Holston 
Electric.
    Our numbers show that nearly three-fourths of the 
businesses enrolled in Green Power Switch came from the small 
business sector. They know it pays to display the Green Power 
Switch logo on their business fronts and to show their support 
for renewable energy. And I will also add the mix between 
business and residential in the Green Power Switch program is 
much stronger in the business area than it is many other green 
power programs.
    Currently we have 16 solar sites across the valley, one 
methane facility near Memphis and a wind farm on Buffalo 
Mountain near Oak Ridge, which made TVA the first utility in 
the southeast to use wind power on a commercial scale. Last 
month, these sites generated more than two million kilowatt 
hours of electricity.
    One of our solar sites is located here in the first 
Congressional District at Cocke County High School. It offers a 
good example of creative ways that solar technology is being 
used. Solar panels are arrayed to form a shelter for spectators 
at the high school soccer field. The panels themselves generate 
enough electricity to serve an average home. This types of 
innovation is helping to expand the use of solar energy here in 
the southeast and elsewhere.
    Homes and businesses account for about 70 percent of the 
total electricity consumption in our region. To encourage the 
broader use of renewable generation TVA has established a pilot 
program called Generation Partners. It pays homes and 
businesses for the electricity generated by their own wind and 
solar units. Currently we have about 30 generation partners 
participating in the pilot. Plans are underway to make this 
program part of a permanent net metering program to support the 
increased use of onsite winds and solar power.
    Finally as our plan makes clear, there is no single answer 
to meeting the growing demands of the Tennessee Valley. We must 
use a balanced combination of strengthening our current system, 
investing in new generations such as the restart of Unit 1 at 
the Browns Ferry Nuclear Plant, purchasing power from the 
marketplace, and using cost effective energy conservation, and 
energy efficiency initiatives to meet that growing demand.
    The Valley has enjoyed some of the lowest cost electricity 
available in the United States for the past seven decades. 
However, the cost of fuels to produce electricity such as coal 
and natural gas are rising due to the increased demand here in 
the U.S. and worldwide. By focusing on energy efficiency and 
conservation, we can all help keep the price of electricity as 
a competitive advantage for the region's economy and for the 
people in for the people and businesses who live and work here.
    Thank you, very much.
    Mr. Davis. Thank you, Mr. Keiffer. We appreciate what you 
do for the region. Thank you for being here in Johnson City 
today.
    Mr. Keiffer. Thank you for having me.
    Mr. Davis. Our next witness is Mr. Robert White. Robert, 
thank you for being here, thank you for your friendship. Robert 
is in his 23rd year in the Johnson City Power Board, I am 
making you older than you really are, Robert, a public electric 
utility company serving all of Washington County and parts of 
Sullivan, Carter, and Greene Counties. He has served in several 
roles during his tenure with the power board. His roles 
included, meter reader, assistant stock keeper, supervisor of 
stores, purchasing, transportation and manager of maintenance, 
purchasing transportation.
    Robert currently serves as the chief public relations 
officer, where he manages and oversees the public community 
relations and customer support departments.
    Robert, thank you for opening up your beautiful facility to 
us today. Thank you for your hospitality and thank you for your 
testimony.
    [The prepared statement of Mr. Keiffer may be found in the 
Appendix on page 81.]


  STATEMENT OF ROBERT WHITE, CHIEF PUBLIC RELATIONS OFFICER, 
       JOHNSON CITY POWER BOARD, JOHNSON CITY, TENNESSEE

    Mr. White. Thank you. It is a pleasure to be here this 
morning. Congressman Davis and Congressman Shuler, thank you 
for the opportunity to appear before this Committee to address 
the subject of today's hearing, the Cost of Availability of 
Energy and the Effect on Small Business.
    I am responsible for managing and overseeing our public and 
community relations and customer support departments. So we 
hear a lot from our small business customers.
    With national energy costs on the rise, it is a pleasure to 
address you from within the Tennessee Valley Authority service 
territory. The Johnson City Power Board serves an area of 
approximately 357 square miles serving all of Washington County 
and parts of Carter, Greene, and Sullivan Counties.
    Johnson City Power Board is fortunate to have access to TVA 
generated electricity. It is some of the lowest priced and most 
reliable electricity available in the United States. We at 
Johnson City Power Board realize however contentedness is akin 
to stagnation. This is precisely why we continue to reevaluate 
our programs, practices, procedures, in our unrelenting pursuit 
of excellence. It is our mission as a power distributor to be 
recognized by our customers, non-customers, and competitors as 
the leading energy and energy services provider in the region 
and to promote and support economic development programs for 
the benefit of all.
    The Johnson City Power Board customer base has increased by 
an average of two percent the last eight to ten years. This 
growth rate has been a result of a mirror increase in both 
residential and our commercial and industrial customers.
    We currently serve 73,227 customers, residential customers 
represent 86 percent of our customer base and commercial and 
industrial customers represent 14 percent of our customer base. 
While commercial and industrial customers represent only 14 
percent of our customer base, they generate 49 percent of our 
revenues. This fact is what drives us to promote programs 
designed to address our small business customers' needs.
    An asset that we offer to our customers, including our 
small business customer, is our ability to serve as a conduit 
to the many programs and services offered by TVA. Johnson City 
Power Board energy services and marketing department offer a 
key accounts program through which various TVA programs are 
administered. Although, the key accounts program serves mostly 
large commercial and industrial customers' special needs, the 
program also serves as a liaison for the small business 
customer as well. Our key accounts program partners with TVA to 
offer programs and services such as have already been 
mentioned, Energy Right, a program offering energy management 
tools help reduce overall energy cost; heat pump loans to 
provide access to affordable financing for installing high 
efficiency heat pumps; and comprehensive services, which 
provides technical expertise to increase efficiency or to 
explore the use of new energy technology.
    The Johnson City Power Board also participates in TVA's 
Green Power Switch and Generation Partners. Green Power Switch 
is a renewable energy program offering customers the 
opportunity to support the development and growth of more 
renewable energy. In 2006 our customers purchased over 1.3 
million kilowatt hours of Green Power. Generation Partners is a 
pilot program that pays homes and businesses for the 
electricity generated by their own wind and solar units. We are 
proud to say that Johnson City Power Board currently has two 
customers of the 30 participating in Generation Partners.
    As the Johnson City Power Board plans for the future, we 
are committed to identifying and addressing the needs of all of 
our customers including our small business customers and to 
provide resources available to make them successful. In the 
words of our general manager Homer G'Fellers, for any 
challenge, we will either find a way or we will make one.
    Thank you.
    Mr. Davis. Thank you, Mr. White.
    Our next witness is my good friend, Larry Elkins. Larry has 
been employed by the Holston Electric Cooperative for 28 years 
and been general manager since 1984. During his tenure as 
general manager he actively participated in programs and served 
on numerous committees within the Tennessee Valley Public Power 
Association, Tennessee Electric Cooperative Association, 
Appalachian District Power Distributors Association, and the 
National Rural Electric Cooperative Association where he 
currently serves on the board of directors representing 
Tennessee.
    It was actually Larry and I that discussed about two months 
ago the need for this Congressional hearing. Larry, thank you 
for your foresight and thank you for being willing to testify 
today.
    [The prepared statement of Mr. White may be found in the 
Appendix on page 85.]


 STATEMENT OF LARRY ELKINS, GENERAL MANAGER, HOLSTON ELECTRIC 
              COOPERATIVE, ROGERSVILLE, TENNESSEE

    Mr. Elkins. Congressman, thank you for allowing me to 
testify today and Congressman Shuler, we are glad to have you 
on this side of the mountain. We were just over on your side of 
the mountain a couple of weeks ago, at Mount Mitchell playing 
golf, so we really enjoyed your area.
    As Congressman Davis said, I am Larry Elkins, General 
Manager of Holston Electric. We serve 30,000 members in Hawkins 
and Hamblen Counties and then a spattering of customers all 
over Greene, Cocke, Grainger, even a few in the edge of 
Virginia.
    I have been in the business--I actually started in the 
business in 1974. And if you recall at that time that is when 
we started an energy crisis. As one of the gentleman spoke to 
earlier, this same subject matter that we are discussing today 
was in the headlines and on the evening news about 34 years ago 
in 1973. We had long car lines, I know there in Rogersville and 
the energy crisis that we are experiencing today is nothing 
new. It started back then. The 1973 oil embargo began a painful 
realization of the vulnerability of energy supplies. However, 
the crisis of today is much more than just a shortage of 
gasoline that led to long lines forming at the gas pumps. More 
than any time in the past, we are an industrialized nation that 
is dependent upon electric energy as a basis of our economy. 
And our appetite for electricity continues to increase.
    According to the Energy Information Administration, 
worldwide electricity consumption is expected to double during 
the period of 2002 through 2025. But while the demand for 
electric power continues to increase, no new base generating 
plants have been built in years. The plants that have been 
constructed are peaking units and we have talked a little bit 
about that earlier that have been built generally just to 
provide power during peaking times. So no baseload plants have 
been built.
    Some in Congress say to let the natural laws of economics, 
supply and demand control the price of electricity, let rates 
go up so the demand for electricity will go down. We found that 
out in the 1970s and that approach does work. When I came to 
work at Holston Electric, we were selling a kilowatt hour for a 
cent and a half and almost overnight it went to three cents. 
The demand for electricity was cut severely, but that is on the 
backs of people that can least afford to pay it. The 
consequences of such an action would prove to be devastating to 
our business and industry. Adding an increased power cost to 
the bottom line of major industries in this region who are 
already struggling with high labor and operating cost will only 
add to the elimination of local manufacturing jobs and their 
subsequent relocation to neighboring countries. And statistics 
show that every manufacturing job in our economy leads to six 
other jobs in related sectors. This higher rates, lower demand 
way of thinking also hurts, as I mentioned, the low income and 
those on fixed income to a greater extent that it does to 
middle and higher incomes.
    Drastic rate increases for electric power is not the 
solution. Efforts to conserve electricity and to develop 
alternative sources of energy such as has been discussed here 
today, such as solar wind, hydrogen fuel cells are all to be 
applauded and must continue.
    Nuclear plants produce power at minimal cost but are 
extremely expensive and they require an extensive amount of 
time to construct. But while these efforts inch forward, the 
United States is at the mercy of the Middle East for its 
energy. We are at a point that we are going to have to build a 
base generated plants to provide for the consistent demand for 
electric power for industrial, commercial, and residential 
customers or we are going to have to be ready to live with the 
consequences of an inadequate supply of electric power for this 
country.
    Electricity can be generated by many different sources. 
According to the latest Department of Energy statistics 
American electricity is currently being generated 50 percent by 
coal, 19 percent by nuclear reactors, 19 percent natural gas, 
6.5 percent by hydroelectric, 3 percent by oil, and only 2.8 
percent is produced by all other sources that we have talked 
about, solar and green power, and all the many ways that we 
have.
    By a wide margin, coal is the lead in energy source for 
generating electricity in the United States and the world, it 
is also the least expensive way to generate electricity, when 
you take everything into account. And a few other critical 
statistics to keep in mind, the United States has 26 percent of 
the world's supply of coal but only two percent of the world's 
supply of oil and three percent of the world's supply of 
natural gas.
    The protests in this country against pollution from coal-
fired plants continue and have led to stricter emission 
standards and the development of new cleaner technology, such 
as coal gasification. Everyone wants clean air to breathe and 
to be environmentally responsible. But the United States does 
not control the emissions of the world.
    Asia, but primarily China, accounts for 50 percent of the 
global coal consumption. China uses coal for 82 percent of 
electricity generation, India 70 percent, South Africa 92 
percent. Another staggering fact is that China is bringing in 
one new coal-fired generation plant on line every week. My 
point is, even if we restricted our use of coal in power 
generation to save the planet, we have no way to control the 
amount of emissions being put into the atmosphere by the rest 
of the world.
    We need baseload generation coming on line and we need it 
now. We have the coal reserves to fuel the power plants that 
are required for our future, but without additional generated 
plants, quite simply, there will not be adequate power for this 
region.
    The electric utility industry is in a standoff with the 
coalition of environmental and political activists who are 
coordinating the tax on new baseload plants projects all over 
our nation. In short, they do not nuclear plants, they do not 
want coal-fired plants, even with the promise of technology 
improvements. Rather they tout the folly that renewable 
generation and energy conservation measures alone will provide 
enough electricity capacity for our nation well into the 
future.
    Business and industries rely on us to supply their energy 
needs. Our customers expect to flip a switch and to have power, 
and not excuses. We implore the use of common sense in the 
legislative process. Let American ingenuity work out the 
details of clean coal and safe nuclear technologies and let the 
construction of new power plants provide for the future of our 
citizens business and industry.
    Thank you, gentlemen.
    [The prepared statement of Mr. Elkins may be found in the 
Appendix on page 87.]

    Mr. Davis. Thank you Mr. Elkins for your testimony.
    Mr. White, the first panel today talked about the need to 
market the availability of how you can keep your costs low and 
use less electricity and other energy sources. Could you tell 
us how you do that here at the Johnson City Power Board?
    Mr. White. Sure, I will be glad to.
    As I mentioned in my statement we have a key accounts 
program that is responsible for mostly large commercial and 
industrial customers, but they also work a lot with small 
business. And as I mentioned, they provide a way to administer 
programs that TVA does offer. I will give you an idea of some 
of the duties that they do handle. They handle billing issues, 
energy audits, HVAC recommendations, lighting recommendations--
Mr. Snowden would not have to go to Atlanta--you could have it 
right here via our relationship with TVA. Metering questions, 
power factor questions are becoming much more important to 
small business with their electronic machinery that they are 
using nowadays. Outage information, which is very important, 
technical assistance. We are very hands on with our small 
business customers through our key accounts program. We have 
several people who are available any time, they just need to 
call and make an appointment. We work with TVA real closely 
with their expertise, with their engineers, with their experts 
to provide small businesses that opportunity for these 
services.
    Mr. Davis. I have one last question and I am going to sort 
of spread it across all three of you if I could.
    Larry, I remember very well the gas lines back in 1973. I 
remember our dependence on foreign oil back then. I remember 
the change in our economy when we went from 30 cents a gallon 
up to 90 cents a gallon. And now we have gone up to 2.50-$3.00 
a gallon for gasoline. So I remember that very well.
    As we continue to move forward, we have heard a lot today 
about renewable energy and that is something I think we have to 
do. I serve on Homeland Security Committee and I can tell you, 
I am very concerned about our dependence on foreign oil and our 
dependence on people that quite frankly do not like us. That is 
worrisome for me in the homeland security aspect, it is very 
worrisome for me for our economy as well. And I think that we 
need to do everything we can to use the domestic resources so 
we become less dependent on foreign oil. And I think we need to 
look at solar and we need to look at wind power, we need to use 
hydro power. I think all of those need to come into play. I 
think there are some people in Congress that would like to 
limit it to those three.
    Now the question, after I made my statement, the question 
across all three of you, what happens to our economy and our 
access to energy if we prohibit the use of coal and nuclear 
availability in the whole mix? And Mr. Keiffer, we will just 
start with you and work our way down the line if we could.
    Mr. Keiffer. I will say that the question I want to make 
sure is, if we limit the access to no more nuclear and no more 
coal what would happen. Let me say this, we are growing, TVA 
just said last, this past couple of weeks, we had the 13 
highest peak days that we have had in the history. So our 
market area is growing. We believe we have to have a mixture of 
nuclear, of baseload generation of some sort, peaking and 
energy efficiency. If you were to take away the fact that you 
could not add any more nuclear or you could not add any more 
coal, and you try to serve the growing needs of the Valley, I 
simply do not think you can keep up with the demand. We believe 
you need to do all of the above.
    Mr. Davis. Thank you.
    Mr. White. I will reiterate that point. I do believe it is 
a balance approach. I feel that especially from our perspective 
as a distributor we are so, I guess we are at the mercy of what 
the purchase power cost and the additional cost may affect TVA, 
which is going to ultimately affect our wholesale power cost, 
which is going to affect our end use customer. I think that 
conservation, efficiency, cutting the peak demand, but at the 
same time realizing that if there is a demand for that 
electricity they expect us to have it. They expect when they 
flip that switch that the energy is going to be provided.
    And there is another thing we have to consider as well. We 
feel it is our responsibility to provide the infrastructure to 
make sure that as the power is generated and transmitted to us 
that we have our infrastructure in place to provide it. We are 
affected by so many different costs, whether it be fuel cost, 
the lead times for transformers are now up to 12 months. It is 
affecting our cash flow with our increased inventory, the cost 
of having to purchase so much in advance. When you combine all 
that with the fact that if we are under distress because 
customers do not want to have nuclear or coal generation, then 
I think it is going to affect our end use customer a whole lot 
worst than they would ever anticipate.
    Mr. Elkins. Congressmen, I would answer that question from 
not being from a power distributor point of view, but being 
chairman of the industrial development board of Hawkins County 
and serving in that capacity for the last 20 some years.
    We are primarily about creating jobs and economic 
development for our young people that are growing up here and 
that are going to East Tennessee State, Northeast State and 
University of Tennessee, we have got to supply jobs. And we are 
seeing more and more of our jobs leaving. And I know over in 
Congressman Shuler's neck of the woods, all of the industries 
that have left North Carolina. We have got to maintain an 
industrial base. We cannot live as a service society for long. 
And as I mentioned statistics show that one manufacturing job 
creates about six related jobs in the service industry and 
various things. And we are seeing so many jobs leave because of 
labor costs and things of that nature. You add on the back of 
that, electricity and energy costs going sky high and you are 
going to see industry leaving our country. And that is my main 
concern. I will be retiring here in a couple or three years out 
of the power business, but I see so many young people that need 
jobs and we are going to--if we are not careful in Congress by 
raising the price up just as I said in my speech to limit the 
use of demand of electricity, it is kind of like my mother used 
to say, cutting your nose off to spite your face, and we are 
going to end up losing a lot of industrial jobs which trickles 
down to all the other jobs in our economy and it really bothers 
me from that point of view.
    Mr. Davis. Thank you, Mr. Elkins. Thank you, panel, you 
have done a wonderful job. I also see Mike Browder out in the 
audience from Bristol Electric; Mike, thank you for being here.
    Thank every one of you for taking part in this hearing 
today and with that I yield back the remainder of my time.
    Chairman Shuler. Thank you so much, Congressman Davis. I 
want to commend all three of you because it is not until your 
power goes out that you realize what an impact you have on all 
of our lives. Whether it be a storm or snow or ice, and the 
people, the men and women work for your different 
organizations, the time and commitment that they put forth in 
those wet rainy cold nights. Please extend my special thanks to 
them, because they are true heroes when the lights come back 
on.
    You know I am very encouraged in a lot of things I hear 
today, obviously, Mr. Keiffer, what the TVA's approach has 
been, I commend the TVA for continuing to put scrubbers on 
those smoke stacks. And truly making a difference on energy 
efficient waste.
    There is so much that we possibly can do. You are exactly 
right, it is going to take a lot of pieces of a puzzle and we 
talk about homeland security, part of it is going to be 
diversifying our energy sources as Dr. Tiller had mentioned 
earlier. You know, putting back--biomass cellulosic fuels, 
putting that back into the economy for our farmers. That is 
going to create--Mr. Elkins, as you say, that is going to 
create jobs in our district. It is going to take a lot. I think 
we are very blessed both in western North Carolina and in east 
Tennessee. People like where we live. And so part of it, the 
people that has moved in here has caused some of the reasons 
for it.
    And I think one of the most important things is people are 
staying here, you know, when they go to East Tennessee State 
University or they go to UNCA they want to remain and live in 
the community. We have to do a very good job economically and 
industrial to be able to protect it. And we have done some 
things over many administrations that has created a problem and 
an issue and we talk about losing our jobs and not having 
adequate enough jobs here to really retain the people we would 
like to. As we say kind of retain our mountain values, 
retaining those mountain values is retaining our students.
    Whether it be NAFTA or CAFTA, however you look at some of 
the trade issues, I know the other night at 1:00 in the morning 
I was still up looking, going through the toys that had the 
recall on them from China, because of lead base paint, you 
know. It started out kind of being funny, but by 1:00 in the 
morning I was still looking through those toys and realizing 
every single toy that my two children, who are two and six, 
every one of them were made in China. And so you know, they 
kind of look Santa Claus brings them all, but momma and daddy 
took them all away in one day.
    So I mean, we have to, I guess that kind of gets back to my 
point, Mr. Elkins, you know, does China's wrong make it right 
for us to continue down that path of destroying our 
environment? That is a question.
    [Laughter.]
    Mr. Elkins. No, it does not. And I am concerned and I think 
it is going to some national treaties between countries the 
size of China and Russia and the United States on a global 
basis. And certainly we need to set the standard. I do not want 
to sound like I am just totally oblivious to everything going 
on, because as you said, I have spent my 59 years here in the 
mountains of east Tennessee and I love it and I love the lakes 
and everything and we want to guard against it. I just do not 
want to take a reckless approach that some of I have heard. As 
was mentioned, I serve on a national board and meet in 
Washington on several times during the year and I hear and read 
all of the comments from the Congressmen and Senators 
throughout the United States and there seems to be a movement 
toward what I would consider to be a reckless abandonment of 
common sense when it comes to energy.
    Chairman Shuler. I can assure you that Congressman Davis 
and I are not going to let it go reckless and abandon and some 
times, do not always pay attention to just the folks that talk 
on C-span because I do not think they always voice the opinion 
of the Congress. And, you know, some of them get up on both 
sides, I would say Congressman Davis, they get up there and I 
think it is for their--they want to become famous. So we do 
have to have those approaches, and I think we have to take 
every aspect. And even personally, I am very fortunate that I 
can--I am getting ready to put an anemometer up on the seventh, 
at my home to be able to track the wind right in my district at 
my home. I am hoping that is going to work. And we have been 
able to work with the power company and they are very excited 
about it. And it is going to take small steps and it ultimately 
takes each and every one of us as individuals and as a 
community to truly make that difference and I commend all of 
you for the work that you are doing, because I know that, you 
know, is building a plant what you really would like to do, you 
would probably like to maintain the stuff that you have 
presently because I know from the TVA and Mr. White, I know 
from you all of us would like to maintain what we have. If we 
could find a way to utilize other resources and create the jobs 
that we have. I think that would make it a better community for 
all of us. And if we can find technologies and ways to utilize 
some of the resources that we do have, then I think that is 
where we have to work together and truly be a big part of the 
solution and as government, we are a lot of problems sometimes 
and we have to be a better part of the solution. And hearing 
your testimony today, it seems like I looked at every single 
question that the staff had put together and you guys have done 
an outstanding job of truly answering all the questions and 
just a wonderful job. And in my closing, I would like to say 
thank you so much for having us here, Mr. White, in your 
facility.
    Mr. White. It is a pleasure.
    Chairman Shuler. And Tennessee always means a whole lot to 
me in so many different ways. And I feel privileged to come 
back and Congressman Davis, a ranking member, having me in his 
district. And I yield back.
    Mr. Davis. Heath--and we know you as Heath--thank you for 
being with us. And I would like to thank Bridget Baird with 
Senator Corker's office; Bridget, thank you for what you and 
the Senator do. I was with Lamar Alexander earlier in the week 
talking about important issues.
    I would like to thank my own staff. You can imagine, it 
takes a lot of work to put one of these together and, Heath, 
you know that first hand with your staff as well. It is a team 
approach. And I thank each and every one of you for being here 
today. And this is something that happens, very unusually, we 
actually end on time. Thank you.
    Chairman Shuler. Also the staff of the committee has done 
and understanding, terrific job and my staff as well.
    This hearing is adjourned.
    [Whereupon, at 12:00 p.m., the Subcommittee was adjourned.]

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