[Senate Hearing 112-962]
[From the U.S. Government Publishing Office]
S. Hrg. 112-962
INNOVATIVE PRACTICES TO CREATE
JOBS AND REDUCE POLLUTION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON GREEN JOBS
AND THE NEW ECONOMY
OF THE
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
October 13, 2011
__________
Printed for the use of the Committee on Environment and Public Works
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COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
BARBARA BOXER, California, Chairman
MAX BAUCUS, Montana JAMES M. INHOFE, Oklahoma
THOMAS R. CARPER, Delaware DAVID VITTER, Louisiana
FRANK R. LAUTENBERG, New Jersey JOHN BARRASSO, Wyoming
BENJAMIN L. CARDIN, Maryland JEFF SESSIONS, Alabama
BERNARD SANDERS, Vermont MIKE CRAPO, Idaho
SHELDON WHITEHOUSE, Rhode Island LAMAR ALEXANDER, Tennessee
TOM UDALL, New Mexico MIKE JOHANNS, Nebraska
JEFF MERKLEY, Oregon JOHN BOOZMAN, Arkansas
KIRSTEN GILLIBRAND, New York
Bettina Poirier, Majority Staff Director and Chief Counsel
Ruth Van Mark, Minority Staff Director
----------
Subcommittee on Green Jobs and the New Economy
BERNARD SANDERS, Vermont, Chairman
THOMAS R. CARPER, Delaware JOHN BOOZMAN, Arkansas
JEFF MERKLEY, Oregon JEFF SESSIONS, Alabama
BARBARA BOXER, California, (ex JAMES M. INHOFE, Oklahoma, (ex
officio) officio)
C O N T E N T S
----------
Page
October 13, 2011
OPENING STATEMENTS
Sanders, Hon. Bernard, U.S. Senator from the State of Vermont.... 1
Boozman, Hon. John U.S. Senator from the State of Arkansas....... 3
Boxer, Hon. Barbara, U.S. Senator from the State of California... 4
Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma... 5
Whitehouse, Hon. Sheldon, U.S. Senator from the State of Rhode
Island......................................................... 7
Merkley, Hon. Jeff, U.S. Senator from the State of Oklahoma...... 8
WITNESSES
White, Edward, Jr., Vice President of Energy Products, National
Grid........................................................... 9
Prepared statement........................................... 11
Responses to additional questions from Senator Boxer......... 16
Kempf, Kyle W., Senior Director, Government Affairs, National
Small Business Association..................................... 17
Prepared statement........................................... 20
Schoen, Phil, CEO, GEO-Enterprises............................... 31
Prepared statement........................................... 33
Responses to additional questions from Senator Boxer......... 37
Smith, Anne, Senior Vice President, Nera Economic Consulting..... 38
Prepared statement........................................... 40
Rowlan, Steven, General Manager, Environment, Nucor Corporation.. 48
Prepared statement........................................... 50
Responses to additional questions from Senator Boxer......... 52
INNOVATIVE PRACTICES TO CREATE JOBS AND REDUCE POLLUTION
----------
THURSDAY, October 13, 2011
U.S. Senate,
Committee on Environment and Public Works,
Subcommittee on Green Jobs and the New Economy,
Washington, DC.
The subcommittee met, pursuant to notice, at 10 a.m. in
room 406, Dirksen Senate Office Building, Hon. Bernard Sanders
chairman of the subcommittee) presiding.
Present: Senators Sanders, Boozman, Boxer, Inhofe,
Sessions, Whitehouse, and Merkley.
OPENING STATEMENT OF HON. BERNARD SANDERS,
U.S. SENATOR FROM THE STATE OF VERMONT
Senator Sanders. Good morning and welcome to an important
hearing sponsored by the Green Jobs Subcommittee. We will begin
with opening remarks from Members of the Senate on the
Committee, and then we will go to testimony from panelists, and
we very much thank our distinguished panelists for being here.
The issue that we are discussing today is not exactly a
sexy issue. It is not going to appear on the front pages of
newspapers all over this Country, but in my view it is a very,
very important issue. And it is an important issue because it
addresses at least three major concerns that we have in our
Country.
No. 1, obviously all of us are concerned about the
recession and the significant amount of unemployment that we
have. This bill creates jobs.
No. 2, many of us are concerned about the kinds of expenses
and costs that businesses, homeowners accrue. This concept will
help make small businesses run their enterprises more cost-
effectively. It will help homeowners save substantial sums of
money on their electricity and their fuel bills, and do the
same for municipalities.
So to the degree that we want to save consumers money, make
our businesses more competitive, this bill does that as well.
And for those of us who are concerned about the crisis of
global warming and cutting greenhouse gas emissions, this
concept is also very important because it will do just that.
On-bill financing, which is the subject of discussion
today, refers to a program run by a utility where customers can
get a loan to pay for energy efficiency or sustainable energy
at their home or small business and use the energy savings from
those measures to pay back the loan over time on their utility
bill.
It is a simple and straightforward concept and it presents
a huge opportunity to cut energy bills, and we will hear some
testimony as to how that has occurred; an opportunity to create
jobs, we will hear testimony about that; and also to slash
greenhouse gas emissions and other pollutants.
Just consider for a moment the potential for energy
savings. The National Small Business Association, one of our
witnesses here today, issued a report finding that if small
businesses were able to improve energy efficiency by 25
percent, not an unrealistic goal, we could cut greenhouse gas
emissions equivalent to 51 coal-fired powerplants and save the
average small business nearly $5,000 per year on their energy
bills. For a small business, $5,000 is not an insignificant sum
of money.
The White House Middle Class Task Force estimates that
existing technologies can reduce home energy consumption 40
percent on average, and I can tell you in Vermont, we do see
that, which would yield $21 billion annually in energy bill
savings.
Both the National Small Business Association and the White
House Middle Class Task Force identified the need for up-front
funds to pay for these cost-effective energy projects as a
major barrier. In other words, all over this Country, small
businesses, public institutions, homeowners want to make the
investment, but they don't have the $5,000, $10,000, $15,000
that they need to save money in the future. That is the
challenge we are dealing with today.
If you are a large business or a State or local government,
you can get access to what is called energy performance
contracting. That is where a private contractor provides you
with up-front money for cost-effective energy upgrades and you
pay back the loan through your energy bill savings. And I think
many of us are familiar with one of the major examples of that,
and that took place at the Empire State Building. We have heard
a lot of discussion about that.
Johnson Controls, a major corporation, did an energy
performance retrofit that will save 38 percent on energy
consumption, $4.4 million annually in energy costs at the
Empire State Building, meaning the payback for the project is 3
years. That is just an extraordinary investment, I think we can
all agree on that.
These types of saving opportunities exist for small
businesses and families, too, but at this moment in many cases
small businesses and families simply cannot get the kind of
financing that an entity like the Empire State Building is able
to get.
So that is where innovative programs like on-bill financing
come in. On-bill finance lets small businesses and homeowners
access funds to make energy improvements pay for themselves
over time. These programs are available to at least some
customers in 17 States across the Country. And today we will
hear from National Grid, which operates a successful on-bill
finance program in the northeast.
In Vermont, we have led the Nation in energy efficiency,
although I know my colleague from California occasionally
disagrees with me on that. And we have actually cut electric
consumption by 14 percent over the last 10 years compared with
projected demand.
I am pleased that our Governor's new energy plan endorses
on-bill financing as a way to help Vermonters access the funds
to make our homes and businesses more efficient and move us
toward more solar and geothermal and sustainable energy. What
we know in Vermont we know nationwide. We can do more. We
surely can. And on-bill finance programs can help.
We know, too, that according to research from the
University of Massachusetts and the University of California-
Berkeley, investments in energy efficiency and sustainable
energy create more jobs than investments in fossil fuels. So we
are talking about a real job-creating machine here.
And that is why I am announcing today that my office will
soon be introducing legislation to support utilities that want
to go forward on on-bill financing for their customers. We have
17 States that are doing it. I want to see 50 States in this
Country doing it.
When you have a program that cuts energy bills, makes small
businesses more competitive, creates jobs and slashes
greenhouse gas emissions, this is a win-win-win situation and
Congress should be supportive of those efforts.
I look forward to working with all of my colleagues on this
legislation and I thank all of our witnesses for being here
today for this important discussion.
Senator Sanders. I now want to introduce Senator Boozman
for his remarks.
Senator.
OPENING STATEMENT OF HON. JOHN BOOZMAN,
U.S. SENATOR FROM THE STATE OF ARKANSAS
Senator Boozman. Thank you, Mr. Chairman. And I am glad
that we can hold this hearing and really do look forward to the
testimony. I appreciate all of you all being here. I have had
the opportunity to read your testimony and it really is very
helpful.
With high unemployment and economic hardship hitting many
families, in fact I think almost all families, I believe
today's hearing is very timely and it will help us answer a
number of questions, such as: At what point do regulations
become counterproductive by driving blue collar jobs,
manufacturing jobs, energy sector jobs overseas to countries
with lower standards and more pollution? Are we properly
analyzing regulations to make sure we count all the costs and
the benefits? And how can we best support market-driven
incentives like on-bill financing to increase energy efficiency
and renewable energy?
I think today's witnesses will give helpful answers to some
of these questions from their perspectives. Let me also say
again good public policy will lead to net job creation, while
at the same time promoting conservation, clean air and clean
water.
Job creation should include, but not be limited, to green
jobs. Bad policies may create jobs, but they will lead to
greater losses in other areas. We must consider which policies
actually work and which policies have severe unintended
negative consequences.
I have said before, Congress should not rubber-stamp every
policy that is labeled green. There are a lot of steps we can
take to make sure our companies are successful. One of our
witnesses that we are happy to have, for example, is in the
steel industry. His company, Nucor, has approximately 1,500
employees in Arkansas. They have the capacity to recycle 6
million tons of steel annually in our State. The U.S. steel
industry has significantly reduced its energy intensity and its
emissions over the last 20 years, and our domestic industry is
the cleanest steel industry on the planet in terms of energy
intensity and emissions.
We need to make sure industries like this can afford to
comply with new regulations that could drive up the cost of
energy and give their overseas competitors an unfair advantage.
Again, Mr. Chairman, thank you very much for holding this
very timely hearing.
Senator Sanders. Thank you very much, Senator Boozman.
Senator Boxer is the Chair of the full Environment and
Public Works Committee. We are pleased that she is here with us
today.
Senator Boxer.
OPENING STATEMENT OF HON. BARBARA BOXER,
U.S. SENATOR FROM THE STATE OF CALIFORNIA
Senator Boxer. Senator Sanders, thank you so much.
The title of this hearing is Innovative Practices to Create
Jobs and Reduce Pollution. And I think it is very important
because as we expand our economy, we want to make sure we
continue to make progress on clean air. I have often said if
you can't breathe, you can't work. And that is a fact. So I
thank you for this.
This hearing is focusing on policies to expand the use of
energy efficiency, such a win-win, and renewable energy
technologies, which includes financing of these technologies by
utilities companies that the customers pay back over time on
their bill.
What we have happening in California now, Senators, I think
it is interesting, is the private sector has moved in and they
do the same thing that your utilities are doing, the private
sector comes in and they put the solar roof on and then the
customer saves the money and that pays back the company for the
capital investment. It is working very well, creating a lot of
jobs and doing what you want to do, Mr. Chairman. You are
creating jobs and reducing pollution at the same time.
So innovative financing can provide incentives to customers
to improve energy efficiency of their homes and businesses and
increasing the use of renewables. Expanding the use of these
technologies will put people to work, including construction
workers who retrofit structures with insulation and
weatherization, workers who install and maintain heating and
air conditioning systems, and people who manufacture energy
efficient products.
And since we have a very successful businessman here, when
I visited my businesses in Silicon Valley and they are high-
growth. They use a lot of energy, they have saved so much money
from their costs because they have installed a lot of the
latest energy efficiency technologies. They have moved to all
the new innovations that are making us, frankly, a leader in
this area.
By the way, we have $48 billion a year of exports, clean-
tech exports. It supports, by the way, 1.7 million jobs, which
is very, very important.
So again, I think this focus of yours today is so important
as we work for jobs, jobs, jobs. And also work to protect the
health of the American people.
We know that since the Clean Air Act's inception in 1970,
the U.S. gross domestic product has risen by 207 percent. Now,
that is the best in the developing world. So not only is clean
tech a critical job creator, it provides such important health
benefits that, according to a study that was demanded by
Congress, we find that if we continue to turn back efforts to
roll back Clean Air Act protections and keep on moving toward
those protections, by 2020 the Clean Air Act is projected to
prevent, listen to this, 230,000 premature deaths; 2.4 million
asthma attacks; 200,000 heart attacks; 120,000 emergency room
visits; 17 million lost workdays; and 5.4 million lost school
days.
So when we talk about the importance of jobs, let's
remember that fair regulation that makes sense means that we
protect the health of the people. We keep them productive. We
don't have people dying of heart attacks and missing school and
work. This is a very important benefit that we should keep in
mind and why this hearing is so critical. Because what we are
talking about in this hearing is making sure we have expansion
of clean energy. And it is just a win-win for everybody.
So I again say to Senator Sanders, I am so pleased that you
brought us together. I think what you are trying to do is put
people to work. You are going to keep American families healthy
and we are going to save a lot of money for the average family
that gets a chance to take advantage of the kinds of
weatherizaton programs and alternative energy programs that you
are seeing in your State and I am seeing in my State.
And right as we speak, my staff is checking to see who has
the best record in their State for energy efficiency, and we
will get back to you on that. We will leave the record open,
with your permission.
Is that all right?
Senator Sanders. Without objection.
Senator Boxer. Well, thank you.
[Laughter.]
Senator Sanders. Senator Jim Inhofe is the Ranking Member
of the full Committee.
Jim, thanks for being here.
OPENING STATEMENT OF HON. JAMES INHOFE,
U.S. SENATOR FROM THE STATE OF OKLAHOMA
Senator Inhofe. Thank you, Mr. Chairman and Senator
Boozman, for having the hearing today. We have some familiar
witnesses here, Mr. Rowlan and Dr. Smith, and Phil Schoen.
Mr. Chairman, you may not be aware of this, I have to
interrupt you there. In 2003, Mr. Schoen presented me with an
award for my work in promoting the use of geothermal heat.
Oklahoma is a leader in the geothermal area.
Senator Sanders. Jim, we invited him notwithstanding that.
[Laughter.]
Senator Inhofe. Well, I know that and I appreciate that. I
will remember that a year from now, too. That is good.
[Laughter.]
Senator Inhofe. In fact, in 2007, I worked with then-
Senator Clinton to pass the Federal Buildings, along with
Senator Boxer, Energy Conservation Act, a bill that encourages
use of geothermal. So it is something that is there. It is good
and we are the leaders out in Oklahoma.
With the low financing rates dominating the marketplace
today, on-bill financing is a good tool to encourage investment
in energy efficiency. Although I don't see the Federal role in
expanding capital access, I welcome discussions on the topic.
More pressing at this time, however, is the havoc the EPA is
wreaking upon our manufacturing sector.
Whether we are looking at Solyndra, the debacle with that,
or the EPA train wreck, it is clear that the EPA is waging war
on affordable energy that is undermining economic growth.
Ironically, the President himself has now publicly acknowledged
the connection when he stopped the agency from tightening the
national ambient air quality standard. Prose on his statement
could not have been clearer. EPA rules create regulatory
burdens and uncertainty that stifles job growth.
Yet, the EPA continues to push regulations that harm the
economy. The cross-State air pollution rule, the so-called
utility MACT rules, they are primary examples of that. These
rules are specifically designed to force companies to abandon
affordable energy resources like coal.
Remember, President Obama wants electricity rates to
skyrocket as he told the San Francisco Chronicle recently, ``If
somebody wants to build a coal-fired plant, they can, it is
just that it will bankrupt them.'
What this President fails to realize is that affordable,
reliable energy is the lifeblood of a healthy economy and the
foundation of our global competitiveness. The Maguire Energy
Institute points out in a recent report that even modest
electricity price increases for energy-intensive American
manufacturers depress economic growth and make firms less
competitive vis-a-vis China, worsening our trade deficit in the
process.
This is ominous, given that NERA is projecting that the
cumulative effect of EPA's rules on electric utilities may
result in electricity costs increasing as much as 19 percent in
America's manufacturing heartland. In fact, NERA projects these
costs could translate into a loss of 1.6 million jobs by the
end of the decade, even though the so-called green jobs are
taken into account.
So in my State of Oklahoma, the effect of the EPA rules is
already being felt with two powerplants being idled as a result
of just the EPA's rules.
So I applaud the efforts of the House of Representatives to
direct the EPA to move forward in a sensible manner. It is
unfortunate that we are kind of ignoring that over here on this
side, the plight of the business community. And you know, this
isn't unique to Oklahoma. You can go anywhere and they will
tell you that the regulations are just killing us.
The Senate leadership is a major obstacle to relief.
Recently, we learned from the EPA's Inspector General, a
request that I made some 16 months ago, that the agency
circumvented its own peer-review process in the rush to issue
the climate regulation. We are talking about the endangerment
findings. And I can remember so well in I think it was December
2009, right before Copenhagen, when we knew that they were
going to have an endangerment finding.
And I said when you have this endangerment finding, what
science will it be based on? And they said it would be on the
IPCC science, which has been debunked. And now we find out just
recently this last week from the Inspector General that they
had, in fact, cooked the science.
So, just last week, I might add also, the Majority Leader,
Harry Reid, changed longstanding Senate rules to protect EPA's
authority to regulate farm dust. Now, with all these
regulations, all the MACTs, the boiler MACTs, and farm dust, I
had a news conference in my State of Oklahoma in the far
southwestern part, southwest of where you and I were shooting
birds the other day, and a lot of people came. We had some
people there who had never been west of the Mississippi.
And so I said, now, see this brown stuff down here? That is
dirt. Now, see that round green thing? That is cotton. Now, put
your finger in the air. That is wind. Are there any questions?
There is no technology that is going to regulate farm dust.
And this is a problem. I know we are a farm State and people
are just, it is just, the regulations are killing our farmers.
So I am glad we are having the hearing. I hope we will get
to some reasonable response. Green jobs are fine. I love green
jobs. When the technology is there, we are all for it. In the
meantime, you have to run this machine called America and we
need our current available energy.
Geothermal is doing a wonderful thing. I am real excited
that we are at the cutting edge of that. But also just recently
we have been acknowledged as having the largest recoverable
reserves of coal, oil and gas of any country in the world, and
that is what is going to keep us going during the time that we
are working on our technology.
Thank you, Mr. Chairman.
Senator Sanders. Thank you.
Senator Whitehouse.
OPENING STATEMENT OF HON. SHELDON WHITEHOUSE,
U.S. SENATOR FROM THE STATE OF RHODE ISLAND
Senator Whitehouse. Thank you, Mr. Chairman.
Senator Inhofe. Oh, could I interrupt for a minute? I have
to apologize. I have a Senate Armed Services meeting, so I
would like to stay for all of this. I will be coming back. I am
sorry for the interruption.
Senator Whitehouse. Thank you, Mr. Chairman, for the
opportunity to introduce Edward White of National Grid, which
is the company that provides virtually all of the electricity
and natural gas service in my home State of Rhode Island. This
is a company that, dating back to its time as Narragansett
Electric, has been a real leader in energy conservation efforts
back in the 1980's.
I want to say that Narragansett Electric was the first
company to engage in conservation-based rates. I was a young
attorney for the Attorney's General Office. And together with
the business community and the environmental community, we
agreed on conservation-based rates, demand-side management,
cogeneration rates, things that were a novelty at the time.
So I would ask both of my Chairmen, both the Chairman from
Vermont and the Chairman from California, to recognize that
Rhode Island has actually shown a lot of leadership in this
area. I think we may have been first off the mark.
And that tradition continues with National Grid today
through their programs like the least-cost procurement program
which supports cost-effective gas and electric energy
efficiency; programs where they are cost-justified. And as you
have mentioned, Mr. Chairman, the on-bill repayment program
which gets around a sort of capital obstacle with its reliance
on economics and allows corporations, communities, businesses,
municipalities and individuals to reap the savings that new
technologies permit.
So I am delighted to be here with him. I have to go to the
floor so I am not going to be here through the whole hearing,
but let me close by thanking the men and women of National Grid
for the effort that they have put in the storm that Vermont
felt so harshly recently, to make sure that power came back
fairly quickly to Rhode Island.
So those who were three, 4 days without power, obviously it
was a very frustrating time, but I think that National Grid and
their employees worked terribly hard to get people back as
quickly as they could. We had folks from the Federal Government
in and they described how National Grid had performed well
above expectations, well above what the national averages are
for this, and they really put their heart and soul into trying
to get people back online as quickly as they could.
So both for their long tradition of leadership in
conservation focus in the utility community and for their
recent work, it is great to be with you, Ed, and thank you for
being here today.
Senator Sanders. Thank you, Senator Whitehouse.
Senator Merkley.
OPENING STATEMENT OF HON. JEFF MERKLEY,
U.S. SENATOR FROM THE STATE OF OREGON
Senator Merkley. Thank you, Mr. Chair. I am going to pass
on an opening statement so we can get right on to witnesses.
Senator Sanders. Now we are going to hear from the
panelists. We are going to begin with Mr. Edward White, Jr. Mr.
White serves as the Vice President of Energy Products in the
Customer Energy Solutions Group at National Grid. He has
provided his expertise in energy to the National Grid, one of
the largest and best-known energy companies in the world for 15
years. Prior to his role as Vice President of Energy Products,
he led development of a large distributed solar installation
and served as U.S. lead for the National Grid's Energy
Management System.
Mr. White, thanks for being with us.
STATEMENT OF EDWARD WHITE, JR., VICE PRESIDENT OF ENERGY
PRODUCTS, NATIONAL GRID
Mr. White. Great. Thank you. And thank you to Senator
Whitehouse, who I know had to step out.
Good morning, Chairman Sanders, Chairman Boxer, Ranking
Members Boozman and Inhofe and Members of the Subcommittee. It
is an honor to appear before you today on behalf of National
Grid to discuss our customer energy efficiency program.
My name is Ed White. I am the Vice President of Energy
Products for National Grid. One of my key areas of
responsibility, as the Senator just outlined, is to develop and
get approved through our State regulators efficiency programs
to help our customers where they live, work and play.
I have seen first-hand where energy efficiency programs
help customers become more competitive, create jobs and reduce
emissions. We support the Subcommittee's efforts to advance
energy efficiency.
National Grid is an international energy delivery company
based in Waltham, Massachusetts, with other key offices in
Providence, Rhode Island, Albany, Brooklyn, Buffalo and
Syracuse, New York. National Grid provides electricity to
approximately 3.3 million customers in Massachusetts, New York,
New Hampshire and Rhode Island and manages the electricity
network for the Long Island Power Authority.
We are the largest distributor of natural gas in the
Northeast, and we are one of the largest investor-owned
utilities in the United States as measured by customer count.
In these uncertain and difficult economic times, making
smart investments in energy is of critical importance. Our
Country and the local communities we serve need job creation,
energy security and cleaner ways to power our economy.
Investing and promoting energy efficiency has the potential to
help address each of those important challenges.
Studies have shown that energy efficient investments
typically produce three to four dollars in savings for every
dollar invested. We have seen that in Vermont. We have seen
that in California and we have seen that in other States.
As an example, over the last 3 years, our total savings
through new energy efficiency investment in Massachusetts is
expected to save over 1 million megawatt hours. This is as much
electricity as would be used to power 92,000 average homes for
a year.
As our energy efficiency programs grow and our customers'
desires to participate grow, we need to advance the tools used
to deploy these programs. These tools come in many forms,
shapes and sizes, from emerging technologies like LED lighting,
to advanced financing and payment options like what we are
talking about here today.
On-bill financing, or as we call it on-bill repayment,
provides our customers a way to enjoy energy savings today, but
pay for those savings over time. It encourages customers to
make the capital improvements that they otherwise would not
make, which helps them to create jobs, remain competitive,
conserve energy and reduce emissions in our communities and in
our regions.
Here are just a couple of examples where our on-bill
repayment program has helped our customers directly.
Specifically, in Warwick, Rhode Island, National Grid worked on
a large lighting replacement job with a major hotel. By
replacing their inefficient lighting fixtures with 1,900 LED
lamps, the hotel saved over 1 million kilowatt hours per year,
and that will be for years to come. That translates to
significant savings that help go to their bottom line.
In Cranston, Rhode Island, the city was lacking the
necessary funds, just like a lot of communities around all of
our territories, to do an efficiency lighting project for their
School Department. With on-bill repayment, the city is now able
to pay for the projects from the savings on their electric
bill.
On-bill repayment has helped numerous other projects become
possible across the States we are so proud to serve. From the
local florist to the grocery store owner, who both replaced
outdated inefficient lighting, these jobs would not have moved
forward without our on-bill repayment program.
On-bill repayment programs help create economically sound
projects that pay for themselves, put Americans back to work
and reduce emissions. We welcome the efforts of the
Subcommittee to evaluate the appropriate Federal involvement
for energy efficiency programs and respectfully encourage you
to consider complementary policies that would maximize the
economic impact of the existing State programs.
Thank you for your consideration and I look forward to
questions.
Thank you.
[The prepared statement of Mr. White follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Sanders. Mr. White, thank you for your testimony
and for what you are doing.
Our next panelist is Kyle Kempf. Mr. Kempf is the Senior
Director of Government Affairs for the National Small Business
Association, serving over 150,000 small businesses. Kyle
advocates on energy, environmental, regulatory and economic
development issues on behalf of small businesses. He currently
administers the National Small Business Association Political
Action Committee. After graduating from Boston University summa
cum laude, he served offices in the U.S. Senate, British
Parliament, and European Parliament prior to joining the
National Small Business Association.
Mr. Kempf, thanks for being with us.
Mr. Kempf. Thank you. And the PAC is mostly dormant, so
please don't call.
[Laughter.]
STATEMENT OF KYLE W. KEMPF, SENIOR DIRECTOR, GOVERNMENT
AFFAIRS, NATIONAL SMALL BUSINESS ASSOCIATION
Mr. Kempf. Good morning, Chairman Sanders, Chairwoman
Boxer, Ranking Member Boozman and Members of the Committee.
Thank you for inviting me here today to discuss the benefits of
innovative practices that have great benefit to small
businesses, to the U.S. economy, and the environment, on-bill
financing.
My name is Kyle Kempf. And Chairman Sanders, I am Senior
Director of Government Affairs for the National Small Business
Association, America's oldest small business advocacy
organization. Since 1937, NSBA has worked in a nonpartisan
manner to promote policies beneficial to the small business
community.
On-bill financing is a collaborative mechanism among
utilities, contractors and customers aimed at making it as easy
as possible for small business owners to invest in energy
efficiency upgrades, alternative energy sources, and to save
money.
To be honest, this is the main attraction for most small
business owners. On-bill financing saves them a lot of money.
Energy is a very high-overhead expense for many small
businesses, one for which most have little to no control. In
fact, many small businesses, particularly those with fewer than
35 employees in the manufacturing sector, pay 35 percent more
per unit for their electricity than their larger counterparts.
Given the situation, one might surmise that small business
owners have rushed in to invest in energy efficiency upgrades
or alternative energy production, but this is not the case.
Only 40 percent of the respondents to NSBA's 2011 energy survey
reported investing in energy efficiency improvements in the
last 18 months or plan to do so; and only 16 percent conducted
an energy audit in the previous 2 years.
Small business owners obviously are eager to cut costs
whenever and wherever they can, so what is holding them back?
When asked why they had not conducted an energy audit, 30
percent of the respondents cited the cost; 22 percent
identified a lack of information on service providers or the
auditing process; and 18 percent said a shortage of time; 40
percent of the respondents cited cash-flow as the main obstacle
to making their small business more energy efficient.
In short, small business owners lack the necessary money,
time and reliable information to invest in energy efficiency
upgrades and alternative energy production. On-bill financing
resolves each of these impediments.
In 2009, NSBA issued a report, On-Bill Financing: Helping
Small Businesses Reduce Emissions and Energy Use While
Improving Profitability, which highlighted how much small
business owners could save by using on-bill financing programs.
On-bill financing program administrators report the utility
bill savings of 15 to 30 percent are highly typical, usually by
the simple adoption of existing energy efficiency strategies.
Although energy cost savings will vary greatly from one small
business to another, the report found that an average small
business could save $4,932 each year on its energy bills, with
many saving much more.
To illustrate, I would like to share some specific examples
of actual small business owners who used on-bill financing to
reduce their energy costs. In West Haven, Connecticut, Chick's
Drive In, a small family owned restaurant known for its hot
dogs and lobster rolls, used the on-bill financing program at
United Illuminating to improve its energy efficiency.
Following the energy audits of an improved U.I. vendor,
obsolete fluorescent interior lighting was replaced with high-
efficiency lighting, occupancy sensors were installed in work
areas where there generally was little activity and high-
intensity exterior lights were replaced with more efficient
pulse-start technology, while motor and evaporator fan controls
were upgraded. In total, the improvements cost about $32,000,
although the utility subsidized approximately $15,000.
The upgrades are expected to provide Chick's with
remarkable savings of approximately $9,000 per year, which
means that the loans should be paid off in about 2 years.
A small grocer in California used the on-bill financing
program offered by San Diego Gas & Electric to invest about
$20,000 in improved lighting and refrigeration efficiency. The
grocer received a rebate of nearly $6,000, leaving him with
just more than $14,000 to pay back. The estimated annual energy
costs savings resulting from these improvements were nearly
$6,000.
For the 31-month loan term, this result in a customer fixed
monthly loan payment of $463.73, which should go unnoticed
given that the grocer is expected to realized over $475 per
month in monthly energy savings. Following the 31-month payback
period, this small grocer simply will get to keep these
savings.
Firms located in areas that do not offer on-bill financing
programs are significantly less likely to make these sorts of
investments. In addition to significant financial savings for
small business owners, NSBA's on-bill financing report found
that the environmental outcome of the widespread adoption of
similar programs would be enormous.
The report found that small businesses, as a whole, could
reduce greenhouse gas emissions by 250 million tons each year
if they improved their energy efficiency by 30 percent.
Incredibly, this is the equivalent of emissions from 31 coal-
fired powerplants.
On-bill financing represents an effective way to help small
businesses afford critical energy upgrades. These improvements
benefit small business owners' bottom lines, the sizable sector
of the small business community engaged in energy audits,
efficiency retrofits, and alternative energy production, and
the environment.
Thank you again for the opportunity to appear before you
today. I welcome any questions.
[The prepared statement of Mr. Kempf follows:]
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Senator Sanders. Thank you very much, Mr. Kempf.
Mr. Philip Schoen is the founder of GEO-Enterprises, a
leader in the geothermal industry with more than 30 years of
industry experience. He currently serves on the Advisory
Council of the International Ground Source Heat Pump
Association and sits on the Board of Directors for the
Geothermal Heat Pump Consortium.
Mr. Schoen has designed and installed various types of
ground heat exchangers, including systems used by the
Department of Defense, U.S. embassy housing, and the 2008
Olympics in Beijing.
Mr. Schoen, thanks very much for being with us.
STATEMENT OF PHIL SCHOEN, CEO, GEO-ENTERPRISES
Mr. Schoen. I am Phil Schoen, CEO of GEO-Enterprises, an
Oklahoma-based company that I founded in 1997, which
specializes in design and application of geothermal heating and
cooling solutions.
GEO-Enterprises has 24 employees and our company provides a
wide range of services, as thermal conductivity testing,
modeling of heat exchangers, and complete turn-key
installations for residential and commercial projects.
I am pleased to participate in today's hearings on behalf
of the GEO, the Geothermal Exchange Organization, a nonprofit
trade association representing the U.S. geothermal heat pump
industry. I serve on the Board of GEO and I have worked in the
industry for 30 years.
Before I offer some thoughts about innovative strategies
that can expand our industry, lower energy costs for consumers
and reduce emissions, let me briefly describe how our
technology works. A geothermal heat pump is a 50-State clean
energy renewable technology that uses solar energy stored
beneath the Earth's surface to heat and cool residential and
commercial buildings and provide hot water at a rate 40 percent
to 70 percent cheaper than conventional heating-cooling
technologies.
While conventional furnaces and boilers burn fuel to
generate heat, geothermal heat pumps use minimal amounts of
electricity to transfer heat between the Earth and the
building, allowing for higher efficiencies and more efficient
than fuel-burning heaters which can burn at efficiencies of 95
percent, but geothermal heat pumps leverage that by over 400
percent.
Geothermal heat pumps use 25 percent to 50 percent less
electricity than conventional heating and cooling systems.
According to the Environmental Protection Agency, they can
reduce consumption and corresponding emissions by 44 percent to
72 percent as compared to traditional heating and cooling
equipment.
Despite this well-documented energy efficiency, our
industry still is relatively small, with less than 5 percent of
the market penetration for new construction. And the primary
barriers to expanding our industry include high initial
installation costs, lack of consumer awareness, the need for
more qualified design and installation professionals, and the
need for builders, developers, realtors and lenders and
appraisers to value energy savings.
While these barriers present unique challenges that we must
address, our No. 1 challenge is the high initial cost,
primarily due to the installation of our underground loop. One
strategy that is very promising is on-bill financing, which
allows residential and commercial energy-efficient projects to
be financed directly on the utility bill.
The advantage of this approach is that the up-front costs
are converted into small monthly payments that is more than
offset by the monthly energy savings realized by the project.
Several States, including Illinois and California, have
initiated on-bill financing programs. Many utilities are
reluctant to participate, though, because of the concerns of
default risks and added complexity of administering the
financing. Some utilities have turned to third-party financing
programs as a solution, particularly in the residential market.
By creating a Federal program that would reduce financial
exposure of utilities through a loan-loss fund, for example, I
am confident that more utilities would implement on-bill
financing programs. A Federal loan-loss backstop would offer
utilities a major incentive that would not be very expensive.
The default rate of on-bill financing programs is very low, and
the loan is tied to the utility bill, and not the homeowner,
and the loan would continue to be paid as long as the building
is occupied.
If you are looking for a relatively inexpensive way to
create jobs, improve energy efficiency to our homes and
buildings, lower energy costs for consumers, and reduce
greenhouse emissions, I can think of no better approach than
encouraging more utility companies to offer on-bill financing
for installing geothermal heat pumps.
By tackling the up-front cost, we expect our industry would
rapidly expand and we would create thousands of new jobs. These
are U.S.-based jobs in the manufacturing and drilling equipment
and installation. We estimate that a new job would be created
for every 18 heat pump system installations. That is a very
conservative estimate. From my perspective, I would expect
installations would more than double if we had a robust on-bill
financing program. This would allow me to grow my work force by
one-third, from 24 to 32 workers.
We will also drastically reduce emissions. On an average
20-year lifespan, the installation of 100,000 units of
residential geothermal systems can reduce greenhouse gas
emissions by almost 1.1 million metric tons, the equivalent of
removing 58,700 cars from our roads or planting more than
120,000 acres of trees.
Thank you again for the opportunity to testify in your
hearing.
[The prepared statement of Mr. Schoen follows:]
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Senator Sanders. Thank you very much, Mr. Schoen.
Dr. Anne Smith currently serves as Senior Vice President of
NERA Economic Consulting. She is an economist and a specialist
in environmental policy. Prior to joining NERA, she served as a
practice leader in climate and sustainability at Charles River
Associates; Vice President at Decision Focus, Incorporated; and
served as economist for the Office of Policy Planning and
Evaluation at the U.S. Environmental Protection Agency.
Dr. Smith, thanks for being with us.
STATEMENT OF ANNE SMITH, SENIOR VICE PRESIDENT, NERA ECONOMIC
CONSULTING
Ms. Smith. Thank you, Mr. Chairman, Members of the
Committee. My name is Anne Smith and I am an economist and
Senior Vice President at NERA Economic Consulting. My testimony
is my own and does not represent the positions of my employer
or any of its clients.
Today, I wish to summarize the results of a study in which
my colleagues and I evaluated the combined economic impacts of
four major environmental regulations now affecting the electric
power sector.
EPA assesses the cost of these regulations individually,
but we saw a gap in EPA's analysis because they failed to take
into account the effects of how these four regulations interact
when implemented simultaneously. This interaction may create
cumulative impacts on business decisions that are different
from the sum of the individual impacts that EPA estimates.
Also, we saw a need to better understand the interplay
between so-called green jobs that would result from spending on
environmental controls, and job losses from higher electricity
and energy prices that can result from that same spending. We
assessed the net job impact, taking into account both the
positive and negative effects of jobs on different sectors of
the economy.
The four environmental regulations that we analyzed in
combination are, one, the final cross-State air pollution rule;
two, the proposed utility MACT rule; three, the proposed coal
combustion residuals regulations; and four, the proposed
cooling water intake regulations.
Very soon, utility company executives will have to either
invest large sums of money to install new pollution controls at
their coal units or retire them. Retirements imply spending,
too, to build new replacement capacity and increase costs for
cleaner replacement generation.
Whether retirements are few or many, total spending will be
large even using EPA's own technology cost assumptions, and
electricity rates will have to raise paying for both forms of
spending and for any fuel cost increases. Most replacement
capacity is likely to be fired by natural gas, given today's
realities in markets, technologies and policy, thus total unit
retirements may put upward pressure on natural gas prices, even
given the now-recognized abundance of potential domestic shale
gas supplies.
Using U.S. Government assumptions, data and models, we
developed estimates of the likely mix of types of spending in
the next few years, given the anticipation of all four types of
regulations combined. We also assessed impacts on electricity
rates and electricity prices. Then, using a well-established
macroeconomic model, we assessed the overall impact on the U.S.
economy of these many simultaneous changes in spending and
rates.
And our key finding was that the net impact on jobs will be
negative. On average, during the period 2012 to 2020, we do
project at least 55,000 added green jobs. However, we also
project that the increased costs of compliance with these four
regulations reduced other jobs in other sectors by at least
238,000, four times as many. Most of those job losses occur in
retail and other sectors that have no direct impact from these
four regulations. The result is a net reduction of 183,000 jobs
nationwide over that time period.
We also estimated that the four regulations would result in
annual compliance costs of $21 billion per year, which includes
$104 billion in capital spending, most of it for a very large
number of retrofit controls.
Nevertheless, we also projected that natural gas prices
would increase by about 11 percent on average over this period
due to many coal units being replaced with natural gas-fired
electricity supplies.
Given all these costs, nationwide average retail
electricity prices are projected to increase by about 7 percent
over the period, with the increase varying considerably by
region. That is the average, the 7 percent. When billions are
spent on investments in cleaner energy, somebody has to pay it
back. When we also account for those repayments, we find these
regulations cause a greater loss in jobs across the entire
economy than the boost that they give to green jobs in some
sectors of the economy.
Thank you for the opportunity to testify. I would be glad
to answer any questions you might have.
[The prepared statement of Ms. Smith follows:]
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Senator Sanders. Thank you, Dr. Smith.
Mr. Steve Rowlan currently serves as the Director of Energy
and Environment at Nucor Corporation. He joined Nucor almost 20
years to lend his expertise in engineering to all aspects of
environmental affairs and energy utilization. Mr. Rowlan sits
on the Board of Managers for PIZO Technologies North America
and has chaired both the Steel Manufacturers Association and
the American Iron and Steel Institute Environment Committees.
Thanks for being with us, Mr. Rowlan.
STATEMENT OF STEVEN ROWLAN, GENERAL MANAGER, ENVIRONMENT, NUCOR
CORPORATION
Mr. Rowlan. Thank you, Chairman Sanders and Ranking Member
Boozman for the invitation to testify today regarding the
significant impact energy policies and proposed EPA regulations
have on job creation and electricity costs.
Nucor is the largest steel producer and recycler in the
United States. We employ over 20,000 teammates in 23 States.
The steel industry, like many industries in this Country, was
significantly impacted by the Great Recession. Steel capacity
utilization dropped from 90 percent to 36 percent in a matter
of a few months at the end of 2008.
Despite how bad the market got, Nucor did not lay off a
single worker. Economic conditions have improved for the steel
industry, but the continued weakness in the economy is very
concerning. On top of this economic uncertainty and
persistently high unemployment is a rash of new and proposed
regulations by the EPA, including ozone standards, utility
MACT, cross-State air pollution rule, and the greenhouse gas
emissions rules.
This regulatory uncertainty and the threat of significantly
increased costs are holding back capital investment and the
jobs that investment would create. The impact is real. We
recently received a permit under the new greenhouse gas rules
for a direct reduced iron facility in Louisiana. This is a $750
million project that will create 500 construction jobs and 150
permanent manufacturing jobs. It is a great job-creating
investment, particularly in this economy. But this project is
not as large as the $2 billion investment we initially
intended.
Due to the uncertainty created by these regulations, we
made the difficult decision to delay the $2 billion investment,
also delaying the creation of 2,000 construction jobs and 500
permanent manufacturing jobs. This is one example, but we
should also be concerned with the examples we cannot cite.
The reality is that because of burdensome permitting
requirements and rising energy costs, increasingly industrial
projects are no longer even being considered for development in
the United States. The additional regulations EPA is
considering will only continue and intensify that trend.
The other threat these regulations pose is to energy
prices. Economical and abundant energy supplies are the
lifeblood of industry. These new and proposed regulations put
these at risk. Energy must be priced at a level that will allow
energy-intensive industries to be competitive with
international producers of their products. Because energy is
perceived as being cheap, since it costs just pennies per
kilowatt hour, we fail to understand the full impact energy
costs have on profitability.
You will often hear that a proposed regulation will only
cost a few cents per kilowatt hour. That is a true, but very
misleading statement. If industry is paying only five cents per
kilowatt hour, for example, for electricity and the price
increases by one cent, that is a 20 percent increase in energy
costs. For homeowners paying approximately 10 cents, that is a
10 percent increase. These increases, coupled with other
regulations that will force the closure of coal-fired
electrical generation facilities will result in lower supply,
with further upward pressure on prices.
The impact of these seemingly small increases on industry
is staggering. At Nucor, we use electric arc furnaces to
recycle over 20 million tons of scrap metal annually into
usable steel products. For Nucor, a one cent increase in
electricity costs translates into a cost increase of more than
$120 million per year. The question is: Where will that money
come from?
And increase like that leaves industry with few good
options. The steel industry has reduced the energy intensity
required to produce a ton of steel by 30 percent since 1990. We
did this to remain competitive in a global market. At the end
of the day, any energy cost increases stop with us. We do not
have the luxury of passing these costs along.
As a large consumer of natural gas, we are also concerned
that as gas replaces coal, our natural gas costs will increase.
On top of fuel-switching, the EPA is also attempting to expand
its regulatory authority to include hydraulic fracking. We risk
under-developing this important domestic resource by strangling
it in regulations.
We have seen in recent weeks the peril of creating green
energy in defiance of basic market fundamentals. In many mature
industries like steel, technological innovation and markets are
driving increased energy efficiency, greater recycling and
lower emissions. These jobs may not fit the conventional wisdom
of what constitutes a green job, but they are good-paying and
hopefully long-lasting blue collar jobs that are using
innovation to become cleaner, more efficient and reduce
environmental impact.
These are the kinds of jobs we need to be creating, not
eliminating, in pursuit of mandating a green economy on
industry.
[The prepared statement of Mr. Rowlan follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Senator Sanders. Mr. Rowlan, thanks very much.
Let me begin with the questioning, and then we will go to
Senator Boozman and Senator Boxer.
Let me start with Phil Schoen. Mr. Schoen, last year, I
held a town meeting in Vermont on geothermal, and I was
surprised. We had hundreds of people coming out. What you are
suggesting, if I understand you correctly, is there is real
potential there and you are just beginning to tap it, and you
are seeing as a major obstacle the fact that geothermal heat
pumps are a fairly expensive proposition and people don't have
the capital to make that investment.
All right. Answer two questions, if you might. No. 1, what
do you see the potential of geothermal heat pumps in this
Country? What kind of significance will it have? And No. 2,
what role do you see the government playing in helping make
that happen?
Mr. Schoen. Thank you for that question. My response is
that in the lower housing, in the areas of lower housing, our
technology is more expensive because when we install this heat
exchanger, which by the way is 100-year life product, it has
initial first cost. The good news is you can't export drilling
or excavating.
Senator Sanders. Let me ask you this. In practical terms, I
am a homeowner or contemplating a new home in the State of
Vermont, what is it going to cost me? What are my savings, et
cetera, roughly?
Mr. Schoen. In a new home in Vermont, you might expect to
pay $15,000 to have a system put in in a conventional sense.
This product would probably cost $27,000, something like that,
or an additional 50 percent cost increase to put in the heat
exchanger. The inside machinery is the same, but it is 100-year
life. And when you look at lower-cost housing, that is people
with less means to pay for housing, where a dollar they save
has much bigger impact, they don't have the resources to go to
some of the conventional routes, and that is the big expansion
of the marketplace.
Senator Sanders. You mentioned in your testimony that
geothermal was a 50-State proposition.
Mr. Schoen. Yes, sir.
Senator Sanders. You see the application for geothermal all
over the Country.
Mr. Schoen. Yes, sir. We have put in geothermal in Alaska.
We have put in geothermal in Barbados. And so it spans all the
areas of this Country and it almost has an application
everyplace.
Senator Sanders. And what kind of savings? I know this is
average.
Mr. Schoen. An example would be in the State of Arkansas,
when we did Farm Home Administration homes, we were able to
achieve $1 a day for the utility costs of heating and cooling a
home; $1 a day.
Senator Sanders. So you are saving people $360 a year in
their heating.
Mr. Schoen. Yes.
Senator Sanders. OK. That is not insignificant.
All right, let me ask either Mr. White or Mr. Kempf, tell
me what you see the potential of on-bill financing to be if we
were making capital available to those businesses,
municipalities, homeowners who wanted to move aggressively in
energy efficiency or sustainable energy? What do you see the
potential out there?
Why don't you start, Mr. White?
Mr. White. Sure. Great question. One of the things that we
have seen in the States where we already offer it is customers
having the ability to move forward with these projects that
they otherwise wouldn't normally do. So they are worried about
running their florist shop or their hotel or their small
business. They just want the ease of implementation.
So the vendor comes in, offers up the project, shows them
what their savings could be, and it is as simple as paying a
line item on the bill.
Senator Sanders. What might a typical, I am a slow business
person, I have a shop, what might a typical savings be?
Mr. White. It is thousands of dollars each year that they
will save going forward. It is kind of hard to answer the
question directly because it depends on the size of the
project. But we have some projects where the payback is less
than a year or less than 2 years, within that range. So it is
very much a great proposition for a lot of our small
businesses.
Senator Sanders. Mr. Kempf, would you take a shot at that
question, please?
Mr. Kempf. One of the benefits also is that a lot of small
business owners are rightly wary of independent energy
auditors. And the on-bill financing has the added benefit that
it is the utility approving contractors for coming in and doing
it, so they accept the audit more willingly and proceed.
Senator Sanders. You mentioned, I think, Mr. Kempf in your
testimony that almost by definition, the contractors are
themselves small business people.
Mr. Kempf. Yes, by and large, the entire industry which
does these sorts of things are small.
Senator Sanders. So these are people who come in with
weatherization efforts, with new lighting.
All right, my last question for Mr. White or Mr. Kempf,
talk about lighting a little bit. What is the potential that
you see? Are there savings in transiting to more energy-
efficient lighting?
Mr. White. Yes, and that is an area where we see the
technology advancing quite significantly. And a lot of folks
care about LED lighting. You can get it for your homes, your
businesses.
As we have gone in and installed, in the project I
mentioned with the hotel, their payback is going to be a little
over a year and their annual cost savings for those 1,900 LED
bulbs is around $222,000 for annual savings. So think about
that big hotel and all the savings they are going to get from
that technology, that lighting technology.
Senator Sanders. And they are happy with the quality of the
lighting?
Mr. White. They are. They are.
Senator Sanders. OK.
Senator Boozman.
Senator Boxer. Thank you.
Let me thank Senator Boozman for this courtesy. I have a
meeting about the highway bill, so I wanted to make sure I
could get there and do this.
I would like to put into the record this terrific, part of
this document which is The On-Bill Financing: Helping Small
Business Reduce Emissions and Energy Use While Improving
Profitability. This is a document by the National Small
Business Association echoing everything that you said, Mr.
Chairman, and everything that you three have said, and
everybody says they are for small business.
So I want to put in the executive summary into the record
without objection, if that is OK, Mr. Chairman.
Senator Sanders. Without objection.
[The referenced document was not recieved at the time of
print.]
Senator Boxer. OK.
I was a little taken aback by Ms. Smith's testimony because
she really didn't address the issue at hand. But Ms. Smith, you
said you were speaking for yourself, yet you really were
quoting from a report, were you not? Because you kept saying we
found, we examined four rules. Is that correct?
Ms. Smith. I am speaking for myself today, but you are
quoting co-authors on the report that I collaborated with.
Senator Boxer. Yes, and here is the report. We have it
here. And so this is essentially a coal company report and I
would ask unanimous consent to put in the record the names of
the companies and how much they contributed to the report that
you have cited, if I might put that in the record.
Senator Sanders. Without objection.
[The referenced document was not recieved at the time of
print.]
Senator Boxer. Which is all fine, but everything you said
and also the gist of Mr. Rowlan's testimony is refuted in this
report. I would love you to read it. It is a special staff
report, says a strong EPA protects our health and promotes
economic growth. And I am going to quote from it in a bit.
But one thing that, Mr. Rowlan, you didn't talk about which
is something terrific that has gone on in your business that we
got from your webpage does fit into this hearing. It is Nucor
has developed a manufacturing process that increases energy
efficiency and reduces carbon pollution, and it is very
exciting. You say that these mills consume 84 percent less
energy than a conventional mill with a 75 percent reduction in
greenhouse gases. That is in your Crawfordsville, Indiana and
Blytheville, Arkansas facilities.
So I just wanted to thank you, even though you didn't talk
about that, something that I think we should take note of. It
is very exciting that you, too, in that you are continuing,
even though you are opposing new regulations. You are moving to
energy efficiency. And I think that is an important point.
Energy efficiency is something that should get us all
together, whether we demean the EPA or we support the EPA. It
is dollars and cents, whether you are a Democrat or Republican,
you save money and that is why the small business people love
this. And that is why I am so proud of this hearing.
And I am going to close with a few quotes from this report
that really totally contradict what Ms. Smith and Mr. Rowlan
said, and these are all fact-based analyses that you can get
when you get this.
And they are also quotes. Here is a great quote. ``Clean
air, clean water, open spaces, these should once again be the
birthright of every American,' Richard Nixon, January 22, 1970
in his State of the Union.
Christie Todd Whitman and Bill Ruckelshaus, Republicans who
worked for Republican Administrations at the EPA, they wrote an
op-ed together and it said, ``It is easy to forget how far we
have come in 40 years. We should take heart from all this
progress, and not as some have suggested in Congress, seek to
tear down the agency that the President and Congress created to
protect America's health and environment.'
Gerald Ford said, ``Nothing is more essential to the life
of every single American than clean air and pure food and safe
drinking water.'
And then in the area of job creation and economic growth, I
have said before, since the Clean Air Act's implementation, we
have grown faster than any other developed country, 207
percent.
And the Clean Air Act is projected to provide $2 trillion
in annual health benefits by the year 2020. I defy anyone to
come up with anything better than that.
And I am going to give you some more quotes of companies.
OK? Companies that aren't here today: PG&E, CalPine Corp.,
NextEra Energy, Public Service Enterprise Group, National Grid
is in this, Excelon, Constellation Energy. Austin Energy in a
letter to the editor of The Wall Street Journal in 2010, ``Our
company's experience complying with air quality regulations
demonstrates that regulations can yield important economic
benefits, including job creation, while maintaining
reliability.' General Motors said just the other day, July
2011, ``General Motors Company recognizes the benefit for the
Country of continuing the historic national program to address
fuel economy and greenhouse gases that the EPA has begun.'
It goes on and on. And because my time is running out, I do
want to give you what the American people say about the EPA.
And Grant, you found it for me before. Now I have to just take
a second. Here it is. Here it is. The American people, and by
the way, this is an old poll. It is a few months old. There is
a new poll that came out which has even better numbers for the
EPA from the people of this Country. The Clean Air Act enjoys
broad support from the American people. The public supports
stricter limits on air pollution and believes scientific
experts should be responsible for setting pollution standards.
And just to back up the numbers, this is a February 2011
bipartisan poll conducted for the American Lung Association: 69
percent of likely voters think EPA should update clean air
standards with stricter limits on air pollution. They don't say
what Mr. Rowlan said and what Ms. Smith said, or Dr. Smith,
excuse me, Dr. Smith, that we should walk away from these regs;
68 percent of the people of this Country feel Congress should
not stop the EPA from updating Clean Air Act standards, and yet
that is what we are faced with, Mr. Chairman.
They have rolled back three to four to five regs over there
in the House, and they think that is going to gain traction.
Not only does it hurt job creation and threaten a $48 billion
export industry of clean tech; not only does it threaten 1.7
million jobs and future growth.
And we hear from these folks here who are making money from
this; 69 percent believe that EPA scientists, not Congress,
should set pollution standards.
So all I can say is I am very familiar with California and
I just will close with this, and I am so sorry to do this to
you, Mr. Chairman, but you are used to this. The latest report,
it is a California report, so you could question it, says that
California uses the least amount of energy per capita of any
other State in the Nation. And I say that to you, but I do
believe our climate would lead us to that. I think you do face
a little bit chillier winters and a little bit less sun. We
have lots of it there, and more solar energy at this point.
But I did want to put that into the record, subject to your
confirmation.
Senator Sanders. I don't know about that. I don't know if
we will put that into the record.
[Laughter.]
Senator Sanders. But we will continue that discussion.
Senator Boxer. Thank you. I thank all of our witnesses.
Senator Sanders. OK. Thank you very much.
Senator Boozman.
Senator Boozman. Thank you, Mr. Chairman. And I agree. I
think conservation is something that we all agree is very, very
important and it is good for business. One of the low-hanging
fruits out there is energy-efficient motors, getting rid of
some of these old motors; giving incentives to do that; and
certainly that is good for your business, Mr. Rowlan, and many
other businesses.
On on-bill financing, Mr. White, is there a limit to, if
Mr. Rowlan's company wanted to get efficient, is there a limit
to the amount of money, how big can the company be to
participate? How big can the loan be? Is there a limit? Or how
do you do that?
Mr. White. Yes, so specifically to your question or as it
relates to our small business program, typically we would give
a 70 percent incentive and then the financing would be on the
rest of the 30 percent. So it is a proportion of the overall
project costs.
Senator Boozman. Up to how many dollars?
Mr. White. I don't have the answer to that question right
now. What we see in our different customer types is some of
those customers will select, Mr. Rowlan's company would
actually work with an ESCO and get better, more attractive
holistic projects which it sounds like from their website they
are already doing.
So we don't have a specific cap that I am aware of, but our
programs are more focused on small businesses and
municipalities.
Senator Boozman. No, I think it is a great program, a great
idea, and it seems to be very successful.
Are you allowed to add the administrative costs to the
program?
Mr. White. Yes. Our energy efficiency programs are State
regulated, and the administrative costs associated with those
projects are all included in our budgets.
Senator Boozman. Very good.
I appreciate your testimony, Mr. Kempf. I was surprised,
really in both of yours, well, all three, that the payback in
some cases was pretty significant and pretty quick. So I think
it is a great program and I think it is something that we need
to support. I look forward to working to strengthen that.
Mr. White, you have heard the concern from Mr. Rowlan and
Dr. Smith. Are you concerned about the impact of the four
things? How much does an entity, a lot of natural gas, are you
concerned about the increase in electricity cost? Or better
yet, are your customers concerned if natural gas does go up 11
percent as predicted?
Mr. White. Yes, so what I would say is interacting with our
customers, which is the part of the National Grid that I work
with, our customer is always concerned with the rising cost of
energy. And the solutions or the tools that we provide are the
energy efficiency programs. I can't really speak to the
specific items that were addressed by the other panelists.
Senator Boozman. But you have discussed that in meetings
and things. Give us, I mean, the reality is if all four of
those go into effect, your costs are going to go up
significantly. And what percentage are in the on-bill financing
program? What percentage of your customers are on the on-bill
financing program? Very small, I would suspect.
Mr. White. Well, but it is a growing percentage.
Senator Boozman. But the reality is, if the four did go
into effect, the vast majority of your customers would be
impacted by an increase in their utility rates.
Mr. White. Yes, I am not familiar with the impacts or the
measurements that were discussed here. What I can speak to is
sort of the customer facing or customer interaction programs
that we have with our energy efficiency programs. The impact of
proposed legislation is not really my area of responsibility.
Senator Boozman. OK. But you do deal with customers.
Mr. White. Yes.
Senator Boozman. And if your customers' electricity bill
went up significantly, your businesses and your individuals,
the single moms, and then it was realized that that was due to
these four things going into effect, I doubt that the polling
would be very good as far as support for the four things that
were put in place.
Mr. White. Yes, again, I can't speak to the polling or the
impact of the four things that were mentioned.
Senator Boozman. But in dealing with customers, they would
be concerned about the increase.
Mr. White. Yes.
Senator Boozman. And I don't want to beat a dead horse. You
understand what I am saying.
Mr. White. I do. Yes.
Senator Boozman. And these are big things. They really are,
I know in Arkansas. One of my frustrations is we are losing our
manufacturing and it is a huge deal. And we have to as a Nation
address how do we do that. But one of the bases of that is
certainly reasonably priced energy. And so we do have to figure
this thing out where we are able to provide reasonably priced
energy, but also to meet the environmental needs that we need
to do.
So thank you, Mr. Chairman. I apologize. I have another
meeting with a major manufacturer that is scheduled to come up,
this meeting with our entire delegation. They are in a
situation of needing some encouragement, and so I am going to
sneak out. Senator Sessions is going to be around for a while.
Thank you very much.
Senator Sanders. Thank you, Senator Boozman.
Senator Sessions.
Senator Sessions. Thank you.
Let me just say right up front, I think we have, I don't
think, we do have a difference of opinion about green jobs. We
just do. We have had an world experiment in Spain. They have
been one of the most ambitious countries in the world in trying
to create jobs by creating a green energy program. For over a
decade, they pursued the policy through green energy. But
recent studies have shown that Spain spent over 500,000 euros,
$680,000 dollars to create each green job.
Those studies also indicate that Spain lost 2.2 jobs for
every green job created. This is because Spain's focus on green
energy resulted in substantially higher electricity prices that
affected the cost of production.
And Nucor Steel, which has plants in Alabama, they have to
compete worldwide. If they have lower energy costs, they are
more competitive and can hire more people. If their energy
costs are higher, they are less competitive and they can be
less successful and hire less people.
In fact, Spain has acknowledged their error and have backed
away from much of what they have been doing.
We also have this idea that somehow we can create jobs by
reversing the law of markets. Solyndra, $530 million, we are
not going to have any more jobs there, it looks like, filed for
bankruptcy. You have the plant in Massachusetts that also went
belly up that have huge State support, not Federal support;
Boston, the Evergreen Solar, $58 million in subsidies and tax
breaks and it declared bankruptcy in August of this year.
So Dr. Smith, you have looked at this in the numbers. And
we have just got to be honest with each other and try to figure
out what the right policy is. I certainly agree with the
Chairman and Senator Boozman about conservation, effective
techniques and machinery that will help us use less energy. I
think that is a win-win when it can be paid for and it makes
sense.
So let me ask you, Dr. Smith, your studies show staggering
levels of job losses due to the EPA's projected slate of
utility coal regulations. A review of your report indicates you
actually make several conservative assumptions; that you tend
to underestimate the actual losses that might occur. Your
analysis, for example, did not take into account increased
costs from reduced electricity reliability.
Is it fair to say that the total cost in job losses from
the four EPA rules analyzed in your report could actually be
greater than you projected?
Ms. Smith. They could be greater. What I produced is an
estimate of the average net loss. And within certain sectors,
there is an increase. In other sectors, there is a very large
decrease, but that is net within the sector as well.
So if we have a very large decrease, as we do in the retail
sector, a surprising place to find the job loss perhaps for
some, there could be even larger losses in there along with
some positive increases in the retail sector that the analysis
doesn't pick up.
So yes, the actual job losses could be larger. The actual
net gains could be larger. I think the important point is that
when you look at the balance between gains and losses across
the whole economy, it always turns out to look negative,
although not always in every sector.
Senator Sessions. What kinds of jobs are most likely to be
lost in your projections?
Ms. Smith. Well, the vast majority of the jobs lost, as I
said, are in the retail sector and a great number of other
sectors that support the economy and the supply chain
generally. They all suffer as the reduction in economic
activity occurs in their overall demand.
So none of them are among the set that are directly
affected by the rules. At the same time, it is true that the
mining sector does face some negative losses. On the other
hand, the gas sector goes positive because of the increased
demand for gas. The sectors where we see the positive jobs are
construction and machinery manufacturing, as you would expect
from a large program of spending on environmental controls or
building new powerplants.
Senator Sessions. Which would be short term.
Ms. Smith. But the negatives are not in the energy sector
entirely. The vast majority are across the whole economy.
Senator Sessions. And what kind? Manufacturing?
Ms. Smith. Manufacturing, except for those parts of the
manufacturing that are supplying the equipment to build the
powerplants for the environmental controls.
Senator Sessions. Because the energy costs can adversely
affect manufacturing?
Ms. Smith. They certainly do. And we see actually a
reduction in demand for electricity in the policy scenario,
compared to not having those policies being implemented. And
that is from the manufacturing being reduced overall across the
economy.
Senator Sessions. Mr. Rowlan, with regard to a steel
company like Nucor, would you explain to us how energy prices
can impact your viability, your growth, and your job and hiring
policies?
Mr. Rowlan. Yes, well, that was in my testimony there. Just
a simple one cent increase per kilowatt hour for us is a cost
well in excess of $120 million a year. And really, if you sit
and look at some of the things that have been said, that $120
million has to come from someplace because we can't just
increase the price of the commodity that we are selling because
we are competing internationally.
So the projects like the good Senator referenced, which is
the Calstrip project which was energy efficient, which is
research we put money into, there is $120-plus million a year,
we can't put money into that. We are happy to pursue energy
efficiency projects. We pursue them, and that is how we have
driven our numbers down and that is how we have become
competitive.
The irony in this is that we say raise prices and somehow
we are going to create jobs, or raise taxes and we will create
jobs. You know, you raise prices, people buy less. That is what
happens. And you don't do that. It goes exactly the opposite
direction. It flies in the face of reality.
Senator Sessions. I know the Chairman and I agreed with
your CEO's views about the China currency, and you give our
foreign competitors an additional advantage. You have wages.
You have currency. Now with China a major steel producer, and
then if you give an energy advantage, I think that you would
agree that would be further damage to the competitiveness.
Mr. Rowlan. Yes, currency is a big issue. You know, these
things manifest themselves in a lot of ways. I heard that the
energy consumption in California, I think, was the lowest per
capita. Well, if industry left and you were dividing all of
that energy being gone now, you basically left the denominator
where it was at. You are going to see that happen. If industry
leaves, the energy consumption per capita in that State will go
down significantly. That would be something I would expect to
see predicted by Dr. Smith.
Senator Sessions. Thank you, Mr. Chairman.
We disagree on some things here, but the Chairman is
sincerely committed to making us a healthy and more viable
place, and I am, too. And let's keep working.
Senator Sanders. Yes, we will. Thank you very much, Senator
Sessions.
It appears that some members of the panel were coming from
different directions than other members, maybe some confusion
as to what the topic of discussion was today. I didn't hear Dr.
Smith or Mr. Rowlan talk about on-bill financing, which is in
fact what the subject of this panel was today.
But I would hope, Senator Sessions, and all members of the
panel, that we pursue this issue of on-bill financing. I know
you missed the first part of the meeting, Jeff, where we think
we have real potential to provide capital to small businesses,
municipalities, homeowners to help them make the innovations
and the efficiencies that they need to substantially lower
their energy bills and cut pollution and greenhouse gas
emissions.
And we have heard testimony that in some cases, the payback
could be a year or two. And yet we are sitting on a situation
where millions of homeowners don't have that initial $10,000,
$20,000 to make the changes.
So I look forward to working with you to see how we can
have the government play a positive role in working with
utilities around the Country, small businesses, homeowners, to
get that capital available, to expedite the process.
So with that, yes?
Senator Sessions. I recently had to replace an air
conditioning unit and I found it difficult to, even with the
requirements we have on energy efficiency, it was more
difficult than I imagined to figure out what the best payback
would be; what the best investment would be. And I felt like
that if we are going to have regulations to do this, somehow it
needs to be a little clearer still.
Senator Sanders. Well, I think that is exactly what Mr.
White and others have been talking about. And my guess is that,
Mr. White, you are helping businesses put in new heating and
cooling systems. Yes?
Mr. White. Yes, that is correct. So we are fortunate to
have programs in four States up in the Northeast, and we help
customers, both residential customers and commercial customers,
and kind of walk them through the process so they can have the
ability to make informed decisions, because it can get
confusing. There is no doubt about that.
Senator Sessions. I believe we can do better, and I thank
you for raising that issue. I do believe that is a win-win.
Senator Sanders. Yes, it is.
Senator Sessions. If you can make the changes in your
heating and cooling and other energy uses that will likely pay
for themselves over a period of years. It is a win-win for us,
I think.
Senator Sanders. So let's work on that together, and thank
you.
And I thank all the panelists for being here.
Oh, Senator Whitehouse, didn't see him.
Senator Whitehouse.
Senator Whitehouse. I snuck back in. We had a Judiciary
markup, but I did want to return, and I won't hold the hearing
long, but I would love to ask Mr. White what the forecast is
for the on-bill financing and what specifically we can do to
help National Grid and other companies who will be following
your lead to take advantage of this mechanism.
Is it access to capital? Is it notice to ratepayers? What
are the hold-backs that have kept this from spreading further?
And how are you going to work your way through them? And what
do you think the ultimate reach of the program should be?
Mr. White. Yes, great question and thank you for that.
And one of the things that I would like to say is Rhode
Island specifically is increasing the amount of energy
efficiency programs they are making available to customers, and
very much competing with Vermont and California and
Massachusetts and others. So I respectfully add that to the
record, which is great.
Senator Whitehouse. Take that, Vermont.
[Laughter.]
Mr. White. What excites me the most about the opportunity
to work with enhancing some of the solutions on on-bill
financing is the fact that in some States there is reluctance
to move forward for a whole host of issues. So to the degree
that we can actually come up with something both federally that
complements the State programs, I think is going to be a win-
win for everyone.
I don't know specifically what the mechanism will or should
be. There are a lot smarter people out there that can figure
that out with us all. But I think from a customer's
perspective, which was one of the questions I received earlier,
on-bill repayment, on-bill financing is just another way. It is
another tool to help enhance the use of these programs. And I
look forward to working with the Committee and all those
involved.
Senator Whitehouse. Are you using your own capital to fund
it, as well as third-party capital?
Mr. White. Yes. It is a combination of both. So we actually
have some requirements at some of our State programs to go out
and find outside capital, which have proved to be a challenge
during these economic times to get capital at the competitive
rates that are needed.
So in some cases, we are using the system benefit charge
moneys that we collect in offering the on-bill financing to
those customers, and our default rates have been very low,
which has been very encouraging.
Senator Whitehouse. As low as zero percent in certain
customer classes. Correct?
Mr. White. Well, zero percent for the financing, but the
default rate is also very low, 2 percent, 1 percent in some
areas. So it has been a very useful tool, very useful
mechanism.
Senator Whitehouse. Very good.
Thank you, Chairman. It has been a great hearing.
Senator Sanders. OK. Thank you all very much for being
here. I appreciate it.
The meeting is now adjourned.
[Whereupon, at 11:25 a.m., the subcommittee was adjourned.]