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



 
         CHARTING A CLEAN ENERGY FUTURE FOR THE INSULAR AREAS

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


                     JOINT OVERSIGHT FIELD HEARING

                               before the

                    SUBCOMMITTEE ON INSULAR AFFAIRS

                             joint with the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

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

                               __________

                           Serial No. 110-66

                               __________

       Printed for the use of the Committee on Natural Resources



  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
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                     COMMITTEE ON NATURAL RESOURCES

              NICK J. RAHALL, II, West Virginia, Chairman
              DON YOUNG, Alaska, Ranking Republican Member

Dale E. Kildee, Michigan             Jim Saxton, New Jersey
Eni F.H. Faleomavaega, American      Elton Gallegly, California
    Samoa                            John J. Duncan, Jr., Tennessee
Neil Abercrombie, Hawaii             Wayne T. Gilchrest, Maryland
Solomon P. Ortiz, Texas              Chris Cannon, Utah
Frank Pallone, Jr., New Jersey       Thomas G. Tancredo, Colorado
Donna M. Christensen, Virgin         Jeff Flake, Arizona
    Islands                          Stevan Pearce, New Mexico
Grace F. Napolitano, California      Henry E. Brown, Jr., South 
Rush D. Holt, New Jersey                 Carolina
Raul M. Grijalva, Arizona            Luis G. Fortuno, Puerto Rico
Madeleine Z. Bordallo, Guam          Cathy McMorris Rodgers, Washington
Jim Costa, California                Louie Gohmert, Texas
Dan Boren, Oklahoma                  Tom Cole, Oklahoma
John P. Sarbanes, Maryland           Rob Bishop, Utah
George Miller, California            Bill Shuster, Pennsylvania
Edward J. Markey, Massachusetts      Bill Sali, Idaho
Peter A. DeFazio, Oregon             Doug Lamborn, Colorado
Maurice D. Hinchey, New York         Mary Fallin, Oklahoma
Patrick J. Kennedy, Rhode Island     Adrian Smith, Nebraska
Ron Kind, Wisconsin                  Robert J. Wittman, Virginia
Lois Capps, California
Jay Inslee, Washington
Mark Udall, Colorado
Joe Baca, California
Hilda L. Solis, California
Stephanie Herseth Sandlin, South 
    Dakota
Heath Shuler, North Carolina

                     James H. Zoia, Chief of Staff
                       Rick Healy, Chief Counsel
            Christopher N. Fluhr, Republican Staff Director
                 Lisa Pittman, Republican Chief Counsel
                                 ------                                

                    SUBCOMMITTEE ON INSULAR AFFAIRS

            DONNA M. CHRISTENSEN, Virgin Islands, Chairwoman
        LUIS G. FORTUNO, Puerto Rico, Ranking Republican Member

Eni F.H. Faleomavaega, American      Elton Gallegly, California
    Samoa                            Jeff Flake, Arizona
Raul M. Grijalva, Arizona            Don Young, Alaska, ex officio
Madeleine Z. Bordallo, Guam
Nick J. Rahall, II, West Virginia, 
    ex officio
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    JIM COSTA, California, Chairman
          STEVAN PEARCE, New Mexico, Ranking Republican Member

Eni F.H. Faleomavaega, American      Louie Gohmert, Texas
    Samoa                            Bill Shuster, Pennsylvania
Solomon P. Ortiz, Texas              Bill Sali, Idaho
Rush D. Holt, New Jersey             Adrian Smith, Nebraska
Dan Boren, Oklahoma                  Steve Scalise, Louisiana
Maurice D. Hinchey, New York         Don Young, Alaska, ex officio
Patrick J. Kennedy, Rhode Island
Hilda L. Solis, California
Nick J. Rahall, II, West Virginia, 
    ex officio
                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

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

Statement of Members:
    Christensen, Hon. Donna M., a Delegate in Congress from the 
      Virgin Islands.............................................     1
        Prepared statement of....................................     3
    Costa, Hon. Jim, a Representative in Congress from the State 
      of California..............................................     4
        Prepared statement of....................................     5
    Shuster, Hon. Bill, a Representative in Congress from the 
      State of Pennsylvania......................................     6

Statement of Witnesses:
    Blaylock, Frazier, Director of Federal Government Affairs, 
      Covanta Holding Corporation................................    51
        Prepared statement of....................................    53
    Bond, D. Drew, Acting Director of Commercialization and 
      Deployment, Office of Energy Efficiency and Renewable 
      Energy, U.S. Department of Energy..........................    69
        Prepared statement of....................................    71
    Cole, Donald G., Vice Chair, Virgin Islands Public Services 
      Commission.................................................    23
        Prepared statement of....................................    24
    Hodge, Hugo, Jr., Executive Director, Virgin Islands Water 
      and Power Authority........................................    16
        Prepared statement of....................................    18
    Miller, Darryl E., President, St. Croix Alliance to Protect 
      Utility Ratepayers.........................................    26
        Prepared statement of....................................    28
    Nicholson, Robert J., III, President, Sea Solar Power 
      International, LLC.........................................    40
        Prepared statement of....................................    42
    Powell, James R., Senior Policy Advisor, Southern States 
      Energy Board...............................................    54
        Prepared statement of....................................    57
    Pula, Nikolao, Acting Deputy Assistant Secretary for Insular 
      Affairs, U.S. Department of the Interior...................    65
        Prepared statement of....................................    67
    Resor, James P., Chief Financial Officer, groSolar...........    43
        Prepared statement of....................................    45
    Richards, Hon. Usie R., Senate President, 27th Legislature of 
      the Virgin Islands.........................................     7
        Prepared statement of....................................     9
    Smith,, Bevan R., Jr., Director, Virgin Islands Energy Office    11
        Prepared statement of....................................    13

Additional materials supplied:
    List of documents submitted for the record...................    79


 JOINT OVERSIGHT FIELD HEARING ON ``CHARTING A CLEAN ENERGY FUTURE FOR 
                          THE INSULAR AREAS.''

                              ----------                              


                        Saturday, April 12, 2008

                     U.S. House of Representatives

            Subcommittee on Insular Affairs, joint with the

              Subcommittee on Energy and Mineral Resources

                     Committee on Natural Resources

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

                              ----------                              

    The Subcommittees met, pursuant to call, at 10:05 a.m., at 
Frits E. Lawaetz Conference Room, Legislature of the Virgin 
Islands, Frederiksted, St. Croix, U.S. Virgin Islands. Hon. 
Donna Christensen [Chairwoman of the Subcommittee on Insular 
Affairs] Presiding.
    Present: Representatives Christensen, Costa and Shuster.

   STATEMENT OF THE HON. DONNA M. CHRISTENSEN, A DELEGATE IN 
                CONGRESS FROM THE VIRGIN ISLANDS

    Mrs. Christensen. Good morning. The oversight hearing by 
the Subcommittee on Insular Affairs and the Subcommittee on 
Energy and Mineral Resources will come to order. The 
Subcommittees are meeting today to hear testimony on Charting a 
Clean Energy Future for the Insular Areas.
    Let me welcome everyone here this morning to this hearing. 
As we have done in Guam, the Commonwealth of the Northern 
Mariana Islands, and American Samoa, the Subcommittees today 
are making history by having the first congressional hearing in 
Frederiksted, St. Croix.
    Thank you, Senate President Richards and the 27th 
Legislature for making the St. Croix chambers available to us.
    I want to also begin by welcoming my colleagues who join me 
on the dais: The Chairman of the Subcommittee on Energy and 
Minerals, Congressman Jim Costa from California, and 
Representative Bill Shuster from Pennsylvania. I am grateful 
that they have taken time away from their own districts to be 
here for this important hearing.
    And I want to acknowledge Chairman Costa's leadership of 
his Subcommittee in working to maintain a healthy balance 
between energy needs and conserving our nation's natural 
resources. I believe we can all agree that the leadership that 
he and the Subcommittee provides is more important than ever in 
today's world of rising oil prices.
    I am also very pleased to welcome my colleague, 
Representative Bill Shuster. This is Mr. Shuster's fourth term 
in Congress representing Pennsylvania's 9th District. In 
addition to his membership on the Energy and Minerals 
Subcommittee, Mr. Shuster serves on the Transportation and 
Infrastructure Committee where he is the Ranking Member of the 
Subcommittee on Railroads, Pipelines and Hazardous Materials.
    The people of the Virgin Islands welcome both of you and 
thank you for your interest in addressing these issues faced by 
your fellow Americans living in the U.S. territories. And as we 
go through this hearing, you will recognize that the residents 
of the territories, in our case the Virgin Islands, will voice 
concerns which are very similar to those of your own 
constituents in California and Pennsylvania. And while the 
entire country is feeling the pinch of increased utility costs, 
you will also find that nowhere is it as severe as here in the 
United States Virgin Islands and our fellow offshore areas.
    I also want to welcome our witnesses, thank them for taking 
time on this Saturday morning to present testimony at what I 
expect to be the first in a series of hearings on the unique 
energy challenges facing the insular territories.
    In 2005, my colleagues and I worked with Natural Resources 
Chairman, Nick Rahall, to update a 20-year-old energy 
assessment done for the insular areas. The Department of the 
Interior, together with the Department of Energy and 
representatives of public power, completed that new assessment 
in 2006.
    This report should be viewed by all, as Congress has 
renewed interest in seeing how well the challenges of reducing 
energy cost to insular areas can be addressed. No one should 
believe that Congress wishes for this report to sit for another 
20 years before action is taken to lessen our territories' 
reliance on imported fuel. Thus, our hearing this morning is 
meant to further this process. Chairman Costa and I brought 
local leaders, residents, industry representatives and 
nongovernmental organizations together with Federal government 
expertise to lay the groundwork in developing a plan which 
would create a clean energy policy that can be implemented in 
the future to benefit our U.S. territories.
    To be frank, many in the U.S. mainland still view our U.S. 
territories solely through sunglass lenses, but as we look 
toward the future with clean and renewable energy in mind, the 
attributes which bring tourists to our shores should also be 
our sources of energy. Island breezes could power turbines, our 
bright sun could charge batteries, our ocean and surf could be 
the driving engines which bring unlimited energy out from our 
sea onto our shores and into our homes.
    I'm pleased that this hearing has generated a lot of 
interest from my constituents. I want to thank Senator Ronnie 
Russell of WSTX for carrying it live on radio so that it can 
reach a broader audience. I'm also pleased that we have had the 
active and meaningful engagement of our government industry, 
NGO's and the Federal agencies.
    And before I close, I just want to point out that despite 
all of the obstacles and challenges that we do face, both WAPA 
and the V.I. Energy Office have had their efforts recognized 
nationally--and the Virgin Islands Department of Energy a few 
years ago for its educational program for the NEED Project. A 
few weeks ago, I was privileged to join Mr. Hodge, Mr. Rhymer, 
and Ms. Dunn from WAPA as they received the Energy Star Partner 
of the Year Award for Excellence in Energy Star Promotion. 
Congratulations to both of you.
    At this time the Chair would like to recognize Chairman 
Costa, Chair of the Subcommittee on Energy and Mineral 
Resources, for any statement that he might have.
    [The prepared statement of Mrs. Christensen follows:]

     Statement of The Honorable Donna M. Christensen, Chairwoman, 
                    Subcommittee on Insular Affairs

    Good morning.
    I want to begin by welcoming all of our witnesses who agreed to 
present testimony at this oversight field hearing convened jointly by 
the Subcommittee on Insular Affairs and the Subcommittee on Energy and 
Mineral Resources. I am joined on the dais by my colleagues, Energy and 
Minerals Chairman Jim Costa (from California) and Representative Bill 
Shuster (from Pennsylvania).
    I want to acknowledge Chairman Costa's leadership of his 
subcommittee to maintain a healthy balance between energy needs and 
conserving our nation's natural resources. I believe that we can all 
agree that the leadership he and his subcommittee provides is more 
important than ever in today's world of rising oil prices.
    I am also very please to welcome my colleague, Representative Bill 
Shuster. This is Mr. Shuster's fourth term in Congress, representing 
Pennsylvania's 9th District. In addition to his membership on the 
Energy and Minerals Subcommittee, Mr. Shuster serves on the 
Transportation and Infrastructure where he is the Ranking Member of the 
Subcommittee on Railroads, Pipelines, and Hazardous Materials.
    The people of the Virgin Islands welcome you to the Caribbean and 
thank you for your interest in addressing the energy issues faced by 
your fellow Americans living in U.S. territories. I believe that 
throughout this hearing you will recognize that residents of the 
territories, in our case the Virgin Islands, will voice concerns which 
are similar to your own constituents in California and Pennsylvania.
    However, the obvious challenges that residents of this and other 
territories must overcome are isolation which prevents 
interconnectivity or economies of scale; the lack of indigenous sources 
of fossil fuels which has led to complete dependence of imported fuel; 
and the ocean's corrosive environment which makes upkeep of energy 
equipment difficult and costly.
    In 2005, my colleagues and I worked with Natural Resources Chairman 
Nick Rahall to update a twenty year old energy assessment done for our 
insular areas. The Department of the Interior, together with the 
Department of Energy and representatives of public power completed the 
new assessment in 2006. This report should be viewed by all as a 
Congress's renewed interest in seeing how well the challenges of 
reducing energy costs to insular areas can be addressed. No one should 
believe that Congress wishes for this report, to sit for another twenty 
years before action is taken to lessen our territories' reliance on 
imported fuel.
    Thus, our hearing this morning is meant to further this process. 
Chairman Costa and I have brought local leaders, residents, industry 
representatives, and non-governmental organizations together with 
federal government expertise to lay groundwork in developing a plan 
which could create a clean energy policy that can be implemented in the 
future to benefit our U.S. territories.
    To be frank, many in the U.S. mainland view our U.S. territories 
solely through sunglass lenses. But as we look toward the future with 
clean and renewable energy in mind, the attributes which bring tourists 
to our shores should also be our sources for energy. Islands breezes 
could power turbines, our bright sun could charge batteries, our ocean 
and surf could be the driving engines which bring unlimited energy out 
from the sea--onto our shores, and into our homes.
    I am pleased that this hearing has generated a lot of interest from 
my constituents, but I am even more pleased that we have had the active 
and willful engagement by industry, NGO's, and our federal agencies.
                                 ______
                                 

 STATEMENT OF THE HON. JIM COSTA, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF CALIFORNIA

    Mr. Costa. Thank you very much, Madame Chairwoman. It is 
indeed our pleasure to be here this morning in the U.S. Virgin 
Islands on the wonderful island of St. Croix to join with you 
in focusing on a very important issue to not only the U.S. 
Virgin Islands but to other insular territories that have 
similar problems. I would go beyond and indicate that this is 
also a matter of national security, especially when we look at 
the importance of the refinery that is here in St. Croix, and 
the role that it plays in providing energy to many of the 
states in the mainland.
    These islands truly are beautiful, and I have been most 
welcomed since I've arrived, notwithstanding my head cold. The 
fact is that we appreciate the Governor, and the President of 
the Legislature, as well as other witnesses who will testify 
before both Subcommittees here today and with our colleague, 
Mr. Shuster, from Pennsylvania.
    Your representative is a tenacious advocate on behalf of 
the constituents of the U.S. Virgin Islands. I know because I 
hear it on a weekly basis, and you should be proud of the hard 
work that she does. She asked if we would be willing to bring 
both Subcommittees together to come here to St. Croix for the 
purpose of trying to deal with the challenges that we are 
facing and the extremely high cost of energy rates that U.S. 
citizens are facing here in the U.S. Virgin Islands, as was 
noted by the Chairwoman, the second highest in the entire 
United States--only exceeded by American Samoa.
    So truly, when you look at the percentage of cost that 
residents pay here as a part of their costs, their monthly 
costs, a larger percentage of the family's monthly budget goes 
to pay for the utilities. So, obviously, it's a pressing issue 
that we must try to address.
    It's important that we note that obviously these energy 
challenges that we are facing are not just facing the U.S. 
Virgin Islands, but they are facing the entire country of ours. 
And at $100 a barrel of oil, it impacts our ability to deal 
with our deficit; it impacts our ability to deal with 
international issues. I submit that this war on terrorism that 
we are fighting today, we are in fact financing both sides of 
this war when we look at the costs that we are faced with in 
Iraq and Afghanistan at $100 a barrel for oil because, of 
course, countries that are not friendly to us are benefiting 
from the high cost of that resource. There are a multitude of 
reasons why we need to figure out strategies to reduce the cost 
of energy for all U.S. citizens.
    It's important that we look at the fact that the insular 
territories' sky-high electrical rates and cost of foreign oil 
are among the issues that are affecting these islands. While 
these islands are not endowed as we know with an abundance of 
natural--other types of natural resources--coal, oil or gas as 
they have in Pennsylvania or they have in California--they are 
blessed with some resources that the good Lord has shown a 
willingness to provide and that, as the Chairwoman mentioned, 
is this wonderful sun, the wind power, and the ocean power. 
These if harnessed properly, I believe, can make major 
improvements to the energy situation of these islands.
    The second panel that we are going to hear from this 
morning, as I understand, is going to provide testimony in 
those areas of how we can reduce the dependency of oil as being 
the sole source of electricity for the U.S. Virgin Islands.
    And while there is a lot of work that is being done to 
provide cleaner and more independency for the energy future of 
the Virgin Islands, it's important that no matter how active 
the government of the U.S. Virgin Islands is, and how tenacious 
an advocate Representative Christensen is--because she 
certainly is--you can't do it alone. And that's why she wanted 
the Subcommittees to come here.
    Our Subcommittees have different jurisdictions in natural 
resources. We have the difficult challenge with the 
Subcommittee on Energy and Mineral Resources, which I chair, to 
protect public lands but, at the same time, try to take 
advantage of the energy and the wealth that comes from them. 
And that oftentimes is a difficult balancing act to perform. 
But if we do our work well, it's essential to ensure that the 
Federal government, the Department of Energy, look at all the 
options.
    One of the questions that I am going to continue to raise 
this morning is the Memorandum of Understanding with Hawaii 
that was established earlier this year, in January, to ensure 
that Hawaii, which has a similar set of circumstances as the 
U.S. Virgin Islands, obtain 70 percent of their energy from 
renewable sources by the year 2030. I think a similar sort of 
goal ought to be addressed as we look at the U.S. Virgin 
Islands. I believe a similar partnership between the Governor, 
the government in Washington and the insular areas is practical 
and necessary.
    The third panel we will be listening to this morning has 
people from the Department of Energy and the Department of the 
Interior who were instrumental in making that Hawaii 
partnership happen. I am going to be addressing many of these 
questions to them.
    I look forward again to listening to all of you. I am 
pleased to be in St. Croix. As I told your representative, when 
I have come here in the past, it's strictly as a civilian with 
my baseball cap on and my little sunglasses she talked about 
earlier, as a sailor. One of my passions is to come to the 
Caribbean and to kind of hide for a week or two and sail these 
beautiful islands. Today I am here in an official capacity and 
pleased to be so.
    I thank you again, Madame Chairwoman, for allowing us to be 
a part of your hearing. I yield back.
    [The prepared statement of Mr. Costa follows:]

            Statement of The Honorable Jim Costa, Chairman, 
              Subcommittee on Energy and Mineral Resources

    Thank you very much, Chairwoman Christensen, and thank you for 
inviting me to your beautiful islands for this hearing, where I have 
experienced the most tremendous hospitality from everyone. I look 
forward to the rest of my stay on the Virgin Islands, and in particular 
hearing more about some of the challenges that you face with respect to 
energy, and what we in Congress can do to try to ease some of those 
burdens.
    Because there is no doubt about it--those burdens are significant. 
The energy problems that we face as a country are magnified in the 
insular areas. The mainland produces about two-thirds of the energy 
that it uses. But on the insular areas, you import essentially 100%. 
Electricity prices are rising across the country, but here they are 
over three times the national average. This situation is simply not 
sustainable for the residents of the Virgin Islands and the other 
insular areas. It is not sustainable for economic growth on these 
islands. And, it is not sustainable for our environment or national 
security. Guam, for example, hosts some of our most important military 
assets in the Pacific, but it is entirely dependent on imported oil.
    That's why we are here to talk about charting a clean energy future 
for the insular areas ``a future that uses indigenous sources of energy 
to lessen your dependence on imported oil and reduce your electricity 
prices, while being friendlier to the environment at the same time.
    I like the fact that we've titled this hearing ``Charting a Clean 
Energy Future'' because I'm an avid sailor. But the title is more than 
just an allusion to sailing. It also emphasizes that the reason the 
Virgin Islands has such tremendous sailing--your beautiful ocean and 
the winds that pass over it--can also hold the answer to your most 
pressing energy challenges.
    As Chairwoman Christensen pointed out, the same factors that make 
this a paradise on earth--the sun, the breezes, the ocean--bless you 
with a tremendous opportunity for generating energy from these 
resources cleanly and sustainably. And whereas the small size of your 
islands creates challenges, is also allows modestly sized renewable 
energy projects to make a major impact.
    I believe the Department of Energy recognized this when they signed 
a Memorandum of Understanding to get the State of Hawaii to 70% 
renewable power in just over twenty years. That is an incredibly 
ambitious goal, but it is achievable. If the Department of Energy is 
willing to come together with the governments of the insular areas, 
then we can try to achieve similar goals for the U.S. Virgin Islands, 
Guam, American Samoa, and the Commonwealth of the Northern Mariana 
Islands. The energy situation faced by Hawaii and the insular areas are 
similar, although in many ways the insular area challenges are even 
more severe--a smaller infrastructure, higher electricity prices, and 
even more frequent tropical storms. But if Hawaii can reach their clean 
energy goals, then the insular areas can meet their energy goals as 
well, and I look forward to hearing from our witnesses on how we can 
best accomplish that together.
                                 ______
                                 
    Mrs. Christensen. Thank you, Chairman Costa.
    The Chair now recognizes Representative Shuster for any 
opening statement he might have.

    STATEMENT OF THE HON. BILL SHUSTER, A REPRESENTATIVE IN 
            CONGRESS FROM THE STATE OF PENNSYLVANIA

    Mr. Shuster. Thank you, Chairwoman. It's a pleasure to be 
here back in the Virgin Islands. I'll start off just as Mr. 
Costa ended. This is my first official visit here, but I've 
been to the Virgin Islands many times. In fact, the last time I 
was in St. Croix was in 1970. I was a young kid. We stayed at 
the Grape Tree Bay Hotel. The second time to the Virgin Islands 
was to St. Croix, but many times to St. Thomas and St. John 
over the years. And for me I always have a warm spot in my 
heart, if not on my skin, when I am in the beautiful sun here 
in the Virgin Islands.
    You have a very strong advocate in Washington in Chairwoman 
Christensen in what she does. Not only is she an aggressive, 
strong arm but, most importantly, effective in making sure that 
the voice of the Virgin Islands is heard in the U.S. Congress. 
So you should really appreciate all the efforts and work she 
does--and she does a great job of it.
    I am not going to repeat a lot of what my colleague said. 
It's obviously critical, not only to the U.S. Virgin Islands, 
but to the world what we are doing in energy, how we are going 
to solve the crisis I believe we face in energy. I know that in 
reading on the Virgin Islands the high cost of your electricity 
here and what we need to do and what you have been doing trying 
to reduce and conserve energy to help reduce those costs.
    But in looking at new energy sources, I think it's 
absolutely critical, not only the renewables, wind and solar, 
but clean coal technology. I come from Pennsylvania, which is a 
large coal producing state, and we want to find ways and we do 
have ways today available to us and that we can use coal and 
burn it clean and use it because we have a great source of it. 
Coal gasification, turning coal into oil and gas to be able to 
utilize that, it's something we must get serious about and 
produce that in this country. And, of course, nuclear energy is 
something we look at other countries around the world that's 
producing--the French, for instance, produce 80 percent of 
their electricity through nuclear power. It's safe, it's clean, 
and we really need to pursue the development of a more robust 
nuclear sector in this country.
    And I know on these islands looking at smaller types of 
facilities, talking briefly before about is it possible to 
build a nuclear facility that's smaller. I know there are folks 
out there looking at that. The Virgin Islands can be a 
laboratory to develop those types of facilities, whether it's a 
smaller coal-fired electric plant, whether it's a nuclear 
facility that can be utilized, because there have been places 
in the country that were able to develop it, we'll be able to 
put that into practice.
    And as Mr. Costa said, this is not just about the economy 
and what it's doing to our economy, but it's a national 
security issue. It should be very high, if not the highest on 
our list of how we are tackling this challenge we have.
    So I am pleased to be here. I look forward to learning a 
lot today, look forward to hearing all our witnesses. With that 
yield back. Thank you.
    Mrs. Christensen. Thank you, Congressman Shuster.
    I would now like to recognize the first panel of witnesses, 
The Honorable Usie Richards, President of the 27th Legislature 
of the Virgin Islands; Mr. Bevan Smith, Director of the Virgin 
Islands Energy Office; Mr. Hugo Hodge, Executive Director of 
the Virgin Islands Water and Power Authority; Mr. Donald Cole, 
Vice Chair of the Public Services Commission; and Mr. Darryl 
Miller, President of the St. Croix Alliance to Protect Utility 
Ratepayers.
    Mrs. Christensen. Thank you. The Chair now recognizes 
Senate President Richards for his testimony.

         STATEMENT OF HON. RAYMOND ``USIE'' RICHARDS, 
       PRESIDENT, 27TH LEGISLATURE OF THE VIRGIN ISLANDS

    Mr. Richards. Pleasant good morning to one and all. It is 
indeed a pleasure for me on behalf of the members of the 27th 
Legislature to bring greetings to our Honorable Delegate, Donna 
M. Christensen, in her position as Chairwoman of the 
Subcommittee of Insular Affairs, along with your distinguished 
Subcommittee members. And equally so, greetings are bestowed 
upon The Honorable Jim Costa, Chairman of the Subcommittee on 
Energy and Mineral Resources and his distinguished Subcommittee 
members. I want to also say a pleasant good morning to 
Representative Shuster. It's a pleasure to have you here from 
Pennsylvania.
    I believe that today it's most fitting that the Joint 
Oversight Hearing on Charting a Clean Energy Future for the 
Insular Areas be convened in the U.S. Virgin Islands, where 
energy costs, existing resources, alternate sources and 
revenues generated are paramount concerns for the Virgin 
Islands and its residents.
    I must therefore elaborate for a brief moment, because in 
the Territory our most major concern is the factor that I am 
sure will be discussed by the representatives of the Water and 
Power Authority, the Levelized Energy Adjustment Cost, the LEAC 
factor. Simply put, LEAC is the fuel charge, the cost to the 
Virgin Islands Water and Power Authority to produce electricity 
and water that is consumed by its customers. According to WAPA, 
it does not profit from LEAC. The LEAC amount paid by each WAPA 
customer is passed on directly to HOVENSA, the local oil 
refinery formally HOVIC, a full subsidiary of Hess Oil.
    Any Virgin Islander would tell you that LEAC makes up in 
excess of one half of his or her monthly WAPA bill. The cost of 
LEAC is ever-increasing. It's the foremost quandary affecting 
the energy future of the Territory. Thus, it remains difficult 
to chart the progression of LEAC costs and the projected future 
impact on Virgin Islanders. This is due primarily to the fact 
that as the cost of fuel increases worldwide, increases to the 
LEAC becomes inevitable. At present, as all of us know, fuel 
costs are well over $100 a barrel.
    In December of 2007, the Virgin Islands Public Services 
Commission approved WAPA's request for a LEAC increase for 
electricity use from 19 cents per kilowatt hour to 25 cents per 
kilowatt hour, resulting in a 34 percent increase in LEAC 
electricity costs for every Virgin Islander. This means that 
for every kilowatt hour a WAPA customer uses, WAPA charges 25 
cents. LEAC costs for water use remained unchanged at 7.58 
cents per kilowatt hour. WAPA's average customer uses 
approximately 500 kilowatt hours monthly, and the average 
customer's bill went up by 22 percent.
    The question is what is being done today? There is 
discussion on alternative sources of energies being explored. 
WAPA is encouraging its customers to lower consumption of 
electricity and water. Whether we speak of the alternative 
sources that are existing today, charting a clean energy future 
suggests that we should look toward alternative energy sources 
which would, one, reduce pollution that is a by-product of 
energy use; conserve non-renewable energy sources; help 
preserve the ecological balance of the planet; help preserve 
natural resources; and most importantly, promote the use of 
renewable energy sources.
    However, viable alternate energy sources must be researched 
thoroughly before a commitment to use is made in the Territory. 
Here I use the term ``viable'' because an alternate source of 
energy has to be cost effective to the Territory. This would 
include reasonable costs for start-up as well as reasonable 
costs for required long-term maintenance. Moreover since the 
Virgin Islands is now four distinct islands geographically, the 
alternate source of energy must consider its capacity to be 
applied on widespread basis to meet the needs of the 
Territory's infrastructure and WAPA's residential and business 
customers. Whether we speak of the alternate sources of wind 
power, petroleum coke, solar power, and geothermal energy, 
these are the ideas I think that we ought to consider.
    But the proposal before WAPA to reduce the cost of energy 
in the Territory are inclusive of some of these and possibly in 
addition to those that I have mentioned. But at the end of 
2007, they had released a request for proposals for alternate 
sources of energy, according to WAPA and pre-qualified bid 
responses were received from companies for wind, solar, 
biomass, and ocean thermal energy. I believe approximately 18 
companies expressed an interest.
    But it should be made evidently clear by now that all of 
the aforementioned proposed alternative sources of energy are 
surely long term and have no impact on the current impact of 
the pocketbooks of our residents. Today the most important 
question to be addressed in the Virgin Islands is our ability 
to immediately access the capital required to reduce the cost 
of energy in the Virgin Islands.
    This brings to me the often discussed and debated item of 
gasoline excise tax. As you are aware, the HOVENSA oil refinery 
on this island of St. Croix is one of the largest refineries in 
the Western Hemisphere and has continuously served as a major 
supplier of gasoline and various oil products to the U.S. 
mainland. In turn, taxes collected from states on gasoline sold 
within their states are collected by both the state and Federal 
governments. A great percentage of these taxes are returned to 
the states to support and finance their infrastructure 
development. This act is of no controversy with the people of 
the Virgin Islands.
    What is of consequence to our people? It's heart wrenching 
to acknowledge that existing Federal law mandates that products 
produced in the Virgin Islands, shipped to the U.S. mainland, 
where taxes are collected on this product, that the Virgin 
Islands Government is reimbursed a percentage, if not all of 
the taxes collected on these oil products.
    It is evident that we must establish a mechanism to finance 
the development, production, and distribution of clean energy 
in the Virgin Islands. The Virgin Islands Government, despite 
its willingness, does not possess the necessary capital to 
assure a reduction in the current cost of energy, much less the 
necessary capital to ascertain and retain clean, renewable and 
sustainable energy. The time is now to begin the discussion and 
take action on the return of gasoline excise taxes to the 
Government of the Virgin Islands.
    I thank you for this opportunity and look forward to a 
healthy discussion on this matter. And, Madame Chairwoman, 
today I thought that I should wear brown, because in our local 
vernacular, things in the Virgin Islands are very brown, but I 
wore green just like you today to hope that it's a bright 
beginning so we could begin to address some of the problems 
that are facing the people of Virgin Islands. Again, thank you 
for this opportunity.
    [The prepared statement of Mr. Richards follows:]

             Statement of The Honorable Usie R. Richards, 
        Senate President--27th Legislature of the Virgin Islands

    On behalf of the members of the 27th Legislature of the Virgin 
Islands, I am honored in my capacity as Senate President to bring 
greetings to The Honorable Donna M. Christensen, the Territory's 
Delegate to Congress who is here today in her position as Chairwoman of 
the Subcommittee on Insular Affairs along with her distinguished 
Subcommittee Members. Equally so, greetings are bestowed upon The 
Honorable Jim Costa, Chairman, Subcommittee on Energy and Mineral 
Resources and his distinguished Subcommittee Members. I welcome each of 
you to our beautiful Island of St. Croix! Enjoy its splendor and while 
here, you are encouraged to contribute to our local economy by dining 
and shopping in our hospitable establishments.
    It is most fitting that a Joint Oversight Field Hearing on, 
``Charting a Clean Energy Future for the Insular Areas'' be convened in 
the U.S. Virgin Islands, where energy costs, sources, alternate sources 
and revenues generated are paramount concerns for the Territory and its 
residents. Please allow me the opportunity to elaborate a moment.
LEVELIZED ENERGY ADJUSTMENT CLAUSE (the LEAC Factor):
    Simply put, LEAC is the fuel charge: the cost to the U.S. Virgin 
Islands Water and Power Authority (WAPA) to produce electricity and 
water that is consumed by its customers. According to WAPA, it does not 
profit from LEAC; the LEAC amount paid by each WAPA customer is passed 
on directly to HOVENSA, the local oil refinery.
    Any Virgin Islander would tell you that LEAC makes up in excess of 
one half of his or her monthly WAPA bill. The cost of LEAC is ever-
increasing. It is the foremost quandary affecting the energy future of 
the Territory. Thus, it remains difficult to chart the progression of 
LEAC costs and the projected future impact on Virgin Islanders. This is 
due primarily to the fact that as the cost of fuel increases worldwide, 
LEAC likewise increases. At present, fuel cost is now over $100 per 
barrel!!
    On December 1, 2007, the U.S. Virgin Islands Public Services 
Commission approved WAPA's request for a LEAC increase for electricity 
use from 19 cents per kilowatt hour to 25 cents per kilowatt hour, 
resulting in a 34% increase in LEAC electricity costs for every Virgin 
Islander. This means that for every kilowatt hour a WAPA customer uses, 
WAPA charges 25 cents! LEAC costs for water use remained unchanged at 
7.58 cents per kilowatt hour. WAPA's average customer uses 500 kilowatt 
hours monthly, and the average customer's bill went up by 22%.
    What is being done?
      Alternate sources of energy are being explored
      WAPA is encouraging its customers to lower consumption of 
electricity and water
ALTERNATE SOURCES OF ENERGY:
    ``Charting a Clean Energy Future'' suggests that we should look 
towards alternative energy sources which would 1) reduce pollution that 
is a by-product of energy use; 2) conserve non-renewable energy 
sources; 3) help preserve the ecological balance of the planet, and 4) 
help preserve natural resources. However, viable alternate energy 
sources must be researched thoroughly before a commitment to use is 
made in the Territory. Here, I use the term ``viable'' because an 
alternate source of energy has to be cost-effective to the Virgin 
Islands. This would include reasonable costs for start-up as well as 
reasonable costs for required long-term maintenance. Moreover, since 
the U.S. Virgin Islands is now four distinct islands geographically 
(St. Croix, St. John, St. Thomas and Water Island), the alternate 
source of energy must have the capacity to be applied on a widespread 
basis to meet the needs of the Territory's infrastructure and WAPA's 
residential and business customers.
    Some alternate sources of energy being explored presently include:
      Wind Power: Wind-powered generators are used to produce 
wind energy. It is a renewable source of energy; as long as there is 
wind, this source of energy can be generated. No pollution is produced 
from wind power therefore the environment is not contaminated.
      Petroleum Coke: Petroleum Coke is a waste-product of the 
Hovensa Oil Refinery that is the result of the process utilized to 
refine oil using the catalytic cracking plant. This material when 
efficiently burned provides an opportunity to produce clean energy. 
Currently this material is in demand by off-island entities and thereby 
is collected and shipped off-island.
      Solar Power: Solar energy is obtained when the sun's rays 
are collected into solar cells or solar thermal panels for conversion 
into electricity. Solar power also is a renewable source of energy and 
is non-pollutant. I am aware that a St. Croix family on the East End 
(Jan Mitchell and Steffen Larsen) was recently honored for use of solar 
power in their home.
      Geothermal Energy: Geothermal power is derived from heat 
energy beneath the earth. GeoNet BioFuels is a company recently 
established on St. Croix as an alternate source to gasoline.
PROPOSALS BEFORE WAPA TO REDUCE THE COST OF ENERGY IN THE VIRGIN 
        ISLANDS:
    At the end of November 2007, WAPA released a request for proposals 
for alternate sources of energy. According to WAPA, pre-qualified bid 
responses were received from companies for wind, solar, bio-mass and 
ocean thermal energy. Eighteen (18) companies expressed an interest and 
financial capability to sell power to WAPA. The respondents' proposals 
are due by May 1, 2008.
GASOLINE EXCISE TAX:
    As you are aware, the HOVENSA Oil Refinery, on this island of St. 
Croix, is one of the largest refineries in the Western Hemisphere and 
has continuously served as a major supplier of gasoline and various oil 
products to the U.S. mainland. In turn taxes collected from states on 
gasoline sold within their states are collected by both the state and 
federal governments. A great percentage of these taxes are returned to 
States to support and finance their infrastructure development. This 
act is of no controversy with the people of the Virgin Islands. What is 
of consequence to our people? It is heart wrenching to acknowledge that 
existing Federal Laws mandates that products produced in the Virgin 
Islands and shipped to the U.S. mainland, where taxes are collected on 
this product, that the Virgin Islands Government is reimbursed a 
percentage, if not all of the taxes collected on the oil products 
shipped to the mainland. It is evident that we must establish a 
mechanism to finance the development, production and distribution of 
clean energy in the Virgin Islands. Our territorial government, despite 
its willingness, does not possess the necessary capital to ascertain 
and retain clean, renewable and sustainable energy. I thank you for 
this opportunity and look forward to a healthy discussion on this 
matter.
                                 ______
                                 
    Mrs. Christensen. Thank you, Senate President Richards. 
That is the purpose for which we are being here today, to look 
for better days.
    I did not state at the beginning of Senator Richards 
testifying that the timing light on the table indicates when 
time is concluded. But I didn't feel that I could come into his 
own chamber and cut him off before he was finished, so we 
allowed you to go over. Thank you for your testimony.
    The Chair now recognizes Mr. Smith to testify. Mr. Smith, 
in addition to being the Director of the V.I. Energy Office, is 
testifying on behalf of the Governor is my understanding as 
well. We invite you to testify for five minutes.

              STATEMENT OF BEVAN SMITH, DIRECTOR, 
                  VIRGIN ISLANDS ENERGY OFFICE

    Mr. Smith. Thank you.
    Good morning, Madame Chairwoman Christensen, Chairman 
Costa, Representative Shuster, other members of the 
Subcommittees, members in the audience and those listening on 
radio. My name is Bevan Smith, Jr., and I have been working 
with the Virgin Islands Energy Office for 25 years and served 
in the capacity of the Director since 2004. It is a pleasure to 
appear before you today to offer testimony on such a timely 
subject matter, Charting a Clean Energy Future for the Insular 
Areas.
    The Virgin Islands is an unincorporated territory of the 
United States located in the Lesser Antilles islands group 
between the Atlantic Ocean and the Caribbean Sea.
    The Territory faces many of the same problems encountered 
by all small island nations with our relatively small electric 
power system, limited interconnection, and generation units 
that are based on older petroleum fueled technology with 
relatively poor heat rates. This is further complicated by the 
reliability criteria that require online generation to maintain 
high spinning reserve margins in the absence of a supply grid. 
These conditions lead to excessive costs for the sole electric 
utility which are further increased by the recent upturn in 
petroleum prices.
    The U.S. Virgin Islands currently relies on virtually 100 
percent imported petroleum as its source of its energy. The 
Territory's generating facilities are included in that slim 
minority of just 1.6 percent of the total electricity generated 
nationwide that utilizes oil-fired plants. Due to the 
concentration of the majority of the world's oil reserve in 
countries that are unfriendly to the United States, the growing 
international demand for oil and the associated increase in the 
price of oil, the economy of the U.S. Virgin Islands is highly 
vulnerable to supply disruptions and energy price increases. 
This vulnerability is further exacerbated since much of the 
petroleum is imported from PDVSA, the state-owned petroleum 
company of Venezuela. The current political instability of that 
region of the world could result in a severe disruption or 
curtailment of petroleum shipments from HOVENSA refinery on St. 
Croix, which is partially owned by PDVSA.
    Furthermore, the reliance on imported energy sources 
creates a large financial burden on the United States Virgin 
Islands economy. Typically, two-thirds of the price of 
electricity in the U.S. Virgin Islands is attributed to the 
fuel adjustment charges, all of which are derived from the 
escalating cost of purchasing petroleum. The dependence on 
imported fossil fuel forces our residents to pay a higher 
percentage of their disposable income for energy than residents 
of the mainland United States. An increasing number are faced 
to make decisions to either pay for the food, medicine or 
utility bill.
    High energy costs are driving up the cost of living in the 
Territory by fueling inflation. It serves as the deterrent to 
business development, and is perhaps the greatest threat to the 
Virgin Islands economy. It is imperative that this reality is 
taken into consideration throughout all testimonies to the 
Joint Oversight Field Hearing on Charting a Clean Energy Future 
for the Insular Areas.
    The United States Department of Energy has been 
instrumental in the Territory's development of energy programs 
over the past 34 years through its formula-driven Energy 
Extension Service, State Energy Conservation Program, 
Institution Conservation Program and the State Energy Program 
grants. The former three grants have been phased and SEP 
continues to supplement funding to the Territorial State Energy 
Plan.
    Over the past decade, the U.S. Virgin Islands has been 
awarded an average of $235,000 annually in the U.S. Department 
of Energy formula grant funds, which represents 8 percent of 
the total budget. Program year 2008 will bring $174,000 to the 
Territory to assist with the mission of the Virgin Islands 
Energy Office. Low Income Heating and Energy Assistance 
Program, LIHEAP, funds are awarded directly to the local 
Department of Human Services, and that's to the tune of some 
$122,000. Significantly, our focus on general education 
programs earned the U.S. Virgin Islands the 2003 National 
Energy Education Development State Program Award from the NEED 
Project.
    In charting a clean energy future for the insular areas, we 
need both the Insular Affairs and the Energy and Mineral 
Resources Subcommittees to address on behalf of all the 
territories of the United States of America the funding 
challenges, program priorities, and our unique energy issues. 
An adequate resolution will bring self-sufficiency through 
increased utilization of renewable energy technology and energy 
sufficient measures. As it pertains to the funding issues, the 
U.S. Virgin Islands is often inappropriately compared to the 
continental U.S. when it comes to allocation of energy funds. 
This comparison is grossly unfair since the United States 
Virgin Islands is not as densely populated as the continental 
U.S., therefore distributing electricity generation costs among 
fewer utility customers.
    Electricity rates in the southeast continental U.S. 
averages between 5 to 10 cents a kilowatt hour, while 
electricity in the U.S. Virgin Islands is currently at 35 cents 
a kilowatt hour heading to 42 cents in the near future. 
Additionally, the U.S. Virgin Islands is often compared to 
Hawaii when it comes to energy. While the climates of the 
Pacific and Caribbean islands are somewhat similar, 
demographics are starkly different. Hawaii is densely populated 
and has a highly sophisticated energy infrastructure.
    Mrs. Christensen. I am going to ask you to wrap up. We are 
going to get to some of your other points in the question and 
answer.
    Mr. Smith. Thank you. I just say that Section 251 of the 
2005 Energy Policy Act authorizes the Secretary of the Interior 
among other items to make grants to governments of insular 
areas of the United States for project plans that include an 
analysis of a range of options to address energy security 
projects such as protecting electric power transmission 
distribution lines or significantly reducing dependence on an 
insular area on imported fossil fuel.
    The Office of the Governor has taken a lead by example 
posture by instituting an energy demand reduction program for 
the central Government.
    In closing, I would like to thank both Chairs of the 
Subcommittees, and I would like to reiterate that the driving 
factor in the economy of the U.S. Virgin Islands is the high 
cost of energy. We are hoping that clean energy technologies 
can be that solution. However, there are significant 
impediments to the implementation, and the U.S. Virgin Islands 
may not be able to overcome without assistance from the Federal 
Government. This requires immediate Congressional action. Thank 
you.
    Mrs. Christensen. Thank you, Mr. Smith.
    [The prepared statement of Mr. Smith follows:]

              Statement of Bevan R. Smith, Jr., Director, 
                      Virgin Islands Energy Office

    Good Morning Madame Chairwoman Christensen, Chairman Costa and 
other members of the two Subcommittees. My name is Bevan Smith Jr. and 
I have been working with the Virgin Islands Energy Office for 25 years 
and served in the capacity as Director since 2004. It is a pleasure for 
me to appear before you today to offer testimony on such a timely 
subject matter:
Charting a Clean Energy Future for the Insular Areas
    The U.S. Virgin Islands is an unincorporated territory of the 
United States located in the Lesser Antilles islands group between the 
Atlantic Ocean and the Caribbean Sea.
    The Territory faces many of the same problems encountered by all 
small island nations with our relatively small electric power system, 
limited interconnection, and generation units that are based on older 
petroleum-fueled technology with relatively poor heat rates. This is 
further complicated by reliability criteria that require online 
generation to maintain high spinning reserve margins in the absence of 
a supply grid. These conditions lead to excessive costs for the sole 
electric utility which are further increased by the recent upturn in 
petroleum prices.
    The U.S. Virgin Islands (USVI) currently relies on virtually 100% 
imported petroleum as the source of its energy. The Territory's 
generating facilities are included in that slim minority of just 1.6% 
of the total electricity generated nationwide that utilizes oil-fired 
plants. Due to the concentration of the majority of the world's oil 
reserves in countries unfriendly to the US, the growing international 
demand for oil and the associated increase in the price of oil, the 
economy of the USVI is highly vulnerable to supply disruptions and 
energy price increases. This vulnerability is further exacerbated since 
much of the petroleum is imported from PDVSA--the state-owned petroleum 
company of Venezuela. The current political instability in that region 
of the world could result in a severe disruption or curtailment of 
petroleum shipments to the Hovensa refinery on St. Croix, which is 
partially owned by PDVSA.
    Furthermore, the reliance on imported energy sources creates a 
large financial burden on the USVI economy. Typically two-thirds of the 
price of electricity in the USVI is attributed to fuel adjustment 
charges, all of which is derived from the escalating cost of purchasing 
petroleum. The dependence on imported fossil fuels forces our residents 
to pay a higher percentage of their disposable income for energy than 
residents of the mainland United States. An increasing number are 
forced to make decisions to either pay for food, medicine, or their 
utility bill. High energy cost is driving up the cost-of-living in the 
Territory by fueling inflation; it serves as a deterrent to business 
development, and is perhaps the greatest threat to the Virgin Islands 
economy. It is imperative that this reality is taken into consideration 
throughout all testimonies to this Joint Oversight Field Hearing on 
``Charting a Clean Energy Future for the Insular Areas''.
    The U.S. Department of Energy has been instrumental in the 
Territory's development of energy programs over the past 34 years 
through its formula driven Energy Extension Service, State Energy 
Conservation Program, Institutional Conservation Program and State 
Energy Program (SEP) grants. The former three grants have been phased 
out and the SEP continues to supplement funding to the Territorial 
State Energy Plan. Over the past decade, the USVI has been awarded an 
average of $235,000 annually in USDOE formula grant funds, which 
represents eight percent of each fiscal year's total budget. Program 
year 2008 will bring $174,000 to the Territory to assist with the 
mission of the Virgin Islands Energy Office. Low Income Heating and 
Energy Assistance Program (LIHEAP) funds are awarded directly to the 
local Department of Human Services to supplement their Energy Crisis 
Assistance Program. Significantly, our focus on general energy 
education programs earned the USVI the 2003 National Energy Education 
Development State Program Award from the NEED Project.
    In charting a clean energy future for the Insular Areas, we need 
both the Insular Affairs and the Energy and Minerals Resources 
Subcommittees to address on behalf of all Territories of the United 
States of America, funding challenges, program priorities, and our 
unique energy issues. An adequate resolution will bring self-
sufficiency through increased utilization of renewable energy 
technologies and energy efficiency measures. As it pertains to funding 
issues, the USVI is often inappropriately compared to the continental 
U.S. when it comes to allocation of energy funds. This comparison is 
grossly unfair since the USVI is not as densely populated as the 
continental US, therefore distributing electricity generation costs 
among fewer utility customers. Electricity rates in the Southeast 
continental U.S. averages between $0.05--$0.10/kWh while electricity in 
the USVI is presently $0.35/kWh and forecasted to be $0.42 in the near 
future. Additionally, the USVI is often inappropriately compared to 
Hawaii when it comes to energy. While the climates of the Pacific and 
Caribbean islands are somewhat similar, the demographics are starkly 
different. Hawaii is densely populated and has a highly sophisticated 
energy infrastructure and a large industrial base. The USVI is not as 
densely populated and has an increasingly antiquated energy 
infrastructure. The State Energy Program formula for allocation of 
funds to the States and Territories has not been updated in over 20 
years. The formula was developed when energy costs in the Territory 
were much lower. To discontinue this inadvertent discrimination the 
formula needs to be updated to include changes in energy costs, insular 
location, climate, demographics, etc.
    The U.S. Department of Energy's Weatherization Assistance Program 
(WAP) is the nation's largest residential energy efficiency program. 
Its mission is to insulate the dwellings of low-income persons, 
particularly the elderly, persons with disabilities, families with 
children, high residential energy users, and households with a high 
energy burden, in order to conserve needed energy and to aid those 
persons least able to afford higher utility costs. While the USVI does 
not require funding to insulate against cold winter temperatures, low-
income citizens of the Territory can increase energy efficiency through 
the insulation of conventional water heater tanks or the installation 
of domestic solar water heaters to reduce electricity costs. The latter 
program was successfully implemented by the sunshine State of Florida 
using Weatherization Assistance Program funds. However, under current 
law, the USVI cannot participate in the WAP. Even if we were made 
eligible through an act of Congress, the USVI's portion would be 
approximately $25,000 based on the existing formula. Here again is 
another example of inadvertent discrimination against the Territories 
when it comes to the allocation and distribution of Federal Funds. This 
disparity should be corrected and the allocation formula for both 
LIHEAP and WAP should be updated.
    There are specific program priorities that must be addressed in 
charting a clean energy future for the Territories. We need every 
opportunity available to improve our energy efficiency, increase the 
use of renewable energy and to reduce our 100% dependence on imported 
fossil fuels. As previously mentioned, the USDOE formula grant makes up 
a relatively small percentage of the overall SEP Territorial State 
Plan's budget; therefore, participation in the USDOE Competitive 
Solicitations is necessary. In many instances when the USDOE issues 
solicitations the Territories are either excluded from competition or 
the program areas for funding are not applicable or relevant to energy 
priorities within the particular insular area.
    Despite the difficulties of acquiring private partnerships, 
matching non-federal grant funds, and competing with the 50 states, the 
USVI has been successful in winning a handful of USDOE Special Projects 
Solicitation grant awards. We formed partnerships and conducted 
technical building audits through a Rebuild American Paradise grant; 
the Building Energy Codes grant was instrumental in the Territory's 
adoption of the 2003 International Building Codes. Plans are currently 
underway for an upgrade to a tropical building energy code through a 
grant to Hawaii on behalf of the Territories; a grant for the 
development of a distributed generation policy led to a Net Metering 
policy for the Territory; and a grant to conduct a Wind Energy Case 
Study provided data that supplemented Wind Mapping efforts of the 
National Renewable Energy Laboratory and the USDOE Wind Powering 
America in a recent wind workshop with record breaking attendance by 
residents of the USVI. The technical assistance was beneficial in 
showing the potential of each category of the grant award, but due to 
the lack of funding for actual implementation, no energy or cost 
savings were realized.
    Section 251 of the 2005 Energy Policy Act authorizes the Secretary 
of the Interior among other items, to make grants to governments of 
insular areas of the United States for project plans that include an 
analysis of a range of options to address energy security projects such 
as protecting electric power transmission and distribution lines or 
significantly reducing the dependence of an insular area on imported 
fossil fuel. There are authorized in the Act, but not yet appropriated, 
$6,000,000 for each fiscal year after the enactment. Similar 
authorization existed in previous EPACTs but no appropriations have 
actual been made even though the Territorial Energy Assessment Plan has 
been completed with its findings and recommendations. The Virgin 
Islands Energy Office and the Water and Power Authority (WAPA) have 
already employed many of the strategies or projects identified by the 
Secretary of Energy as having the greatest potential for reducing the 
dependence on imported fossil fuels. Through the appropriation of these 
grants, the recommendations in the recently updated Energy Assessment 
report and other subsequent reports can serve as the roadmap towards 
reducing the Territories dependence on imported fossil fuel and begin 
to chart a clean energy future for all.
    The Office of the Governor has taken a lead by example posture by 
instituting an energy demand reduction program for the central 
Government. This project aims to reduce energy consumption in 
government facilities and vehicles by at least 5 percent per year over 
the next four years. The program will implement the best practices in 
order to advance energy-efficiency throughout government, improve 
utility management decisions in government facilities, and promote the 
use of renewable and advanced vehicle technologies and/or alternative 
fuel blends.
    The Virgin Islands Energy Office was recently relocated to the 
Office of the Governor to bring a serious focus on energy issues in the 
USVI by commissioning the development of a comprehensive energy 
strategy for the Territory with the collaboration of the Southern 
States Energy Board, USDOE National Energy Technology Laboratory, and 
Virgin Islands energy stakeholders.
    The goal of the comprehensive energy strategy is to develop a 
comprehensive energy strategy for the USVI that will increase the 
standard of living of the citizens of the Territory by assuring the 
long-term availability of affordable, secure supplies of energy. A 
secondary goal is to become a Caribbean and worldwide showcase for the 
development and use of renewable energy.
    In closing, I thank both chairs of the subcommittees, and would 
like to reiterate that the driving factor in the economy of the USVI is 
the high cost of energy. We are hoping that clean energy technologies 
can be the solution. However, there are significant impediments to 
their implementation and the USVI may not be able to overcome without 
assistance from the Federal Government. This will require immediate 
Congressional action.
                                 ______
                                 
    Mrs. Christensen. The Chair now recognizes the Executive 
Director of V.I. WAPA, Mr. Hodge for 5 minutes.

       STATEMENT OF HUGO HODGE, JR., EXECUTIVE DIRECTOR, 
            VIRGIN ISLANDS WATER AND POWER AUTHORITY

    Mr. Hodge. Good morning, Madame Chairwoman Christensen, 
Chairman Costa, Representative Shuster and members of the two 
Subcommittees. My name is Hugo Hodge, Jr. I am the Executive 
Director of the Virgin Islands Water and Power Authority. Let 
me begin by thanking both Subcommittees on behalf of the 
Authority for the attention to this extremely important topic 
and for affording us the opportunity to inform you folks of 
Virgin Islands Water and Power Authority's extended effort to 
bring clean and economical energy to the islands and the 
critical role that it believes the Federal government has to 
play in this endeavor.
    To this end, the Authority would like to describe for you 
its considerable and ongoing efforts to control and reduce the 
exorbitant costs of power and water to the citizens of the 
Virgin Islands in this very difficult economic environment, and 
to reduce our dependence on imported oil; outline some of the 
more significant impediments that have made this goal so 
difficult to achieve; and identify ways in which we believe the 
Federal government and Congress in particular can provide 
assistance that is critical to our success.
    As you will see shortly from my presentation, I believe 
that, while we have undertaken a number of powerful initiatives 
and are actively exploring a broad range of alternatives to our 
current generating system, assistance from Washington will be 
critical in our ultimate success in these endeavors.
    To begin, the Authority believes that it is extremely 
important to understand the truly unique circumstances that 
govern its efforts to secure clean and economical energy for 
the residents of the islands, and to recognize that they are 
far more constraining, both economically and geographically, 
than anything that stateside United States face in these 
endeavors. Unlike most stateside systems, the Authority is in 
essence a nonprofit government owned utility that is the sole 
source of public power and water in the island.
    One of WAPA's most distinguishing characteristics is that 
it operates in an insular environment where there is no power 
grid from which it can gain access to electricity generated by 
other utilities, or even generated by its own separate 
generating plants on St. Thomas and St. Croix.
    Among other things, this prevents the Authority from being 
able to purchase power generated elsewhere by others that might 
provide a variety of alternative, and possibly much less 
expensive, sources of power. It also means that we must have 
more generating units per megawatt of capacity, and incur the 
high operating costs that entails in order to provide the 
necessary on-site backup generating capacity that is typically 
provided stateside by the regional power grids.
    Our insular character and limited geographical resources 
eliminates a number of other options that are available to 
stateside utilities. For example, natural gas, hydroelectric 
and nuclear power generation are simply resources not readily 
available here. Similarly the absence of large areas for crop 
production make reliance on biofuels impractical in the 
islands.
    Because the islands do not have any significant natural 
sources of potable water, our power generating system must also 
provide the power necessary for the operation of the 
Authority's large desalination plants, which provide the vast 
majority of the drinking water for the islands. Because of 
this, anything that adversely impacts the cost of electricity 
in the islands also increases the cost of drinking water.
    It is also critically important to recognize that our 
limited financial resources create major obstacles to our 
efforts to develop and implement alternative sources of energy 
that are environmentally sound, less costly and might 
significantly reduce our dependence on imported oil.
    Given that the Authority is funded 100 percent by its 
customers, it's important to recognize the difficult economic 
conditions facing the residents of the islands. The cost of 
electricity to our residential customers is currently running 
an exorbitant 34 cents per kilowatt hour. That is almost 350 
percent above the U.S. national average of 10.8 cents per 
kilowatt hour. The huge increases in the price of oil in recent 
years and months have caused our rates to increase by over 118 
percent since 2002. Consequently, stateside concerns about 
increased power costs attributable to the increased price of 
oil pale in comparison to what Virgin Islands residents already 
experience, while further increases loom in the horizon.
    We estimate that for every dollar increase in the cost of a 
barrel of oil, the cost to our residential customers for a 
kilowatt hour of power will increase by at least 1.75 cents.
    Even though our citizens pay far more for electricity than 
stateside customers, they are far less able to afford these 
enormous prices. It often goes unrecognized that the per capita 
income in the Virgin Islands is about $19,000, which is over 34 
percent below the per capita income in the poorest of the 50 
states.
    The combined impact of extremely high energy costs and 
limited financial resources can be seen in the dramatically low 
power consumption rates of our citizens. Whereas stateside 
households consume an average of 1,000 kilowatt hours per 
month, the average in the Virgin Islands is a dramatic 50 
percent lower, at only 500 kilowatt hours per month.
    You want me to conclude?
    Mrs. Christensen. You got about a minute.
    Mr. Hodge. WAPA has been aggressively evaluating potential 
alternative sources of energy and changes in the Authority's 
system infrastructure that could reduce power costs and 
dependence on oil.
    On February 28 R.W. Beck, a consultant firm under contract 
with the Authority, in collaboration with the Public Service 
Commission, completed a major update of WAPA's plan for power 
generation expansion. Wind power resources, efficiency 
improvements, waste to energy options, utilization of slow-
speed diesels, increased implementation of combined cycle 
generation, the use of liquefied natural gas, petroleum coke, 
and ocean thermal technology are all being considered.
    In conclusion, I want to thank the Subcommittees once again 
for allowing us the opportunity to make this presentation. I 
hoped that I have helped to increase your understanding of the 
very unique circumstances that constrain our efforts to reduce 
our dependency on oil, to reduce our exorbitant costs for 
electric power generation, and to develop alternative sources 
of energy in the Virgin Islands. I also hope that you 
appreciate how hard we have been working to achieve those 
goals, and how much we are in need of Federal assistance to 
supplement the extremely limited resources we are able to 
devote to this critically important effort. Thank you.
    Mrs. Christensen. Thank you, Mr. Hodge.
    [The prepared statement of Mr. Hodge follows:]

         Statement of Hugo Hodge, Jr., Executive Director-CEO, 
                 Virgin Islands Water & Power Authority

I. Introduction
    Good morning, Chairwoman Christensen, Chairman Costa, and members 
of the two Subcommittees.
    My name is Hugo Hodge, Jr. I am the Executive Director of the 
Virgin Islands Water & Power Authority. I am joined here this morning 
by the Authority's Chief Operating Officer, Mr. Gregory Rhymer, who 
will be available to assist me in addressing any question you might 
have at the conclusion of my prepared remarks. Mr. Rhymer was 
specifically responsible for the Territorial Energy Assessment update 
in 2006 and has been the Authority's guide for the past 18 years in its 
compliance with environmental requirements relating to its many past 
modifications and future expansion projects. As you know, we provided 
the subcommittees in advance with a detailed written statement, which I 
will try to summarize for you now within the 5-minute time period 
allotted for each of the oral presentations. For those in the audience 
who might like to see our full written presentation, we have brought a 
number of copies and will make them available when the hearing has 
concluded.
    As you may know, I assumed the leadership of the Authority on 
January 1. Before that I was the Director of Griffin Power in Georgia, 
where I was in charge of strategic planning, and led management teams 
in all aspects of electric utility operations--including the evaluation 
of alternative sources of power generation. Born and raised in the 
Virgin Islands, I hold a bachelor of science degree in mechanical 
engineering, have an MBA from Georgia State University, and am 
nationally certified as a Power Quality Professional and as a Public 
Manager.
    Let me begin, by thanking both subcommittees on behalf of the 
Authority for their attention to this extremely important topic, and 
for affording us the opportunity to inform you of both VIWAPA's 
extensive efforts to bring clean and economical energy to the Islands, 
and the critical role that it believes the federal government has to 
play in this endeavor.
    To this end, the Authority would like to----
    1.  Describe for you its considerable, and ongoing, efforts to 
control and reduce the exorbitant costs of power and water to the 
citizens of the Islands in this very difficult economic environment, 
and to reduce our dependence on imported oil;
    2.  Outline some of the more significant impediments that have made 
this goal so difficult to achieve; and
    3.  Identify ways in which we believe the federal government, and 
Congress in particular, can provide assistance that is critical to our 
success.
    As you will see shortly from my presentation, I believe that, while 
we have undertaken a number of powerful initiatives, and are actively 
exploring a broad range of alternatives to our current generating 
system, assistance from Washington will be critical to our ultimate 
success in these endeavors.
II. Our Critically Important Insular Setting
    TO BEGIN, the Authority believes that it is extremely important to 
understand the truly unique circumstances that govern its efforts to 
secure clean and economical energy for the residents of the Islands, 
and to recognize that they are far more constraining, both economically 
and geographically, than anything that state-side utilities face in 
these endeavors.
    VIWAPA is a quasi-public entity that is the sole source of public 
electricity and water in the Islands. Unlike most state-side systems, 
it is, in essence, a non-profit government-owned utility. It is run by 
a governing Board that is appointed by the Governor (with the advice 
and consent of the Legislature). That Board, both monitors its 
operations, and selects its Executive Director--who, with his staff and 
Authority employees, manages and conducts its widespread and complex 
operations on a daily basis.
    One of WAPA's most distinguishing characteristics is that it 
operates in an insular environment where there is no power grid from 
which it can gain access to electricity generated by other utilities, 
or even generated by its own separate generating plants on St. Thomas 
and St. Croix. This island isolation imposes significant operational 
constraints on the Authority that are not shared by state-side 
facilities.
    1.  Among other things, this prevents the Authority from being able 
to purchase power generated elsewhere by other utilities or by private 
entities that might provide a large variety of alternative, and 
possibly much less expensive, sources of power.
    2.  It also means that, unlike state-side utilities, we must have 
more generating units per MW of capacity (and incur the higher 
operating costs that entails) in order to provide the necessary on-site 
backup generating capacity that is typically provided state-side by the 
regional power grids to which almost all other electric utilities have 
ready access.
Geographic Limitations
    Because of our insular situation, and limited geologic resources, 
there are certain options available to other utilities that are simply 
unavailable to the Authority. For example:
    1.  The use of less expensive and less polluting natural gas is 
simply not an option, here. The same is true for coal.
    2.  Similarly, the absence of large areas for crop production makes 
reliance on biofuels impractical in the Virgin Islands
    3.  Hydroelectric and nuclear power generation are also not options 
here.
    4.  In addition, our insularity and remote location limits the 
potential use of a number of emission control options that are under 
active consideration elsewhere--like carbon sequestration that might be 
used with the combustion of cheap coal for the control of greenhouse 
gas emissions.
    5.  Water Supply--Because the Islands do not have any significant 
natural sources of potable water, our power generating system must also 
provide the power necessary for the operation of the Authority's large 
desalinization plants--which provide the vast majority of the drinking 
water for the Islands. Because of this, anything that adversely impacts 
the cost of electricity in the islands also increases the cost of 
drinking water.
Economic Constraints
    It is also critically important to recognize that our limited 
financial resources create major obstacles to our efforts to develop 
and implement alternative sources of energy that are environmentally 
sound, less costly and might significantly reduce our dependence on 
imported oil.
    Given that the Authority is funded 100% by its customers, through 
its charges for power and water, it is important to recognize the 
difficult economic conditions facing the residents of the Islands.
    1.  The Already Exorbitant Cost of Electricity--The cost of 
electricity to our residential customers is currently running about 38 
cents per kilowatt hour (kwh). To put this in stark perspective, that 
is almost 400% above the U.S. national average of 10.8 cents per 
kilowatt hour. Due to our heavy dependence on oil for power generation, 
and the huge increases in the price oil in recent years (and months), 
our rates have increased by over 118% in just the last 6 years. While 
there are very legitimate concerns among U.S. mainland citizens about 
increasing power costs attributable to the increased price of oil, they 
pale in comparison to what Virgin Island residents already experience, 
with further increases looming on the horizon.

          We estimate that for each $1 increase in the cost of a barrel 
        of oil, the cost to our residential customers for a kilowatt 
        hour of power will increase by at least $0.0175.
    2.  Low Per Capita Income--Even though our citizens pay far more 
for electricity than state-side customers, they are far less able to 
afford these enormous prices. It often goes unrecognized that the per 
capita income in the Virgin Islands is about $19,000, which is over 34% 
% below the per capital income in the poorest of the 50 states.
    3.  Severely Reduced Household Consumption of Electricity--The 
combined impact of extremely high energy costs and limited financial 
resources can be seen in the dramatically low power consumption rates 
of our citizens, in comparison to state-side customers. Whereas state-
side households consume an average of 1,000 kilowatt hours per month, 
the average in the Virgin Islands is a dramatic 50% lower, at only 500 
kilowatt hours per month.
Unique Dependence On Oil
    State-side, only a minuscule percentage of the generated 
electricity comes from the burning of oil. Consequently, while the 
recent drastic increases in the price of oil have had some impact on 
the state-side cost of electricity, is has been trivial in comparison 
to the impact in the Virgin Islands.
    State-Side, the breakdown in power generation is as follows:
        48.6% Coal
        21.5% Natural Gas
        19.4% Nuclear
        6.0% Hydroelectric
        3.0% Other
        Only 1.6% Oil
    It is particularly noteworthy that the predominant state-side 
sources of electric power (the first four I just listed--comprising 
over 95% of the total) are not now, and never will be, available in the 
Virgin Islands--due to the remote location and geographic features of 
the Islands.
    In stark contrast, literally 100% of power generation in the Virgin 
Islands is currently derived from the combustion of oil.
    Consequently, the dramatic increases in the price of oil over the 
past several years (and particularly in the last several months), have 
had a 60 times greater impact on the average cost of power generation 
here than in the states.
    The result is that the recent increases in the price of oil have 
had a far more dramatic impact in the Islands than they have elsewhere, 
and that the adverse impacts will only be further magnified as oil 
prices continue to rise.
    Under these circumstances, it is obvious that we have a tremendous 
incentive to improve the efficiency of our power generation, to 
encourage power conservation by our citizens, and to otherwise reduce 
our dependence on imported oil by identifying and developing 
alternative sources of energy that are both environmentally beneficial 
and significantly less costly.
III.  VIWAPA's Broad and Aggressive Initiatives To Achieve These 
        Important Goals
A.  Improving the Efficiency of the Authority's Power Generation from 
        Oil.
    Increases in Combined Cycle Operations--Obviously, to the extent we 
can extract more power production from each gallon of oil we burn, the 
more efficient we are, and the less it will cost our customers for each 
kilowatt hour of electricity they purchase. To that end, the Authority 
has invested a great deal in the addition of waste heat recovery 
generators (sometimes called ``HRSG's or waste heat boilers) to its 
facilities in recent years.
    Waste heat boilers make use of the otherwise ``wasted'' heat that 
is released from the burning of oil in its combustion turbine 
generators, by converting it to steam which is then utilized in either 
the production of electricity or the production of water by our 
desalinization plants. This reduces the amount of oil that it would be 
necessary to purchase in the absence of the waste heat boilers.
    This mode of efficient operation is called ``combined cycle 
operation.'' We currently have 2 waste heat boilers, which operate in 
combined cycle mode with four of our combustion turbine generators.
    Moreover, we are in the process of installing another waste heat 
boiler on St. Croix, and are evaluating the addition yet another one on 
St. Thomas.
    Future Installation of More Efficient Combustion Turbines--In 
addition, we have also taken steps via a Condition Assessment and Power 
Supply Study update to identify and evaluate more efficient primary 
combustion turbines when replacing older units or adding to our overall 
generating capacity.
B.  Improved Efficiency in the Use of Electricity by Our Residents
    As part of its major effort to improve efficiency in the use of 
electricity by our citizens, the Authority has been very active for 
several years with its energy conservation public education program. In 
2006, VIWAPA became an EPA-recognized ENERGY STAR partner in order to 
better leverage the available tools and resources to enlighten our 
residents and visitors on the importance of energy efficiency. Our 
vigorous efforts in this regard earned us EPA's ENERGY STAR Partner of 
the Year 2008 Award for Excellence in Energy Star Promotion, which was 
presented to the Authority at an awards ceremony on April 1 in 
Washington, D.C..
    The goal of our energy efficiency program is to reduce energy 
consumption, reduce associated greenhouse gas emissions, and reduce 
demand on our power generation capabilities. As one example, we have 
taken significant steps to increase consumer awareness of the benefits 
of CFL lighting fixtures and other energy-efficient technologies and 
practices. In 2006, the Authority purchased 60,000 Energy Star 
qualified CFLs, and have already distributed most of them free of 
charge in well-publicized educational events to our individual 
customers and a broad array of public institutions. Our extensive 
educational outreach program has included CFL distribution at our 
offices, at over 40 other convenient locations via ``CFL Caravans,'' 
and at heavily populated community events. Ads and other educational 
messages in local print media, on local radio and tv stations, in our 
own newsletter and in presentations to our employees, community groups, 
businesses, government agencies, churches and schools have also helped 
to convey the energy-efficiency message to our citizens, and to 
increase consumer awareness of the link between energy production and 
greenhouse gas emissions.
IV.  Aggressive Evaluations of Potential Alternative Sources of Energy 
        and Changes in the Authority's System Infrastructure That Could 
        Reduce Power Costs and Dependence on Oil
The Recent R.W. Beck Power Supply Study
    On February 28, the R.W. Beck power industry consulting firm, under 
a contract with the Authority, and in collaboration with the Public 
Service Commission, completed a major update of VIWAPA's plans for 
power generation expansion. The overarching objective of its Power 
Supply Study was to provide an understanding of near- and long-term 
power supply options that might reduce the Authority's cost of electric 
power production and simultaneously reduce its dependence on fuel oil. 
It provided a detailed assessment of the potential economic, geographic 
and environmental compliance feasibility of a broad array of potential 
technologies, including:
      wind powered resources;
      efficiency improvements;
      waste to energy options;
      utilization of slow-speed diesels;
      increased implementation of combined cycle generation;
      the use of imported Liquified Natural Gas (LNG);
      the direct combustion of petroleum coke generated as a 
by-product of the Hovensa refinery on St. Croix;
      the combustion of methanol generated locally from the 
gasification of petroleum coke;
      Ocean Thermal Energy Conversion (OTEC); and
      the interconnection of the St. Thomas and St. Croix 
electric systems via a high-voltage submarine direct current 
transmission line.
B.  The Resulting RFP Process
    Based on the analysis and recommendations in the Beck Power Supply 
Study, the Authority moved aggressively to develop and publish a 
Request For Proposals, that solicited proposals from well-qualified 
companies for the implementation of one or more of the non-oil based 
alternatives that were identified as potentially viable in the Beck 
Study. Bidding was open on all such generation technologies, and 
proposals were invited that would displace as much of our current 
source of power as possible, under power purchase agreements that could 
last as long as 20 years.
    The RFP was communicated to relevant trade associations and was 
advertized in a number of trade journals. Among other things, it 
specifically referenced interest in power generation based on wind, 
solar, ocean thermal, biomass, tidal, wave geothermal, and petroleum 
coke technologies, and suggested that alternatives might include the 
submarine cable interconnection of our plants on St. Thomas and St. 
Croix, and LNG and methanol fuel options, most of which were 
recommended in the Territorial Energy Assessment Report.
    Twenty firms submitted pre-qualification forms, and were evaluated 
by a technical committee consisting of a representative from Boston 
Pacific Company, independent expert technology and financial 
consultants, and the Authority's Chief Operating Officer, Mr. Gregory 
Rhymer. In order to pre-qualify, bidders had to demonstrate experience 
designing, constructing and operating generating facilities similar to 
those they would be proposing. They had to demonstrate the ability to 
obtain the financing for their proposals, and they had to demonstrate 
that their non-oil based solutions are commercially feasible. Eighteen 
bidders were pre-qualified by the technical committee, and we are 
anxiously awaiting the final proposals, which are due on May 1.
    Although we have not yet received the final detailed proposals 
under the RFP, we know from the R.W. Beck analysis, and the other 
information we have received to-date, that all of the potential 
initiatives are extremely expensive, and will, at a minimum, severely 
strain the Authority's limited resources (and the resources of our 
citizens). In some cases, it appears almost certain that the Authority 
will not be able to pursue promising approaches without significant 
financial help--either because it has inadequate resources to invest, 
or because the risks are just too great for it to assume on its own. 
For some of the more promising alternatives, it appears all but certain 
that we will not be able to pursue them without significant assistance 
from the federal government.
V. Federal Assistance Is Critical
A. Financial Assistance
    Due to the general economic conditions in the Islands, the high 
cost of maintaining our generators and distribution systems in our 
remote locations, and the already exorbitant cost of energy shouldered 
by our citizens, the Authority has extremely limited resources to 
devote to the exploration and development of viable alternatives to 
oil. Our economic plight is exemplified by the fact that our largest 
customer (the Government of the Virgin Islands) has had chronic 
difficulties over the years in making timely payments for the power it 
must consume on behalf of our citizens. Consequently, we are in urgent 
need of financial assistance from Washington.
    It is our understanding that in the Energy Security Act of 2005, 
the Department of the Interior was obligated to fund power generation 
initiatives in the insular territories of the type that VIWAPA is 
currently trying to pursue. We understand that while Congress 
appropriated money for that program, and Interior made promises that it 
would be distributed, none of it was ever released. Congress obviously 
recognized that financial assistance for this sort of program was 
necessary and appropriate. Consequently, we would urgently request any 
assistance you could provide in helping us to secure funding under that 
legislation, or in securing future appropriations under new legislation 
that would help to finance these important initiatives.
    We would point to our potential development of an undersea 
connection between St. Thomas and St. Croix as a good example of a 
project that might be particularly appropriate for federal financial 
assistance. The Beck study indicated that such a connection could 
significantly reduce the redundancy in our systems due to the current 
need for substantial on-site back-up capacity on both islands, and 
would enable both of our facilities to install larger, more efficient, 
generators, and to operate them more frequently at their most efficient 
load levels. It might also serve as a pilot demonstration for submerged 
connections that could be applied elsewhere in the Insular Areas.
B.  Other Legislative Assistance- Global Warming Legislation
    In the Clean Air Act Amendments of 1990, Congress and EPA 
recognized (in the adoption of special provisions in what is now 
Sec. 325 of the Act) that the unique geographical and economic 
conditions in the Virgin Islands and other territories could make it 
unreasonable to require them to comply with all of the emission control 
requirements that are applicable state-side. Under that provision, EPA 
has exercised its authority to grant relief on several occasions.
    Both houses of Congress are currently considering legislation that 
is likely to establish major requirements for the control and reduction 
of emissions of greenhouse gases like carbon dioxide. Some of those 
proposals would include requirements that emitters of carbon dioxide 
either substantially reduce their emissions (through increased use of 
alternative sources of power), or purchase costly emission reduction 
credits. While we do not believe that it is intended that requirements 
of this type be applied to small territorial facilities like those of 
the Authority, we are concerned that language might ultimately be 
adopted that could inadvertently sweep the Authority into such a 
program. We hope that our presentation helps you to understand why that 
should be avoided at all costs.
    Due to the extremely high electricity costs borne by our citizens, 
there is already far more than enough financial incentive than is 
necessary for the Authority to reduce its greenhouse gas emissions as 
much as it can. More importantly, due to its remote locations and 
limited economic and geographic resources, the Authority simply does 
not have the broad array of options for reducing greenhouse emissions 
that is available to state-side utilities. And, of course, to the 
extent it is not able to reduce its greenhouse gas emissions, neither 
the Authority, nor the citizens of the Virgin Islands (who would have 
to pay for any emission credits through increased utility bills), would 
have the financial resources to purchase any credits that might be 
required. Under these circumstances, and given the extremely small 
contribution that the territories make to greenhouse emissions 
generally, we would solicit your assistance in making sure that federal 
greenhouse gas legislation does not require the Authority to purchase 
emission credits that the citizens of the Virgin Islands will never be 
able to afford.
CONCLUSION
    In conclusion, I want to thank the subcommittees once again for 
allowing us the opportunity to make this presentation. I hope that I 
have helped to increase your understanding of the very unique 
circumstances that constrain our efforts to reduce our dependence on 
oil, to reduce our exorbitant costs for electric power generation, and 
to develop alternative sources of energy in the Virgin Islands. I also 
hope that you appreciate how hard we have been working to achieve those 
goals, and how much we are in need of federal assistance to supplement 
the extremely limited resources we are able to devote to this 
critically important effort.
                                 ______
                                 
    Mrs. Christensen. The Chair now recognizes Mr. Cole to 
testify on behalf of PSC.

             STATEMENT OF DONALD COLE, VICE CHAIR, 
                   PUBLIC SERVICES COMMISSION

    Mr. Cole. Thank you, Madame Chair Delegate Christensen, 
members of the Subcommittees on Insular Affairs, Energy and 
Mineral Resources and the listening audience. On behalf of the 
Public Services Commission of the Virgin Islands, I thank you 
on your attention to these important issues affecting the 
residents and the economy of the United States Virgin Islands. 
The Public Services Commission is the U.S. Virgin Islands' 
regulatory authority with jurisdiction over all public 
utilities, including electricity, water, waste management, and 
ferry transportation. I'm the Vice Chair of the Commission, and 
I have members of my Commission and my legal team sitting in 
the audience.
    We have submitted written testimony, Madame Chair, which we 
kept brief. I have brought additional copies of that testimony 
for your convenience. In keeping with your request, I will only 
summarize our testimony in my comments.
    The Public Services Commission is charged with balancing 
the interest of the ratepayers with those of the regulated 
utilities. For the past five years the Virgin Islands' 
dependence on fuel oil for transportation and electrical energy 
and even for water production has imbalanced the scale. The 
only way these utilities survived has been to impose unending 
increases in fuel on the ratepayers. The burden has become 
unsustainable, and it does not yet appear to have peaked. Our 
residents are paying 34 cents per kilowatt hour and 40 cents 
appear to be on the near horizon. Compare those rates with 
mainland rates from 7 to 15 cents per kilowatt hour, and the 
extraordinary burden is obvious. The Water and Power Authority 
is strapped for cash even at these rates.
    As the maintenance suffers, the aging infrastructure 
becomes less efficient, and the downward spiral worsens. 
Meanwhile, our annual fuel oil bill at the Authority would be 
more than $260 million on today's oil prices just for 
electricity and water. And that burden is imposed on the 
population of less than 120,000 people.
    Families, the poor, and elderly simply cannot afford these 
continuing extraordinary costs, and the very sustenance of life 
is in danger. Conservation can only help reduce costs so far, 
and Virgin Islanders already consume only about half of the 
national average in electricity. Rates must be reduced to 
maintain affordability.
    The burden goes beyond individual suffering. Commercial 
ratepayers are already paying even higher rates. Studies done 
elsewhere, such as in Hawaii, indicate the damaging economic 
effects of such high rates--extracting money that could be 
reinvested and discouraging new investment.
    The Commission has worked with WAPA over the past four 
years to ensure that the existing infrastructure is examined 
and new options evaluated. An updated studies on those issues 
is on the way and it's due within weeks.
    The Virgin Islands are well placed to replace much of its 
existing infrastructure with more efficient and greener 
technology. We are well placed to take advantage of wind and 
solar power, and it may even be possible to connect with other 
islands where geothermal resources will be present.
    We now must move from studies to planning and 
implementation of changes. WAPA currently has an RFP for new 
power, but that is only the start. We must move rapidly in a 
manner that can afford both short-term and long-term relief to 
the ratepayers.
    In doing so, we are seeking to fulfill the mandates of the 
2005 Energy Policy Act, and the Energy Independence and 
Security Act of 2007. We will be seeking assistance in reducing 
our reliance on oil, as all of our oil is imported, and moving 
toward power that is both economical and environmentally 
sensitive. To do so, we will need your assistance, Madame 
Chair, and the Congress.
    The ratepayers are already incredibly burdened, which 
financing will be critical to get the technologies in place. We 
will be seeking assistance on the both of these acts, and we 
require new appropriations. The economy of the Virgin Islands 
is at stake, and we will continue to seek your assistance in 
moving these islands forward to a clean and efficient, 
affordable future.
    Thank you very much, Madame Chair.
    Mrs. Christensen. Thank you, Mr. Cole.
    [The prepared statement of Mr. Cole follows:]

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

    Dear Delegate Christensen, members of the Subcommittees on Insular 
Affairs and Energy and Mineral Resources, and the Listening Public:
    The Public Services Commission of the Virgin Islands thanks you for 
your attention to these important issues affecting the residents and 
the economy of the United States Virgin Islands. The Public Services 
Commission is the U.S. Virgin Islands' regulatory authority with 
jurisdiction over all public utilities, including electricity, water, 
waste management, and ferry transportation.
    The Virgin Islands are experiencing a serious energy crisis. It is 
a crisis not of our making, but is the result of federal government 
monetary and fiscal policies, international events, and other factors, 
far beyond our control. Unlike the mainland, there are no indigenous 
sources of oil, coal or natural gas energy available for use here in 
the Virgin Islands. Neither are there large rivers which can be tapped 
for hydro-electric power. And, nuclear energy, while in wide-spread use 
on the mainland, is cost prohibitive given our size and isolation. 
Accordingly, we are today totally dependent on imported oil. Because 
oil had been relatively stable and economical until 2003, the Virgin 
Islands had come to rely on this resource, not only for transportation, 
but for electrical generation and water production have--all have been 
powered by fuel oil here in the Virgin Islands. Oil prices have 
increased five-fold, from $22/bbl to $110/bbl, in just five years. The 
days of cheap oil appear to be irretrievably over, and changes must 
occur and quickly.
    The Commission has for several years worked with the Virgin Islands 
Water and Power Authority (``WAPA'') to diversify its energy sources 
and to increase its use of renewable energy. Today, WAPA is in the 
final stages of completing studies on its current power generation and 
water production facilities, its options for replacement and/or 
rehabilitation of existing equipment, and the preparation of a long-
term plan. That process was initiated in 2004 and completion is 
anticipated in a matter of weeks. The first study, the Condition 
Assessment Study, was conducted based on $33/bbl oil; however, oil 
continued its climb throughout the study period and by the time the 
study was finished oil was above $50/bbl. As everyone is well aware, 
that increase has only continued, and oil today is above $110. WAPA has 
conducted an initial review of the 2005 study (called a ``Fatal Flaw 
Analysis''), reviewing alternatives for new power generation, and is 
presently working to complete the updated Condition Assessment Study. 
We are happy to provide you with any of these documents.
    At the present time, Virgin Islands residents pay nearly 34 cents/
kWh for power--to our knowledge, the highest rate in the nation. The 
majority of consumer's cost is fuel oil, totaling more than 25 cents or 
approximately 74% of the residential electric rate. It is important to 
note that this rate is based on $92/bbl fuel--so we already know that 
the rate will continue to climb even further. Moreover, as the Virgin 
Islands do not have substantial surface or ground water, the majority 
of our water supplies are through rooftop catchment and desalination. 
Desalination is an energy intensive process, and the Virgin Islands 
currently rely on an older distillation technology that requires steam 
for the desalination process. As water is the very essence of life, its 
cost is a matter of grave concern to the public welfare, and one to 
which the Commission is paying acute attention.
    Currently, the Virgin Islands spend more than $200,000,000 per year 
just for fuel oil for its electricity and water. This staggering cost 
is compounded by several additional factors which include the 
relatively small size of the Islands' population, at just over 110,000 
and the low per capita income and higher cost of goods and services to 
Virgin Islands residents. This combination of factors creates a burden 
that is simply not sustainable. On average, Virgin Island residents 
consume less than half the electricity of mainland residents, yet an 
average residential bill now exceeds $170 per month. To put this into 
further perspective, mainland power costs for residential consumers 
range from 6/kWh to 15/kWh--comparatively, Virgin Island consumers 
pay more than twice that amount. Since the Virgin Islands per capita 
income is well below the U.S. average, the extraordinary cost of energy 
imposes a tremendous burden that simply cannot be continued for the 
long term. Additionally, the Commission finds these costs especially 
worrisome for those members of our community who are most affected by 
these rates, particularly the high level of families with children 
living in poverty and the numbers of seniors for whom these costs may 
present an insurmountable burden.
    In the Department of Energy's Memorandum of Understanding with the 
State of Hawaii on the Clean Energy Partnership, the parties note the 
enormous burden placed on the local economy by the increases in world 
oil prices. Hawaii is estimated to suffer a 0.5 percent reduction in 
GDP for every 10 percent increase in the price of oil--and given the 
greater percentage reliance on oil here, there is no reason to think 
that the Virgin Islands suffer less.
    In addition to relying solely on oil-fired generation for the 
generation of electricity and the production of water, the Virgin 
Islands also suffer from an aged and outdated infrastructure, with much 
of the Islands' electrical generation capacity being twenty-five years 
or more old. The Commission views this both negatively and positively. 
While antiquated plants presents a near term problem, in that our 
generation facilities are not as efficient as newer equipment, it also 
means that we are in an excellent position to develop a modern, 
environmentally sensitive, and efficient electrical generation and 
water production plan for the future.
    While the Territory is currently dependent on oil-fired processes, 
the Virgin Islands is ripe for receiving and implementing renewable and 
environmentally sensitive power production. However, there are 
additional challenges that must be taken into consideration in addition 
to the overall need and desire for moving to alternative energy 
sources. For example, while these Islands are located within the trade 
winds and can produce steady wind power much of the year this benefit 
must be weighed against the potential conflict with the Islands' major 
source of revenue which is tourism. St. Thomas and St. John have little 
available land that is not already occupied, and are tourist based 
economies. There is a justifiable concern about the visual impact and 
potential effects on tourism that are associated with wind energy. 
Additionally, on St. Croix some of the prime sites for wind generation 
are also highly visible and in environmentally sensitive areas. 
Moreover, our location within the tropics also makes these islands 
vulnerable to hurricanes and tropical storms, and the relative 
isolation of the Virgin Islands creates additional concerns regarding 
over-reliance on wind power. Performance guarantees and storm insurance 
would make wind power a substantially more attractive option for 
investment.
    Solar power would also appear to be a logical addition to the power 
generation options in the Virgin Islands but, until very recently, it 
has been cost prohibitive, at least as to photovoltaic power. Solar 
thermal, which has been successfully used in the desert Southwest also 
carries some concerns about vulnerability to storm damage, and land 
area requirements. Because it is so reliably sunny, and well within the 
tropics, the Virgin Islands should be a prime candidate for any 
demonstration project for large scale distributed solar project.
    Only Hawaii and the Pacific Islands can offer anything comparable 
to the Virgin Islands' ability to reach both warm tropical waters and 
cold deep water; in fact, our surface waters are substantially warmer 
than those surrounding Hawaii, resulting in an even greater temperature 
differential. But ocean thermal technology does not appear to have 
reached commercially viable status, and is unlikely to do so without 
further research and support. The Virgin Islands is the best location 
for a demonstration Ocean Thermal Energy (OTEC) project in the Atlantic 
basin.
    The Virgin Islands also have a problem addressing waste disposal, 
which is not surprising given our limited land and many visitors. 
Waste-to-energy would seem to be a logical response for a limited 
portion of our energy needs, and this would assist in the resolution of 
another environmental issue for the islands.
    Finally, the Virgin Islands are home to the largest petroleum 
refinery in the Caribbean, the HOVENSA facility on St. Croix. The 
presence of this refinery provides a steady supply of petroleum coke, 
which is a low cost fuel, but with a very high carbon footprint. The 
Virgin Islands should be a prime candidate for a demonstration pet coke 
plant with carbon recapture.
Concluding Remarks:
    In order to make progress and overcome the dire energy needs of the 
Territory, the Virgin Islands could benefit tremendously from federal 
assistance with and guarantees for long term debt. The Virgin Islands 
must replace aging plants that are cost effective to retire. This will 
have the added benefit of retiring aging plants with new and greener 
technologies that may make carbon credits available.
    In addition, the Virgin Islands may require waivers from certain 
standards--for example, diesel generators may be economically and 
environmentally sound as back up generators in complement with solar 
and wind power, but are difficult to permit within the United States. 
Such units are however, vastly more fuel efficient than the current 
generators within the Virgin Islands.
    The Virgin Islands could also benefit from assistance in making our 
current system more efficient as we transition to new technologies.
    On behalf of the Public Services Commission, I thank you for 
creating this important forum, wherein the dialogue on the challenges 
and solutions of our present energy crisis could be discussed. It is 
our greatest hope that the fruits of this discussion will mean a true 
transformation for the territory, its infrastructure, and the people of 
the Virgin Islands.
    Thank you,
                                 ______
                                 
    Mrs. Christensen. The Chair now recognizes the final 
panelist, Mr. Miller, to testify on behalf of the St. Croix 
Alliance to Protect Utility Ratepayers.

            STATEMENT OF DARRYL MILLER, PRESIDENT, 
        ST. CROIX ALLIANCE TO PROTECT UTILITY RATEPAYERS

    Mr. Miller. Good morning, Chairman Costa, Chairwoman and 
Delegate Donna M. Christensen and other distinguished members 
of the Committee on Natural Resources Subcommittee on Insular 
Affairs and Subcommittee on Energy and Mineral Resources.
    On behalf of the hard working ratepayers of the Virgin 
Islands, I am privileged to appear before you to speak as the 
voice of the ratepayers and to express in the most urgent 
manner possible, the need for immediate and tangible solutions 
to our extremely high and inefficient power production and 
distribution system in the Territory.
    The ratepayers of the Territory look forward with great 
anticipation toward the results of this hearing in an effort to 
alleviate the burden placed on us daily by the inefficiency of 
our Water and Power Authority.
    The extremely high cost of water and power production has 
exponentially increased our cost of living. It greatly affects 
every single commodity we purchase and consume on a daily 
basis. As a result, an economic burden has been placed squarely 
on the backs of each and every ratepayer territory wide.
    On August 31, 2005, I testified before the 26th 
Legislature's Committee of the Whole on this very same relevant 
and critical issue at hand today--developing and implementing 
immediate solutions to the problem of an inefficient and 
extremely high electric and water production system in the 
Territory. Needless to say, three years into the future, the 
ratepayers of the Territory still face the exact same dilemma 
of 2005, with additional increases in both water and power 
costs, with no solutions in sight from the Governor, the 
Legislature, the Public Services Commission, and the Water and 
Power Authority.
    To date there is absolutely no definite or clearly 
intelligible sense of urgency to this problem. As a result, 
ratepayers implore you, the oversight committee on Insular 
Affairs, not to follow suit in inaction, but to posthaste use 
all your resources and power to mitigate corrective solutions 
to our outdated water and power production and distribution 
system.
    Corrective solutions must result in an implemented dynamic 
energy strategy that will help us meet our energy needs based 
on highly informed decisions about how our energy is purchased, 
consumed, and managed. This requires a robust energy management 
system with data analysis and reporting capabilities to 
proactively manage energy production, consumption, and cost.
    No longer should it be allowed for our Water and Power 
Authority, with the assistance of the Public Services 
Commission, to pass the cost of inefficiency on to the 
ratepayers of the Territory without accountability. Business 
intelligence must replace party politics if corrective measures 
are to be implemented.
    In the past, our Territory has been burdened by elected 
officials who lack competence in understanding the 
modernization of energy production and distribution. These 
officials would then appoint board members to the Water and 
Power Authority who similarly lack the knowledge of modernizing 
energy production and distribution. This has resulted in 
limited knowledge of how to wisely invest, plan and forecast in 
the most effective and cost-effective energy efficiency 
portfolios for overcoming common marketplace barriers to energy 
efficiency. The solution is business intelligence. Business 
intelligence is the most effective way to continue successfully 
negating change. This translates into energy efficiency.
    Utilities, states, and others across the United States have 
decades of experience in delivering energy efficiency to their 
customers. Thus, it is the duty of this oversight committee of 
Insular Affairs to work with our government and Legislature to 
enact policies and programs to capture the benefits of energy 
efficiency and address underinvestment in energy efficiency. 
This can only be done by providing the funding necessary to 
deliver these programs, and by examining policies governing our 
Water and Power Authority to ensure that these policies 
facilitate, not impede, cost-effective programs for energy 
efficiency.
    Our power production infrastructure is overburdened and 
outdated. Overburdened and outdated systems significantly limit 
the availability of low-cost electricity, and our sole reliance 
on fossil fuel raises energy prices and potentially compromises 
energy system reliability, resulting in frequent outages with 
no compensation for damaged goods to the ratepayers.
    The ratepayers of the U.S. Virgin Islands hereby 
respectfully request the Committee on Insular Affairs to take 
immediate visible action to establish a timeline of 
implementation and completion to modernize the Water and Power 
Authority; to establish a team of competent individuals to 
recover, analyze, and implement existing studies already done 
by both the Public Services Commission and the Water and Power 
Authority with taxpayers' money that have clearly expressed 
solutions and corrective measures to our current energy crisis.
    In conclusion, the past four years has resulted in nothing 
but higher utility cost to the ratepayers of the territory with 
no visible, tangible signs of sense of urgency to mitigate the 
problems of high energy cost by our elected officials. Charting 
the future requires complete understanding of the precise 
problem of energy production and distribution, then 
implementing solutions unique to the Virgin Islands. It is said 
that the solution to our high energy cost and inefficiency 
would take at least two years. Chairman Costa, ratepayers 
cannot simply afford two more years without relief.
    The St. Croix Alliance to Protect Utility Ratepayers would 
like to thank you, Chairman Jim Costa and Chairman and Delegate 
Donna M. Christensen, for this opportunity to appear before the 
respected Committee on Insular Affairs and on the Subcommittee 
on Energy and Mineral Resources. Thank you for your attention 
and time.
    Mrs. Christensen. Thank you, Mr. Miller.
    [The prepared statement of Mr. Miller follows:]

 Statement of Darryl E. Miller on behalf of the Ratepayers of the U.S. 
     Virgin Islands and the St. Croix Alliance to Protect Utility 
                           Ratepayers--SCAPUR

    Good Morning, Chairman Nick J. Rahall, Chairwoman and Delegate 
Donna M. Christensen, and other distinguished members of the Committee 
on Natural Resources Subcommittee on Insular Affairs and Subcommittee 
on Energy and Mineral Resources.
    On behalf of the hard working Ratepayers of Virgin Islands, I am 
privileged to appear before you to speak as the voice of the 
Ratepayers, and to express in the most urgent manner possible, the need 
for immediate and tangible solutions to our extremely high and 
inefficient power production and distribution system in the Territory.
    The Ratepayers of the Territory look forward with great 
anticipation, towards the results of this hearing in an effort to 
alleviate the burden placed on us daily by the inefficiency of our 
Water and Power authority.
    Members of the Committee on Natural Resources Subcommittee on 
Insular Affairs and Subcommittee on Energy and Mineral Resources, let 
me inform you if you do not already know, we the Ratepayers of the U.S. 
Virgin Islands are currently paying the highest cost per kilowatt for 
electricity under the U.S. flag, coupled with the additional high cost 
of water production.
    The extremely high cost of water and power production has 
exponentially increased our cost of living here in the Territory, as it 
pertains to every single commodity we consume on a daily basis, 
resulting in nothing short of a burden on the backs of each and every 
Ratepayer territory wide.
    Members of the Committee and Subcommittee, on August 31, 2005, I 
testified before the 26th Legislature's Committee of the Whole, as it 
pertained to the very same relevant and critical issue at hand today, 
developing and implementing immediate solutions to the problem of an 
inefficient and extremely high electric and water production system in 
the Territory. Needless to say, three years into the future, the 
Ratepayers of the Territory still face the exact same dilemma of 2005, 
with additional increases in both water and power costs, with no 
solutions in sight from the Governor, the Legislature, the Public 
Services Commission, and the Water and Power Authority.
    To date, there is absolutely no definite or clearly intelligible 
``sense of urgency'' to this problem, and as a result, the Ratepayers 
of the Territory implore you the Oversight Committee on Insular 
Affairs, not to follow suit in inaction, but to post haste use all your 
resources and power to mitigate corrective solutions to our outdated 
water and power production and distribution system.
    Corrective solutions must result in an implemented dynamic energy 
strategy that will help us meet our energy needs based on highly 
informed decisions about how our energy is purchased, consumed and 
managed. This requires a robust energy management system with data 
analysis and reporting capabilities to proactively manage energy 
production, consumption, and cost.
    An investment in the latest computer software the energy industry 
has to offer to track energy use, would enable our Water and Power 
Authority the ability to build a comprehensive energy database, over a 
period of years, to collect and analyze historical utility data to 
proactively manage energy production, consumption, and cost. ``The 
historical energy data also play a pivotal role in performing a host of 
energy management operations; particularly load forecasting for 
procurement purposes.'' The result is the ability to forecast daily, 
weekly, monthly, and yearly energy needs, as well as potential peak 
demand periods and associated energy costs, increasing efficiency.
    No longer should it be allowed for our Water and Power Authority, 
with the assistance of the Public Services Commission, to pass the cost 
of inefficiency onto the Ratepayers of the Territory without 
accountability. ``Business Intelligence'' must replace party politics 
if corrective measures are to be implemented.
    In the past, our Territory has been burdened by elected officials 
who lack competence in understanding the modernization of energy 
production and distribution. These officials would then appoint board 
members to the Water and Power Authority who similarly lack the 
knowledge of modernizing energy production and distribution. This would 
result in limited knowledge of how to wisely investment, plan, and 
forecast in the most effective and cost-effective energy efficiency 
program portfolios and programs for overcoming common marketplace 
barriers to energy efficiency. The solution is ``Business 
intelligence''.
        ``Business intelligence is a combination of technology and 
        management practices that prioritizes collecting, providing 
        access to, and analyzing large amounts of unstructured data in 
        ways that help people make better decisions.''
    ``The key to effective energy intelligence is transforming the 
large amount of energy and enterprise data into information and 
knowledge that can help achieve specific business objectives, such as:
      Avoiding surprises in energy costs and management
      Recovering costs through end user rebilling
      Reducing costs through identifying inefficiencies
      Reducing costs through demand response
      Reducing price risk through hedging and sourcing 
strategies
      Creating a culture of conservation through increased 
energy accountability.''
    ``Business intelligence is the most effective way to keep 
successfully navigating change'', this translates into energy 
efficiency.
    ``Recognizing energy efficiency as a high-priority energy resource 
is an important step in efforts to capture the benefits it offers and 
lower the overall cost of energy services to ratepayers.''
    Utilities, states, and others across the United States have decades 
of experience in delivering energy efficiency to their customers. Thus, 
it is the duty of this oversight committee of Insular Affairs, to work 
with our Government and Legislature to enact policies and programs to 
capture the benefits of energy efficiency and address underinvestment 
in energy efficiency. This can only be done by providing the funding 
necessary to deliver these programs, and by examining policies 
governing our Water and Power Authority to ensure that these policies 
facilitate, not impede, cost-effective programs for energy efficiency.
    Our power production infrastructure is overburdened and outdated. 
Overburdened and outdated systems significantly limit the availability 
of low-cost electricity; and our sole reliance on fossil fuel raises 
energy prices and potentially compromises energy system reliability, 
resulting in frequent outages with no compensation for damaged goods.
    The Ratepayers of the U.S. Virgin Islands hereby respectfully 
request the Committee on Natural Resources Subcommittee on Insular 
Affairs and Subcommittee on Energy and Mineral Resources take immediate 
and visible action and establish a timeline of implementation and 
completion in order to:
      Modernize the Water and Power Authority; it's water/
electrical energy production and distribution, and other assets, to 
drastically improve overall water/electrical systems efficiency
      Establish a team of competent individuals to recover, 
analyze, and implement existing studies already done (by both PSC and 
WAPA) with taxpayers money that have clearly expressed solutions and 
corrective measures to our current energy crisis
      Establish an Energy Management Division with a robust 
energy management system and a comprehensive energy database
      Develop a comprehensive and dynamic energy strategy/plan 
that establishes how energy from 2008 and in the future is Purchased, 
Consumed, and Managed in the U.S. Virgin Islands
      Manage WAPA's electrical and water production and 
distribution by improving meter reading efficiencies and implementing 
automatic meter reading technology and data collection
      Manage outage response, by implementing outage detection 
technologies to reduce the frequency of outages, improve response and 
restore times for outages
      Subsidize the Water and Power Authority for the expressed 
purpose of eliminating substantial rate increases
      Audit the Water and Power Authority to correctly assess 
financial inefficiencies and determine the true financial picture. 
Apply ``business intelligence'' to control our energy costs
      Once and for all, direct the Water and Power Authority to 
negotiate the RFP to secure Alternative Energy Solution, in accordance 
with the Public Utility Regulatory Policies Act, no more stalled talks
      Allocate money that would liquidate outstanding 
Government Water and Power Authority bills owed, set clearly defined 
and stable energy budgets, and mandate that government agencies pay 
their utility bills annually
      Develop investment strategies and planning that would 
convert government buildings into ``green buildings'' that utilizes 
solar technology
      Place technologically competent people on the boards of 
the Water and Power Authority and the Public Services Commission
      Establish and mitigate safe, reliable, efficient, and 
affordable services and rates for the ratepayers of the U.S. Virgin 
Islands to reduce consumption and cost
      Restore Ratepayers faith in the oversight of the Water 
and Power Authority, and all other utilities of the Territory, that our 
trust and tax dollars are being well spent
      Establish the National Action Plan for Energy Efficiency 
Recommendations and Options in the U.S. Virgin Islands (see figure ES-
2)
    In conclusion, the past four years has resulted in nothing but 
higher utility cost to the Ratepayers of the Territory, with no visible 
or tangible ``sense of urgency'' to mitigate the problem of high energy 
cost, by our elected officials. The St. Croix Alliance to Protect 
Utility Ratepayers would like to thank you Chairman, Nick J. Rahall, 
and Chairwoman, and Delegate, Donna M. Christensen, for this 
opportunity to appear before the respected, Committee on Natural 
Resources Subcommittee on Insular Affairs and Subcommittee on Energy 
and Mineral Resources.
    Thank you for your attention and time.
                                 ______
                                 
Figure ES-2.
National Action Plan for Energy Efficiency Recommendations & Options
Recognize energy efficiency as a high priority energy resource.
Options to consider:
      Establishing policies to establish energy efficiency as a 
priority resource.
      Integrating energy efficiency into utility, state, and 
regional resource planning activities.
      Quantifying and establishing the value of energy 
efficiency, considering energy savings, capacity savings, and 
environmental benefits, as appropriate.
Make a strong, long-term commitment to implement cost-effective energy 
        efficiency as a resource.
Options to consider:
      Establishing appropriate cost-effectiveness tests for a 
portfolio of programs to reflect the long-term benefits of energy 
efficiency.
      Establishing the potential for long-term, cost-effective 
energy efficiency savings by customer class through proven programs, 
innovative initiatives, and cutting-edge technologies.
      Establishing funding requirements for delivering long-
term, cost-effective energy efficiency.
      Developing long-term energy saving goals as part of 
energy planning processes.
      Developing robust measurement and verification (M&V) 
procedures.
      Designating which organization(s) is responsible for 
administering the energy efficiency programs.
      Providing for frequent updates to energy resource plans 
to accommodate new information and technology.
Broadly communicate the benefits of and opportunities for energy 
        efficiency.
Options to consider:
      Establishing and educating stakeholders on the business 
case for energy efficiency at the state, utility, and other appropriate 
level addressing relevant customer, utility, and societal perspectives.
      Communicating the role of energy efficiency in lowering 
customer energy bills and system costs and risks over time.
      Communicating the role of building codes, appliance 
standards, and tax and other incentives.
Provide sufficient, timely, and stable program funding to deliver 
        energy efficiency where cost-effective.
Options to consider:
      Deciding on and committing to a consistent way for 
program administrators to recover energy efficiency costs in a timely 
manner.
      Establishing funding mechanisms for energy efficiency 
from among the available options such as revenue requirement or 
resource procurement funding, system benefits charges, rate-basing, 
shared-savings, incentive mechanisms, etc.
      Establishing funding for multi-year periods.
Modify policies to align utility incentives with the delivery of cost-
        effective energy efficiency and modify ratemaking practices to 
        promote energy efficiency investments.
Options to consider:
      Addressing the typical utility throughput incentive and 
removing other regulatory and management disincentives to energy 
efficiency.
      Providing utility incentives for the successful 
management of energy efficiency programs.
      Including the impact on adoption of energy efficiency as 
one of the goals of retail rate design, recognizing that it must be 
balanced with other objectives.
      Eliminating rate designs that discourage energy 
efficiency by not increasing costs as customers consume more 
electricity or natural gas.
      Adopting rate designs that encourage energy efficiency by 
considering the unique characteristics of each customer class and 
including partnering tariffs with other mechanisms that encourage 
energy efficiency, such as benefit sharing programs and on-bill 
financing.
Sources:
Itron White Paper, Business Intelligence for Enterprise Energy 
        Management
National Action Plan for Energy Efficiency, July 2006
                                 ______
                                 
    Mrs. Christensen. I'd like to thank all of the panelists. 
We are also under a five minute limit for questions, and I am 
going to begin my questions, and I would ask for as concise 
responses as possible so that I can get at least three 
questions in my five minutes.
    One of the reasons of course we scheduled this hearing is 
to establish a record which would serve as a basis for my being 
able to request assistance, and all of you have spoken to that.
    Mr. Smith, there are a number of programs out there to 
assist, as you mentioned, but some are being funded, some are 
not, some we are eligible for, some we are not eligible for. 
What, in your opinion, would be the most useful thing the 
Federal government could do--increase funding to state energy 
programs or, under Sections 251 or 252 of Energy Policy, a 
partnership similar to Hawaii, the financing program? Maybe you 
could start with your recommendations as to the grants that are 
available that you might have some recommendations on.
    Mr. Smith. Most definitely, Madame Chairwoman Christensen, 
we can definitely see an increase in the overall SEP formula. I 
urge Members of Congress to look at the formula for the 
Territory and really consider updating them. This formula has 
not been updated for over 20 years.
    When it comes to special solicitation, the territories are 
usually inadvertently discriminated against because many of the 
program priorities of the United States mainland are not the 
same for the insular areas. So, therefore, I suggest having a 
solicitation that let the territories compete among each other, 
if it must be competitive grants. For instance, there is a 
Solar America Initiative. These initiatives start where the 
population must be 250,000. From the very start, we can't 
qualify.
    Our programs in the Territory as it relates to solar has 
been very successful. The report--as most people referenced--
said that the Virgin Islands is in the best position to move 
these programs. Therefore, I think a program such as a Solar 
America Initiative should start with the territories and 
funding adequately should be available.
    Mrs. Christensen. Thank you.
    Senator Richards, you have already heard about the Hawaiian 
Clean Energy Initiative--mentioned by Chairman Costa--and it is 
expected that the State of Hawaii would have to take some 
legislative and regulatory actions in order to make them more 
attractive to renewable energy investors. If the Department of 
Energy were to enter into a similar partnership maybe uniquely 
tailored to Virgin Islands, would you be willing to consider 
the legislative and regulatory changes that might be 
recommended?
    Mr. Richards. Thank you, Madame Chair. I think at this 
particular point in time, at least as a member of the body, it 
would be premature for me to respond to that without knowing 
what the contents and the commitment is that would be required 
in the legislation.
    Mrs. Christensen. But I'm sure that you--if it meant 
helping the Territory, that the Legislature would--and I think 
you have already started to address some issues by I think--did 
I read that you are providing some funding to seniors and low 
income.
    Mr. Richards. Yes, we have. I can simply respond to you 
that if in the majority of the members mind that it is going to 
help the energy crisis, I suspect that would be something the 
Legislature can address.
    Mrs. Christensen. Thank you for your answer. I think they 
are currently reviewing that in Hawaii, and we wouldn't expect 
you to give a blanket OK.
    Mr. Hodge, question to you. We've heard you make reference 
to inefficiencies at WAPA. Could you tell the Subcommittees a 
little about what WAPA has been doing to reduce those 
inefficiencies.
    Mr. Hodge. Yes, Madame Chair. Currently WAPA is embarked on 
efforts to achieve the efficiency, not only on the generation 
but on the distribution side and on the metering throughout the 
broad spectrum of the Authority. We invested in some waste heat 
boilers on St. Croix. The new one is being built on St. Thomas. 
We are refurbishing the one that was off line for the last 
several months. The one on St. Thomas alone, we are able to 
fast track the repairs of it and it will be coming back on line 
somewhere in late June, early July, which is about six months 
ahead of schedule. That itself allows for a combined cycle 
effort, which means it will be able to power a third unit by 
the exhaust from this waste heat boiler, which is a unit being 
spun without burning oil.
    It's about 1.2 to 1.4 million dollars of savings when that 
unit is running, and by it coming on line in July, June, six 
months ahead of schedule, you are looking at 14 to 18 million 
dollars of savings in oil purchases. The one that is being 
built in St. Croix is also the same, and that's based on 
today's prices of oil.
    So, you know, the infrastructure needs to be maintained. 
There is a cash flow problem. The government has indicated that 
they are intent on satisfying their debt to the Authority, and 
with that we will be able to maintain the equipment and 
dispatch the units in the most efficient manner.
    Mrs. Christensen. Thank you.
    My time is up. I will now recognize Mr. Costa for his 
questions.
    Mr. Costa. Thank you very much, Madame Chairwoman. And 
thank all the witnesses for your testimony. You obviously 
caused myself and I think members of the committee to ask a lot 
of questions, but time is limited.
    Mr. Smith, why do you believe that there was--the insular 
areas were left out of the weatherization program?
    Mr. Smith. As a colleague of mine said, it seems to be some 
time of folklore. They said in the initial program when the 
territories were asked, we declined. I checked every Energy 
Director prior to me, and no one has such recollection.
    Mr. Costa. Let's try to follow up on that. The 
comprehensive energy strategy that has been discussed with the 
Department of Energy, I was looking here in our handouts, and 
there seems to be a plan that's at least been partially focused 
on. And I would like to get a better idea of where you are on 
that effort that talks about a staged approach, the work plan; 
it talks about project funding and planning, assessing the 
future U.S. VI energy situation. It goes on and it has six 
tasks. It seems to be a logical way in which to pursue this 
effort. Where would you describe you are in this process?
    Mr. Smith. If my recollection serves me right, I think 
project funding was one of the first tasks in the work plan. 
And we have had some meetings. We have met with all the 
stakeholders that we have identified to include HOVENSA, the 
Water and Power Authority, we have met with the Alliance, Mr. 
Darryl Miller's group, we have met with the St. Croix 
Environmental Association, and we have taken their 
recommendations of what they can see as to be very profitable 
and viable within an energy strategic plan. We have catalogued 
those suggestions, and we kind of run out of money. And two 
days ago we did get an award from the Department of the 
Interior to continue that study. So we are moving----
    Mr. Costa. I think that plan is important in terms of 
helping get all the, for lack of a better term, the ducks in 
order in terms of how to proceed. I mean, you have a very 
tenacious and passionate representative in my colleague, 
Congresswoman Christensen, but she has to have a plan in place 
to say, look, we got our act together, this is what we think we 
can do to reduce these horrific rates that our citizens are 
paying, but we need help in implementing the plan.
    Let me ask you about landfill issues and gas. There was, I 
guess, a state energy program for grants--I mean in landfill. 
How many tons of trash does the Virgin Islands----
    Mr. Smith. Our numbers say that territorially we generate 
about 400 tons per day. I hear recent numbers we can get up 500 
tons a day.
    Mr. Costa. Has serious waste to energy been considered as a 
part of a solution?
    Mr. Smith. Yes, it has. We are in the process of reviewing 
some proposals from several companies who are offering to 
provide waste to energy solutions. The Energy Office is also 
doing a demonstration project with the Waste Management 
Authority to extract some of the methane from Bovinity 
landfill.
    Mr. Costa. Because we are doing that a lot. I would like to 
go back to that, but my time is going quickly.
    Mr. Hodge, you talked in your testimony--not in your oral 
statement--about an electrical cable between St. Thomas and St. 
Croix to help reduce the distributive cost of power. How much 
would that cost and how serious is that proposal?
    Mr. Hodge. There is a study being done right now, I 
believe, through the Department of the Interior as to tell you 
what the actual cost would be to develop such a conductor 
between those islands. The benefits are a reduction in the 
amount of spending reserve that you have to run independently 
by each plant, and reliability by having the systems connected. 
In the event the FPI comes up with a possibility of a large 
generating facility, you could have it on St. Croix where it 
has land space and would benefit all the Virgin Islands. It's 
critical to determine where the future should go for the Virgin 
Islands. The price is being determined as we speak.
    Mr. Costa. You haven't determined the cost effectiveness 
yet?
    Mr. Hodge. No.
    Mr. Costa. It strikes me as the percentage of electricity 
that you are currently using to desalinize your water. What 
percentage of the electricity usage here in the islands go 
strictly for desalination of water? Can you give me that 
breakdown?
    Mr. Hodge. It's hard to say strictly because the units that 
are spinning to produce power, steam is extracted to run the 
desal units. I would guess somewhere in the neighborhood of 
steam for maybe 60 percent of the unit is going toward the 
desal plants. It's a conjunction, while it's generating 
electricity, we are using the extracted steam for water at the 
same time.
    Mr. Costa. My time is expired, Madame Chairwoman, but there 
are a couple of questions, if we have a second round, I would 
like to come back to. And because of the water issues we have 
in California, I would like to get it separate from this 
hearing, but I would like to find out how much it cost per acre 
foot for you to desal water, because something we need to look 
at in greater effort in California.
    Mrs. Christensen. Do you have an answer for that question?
    Mr. Hodge. Per acre cost I have to get that, but we can 
determine it.
    Mrs. Christensen. The Chair now recognizes Mr. Shuster for 
his questions.
    Mr. Shuster. Thank you, Chair, and thank all the witnesses 
for testimony today.
    First question, Mr. Hodge, you talked about the efficiency, 
the things you are doing to increase the efficiencies of the 
plant. Can you spend enough money to really make that more 
efficient, or is it just the cost of oil so expensive that you 
are going to get little benefit out of those efficiencies?
    Mr. Hodge. The cost is simply prohibitive for a lot to 
happen, but you have to get efficient with what you have while 
you release your dependency from oil. If you have a combined 
effort, increase your efficiency, get rid of your dependency on 
oil all at the same time.
    Mr. Shuster. With the current plant you can't get the 
tremendous increase in efficiency that you really need?
    Mr. Hodge. There is a lot that can be gained from the 
current plant, because there are some units that aren't running 
due to lack of maintenance and need. Some of them have actually 
new parts that can be refurbished and perform in a better 
manner. If you can dispatch the units in an efficient manner 
and utilize both the No. 6 and No. 2 oil in a manner that's 
best for the plant, you can see a significant savings.
    The problem is you have units down, so you are running your 
most expensive units, and the larger ones aren't running as 
well, and you are using more units to achieve the same amount 
of power. With the influx of revenue of cash, we will be able 
to get the units in a situated dispatched more efficiently.
    Mr. Shuster. Even with a older plant, you can see some 
efficiency?
    Mr. Hodge. That's correct. The plant is older, but you do 
have a lot of units that have new generators, new turbines. 
There is a lot of new parts in those old units.
    Mr. Shuster. This LIHEAP program, coming from the 
northeast, Pennsylvania, we benefit greatly, our low income 
seniors especially with the LIHEAP. Do you receive any of that 
LIHEAP money down here in the Virgin Islands? I don't know who, 
maybe, Mr. Smith, I don't know if you know the answer to that.
    Mr. Smith. Yes, we do receive LIHEAP to the tune of roughly 
$122,000, and we have matched I think a million dollars to help 
with our Energy Crisis Assistance Program. What happens with 
the lack of funding, we usually have to take off a lot of 
qualifying people and only focus on the elderly and senior 
citizens.
    Mr. Shuster. There was some talk by some of you about solar 
and wind. Solar power, what percentage of the territory 
generates electricity through solar power presently?
    Mr. Smith. I'd say less than 2 percent.
    Mr. Shuster. Even if you had a significant increase in 
solar, you are doubling, it would still only be 4 percent.
    Mr. Smith. We do have a net peering program which is 
helping to increase that. The cost of solar panels is still 
very high for the average citizen.
    Mr. Shuster. What about wind?
    Mr. Smith. Wind is growing very much. We are working with 
our permitting, and there is strong interest. I think there are 
at least a dozen people right now ready for the sky streams and 
similar turbines.
    Mr. Shuster. What percentage of wind produced electricity?
    Mr. Smith. Even less than solar.
    Mr. Shuster. That brings me to my question, I see you put 
an RFP out on small power providers, and I read that's soon to 
come in.
    Mr. Hodge. May 1.
    Mr. Shuster. As I mentioned the statement about coal 
producing electric plants and nuclear power, are those 
alternatives that have been considered? I know they are long-
term. I know you talked a little bit short-term and long-term. 
These are long-term solutions. What are the prospects of coming 
up with a design for a smaller coal-fired and electric plant or 
taking the technology out of a nuclear sub, a smaller nuclear 
generator? Is that something to be considered or would it be 
something feasible here in the Virgin Islands?
    Mr. Hodge. There is a respondent that is proposing a coal 
solution to the territory's needs, so that is one option. There 
is an existing facility in the Virgin Islands that has a coal-
fired unit. So they are responding to the RFP.
    As far as nuclear, the economies of scale are a little 
tricky when you get to this size for a nuclear reactor. It has 
to be something that incorporates both the Virgin Islands and 
Puerto Rico for it to make sense from my knowledge of nuclear 
facilities, and that would still require an interconnection 
under water between the Virgin Islands and Puerto Rico. It has 
been mentioned and we are trying to get a alliance with PREPA 
right now in Puerto Rico to see where we could further evaluate 
those scenarios.
    Mr. Shuster. The grid right now doesn't connect to Puerto 
Rico?
    Mr. Hodge. No, sir. St. Thomas is connected to St. John, 
and that's the extent of the connection of the grid in the 
Virgin Islands.
    Mr. Shuster. I'm sorry.
    Mr. Hodge. St. Thomas and St. John are connected, but 
that's the extent of any interconnection in the area.
    Mr. Shuster. The question is how difficult is that? How 
expensive is that? Is that prohibitive or is it something that 
can be done?
    Mr. Hodge. St. Thomas and St. Croix the problem with the 
connection there is that those are some of the deepest waters 
and the undulating at the bottom of the floor of the water 
there as well. There is a study being done right now of the 
topography of the seafloor to see if it can actually be done at 
a decent price. St. Thomas and Puerto Rico might be even more 
affordable than the one through St. Thomas and St. Croix. It's 
all being done through a study right now so we can get accurate 
numbers on it. The benefit would be tremendous.
    Mr. Shuster. Thank you. I see my time has expired.
    Mrs. Christensen. Thank you.
    As requested by Chairman Costa, we are going to have a 
brief second round of questions.
    Senator Richards, as you listed possible alternative 
energy, you didn't list voltaic. Was there a reason, or was it 
just an oversight?
    Mr. Richards. No, Madame Chair, it's not a particular 
reason. My sole purpose of being here is regard to the 
statement that I made that we can speak about all these other 
alternative energies, until we get to the bottom point of 
finding some time and some energy, getting the financial 
capital that we believe should be returned to the Virgin 
Islands, we are looking farther down in the future not dealing 
with today's crisis that the residents and our constituents are 
faced with today in the Virgin Islands.
    Mrs. Christensen. I think it's a matter that we can also 
take up in another hearing, but part of the purpose for this 
hearing is looking at what is needed so that the capital--so 
that we can go back to Congress and see where we can capitalize 
the needs of WAPA and the territory in general.
    Mr. Miller, you spoke at one of my town meetings a couple 
of years ago, and I was--can you point to couple of areas where 
you seen some improvement?
    Mr. Miller. Congress Lady, to be honest with you, when I--
when we as ratepayers look at improvement by our Authority, we 
want to see or feel it in our pockets. And there is--feeling it 
in our pocket is where we would assess improvement, and we 
don't see--we don't feel it in our pockets, so we are not 
saying the improvement has been, if any, significant enough for 
us to say that improvement is working.
    Mrs. Christensen. That is the bottom line. That is the 
bottom line. As you said in your testimony, it is severely 
impacting the quality of life here in the territory.
    Mr. Hodge, just to follow up a little on the coal issue. In 
your testimony I think you mentioned that coal would really not 
be an option for the Virgin Islands, but you did have a request 
for proposals for coal on the petcoke or dual fire units, and 
we have the availability of petcoke here in the territory. With 
the environmental problems that come from coal and coke burning 
and the likelihood that Congress is going to be enacting more 
climate change legislation, is that a viable solution for the 
territory?
    Mr. Hodge. It's viable, especially if we can get through 
your help some relief from any possible carbon tax that might 
come in the future, if we can get the insular areas exempted 
from such a program, it's even more viable at that point. So we 
look forward to your help and your efforts to help us with 
that.
    But coal is a viable option. And I apologize, but I did 
resubmit my testimony for you having made some changes to it. 
You should have it in your presence by now. The clerk has 
received it. But coal is a viable option for us.
    Mrs. Christensen. Thank you. Your answer allowed you to 
bring in the other issue about the credits. Thank you.
    I now recognize Mr. Costa for his questions.
    Mr. Costa. Thank you very much. That was one of the areas I 
wanted to follow up with regards to petcoke, which is a by-
product with regard to the refinery capability here and how 
carefully and cost effective that might be as part of the 
solution.
    It seems to me--and I'm new to the challenges that you are 
facing here, but you are the experts, and while Congresswoman 
Christensen has indicated at great length the challenges and 
the difficulty, the great difficulty it's causing for citizens 
of the U.S. Virgin Islands on these utility rates, that like 
the strategies that we are attempting to pursue in the states, 
that there is no one silver bullet. Just seems to me that there 
is a combination of strategies that you are going to have to 
try to employ here as you look at renewable sources of energy, 
as you look at what you are currently using and how the 
refinery that exist here might be a part of that solution as 
you look on transitioning with other technologies. I know we 
haven't even begun to talk about the potential for waste 
technology.
    But speaking of renewables, Mr. Cole, I know among other 
wonderful islands that I enjoy frequenting when I can get some 
free time, in Hawaii they have done a great deal with wind 
power, and I'd like to get your take as to the acceptance and 
utilization here. One of the things that the islands have in 
abundance it seems to me is wind power, and I would like to 
know what studies have been done and what the current view is 
from the Public Services Commission on the availability of wind 
power and its applicability.
    Mr. Cole. Thank you, Mr. Costa. Mr. Smith, Bevan Smith, who 
is the Director of the Energy Office held a conference about a 
month and a half ago where it was a wind energy conference, and 
the statistics have shown that here on the island of St. Croix, 
on the south shore of St. Croix and in St. Thomas that wind can 
be a viable renewable energy. The thing is the cost going into 
getting this energy up and running.
    The Public Services Commission has always advocated with 
the Water and Power Authority through a regulatory authority 
that RFPs went out, and wind was one of the winners in the RFP 
that went out earlier, but it's an avoided cost issue. I'm sure 
Mr. Smith can speak more to the facts of the study on wind, and 
Mr. Hodge in terms of the avoided cost in terms of that type of 
energy.
    Mr. Costa. Mr. Smith, you care to comment briefly?
    Mr. Smith. Yes, sure. As Mr. Cole said, we did conduct a 
wind energy workshop, and the attendance was overwhelming. It 
was one of the best workshops I have seen on energy. We had 
some 251 very interested attending.
    With wind, we have steady marginal winds. However, the 
strong interest in the territory is for small wind, unlike most 
of the states, and because of that we have to really look at 
the balance of our tourism product and putting up small wind 
turbines throughout downtown Charlotte Amalie or Christiansted, 
St. Croix. So the Department of Planning and Natural Resources 
are carefully trying to see what areas, how we are going to go 
about putting small wind.
    Definitely wind is an option at the utility scale, and I 
know for sure WAPA is considering utility scale wind in the 
RFP.
    Mr. Costa. I would just from my own experience suggest that 
the concern about tourism and the impacts, Maui is a wonderful 
island like St. Croix is, as well as St. Thomas or St. John, 
but they have been experiencing--not just on Maui but other 
islands of the Hawaiian chain--wind. And they've got a series 
of large scale generation wind plants down one of the ridges of 
the mountain there between the heel valley between Makawao and 
on the way over to Lo'ihi, and I don't think it has one impact 
on the level of tourism for the people wanting to go to Hawaii.
    In California, we are blessed with much of course, but 
tourism, believe it or not, is one of our major industries in 
California, and we have series of regions where we have wind 
farms that, some would think they are rather ostentatious. I am 
not suggesting you put it here, but they are very productive. 
Almost excess of 4 percent of California's energy needs now are 
from wind.
    So I think that it's not going to solve all your problems, 
but it does provide I think an important balance and mix. I 
don't think it's going to--I would be very doubtful that it 
would impact tourism here in the islands.
    Mr. Smith. May I respond?
    Mr. Costa. I agree with you, and I think the Office of the 
Governor does also, but they were very surprised that our 
interest here is small wind. Therefore, we are talking about 
residential and small commercial areas putting individual 
towers on their property.
    When we look to the states, there are not many districts 
that deal with small wind. We are trying to really see how we 
can still satisfy the individual residences and protect our 
tourism product. But we do want to see wind power here in the 
territory. We are working very hard to see that happen. Thank 
you.
    Mrs. Christensen. The Chair recognize Mr. Shuster for his 
questions.
    Mr. Shuster. Thank you.
    One brief question, this is follow up to grid. You said the 
water is very deep between St. Croix and St. Thomas. What about 
the other islands in the Caribbean, are there other islands--I 
got to believe they have similar type problems. Can you connect 
to any of those other islands?
    I think sometimes we all sit here and think, well, we are 
all the U.S., we got to connect to a U.S. territories and 
states, but in Europe, the grid is all connected throughout 
Europe. The French sell to Germans and the British sell to 
Dutch. Is there another island or other islands that are close 
enough without the deepwater problem?
    Mr. Hodge. There is a long-term plan that is out there that 
discusses the connection of underwater grid between the 
Caribbean island that goes down the same route as the 
communication cables. So there has been some discussions and 
talks about it.
    We used to be a member of CARILEC, which is the 
organization for all the Caribbean electric companies, and 
previously the Authority had removed itself from the 
membership, and I have recently reapplied for membership. So 
that would again foster that kind of discussion again to see if 
we could get some kind of agreement worked out between all the 
islands.
    Mr. Shuster. Is my assumption correct that all these 
islands throughout the Caribbean have this energy situation?
    Mr. Hodge. That's correct. We all generate pretty much the 
same way. Some of the islands have subsidy from the government, 
and that's how they combat their problems. And then you have 
other islands that some are blessed with geothermal, some are 
blessed with different resources; but pretty much most of the 
Caribbean islands generate using oil in the same way.
    Mr. Shuster. Thank you.
    Mrs. Christensen. Thank you. I want to thank the first 
panel for their valuable testimony. And members of the 
Subcommittees will likely have additional questions which will 
be submitted in writing, which we will ask for you to respond 
in writing as well. Thank you very much.
    I would like to now recognize the second panel of 
witnesses: Mr. Robert Nicholson of Sea Solar Power 
International; Mr. James Resor, the Chief Financial Officer of 
groSolar; Frazier Blaylock, the Director of the Federal 
Government Relations, Covanta Holding Corporation; and Mr. Jim 
Powell, Senior Policy Advisor to the Southern States Energy 
Board.
    Mrs. Christensen. We are ready to resume our testimony with 
the second panel. The Chair now recognizes Mr. Nicholson to 
testify for five minutes.

                STATEMENT OF ROBERT NICHOLSON, 
                 SEA SOLAR POWER INTERNATIONAL

    Mr. Nicholson. Madame Chairwoman Christensen, Mr. Chairman 
Costa, Representative from the Commonwealth from Pennsylvania, 
Mr. Shuster, staff of the Subcommittee, listening audience, 
renewable energy enthusiasts, my name is Robert Nicholson. I am 
President of Sea Solar Power International, and we are a 
leading firm in the commercial development of OTEC.
    OTEC takes advantage of the solar energy that's stored in 
the upper layers of the ocean and surrounds the various islands 
of the Caribbean. St. Croix, for example, can be supplied 
entirely with OTEC 100 percent of the time with about 30 
megawatts of installed power.
    The ocean is the largest solar collector in the world. It 
absorbs the sun 24 hours a day. The energy is stored. We use 
the surface water as the heat source, we use the cold bottom 
water which is 40 degrees, 3,000 feet below the surface as a 
heat sink, and we can develop 10 megawatts of electricity.
    This power plant is designed specifically for small 
tropical islands. It will produce 3 million gallons of 
desalinated water per day. It will produce a whole variety of 
fish, vegetables that could be grown with the upper lining of 
the nutrient rich water from the bottom of the ocean. It would 
support 500 acres of mariculture. St. Croix, the tropical 
islands throughout the equatorial zone can become energy rich 
with this technology.
    We have our own financing. We are proposing to build, own 
and operate and install these plants. We have proposals in ten 
other small islands. We have proposals for the Hawaiian 
Electric Company, Puerto Rico, and the Persian Gulf for 100 
megawatt floating plants. We are convinced that we can supply 
most of the tropical world equatorial zone with low cost clean 
energy using only solar energy, producing enormous quantities 
of freshwater.
    Each 100 megawatt power plant would support an annual fish 
harvest of $100 million a year. This is a technology that is 
ready for today. We have a team that we have assembled that can 
design, build, own and operate each plant. We have full funding 
from private investors, and we are in the position to provide 
St. Croix with a proposal May 1st for a 10 megawatt land base 
plant.
    Once the island becomes renewable energy dependent, it can 
then convert its automobiles to electric plug-ins, and at that 
point you become energy rich, energy self-sufficient, and no 
longer do you have a goal vein on your treasury for money going 
to import foreign oil. We can do this in American Samoa. This 
can be applied to Guam, all the territories, all the islands 
throughout the tropical equatorial zone.
    At the moment we have a proposal to the Hawaiian electric 
company for 100 megawatt plant. The whole idea for the future 
is to build eight 200 megawatt power plants, surround Oahu with 
these solar energy generating facilities, and at that point 
again convert to electric plugs-in. They become energy rich.
    One of the best examples to site in the Caribbean and 
everyone knows this, and you think you have problems in St. 
Croix, St. Thomas, St. John, Haiti is in dire straits. It is a 
country in ruin. This technology can make them very energy 
independent.
    The lower the cost of energy in any given economy, the 
higher the standard of living for its citizens. So now is the 
time to take advantage of this unusual situation. You are 
surrounded by energy, you are rich in your own natural 
resource. We have the technology that can convert that solar 
energy into electricity 24 hours a day, enormous quantities of 
fish and food production and automobile transportation as well.
    We are currently working with research laboratories, and we 
have two ways to generate liquid fuel from the seawater using 
only solar energy. We believe that from a national security 
standpoint, we can make our country, United States, energy 
rich, energy independent. We don't have to be relying on 
foreign produces who are not our friends. This is a fantastic 
opportunity for everyone.
    We've been working with WAPA. We realize that this is a 
tremendous opportunity now with the new director who's fresh, 
who has new vision. We have dynamic leadership with Donna 
Christensen, the representative to the islands. And I am 
pleased that Chairman Costa with his interest in renewable 
energy just makes it a fantastic opportunity to move this 
forward.
    So in conclusion we are getting ready to submit the 
proposal May 1st. We will have a very attractive competitive 
price. This will I'm sure get the attention of everyone. We 
have our own financing. There is no risk to the host client. We 
bear that risk. However, in the future at any time should the 
WAPA, the U.S. Virgin Islands want to purchase the power plant 
from us, we will sell it to them. So we are not a threat to oil 
or coal or to the operation that's now underway. This is just 
an incredible opportunity to ease in to renewable energy and 
get off in a phased out manner with fossil fuel. Thank you.
    Mrs. Christensen. Thank you, Mr. Nicholson.
    [The prepared statement of Mr. Nicholson follows:]

   Statement of Robert J. Nicholson III, President, SEA SOLAR POWER 
           INTERNATIONAL, LLC, Owned by the Abell Foundation

                  ``FEED THE PEOPLE--SAVE THE WORLD''
                             WHAT IS OTEC?
                    ocean thermal energy conversion
      OTEC is an economically and environmentally efficient 
means to convert the solar energy of the tropical oceans into low-cost 
electricity.
      A large floating vessel similar to an ocean drilling rig 
or large tanker houses the power cycles. Small, land based plants are 
also available.
      Warm 80 degree F surface water is pumped through heat 
exchangers in order to boil the working fluid, propylene, into a vapor. 
Propylene boils under pressure at 67 degrees F. The vapor then expands 
through vapor turbines which drive generators.
      Cold 40 Degree F bottom water is pumped up from 3,000 
feet below the surface to condense the vapor back into its liquid 
state. The liquid propylene returns to the evaporators where the cycle 
starts all over again.
                                  OTEC
                            renewable energy
      Oceans are largest solar collectors on earth
      They are already built and paid for
      Manmade solar collectors only work when the sun shines
      OTEC - base load power operates 24 hours per day
      Stored solar energy throughout the equatorial zone could 
provide 300 times the world's consumption of electricity
                             THERMAL ENERGY
      A pound of water raised one degree is lifted to an 
equivalent height of 778 feet
      OTEC operates on a delta-T of 40 Degrees F
      40 degrees x 778 feet = 31,120 feet
      Best possible Carnot cycle designed by SSP is 3.25%
      3.25% x 31,120= 1,011 feet
      Warm water, cold water--divide 1,000 by 2 = 500 feet of 
head--constant heat source
                        TWO STANDARD OTEC MODELS
      10 MW land based OTEC plant--3 million gallons of fresh 
water per day
      100 MW floating OTEC plantship--32 million gallons of 
fresh water per day
      Both small and large plants can be dedicated to produce 
only fresh water
      Small land based plant: 10 million gallons of fresh water 
per day--large plantship--130 million gallons of fresh water per day
      Large quantities of ammonia for fertilizer
                 STUDIES CONFIRM TECHNICAL FEASIBILITY
      Fluor Daniel
      Lehigh University Energy Research Center
      EA Engineering / Abell Foundation
      Indian Government Appraisal
      Southern States Energy Board's Special Report to Puerto 
Rico
      Stone & Webster / Kvaerner- John Brown
                    SEA SOLAR POWER INT., LLC, TEAM
      Sea Solar Power International, LLC: OTEC cycle designed 
by J. Hilbert Anderson
      Abell Foundation: equity funding
      AON Risk Insurance: guarantee performance of each SSP-
OTEC plant
      Burns & Roe Enterprises, Inc: mechanical engineers--
design OTEC cycle
      Whiting-Turner Contracting Company: construction of 
complete OTEC plant
      Mele Associates, Inc: environmental permits
      Loria Emerging Energy Consulting: OTEC expert
      Dr. Pierce Linaweaver: OTEC expert
      Alion Science & Technology: marine architects--design 
marine platforms
      Healy Tibbitts Builders, Inc., Division of Weeks Marine, 
Inc: install cold water pipe
                                PROPOSAL
      SSPI is prepared and eager to install OTEC plants 
throughout the equatorial zone
      SSPI has the most advanced OTEC design, the team in place 
to deliver and the financing from private investors to begin now
      SSPI is seeking sincere clients to enter into signing 
contracts for both power and water
      This includes both the land based OTEC for small islands 
and the large floating OTEC plantships for continental applications
                                 ACTION
      Identify decision makers--coordinate with their technical 
advisors
      Select ideal site
      Negotiate power and water contracts
      Secure operating permits
      Install OTEC plant--3 years
      Additional plants as desired
                                 ______
                                 
    Mrs. Christensen. The Chair recognizes Mr. Resor to testify 
for five minutes.

  STATEMENT OF JAMES RESOR, CHIEF FINANCIAL OFFICER, GROSOLAR

    Mr. Resor. Thank you. First, thank you to Honorable 
Chairwoman Christensen and Chairman Costa, Representative 
Shuster, and particularly I note staff has worked hard to pull 
together these hearings.
    My name is James Resor. I'm the Chief Financial Officer of 
groSolar. We are a distributor and installer of photovoltaic 
systems for residences and also commercial enterprises. We 
operate in about 40 states, and we are based in Vermont but 
obviously have field offices throughout the mainland. In our 
experience we also work with a lot of different utilities, so I 
very much appreciate hearing the perspectives of WAPA earlier 
today.
    A couple of comments. One is when we look at solar, since 
we are involved in solar projects throughout many different 
situations from the northeast to California to Colorado, there 
are a couple variables that we look at that make it more 
compelling than other places. Probably the most important is, 
what are the electricity rates that ratepayers have to pay from 
a conventional source of electricity.
    So clearly, as we have heard many testify, when you are 
paying more than 30 cents a kilowatt hour right off the bat, 
regardless of your sun quality, even if that was 35 cents in 
Massachusetts or Alaska, it would still be a relatively 
compelling opportunity for solar. Clearly here when you add an 
addition that you have ample sunlight, the opportunity for 
solar as a true distributed source of energy in small doses for 
residences or commercial enterprises is compelling.
    In addition, there are certain site characteristics that 
are important. A very important feature is the cooperation with 
the local utility. And fortunately there is a lot of data and 
experience that you can draw from other parts of the United 
States in terms of net metering and how those programs are 
implemented to make streamline the implementation so it doesn't 
become a barrier, but it really encourages the installation of 
solar.
    The other aspect terms of net metering, which I understand 
has recently been put in place for the Virgin Islands, which is 
very positive, is to be careful that you don't exclude 
commercial enterprise. Sometimes if the cap is only 10 
kilowatts, you may effectively exclude some opportunities for 
solar for food distributors and hotels and other commercial 
enterprises which have the same--are feeling the same pinch of 
the high electricity prices.
    In our experience a lot of our clients in the commercial 
sector are big box retail stores, food distributors that have a 
lot of air conditioning and food refrigeration electricity uses 
and are often very attractive customers for solar solution.
    One other piece which I addressed in my written testimony I 
think the timing of this hearing is very critical, and that as 
you probably all know, last week the Senate passed a bill 
particularly for solar and wind renewing the investment tax 
credit and other features that have been discussed in the House 
already, in fact passed in the House under different forms. But 
the bill under--that was introduced by Senator Cantwell did 
pass the Senate I believe 88 to 8. Again, showing strong 
bipartisan support. Now the interest will turn back to the 
House.
    I think your Subcommittees taking up this issue--and that's 
a bill that helps the U.S. Virgin Islands as it does any part 
of United States because it basically allows businesses to have 
that longer term horizon to drive the commercial investment tax 
credit. In addition, it helps at the residential level by 
extending the 30 percent tax credit that's available to the 
residence owner and removing the cap. Right now it's capped at 
$2,000 per system. So I think those are both--and there is more 
detail of that in my written testimony, but again I think the 
extent that the hearings from these Subcommittees can provide 
additional momentum and support for those discussions in the 
House, that will be extremely timely.
    And then last, again I will be happy to take any questions 
on solar, but we feel there is a tremendous opportunity here in 
the U.S. Virgin Islands, and I think as Chairman Costa pointed 
out, there is no one silver bullet. You really need to look at 
a mixed strategy over time that you can start to address the 
acute needs that the people of U.S. Virgin Islands are 
experiencing. Thank you.
    Mrs. Christensen. Thank you, Mr. Resor.
    [The prepared statement of Mr. Resor follows:]

      Statement of James Resor, Chief Financial Officer, groSolar

Introduction:
    Thank you, Mr. Chairman and Members of the Committees, for 
providing me the opportunity to testify today.
    My name is James Resor. I am the Chief Financial Officer of 
groSolar, Inc. groSolar (www.grosolar.com) is a national distributor, 
integrator and installer of solar photovoltaic systems for residences 
and commercial enterprises. We are active in more than forty states and 
Canada with offices and distribution centers in several northeastern 
states, New Jersey, Colorado, California, Oregon and Canada.
    In addition to our diverse residential solar experience, groSolar 
has designed and installed solar systems for a wide range of commercial 
and government enterprises and other property owners. These 
installations include: food distribution centers, agricultural 
operations, schools, municipal buildings, general office buildings, 
multi-unit residential complexes, sports stadiums and resort 
properties. These solar installations are tied to the local electric 
utility (``grid-tied''). Customers retain access to their electric 
utility while generating electricity from solar power.
    Solar energy systems (photovoltaic for electricity or solar thermal 
for water heating) can be used in most places throughout the United 
States. Photovoltaic (PV) and solar water heating systems are 
distributed generation (DG) technologies. Like other DG technologies, 
they provide energy at the point of consumption rather than at a 
central power plant hundreds of miles away. As such, DG does not rely 
on vulnerable regional transmission lines and local distribution 
networks. By producing energy at the source of consumption, solar power 
alleviates stress and vulnerability on the grid. It also ensures power 
generation should transmission facilities or generating stations fail 
due to terrorism, accidents or natural disaster. Solar power is a very 
flexible solution that can be added in targeted or widespread doses for 
residential and commercial purposes to meet the needs of consumers and 
utility grid reliability. 1
---------------------------------------------------------------------------
    \1\ See Appendix 1 for overview of PV, solar thermal and other 
solar technologies
---------------------------------------------------------------------------
Where Solar Energy Makes Sense:
    The relative attractiveness of solar installations depends upon 
three sets of variables: (I) geographic/economic factors, (ii) site 
characteristics, (iii) and program objectives:
1. Geographic/Economic Factors:
      Utility prices for conventional electricity vary greatly 
among different parts of the country. High cost areas like the 
Northeast, much of California, Hawaii and Insular Areas such as the 
U.S. Virgin Islands make solar systems look relatively more attractive 
than in low cost areas such as parts of the Southeast or certain 
Western states. When electricity prices are approaching $0.20 per kwh 
or even higher (versus the U.S. mainland average of $0.13 per kwh), 
this makes solar energy that much more attractive. Thus, in places like 
the U.S. Virgin Islands or Hawaii, prices greater than $0.30 per kwh 
offering a compelling opportunity to install solar energy systems.
      Favorable local regulations such as the existence of 
``net metering'', which allows customers to sell excess power back to 
the grid at the same price as they purchase power, are critical.
      Local/utility financial incentives provided by the state 
or local government or utility company that can augment federal 
incentives. An example of this can be where the local utility is 
willing to provide incentives to homeowners or businesses to install 
solar in order to address peak demand or grid congestion issues. This 
can help the utility mitigate risks of brownouts and/or avoid expensive 
grid or generation capacity enhancements. For example, groSolar is 
working with several utilities to provide ``distributed generation'' 
near the demand points to work around grid congestion points and thus 
avoid expensive grid upgrades.
      Amount of sunlight. While Arizona is obviously better 
than Massachusetts in terms of sunlight, other variables such as 
relative utility prices and local regulations are more critical and 
usually outweigh the significance of the amount of sunlight. Consider 
the fact that Germany and Japan have been the leaders in solar capacity 
with far less solar resources than the U.S. Acceptance of solar energy 
in southern California has more to do with high electric rates and 
supportive local incentives than plentiful sunlight.
2. Site Characteristics:
      Various site-specific characteristics affect the 
productivity and/or installation costs of solar systems. It is 
preferable to have:
        Unobstructed southerly site exposure
        Flat roof or low-angle slope (or nearby fields or parking 
lots for ground-mounted or canopy arrays)
        Less than 60 feet above ground for roof mounted systems 
(preferably 1-2 stories)
        Structurally sound roof to bear weight of solar array 
without significant obstruction from dormers, mechanical equipment, 
vents or shading from sunlight
3.  Program Objectives (some of these apply more to commercial 
        opportunities):
      Property owner/manager objectives
        Lock in long-term, predictable energy costs to mitigate 
risks of electric rate increases, particularly for those areas that are 
highly dependent upon petroleum-based sources for electric generation.
        Reduce carbon emissions
        Use solar energy as part of broader energy conservation 
measures (e.g. with efficient lighting, recycling, etc.) to reduce 
overall energy costs
        Public relations value to residents, employees, customers 
and other constituents
      Sufficient scale of project to provide economies of scale 
for design, permitting, financing, installation of multi-residential 
sites or office buildings. A portfolio of smaller projects or 
residential installations, which share a common owner/manager and other 
characteristics, can also provide attractive economies of scale and 
reduce the all-in cost of solar installations.
      Long-term financing potential
        Good credit quality of owner/user of power (or use of 3rd-
party credit enhancements/guarantees) to facilitate long-term financing
        Ability of owner or third-party to use commercial 
investment tax credits which are currently 30% in year one
Current Legislation:
    I would now like to direct my testimony to current discussions 
within Congress. The timing of this joint hearing is excellent. Earlier 
this month, Senators Cantwell and Ensign proposed the Energy Tax 
Stimulus Act of 2008 (S. 2821). It contains key items that are 
necessary for continued rapid growth of solar energy in the U.S., 
including Insular Areas such as the U.S. Virgin Islands. The proposed 
legislation draws on strong bipartisan support for solar. For example, 
two important provisions are:
    1.  the extension of the 30% Investment Tax Credit (ITC) for 
commercial solar investments for eight years (and allowing electric 
utilities to claim the ITC)
    2.  the extension of the 30% personal tax credit for one year for 
residential solar investments while also repealing the current $2,000 
cap
    Further information on the components of this important legislation 
is included in Appendix 2. The short and long-term benefits of enacting 
this legislation would be significant. The benefits include:
      Increased energy security: Solar energy is a domestic and 
abundant energy source in the U.S. The U.S. has the best solar 
resources of any developed country in the world. Proportionally, U.S. 
solar energy resources exceed those of fossil, nuclear or other 
renewable energy resources. Despite this tremendous advantage, the U.S. 
has failed to capture and harness this free and readily available 
energy. In 2006, solar energy produced just 1/30th of one percent of 
all electricity in the U.S.; Germany in contrast, with the solar 
resources no better than those of Alaska, installed seven times more 
solar energy property than the entire U.S. 2 Solar 
technologies help stabilize the nation's electricity grid, provide 
clean, reliable power, and reduce the impact of natural disasters and 
terrorist acts. By generating electricity at the point of consumption, 
the effects of natural disaster or terrorist attacks can be mitigated. 
Producing these home-grown technologies in the U.S. will reduce our 
dependence on foreign sources of energy, while simultaneously lowering 
the cost of energy to consumers.
---------------------------------------------------------------------------
    \2\ EIA, Net Generation by Energy Source by Type of Producer, 
October 2006.
[GRAPHIC] [TIFF OMITTED] 41819.001

    .eps  Reduction in the use of high cost natural gas (and 
other petroleum-based fuels): In most parts of the U.S., peak 
electricity demand occurs when solar electricity is near optimal 
efficiency (9 AM--6 PM). This demand load is almost exclusively served 
by central station gas generation (or other petroleum-based fuels) that 
can be easily cycled on and off and is often highly inefficient. Given 
the high price of natural gas to key industrial sectors and consumers, 
the U.S. can no longer afford to neglect its abundant solar resources. 
Analysis conducted by the Solar Energy Industries Association (SEIA) 
concludes that an eight-year extension and expansion of investment tax 
credits for solar energy will displace over 5.5 trillion cubic feet 
(Tcf) of natural gas, providing an economic value to consumers in 
excess of $50 billion. 3 This is enough energy to displace 
the need for all new LNG terminals by 2012.
---------------------------------------------------------------------------
    \3\ Solar Energy Industries Association Natural Gas Displacement 
Model
[GRAPHIC] [TIFF OMITTED] 41819.002

    .eps  Hedge against rising energy prices: In the last five 
years, consumers have seen electricity prices escalate between 20 and 
78 percent. At the same time, we have seen the price of natural gas 
triple and the price of gasoline routinely exceed $3.00 per gallon. 
Each year the cost of energy is taking a larger percentage of a 
family's income than at any other time in U.S. history. This energy 
inflation vulnerability especially impacts the poor and elderly on 
fixed incomes. Solar can help address this vulnerability because it 
requires no fuel to operate. Although a solar system is more expensive 
up front in many cases, there are no additional costs for operating a 
system once installed. Furthermore, solar panels are guaranteed for 20-
25 years, allowing consumers to ``lock in'' their electricity prices 
for decades.
      Job creation: Solar systems require high-tech 
manufacturing facilities and produce well paying, high-quality jobs. 
Extending the tax credit will create an estimated 55,000 new jobs in 
the solar industry and over $45 billion in economic investment. 
groSolar has doubled its workforce in the last 12 months, including 
some hires who had been recently laid off from construction related 
employment due to the downturn in the U.S. housing market.
      Clean energy and environmental benefits: Solar energy is 
the cleanest method of energy generation, in terms of avoided air, 
waste and noise pollution, energy payback, water conservation, 
radiation, harm to wildlife, or environmental risk in the event of an 
accident. Solar energy produces no greenhouse gases, no acid 
precipitation or toxic emissions, and no other air pollution of any 
kind. Over the 40-50 year life of a solar electric system, every 
kilowatt (kW) of solar electric power reduces 217,000 pounds of carbon 
dioxide, 1500 pounds of sulfur dioxide, and 830 pounds of nitrogen 
oxides emissions as compared to electricity produced by conventional 
generation. 4 Photovoltaic solar energy generates 
electricity without using any water. In contrast, fossil fuel and 
nuclear based electricity generation use substantial amounts of water 
to run steam turbines. Across the U.S., approximately 40% of fresh 
water withdrawals are used for electric generation. 5 If 
water-starved communities like Phoenix and Las Vegas are to continue 
growing, we must place greater emphasis on water-free electricity 
generating technologies.
---------------------------------------------------------------------------
    \4\ NREL report, ``Distributed Energy Resources for the California 
Local Government Commission,'' October 2000.
    \5\ Sandia National Laboratories, Energy-Water Nexus, http://
www.sandia.gov/news-center/news-releases/2006/environ-waste-mgmt/
mapwest.html
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                                 ______
                                 
APPENDIX 1
                 OVERVIEW OF SOLAR ENERGY TECHNOLOGIES
                           photovoltaics (pv)
Technology
    Photovoltaic (PV) devices generate electricity directly from 
sunlight via an electric process that occurs naturally in certain types 
of material. Groups of PV cells are configured into modules and arrays, 
which can be used to power any number of electrical loads.
    Crystalline silicon--the same material commonly used by the 
semiconductor industry--is the material used in approximately 90% of 
all PV modules today. PV modules generate direct current (DC) 
electricity. For residential use, the current is then fed through an 
inverter to produce alternating current (AC) electricity that can power 
the home's appliances.
    The majority of PV systems today are installed on homes and 
businesses that remain connected to the electric grid. Consumers use 
their grid-connected PV system to supply some of the power they need 
and use utility-generated power when their power usage exceeds the PV 
system output (e.g., at night). In 41 U.S. states, when the owner of a 
grid-connected PV system uses less power than their PV system creates, 
they can sell the electricity back to their local utility, watch their 
meter spin backwards, and receive a credit on their electric bill--a 
process called net metering. The electric grid thus serves as a 
``storage device'' for PV-generated power. Net metering is a critical 
requirement to facilitate adoption of PV systems.
Markets
    The global PV market has averaged 38% annual growth over the last 
five years. Yet PV still accounts for a small percentage of electricity 
generation worldwide and less than 1/30th of 1% in the U.S. 
Furthermore, the U.S. lags behind Germany and Japan in installations as 
well as in manufacturing. Germany and Japan have surged to the lead 
with coherent, long-term national incentive policies, despite 
dramatically inferior amounts of sunshine.
    The U.S. possesses the best solar resources in the world, and yet 
Germany installs seven-times as much PV as the U.S. Germany and Japan 
have taken the lead in solar manufacturing and installations because of 
long-term national incentive policies designed to make solar power 
mainstream. Japan instituted a carefully designed rebate program that 
lasted over ten years, while Germany incentivizes solar installations 
by paying 3-4 times retail electric rates for the electricity generated 
from PV systems for 20 years. The surging player in the industry, 
China, has gone from having no PV industry to manufacturing twice the 
level of the U.S. in just three years. While California is the dominant 
U.S. market for PV, with 73% of the grid-tied installations in 2006, 
there is substantial activity in other states.
                         solar thermal systems
Technology
    Solar thermal systems provide environmentally friendly heat for 
household water and space heating. The systems collect the sun's energy 
to heat either air or a fluid. The air or fluid then transfers solar 
heat to your home or water. In many climates, a solar heating system 
can provide a very high percentage (50 to 75%) of domestic hot water 
energy. In many northern European countries, combined hot water and 
space heating systems are used to provide 15 to 25% of home heating 
energy.
    Active solar water heating systems can be either ``open loop,'' in 
which the water to be heated flows directly through the rooftop 
collector, or ``closed loop,'' in which the collector is filled with an 
antifreeze solution that passes through a heat exchanger mounted in or 
around your normal water heater. During the day, in good weather, your 
water can be heated entirely by the sun. In any weather, the heating 
system can back up your existing heater, reducing overall energy costs.
[GRAPHIC] [TIFF OMITTED] 41819.003

.epsMarkets
    In the absence of coherent national policies, from 1997 until 2005, 
the U.S. solar water heating and solar space heating market showed 
little growth, averaging about 6,000 installations per year. In the 
past couple years, numerous states have created or expanded incentives 
to complement the new federal tax credits. Accordingly, the market is 
has increased quite a bit. Solar water heating can be done at same time 
as PV.
                       concentrating solar power
Technology
    Concentrating solar power (CSP) plants are utility-scale generators 
that produce electricity by using mirrors or lenses to efficiently 
concentrate the sun's energy. Two principal CSP technologies are 
parabolic troughs and dish-Stirling engine systems.
    Using curved mirrors, parabolic trough systems concentrate sunlight 
to drive conventional steam turbines. The mirrors focus the sun's 
energy onto a receiver pipe or heat collection element. From there, a 
high temperature heat transfer fluid picks up the thermal energy and 
uses the heat to make steam. The steam drives a conventional steam-
Rankine power cycle to generate electricity. A typical collector field 
contains many parallel rows of troughs connected in series.
                            thin film solar
Technology
    There are four basic categories of thin film PV based on the 
materials used to convert light into electricity. They are: i) 
Amorphous Silicon ( a-Si ), ii) Cadmium Telluride (CdTe), iii) 
Copper Indium (Gallium) di-Selenide (CIS/CIGS) and iv) Emerging (Dye-
sensitized, Organic or Nano-materials)
    Not only can different materials be used to create the PV effect, 
but they can also be deposited on different substrates. Currently, most 
production technologies use glass as the substrate, as in the case of 
all CdTe technologies, and many emerging a-Si technologies. But some a-
Si solutions use a flexible metal foil as the substrate, and many 
emerging and CIGS technologies can be deposited on glass or metal foil 
as well as lower temperature substrates like plastic.
    Unlike today's traditional solar photovoltaic (crystalline PV) 
technology, thin film PV uses very little or no silicon and other 
material to build a solid state electricity generation device. Thus, a 
whole new range of applications otherwise not possible using 
traditional solar cells are enabled because thin film materials can be 
applied to a multitude of surfaces such as glass, plastic and flexible 
metal foils. Thin film PV can be manufactured using various deposition 
and packaging methods that offer flexibility in scaling production and 
addressing applications. Currently, commercial applications of thin 
film PV are limited due to lower efficiencies and used predominantly 
for large utility-scale PV projects where space is not a constraint.
                                 ______
                                 
APPENDIX 2
               the clean energy tax stimulus act of 2008
    On April 3, 2008 Senators Cantwell and Ensign announced the Clean 
Energy Tax Stimulus Act of 2008 (S. 2821). It contains key items that 
are necessary for continued rapid growth of solar energy in the U.S. 
Here is a summary of key sections of the proposed legislation.
    Purpose: To provide for the limited continuation of clean energy 
production incentives and incentives to improve energy efficiency in 
order to prevent a downturn in these sectors that would result from a 
lapse in the tax law.
Title I--Extension of Clean Energy Production Incentives
    Section 101. Extension and modification of the renewable energy 
production tax credit (IRC Section 45). Under current law, an income 
tax credit is allowed for the production of electricity using renewable 
energy resources, like wind, biomass, geothermal, small irrigation 
power, landfill gas, trash combustion, and hydropower facilities. A 
taxpayer may generally claim a credit for 10 years, beginning on the 
date the qualified facility is placed in service. In order to qualify, 
however, facilities must be placed in service by December 31, 2008. The 
bill extends the placed in service date for one year (through December 
31, 2009). It also redefines small irrigation power to include marine 
and hydrokinetic energy, and enables the credit to help reduce the cost 
of renewable electricity that is ultimately sold to utility customers 
when the utility itself is also a part owner of the renewable facility.
    Section 102. Extension and modification of the solar energy and 
fuel cell investment tax credit (``ITC'') (IRC Section 48). Under 
current law, taxpayers can claim a 30 percent business energy credit 
for purchases of qualified solar energy property and qualified fuel 
cell power plants. In addition, a 10 percent credit for purchase of 
qualifying stationary microturbine power plants is available. The 
credit for qualified fuel cell power plant property is capped at $500 
per 0.5 kilowatt of capacity. Credits apply to periods after December 
31, 2005 and before January 1, 2008. The bill enables taxpayers to 
claim the 30 percent business credit for the purchase of fuel cell 
power plants and solar energy property and the 10 percent credit for 
stationary microturbines, through December 31, 2016. In addition, the 
bill repeals the $500 per .5 kilowatt of capacity cap for qualified 
fuel cell power plant property, and allows electric utilities to claim 
the ITC.
    Section 103. Extension and modification of the residential energy-
efficient property credit (IRC Section 25D). Under current law, 
taxpayers can claim a personal tax credit for the purchase of property 
that uses solar energy to generate electricity for use in a dwelling 
unit and qualified solar water heating property that is used 
exclusively for purposes other than heating swimming pools and hot 
tubs. The credit is equal to 30 percent of qualifying expenditures, 
with a maximum $2,000 credit for each of these systems of property. 
Section 25D also provides a 30 percent credit for the purchase of 
qualified fuel cell power plants. The credit for any fuel cell may not 
exceed $500 for each 0.5 kilowatt of capacity. The credit applies to 
property placed in service prior to January 1, 2009. The bill extends 
the credit for residential solar property for one year (through 
December 31, 2009) and repeals the $2,000 credit cap for qualified 
solar electric property. The bill also allows the tax credit to offset 
Alternative Minimum Tax (``AMT'') liability.
    Section 104. Clean Renewable Energy Bonds (``CREBs'') (IRC Section 
54). Under current law, public power and consumer-owned utilities that 
cannot benefit from tax credits can issue Clean Renewable Energy Bonds 
(CREBs) to help them reduce the cost of renewable energy investments. 
Under current law, there is a national CREB limitation of $1.2 billion 
in bonding authority and CREBs must be issued before December 31, 2008. 
This bill authorizes an additional $400 million of CREBs that may be 
issued and extends the authority to issue such bonds through December 
31, 2009. In addition, the bill allocates 1/3 of the additional bonds 
for qualifying projects of State/local/tribal governments; 1/3 for 
qualifying projects of public power providers; and 1/3 for qualifying 
projects of electric cooperatives.
    Section 105. Extension of the special rule to implement FERC 
restructuring policy (IRC section 451(i)). The bill extends through 
December 31, 2009, the present-law deferral provision that enables 
qualified electric utilities to recognize gain from certain 
transmission transactions over an 8-year period.
Title II--Extension of Incentives to Improve Energy Efficiency
    Section 201. Extension and modification of the credit for energy-
efficiency improvements to existing homes (IRC section 25C). 1Current 
law provides a 10 percent investment tax credit for purchases of 
advanced main air circulating fans, natural gas, propane, or oil 
furnaces or hot water boilers, windows and other qualified energy-
efficient property. The credit applies to property placed in service 
prior to January 1, 2008. The bill extends the credit for one year 
(through December 31, 2009), and specifies that certain pellet stoves 
are included as qualified energy-efficient building property.
    Section 202. Extension of the tax credit for energy-efficient new 
homes (IRC section 45L). 1Current law provides a tax credit to an 
eligible contractor equal to the aggregate adjusted bases of all 
energy-efficiency property installed in a qualified new energy-
efficient home during construction. The bill extends the energy-
efficient new homes credit for two years (through December 31, 2010), 
and permits the eligible contractor to claim the credit on a home built 
for personal use as a residence.
    Section 203. Extension of the energy-efficient commercial buildings 
deduction (IRC section 179D). 1Current law allows taxpayers to deduct 
the cost of installing energy-efficient improvements in a commercial 
building. The deduction equals the cost of energy-efficient property 
installed during construction, with a maximum deduction of $1.80 per 
square foot of the building. In addition, a partial deduction of 60 
cents per square foot applies to certain subsystems. The deduction 
applies to property placed in service prior to January 1, 2009. The 
bill extends the deduction to property placed in service through 
December 31, 2009, increases the maximum deduction to $2.25 per square 
foot, and allows a partial deduction of 75 cents per square foot for 
building subsystems.
    Section 204. Modification and extension of the energy-efficient 
appliance credit (IRC section 45M). 1Current law provides a credit for 
the eligible production of certain energy-efficient dishwashers, 
clothes washers, and refrigerators. The credit for dishwashers applies 
to dishwashers produced in 2006 and 2007 that meet the Energy Star 
standards for 2007. The bill extends the credit to appliances produced 
in 2008, 2009, and 2010 and updates the qualifying efficiency standards 
in accordance with the Energy Independence and Security Act of 2007.
                                 ______
                                 
    Mrs. Christensen. The Chair now recognizes Frazier Blaylock 
to testify for five minutes.

  STATEMENT OF FRAZIER BLAYLOCK, DIRECTOR, FEDERAL GOVERNMENT 
             RELATIONS, COVANTA HOLDING CORPORATION

    Ms. Blaylock. Thank you, Chairwoman Christensen, Chairman 
Costa, Mr. Shuster. We greatly appreciate your having us here 
this morning. My name is Frazier Blaylock. I am the Director 
the Federal Government Affairs for Covanta Energy Corporation. 
Thanks for the opportunity to speak to you about how we could 
help in restoring a clean energy future for the insular areas.
    Covanta operates 34 energy-from-waste facilities in the 
United States including three in Pennsylvania, one in 
Stanislaus County, California. We also operate one in Honolulu, 
four in Florida, and three on Long Island in New York. And I 
mention those communities in particular because the geographic 
similarities they share with insular areas we are discussing 
today.
    Energy from waste is a specially designed energy generation 
process that uses household waste as a fuel and help solve some 
of society's biggest challenges, including dependence on 
foreign oil, solid waste management, climate change, and land 
use, all of which have already been raised today.
    Covanta serves the disposable needs of approximately twelve 
million people in communities across the United States and 
reduces the need for fossil fuels by generating over 1,200 
megawatts of renewable energy and saving the equivalent of 15 
million barrels of oil each year.
    Every ton of trash processed at energy-from-waste 
facilities generates between 500 and 700 kilowatt hours of 
renewable electricity on a 24/7 base load basis, and our 
operations recycle over 350 million tons of recovered metals 
every year.
    One key benefit of the energy-from-waste process is the use 
of an indigenous, sustainable fuel called trash, which itself 
creates management challenges for insular communities and 
communities throughout the country. Unlike fossil fuel, garbage 
is readily available and within short transportation distances 
from these energy facilities and from the energy consumers. For 
each ton of trash processed in energy-from-waste facility 
enough electricity is generated to offset one barrel of oil.
    It is particularly relevant for Covanta to be addressing 
the energy future of the insular areas because of other 
environmental benefits that we offer. Energy from waste is a 
safe, reliable waste disposal method that generates renewable 
energy, reduces greenhouse gas emissions, recovers metals from 
recycling and reduces reliance on landfills. The energy-from-
waste process reduces the volume of solid waste received in our 
facilities by 90 percent, and displaces one ton of greenhouse 
gas emissions for every one ton of trash we process.
    According to the Department of Energy, who is here today, 
energy from waste makes important contributions to the overall 
effort to achieve increased renewable energy use. And in 2003 
the EPA stated that energy from waste produces electricity with 
less environmental impact than almost any other source of 
electricity.
    I mentioned Hawaii, New York, and Florida earlier and 
that's because island and peninsula communities share some 
similar characteristics that present--share some similar 
characteristics that are relevant to your island communities. 
Limited drinking water supplies, a limited ability to import 
power and export waste and finite land space are among those 
challenges. Energy from waste, in addition to having a 
potential to contribute significantly to energy independence 
and renewable energy, has the benefit of positively impacting 
those challenges.
    Insular peninsula areas, they're depending on energy from 
waste as part of their growing energy environmental 
infrastructure. Hillsborough and Lee Counties in Florida has 
expanded their existing energy-from-waste facility because of 
population growth and limited landfill space. The city of 
Honolulu is planning a 900 ton per day expansion of their 
existing energy-from-waste facility, which we operate. That 
expansion will increase the contribution of energy generated in 
that Honolulu plant by 8 percent of all the power generated on 
the island of Oahu. In addition, Florida and Long Island 
communities also moved to energy from waste because it avoids 
stress to drinking water supplies that landfilling presents. 
More locally, Puerto Rico's solid waste management plan calls 
for the construction of two energy-from-waste plants with the 
combined capacity of 2900 tons per day.
    Finally, another critical benefit these communities will 
realize by generating renewable energy, energy-from-waste 
plants is a net reduction in their greenhouse gas production, 
the avoidance of methane gas generation from landfills, 
avoidance of fossil fuel production, and minerals recycling all 
contribute to energy-from-waste greenhouse gas avoidance.
    We believe we would be an excellent choice for renewable 
power for insular communities like the U.S. Virgin Islands for 
all these reasons and be delighted to take any questions from 
the committee. Thank you very much.
    Mrs. Christensen. Thank you, Ms. Blaylock.
    [The prepared statement of Ms. Blaylock follows:]

       Statement of Frazier Blaylock, Covanta Energy Corporation

    Good morning Chairman Christensen, Chairman Costa and members of 
the committee. My name is Frazier Blaylock and I am the Director of 
Federal Government Affairs for Covanta Energy Corporation. Thank you 
for the opportunity to come speak to you today about the benefits of 
Energy-from-Waste (EfW) in pursuing a clean energy future for the 
insular areas.
    Covanta Energy operates 34 Energy-from-Waste facilities in the 
United States, including one in Honolulu, 4 in Florida and 3 on Long 
Island in New York. I highlight these seven locations because of the 
geographic similarities they share with the insular areas we are 
discussing today. We also have a worldwide presence, with facilities in 
Europe and China.
    Energy-from-Waste is a specially designed energy generation process 
that uses household waste as fuel and helps solve some of society's 
biggest challenges including dependence on fossil fuels, solid waste 
management, climate change, and land use. Covanta serves the disposal 
needs of approximately 12 million people in communities across the 
United States and reduces the need for fossil fuels by generating 1,265 
megawatts of renewable energy, and saving the equivalent of 15 million 
barrels of oil each year. Every ton of trash processed at an EfW 
facility generates a significant 500-700 Kwh of renewable electricity 
on a 24/7, base-load basis. And, our operations recycle over 350 
million tons of recovered metals each year.
    A key benefit of the EfW process is the use of an indigenous, 
sustainable fuel which in and of itself creates management challenges 
for insular communities. Unlike fossil fuels, garbage is readily 
available and within short transportation distances from these energy 
generating facilities and the energy consumers. For each ton of trash 
processed at an EfW facility, enough electricity is generated to offset 
one barrel of oil.
    It is particularly relevant for Covanta to be addressing the energy 
future of the insular areas because of the unique environmental 
benefits that we offer. EfW is a safe, reliable waste disposal method 
that generates renewable energy, reduces greenhouse gas emissions, 
recovers metals for recycling, and reduces reliance on landfills. The 
EfW process reduces the volume of solid waste received at a facility by 
90% and displaces one ton of greenhouse gas emissions for every ton of 
trash we process. According to the U.S. Department of Energy, EfW makes 
``important contributions to the overall effort to achieve increased 
renewable energy use and the many associated positive environmental 
benefits.'' In 2003, the EPA stated that EfW produces electricity 
``with less environmental impact than almost any other source of 
electricity.''
    I mentioned Hawaii, New York and Florida earlier, and that is 
because Island and peninsula communities share some similar 
characteristics that can present infrastructure challenges to 
government. Limited drinking water supplies, a limited ability to 
import power and export waste, and finite land space are among those 
challenges. EfW, in addition to having the potential to contribute 
significantly to energy independence and renewable energy, has the 
benefit of positively impacting those challenges.
    Insular and peninsula areas today are depending upon EfW as part of 
their growing energy and environmental infrastructure. Hillsborough and 
Lee Counties in Florida have expanded their existing EfW facilities 
because of population growth and limited landfill space. The City of 
Honolulu is also planning a 900 ton per day expansion of their existing 
EfW facility. That expansion will increase the contribution of energy 
generated by that renewable facility to approximately 8% the amount of 
all the power generated on the Island of Oahu. In addition, Florida and 
Long Island communities also look to EfW because it avoids threats to 
drinking water supplies that landfilling presents. More locally, Puerto 
Rico's solid waste management plan calls for the construction of two 
EfW plants with a combined capacity of 2,910 tons per day.
    Another critical benefit that these communities will realize by 
generating renewable energy at EfW plants is a net reduction in their 
greenhouse gas production. The avoidance of methane gas generation from 
landfills, avoidance of fossil fuel production, and metals recycling 
all contribute to EfW's greenhouse gas avoidance.
    Energy from Waste is an excellent choice for renewable power for 
insular communities because it can not only provide clean, reliable, 
base load renewable power, but it does so by solving a second insular 
infrastructure challenge which is uniquely met by EfW.
    Thank you for the opportunity to speak with you today. I am more 
than happy to answer any questions the Members may have.
                                 ______
                                 
    Mrs. Christensen. And the Chair now recognizes Mr. Powell 
representing the Southern States Energy Board for five minutes.

STATEMENT OF JIM POWELL, SENIOR POLICY ADVISOR, SOUTHERN STATES 
                          ENERGY BOARD

    Mr. Powell. Madame Chairwoman, Mr. Chairman, Mr. Shuster, 
and other members of this committee, and I thank you very much 
for the opportunity to be here today to testify on Charting a 
Clean Energy Future For the Insular Territories. Special thanks 
to the committee staff for arranging this.
    The Southern States Energy Board is a nonprofit interstate 
compact organization that was created in 1960 and established 
under public law. I am here today representing the Southern 
States Energy Board. The board's mission is to enhance economic 
development and the quality of life in the South through 
innovations in energy and environmental policies, programs and 
technologies. 16 southern states and two territories including 
the U.S. Virgin Islands are members of the Southern States 
Energy Board.
    We talked a lot today about the energy dilemma is what I 
would like to call it. I am not going to repeat examples that 
people have provided that preceded me. But the citizens of the 
insular areas, including the Virgin Islands are currently 
experiencing some of the highest energy costs in our nation, 
perhaps even the world. Because of this, because of the high 
prices, citizens of the insular territories are forced to spend 
a higher percentage of their disposable income on energy as 
compared to people in other parts of the continental U.S.
    Energy dollars are leaving the insular areas. Every barrel 
of oil that's brought into the insular territories is money 
going out to politically unstable parts of the world that some 
of us don't like to talk about. By using indigenous renewable 
resources that are located here in this insular areas, energy 
dollars stay in insular areas thus benefiting the local 
economies by creating clean energy jobs not to mention the 
benefits that it does to the environment. Many of the citizens 
in the insular areas are forced to make quality of life 
decisions such as purchasing food and medicine or paying a 
utility bill. It's not the case in all parts of the U.S.
    The Energy Policy Act, Section 251 of the Energy Policy Act 
of 2005 produced the Insular Areas Energy Assessment Report, 
which was prepared by the Pacific Power Association for the 
Department of the Interior and released in the summer of 2006. 
This important report is a comprehensive assessment totaling 
453 pages that contains numerous recommendations designed to 
reduce the insular areas dependence on imported petroleum and 
to increase the use of renewable energy resources while 
improving energy efficiency measures. The broad base assessment 
should be used as the basis for all the insular areas to 
develop a comprehensive energy strategy for the future.
    Section 252 of EPACT 2005 directed the Secretary of Energy 
in consultation with the Secretary of Interior to assess and 
report to Congress on projects with the greatest potential for 
reducing dependence on fossil fuels used to generate 
electricity and to promote distributed energy.
    DOE was authorized to provide technical and financial 
assistance for feasibility studies and for implementation of 
projects. Funding was authorized at 500,000 per year for 
feasibility studies and 44 million for project implementation. 
Unfortunately, Congress has not provided funding for the 
implementation of this important EPACT provision.
    The Southern States Energy Board urges Congress to fully 
fund this EPACT provision so that insular areas would be able 
to conduct studies of projects and strategies identified in the 
assessment report that would significantly reduce their 
dependence on imported fossil fuels. The economic future of the 
insular areas depends on their ability to reduce their reliance 
on costly fossil fuels by increasing the efficiency with which 
we use such fuels and by exploiting the local renewable energy 
resources.
    In August 2007, Governor deJongh asked the Southern States 
Energy Board to assist in the development and implementation of 
a Comprehensive Energy Strategy that will be designed to 
increase the standard of living for the citizens of the U.S. 
Virgin Islands by assuring long-term availability of 
affordable, secure supplies of energy.
    A secondary goal of that study--of that strategy, the 
Virgin Islands will be poised to be a Caribbean and worldwide 
showcase for the development and use of renewable energy. The 
Insular Areas Energy Assessment Report has proven to be an 
important resource for the project team.
    A bit on the State Energy Program. DOE's State Energy 
Program provides grants for the states and territories for 
energy efficiency and renewable energy programs and projects. 
States and territories use the State Energy Program grant 
funding to address their energy priorities and to adopt 
emerging renewable energy and energy efficiency technologies.
    State Energy Program is the only Federally funded energy 
program that provides financial and technical assistance 
directly to the states and territories. The State Energy 
Program funding allocations to the states and territories is 
based on an antiquated formula that needs to be updated to 
reflect the current world energy and economic realities.
    The insular areas receive only a minimal amount of funding 
under the State Energy Program. For example, in 2007, Fiscal 
Year 2007, the Virgin Islands received 259,000, while the State 
of Texas received $2,782,000. In fact, the total insular area 
SEP formula allocation for 2007 was $974,000 vice a total of 
$44,456,000 for the states.
    The Weatherization Assistance Program is another Department 
of Energy program. Under current Federal statute, the insular 
areas do not participate in that program. However, if they did 
participate and used the same formula that's there now, without 
an update they only receive a small amount of funding and 
probably wouldn't make a worthwhile program in the insular 
areas. That funding formula is very old as well and needs to be 
updated.
    The Southern States Energy Board urges Congress to include 
the insular areas in the weatherization program and direct DOE 
to update the allocation formula to include criteria such as 
current energy costs, demographics and climate. And the 
Southern States Energy Board also encourage Congress to provide 
a minimum allocation of at least $2 million to the insular 
areas for this program. This amount of funding will ensure 
operation of a meaningful program.
    The territorial energy offices are an important part of the 
equation of the insular areas quest to reduce their dependence 
on imported petroleum and to establish a clean energy economy. 
The energy policies and programs of the territorial energy 
offices are vital to ensure economic growth, increased energy 
efficiency, and an increased reliance on clean----
    Mrs. Christensen. I am going to have to ask you to wrap up.
    Mr. Powell. Real quick. Thank you, Congresswoman. Just a 
brief mention of the Hawaii Clean Energy Initiative. This is 
exactly the type of effort that the insular areas need. We are 
concerned that the insular areas have been left out of this 
effort and why the effort was focused on Hawaii without 
considering other insular areas. The insular areas need the 
same type of attention. We are interested as to how Hawaii 
actually got this award without the additional areas being 
considered.
    In conclusion, the Southern States Energy Board is proud of 
the strong relationship we have enjoyed with the Virgin Islands 
over the years. We are proud of the relationship with Mr. 
Smith. He has done a marvelous job in the Energy Office in his 
capacity as Director. Under his leadership, it's an award 
winning office, and he's a great asset for the Virgin Islands. 
Thank you for your leadership.
    Mrs. Christensen. We allowed you to go over so that you can 
speak highly of Mr. Smith. Thank you.
    [The prepared statement of Mr. Powell follows:]

         Statement of James R. Powell, Senior Policy Advisor, 
            Southern States Energy Board, Norcross, Georgia

    Madame Chairwoman, Mr. Chairman and members of the Subcommittees, 
thank you for this opportunity to testify on ``Charting a Clean Energy 
Future for the Insular Areas.'' Mr. Nemeth would very much like to have 
been testifying today, but he had a previous commitment outside of the 
country and requested that I serve as his surrogate.
    The Southern States Energy Board (SSEB) is a non-profit interstate 
compact organization created in 1960 and established under Public Laws 
87-563 and 92-440. The Board's mission is to enhance economic 
development and the quality of life in the South through innovations in 
energy and environmental policies, programs and technologies. Sixteen 
southern states and two territories comprise the membership of SSEB: 
Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Maryland, 
Mississippi, Missouri, North Carolina, Oklahoma, Puerto Rico, South 
Carolina, Tennessee, Texas, U.S. Virgin Islands, Virginia and West 
Virginia. Each jurisdiction is represented by the governor and a 
legislator from the House and Senate. Governor Joe Manchin of West 
Virginia currently serves as the chair. The U.S. Virgin Islands (USVI) 
is a member and Governor John deJongh is a member of the Executive 
Committee.
    On December 23rd, 1992, Governor Alexander A. Farrelly, signed 
Executive Order Number 338-1992 authorizing the USVI to become a member 
of SSEB. Executive order Number 341-1993 was signed on November 12th, 
1993 and then Executive Order 364-1995 was signed on November 16th, 
1995 by Governor Roy Schneider.
    SSEB was created by state law and consented to by Congress with a 
broad mandate to contribute to the economic and community well-being of 
the citizens of the southern region. The Board exercises this mandate 
through the creation of programs in the fields of energy and 
environmental policy research, development and implementation, science 
and technology exploration and related areas of concern. SSEB serves 
its members directly by providing timely assistance designed to develop 
effective energy and environmental policies and representing members 
before governmental agencies at all levels.
    SSEB's long-term goals are to:
      perform essential services that provide direct scientific 
and technical assistance to state governments;
      develop, promote and recommend policies and programs on 
energy, environment and economics that encourage sustainable 
development;
      provide technical assistance to executive and legislative 
policy makers and the private sector in order to achieve synthesis of 
energy, environment and economic issues that ensure energy security and 
supply;
      facilitate the implementation of energy and environmental 
policies between federal, state and local governments and the private 
sector;
      sustain business development throughout the region by 
eliminating barriers to the use of efficient energy and environmental 
technologies; and
      support improved energy efficient technologies that 
pollute less and contribute to a clean global environment, and protect 
indigenous natural resources for future generations.
    The USVI clearly has opportunities today to move forward in 
reducing dependence on foreign resources for its energy supply. Over 
the past ten years, SSEB has provided the USVI with funding to conduct 
numerous projects related to bioenergy. Most recently, SSEB funded work 
in the amount of $48,000 to assess the feasibility of collection and 
cleaning of the landfill biogas to insure the greatest possible use of 
available biogas resources in the territory.
    As all the Nation moves forward, it is important to realize that 
the insular areas represent an important role and the USVI needs 
assistance from Congress to work toward a sustainable and clean energy 
future. Please refer to attachment A for comprehensive description of 
the work that SSEB with the U.S. Virgin Islands.
    Energy Dilemma. The citizens of the Insular areas, including the 
USVI are currently experiencing some of the highest energy costs in our 
Nation, perhaps the world. For example, citizens in the USVI are 
currently paying around 35 cents per kilowatt hour for electricity 
while citizens in most of the Southeast region of the U.S. pay between 
5 to 10 cents per kilowatt hour. Gasoline sells for around $4.15 per 
gallon on St. Thomas while the price per gallon in the metropolitan 
Atlanta, Georgia area is around $3.25. With the world price of oil 
hovering around $106 per barrel these high costs appear to be 
increasing. Citizens of the Insular areas are forced to spend a higher 
percentage of their disposable income on energy as compared to people 
in parts of the continental U.S. Accordingly, many of the citizens of 
the Insular areas are forced to make quality of life choices such as 
purchasing food and medicine or paying a utility bill.
    Energy Policy Act and Insular Areas Energy Assessment Report. 
Section 251 of the Energy Policy Act of 2005 (EPACT) directed the 
Secretary of Interior, in consultation with the Secretary of Energy and 
the head of government of each insular area, to update insular area 
energy plans to reflect findings, with the goals of reducing energy 
imports by 2012, increasing energy conservation and energy efficiency, 
and maximizing the use of indigenous resources. The Insular Areas 
Energy Assessment Report was prepared by the Pacific Power Association 
for the Department of the Interior and released in the summer of 2006. 
This report is a comprehensive assessment totaling 453 pages that 
contains numerous recommendations designed to reduce the Insular areas 
dependence on imported petroleum and to increase the use of renewable 
energy resources while improving energy efficiency measures. This broad 
based assessment should be used as the basis for the Insular areas to 
develop a comprehensive energy strategy for the future.
    Section 252 of EPACT 2005 directed the Secretary of Energy, in 
consultation with the Secretary of the Interior to assess and report to 
Congress on projects with the greatest potential for reducing 
dependence on fossil fuels used to generate electricity, and to promote 
distributed energy, in the insular areas. DOE was authorized to provide 
technical and financial assistance, on a matching basis with local 
utilities, for feasibility studies and for implementation of projects 
the Secretary of Energy determines are feasible and appropriate. 
Funding is authorized at $500,000 per year for feasibility studies and 
$44 million per year for project implementation. Unfortunately, 
Congress has not provided funding for the implementation of this 
important EPACT provision and should act to do so in an expeditious 
manner. In a letter to Congress this month, the heads of government of 
some Insular areas have requested Congress to ``fund feasibility 
studies of projects and strategies identified in the Assessment that 
would significantly reduce our dependence on imported fossil fuels, or 
provide needed distributed generation in remote insular areas. The 
economic future of our communities depends on our ability to reduce our 
reliance on costly fossil fuels by increasing the efficiency with which 
we use such fuels and by exploiting local renewable energy resources.''
    Comprehensive Energy Strategy. In August 2007, Governor John 
deJongh asked SSEB to assist in the development and implementation of a 
Comprehensive Energy Strategy that will be designed to increase the 
standard of living of the citizens of the Territory by assuring the 
long-term availability of affordable, secure supplies of energy. A 
secondary goal is to become a Caribbean and worldwide showcase for the 
development and use of renewable energy. The Insular Areas Energy 
Assessment Report has proven to be an important resource for the 
project team.
    Integral to this direct service to the USVI is adequate funding to 
truly implement an effective comprehensive energy strategy that is 
sustainable for the future. As part of this service, SSEB works with 
Mr. Bevan Smith, Director of the VIEO and others as designated to 
establish clear, realistic goals. As a first step, the USVI has 
assessed current and future types, amounts and sources of energy 
imported into the Territory. Additionally, this work will assist in 
identifying the amount of energy used by various sectors, the cost of 
energy to the end users and to the extent possible an analysis of how 
this energy is being used within each sector (e.g. domestic hot water, 
diesel highway and off-highway use). The intent is also to project the 
types and amounts of energy that will be required over the next 20 to 
30 years in the USVI. Important to implementing the strategy is 
identification of all potential energy options with a primary focus on 
renewable energy, energy efficiency and conservation. Once data is 
collected and analyzed the intent is that potential energy solutions 
will result in a number of options for implementation in the future. Of 
course, the implementation of energy plan requires resources and most 
likely, policy incentives to achieve success.
    State Energy Program. DOE's State Energy Program (SEP) provides 
grants to states and territories for energy efficiency and renewable 
energy programs and projects. States and territories use SEP grant 
funding to address their energy priorities and to adopt emerging 
renewable energy and energy efficiency technologies. SEP is the only 
federally funded program that provides financial and technical 
resources directly to the states and territories. With SEP funds and 
the resources leveraged by them, the state and territory energy offices 
develop and manage a variety of programs geared to increase energy 
efficiency, reduce energy use and costs, develop alternative energy and 
renewable energy sources, promote environmentally conscious economic 
development, and reduce reliance on imported oil. The program was 
funded at $36.6 million in FY 2006, $49.4 million for FY 2007 and at 
S44.5 million for FY2008. However, DOE plans to include on $33 million 
in the competitive allocations.
    SEP funding allocations to states and territories are based on an 
antiquated formula that needs to be updated to reflect the current 
world energy and economic realities. The Insular areas receive only a 
minimal amount of SEP funding under the current allocation formula. For 
example, in FY 2007 the USVI received $259,000 in SEP funding while 
Texas received $2,782,000. In fact, the total Insular area SEP funding 
formula allocation for FY2007 was $974,000 vice $44,456,000 for the 
states and the District of Columbia.
    The Insular areas need every opportunity available to improve 
energy efficiency, increase of use of renewable energy and to reduce 
our 100% dependence on imported fossil fuels.
    Weatherization Assistance Program. Under current Statue, the 
Insular areas do not participate in the DOE's Weatherization Assistance 
Program (WAP). The reasons why the Insular areas were not included when 
the program began in 1976 is akin to folklore. However, if the Insular 
areas were included in the program and received a funding allocation 
under the current formula it would likely be a small amount. In fact, 
some would question if the funding would be adequate to even operate an 
Insular area WAP.
    The formula used to allocate WAP funding is antiquated and needs to 
be updated to reflect the current world energy and economic realities. 
Legislation is required to include the Insular areas in WAP. Congress 
should consider including the Insular areas in the WAP and direct DOE 
to update the allocation formula to include criteria such as current 
energy costs, demographics and climate, Congress should also require 
DOE to provide a minimum allocation of at least $2 million to the 
Insular areas. This amount funding would ensure the operation of a 
meaningful and robust program.
    DOE did not request any funding for the WAP in the FY2009 budget 
request. This reduces heating and cooling costs for low-income 
families, particularly for the elderly, people with disabilities, and 
children, by improving the energy efficiency of their homes while 
ensuring their health and safety. It is essential that Congress fully 
fund this critical energy assistance program at the FY2008 amount of 
$227.2 million.
    Territorial Energy Offices. The Territorial Energy Offices are an 
important part of equation in the Insular areas quest to reduce their 
dependence on imported petroleum and to establish a clean energy 
economy. The energy policies and programs of the Territorial Energy 
Offices are vital to ensuring economic growth, increased energy 
efficiency and an increased reliance on clean renewable energy sources. 
These offices have become experts on researching, demonstrating and 
deploying emerging clean energy technologies.
    Under the leadership of Mr. Bevan Smith, Director, the VIEO has 
grown into an award winning organization that manages a multitude of 
meaningful energy efficiency and renewable energy programs that 
directly benefit the citizens of the USVI. Some of these popular 
programs are: building energy program, discretionary grants, energy 
rebates, and solar energy. In addition, the VIEO holds a number of 
education outreach events throughout the year that are designed to 
increase the awareness of the general public on energy efficiency and 
renewable energy programs and practices. Also, Mr. Smith was 
instrumental in bringing the best practice of net metering to the USVI. 
He worked in a collaborative manner with the utility and the Public 
Services Commission to develop and implement a successful program. At 
the request of Governor deJongh and the concurrence of the Senate, the 
VIEO was recently relocated from the Department of Planning and Natural 
Resources to the Office of the Governor. This important organizational 
relocation sends a strong message to the Insular areas that the 
Governor is keenly interested in USVI energy issues.
    Hawaii Clean Energy Initiative. According to a DOE press release 
dated January 28, 2008, DOE and Hawaii joined in a Memorandum of 
Understanding (MOU) establishing the Hawaii Clean Energy Initiative 
(HCEI), a long-term partnership designed to transform Hawaii's energy 
system to one that utilizes renewable energy and energy efficient 
technologies for a significant portion of its energy needs. The 
partnership aims to put Hawaii on a path to supply 70% of its energy 
needs using clean energy by 2030, which could reduce 72% of Hawaii's 
current crude oil consumption. While a specific amount of funding was 
not identified, DOE committed to the provision of technical and policy 
expertise and capabilities to help demonstrate reliable, affordable and 
clean energy technologies in Hawaii.
    DOE agreed to immediately engage experts in clean energy technology 
development to help Hawaii to launch several projects with public and 
private sector partners that target early opportunities and critical 
needs for Hawaii's transition to a clean energy economy, including:
      Designing cost-effective approaches for the exclusive use 
of renewable energy on smaller islands;
      Designing systems to improve stability of electric grids 
operating with variable generating sources, such as wind power plants 
on the islands of Hawaii and Maui;
      Minimizing energy use while maximizing energy efficiency 
and renewable energy technologies at new large military housing 
developments;
      Expanding Hawaii's capability to use locally grown crops 
and byproducts for producing fuel and electricity; and
      Assisting in the development of comprehensive energy 
regulatory and policy frameworks for promoting clean energy technology 
use.
    The HCEI is the type of attention and dedication that the Insular 
areas desperately need to help reduce their dependence on imported 
petroleum and to establish a clean energy economy. Congress should 
inquire as to why Hawaii was selected non-competitively for this 
initiative and why the Insular areas were not provided an opportunity 
to compete. Congress should require DOE to engage the Insular areas 
with an effort similar to HCEI. The same amount of attention and 
resources should also be provided to the Insular areas.
    Conclusion. SSEB is proud of the strong relationship we have 
enjoyed with the USVI for over 16 years. We are committed to doing 
everything within our ability to help the USVI attain a stronger 
economy and improve the quality of life for its citizens. As mentioned 
previously, we are working closely with Mr. Bevan Smith, Director of 
the VIEO. We commend Mr. Smith for his outstanding accomplishments with 
limited resources. We thank the committee for asking us to participate 
in this hearing. We believe with Congresswoman Christiansen's 
leadership equitable opportunities will enable the Insular areas to 
work toward a sustainable clean energy future that will strengthen the 
USVI's economy and improve the quality of life for all future 
generations.
                                 ______
                                 
    Mrs. Christensen. I'd like to thank everyone for their 
testimony. I will recognize myself for five minutes of 
questions.
    Mr. Nicholson, let me start with you. Some people would say 
that OTEC is still an unproven technology and maybe that's 
something that ought to be considered maybe not now but later 
on. How would you respond to that?
    Mr. Nicholson. Well, that's true, it is unproven. However, 
we have our own financing, so the risk is placed on us, not the 
host client, and the rewards are so great. For example, in 
Hawaii where we have a proposal for 100 megawatt plant, the 
investment is $500 million. So the risk is much greater than 
the one proposed here, which is a smaller plant. But we are 
going forward with that, and that will probably happen before 
the plant goes into St. Croix or could go into St. Croix.
    I don't think that really should be a factor. I think the 
decision makers should really try to plan and go forward. We 
have an insurance company that would guarantee the performance 
of our first plant. The fact that we have private investors 
that would put up all the money, that in itself is a 
confirmation of confidence.
    Mrs. Christensen. Thank you.
    Mr. Resor, one of the maps in your testimony shows parts of 
Hawaii with less sun than parts of Maine, which is kind of 
surprising. Do we have similar information for the insular 
areas?
    Mr. Resor. Yeah. It wasn't included in that particular map. 
Generally the insulation for the U.S. Virgin Islands is very 
good. I'm sure that data is available for the third party.
    Mrs. Christensen. I am going to need everybody to speak a 
little closer to the mike. I think we were able to hear you, 
but just----
    Mr. Resor. Just repeat. The same data I'm sure is available 
from the same third party sources that would show it for each 
of the insular areas.
    Mrs. Christensen. Thank you.
    Ms. Blaylock, I think the first panel said that the Virgin 
Islands produces about 400 to 500 tons of trash per day. Does 
that make waste energy feasible for us?
    Ms. Blaylock. That's about the threshold that a waste to 
energy facility would need in terms of trash volume. Ideally 
you would--600 tons per day is really the true threshold. The 
reason for this economies of scale, the more garbage that you 
bring into the facility, the more energy you can generate, and 
therefore the more electricity can be sold and offset the cost 
of the facility's operation.
    Mrs. Christensen. I would also imagine in that 4 to 500 
tons there might be some kinds of trash that would not be able 
to be used, or do you burn everything?
    Ms. Blaylock. We can safely burn all municipal solid waste. 
In the communities where Covanta has waste to energy 
facilities, the recycling rates tend to be 20 percent higher 
than communities that don't have waste to energy. Most of our 
communities separate their recyclables; however, not all do. 
And any of the materials that are disposed of at a restaurant 
or at a private home would be safely handled at an energy-to-
waste plant. It's a much better place to send it than to a 
landfill, certainly.
    Mrs. Christensen. Absolutely. Thank you for your answer.
    Mr. Powell, thank you for Southern States' partnership and 
support of the U.S. Virgin Islands. We really appreciate it. 
You mentioned in your letter that some insular areas are sent 
to Congress asking for funding feasibility studies. Are there 
specific feasibility studies that have been requested, do you 
know, and what areas? What kinds of feasibility studies?
    Mr. Powell. Madame Chairman, no, I'm not aware of specific 
studies that have been requested. I'm aware of a letter that 
some of the Governors of insular areas actually sent to 
Congress requesting funding of that EPACT provision.
    Mrs. Christensen. Is your knowledge of why the territories 
were excluded from the weatherization program the same as Mr. 
Smith's or----
    Mr. Powell. Yes, ma'am. Very much, I have been around the 
Weatherization Assistance Program since the early '90s, and 
folklore is probably the best way to describe it. The 
Weatherization Assistance Program when it was initiated was 
focused on cold weather states. Since then it includes warm 
weather states. And there is a formula that's designed for both 
cold weather and warm weather states and which is more reason 
why the territories should be included.
    Mrs. Christensen. We will get to work on that. Thank you.
    I now recognize Mr. Costa for his questions.
    Mr. Costa. Thank you again, Madame Chairwoman.
    Let me begin with Mr. Resor. What does it cost to implement 
a solar system on the roof of an average family house? In 
California we are doing a lot of this. As in other western 
states, the utility companies are providing rebates, as you 
know, for that purpose. With $19,000 per capita income here in 
the U.S. Virgin Islands, obviously it would be more difficult, 
but give me the breakdown.
    Mr. Resor. Sure. It varies a bit on the scale operation. 
Rough rule of thumb, if you do a 3 kilowatt system, which is a 
pretty standard size of residence, you are probably looking at 
$25,000 to $27,000 dollars for that. Now, if you are doing 
that--that's the retail price. That's before any Federal tax 
credit comes into play. If there is a state incentive, or 
utility incentive, that price is reduced significantly, as it 
is in California.
    Mr. Costa. The Federal tax credit being?
    Mr. Resor. Right now the Federal tax credit for the 
residence is only $2,000.
    Mr. Costa. It's 25,000----
    Mr. Resor. 23. But in California, Massachusetts you are 
often getting another 8 to 10 knocked off.
    Mr. Costa. Knocks it down to about 15?
    Mr. Resor. Right.
    The other piece for the U.S. Virgin Islands in your comment 
about the lower per cap income is I think an obstacle here that 
would need to be addressed is if that can be financed upfront, 
where the homeowner wasn't expected to shell that all out, 
let's call it net $18,000 for the system on day one. And if the 
same way that could be financed over time, the economics worked 
out very well, if the electricity you are replacing is costing 
you more than 35 cents a kilowatt and rising.
    Mr. Costa. So then you would have a system in place for 3 
kilowatt. If you implemented that, it will provide all the 
electricity needs that you would have for your home?
    Mr. Resor. It depends on the----
    Mr. Costa. The system.
    Mr. Resor. The electricity needs of that home. The idea is 
typically the size of the system not to produce 100 percent of 
the home's needs. With net metering you can provide the excess 
factor in the day. Often you look to provide anywhere from 35 
to 85 percent. And that just depends on the exact pattern usage 
how you want to size it.
    Mr. Costa. You speak a lot about net metering. Recently I 
understand that the U.S. Virgin Islands have implemented a net 
metering program. How do you think that program would work 
with----
    Mr. Resor. I think a lot of what we are experiencing 
working with probably 30, 40 different utilities is the net 
metering you have to be very careful to the implementation 
details. What you want to avoid is inadvertently throwing up 
roadblocks for the consumer, the business in terms of 
application they have to fill out, how the metering is done. On 
the surface the net metering looks fine. I don't know the 
particulars of how it is implemented.
    Mr. Costa. If you could get back to us on that. My time 
is----
    Mr. Resor. OK.
    Mr. Costa. Ms. Blaylock, you talked about your efforts in 
other parts of the country and the world. How far along is 
Puerto Rico's plan to go to an energy-from-waste plant?
    Ms. Blaylock. Their solid waste management plan has 
suggested that that should be part of the future. There are not 
bids out for----
    Mr. Costa. Those projects that you are involved in, I 
assume they are private/public partnerships?
    Ms. Blaylock. Yes, sir, in every case.
    Mr. Costa. We know what the challenge is economically that 
the territories here have. How would you pursue or propose a 
plan or have you for a private/public partnership on waste to 
energy?
    Ms. Blaylock. We haven't proposed one yet, but if we were 
to do one, it would be a regional approach, which would take 
trash from all the three islands and potentially depending on 
the transportation costs from other sources, and----
    Mr. Costa. Are you considering doing so?
    Ms. Blaylock. We will be delighted to do so. Right now the 
RFP that came out recently was just for a 12 megawatt facility 
and was just looking at 200 tons per day.
    Mr. Costa. I would suggest, in terms of the submission of 
testimony today, that's one of the takeaways. You will be 
delighted to provide a proposal?
    Ms. Blaylock. Yes.
    Mr. Costa. Very good.
    Mr. Nicholson, where has your company successfully 
implemented a plant? Obviously, it sounds wonderful the 
description in your testimony. Where have you successfully 
implemented one?
    Mr. Nicholson. There has not been an installation of this 
technology.
    Mr. Costa. That's kind of problematic, don't you think?
    Mr. Nicholson. First of all, the technology that was 
invented in 1881.
    Mr. Costa. No. No. I am very familiar with all of these 
technologies, but you hate to have an area like this with 
limited resources to be the first experience, because they 
don't have the resources in terms of the R&D.
    Mr. Nicholson. They don't need the resources.
    Mr. Costa. I think they do need the resources. $19,000 per 
capita and the constraints that they are facing, it's 
important--I'm always looking for best management practices, 
someone who has actually paved the way, if you understand.
    Mr. Nicholson. We are putting up the $80 million. We will 
own and operate the plant.
    Mr. Costa. Have you submitted a proposal?
    Mr. Nicholson. It's due May 1st.
    Mr. Costa. To the U.S. Virgin Islands?
    Mr. Nicholson. Yes. And the same thing is true in Hawaii, 
it's a $500 million investment. We are putting up that money. 
It's our money. There is no burden or risk to the host client.
    Mr. Costa. It will be interesting to follow up on that. My 
time has expired clearly.
    Mrs. Christensen. The Chair recognizes Mr. Shuster for 
questions.
    Mr. Shuster. I would like to follow up on, Mr. Nicholson, 
if you have not built any facilities and you say there is no 
risk with the capital that you are going to outlay, you are 
going to have to generate revenue, and you are going to do that 
within the public utilities commission operation. I mean, are 
you going to be able to get the return?
    Mr. Nicholson. Yes. For an example, in Hawaii it's about 
$109 million a year revenue stream. There is no energy cost. In 
the Virgin Islands, it's about $10 million revenue stream for 
water and--I'm sorry, for power, and about a $8 million a year 
revenue stream for water. Plus, the island can benefit with 
diversity by having 500 acres or less, whatever is desirable, 
of mariculture. They can grow fish, they can grow vegetables. 
They can become really energy self-sufficient and reduce 
dramatically their importation of food. There are so many 
benefits to this technology.
    Mr. Shuster. I, unlike Mr. Costa, am not familiar with 
these technologies, but I think I have a clear amount of 
skepticism. Why hasn't one been built somewhere in the world to 
date?
    Mr. Nicholson. First of all, we are the modern-day pioneer 
in the development of this technology on the commercial basis. 
It was invented in York, Pennsylvania. We presented it to the 
U.S. Government before the U.S. Department of Energy was even 
established. This technology is over 40 years old. We had no 
political representation or credibility. Senator Sparky 
Matsunaga from Hawaii grasped the opportunity and hundreds of 
millions of dollars went to Hawaii. U.S. Department of Energy 
and Hawaii attempted to compete with our design and failed. We 
lost 30 years.
    We have continued to operate supporting ourselves, funding 
our ourselves, and we have now raised the money to build these 
plants throughout the equatorial zone. We don't need government 
support. We are a private company, we have a private funding, 
and we are going forward on a commercial basis. And St. Croix 
has excellent operating conditions for this type of technology.
    Mr. Shuster. That's music to my ears to hear that you don't 
require government support. You have small scale testing that's 
been out there? What have you built that is designed? That 
always makes me skeptical when it's in design, when it's not in 
practical application--even on a small scale.
    Mr. Nicholson. That's a fair question. And the same 
inventor invented the world's first commercial binder cycle 
geothermal power plant, just went ahead and built it, and that 
works on a commercial basis. The Eagle Foundation, which owns 
my company, has spent millions of dollars developing to come up 
with the components that go into this cycle. We built and 
tested those components. We have a complete team of 
professionals, large engineering firms, one of the largest 
construction companies in the United States, Naval 
architectural design firms, insurance companies that guarantee 
the performance of the first plant.
    The people who should be skeptical or worried are the 
investors. They spent millions of dollars confirming that our 
technology is sound. They are ready and eager to go forward.
    It's so much larger than the small islands throughout the 
equatorial zone. This is a major opportunity for shipbuilding. 
For example, we are working with the Governor of Maryland. We 
have shown the City of Baltimore shipbuilding industry where 
building six plants per year in Baltimore creates 25,000 jobs. 
We can do that in California shipyards; we can do that in 
Philadelphia. We can revitalize the American shipbuilding 
industry.
    Mr. Shuster. It sounds exciting. I look forward to watching 
closely what you do. The $80 million investment here in the 
Virgin Islands, what percentage of the electricity would that 
produce or generate?
    Mr. Nicholson. I don't know that I have that for sure, but 
it's probably a third. I am not suggesting--I mean, I have 
suggested and I think it's possible and realistic to have 30 
megawatts of OTEC in St. Croix. But, also, I think the trash is 
a great idea, recycled trash, and Jaime's technology. It's not 
a silver bullet for St. Croix or St. Thomas or St. John, but I 
think OTEC can play a very significant role for this community. 
It plays a much larger role in the world market and on the 
national market.
    Mr. Shuster. I see my time is winding down. I would like to 
have an opportunity to submit questions.
    Mrs. Christensen. I think that we would submit questions in 
writing, unless you have a real burning one that you want----
    Mr. Shuster. I do have one quick one. 3 kilowatts how big a 
house is that? 3,000 square feet, how much energy would that--I 
know it's going to vary from house to house.
    Mr. Resor. 2,000 square foot house or even smaller, you can 
have it on the roof or it could be ground level. It's very 
flexible.
    Ms. Blaylock, I will submit.
    Mrs. Christensen. I want to again thank this panel for 
their testimony and members for their questions, and we are 
very likely to have additional questions that we will submit in 
writing and ask for you to respond in writing. Thank you.
    The Chair would now like to recognize the third panel, Mr. 
Nikolao Pula, the Acting Deputy Assistant Secretary for Insular 
Affairs, the U.S. Department of the Interior, and Mr. Drew 
Bond, the Director of Commercialization, Office of Energy 
Efficiency and Renewable Energy at the U.S. Department of 
Energy.
    Mrs. Christensen. I know folks are very interested in 
learning more about the renewable forms of energy, but we need 
to get started. Thank you.
    The Chair now recognizes Mr. Pula for his testimony.

 STATEMENT OF NIKOLAO PULA, ACTING DEPUTY ASSISTANT SECRETARY, 
        INSULAR AFFAIRS, U.S. DEPARTMENT OF THE INTERIOR

    Mr. Pula. Good afternoon, Madame Chairwoman Christensen, 
Chairman Costa, and Mr. Shuster and members of the 
Subcommittees. This is a subject of overriding importance for 
the insular areas. Well, thank you for the opportunity to 
testify on charting a clean energy future for the insular 
areas. This is a subject of overriding importance for the 
insular areas and the free associated states.
    In island communities we see very little air pollution. The 
wind blows it away. What does not blow away is the escalating 
cost of fossil fuels. When faced with the need to purchase 
large-scale electric capacity, officials in the islands however 
have found it more economic to continue to rely on oil based 
fuel. Not any more. The high cost of oil means that alternative 
sources of energy are increasingly attractive from an economic 
point of view. High energy prices are currently the greatest 
threat to all of the economies of the insular areas.
    I think the last two panelists have said a lot already, so 
I am going to really cut my testimony short. Besides the 
potential for alternatives to oil, a second avenue for energy 
improvement is focused on the management and maintenance 
practices for existing electric generation facilities. 
Potential efficiencies could be gained by, one, improving 
operations and maintenance standards; second, improving load 
balancing and distribution; and, three, replacing transformers 
and other distribution systems with more efficient models.
    The 2006 report identified steps to reduce overall 
consumption including adoption and enforcement of building code 
provisions used by Guam and the Virgin Islands; metered power 
rates that reward savings and lower usage; promotion of the use 
of energy efficient appliances and light bulbs; and extension 
of publicity for the Energy Star programs and maybe more.
    We encourage the insular governments and utilities to 
explore new concepts that may alter energy consumption. For 
instance, local retailers and wholesalers could arrange bulk 
purchases of proven alternative systems with financing and 
repay loans through the utilities' billing processes.
    The Department of the Interior has supported efforts to 
build the capacity and improve the efficiencies that lead to 
lower costs and lower emissions for delivered electricity. For 
example, our Operations and Management Improvement Program has 
invested over $4.7 million in the last three years in the 
Pacific Lineman Training Program.
    Our Capital Improvement Program has supported numerous 
power projects in the four United States territories. Under 
Compact II funding, the free associated states are eligible to 
spend infrastructure sector funds on power projects. Our 
Technical Assistance program has been the source of funding in 
the past for resource surveys similar to those outlined in the 
2006 report.
    The Energy Assessment Report contains valuable data and 
ideas. A sustained effort is now required to ensure that the 
options outlined in the study are more fully reviewed and the 
residents of the insular areas receive any potential benefit as 
quickly as possible.
    In order to stretch the island energy dollar as far as 
possible, officials from my office of Insular Affairs will be 
visiting the other territories, including the free associated 
states to discuss ways to implement the most promising energy 
options.
    On Thursday we met with Governor deJongh and presented him 
with a $50,000 grant to aid investigation of realistic energy 
measures that would benefit the Virgin Islands. Our Interior 
team also yesterday met with and discussed promising technology 
with government officials in the Virgin Islands to more 
aggressively see these ways to help out.
    Because of initiative shown by the Governor and with some 
of his staff, we met with Bevan Smith and Carl Knight, and 
other colleagues, including my colleague from the Energy 
Department here, Drew Bond, and we had a very good meeting 
yesterday discussing these issues.
    We believe that effort expended in the energy area can 
bring significant energy pay off in the form of lower utility 
costs for residents and businesses, and may possibly pave a way 
for new industry in some of the islands. As Co-Chairs you are 
to be applauded for your leadership you have shown on this 
critical issue on energy. And I thank you for your effort and 
support and for inviting me to testify today.
    Mrs. Christensen. Thank you, Acting Deputy Assistant 
Secretary.
    [The prepared statement of Mr. Pula follows:]

    Statement of Nikolao I. Pula, Acting Deputy Assistant Secretary 
                  of the Interior for Insular Affairs

    Co-chairs and members of the Subcommittees on Insular Affairs and 
Energy and Mineral Resources, thank you for the opportunity to testify 
on Charting a Clean Energy Future for the Insular Areas. The Insular 
Areas include the United States territories of the United States Virgin 
Islands, Guam, American Samoa, and the Commonwealth of the Northern 
Mariana Islands (CNMI); and the freely associated states of the 
Republic of the Marshall Islands, the Federated States of Micronesia 
(FSM), and the Republic of Palau.
    In island communities, we see very little air pollution. The wind 
blows it away. What does not blow away is the escalating cost of fossil 
fuels. Most people in the islands would like to utilize clean energy. 
When faced with the need to purchase large-scale electric capacity, 
officials in the islands, however, have found it more economic to 
continue to rely on oil based fuel. Not any more. The high cost of oil 
means that alternative sources of energy are increasingly attractive 
from an economic point of view.
    High energy prices are currently the greatest threat to all of the 
economies of the United States and affiliated insular areas. The high 
cost of electricity depletes the wallets of island residents and the 
finances of local governments and businesses. In those islands where 
the cost of electricity is subsidized by the local government, we are 
approaching a crisis. Increasingly substantial portions of the local 
government budgets are being siphoned off for fuel to run their 
electric power plants. In the CNMI, for example, where the annual 
budget is approximately $160 million, $80 million is spent on fuel for 
its power plants.
    The rising price of oil has made alternative sources of power more 
economic. It has also highlighted the long-standing need for existing 
equipment to give us its best performance and efficiency.
    Pursuant to the Energy Policy Act of 2005, the Department of the 
Interior published the United States of America Insular Areas Energy 
Assessment Report in 2006. Copies of the report were made available to 
the Congress. The report analyzes the energy situation in each United 
States territory and freely associated states, in detail. The report 
deals with both the supply and the demand sides of the energy equation.
ENERGY SUPPLY
    On the supply side, some alternative technologies already have been 
proven to be commercially viable; others may be available in the 
future.
      Solar. Given current power costs, solar can be cost 
effective for small scale and individual residential use. Solar sets 
are already in use on isolated islands in the Pacific to power small 
scale activities such as dispensaries and offices. Residential 
customers everywhere in the insular areas could purchase solar sets to 
place on their homes or property and connected to the local power grid 
through a ``net metering'' system. The Virgin Islands and American 
Samoa have already begun exploring such systems.
      Wind. With constant wind, the islands hold a great deal 
of potential for wind generation of electricity. This is a proven 
technology that can be cost effective. There are, however, two issues 
that must be addressed before pursuing wind generation projects in the 
United States-affiliated insular areas. The first is a concern about 
tropical cyclones; all four United States territories experience these 
powerful storms, and careful consideration should be given to hardening 
any wind generation project against them. The second issue to consider 
is the need for detailed wind resource studies prior to embarking on 
any deployment of the technology. This is explained in the 2006 report.
      Geothermal. Geothermal is a technology that is coming of 
age for volcanic areas. The United States Navy uses geothermal power 
for some of its installations. Northern California, Iceland, and the 
Philippines all have major geothermal installations that are producing 
electricity. What California, Iceland and the Philippines all have in 
common are active volcanoes that power their geothermal energy 
production. The CNMI, and possibly Guam, may be able to benefit from 
geothermal power over in the future. Feasibility studies are under way 
to quantify the geothermal resource in the region.
      OTEC. Ocean Thermal Energy Conversion (OTEC) is a 
technology that, in the future, may play a significant role in 
providing electricity on a large scale for our islands. Three of the 
four territories and parts of the freely associated states are in 
locations where the undersea topography is favorable for the 
development of such systems. This technology, however, has not been 
deployed on an industrial scale for power production. Until a 
commercial project is completed, questions remain about the costs 
associated with the development of these systems.
      Biofuels and Biogas. Although the islands lack the land 
area necessary for large-scale biomass production, several areas in the 
Pacific already use copra oil to fuel vehicles and machinery. The 2006 
report also noted that there was some potential in certain areas for 
biogas recovery from solid waste and wastewater plants, and that 
recovery systems should be considered for inclusion in future upgrades 
and construction of these facilities.
      Coal. It has been over 100 years since the chiefs of 
Tutuila and Manu'ua ceded their islands to the United States, enabling 
the United States Navy to use American Samoa as a coaling station. 
While the energy assessment did not focus on coal, it may be time to 
reconsider it.
      Nuclear. The generation of electricity in nuclear power 
plants is quite large scale but may not be cost effective for any of 
our islands with their small populations.
    Besides the potential for alternatives to oil, a second avenue for 
energy improvement is a focus on the management and maintenance 
practices for existing electric generation facilities. Most of the 
insular areas have paid considerable attention to these issues in 
recent years.
    Potential efficiencies could be gained by (1) improving operations 
and maintenance operations standards, (2) improving load balancing and 
distribution on the existing grids, and (3) replacing transformers and 
other distribution systems with more efficient models. The CNMI, for 
example, is in the midst of an overhaul of most of its generating base. 
When the overhaul is complete, CNMI officials estimate that they will 
save over $2 million a month in fuel and lubrication costs.
ENERGY DEMAND
    The 2006 report identified a range of steps that can be taken by 
the insular areas to reduce overall consumption and create long-term 
savings for utility customers. These suggested steps include:
      Adoption and enforcement of building code provisions used 
by Guam and the Virgin Islands.
      Modification or institution of metered power rates that 
reward savings and lower usage.
      Promotion of the use of energy-efficient appliances and 
light bulbs, which collectively represent some of the largest sources 
of consumer usage.
      Promotion of the use of systems, such as solar water 
heaters, to replace electrically-heated systems, including the possible 
financing of bulk purchases of systems that electric utility customers 
could finance over time as they pay lower utility bills.
      Expansion of publicity for the Energy Star program to 
bring great savings to citizens in the insular areas because of the 
exceedingly high cost of electricity.
    Outreach and education will be critical. Some may balk at the up-
front costs associated with adopting alternative energy solutions, even 
if the longer-term savings far outweigh the up-front costs. We 
encourage the insular governments and utilities to explore new concepts 
that may alter energy consumption. For instance, local retailers and 
wholesalers could arrange bulk purchases of proven alternative systems 
with financing and repay loans through the utilities' billing 
processes.
INTERIOR SUPPORT FOR ENERGY INNOVATION
    The Department of the Interior has long supported electricity 
producers in the islands in their efforts to build the capacity and 
improve the efficiencies that lead to lower costs and lower emissions 
for delivered electricity.
      Our Operations and Management Improvement Program (OMIP) 
has invested over $4.7 million in the last three years in the Pacific 
Lineman Training Program and the efforts of the Pacific Power 
Association to develop a cadre of knowledgeable, professional linemen 
that provide their communities with safe and efficient electricity 
transmission.
      Our Capital Improvement Program (CIP) has supported 
numerous power projects in the four United States territories. We are 
currently reprogramming unused CIP funds, a good deal of which will be 
used for power-related projects including the refurbishment of the 
generators in the CNMI.
      Under Compact II funding, the freely associated states of 
the Marshall Islands and the Federated States of Micronesia are 
eligible to spend infrastructure sector funds on power projects.
      Our Technical Assistance (TA) program has been a source 
of funding in the past for resource surveys similar to those outlined 
in the 2006 report. Early this year, CNMI Governor Benigno Fitial 
requested and received a TA grant (supported by the CNMI Washington 
Representative Pedro Tenorio) for $300,000 to continue research on 
fresh water production for agriculture by using the cold thermal 
properties of deep ocean water. In March, the CNMI submitted a $500,000 
TA request to undertake assessment of geothermal resources on the 
islands of Pagan and Saipan that could yield low-cost electricity and 
industrial potential for the territory.
FOLLOW-THROUGH
    The Energy Assessment Report contains valuable data and ideas for 
addressing the energy challenges that we are currently experiencing. A 
sustained effort is now required to ensure that the options outlined in 
the study are more fully reviewed and the residents of the insular 
areas receive any potential benefit as quickly as possible.
    In order to stretch the island energy dollar as far as possible, 
officials from the Office of Insular Affairs will visit each of the 
United States territories and freely associated states to discuss ways 
to implement the most promising energy options outlined in the Energy 
Assessment Report.
    On Thursday, Secretary Kempthorne's Deputy Chief of Staff, Doug 
Domenech, and I met with Governor John P. de Jongh, Jr., in St. Thomas 
to present him with a $50,000 grant from the Office of Insular Affairs 
to aid investigation of realistic energy measures that will benefit the 
residents of the Virgin Islands. The grant was made in response to a 
request from the Governor. Our Interior team then met with other local 
government officials to discuss the Insular Areas Energy Assessment 
Report and promising technology. The Government of the Virgin Islands 
is to be praised for moving aggressively on the energy issue. Because 
of the initiative shown by the Governor and his staff, we look forward 
to a good working relationship as we seek out practical energy 
solutions.
    At the end of this month, staff and I fly to the CNMI to discuss 
the CNMI portion of the report. OIA officials will later visit Guam, 
American Samoa, and the freely associated states.
    We believe that effort expended in the energy area can bring 
significant economic pay off in the form of lower utility costs for 
residents and businesses, and may possibly pave the way for new 
industry in some of the islands.
    We appreciate the leadership the co-chairs have shown on this 
critical issue of energy. Thank you for your effort and your support. I 
would be happy to answer any questions you may have for me.
                                 ______
                                 

STATEMENT OF DREW BOND, DIRECTOR, COMMERCIALIZATION, OFFICE OF 
  ENERGY EFFICIENCY AND RENEWABLE ENERGY, U.S. DEPARTMENT OF 
                             ENERGY

    Mr. Bond. Thank you, Madame Chairwoman, Mr. Chairman, 
members of the Subcommittee. Thank you for the opportunity to 
testify on behalf of the Department of Energy's Office of 
Energy Efficiency and Renewable Energy. It's an honor to be 
here.
    My name is Drew Bond, and I am the Director of our 
Commercialization and Deployment activities within DOE's Office 
of Efficiency and Renewable Energy. First, let me give a brief 
explanation of the commercialization team that I lead within 
EERE, as we call ourselves. In 2006, Assistant Secretary 
Karsner assembled for the first time a team of individuals 
reporting directly to him, that focuses on aggressive 
commercialization and deployment of our technologies. Briefly 
what this means is that we are charged with the responsibility 
of increasing the pace, the success rate, and the scale in 
which renewable energy and efficient energy technologies move 
from the R&D to the market changing products and processes. 
Among our many initiatives, this is a consorted effort to 
expand the use of clean energy in island communities.
    My testimony today will discuss the Energy Policy Act of 
2005 provisions relative to insular areas, as well as the 
department's recent announcement of the Hawaii Clean Energy 
Initiative, which is a model for the type of focused commitment 
necessary to change the predominant source of energy in islands 
and territories, nations, and insular areas from imported oil 
to clean sustainable energy sources.
    As you well know, Section 251 of the Energy Policy Act of 
2005 required that the Secretary of Interior in consultation 
with the Secretary of Energy and the head of the government of 
each insular area to update the 1982 Territorial Energy 
Assessment. The implementation of this EPACT requirement 
resulted in an updated report developed and made available by 
the Department of the Interior in the fall of 2006.
    The report reaffirmed the original finding that insular 
areas face unique challenges in the reliance of imported energy 
as well as high fuel and energy prices. Island's coping with 
these problems stand to benefit greatly from the end use 
efficiency measures and the expansion of renewable energy 
production. Territories can use the information from Section 
251 assessment to develop an advanced energy plan, and use the 
DOE State Energy Program grant funds to act on these findings.
    I would like to share with the committee our work in 
Hawaii, which serves as a possible example that could be 
translated for use in insular areas. On January 28, 2008, of 
this year, the Department of Energy and the State of Hawaii 
signed a memorandum of understanding that launched the Hawaii 
Clean Energy Initiative and put Hawaii on the path to supply 70 
percent of its energy needs with renewable sources by 2030.
    While this is a dramatic increase compared to the state's 
legal renewable portfolio standard requirement of 20 percent by 
2020. Hawaii is uniquely positioned to achieve the accelerated 
goal because of its high electricity prices and dependence on 
oil for energy. Oil supplies approximately 90 percent of 
Hawaii's total energy and 84 percent of energy generation.
    DOE's approach to performing its role in this partnership 
is threefold. First, working groups; second, partnership 
projects; third, clean energy transformation. First, the 
working groups strive to integrate the department's technical 
and policy expertise with Hawaii based knowledge and project 
relation resources.
    Second, partnership projects test and validate concepts 
laid out by the working groups such as solving grid integration 
and financing challenges for wind, solar, geothermal and ocean 
thermal energy resources.
    Third and most importantly, lessons learned through the 
working groups and partnership projects will guide what new 
regulations and laws may be needed to incentivize intelligent 
investments by capital markets, by energy suppliers and by 
energy consumers. Transforming Hawaii to have a cleaner more 
diverse and sustainable energy portfolio.
    These efforts are expected to help Hawaii progress toward 
increased use of cleaner energy as well as to help demonstrate 
existing and new technology at a significant scale, to help 
stimulate new investment to promote rapid asset turnover, and 
to help improve standards of service, energy service delivery 
and energy security. Likewise, this model could be replicated 
for territories.
    Underpinning all of these efforts is the need for the State 
of Hawaii to redefine its regulatory policy framework in a way 
that transforms its own energy infrastructure. Current utility 
regulations and rules in Hawaii and elsewhere make it difficult 
for investor owned utility or co-ops to profit from things like 
non-utility renewable generation from customer owned 
distributed generation and from energy efficiency. All of which 
are critical to the success of this partnership.
    Achieving Hawaii's Clean Energy Initiative goals would 
require reconsideration of how Hawaii's electric system is 
regulated, redesigning electricity and gas rates and tariffs, 
and changing the regulation and opportunities for electricity 
substitutes, including energy efficient solar hot water 
heaters, solar photovoltaic, and future grid-affecting 
technologies, such as plug-in hybrid electric vehicles.
    Cooperation between the Department of Energy and Hawaii to 
achieve the objectives of this partnership will mean that many 
people that visit the state for the scenic beauty that only 
islands can provide will also be able to see a functional, 
renewable energy economy. If successful, the Hawaii Clean 
Energy Initiative would serve as an integrated demonstration 
model for insular areas, for U.S. territories, and for other 
island communities globally.
    Madame Chairwoman, Mr. Chairman, this concludes my prepared 
statement. I am happy to answer any questions.
    [The prepared statement of Mr. Bond follows:]

  Statement of D. Drew Bond, Acting Director of Commercialization and 
  Deployment, Office of Energy Efficiency and Renewable Energy, U.S. 
                          Department of Energy

    Madame Chairwoman, Mr. Chairman, Members of the Subcommittees; 
thank you for the opportunity to testify on behalf of the Department of 
Energy's (DOE) Office of Energy Efficiency and Renewable Energy (EERE) 
regarding our efforts that contribute to Charting a Clean Energy Future 
for the Insular Areas.
    First, let me give the Committee a brief explanation of the 
commercialization team that I lead in EERE. In 2006, Assistant 
Secretary Karsner assembled for the first time a team of individuals 
reporting directly to him that focuses on commercialization and 
deployment of our technologies as part of the Department's balanced 
approach achieving its goals and meeting its mission. Briefly, what 
this means is that our program is targeted to help increase the pace, 
success rate, and scale at which renewable and efficient energy 
technologies move from R&D to market-changing products and processes. 
Among our many activities is a concerted effort to help expand the use 
of clean energy in island communities. My testimony today will discuss 
the Energy Policy Act of 2005 provisions relative to insular areas. In 
addition I will discuss the Department's recently established Hawaii 
Clean Energy Initiative. Although Hawaii is not an insular area, DOE 
believes this is an example of a type of focused effort that could be 
translated to help change the predominant source of energy in island 
territories, nations, and insular areas from oil to renewable or 
alternative energy sources.
    As you know, Section 251 of the Energy Policy Act of 2005 (EPACT) 
required the Secretary of the Interior, in consultation with the 
Secretary of Energy and the head of government in each insular area, to 
update the 1982 Territorial Energy Assessment. The implementation of 
this EPACT requirement resulted in an updated report developed and made 
available by the Department of the Interior in the fall of 2006. The 
report reaffirmed the original finding that insular areas face unique 
challenges in their reliance on imported energy as well as high fuel 
and energy prices. Islands coping with these problems stand to benefit 
from end-use efficiency measures and the expansion of renewable energy 
production. Territories can use the information from the Section 251 
Assessment to develop an advanced energy plan, and use DOE State Energy 
Program (SEP) grant funds to act on the findings. SEP provides grants 
to the states and territories to design and carry out their own 
renewable energy and energy efficiency programs and to fund energy 
projects managed by state energy offices.
    I would like to share with the Committee our work in Hawaii, which 
could serve as a possible example that could be translated for use in 
insular areas. The Department's work with the State of Hawaii is an 
example of a collaborative effort to combat the energy issues 
characteristic of insular areas. On January 28, 2008, The Department of 
Energy and the State of Hawaii signed a Memorandum of Understanding 
(MOU) that launched the Hawaii Clean Energy Initiative (HCEI) and put 
Hawaii on a pathway to supply 70 percent of its energy needs with 
renewable energy sources by 2030. Achieving this objective could reduce 
the State's crude oil consumption significantly. Though not legally 
binding, the HCEI significantly increases the commitment of Hawaii 
beyond the State's legal renewable portfolio standard requirement of 20 
percent by 2020. Hawaii is uniquely positioned to achieve the 
accelerated goal and help demonstrate technologies that, once 
demonstrated in a fully integrated way, could be used elsewhere.
    Pocketbook issues are foremost in making Hawaii the ideal test bed 
for a renewable energy economy. Islands are often hit the hardest by 
high oil prices. Oil supplies approximately 90 percent of Hawaii's 
total energy and approximately 84 percent of its electricity 
generation. 1 Hawaii also has some of the highest 
electricity prices in the nation, making it an apt proving ground for 
clean energy technologies that are not fully cost-competitive elsewhere 
in the country.
---------------------------------------------------------------------------
    \1\ Sources: Energy Information Administration and State of Hawaii 
Strategic Industries Division.
---------------------------------------------------------------------------
    The Department of Energy's role in the HCEI is to provide 
expertise, third-party objectivity, and resources to the process. DOE 
provides expertise through Department staff, national labs, and private 
partners dedicated to R&D in renewable energy, energy efficiency, and 
electricity delivery; and most importantly, in the emerging area of 
system level integration of clean energy technologies. DOE expects that 
Hawaii will need to employ an integrated systems approach if it is to 
achieve the HCEI goals. The Department can also assist in convening and 
facilitating public/private sector collaborations that could help 
address barriers to renewable and efficiency technology advancement in 
the State.
    DOE's approach to performing its HCEI roles is based on three 
areas: working groups, partnership projects, and clean energy 
transformation. First, the working groups are small, collaborative 
teams focused on long-term, intelligent energy solutions. Convened 
around topics of energy generation, energy delivery, transportation, 
and end-use efficiency, these groups strive to integrate the 
Department's technical and policy expertise with Hawaii-based knowledge 
and project resources. Second, partnership projects test and validate 
concepts laid out by the working groups, such as solving grid 
integration and financing challenges for wind, solar, geothermal, and 
ocean thermal energy sources. Third and concurrently, lessons learned 
through the working groups and partnership projects are expected to 
help Hawaii in its consideration of potential changes to state-level 
regulations and laws, with the goal of promoting a clean energy 
transformation that could help incentivize intelligent investment by 
capital markets, energy suppliers, and energy consumers. These efforts 
are expected to help Hawaii progress toward increased use of cleaner 
energy as well as help demonstrate existing and new technology at 
scale, help stimulate new private sector investment to promote asset 
turnover, and help improve standards of service, energy service 
delivery, and energy security.
    To put the HCEI into action, immediately following the MOU signing, 
DOE staff held meetings with utilities' and island co-ops' senior 
management, business leaders, military officials, and policy and 
regulatory leaders. These meetings were part of the effort to engage 
experts in clean energy technology development to help Hawaii launch 
several projects with public and private sector partners that target 
early opportunities and critical needs for Hawaii's transition to a 
cleaner energy economy, including:
      Designing cost-effective approaches for the exclusive use 
of renewable energy on smaller islands;
      Designing systems to improve stability of electric grids 
operating with variable generating sources, such as wind power plants 
on the islands of Hawaii, Kauai and Maui;
      Minimizing energy use while maximizing energy efficiency 
and renewable energy technologies at new large military housing 
developments;
      Expanding Hawaii's capability to use locally grown crops 
and byproducts for producing fuel and electricity; and
      Assisting in the development of comprehensive State 
energy regulatory and policy frameworks for promoting clean energy 
technology use.
    DOE believes that underpinning all of these efforts is the need for 
the State of Hawaii to change its regulatory and policy framework to 
drive the necessary changes throughout its energy infrastructure. 
Current utility regulation and rules in Hawaii make it difficult for an 
investor-owned utility or a co-op to profit from non-utility 
generation, extensive renewable and distributed (customer-owned) 
generation development, and energy efficiency--all of which are 
critical to the success of the HCEI. Achieving HCEI goals will require 
not only reconsideration of how Hawaii's electric system is regulated, 
but also a redesign of electricity and gas rates and tariffs, and 
changes in the state's regulation and opportunities for electricity 
substitutes including energy efficiency, solar hot water heating, solar 
photovoltaics, and future grid-affecting technologies such as plug-in 
hybrid vehicles. Governor Lingle elevated the issue of advantageous 
regulatory and policy changes in her State of the State Address, and 
announced a separate cabinet agency to address Hawaii's energy future.
    Cooperation between the Department of Energy and Hawaii to achieve 
the objectives of the HCEI will mean that the many people who visit the 
State for the scenic beauty that only islands can provide will be able 
to see a functional renewable energy economy as well. Employing 
renewable technologies at scale, in an integrated manner is an 
important step toward attaining advanced energy goals. The HCEI takes a 
preliminary step in the pursuit of clean, sustainable energy solutions 
for an island setting. If successful, the HCEI could serve as an 
integrated example for insular areas, U.S. territories and other island 
communities globally.
    Madame Chairwoman, Mr. Chairman--this concludes my prepared 
statement, and I am happy to answer any questions the Committee Members 
may have.
                                 ______
                                 
    Mrs. Christensen. Thank you both for your testimony. And I 
recognize myself for questions.
    Mr. Bond, maybe you could answer the question about why--
what was it about Hawaii that made this initiative start there? 
How did it come about?
    Mr. Bond. That's a great question. The short answer is the 
leadership at the state level. The Governor has been very 
progressive in pushing for changes within the state, not only 
at the policy level but at the State Regulatory Commission, 
working with the legislature on a great bipartisan basis, and 
also pushing the state utility to change its way of thinking. 
Because what this really involves is, it requires the existing 
state monopoly to change its business model so it actually can 
make money off of the things that it's not use to making money 
off of, things like using less energy.
    Mrs. Christensen. And have there been any discussions about 
changing the state's energy program formulas or including the 
territories in the WAA program? And would Department of Energy 
support that change? And are you in agreement--is that the 
reasons that we heard, are those the only reasons that we might 
have at some point said we did not want to participate as far 
as, you know, those would be the only reasons why we would not 
be in the program?
    Mr. Bond. Madame Chairman, that's my understanding. With my 
focus as Director of Commercialization and Deployment, that's 
not really in my purview. I do understand that ESA 2007 did 
apparently change the definition of the state and how--whether 
or not a territory would be eligible for the programs. My 
understanding is that that legislative fix has now happened to 
allow territories to be able to apply.
    Mrs. Christensen. And in many instances I tried to get 
Homeland Security to put state and territories. They insisted 
that when they put state, it meant state and territories. What 
you are saying is in recent legislation state includes 
territories?
    Mr. Bond. That is my understanding, yes.
    Mrs. Christensen. So we just need to work on the formula.
    Mr. Pula, can we realistically expect more funding from the 
Department of Energy to help in the development of 
alternatives? With the Department of the Interior.
    Mr. Pula. I was just going to say, absolutely yes.
    Mrs. Christensen. Is the Department of the Interior 
prepared to help the territories financially to a greater 
extent of the development?
    Mr. Pula. Thank you, Congresswoman. I think lately, as you 
probably well know, our focus have been on economic development 
and accountability; but with the energy situation, which is 
basically kind of a crisis come up in the last year or so, in 
my testimony I mentioned about, for example, in CNMI, their 
budget was for '08 was 160 million, and cost of fuel for them 
alone was 80 million. And so we've now received requests from 
the areas. I am really thinking seriously of focusing the 
resources that we have on the energy crisis.
    As I also mentioned, that's why we had the meeting 
yesterday. This is a great hearing, beginning of hearings, as 
mentioned in your earlier statement. We are going to go over to 
the other areas. Really Mr. Bond and I discussed yesterday that 
when we get back to Washington, we are going to try to bring 
our resources together, both departments to see what we can do 
and help out.
    Mrs. Christensen. That addresses the long-term problem, but 
as you heard from Mr. Miller, the issue is lowering the cost. 
Do either of you have any recommendations or in your opinion 
what else can be done to help residents with the cost of paying 
for this utility?
    Mr. Pula. Let me yield to my colleague.
    Mr. Bond. I guess one comment I would make, part of the 
mindset change that's needed at the utility level is looking 
beyond the first initial cost of investment in technology and 
looking to the life cycle cost of technology. In other words, 
renewable energy technologies, particularly wind and solar, 
geothermal, even ocean energy, they--the feedstock is virtually 
free once you make the initial investment of the capital. And 
so I think you do have to be careful to make promises that this 
will result in cheaper energy in the near term future. But I 
think what's more important in the near term is diversifying 
the energy mix to a securing reliability, and then lower cost 
to energy certainly can come with the right investment.
    Mrs. Christensen. Mr. Pula.
    Mr. Pula. The only thing I would like to add, as you 
emphasize on the word ``realistically'' and ``time,'' on any 
budget cycle, as we know, if I were asked the question to bring 
forward something that will go to the administration budget 
process, I will have to work really hard with all the insular 
areas, the territories to come up with a plan. If I was going 
to propose something for the administration's plan through OMB 
in the process, as you well know, we got to have something from 
our areas that justifies being able to do that. And I think 
that's the focus in my mind. So a lot relies on our 
relationship in working with the folks in energy.
    Mrs. Christensen. Thank you. My time is up.
    I now recognize Chairman Costa for his questions.
    Mr. Costa. Thank you very much, Madame Chairwoman.
    Mr. Pula, the Office of Insular Affairs has a number of 
grant programs for insular areas. Do you know roughly what 
percentage of those grants has gone to power projects in recent 
years and how they spread out over the territories?
    Mr. Pula. I don't have the number off the top of my head, 
but I can provide that for you.
    Mr. Costa. Please find that information for the committee.
    You talked about the necessity of developing a plan. Of 
course, I have an interest of what I think are a host of 
options that are available in terms of looking at renewable 
resources. I do believe you have to have a plan first. I 
understand that you been with the department for most of your 
career, and that means you are not an appointee, so you are 
going to be around after next year; correct?
    Mr. Pula. Correct.
    Mr. Costa. I believe you're happy as well.
    But that means that you have some consistency. Don't you 
think we really ought to be working with all the insular 
territories to deal with this? I mean, we know that energy is 
not going to get cheaper. We know that they have a host of 
renewable resources, and as was spoken about a moment ago, the 
Hawaii plant seems to really meet what we need to be doing for 
the other insular territories.
    Mr. Pula. Absolutely. I myself haven't heard of the Hawaii 
plant until yesterday in our meeting. It was a great meeting--
--
    Mr. Costa. We need to coordinate, and I will be happy to do 
that with the Subcommittee Chairwoman to see how we can get 
that same sort of comprehensive effort, so we could look at, 
for example, whether or not the detailed resources of wind 
studies have been performed here. You think they have been?
    Mr. Pula. Over here?
    Mr. Costa. Yes.
    Mr. Pula. In our meeting yesterday, yes, there are some, 
very little.
    Mr. Costa. What about the unused Capital Improvement 
Program, what funds are there and when do you reprogram? And do 
you do that with the consent of the territories in which those 
funds were originally intended for?
    Mr. Pula. For the Capital Improvement?
    Mr. Costa. Right.
    Mr. Pula. There is a set amount. It's only 27 million for 
the four territories.
    Mr. Costa. If they are not used, how do you reprogram?
    Mr. Pula. If they are not used?
    Mr. Costa. Yes.
    Mr. Pula. Primarily it goes sort of like a competitive way 
that we have done in the last three years, and goes to the four 
territories. Usually when they get it, then they use it for 
their projects, but it's no year money.
    Mr. Costa. What you are saying it's always used then? There 
is never any unused funds?
    Mr. Pula. In some of the territories, for example, CNMI, 
they don't spend it as fast as they can, because of many other 
problems. What we are trying to do--right now I just meant, for 
example, in CNMI I met with the Governor in February and 
basically told him that's where they need to spend their money 
prioritizing, is power and water with their situation.
    Mr. Costa. I think the old plan is what we got to get back 
to, because it's how you integrate a comprehensive plan that 
you ultimately find solutions. My time is moving here.
    Mr. Bond, you ever think about changing your first name?
    Mr. Bond. Several times. I tried to slip it in one of my 
children.
    Mr. Costa. My name is James. Maybe I need to change my 
last.
    I noticed that the Energy Information Administration 
doesn't keep data for insular areas the way it does for states. 
Why is that?
    Mr. Bond. It's a good question.
    Mr. Costa. I mean, you treat them almost like they are 
foreign countries. I don't want to go too far down that road, 
because I am sure I would be fighting for the home folks. I am 
not running for election here. Please explain.
    Mr. Bond. I would love to be able to explain. However, I 
don't have an explanation just given my role.
    Mr. Costa. Don't you think we ought to change that?
    Mr. Bond. I think it's something I will be happy to explore 
and report back to you with the energy division of the agency.
    Mr. Costa. I think you ought to report to the Chairperson 
of the Subcommittee. I will be willing to sign a letter and add 
to that, because, frankly, it doesn't make any sense to me. 
These are U.S. citizens we are talking about.
    Maybe I might come down and run.
    Wouldn't it be helpful if the EIA treated--I don't want to 
belabor this point, but it seems to me frankly the Department 
of Energy has a responsibility here, and we ought to pursue the 
multi-strategy just as you explained in Hawaii. I mean, that's 
what I would like to see as one of the primary takeaways from 
today's hearing. When do you think we need to do that.
    Mr. Bond. I think in terms of the partnership that we had 
in Hawaii from the beginning, we have marked the success of 
that partnership with how we are able to replicate that 
success. So it doesn't benefit the rest of the United States, 
and all of our citizens if it only benefits Hawaii. So to find 
ways to further replicate that, we are happy to be able to work 
with the committee and with any of the insular areas to do 
that.
    Mr. Costa. I just want to commit every resource that we 
have within our Subcommittee on Energy and Mineral Resources to 
working with the Chairwoman with her Subcommittee to see that 
that happens.
    And I want to thank you, Congresswoman Christensen, for 
this hearing today and for allowing us the opportunity to be 
better informed. I think it's clear what we need to do on our 
part to try to better enhance our insular territories to deal 
with these challenges and give my commitment to do whatever we 
possibly can together.
    Mrs. Christensen. Thank you, Mr. Chairman.
    The Chair now recognizes Mr. Shuster.
    Mr. Shuster. Thank you very much. My question is to Mr. 
Bond. Your view on sea solar power technology, what's your view 
on that? It sounds promising. Your view on that type of 
technology, the OTEC technology we heard about earlier, what's 
the Energy Department's view of that is?
    Mr. Bond. It's actually an area where the Department of 
Energy is just setting up its program as a result of the 
Omnibus Bill that funded our '08 budget. There is $10 million 
allocated for further research and development within this 
area. Where I would come down is to say that our goal really is 
to create an environment where any renewable and alternative 
form of energy can be competitive.
    And so we don't view our role as picking winners in 
technology. We view our role as more trying to further the 
commercialization of the technologies and ensuring that the 
market exists. So rather than the Department of Energy 
commenting specifically of which technology will and wouldn't 
work, it really depends on many circumstances, and there is a 
lot of factors that go into that.
    Mr. Shuster. I guess, I don't know what to take away from 
that. Is there a positive view toward that technology?
    Mr. Bond. I think the potential within that sector is 
tremendous, and studies have shown this in terms of where you 
look at the different technologies and where they are in the 
commercialization time frame. It's clearly when it's furthest 
along the line of all the technologies. Solar is moving quickly 
behind that, and so in terms of getting the technologies cost 
competitive, which is our real goal within our programs, there 
certainly are some technologies that have been out there, 
tested and proven in the marketplace longer, that are farther 
in the R&D stage, and more in the commercialization stage. The 
potential is tremendous.
    Mr. Shuster. Thank you.
    Question to Mr. Pula on the grid we talked earlier a little 
bit and I asked the question. And I don't know if you--probably 
your department will be involved, but if we are talking about 
attaching--connecting the grid with other Caribbean islands and 
which means other countries, other locations. How would that 
process work though? Because it just seems to me the economies 
of scale, if you can band together, you can build one facility 
and it will power seven islands, twenty islands. What's the 
process for doing that, and is that something you are looking 
at the Office of Insular Affairs to be considered?
    Mr. Pula. Thank you for the question. Let me just say, 
recently I was approached by the folks in CNMI, and they are 
really interested in geothermal because in the Northern Islands 
they have the volcanoes, and there is about 300 miles, if they 
were to lay a cable to get, you know, the source, it cost about 
a million dollars a mile. That's what they were telling me, in 
that area.
    And yesterday we kind of discussed the potential here with 
some other islands that may have some geothermal energy. I was 
asking those kind of questions. I think we don't have the 
answers. We are looking into those kinds of things and seeing, 
of course, with the limited resource we will have to look into 
this.
    And to answer your question, I mean, if the potential is 
there, it is there and it could be worked in coordination with 
the other areas, because I think the Navy was thinking about an 
interest in Guam in getting their energy from CNMI, from the 
northern volcanoes. That would be something to do. Here if 
there is available energy in the same form from other islands, 
we will be happy to look into that.
    Mr. Shuster. Speaking of geothermal energy, in the 
territories here--I am stepping out of bounds of myself and 
knowledge. I have to stick closely to my script here. The 
geothermal energy typically you think of larger plants, binary 
plants. I understand there is--you can tap into geothermal heat 
exchange system by drilling holes. Is that something that's 
being explored here in the territories?
    Mr. Pula. I haven't had time to ask those questions of our 
folks here. But, again, they were drilling for water and they 
came upon one of the holes and that steam came up, and they 
always thought that volcanic line trenches were farther away. 
So now the scientists at USGS are saying, well, maybe it is 
closer and there is possibility to have that. Again, we are 
asking people at USGS, we will be talking to our colleagues 
here at Energy and see what we can come up with.
    Mr. Shuster. Thank you very much.
    Mrs. Christensen. I thank the witnesses for their 
testimony. We will have questions submitted in writing, and we 
will ask for you to respond to those questions in writing as 
well.
    I want to take this opportunity to thank all of the 
witnesses for their valuable testimony and the members for 
their questions.
    In closing, I'd like to just make a brief closing 
statement. Of course, the reason for this hearing is to be able 
to establish a record in the Congress. This is a formal hearing 
of the Congress of the United States in Frederiksted, St. 
Croix. And this record will serve as the basis for our being 
able to request the assistance from our colleagues in Congress 
to help you, my constituents, as well as the residents of the 
other insular territories to cope with the very high cost of 
electricity, and many of course of who are on fixed incomes and 
have to decide between buying food or paying their electric 
bills.
    There is really nothing like hearing from the leaders in 
the field and the representatives of the constituents 
themselves. So I want to again thank Chairman Costa and 
Congressman Shuster for being willing to come and to listen, 
and to thank those who testified for putting a face on the 
issues here in the territory and helping to point out not only 
some of the unique challenges that we face but some of the 
equities that the territories face as we try to address the 
needs and concerns of our constituents.
    The record for this hearing will remain open--let me see 
how long--for ten days. As you might recall from previous 
hearings, we welcome written testimony, and that written 
testimony if received within those ten days, becomes just as 
much as an official part of this hearing record as the 
testimony you heard this morning.
    And so then if there is no further business, this hearing 
stands adjourned.
    [Whereupon, at 12:43 p.m., the Subcommittee was adjourned.]

    [List of additional material submitted for the record 
follows:]

               List of Documents Submitted for the Record

    Statements submitted for the record by the following individuals 
and organizations have been retained in the Committee's official files.
      Mr. Jason Budsan
      Mr. Malcolm W. Ford
      St. Croix Renaissance Group, LLP

                                 
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