    [House Hearing, 113 Congress]
    [From the U.S. Government Publishing Office]

       AMERICAN ENERGY SECURITY AND INNOVATION: AN ASSESSMENT OF PRIVATE-
                                    SECTOR
          SUCCESSES AND OPPORTUNITIES IN ENERGY EFFICIENT TECHNOLOGIES

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

                                    HEARING

                                   BEFORE THE

                        SUBCOMMITTEE ON ENERGY AND POWER

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                           TUESDAY, FEBRUARY 26, 2013

                                   __________

                                Serial No. 113-8

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

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                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman
    RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
    JOE BARTON, Texas                      Ranking Member
      Chairman Emeritus                  JOHN D. DINGELL, Michigan
    ED WHITFIELD, Kentucky                 Chairman Emeritus
    JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
    JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
    GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
    LEE TERRY, Nebraska                  ANNA G. ESHOO, California
    MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
    TIM MURPHY, Pennsylvania             GENE GREEN, Texas
    MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
    MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
      Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
    PHIL GINGREY, Georgia                JANICE D. SCHAKOWSKY, Illinois
    STEVE SCALISE, Louisiana             ANTHONY D. WEINER, New York
    ROBERT E. LATTA, Ohio                JIM MATHESON, Utah
    CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
    GREGG HARPER, Mississippi            JOHN BARROW, Georgia
    LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
    BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin
    BRETT GUTHRIE, Kentucky                  Islands
    PETE OLSON, Texas                    KATHY CASTOR, Florida
    DAVID B. McKINLEY, West Virginia     JOHN P. SARBANES, Maryland
    CORY GARDNER, Colorado               JERRY McNERNEY, California
    MIKE POMPEO, Kansas                  BRUCE L. BRALEY, Iowa
    ADAM KINZINGER, Illinois             PETER WELCH, Vermont
    H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
    GUS M. BILIRAKIS, Florida            PAUL TONKO, New York
    BILL JOHNSON, Missouri
    BILLY LONG, Missouri
    RENEE L. ELLMERS, North Carolina
                        Subcommittee on Energy and Power

                             ED WHITFIELD, Kentucky
                                     Chairman
    STEVE SCALISE, Louisiana             BOBBY L. RUSH, Illinois
      Vice Chairman                        Ranking Member
    JOHN SHIMKUS, Illinois               JERRY McNERNEY, California
    JOSEPH R. PITTS, Pennsylvania        PAUL TONKO, New York
    LEE TERRY, Nebraska                  EDWARD J. MARKEY, Massachusetts
    MICHAEL C. BURGESS, Texas            ELIOT L. ENGEL, New York
    ROBERT E. LATTA, Ohio                GENE GREEN, Texas
    CATHY McMORRIS RODGERS, Washington   LOIS CAPPS, California
    BILL CASSIDY, Louisiana              MICHAEL F. DOYLE, Pennsylvania
    PETE OLSON, Texas                    JOHN BARROW, Georgia
    DAVID B. McKINLEY, West Virginia     DORIS O. MATSUI, California
    CORY GARDNER, Colorado               DONNA M. CHRISTENSEN, Virgin
    MIKE POMPEO, Kansas                      Islands
    ADAM KINZINGER, Illinois             KATHY CASTOR, Florida
    H. MORGAN GRIFFITH, Virginia         JOHN D. DINGELL, Michigan
    JOE BARTON, Texas                    HENRY A. WAXMAN, California (ex
    FRED UPTON, Michigan (ex officio)        officio)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Ed Whitfield, a Representative in Congress from the
      Commonwealth of Kentucky, opening statement....................     1
        Prepared statement...........................................     2
    Hon. Bobby L. Rush, a Representative in Congress from the State
      of Illinois, opening statement.................................     3
        Prepared statement...........................................     4
    Hon. Fred Upton, a Representative in Congress from the State of
      Michigan, opening statement....................................     5
        Prepared statement...........................................     5
    Hon. Henry A. Waxman, a Representative in Congress from the State
      of California, opening statement...............................     7
        Prepared statement...........................................     8
    Hon. John D. Dingell, a Representative in Congress from the State
      of Michigan, prepared statement................................   214

                                   Witnesses

    Hon. Lisa Murkowski, A United States Senator from the State of
      Alaska, Ranking Member, Senate Energy and Natural Resources
      Committee......................................................     9
        Prepared statement...........................................    12
    Hon. Jeanne Shaheen, A United States Senator from the State of
      New Hampshire..................................................    14
        Prepared statement...........................................    17
    Kathleen Hogan, Deputy Assistant Secretary for Energy Efficiency,
      Office of Energy Efficiency and Renewable Energy, U.S.
      Department of Energy...........................................    21
        Prepared statement...........................................    23
        Answers to submitted questions...............................   279
    Kevin C. Kosisko, Vice President Service, North America, ABB,
      Inc., on Behalf of National Electrical Manufacturers
      Association and Industrial Energy Efficiency Coalition.........    51
        Prepared statement...........................................    54
    Britta MacIntosh, Vice President, Business Development, NORESCO,
      on Behalf of Federal Performance Contracting Coalition.........    95
        Prepared statement...........................................    97
    James Crouse, Executive Vice President of Sales and Marketing,
      Capstone Turbine Corporation, on Behalf of U.S. Combined Heat
      and Power Association..........................................   102
        Prepared statement...........................................   104
    Helen A. Burt, Senior Vice President and Chief Customer Officer,
      Pacific Gas and Electric Company...............................   114
        Prepared statement...........................................   116
    R. Neal Elliott, Associate Director of Research, American Council
      for an Energy-Efficient Economy................................   127
        Prepared statement...........................................   129
    Ted Gayer, Co-Director, Economic Studies and Joseph A. Pechman
      Senior Fellow, The Brookings Institute.........................   144
        Prepared statement...........................................   146

                               Submitted Material

    Press release from cable companies, submitted by Mr. Shimkus.....   216
    Report entitled, ``Doubling U.S. Energy Productivity by 2030,''
      by the Alliance Commission on National Energy Efficiency
      Policy, submitted by Mr. Kinzinger.............................   219
    Statement of Arkema, Inc., submitted by Mr. Whitfield............   253
    Statement of The Pew Charitible Trusts, submitted by Mr.
      Whitfield......................................................   258
    Statement of The Alliance for Industrial Efficiency, submitted by
      Mr. Whitfield..................................................   261
    Statement of the American Chemistry Council, submitted by Mr.
      Whitfield......................................................   265
    Statement of the Heat is Power Association, submitted by Mr.
      Whitfield......................................................   270

       AMERICAN ENERGY SECURITY AND INNOVATION: AN ASSESSMENT OF PRIVATE-
      SECTOR SUCCESSES AND OPPORTUNITIES IN ENERGY EFFICIENT TECHNOLOGIES

                                  ----------

                           TUESDAY, FEBRUARY 26, 2013

                      House of Representatives,
                      Subcommittee on Energy and Power,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:08 a.m., in
    room 2123 of the Rayburn House Office Building, Hon. Ed
    Whitfield (chairman of the subcommittee) presiding.
        Members present: Representatives Whitfield, Scalise,
    Shimkus, Pitts, Terry, Burgess, Cassidy, Olson, McKinley,
    Gardner, Pompeo, Kinzinger, Griffith, Upton (ex officio), Rush,
    McNerney, Tonko, Capps, Barrow, Matsui, Castor, Welch, and
    Waxman (ex officio).
        Staff present: Nick Abraham, Legislative Clerk; Gary
    Andres, Staff Director; Charlotte Baker, Press Secretary; Mike
    Bloomquist, General Counsel; Matt Bravo, Professional Staff
    Member; Allison Busbee, Policy Coordinator, Energy and Power;
    Patrick Currier, Counsel, Energy and Power; Carolyn Ferguson,
    Staff Assistant; Tom Hassenboehler, Chief Counsel, Energy and
    Power; Heidi King, Chief Economist; Ben Lieberman, Counsel,
    Energy and Power; Gib Mullan, Chief Counsel, Commerce,
    Manufacturing, and Trade; Mary Neumayr, Senior Energy Counsel;
    Andrew Powaleny, Deputy Press Secretary; Chris Sarley, Policy
    Coordinator, Environment and Economy; Lyn Walker, Coordinator,
    Admin/Human Resources; Jeff Baran, Democratic Senior Counsel;
    Phil Barnett, Democratic Staff Director; Greg Dotson,
    Democratic Staff Director, Energy and Environment; Caitlin
    Haberman, Democratic Policy Analyst; and Alexandra Teitz,
    Democratic Senior Counsel, Environment and Economy.

      OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF KENTUCKY

        Mr. Whitfield. Good morning, and I would like to call this
    hearing to order this morning. I will recognize myself for an
    opening statement.
        Anyone who focuses on energy issues, I believe, has been
    amazed at recent discoveries of resources that make it possible
    for America to be energy independent, both generating
    electricity and producing fuel for transportation purposes.
    Certainly, supply and demand affects price and if we can
    control price, we can be more competitive in the global
    marketplace, strengthen our economy, and create jobs. That is
    certainly a goal to which we all aspire.
        Now, we have had several hearings about supply in this
    subcommittee, and today, we are going to focus on demand, and
    specifically, energy efficiency. In fact, today's hearing is
    entitled ``American Energy Security and Innovation: An
    Assessment of Private-Sector Successes and Opportunities in
    Energy Efficient Technologies.'' Just as we have been
    successful in finding additional resources for energy
    production, we have also made great strides in energy
    efficiency, and we can do even more.
        History teaches us that nothing is more efficient than the
    free market. The only thing you need to spur than improve
    energy efficiency is profit-seeking companies responding
    rationally to high energy bills. Any company that doesn't use
    energy as wisely as possible will lose ground to a competitor
    that does. This is why free economies are the most efficient
    and have the lowest energy inputs per units of gross domestic
    product when you contrast that particularly with centrally-
    planned economies, which are certainly not as efficient.
        We all understand that government has a very important role
    to play and has contributed much in this area, such as
    utilizing the latest advances to improve efficiency in federal
    buildings, and in conducting energy efficiency research. And
    all of us are fans of the energy savings performance contract
    program over at DOE, and it continues to do a great job, and we
    look forward to making sure that it continues to make that kind
    of contribution.
        We have a great panel of witnesses today. We have three
    panels, and on the first panel, we are very fortunate to have
    two United States senators. We have Senator Lisa Murkowski of
    Alaska, who has been a leader in the energy sector. Senator, we
    really appreciate your taking time to be with us today. And
    Senator Shaheen of New Hampshire was given a speaking
    engagement this morning, and she is on her way, and it is not
    seldom that we have two senators over here, so we are always
    going to pay particular attention to what they say, because as
    they say, the House and the Senate need to work closely
    together on all these issues. So we are excited about the
    witnesses this morning, and I will introduce the three panels
    as we come to them.
        [The prepared statement of Mr. Whitfield follows:]

                    Prepared statement of Hon. Ed Whitfield

        Energy prices are a function of supply and demand, and high
    prices are a clear sign that supply is struggling to keep up
    with demand. That is why expanding domestic energy supplies is
    a big part of the solution to the nation's energy challenges
    and one that this subcommittee will continue to address. But
    this morning's hearing will focus on the demand side of the
    energy equation, and specifically private sector efforts to
    develop and utilize innovative technologies and processes to
    reduce waste and cut costs.
        History teaches us that nothing is more efficient than the
    free market. The only thing you need to spur innovations that
    improve energy efficiency is profit-seeking companies
    responding rationally to high energy bills. Any company that
    doesn't use energy as wisely as possible will lose ground to a
    competitor that does. This is why free economies are the most
    efficient and have the lowest energy inputs per unit of gross
    domestic product. Contrast that with centrally planned
    economies which are among the least efficient.
        These private sector innovations can take the form of
    energy efficient technologies like combined heat and power
    systems. They can also take the form of novel instruments like
    energy savings performance contracts. We will discuss both
    kinds of innovations today.
        The benefits of energy efficiency are something that both
    Republicans and Democrats can agree upon. They are also
    something that both the House and the Senate can agree upon,
    which is why I am pleased that Senators Lisa Murkowski and
    Jeanne Shaheen are joining us to discuss energy efficiency
    efforts underway in the Senate. Those of us in the House are
    always ready to learn from the world's greatest deliberative
    body.
        Some make the mistake of thinking that efficiency only
    happens as a result of federal regulations or other mandates.
    But the stories we will hear from our private sector witnesses
    demonstrate otherwise. Utilities, manufacturers, commercial
    property owners and others are continually developing clever
    new ways to save on their energy costs, and are not waiting for
    orders from Washington DC.
        In fact, government policy can sometimes get in the way of
    energy efficiency. For example, a provision included in the
    Energy Independence and Security Act of 2007 mandates the
    elimination of all fossil fuel-generated energy use in new and
    modified federal buildings by the year 2030. This federal
    mandate potentially restricts the adoption of high-efficiency
    technologies such as natural gas combined heat and power and
    waste heat recovery systems in federal facilities. We need to
    reconsider any and all federal impediments to energy
    efficiency.
        On the other hand, there is a constructive role for the
    government to play, such as utilizing the latest advances to
    improve efficiency in federal buildings, and in conducting
    energy efficiency research. We need to steer government efforts
    in a positive direction.
        Necessity is the mother of invention, and the necessity
    brought on by expensive energy, tight budgets, and the
    pressures of global competition has fostered some great private
    sector advances in efficiency. I look forward to learning more
    about these exciting developments and yield back the balance of
    my time.

        Mr. Whitfield. And with that, Mr. Rush, I would recognize
    you for an opening statement.

     OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Rush. I want to thank you, Mr. Chairman, for holding
    today's hearing on the successes and opportunities in energy
    efficiency technology. It is my sincere hope that after hearing
    from today's panel of witnesses, members on both sides of the
    aisle will be able to come together and move their country's
    energy policy forward by working to enact common sense energy
    efficiency legislation.
        Mr. Chairman, I remain optimistic that this subcommittee
    may return to the days of enacting bipartisan and comprehensive
    energy policy like we did most recently in '05 and '07. I
    believe that the area of energy efficiency may, in fact, be the
    opportunity for us to do so.
        The story of energy efficiency is one that is filled with
    success stories that I really hope propel our Nation forward by
    making us more independent and more secure, while also reducing
    the cost of energy, both in our pocketbooks and its impact on
    the environment. According to a recent ACCC study, U.S. energy
    consumption in 2010 was less than half of what it would have
    been without the energy efficiency improvements made since
    1970.
        Mr. Chairman, while today's hearing focuses on the progress
    made in the private sector, let us not forget that it was the
    leadership of State and Federal Government activities that
    paved the way for many of these energy efficiency successes.
    DOE rulemaking spurred dozens of national efficiency standards
    for appliances and equipment since 1987. ACCC--EEE, rather,
    found that these existing standards will provide net savings of
    $1.1 trillion through 2035, while also reducing carbon
    pollution by the equivalent amount of taking approximately 118
    coal-fired power plants offline by that same year. In fact, in
    2010, overall U.S. energy use was 7 percent less than it would
    have been without these extending--existing, rather, standards.
        However, Mr. Chairman, it is important to note that the
    ACEEE also found, and I quote, ``The prospect for future
    improvements is large.'' In fact, the report estimates that
    additional energy efficiency efforts could reduce U.S. energy
    use by 42 to 59 percent over current projections, which will
    create over one million jobs and increase U.S. GDP by $100 to
    $200 million by the year 2050.
        So, Mr. Chairman, it is important that the Federal
    Government does not abdicate its responsibility, its leadership
    role, of promoting, of encouraging, of enticing interested
    stakeholders to continue with the progress that has already
    been made in energy efficiency technologies so that we may keep
    moving forward, moving our Nation forward. We have a rich and
    strong legacy to stand on, Mr. Chairman, and let us not abandon
    the work that has already been done. Energy efficiency has been
    the low-hanging fruit that may, indeed, as I said earlier,
    bring both sides together in a legislative manner while also
    making our Nation safer, more secure, and more attentive to the
    impacts of climate change.
        Mr. Chairman, I look forward to hearing from these
    outstanding members of the other body, our Nation's leaders,
    and I look forward to this hearing. And with that, I yield back
    the balance of my time.
        [The prepared statement of Mr. Rush follows:]

                    Prepared statement of Hon. Bobby L. Rush

        Thank you, Mr. Chairman, for holding today's hearing on the
    successes and opportunities in energy efficient technologies.
        Mr. Chairman, it is my sincere hope that after hearing from
    today's panel of witnesses, members from both sides of the
    aisle will be able to come together and move the country's
    energy policy forward by working to enact commonsense energy
    efficiency legislation.
        I remain optimistic that this subcommittee may return to
    the days of enacting bipartisan and comprehensive energy
    policy, like we did most recently in 2005 and 2007, and I
    believe the area of energy efficiency may, in fact, provide us
    with an opportunity to do so.
        Mr. Chairman, the story of energy efficiency is one that is
    filled with success stories that have really helped propel our
    country forward by making us more independent and secure, while
    also reducing the cost of energy, both in our pocketbooks and
    its impact to our environment.
        According to a recent American Council for an Energy-
    Efficient Economy (ACEEE) study, U.S. energy consumption in
    2010 was less than half of what it would have been without the
    energy efficiency improvements made since 1970.
        Mr. Chairman, while today's hearing focuses on the progress
    made in the private sector let us not forget that it was the
    leadership of state and federal government that paved the way
    for many of these energy efficiency successes.
        Department of Energy (DOE) rulemakings spurred dozens of
    national energy efficiency standards for appliances and
    equipment since 1987.
        ACEEE found that these existing standards will provide net
    savings of $1.1 trillion through 2035, while also reducing
    carbon pollution by the equivalent amount of taking
    approximately 118 coal-fired power plants offline by that same
    year.
        In fact, in 2010, overall U.S. electricity use was 7% lower
    than it would have been without these existing standards.
        However, Mr. Chairman, it is important to note that the
    ACEEE study also found that ``the prospect for future
    improvements is large.''
        In fact, the report estimates that additional energy
    efficiency efforts could reduce U.S. energy use by 42-59% over
    current projections, which would create over a million jobs and
    increase U.S. GDP by $100-200 billion by the year 2050.
        So, Mr. Chairman, it is important that the federal
    government does not abdicate its leadership role or
    responsibility of promoting, encouraging, and enticing
    interested stakeholders to continue with the progress that has
    already been made in energy efficiency technologies so that we
    keep moving the nation forward.
        Energy efficiency has proven to be the low-hanging fruit
    that may indeed bring both sides together, legislatively, while
    also making our country safer, more secure, and more attentive
    to the impacts of climate change.
        So I look forward to hearing from today's panel of expert
    witnesses on the successes and opportunities in energy
    efficiency technologies, and with that I yield back the balance
    of my time.

        Mr. Whitfield. Well thank you, Mr. Rush.
        At this time, I recognize the chairman of the full
    committee, Mr. Upton, for a 5-minute opening statement.

       OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF MICHIGAN

        Mr. Upton. Well thank you, Mr. Chairman. I want to thank
    both of our senators for being here. Thanks for crossing the
    Capitol this morning to provide your perspective on energy
    efficiency innovation. Energy efficiency is not only a
    bipartisan issue, but as your presence here today demonstrates,
    there is bicameral interest as well.
        You know, for an economy to thrive, it does need energy. In
    fact, increased energy consumption is often a harbinger of
    economic growth, a very good thing by any measure. When we talk
    about energy efficiency, I believe our goal is to maintain and
    enhance our economic growth by finding ways to maximize the
    ways that we use energy, to get the most bang for the buck.
    Energy efficiency measures are some of the simplest and most
    affordable ways to address U.S. energy demand. The U.S. has
    steadily improved its energy productivity as a result of
    advances in technology driven by private sector innovation.
    Reducing waste and consuming less energy are common sense
    strategies to cut costs, which is why the industrial and
    manufacturing sectors have undertaken significant efforts to
    improve efficiency and reap the resulting economic benefits.
    But significant energy efficiency opportunities remain, and we
    will hear about some of those opportunities, as well as the
    challenges, from our distinguished panelists today.
        We have got to remember that as the sequester takes center
    stage this week, that the Federal Government is the Nation's
    largest user of energy, and sensibly utilizing energy-saving
    techniques can significantly reduce the amount of taxpayer
    dollars spent on federal energy costs.
        So on behalf of all of our colleagues, I welcome both of
    you here, and yield the balance of my time to Mr. Gardner.
        [The prepared statement of Mr. Upton follows:]

                     Prepared statement of Hon. Fred Upton

        I want to welcome Senator Murkowski and Senator Shaheen--
    thank you for crossing the Capitol this morning to provide your
    perspectives on energy efficiency innovation. Energy efficiency
    is not only a bipartisan issue, but as your presence here today
    demonstrates, there is bicameral interest as well.
        For an economy to thrive, it needs energy. In fact,
    increased energy consumption is often a harbinger of economic
    growth--a very good thing by any measure. When we talk about
    energy efficiency, I believe our goal is to maintain and
    enhance our economic growth by finding ways to maximize the
    ways we use energy--to get the most bang for the buck. Energy
    efficiency measures are some of the simplest and most
    affordable ways to address U.S. energy demand. The U.S. has
    steadily improved its energy productivity as a result of
    advances in technology driven by private sector innovation.
    Reducing waste and consuming less energy are commonsense
    strategies to cut costs, which is why the industrial and
    manufacturing sectors have undertaken significant efforts to
    improve efficiency and reap the resulting economic benefits.
        But significant energy efficiency opportunities remain, and
    we will hear about some of those opportunities--as well as the
    challenges--from our distinguished panelists today. We must
    also remember, as the sequester takes center stage this week,
    that the federal government is the nation's largest user of
    energy, and sensibly utilizing energy savings techniques can
    significantly reduce the amount of taxpayer dollars spent on
    federal energy costs.
        On behalf of all my colleagues on the Energy and Commerce
    Committee, I want to again thank Senators Murkowski and
    Shaheen--and all of our panelists--for taking the time to be
    with us today, and we look forward to working together on these
    issues in the 113th Congress.

        Mr. Gardner. Thank you, Mr. Chairman, and thank you,
    Chairman Whitfield and Ranking Member Rush, thank you for
    holding this hearing today. Over the past 2 years, I have
    become increasingly more interested in this topic of energy
    efficiency, and look forward to hearing our witness's testimony
    this morning.
        There is a lot more that the Federal Government in
    particular could be doing to become more energy efficient,
    since we truly are the largest energy consumer in the Nation.
    That is why I have partnered with Mr. Welch of Vermont, who
    also serves on this committee, to form a caucus solely focused
    on advancing energy efficiency in a way that helps the
    environment and the taxpayer. Our caucus focuses on performance
    contracting, whether they be energy savings performance
    contracts, or utility energy service contracts. ESPCs and UESCs
    allow private companies to perform energy upgrades by taking on
    all the risks associated with those improvements. The company
    only gets paid when the monetary savings materialize. They are
    a win-win for government and the taxpayer, creating private
    sector jobs along the way.
        I truly believe that energy efficiency is an issue that
    Republicans and Democrats can come together on, as we have done
    in Colorado. And during times when this city can seem so
    partisan to the rest of the country, I think we should jump at
    this opportunity to do so. I will point out, however, that
    there is one minor impediment to moving forward with ESPCs, and
    in the way that many of us in this room would like to do so.
    While OMB does not score ESPCs, CBO does. Even though it saves
    money, it has no appropriated dollars with it. It is
    unfortunately restricting our ability to utilize a tool that
    makes complete sense during an economic downturn, and during a
    time when the Federal Government is trying to find a way to
    save money.
        I look forward to working with everyone on this issue, and
    the others in this room as we discuss what we can do to
    encourage energy efficiency here in Congress.
        Thank you, Mr. Chairman. I yield the remainder of my time.
        Mr. Whitfield. Well thank you, Mr. Gardner, and at this
    time, I recognize the ranking member of the full committee, the
    gentleman from California, Mr. Waxman, for 5 minutes.

    OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. Waxman. Thank you, Mr. Chairman.
        At its heart, energy efficiency is about reducing waste.
    Doing more with less. This frees up energy supplies, saves
    money, and reduces dangerous carbon pollution.
        Energy efficiency is good for consumers, good for business,
    good for our economy and job creation, and good for fighting
    dangerous climate change.
        A recent report from the International Energy Agency
    highlights the critical role of energy efficiency in slowing
    dangerous climate change. IEA concluded that if the world does
    not take action to reduce carbon pollution by 2017, then the
    energy infrastructure existing at that time will make it
    impossible to limit warming to 2 degrees Celsius. In other
    words, we have just 4 years to take serious actions to reduce
    carbon pollution, or we will be locked into a path forward that
    will lead to devastating climate change. But if we invest now
    in energy efficiency, we can give ourselves more time.
        According to the IEA, the rapid deployment of energy
    efficiency measures would give the world at least 5 additional
    years to develop long-term solutions. IEA also found that there
    are huge efficiency opportunities available. Cost effective
    energy efficiency measures using technology available today
    could reduce expected future energy use by over 40 percent.
    These measures, of course, would save consumers and businesses
    over $11 trillion through 2050. Two-thirds of the potential
    energy efficiency savings remain untapped.
        Existing efficiency standards will provide net savings of
    over $1 trillion through 2035, while reducing annual carbon
    emissions by 470 million metric tons. That is equivalent to the
    annual emissions from over 100 coal-fired power plants. Without
    these existing standards, a typical household's electricity use
    would be about 35 percent higher.
        Buildings account for about 40 percent of our total energy
    consumption, and there is a lot we can do to make them more
    efficient. Tools for improving efficiency include building
    efficiency codes, performance goals, information disclosure,
    technical support, innovative financing approaches, and
    reduction of market barriers.
        We are going to hear today from two very distinguished
    members of the Senate. Senator Shaheen worked together with
    Senator Portman on a bipartisan bill that includes many good
    ideas. Senator Murkowski in the last Congress worked with
    Senator Bingaman on a package of consensus energy efficiency
    standards. We should build on both of these bipartisan efforts.
        We need to be ambitious. Study after study has identified a
    myriad of ways we could save energy, save money, and reduce
    dangerous carbon pollution.
        I look forward to hearing the testimony from our two
    senators and other witnesses today, and working on a bipartisan
    basis to do something that I think is in the best interest of
    the American people. Yield back the balance of my time.
        [The prepared statement of Mr. Waxman follows:]

                   Prepared statement of Hon. Henry A. Waxman

        At its heart, energy efficiency is about reducing waste.
    Doing more with less. This frees up energy supplies, saves
    money, and reduces dangerous carbon pollution.
        Energy efficiency is good for consumers, good for
    businesses, good for our economy and job creation, and good for
    fighting dangerous climate change.
        A recent report from the International Energy Agency (IEA)
    highlights the critical role of energy efficiency in slowing
    dangerous climate change. IEA concluded that if the world does
    not take action to reduce carbon pollution by 2017, then the
    energy infrastructure existing at that time will make it
    impossible to limit warming to 2 degrees Celsius. In other
    words, we have just four years to take serious actions to
    reduce carbon pollution, or we will be locked into a path
    forward that will lead to devastating climate change. But if we
    invest now in energy efficiency, we can give ourselves more
    time.
        According to the IEA, the rapid deployment of energy
    efficiency measures would give the world at least five
    additional years to develop long-term solutions. IEA also found
    that there are huge efficiency opportunities available. Cost
    effective energy efficiency measures using technology available
    today could reduce expected future energy use by over 40%.
    These measures, of course, would save consumers and businesses
    over $11 trillion through 2050. Two-thirds of the potential
    energy efficiency savings remain untapped.
        Existing efficiency standards will provide net savings of
    over $1 trillion through 2035 while reducing annual carbon
    emissions by 470 million metric tons. That's equivalent to the
    annual emissions from over 100 coal-fired power plants. Without
    these existing standards, the typical household's electricity
    use would be about 35% higher.
        Buildings account for about 40% of our total energy
    consumption, and there is a lot we could do to make them more
    efficient. Tools for improving energy efficiency include
    building efficiency codes, performance goals, information
    disclosure, technical support, innovative financing approaches,
    and reduction of market barriers.
        We are going to hear today from two very distinguished
    members of the Senate. Senator Shaheen worked together with
    Senator Portman on a bipartisan bill that includes many good
    ideas. Senator Murkowski in the last Congress worked with
    Senator Bingaman on a package of consensus energy efficiency
    standards. We should build on both of these bipartisan efforts.
        We need to be ambitious. Study after study has identified a
    myriad of ways we could save energy, save money, and reduce
    dangerous carbon pollution.
        I look forward to hearing the testimony from our two
    Senators and our other witnesses today, and working on a
    bipartisan basis to do something that I think is in the best
    interest of the American people.

        Mr. Whitfield. Thank you, Mr. Waxman, and that concludes
    the opening statements, so it is my pleasure now to introduce
    our first panel of witnesses. They have already been
    introduced, but I will do it again. We have Senator Lisa
    Murkowski, a U.S. Senator from Alaska, who is the ranking
    member of the Senate Energy and Natural Resources Committee,
    and we have the Honorable Jeanne Shaheen, U.S. Senator from New
    Hampshire, and as has already been stated, both of you all have
    worked on these issues and in a very bipartisan way, and so we
    welcome you to this committee. It is my understanding that when
    you finish your opening statements, that you both have some
    other responsibilities, so we will not be asking you any
    questions, but do look forward to your testimony, and Senator
    Murkowski, I will start with you and recognize you for 5
    minutes.

    STATEMENTS OF HON. LISA MURKOWSKI, A UNITED STATES SENATOR FROM
    THE STATE OF ALASKA, RANKING MEMBER, SENATE ENERGY AND NATURAL
     RESOURCES COMMITTEE; AND HON. JEANNE SHAHEEN, A UNITED STATES
                SENATOR FROM THE STATE OF NEW HAMPSHIRE

                    STATEMENT OF HON. LISA MURKOWSKI

        Senator Murkowski. Thank you, Mr. Chairman, Ranking Member
    Rush, Mr. Waxman, Mr. Upton, thank you for the opportunity to
    be here this morning to focus on an energy efficiency
    specifically. I don't know how you do this, but the fact that
    you actually have your cups this morning that talk about energy
    efficiency--I don't know if you do this for every hearing over
    here, but kudos to the committee here for being on subject.
        You note in your introduction of me that as the ranking
    member on the Energy Committee, I would obviously have an
    interest in this, but coming from the State of Alaska, as I do,
    where in some of our remote, rural communities, Alaskan
    families are spending up to 47 percent of the family's budget
    on energy. There is every reason to be efficient. There is
    every reason to squeeze everything that you can out of the
    energy that comes our way, so I have taken a very keen interest
    in it, and as a consumer of energy, as we all are, we should
    all be focused on energy and what we can do to make a
    difference.
        Before I get into the specifics of energy efficiency, I
    want to offer some context for it in the position of a broader,
    more comprehensive look at energy policy. I brought with me
    today one of the Hill's best sellers, this is Energy 20/20, a
    brilliant piece of 115 pages focusing on all things energy. And
    it is not very often around here that we actually see 200
    recommendations on energy policy come out, a focus on energy as
    the bigger picture in terms of what we can do to strengthen our
    economy. I would commend it to you. It is available on my Web
    site. But let me give you the Reader's Digest condensed
    version. It starts with a simple premise that energy is good.
    You can distill it in a bumper sticker, but it--think about it.
    It provides the basis for modern society. It allows us to lead
    happy and productive lives. It allows us to produce food, to
    manufacture, to communicate, to move. It is all good.
        And to give you five easy principles when we talk about
    energy, we should strive to make energy abundant, affordable,
    clean, diverse, and secure. And to accomplish all this, again,
    I outline about 200 different recommendations, but as we think
    about energy policy here in this Congress and how to move
    forward in an area that really can help us be more efficient in
    our use, just think of it in context of these five attributes
    as a way to evaluate legislative actions that affect energy.
    And I would hope that taken together, we can agree that these
    are the attributes that should allow our policies to advance.
        Now, as your focus on American energy security and
    innovation reminds us, energy--efficiency is more than just
    driving energy consumption down. As I say in the blueprint
    here, using energy more efficiently is akin to developing more
    fuel. It also encompasses the more efficient production of
    energy.
        Now, we must do more. We must do more to discourage the
    inefficiencies that I think we see oftentimes with regulation
    and how that is introduced into our energy supply chain. Our
    aim with energy efficiency policies should be to require less
    energy per unit of gross domestic product, and it is worth
    emphasizing that what we want is a rising GDP here as a measure
    of increasing prosperity.
        To underscore for the discussion of efficiency, we must
    never lose sight of the fact that we want our Nation--in fact,
    we want the world to be more prosperous, and we know prosperity
    is an aid to peace and human development, and energy is an aid
    to prosperity, so the title for the hearing today reminds us
    that we must see efficiency within the context of energy
    security and innovation.
        I am honored to be here with Senator Shaheen, who has been
    a leader on efficiency during her tenure on the Energy
    Committee with me. She continues to work with Senator Rob
    Portman on their version of a comprehensive energy efficiency
    bill. It was, and it thankfully remains, a bipartisan effort to
    make progress in an area where you all have pointed out,
    agreement is imminently possible, and I think that we saw this
    as the last Congress waned down. We managed to pass an
    efficiency bill, the American Energy Manufacturing Technical
    Corrections Act. There were only two Members of Congress that
    voted against that, so again, when you think about those things
    that we can do together, we should be looking to efficiency.
        So where do we go on efficiency this year as we look at
    ways to boost the efficiency of everything that we are doing,
    whether it is from the buildings here, our vehicles, our
    appliance, everything? The bill that Senator Shaheen and
    Senator Portman will offer, I think provides a promising path
    that is worthy of our consideration. You will see, complements
    of their work with reports from private sector associations
    like the Business Roundtable, the National Association of
    Manufacturers, the Alliance to Save Energy, we must continue to
    encourage outside stakeholders to reach these voluntary
    consensus agreements so that efficiency does not become
    synonymous with this top down approach of mandates that are
    issued by the Federal Government. I think given the constraints
    on federal finances that has been mentioned and the failure of
    mandates to deliver on certain promised results, those of us in
    the Federal Government should also put our own House in order.
    And as a start, I am going to be calling upon the GAO to review
    current funding and past performance of residential,
    commercial, and industrial energy efficiency programs within
    DOE, and then propose new authorization levels based on this
    review.
        Now finally, you have appropriately called attention with
    this hearing to private sector successes and opportunities, and
    as private--as President Reagan's Administration reminded us
    more than 25 years ago, the greatest gains in energy efficiency
    come from the private sector in a growing economy. So here, the
    government's priority should be the removal of barriers that
    stand in the way of their investments and the economic growth
    that make them possible.
        Again, I thank you for the opportunity to come over. I
    think it is important that we share our ideas between the two
    Houses, certainly amongst members and our parties, and I
    welcome the opportunity for future dialogue on energy
    efficiency and all things energy.
        Thank you for the opportunity to be here this morning.
        [The prepared statement of Ms. Murkowski follows:]
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        [GRAPHIC] [TIFF OMITTED] 79891.002

        Mr. Whitfield. Well Senator Murkowski, thanks so much for
    your testimony and your continued leadership, and welcome,
    Senator Shaheen. We--at this time, I would like to recognize
    you for 5 minutes for your opening statement.

                    STATEMENT OF HON. JEANNE SHAHEEN

        Senator Shaheen. Thank you very much, Mr. Chairman, Ranking
    Member Rush, and the members of the committee. Thank you for
    holding this very important hearing today. I am especially
    pleased to be joined by Congressman Waxman, the ranking member
    of the full committee, and I was pleased to see Chairman Upton
    here as well.
        I share the views, I think, of all of you that we have just
    heard from that energy efficiency is a win-win-win. We can save
    energy, save pollution, we can protect our national security,
    and we can also create jobs. And so it is a great place to
    start, and it has bipartisan support.
        I am also pleased to be joining my former ranking member. I
    served for 4 years on the Energy Committee with Senator
    Murkowski, and I know what great leadership she has provided on
    this issue, as well as so many other energy issues. She pointed
    out that with the assistance of this committee, last session we
    passed the American Energy Manufacturing Technical Corrections
    Act, which is a mouthful, but it included many energy
    efficiency provisions, including several from the Shaheen-
    Portman legislation that really helped to lay a foundation, I
    think, for further discussion about energy efficiency.
        I want to talk a little bit about the legislation that
    Senator Portman and I have introduced, but I want to begin by
    putting it in a little bit of context, as Senator Murkowski
    did. I think all of us would agree that we need a comprehensive
    national energy policy. We remain overly dependent on foreign
    oil. We remain reliant on an outdated energy infrastructure
    that harms American businesses and gives our overseas
    competitors an advantage. I think we have to utilize a wide
    range of energy sources, including natural gas, oil, nuclear,
    and renewables, like wind, biomass, and solar to address our
    future energy needs, and that this gives us an energy future
    that is more stable and gives us a stronger economy.
        As you all will highlight in today's hearing, we can't just
    talk about the supply side of energy; we also have to talk
    about how we consume energy once we have it. Efficiency, as we
    all know, is the cheapest, fastest way to deal with our energy
    needs and our economy's energy independence.
        I wanted to start with a couple of examples that I think
    are important as we think about the successes we can achieve
    through energy efficiency. One of the most well-known is the
    recent makeover of the Empire State Building, which reduced
    energy costs by $4.4 million a year. It created 252 jobs, and
    it is estimated to have saved 4,000 metric tons of carbon
    emissions. They did things like install 6,500 new windows, a
    chiller plant retrofit, new building controls, and a web-based
    tenant energy management system.
        I had the opportunity not too long ago to visit a New
    Hampshire company called High Liner Foods, which is in
    Portsmouth, on the seacoast of New Hampshire. It is an energy-
    intensive seafood processing plant that requires a tremendous
    amount of energy to operate. At one point, the 180,000 square
    foot facility consumed roughly 2 megawatts of power at any
    given time during normal operations. So next to the cost of
    personnel and fish, their biggest cost was energy. But by
    installing efficient lighting, new boilers, and various demand
    response techniques, the company has made great strides in
    reducing its energy consumption, which allows them to expand
    their business footprint in the State, and be more cost
    effective in their production.
        We can also benefit from those companies that are producing
    energy efficiency technologies. We have a company in New
    Hampshire called Warner Power that has made the first
    breakthrough in transformers in over 100 years. It is called
    the hexaformer, and if we look at the--where we lose power,
    about 5 percent of all electricity generated in the United
    States is lost through inefficiencies in transformers. So with
    wide scale use of this transformer, the company estimates that
    1.5 percent of all transformer energy losses could be
    eliminated, saving the country 60 terawatts of electricity per
    year. Now, you all may know more about terawatts than I do, but
    I translate that into five times New Hampshire's annual
    electricity consumption, so significant savings.
        As Senator Murkowski pointed out, energy efficiency enjoys
    diverse support among industry advocates. Because too much of
    our debate around energy has been fossil fuels versus
    alternatives. It has been about whether we benefit in the
    Northeast versus who benefits in the South or the West or
    Alaska, and everybody benefits from energy efficiency. It is
    one of the great places where we can really come to some common
    agreement.
        Senator Portman and I have done that over the last couple
    of years. We introduced legislation last year. As I pointed
    out, some of those provisions were signed into law as part of
    the Act. Those provisions required federal--the DOE to utilize
    advanced metering tools, the Department of Energy to study and
    better understand the barriers to the deployment of industrial
    energy efficiency. And we are reintroducing the legislation
    this year. It will include provisions around buildings that are
    voluntary, not mandatory, but critical because it will provide
    incentives, and as we all know, buildings use about 40 percent
    of our energy each year. It will assist the manufacturing
    sector, which consumes more energy than any other sector of the
    U.S. economy, and it will require the Federal Government, as
    you all pointed out, the single largest energy user, to adopt
    more efficient building standards, smart metering technology,
    and Congressman Gardner, I certainly agree. We need to do more
    to make sure that people can take advantage of performance
    contracting. The bill will have a real measurable benefit to
    our economy and our environment. A study by the American
    Council for an Energy-Efficient Economy found that last year's
    version of the bill would have saved consumers $4 billion by
    2020, and helped businesses add 80,000 jobs to the economy. It
    would also cut carbon dioxide emissions by the equivalent of
    taking five million cars off the road. And in the process, it
    would nothave increased the deficit of this country at all.
        We passed in the committee last session the Shaheen-Portman
    legislation with broad bipartisan support. We had more than 200
    endorsements from a wide range of businesses, environmental
    groups, think tanks, and trade associations, from the U.S.
    Chamber of Commerce to the National Association of
    Manufacturers, and the Natural Resources Defense Council, not
    usually a coalition that comes together around legislation.
    These are the kinds of nontraditional alliances that allowed us
    to make progress. I think we have the opportunity working
    together, both in a bipartisan way and a bicameral way, to
    build on the success of the last session, and to do something
    significant around energy efficiency.
        I thank this committee very much for the opportunity to be
    here, and for the work that you are doing, and look forward to
    partnering with you.
        [The prepared statement of Ms. Shaheen follows:]
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        Mr. Whitfield. Well Senator Shaheen, thanks very much, and
    once again, I want to thank both of you for coming over. We
    look forward to continuing a dialogue and working with members
    of the Senate in coming up with some solutions to these
    problems, and we look forward to working with you in the
    future. So thank you very much, and good luck in getting back
    over to the Senate.
        Senator Murkowski. That is the hardest part of our job.
        Mr. Whitfield. At this time, I would like to call up the
    witness on the second panel, and that is the Honorable Dr.
    Kathleen Hogan, who is the Deputy Assistant Secretary for
    Energy Efficiency, the Office of Energy Efficiency and
    Renewable Energy, at the Department of Energy. So Dr. Hogan, if
    you would please step forward?
        Dr. Hogan, welcome. Thanks so much for taking time to join
    us this morning. Before I introduce you, I just want to make
    one comment. You know, we have these hearings and we really
    value the testimony that is provided to the committee, and we
    do have a rule that we try to follow, being able to receive the
    testimony 2 days prior to the hearing, and unfortunately, we
    received yours last night around 7:00 p.m. I know that you have
    a very busy schedule, but I hope that in the future if you all
    testify here, that you might be able to get here a few days
    early on this testimony so we have an opportunity to really
    look at it.
        But thank you for being with us today. We do look forward
    to your testimony and your expertise, and I will recognize you
    for 5 minutes for your opening statement.

        STATEMENT OF HON. DR. KATHLEEN HOGAN, DEPUTY ASSISTANT
     SECRETARY FOR ENERGY EFFICIENCY, OFFICE OF ENERGY EFFICIENCY
            AND RENEWABLE ENERGY, U.S. DEPARTMENT OF ENERGY

        Dr. Hogan. Thank you, Chairman Whitfield, Ranking Member
    Rush, and members of the subcommittee for inviting me to
    testify today on behalf of the Department of Energy. As noted
    by many that have spoken already, energy efficiency is a large,
    untapped resource in the United States. It offers important
    benefits for the country, improved competitiveness, billions in
    consumer savings: growth in domestic jobs, greater reliability
    of our energy systems, and reduced reliance on foreign oil, as
    well as environmental benefits.
        This year's State of the Union address included a goal to
    cut energy wasted by our homes and businesses by half over the
    next 20 years, and to double our energy productivity. The
    Department of Energy's energy efficiency portfolio is making
    important contributions towards these goals, including helping
    to ensure the long-term competitiveness of the United States,
    though much more needs to be done. We can start by looking at
    our homes and buildings. They consume about 40 percent of U.S.
    energy at a cost of about $400 billion a year, and there are
    many savings opportunities. DOE R&D has advanced new
    technologies, lighting, heating and cooling systems, windows
    that offer significant savings. Our work with leading home
    builders offers new homes with 50 percent savings over typical
    homes, as well as good indoor air quality and durability. We
    are working with organizations, and a number of them, on home
    upgrade programs to address the large number of existing homes,
    most built before modern codes, and these programs offer
    savings of 15 to 30 percent. We have recently reached the major
    milestone of weatherizing more than a million low income homes
    since 2009, helping these families save hundreds of dollars
    each year. We have also partnered with over 100 commercial,
    industrial, and public sector organizations representing
    billions of building square feet, and $2 billion in financing.
    They have taken the President's Better Buildings Challenge,
    with a goal of saving 20 percent or more on their energy bills
    by 2020, and then showcasing for others how to do it. Our
    minimum energy conservation standards that we implement now
    span more than 60 categories of appliances and equipment, and
    are currently saving consumers and businesses tens of billions
    of dollars each year. And as we have heard a lot of discussion
    this morning, as the Nation's single largest user of energy,
    the Federal Government does continue to lead by example. We
    have reached large energy savings, water savings, and renewable
    energy goals, and are on target to meet the President's
    challenge to implement $2 billion in performance-based
    contracts by December 2013, investments, as we have heard, that
    will reduce our energy use at no cost to the taxpayer.
        Turning to manufacturing, we are working on next generation
    technologies, processes, and materials that offer substantial
    improvements in efficiency, and which will position U.S.
    competitively for the future. In the State of the Union
    address, President Obama called for a network of manufacturing
    institutes that would help address cross-cutting challenges and
    help accelerate progress across the country. DOE is a partner
    in these efforts, for example, through a new pilot effort on
    additive manufacturing in Youngstown, Ohio, and we have
    recently announced a new energy innovation hub on critical
    materials at Ames Laboratory to develop solutions to domestic
    shortages of rare earth materials and other materials critical
    to U.S. energy security. We also have a strong track record
    with combined heat and power, which now has new market
    opportunities with lower cost natural gas, and we are
    supporting the President's goal of 40 new gigawatts by 2020.
        Finally, DOE manages a diverse transportation research
    portfolio that spans many technologies and addresses light duty
    passenger cars to heavy duty trucks. Building on past DOE
    research successes, the President has launched the EV
    Everywhere Grand Challenge to spur American innovation and to
    make electric vehicles more affordable and convenient to own
    and drive than today's gasoline-powered vehicles within the
    next 10 years. Electric vehicles do offer the potential for $1
    a gallon gasoline equivalent, as well as a number of consumer
    conveniences, and the U.S. needs to continue to lead in this
    marketplace.
        So we are pleased to be part of meeting these challenges
    and contributing to a more secure, resilient, and competitive
    energy economy. We look forward to see what more we can do
    together with you, and thank you again for the opportunity to
    be here today. I am happy to answer any questions.
        [The prepared statement of Dr. Hogan follows:]
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        Mr. Whitfield. Well, Dr. Hogan, thanks so much for your
    comments. We appreciate, as I said, your being here, and I will
    recognize myself for 5 minutes of questions.
        I know you have a large portfolio of responsibilities, and
    certainly one of them does relate to the energy savings
    performance contracts. Would I be accurate in saying that part
    of your responsibility is working with other agencies of the
    Federal Government to encourage them to identify ways to be
    more efficient in their areas of responsibility? And do you
    know how many existing energy savings performance contracts are
    active at this time?
        Dr. Hogan. So you are accurate in saying that my portfolio
    includes the Federal Energy Management Program that does work
    with the other agencies to help them achieve a variety of
    energy, water, and renewable energy targets, and to help them
    with energy savings performance contracts. Currently, there are
    over 250--perhaps 270, 280 performance contracts in place,
    driving investment of more than $2.5 billion in building
    improvements.
        Mr. Whitfield. Right, and my understanding, the private
    companies that get these contracts, they provide the financing
    for this and the government simply pays it back over time with
    a nominal interest charge. Is that correct?
        Dr. Hogan. Energy savings, yes. So there is a sort of
    shared savings mechanism.
        Mr. Whitfield. And generally, how long do these contracts--
    what is the repayment terms on the contract, the length of
    time?
        Dr. Hogan. They can vary based on what is necessary so that
    it works for the performance contracting firm. It can be 10,
    15, 20 years.
        Mr. Whitfield. Well, recently I attended a luncheon, and
    there were a large number of company representatives there, and
    all of them were uniformly excited about this program and very
    optimistic and positive about it. And I left that luncheon
    excited myself, because they were talking about all the great
    accomplishments they had made. And then, really to my surprise,
    about 3 days later, a group of employees at a federal
    installation came into my office, and they were complaining
    about a contract that had been completed on their installation
    and they were talking specifically about some sensor detectors
    that did not work right and some impact that it had on boilers,
    and it ended up costing a lot more money. And they had to bring
    people in on overtime to take care of these problems, and they
    ended up even disconnecting some of the systems. And we all
    know that you can find something that didn't work correctly,
    but generally speaking, what sort of oversight do you have to
    ensure that at least those experiences are minimal?
        Dr. Hogan. So I have the Federal Energy Management Program
    under my purview, and we do work with all the federal agencies
    around best practices to be following up with their energy
    service contracts. There are best practices for how to do
    evaluation, measurement, and verification on what is being
    achieved with these contracts, and we are happy to work with
    any sort of issues that address and help those agencies work
    them through so that we are getting the bang for the buck that
    ESPCs have to offer.
        Mr. Whitfield. So they can always come back to you all and
    say hey, we have got--this is really not working the way it is
    supposed to be working.
        Dr. Hogan. Absolutely.
        Mr. Whitfield. OK. Well, I have no further questions at
    this time. Mr. Rush, I will recognize you for 5 minutes of
    questioning.
        Mr. Rush. I want to thank you, Mr. Chairman, and Secretary
    Hogan, it is certainly a pleasure to have you before the
    committee again here. I am proud of the many accomplishments
    that you have made and that your agency--the Department has
    made.
        I want to just focus on an area that centers on low income
    households. It has been well-established that low income
    households pay a disproportionate amount of their paychecks on
    energy bills, and many urban constituents, those who live in my
    district, the First Congressional District of Chicago--
    Illinois, rather, live in older homes and older buildings that
    are less energy efficient, and therefore, they are more
    expensive in the summer to cool and in the winter to heat. This
    leads to higher energy bills, and so my question to you is of
    the many programs that President Obama has implemented, many of
    his proposals on energy efficiency, I would like to know which
    ones do you think that are most important, that will have the
    most impact on our urban and low income communities? And so
    which one of the programs do you think that would happen?
        Dr. Hogan. Well certainly the weatherization assistance
    program has had a large impact in lowering the energy bills of
    low income households. That is a several-decade old program at
    this point that has weatherized six million or so homes over
    this period of time, a million or so since the Recovery Act was
    put into place, and it is helping these households at this
    point save billions of dollars. We are doing a lot with that
    program to try and expand its use so it can be more effective
    in multi-family housing and engage with the owners of those
    buildings that need different mechanisms with which to engage
    with the Federal Government. So that has just been a very
    powerful program that way.
        Mr. Rush. And the public housing-owned apartments, rental
    units, do you have any segmentation of the energy costs and are
    they--especially in newer public housing developments, are they
    meeting energy standards--our higher energy standards? Are you
    monitoring those, and what is going to be effective of those
    rental units and public housing?
        Dr. Hogan. Yes, so newer buildings certainly are meeting
    higher efficiency levels than the vast number of the older
    buildings that are out there, and we continue to work with HUD
    around standards for federally-owned buildings, and work to
    continue to engage with building owners of tenant-occupied
    space.
        Mr. Rush. I have--I think that in order to have a more
    vibrant and effective energy policy and energy culture more
    into the future, it is important that we frame--it is important
    that we introduce--it is important that we teach young people,
    even in the early grades of grammar school or grade school, the
    importance of energy. Do you see that as being a part of what
    you have done and what you plan to do in the future in terms of
    working with the school systems across the Nation?
        Dr. Hogan. Yes. We have done a number of educational
    initiatives with students in schools around energy challenges
    and other means so that we can educate people about energy in
    the school, energy at home, and create such a culture. I am
    happy to engage with you more on those topics.
        Mr. Rush. Well, I would like to work with your office to
    identify the different types of programs and incentives that
    exist for lower income constituents.
        Mr. Whitfield. Gentleman's time is expired.
        Mr. Rush. Thank you, Mr. Chairman.
        Mr. Whitfield. At this time, I recognize the gentleman from
    Illinois, Mr. Shimkus, for 5 minutes.
        Mr. Shimkus. Thank you, Mr. Chairman. I am going--I will be
    real brief.
        The original mission of the Department of Energy was to
    decrease our reliance on imported crude oil. The mission
    statement that I pulled up recently has changed a little bit.
    There are reports today that we have actually imported more
    crude oil from Saudi Arabia over the last month than we have in
    the last previous years. So put me down as a skeptic about the
    benefits of parts of the Department of Energy.
        Having said that, Mr. Chairman, I would like to put into
    the record a press release from the National--from the Consumer
    Electronics Association and National Cable and
    Telecommunications Association--announced today these
    companies, Comcast, DirecTV, DISH, Time Warner Cable, Cox,
    Verizon, Charter, AT&T, Cablevision, Bright House Networks, and
    CenturyLink, and Manufacturers Cisco, Motorola, and EcoStar
    Technologies, and Aris, they have come to an agreement to
    obviously establish set box--set top boxes that have--are
    energy efficient, use the same technology as some of the
    electronics, you know, the sleeping modes and stuff. This is an
    example of the industry doing it without government assistance
    or help. I also believe in the consumers, and I am also
    concerned that if we push environmental standards and rules and
    regs on the individual homeowners, that folks in the poorer
    regions of this country can't afford the more expensive homes
    that require new technology, versus homes that they want to
    purchase and live in.
        So with that, Mr. Chairman----
        Mr. Whitfield. Without objection.
        [The information appears at the conclusion of the hearing.]
        Mr. Shimkus. And I yield back my time.
        Mr. Whitfield. Gentleman yields back his time.
        I recognize the gentleman from California, Mr. Waxman, for
    5 minutes.
        Mr. Waxman. Thank you, Mr. Chairman.
        Dr. Hogan, I want to ask you some questions about the
    national energy efficiency standards for appliances and
    equipment, but before I turn to that, I want to briefly discuss
    a DOE rulemaking under Section 433 of the Energy Independence
    and Security Act. Section 433 requires new and substantially
    rebuilt federal buildings to meet strong efficiency performance
    standards to reduce the use of energy generated from fossil
    fuels. DOE issued a proposed rule in 2010, but it lacks
    sufficient detail for stakeholders to evaluate how the
    standards would operate in practice.
        Last summer, Senator Bingaman and I wrote to Secretary Chu
    requesting DOE to issue a supplemental notice of proposed
    rulemaking to address issues raised by stakeholders and allow
    for additional public comment. Your response indicated
    willingness to issue such a proposal, but we have been waiting
    since last August.
        Dr. Hogan, is DOE committed to issuing a supplemental
    proposal for implementing Section 433, and if so, by when?
        Dr. Hogan. I am happy to be here to be able to relay that,
    indeed, we are committed to issuing a supplemental proposed
    rule. We actually do have that supplemental proposed rule at
    this point with the Office of Management Budget under review,
    which is part of our process before it can be shared with
    stakeholders. So if you rolled back the clock just a few weeks,
    if you looked at the OMB system, it would have shown that there
    was a final rule under review and now it will show that there
    is a proposed rule under review.
        I think also in the letter that we sent to you, we
    indicated that we did understand some of the issues that were
    being raised, both by federal agencies and stakeholders, and
    things that needed to be reconsidered, such as using renewable
    energy credits potentially to meet some of the requirements,
    how to define a retrofit or renovation, as well as how to deal
    with CHP and those are the types of issues that we will be
    addressing in this supplemental notice.
        Mr. Waxman. Will this proposal address the concerns
    stakeholders have raised regarding how to define major
    renovation that potential use of energy credits for compliance
    and clarifying the treatment of combined heat and power?
        Dr. Hogan. Yes.
        Mr. Waxman. Section 433 was intended to reduce carbon
    pollution by promoting energy efficiency and renewable energy
    in government buildings in a common sense and reasonable
    manner. For example, it directs the Secretary to consider
    whether there are significant opportunities for substantial
    improvements in energy efficiency in determining whether a
    renovation is major and subject to the standards. Dr. Hogan,
    will you commit to work closely with the stakeholders
    throughout the rulemaking process to ensure that the rule is
    practical, reasonable, and effective?
        Dr. Hogan. Absolutely we will make that commitment.
        Mr. Waxman. Thank you. Dr. Hogan, in your testimony you
    referenced the tremendous effectiveness of energy efficiency
    standards for appliances and equipment. Could you please
    elaborate on that?
        Dr. Hogan. Sure. So the Department of Energy implements an
    appliance standards program. We implement them under
    congressional authorization to do so. I think there is always
    an interesting conversation around these standards. One of the
    ways to look at it is we are typically given authority to
    implement these standards when different states are taking
    different approaches, which creates a patchwork effect across
    the country that is very difficult for manufacturers to deal
    with. That is typically when they go to the Congress and ask
    for the Department to have such authorities.
        Mr. Waxman. Dr. Hogan, as I understand, the Department
    implements minimum energy conservation standards for more than
    60 categories of appliances and equipment. As a result of these
    standards implemented since 1987, energy users are estimated to
    have saved tens of billions of dollars on their utility bills
    in 2010. Is that right?
        Dr. Hogan. That is right. These standards that create a
    minimum level for the products that can be sold in this country
    are saving tens of billions of dollars.
        Mr. Waxman. I understand there are at least five proposed
    or final efficiency standards that have been sitting at OMB for
    over a year, and I understand that DOE has missed the
    rulemaking deadlines for another four standards that have not
    yet gone to OMB. I assume this is correct? Am I right?
        Dr. Hogan. That is in the ballpark, yes.
        Mr. Waxman. Well, it makes no sense. These standards save
    money, strengthen our economy, and reduce pollution. I urge the
    Administration to move forward and get them finalized.
        Thank you so much for your----
        Dr. Hogan. Thank you.
        Mr. Waxman [continuing]. Participation in the hearing.
    Thank you, Mr. Chairman.
        Mr. Whitfield. Thank you, Mr. Waxman.
        I might just say that in the spirit of all of the above
    energy policy, many of us would like to get rid of Section 433,
    because it certainly discriminates against area of energy
    supply.
        At this time, I would like to recognize the gentleman from
    Louisiana, the vice chairman, Mr. Scalise, for 5 minutes.
        Mr. Scalise. Thank you, Mr. Chairman. I appreciate you
    being with us, Ms. Hogan, and you know, as the chairman
    referenced, Section 433--and I think the ranking member of the
    full committee just was talking about that, too, and the
    rulemaking process. Can you tell me what kind of concerns you
    all have heard about these supplemental rules being developed?
        Dr. Hogan. What we hear is stakeholders are looking for a
    fair amount of flexibility in the implementation of the
    standards. So some of the questions that have been raised are
    around the definition of a major renovation, so what actually
    triggers these significant savings requirements, whether or not
    you can use renewable energy credits to meet some of these
    savings targets, and how it is that CHP would be counted. Those
    are the types of issues that we think we can address through a
    notice of proposed rule and effectively engage stakeholders in
    getting to resolution.
        Mr. Scalise. And it is something that concerns a lot of us,
    you know, just that section in general, you know, and I think
    we will be looking at it some more.
        The Federal Government is the largest user of electricity
    and fuel in the country, so I would like to know what steps you
    are taking to actually go throughout federal agencies and
    achieve real efficiencies and savings in the Federal
    Government.
        Dr. Hogan. So the Federal Government currently is subject
    to a number of savings targets, either through congressional
    action or through executive orders.
        Mr. Scalise. Which ones are actually saving taxpayers
    money? I am not talking about objectives and goals down the
    road years from now. How are you saving the tax--I mean, when
    we came in 2 years ago into the Majority, we said we need to
    start controlling spending, because 40 cents of every dollar is
    borrowed money, and we started with ourselves. We actually cut
    our own budgets here in the House. We cut the budgets for
    congressional offices, because we felt like you have to put
    your money where your mouth is. So, you know, as you all are
    going around telling everybody else to change their lifestyles,
    what kind of things are you doing within the Federal Government
    to save taxpayers money in terms of----
        Dr. Hogan. Sure. So take energy, the energy intensity of
    the Federal Government has been reduced by approximately 15
    percent over the last 10 years or more. Also on water savings,
    we are meeting significant savings targets there as well. Both
    of those lead to substantial dollar savings across the federal
    fleet.
        Mr. Scalise. I think a lot of us would say if you just, you
    know, turned out all the lights over at, you know, some of
    these agencies that are putting radical regulations in place
    that are costing us jobs and making families have to pay more
    for food and for electricity and for gasoline, you would
    probably not only become more efficient, you would help
    families and get this economy moving again.
        I just throw one suggestion out there as we are talking
    about efficiency, you know, the President today and every day
    for the last couple of days has sequesters going around. He has
    been flying around on Air Force One all around the country,
    trying to scare people about the effects, many of which are not
    even accurate on this sequester. I think you could probably be
    a lot more efficient, you might want to call the White House to
    tell him, just park Air Force One. I mapped it out. It is only
    less than 2 miles for the President just to drive right down
    here to the Capitol and sit down and let us work this thing out
    instead of flying all around the country, tens of thousands of
    miles, and using who knows how much fuel. You know, just park
    Air Force One and go the maybe 2 miles down here and just sit
    around a table and figure this thing out. But that might be a
    way to save a lot of energy. I am not sure if you want to pass
    that on to the White House. It might be a good idea.
        With that, I yield back the balance of my time, Mr.
    Chairman.
        Mr. Whitfield. Thank you, Mr. Scalise.
        At this time, I recognize the gentleman from California,
    Mr. McNerney, for 5 minutes.
        Mr. McNerney. Thank you, Mr. Chairman, and I appreciate
    your opinion on that, Mr. Scalise.
        I thank you, Dr. Hogan, for coming and testifying today,
    and for your hard work in the Department. I just have a
    question about rate of return. What--do you have sort of an
    average rate of return a household might experience by
    investing in energy efficiency technology? How many years would
    it take back--to pay back a $5,000 investment in new windows or
    something like that, if it is just taking out of energy
    savings?
        Dr. Hogan. Yes, so every home can be a little bit
    different, but I think there is a fair number of improvements
    somebody in their home can make that can have a payback of 3,
    4, 5, 6, 7 years.
        Mr. McNerney. So--and that is not including federal
    subsidies, or is that including?
        Dr. Hogan. That would be without any type of subsidies.
    That would just be based on doing insulation, windows, a more
    efficient furnace, et cetera.
        Mr. McNerney. So the homes in lower income areas are going
    to be less efficient than the new homes in the more affluent
    areas, so they would have quicker rate of return, perhaps, than
    the newer homes, so federal help in that would be very
    effective in terms of reducing energy use and saving people
    money?
        Dr. Hogan. Yes, I think people use incentives for any
    number of reasons. One is to help buy down the cost of these
    improvements, but also, as we know from utility programs around
    the country, you use some incentives just to even get people's
    attention, just to help get those improvements moving.
        Mr. McNerney. Thank you. I was very thrilled to hear you
    talk about water savings. You know, I am from California and we
    have water wars out there, and water savings is a double win,
    because you are not only saving water, but you are saving
    energy because so much energy is needed to produce and deliver
    water. Are there significant programs in place to incentivize
    western users, particularly in southern California, to save
    water?
        Dr. Hogan. We can look into that and get back. Certainly
    not at the federal level, but there is certainly the issues
    with water in California are being addressed by a number of the
    California agencies, and I know they are trying to put programs
    in place very similar to what the energy utilities have been
    doing for years.
        Mr. McNerney. OK, one more area of questioning. Again, I
    was thrilled to hear you talk about electric vehicles, but I
    have heard some concern about companies installing equipment
    that might service all kinds of vehicles. Are you working with
    companies to address potential concerns of these businesses for
    installing stations that can accommodate all vehicles? What is
    the plan in terms of getting this out there in the business
    world?
        Dr. Hogan. Yes, so we are trying to engage with
    organizations of all kinds around building out the right
    infrastructure around alternative vehicles. We have a Clean
    Cities Program that works with cities around, you know, helping
    them plan for the right infrastructure and build it out based
    on sort of what makes sense in their regions, and want to be
    doing this in as an efficient and effective a way as possible.
        Mr. McNerney. So we are moving forward aggressively in
    that?
        Dr. Hogan. Yes.
        Mr. McNerney. And I think the new automobile efficiency
    standards are going to go a long ways in terms of getting us to
    use less fuel, and I applaud your efforts on that.
        Dr. Hogan. Thank you.
        Mr. McNerney. Thank you. With that, I yield back, Mr.
    Chairman.
        Mr. Whitfield. Thank you very much.
        At this time, I recognize the gentleman from Texas, Dr.
    Burgess, for 5 minutes.
        Mr. Burgess. Thank you, Mr. Chairman. I appreciate you
    having the hearing, appreciate the opportunity to hear from the
    Department of Energy.
        Let me just say for the record, I am a big believer in
    energy efficiency. I do think that is the low-hanging fruit. I
    think that is the common ground that where certainly we can
    meet on many of these issues. Every July, I do an energy
    efficiency summit in the district back home in Texas. We have
    had speakers as diversified as David Porter for the Texas
    Railroad Commission to James Woolsey, the former Director of
    the CIA. I have tried to construct things in my life around
    energy efficiency, the home we live in, the hybrid car that I
    drive. So I am a believer in energy efficiency. I made those
    decisions based upon what was right for me and my family, not
    based on anything that the Federal Government told me to do.
        But since you are here, let me ask you a question. The
    number one question everyone in my district is asking is why
    are gas prices so high right now? Gasoline prices.
        Dr. Hogan. I guess it is based on the cost of production
    and the cost of moving it through our systems.
        Mr. Burgess. Well, if you are in the Department of Energy,
    presumably you have these discussions, correct?
        Dr. Hogan. The Department of Energy does have discussions
    about what we can do in the short term and in the long term to
    address gas prices. I think in the short term what we can do is
    really give people tips about how to use the gasoline that they
    are using as efficiently as possible, and then in the longer
    term, we can clearly be figuring out how to increase low-cost
    supply, as well as use alternative fuel vehicles and further
    development in that space.
        Mr. Burgess. Well, it is of concern that here we are in
    February, and back home in Texas right before I came up here, I
    filled up the hybrid with gasoline that cost $3.70 a gallon in
    Texas in February. That means in New York, after Memorial Day,
    they will be closing in on $5 a gallon gasoline. So I think
    this is a matter of some importance, and since the Department
    of Energy is involved in this, and this may have a direct
    effect on our economy generally. No one can forget that just
    before the meltdown that occurred in 2008, our gasoline prices
    and diesel prices were sky high, and they certainly had an
    effect on the economy, so I would think this would be something
    that you would be discussing internally and maybe even some
    interagency discussions. Do you ever pick up the phone and call
    the people at the Commodities Futures Trading Commission?
        Dr. Hogan. We do engage in conversations across the Federal
    Government, and we, of course, are very concerned about these
    prices and are doing what we can do at this point, yes.
        Mr. Burgess. What does Mr. Ginsler at CFTC tell you that he
    is doing that may dovetail with what you are doing with the
    energy efficiency in the Department of Energy?
        Dr. Hogan. We can give you a more detailed explanation, if
    you would like, on what the Federal Government is doing in
    this----
        Mr. Burgess. I would appreciate that very much, and again,
    I think that would be of general interest to people who are
    maybe watching this on C-SPAN.
        Now, in answer to--or actually, Mr. Waxman made a point
    about that he wanted to see things that were common sense
    directions and applied in a reasonable manner, and I think he
    was talking about the Federal Energy Management Program. So you
    have the jurisdiction of federal buildings under your control,
    the energy efficiency of federal buildings? Is that correct?
        Dr. Hogan. That is correct.
        Mr. Burgess. Is this building under your control?
        Dr. Hogan. I believe this is under the Office of the
    Architect of the Capitol.
        Mr. Burgess. But you know, I will just say from my
    observation, having been in the congressional office buildings
    now for a few years, since 2007, 2008. Someone came in and
    changed all my light bulbs to CFLs. Nobody told me they were
    going to do it. Nobody warned me not to break one over my head
    one night, but there I was. I had CFLs in all the offices.
    Well, that is great. We are perhaps saving some energy by doing
    that, but no one has ever done, as far as I can tell, an energy
    audit of the Rayburn Building and discussed the effect of
    having single-pane glass on all of the windows. I have an
    office that faces west. In the summertime, it gets beastly hot.
    Is this something that your office might be interested in?
        Dr. Hogan. We are happy to have a conversation about how to
    do an audit of the Capitol buildings----
        Mr. Burgess. Well, I am just shocked that the architect of
    the Capitol has not reached to you, as part of your mission is
    for the energy efficiency of federal buildings, and this is a
    big federal building that consumes a lot of energy. You changed
    all the light bulbs, but maybe there were other things you
    should have been looking at as well.
        Dr. Hogan. Well I think if we engage the Office of the
    Architect, we will see that they are doing a lot more around
    the Capitol buildings, and probably just started with, as we
    were saying, the low-hanging fruit, and certainly doing those
    audits is a cornerstone of what we are doing across the entire
    federal family.
        Mr. Burgess. So can I assume that there are conversations
    between your office and the Office of the Architect of the
    Capitol as far as the energy efficiency of--the energy
    consumption of federal buildings, at least on the House side?
        Dr. Hogan. We have been engaged with the Office of the
    Architect in their plans, yes.
        Mr. Whitfield. Gentleman's time is expired.
        Mr. Burgess. Well, Mr. Chairman, maybe if you could share
    some of that information with our office as well. We would
    appreciate that.
        Mr. Whitfield. OK.
        Mr. Burgess. Thank you, and I will yield back.
        Mr. Whitfield. At this time, I recognize the gentleman from
    New York, Mr. Tonko, for 5 minutes.
        Mr. Tonko. Thank you, Mr. Chair.
        Dr. Hogan, welcome, and I have a couple of questions about
    combined heat and power, and the President's 2012 Executive
    Order on industrial energy efficiency.
        What role do you see for the--is the federal procurement
    going to play in achieving the President's goals of deploying
    more combined heat and power systems?
        Dr. Hogan. So certainly as the largest energy user and as a
    big procurer of equipment, the Federal Government has a big
    role to play, and we are currently trying to put together a
    broader strategy on what that role could look like. Though what
    we are doing in the immediate term is exploring extending a
    pilot program that we have underway in the ESPC space. We have
    been standing up a pilot program called ENABLE to allow the
    ESCOs to engage in the smaller buildings that are within the
    federal family that typically get overlooked, and we are
    looking to expand that ENABLE pilot to encourage combined heat
    and power or allow investments in a performance contracting
    way.
        Mr. Tonko. Thank you, and as part of the effort to identify
    policy or regulatory barriers to investing in CHP, the
    Executive Order states that federal agencies will convene
    stakeholders to solicit their ideas and input. Is DOE involved
    in that list of agencies?
        Dr. Hogan. Yes, if I am thinking about the same. So the
    Executive Order encouraged us to go out and engage any number
    of stakeholders around how to advance CHP. We are having a set
    of regional dialogues on this topic, the next one in a couple
    of weeks in Baltimore, around the things that we can do, and
    then we are also engaging in a report to Congress that was part
    of the energy bill passed this past December to do a much more
    detailed analysis around the barriers in the way of CHP and the
    things we can do to remove them.
        Mr. Tonko. I know that back in--I think it was '98, a
    roadmap was developed to take the--to double CHP from, what was
    it, 46 gigawatts to 92, in that neighborhood----
        Dr. Hogan. Yes.
        Mr. Tonko [continuing]. And they somewhat met that goal,
    that target deadline. Where do you believe the best
    opportunities exist today for deployment of CHP?
        Dr. Hogan. I think we are at a very interesting point right
    now for CHP in that there are many, many, many opportunities,
    from large heat process type industries to smaller industries
    and into the residential and commercial sectors. I think you
    will hear from another panel member today on this topic, but I
    think also as we look at the post-Sandy period of time, there
    is a lot more interest in things that offer enhanced energy
    security linked to stave off the aftermath of these storms.
        Mr. Tonko. And in the midst of all of that, do you see a
    particular industrial sector that might be targeted for best
    retrofitting to CHP?
        Dr. Hogan. So the industrial sectors that make the greatest
    sense are ones that have some amount of heat load, so again,
    that can be pretty broad.
        Mr. Tonko. In the efforts of the State of the Union for the
    race to the top for energy efficiency, how is that going to be
    developed? I am asking that from my perspective in the State of
    New York, which has been rather aggressive about doing energy
    efficiency. Do we get impacted for being a progressive State in
    regard to a baseline that might be well in advance of other
    States? How would we fare in that whole race to the top?
        Dr. Hogan. So we will be happy to engage stakeholders in a
    conversation about how this program will be designed. At this
    point, the next point when there will be more information about
    this program will be in the rollout of the President's budget,
    and then after that we will be happy to engage with you more
    directly.
        Mr. Tonko. I would just indicate a concern there that if
    you have done great work, you ought to be rewarded for that and
    continue to do more, and the consumers should not be held back
    or impacted--negatively impacted because of it.
        I am just about out of time. I was going to go into
    weatherization, but then let me just make a pitch for
    weatherization activities. Even though the stimulus did a great
    deal of investment to the good, I believe there is a lot of
    unfinished business and would strongly encourage that
    opportunity. Thank you very much.
        Mr. Whitfield. At this time, I recognize the gentleman from
    Nebraska, Mr. Terry, for 5 minutes.
        Mr. Terry. Thank you, Mr. Chairman, and thank you for being
    here today.
        What is the biggest barrier to an increased use of the
    energy savings performance contracts by the Federal Government?
    The barriers that are of concern?
        Dr. Hogan. I think one of the barriers is really just
    getting over the hurdle of having many different agencies go
    down this path. It takes a fair amount of knowledge to go and
    do that, and that is what the Federal Energy Management Program
    is set up to do. But just because we offer those services
    doesn't mean people necessarily want them. And again, it is
    just because everybody is doing so much in their day-to-day
    jobs. And I think that is one of the barriers that the
    President's Performance Contracting Challenge is really helping
    overcome. Challenging the agencies to commit to $2 billion with
    energy savings performance contracting means each agency has
    its own goal and each agency is working through a set of
    projects to meet those goals. So I think we will have largely
    addressed that particular barrier by December 2013.
        Mr. Terry. All right. On weatherization, you may have read
    some stories from my district where there were several million
    dollars issued for weatherization in the city, and it was
    something like 14 or 15 homes that were actually provided the
    services. But yet, the money is gone. And so weatherization, at
    least in our area, is not a program that is held in high
    esteem. It is an example of the waste and fraud.
        So could you point out the internal DOE structure to
    oversee the weatherization program and to ensure that 80
    percent of it, the dollars that are provided, aren't being used
    for administrative purposes?
        Dr. Hogan. Sure. First let me say that issues with
    weatherization really were the exception and not the rule, and
    there is a very comprehensive set of quality assurance
    procedures in place, on top of the fact that only a certain
    portion of the dollars can be used for administrative purposes.
        Mr. Terry. And what percentage is that?
        Dr. Hogan. I think it is about 20 percent.
        Mr. Terry. Twenty percent is allowed for administrative
    purposes----
        Dr. Hogan. In all.
        Mr. Terry [continuing]. And then the rest has to----
        Dr. Hogan. Be put to work to improve low-income family
    homes. So yes.
        Mr. Terry. And so when--how would--there were several
    stories in our local paper outing this scam. Do those rise up
    to--in DOE, do people catch those so you can begin an
    investigation, and how is an investigation into that type of
    waste and fraud--well, what triggers an investigation? Can you
    investigate that?
        Dr. Hogan. Absolutely we can investigate that. Any time we
    hear of an issue, it is investigated and we do everything in
    our power to correct it and recoup any dollars that may have
    been misused.
        Mr. Terry. Will you check for me and get back to me with
    what you have done on the Omaha situation with the waste and
    fraud in that program?
        Dr. Hogan. We would be happy to do that.
        Mr. Terry. Thank you. Yield back.
        Mr. Whitfield. Thank you, Mr. Terry.
        At this time, I recognize the gentlelady from California,
    Ms. Matsui, for 5 minutes.
        Ms. Matsui. Thank you very much, Mr. Chairman. Thank you,
    Dr. Hogan, for being here.
        Energy efficiency is a key component for shifting our
    Nation towards a clean energy economy. We have made great
    progress in changing the way we use and conserve energy, but we
    need to do much more. I believe one area where we can make a
    significant impact is by providing sound financing mechanisms
    to individuals eager to make energy efficiency upgrades to
    their home. In fact, last fall in my district of Sacramento, we
    launched a revamped public-private partnership born out of the
    Recovery Act funds to encourage residential energy upgrades.
        The demand for residential energy retrofits is strong.
    Property Assessed Clean Energy, or PACE programs, are one
    approach to financing home retrofits. With PACE, homeowners can
    finance energy efficiency improvements without an upfront cost
    through a voluntary assessment on their property.
    Unfortunately, PACE programs have faced some major hurdles.
        Dr. Hogan, does DOE support innovative financing mechanisms
    that would help homeowners make these important upgrades?
        Dr. Hogan. Yes, through our work at the Department of
    Energy, we are very supportive of innovative financing
    mechanisms and doing everything that we can to help pull out
    the lessons learned and share them with others, as well as
    working to help States and local governments continue to
    leverage and improve the effectiveness of the revolving loan
    funds that they were able to stand up with Recovery Act
    dollars.
        Ms. Matsui. OK, now is there a way to get PACE programs
    back on track through administrative means? Are you or the
    White House still engaging FHFA to restore this program?
        Dr. Hogan. I think what we have all heard from FHA is FHA
    would like more data to better understand how these loans
    perform, and so the Department of Energy is actively engaged in
    working with others to try and pull together the type of data
    that the finance industry needs to understand this loan
    performance.
        Ms. Matsui. So you are looking at probably similar
    approaches to facilitate this growing demand?
        Dr. Hogan. Exactly.
        Ms. Matsui. OK, great.
        Dr. Hogan, some have suggested that we don't need
    government policies to boost energy efficiency. They say that
    if customers really wanted energy efficiency, the market will
    supply it. But my understanding is that there are a lot of
    market failures in this area. The classic example is the
    situation where the landlord has no incentive to weatherize an
    apartment because a tenant pays the utility bills. Dr. Hogan,
    could you please discuss some of the market failures that allow
    energy waste to persist, even when it could be cost effective
    to deploy efficiency measures, and are these market failures
    significant?
        Dr. Hogan. I think we can see from the opportunity that we
    all talk about over and over with energy efficiency that there
    is a list of market barriers that hinder people from making
    what might be the economically rational choice, and that can
    just be that some of the more efficient products do cost a
    little bit more up front, even if they have a very attractive
    payback associated with them. And some of it is just hard to
    get the information so that you know what that payback would
    look like. So those are the types of things around which
    policies can be very helpful in helping people get these
    savings.
        Ms. Matsui. Could you explain further on that what the
    policies might be?
        Dr. Hogan. Better information and clearly, the reason we do
    appliance standards as well is because we can help consumers
    get the savings that are there from the more efficient products
    whenever there is a cost effective opportunity to do so.
        Ms. Matsui. OK. I just also want to follow up on what my
    colleague from New York has talked about, about the race to the
    top for efficiency. You know, California has been involved in
    this a long time, since the '70s with the grandfather of energy
    efficiency, Art Rosenfeld, and so we don't want to be, in a
    sense, starting from baseline, which is artificial in a sense,
    so we would love to have that discussion with you.
        I have no further questions, so I yield the balance of my
    time.
        Mr. Whitfield. Thank you very much. At this time, I
    recognize the gentleman from Louisiana, Dr. Cassidy, for 5
    minutes.
        Mr. Cassidy. I am going to defer to my gentleman--my
    colleague from Texas for a turn, please.
        Mr. Whitfield. Gentleman from Texas is recognized.
        Mr. Olson. I than the chair, and good morning, Dr. Hogan.
    Welcome. I appreciate your time and expertise.
        One of the instances where energy is lost, regardless of
    the initial source, is in transmission. The wires we use are
    largely copper. They lose significant amounts of energy as they
    travel from place to place. Many people may not realize this
    because Texas is the number one producer of oil and gas, but we
    are the number one producer of wind in America. The problem
    with our wind is it is generated in the panhandle in western
    Texas. We need it in eastern Texas, Houston, Dallas, Ft. Worth,
    San Antonio, Austin--in some cases, 700 miles away. But
    University of Houston is trying to change that. Having recently
    been named a Tier I research university and being led by an
    innovative and hands-on chancellor, Dr. Randy Coture, U of H
    has created an energy research park. One project that they are
    doing at the University of Houston energy research park is
    working on superconducting wires that are up to 20 percent more
    efficient than current wires. This is not just an academic
    project. U of H intends to prove this works by rewiring their
    main campus with these superconducting wires. In true Texas
    tradition, they are going all in, putting their future--and
    more importantly, the future of over 300,000 students--on the
    line. Are you aware of this project being developed at the
    University of Houston energy research park?
        Dr. Hogan. I personally am not, but it certainly does sound
    very exciting.
        Mr. Olson. Well since you are not familiar with it, I would
    like to offer you a chance to come down and see it. I mean, if
    you have got some time, we go right here to Reagan
    International Airport, have a direct shot on United Airlines to
    Intercontinental Airport down in Houston. I would love to take
    you down there and see the energy research park.
        Dr. Hogan. We would be very interested.
        Mr. Olson. Earlier today I had a meeting with the people
    from ABS, which is the American Bureau of Shipping. One energy
    efficiency they are looking at is natural gas, in fact, liquid
    natural gas for transports of maritime vehicles. In fact,
    Nasco, the shipbuilder, is actually building their first
    project where one of the big ships will be powered by LNG,
    going to the Caribbean area and that part of the country. What
    do you think about that issue for energy efficiency, natural
    gas as opposed to traditional fossil fuels?
        Dr. Hogan. Certainly we can have a conversation about that
    as well.
        Mr. Olson. OK. Well one further question for you, ma'am. I
    mean, again, our biggest challenge right now--one thing we have
    in west Texas as well, getting to the Defense Department, they
    are being very innovative with their energy resources, their
    needs. Fort Bliss in El Paso, the largest base--the largest
    geographic base in America, is actually doing great things with
    solar because they have the sun out there. In fact, they are
    hoping to be actually a net exporter some time, getting energy
    off the base and helping local communities. I mean, that is one
    example of what the Federal Government can do, but again, my
    biggest concern, what I am hearing from back home, is let the
    market decide what the technology is. Don't enforce some sort
    of technology from--so I ask your assistance going forward.
    Listen to the market and help us get this superconducting
    technology going on. Come on down and see it. I would really
    appreciate it.
        Dr. Hogan. Terrific.
        Mr. Olson. Thank you. Yield back the balance of my time.
        Mr. Whitfield. At this time, I recognize the gentlelady
    from Florida, Ms. Castor, for 5 minutes.
        Ms. Castor. Thank you, Mr. Chairman, and welcome. Secretary
    Hogan. Thank you for meeting with me a couple of months ago to
    advise on all the great things that are going on with energy
    efficiency. I think there is so much more to do all across the
    country for families and businesses, so I encourage you to keep
    at it, and we can unleash the powers of American ingenuity and
    really empower families and businesses, and save money at the
    same time.
        I also wanted to thank you for your attention to the
    historic investments under weatherization. Under the Recovery
    Act, I think you said we were able to weatherize one million
    homes. And let me tell you what that means in my area, in the
    Tampa Bay area in Florida. That means that thousands of the
    folks that I represent are saving money on their energy bills,
    while at the same time, we created a lot of jobs. We created a
    lot of jobs in a time when the unemployment rate was really
    hurting families, and the legacy it has left is very important.
    Now our community colleges, with that investment, have ongoing
    weatherization training initiatives. They are still creating
    jobs, even though the money, the investments from the Recovery
    Act have tapered off. For families that struggle to get by, if
    they are able to save a few hundred dollars or a thousand
    dollars a year on their electric bill, that is very meaningful
    to them. That means they can do better at the grocery store,
    they can do better with other bills that come in. So thank you
    for your attention to that.
        Is all of the investments under the Recovery Act for
    weatherization, is that all invested now, or are States across
    the country still rolling out any of those monies?
        Dr. Hogan. The vast majority of the Recovery Act dollars
    for weatherization is now spent, so yes, it is----
        Ms. Castor. And what is the status of ongoing
    weatherization efforts?
        Dr. Hogan. That is a good question. Right now, given the
    continuing resolution that we are now under, we are working
    hard to give the States the information they need to go into
    their next program. It is a little bit complicated because of
    the continuing resolution which continues the weatherization
    budget at a level well below where it had been historically----
        Ms. Castor. It is just such a huge payback for the federal
    dollars that we can invest back home in our local communities
    that save our constituents money, so that money comes back to
    them, then we create jobs, and we are still kind of stuck at
    this 7.9 unemployment rate, and it is just difficult to watch
    the Congress self-inflict a wound and set us back at a time
    when the economy is getting better and I see great improvements
    and people are hiring.
        So we--that is our responsibility here, and I encourage my
    colleagues to think about that as these indiscriminate across-
    the-board cuts--this is an area that we should continue to
    invest in, because it has paid such great dividends across the
    country.
        And for my colleagues that worry about gas prices, I have
    to say, we are fortunate to be living through a time when we
    have made such progress in fuel economy for our vehicles. You
    know, I have a member of the family that bought--is leasing one
    of those electric vehicles. Since October, he has not visited a
    gas station. He has not purchased gas. I know my friends from
    Louisiana and the gas producing areas, they probably don't like
    that, but you know how much money that is saving and how much
    that is saving families across the country? This is remarkable
    progress. It is saving consumers money. If you can buy a fuel-
    efficient vehicle, on average, that means that $1,700 back in
    the pocket of consumers where they can spend it on their
    families or their small businesses. It helps with climate
    change because the carbon dioxide from burning gasoline and
    diesel contributes to the--to global warming and changes in the
    climate. It is reducing our oil dependence costs. Dependence on
    oil makes us vulnerable to oil market manipulation and price
    shocks. It increases energy sustainability. Oil is a non-
    renewable resource, and we cannot sustain our current rate of
    use indefinitely. So using it wisely and conserving is,
    frankly, just smart.
        Looking ahead, what are the challenges you see with fuel
    economy and lengthening the life of the batteries of these
    vehicles, and what are you optimistic about?
        Dr. Hogan. I think we are very optimistic about what we can
    do across a whole set of vehicle technologies. Certainly I
    already spoke to the new research effort around electric
    vehicles and what we can do there to make them much more cost
    competitive over the next 10 years, as well as convenient from
    the standpoint of the consumer, and then, of course, make
    available something along the lines of a dollar per gallon
    gasoline through electricity.
        I think we are also interested in what we can do with
    advanced combustion. We are doing a lot more there as well, and
    we think we will be very well-positioned to be working with
    U.S. auto manufacturers to meet the CAFE AE1 standards as they
    continue to ramp up in the coming years.
        Mr. Whitfield. The gentlelady's time is expired.
        At this time, I recognize the gentleman from Louisiana--oh,
    Mr. McKinley from West Virginia for 5 minutes.
        Mr. McKinley. Thank you, Mr. Chairman, and thank you for
    your patience, Dr. Hogan.
        Let us just start by saying I am very supportive of all the
    initiatives on energy efficiency, and as one of just two
    engineers in Congress, it is a delight to be able to try to
    work and improve that a little further.
        But I have got two questions for you. The GAO came out 2
    years ago with a report that said there are 11 agencies
    handling green buildings or 11 agencies offering 94 separate
    initiatives, and they said that--by their own report, they are
    saying that we can benefit with more collaboration. Can you
    share with us briefly what you have accomplished over the last
    2 years in either combining them, because with budget
    constraints right now, wouldn't it make more sense instead of
    having 11 agencies handling green buildings to just a handful
    or fewer? Have you accomplished any of that?
        Dr. Hogan. Yes, we are doing a lot of coordination across
    the federal agencies----
        Mr. McKinley. Different than what you were prior to 2 years
    ago?
        Dr. Hogan. We are. I think we are getting more and more
    efficient as we go forward. I would also say, just going back
    to that GAO study, when you just count things it makes it look
    like there may be more duplication overlap than there may
    actually be, because I oversee the Federal Energy Management
    Program, which has an important role in engaging with each of
    the agencies with their senior sustainability officials around
    their work.
        Mr. McKinley. Could you get back to me, please, with some
    of the--what you have done to help consolidate, so that we can
    use the money--instead of doing it administratively, wouldn't
    it make more sense if we could pass that on to the consumers in
    some fashion by reducing those costs at the Federal Government
    level?
        The second issue I have is a bit of a paradox. Someone at
    my former firm--we designed a lot of schools and a lot of
    public buildings, and we knew that often what the cost was for
    operation of an older building, because they didn't meet all
    the new standards, the air quality and/or air quality
    standards. There was a cost that you can assume in the
    operation, but now under the new standards, new buildings are
    typically--for operational costs are increasing in costs
    primarily because of the standards that are set for fresh air
    to come into a classroom where you have to have four to twelve
    air changes per minute--per hour, as compared to where it had
    been before where we had--maybe sometimes where you had an
    individual unit, they would close the damper and there was no
    fresh air coming into Johnny's classroom. So now we are
    introducing that. So we have a paradox. We are trying to
    improve our air quality and efficiency, but we are increasing
    costs to the consumer. How do you--how are you dealing with
    that?
        Dr. Hogan. We certainly understand that issue and we are
    working to make sure that we are looking holistically at the
    costs for these buildings. Certainly we want to be promoting
    technology that meets our national objectives, but in a way
    that also keeps the costs in a good space for the people that
    have to pay those bills, and really offer the savings that are
    there to be gotten. So we are looking at the O&M costs.
        Mr. McKinley. You do recognize, then, that the new
    standards--and I subscribe to them. I am in agreement with them
    because they are improving our indoor air quality, but they are
    raising the cost of operation.
        Dr. Hogan. When you need mechanical ventilation there is a
    cost there, but I think when you look across everything that is
    going on in these buildings, you see that that can be done in a
    very low cost way. So you are delivering a much more lowe-cost
    building for people to be living in.
        Mr. McKinley. Do you see--with these standards, do you
    accept--I guess I am building back off that same premise,
    because I am glad we are providing fresher air into that, but
    do you acknowledge that perhaps the old buildings--in some of
    these buildings, the indoor air quality wasn't as good as it is
    today by what we are doing, by bringing in fresh air?
        Dr. Hogan. I think that is a complicated question that
    requires a longer conversation.
        Mr. McKinley. Stop by. I am over in Cannon. Let us see if
    we can't follow up with that, because I think we have a dilemma
    here in Congress about indoor air quality versus outdoor air
    quality, and I would like to make sure we have a good
    discussion about that so when those asthma attacks that people
    refer to often perhaps are being caused by our indoor air
    quality and the fact that we are not adhering to the various
    codes and standards that have been set forth. So if you could
    please stop, I would like to do that very much.
        Thank you very much. I yield back my time.
        Mr. Whitfield. Gentleman's time is expired.
        Mr. Griffith, do you have any questions? Mr. Gardner? Dr.
    Cassidy? Dr. Cassidy is recognized for 5 minutes.
        Mr. Cassidy. Good afternoon.
        Young families want the most square footage they can get in
    the place with the best school district. For them to invest in
    energy saving things which have only a payoff over 10 years
    really defeats that purpose, and so the way they are trying to
    scrape money together, how can I get the best square footage in
    the best school district if I invest $3,000 in which the payoff
    is only over 10 years, that is that many fewer square feet I
    can purchase. Does that make sense? You look quizzical, so I am
    not sure I am being clear.
        Dr. Hogan. I understand what you are saying.
        Mr. Cassidy. So really if we are talking about market
    mechanisms, it seems like much of what we discuss almost is by
    fiat, almost by definition, because really under the current
    way we finance mortgages, that family, again, has to make that
    tradeoff, less square footage or not as good a school district
    in order to have some of these things which we all agree would
    be wise for energy efficiency. Again, does that make sense?
        Dr. Hogan. Yes, I think the way we have been looking at
    some of these home purchases is through the total cost of
    ownership, so if you look at the cost of a mortgage plus the
    cost of the energy bill----
        Mr. Cassidy. Now that, though, right now--we have
    investigated this. The cost of energy bill is not currently
    used by mortgage underwriters in terms of discerning someone's
    ability to get a mortgage. So when you look at it, is that
    really impacting that young family with three kids trying to
    get the better home sort of thing?
        Dr. Hogan. Yes, there is an issue as to where that young
    family is and how large a mortgage they can get and whether
    they are at that maximum level of a mortgage. But I think what
    we have seen in recent years is that hasn't been the biggest
    barrier.
        Mr. Cassidy. Now, I will tell you, when I saw--this came to
    mind last year because of Senators Isaacson and Bennet put
    forward their SAVE Act, we have been thinking the same concept,
    but when I spoke to bankers, they really do not include the
    energy cost in a mortgage, or somebody's suitability. Frankly,
    we can't talk about market mechanisms until we address this if
    we are thinking of that young family. Would you concede that,
    and if so, how do we proceed?
        Dr. Hogan. Well I think we can proceed in a number of ways.
    One is let us continue to have the conversation on the role of
    energy bills, because certainly a lower energy bill does give a
    household more money to spend----
        Mr. Cassidy. But again, if the payoff is 10 years for that
    energy saving intervention, really, that family doesn't look at
    that 10-year savings. Does that make sense?
        Dr. Hogan. You mean because it is----
        Mr. Cassidy. They are on a cash flow basis. It is not as if
    they have got a lot of money in the bank that they can invest
    and see the payoff over 10 years. They are just now meeting
    their bills, and anything that pays off over 10 years is
    probably not uppermost in their mind.
        Dr. Hogan. There is the standpoint from the family. There
    is the standpoint from the banker, right, but from the
    standpoint of the family, if you have a more efficient home and
    you had to pay a little bit extra and it is rolled into your
    mortgage, as an example----
        Mr. Cassidy. Yes, but that doesn't occur right now.
        Dr. Hogan. But it can. Those mortgages are available.
    Energy efficient mortgages are available. Part of it is an
    access and awareness issue as opposed to----
        Mr. Cassidy. I would love to see that, because when I spoke
    to the bankers--we had some people come in because we were
    pursuing this--and the bankers said listen, we have a
    proprietary mechanism by which we determine if somebody is
    eligible--it is proprietary to our bank, not industry-wide, and
    we do not include this and we are not quite sure how.
        Dr. Hogan. OK.
        Mr. Cassidy. So if you have those, we would love it if you
    could see that.
        Do you have awareness of Isaacson and Bennet's SAVE Act?
        Dr. Hogan. I do.
        Mr. Cassidy. What are your thoughts about that?
        Dr. Hogan. I think in general we are very supportive of the
    goals of the proposals that can help motivate home
    improvements.
        Mr. Cassidy. So let me just switch subjects. When I speak
    to home builders, they look at the regulations put out by DOE
    and they feel that sometimes something that is proscribed for
    one place wouldn't apply in another. And little things, for
    example, in my State, in Louisiana, if you plant an oak tree on
    the west or south side, frankly, you will get a heck of a lot
    of benefit, but there is no kind of calculation in terms of
    that, in terms of the overall cost efficiency of a home. Their
    suggestion was that you bring in stakeholders coming up with
    metrics so that someone could pick and choose, saying listen,
    insulation really works well here. It is worth bang for the
    buck, and this other intervention cost me a heck of a lot of
    money, but I am not going to get a payoff for 20 years.
    Probably I will have sold the home by then. Any possibility of
    that sort of thing?
        Dr. Hogan. I think there is a robust conversation ongoing
    through the codes organizations about a more performance-based
    path to get to an outcome in the least costly way. I think
    people are always interested----
        Mr. Cassidy. So they feel as if your DOE regulations,
    though, are not outcomes based but rather they are sort of you
    put in this amount of foam and this amount of this, and their
    criticism--and I have learned to say what I have been told, not
    what I know, so Dr. Hogan, you may say oh my gosh, you are
    totally wrong on this, but their criticism is that your
    standards are less performance-based and more ``you shall put
    in 6 inches of foam'' sort of thing.
        Dr. Hogan. And both pathways are there. There are
    performance-based provisions in the codes. I wouldn't quite
    call them our codes. These are codes that are created by model
    code authorities and the Department of Energy's role has been
    to do an energy savings determination relative to those codes
    to show that they do offer meaningful savings over the prior
    code, so they are a stakeholder-driven process to which the
    Department of Energy will also bring technical information to
    the table for consideration, which is why there is an ongoing
    venue through which we can have all of these conversations.
        Mr. Cassidy. Thank you. Thank you, and I yield back.
        Mr. Whitfield. Gentleman's time is expired.
        At this time, I am going to recognize the gentleman from
    New Hampshire as a valuable member of the Energy and Commerce
    Committee. He doesn't happen to serve on the Energy and Power
    Subcommittee, and so he has waited patiently until the end, and
    now he is recognized for 5 minutes for questions.
        Mr. Welch. Mr. Chairman, I thank you very much, Mr. Ranking
    Member. By the way, having this hearing on efficiency this
    early in our congressional term is tremendous, so I want to
    thank you and I think all of do.
        In listening to this and talking to my colleagues, a couple
    of things. Number one, there does seem to be strong bipartisan
    cooperation and leadership on efficiency, and then second,
    there is really three questions that this committee has got to
    sort through, I think. Number one, what can the government do
    on its own. Congressman Gardner and I are really focused on
    these energy saving performance contracts, and I want to come
    back to this, but that is completely within the ability of
    government on its own to do useful things to save the taxpayer
    money, and also make a contribution to cleaning up our
    environment.
        Second, there is a question of what can private citizens
    and companies do on their own? And I know Congressman Burgess
    has been very much--on his own personal situation, very much
    focused on energy efficiency and has some skepticism about
    steps that government takes that are either unnecessary or get
    in the way. Those are fair questions, and I hope our committee
    will ask those so that it ends up that we do is helpful and
    doesn't get in the way of what private sector folks can do on
    their own.
        But then third, there are areas where it is possible for
    the private sector and the public sector to cooperate and then
    leverage the partnership to be successful. Congressman McKinley
    and I are working on efforts to try to provide incentives to
    homeowners to be able to do things that otherwise they would
    not be able to do.
        So this is really just a plea to some extent to our
    committee that even though there will be a lot of legitimate
    questions raised on a practical level about what is the
    government role, what is the private role, what is the
    partnership role, I hope we will sort through those questions
    to have as the outcome, Mr. Chairman, productive steps that
    will allow the taxpayer and a company and the individual to
    save money. And this initial hearing is really helping us on
    our way.
        I do want to talk to you about the energy saving
    performance contracts that I mentioned Mr. Gardner and I are
    really quite focused on. The President had a goal of $2
    billion. I mean, what is better than being able to get a
    company to sign up and be paid essentially by sharing in the
    savings? How is that coming along, and is it possible, if this
    is successful, that reports I hear, that there could be up to
    $20 billion in savings that we could expand this effort?
        Dr. Hogan. Yes, so this was announced a little over a year
    ago, $2 billion, and then each agency took on a goal that adds
    up to that $2 billion, and the agencies are moving forward to
    put those projects in place and sitting here today, we are on
    track to meet that $2 billion savings goal by December 2013,
    which indeed is very exciting, and I think that will allow the
    agencies to step back and work with the White House to
    hopefully come up with a phase two to this effort, but it is
    probably a little premature to say what that would look like.
        Mr. Welch. And how about the utility performance contracts,
    the private sector efforts by our utility companies?
        Dr. Hogan. So this challenge by the President included both
    ESCOs as well as the utility energy savings contracts, and
    those are in this mix as well.
        Mr. Welch. OK. Dr. Cassidy has left, but I was listening
    very carefully to his concern about performance-based approach.
    Vermont does have--I think we are the only State that has an
    energy savings utility, and it is because there has been a
    sense in Vermont that the best--the cheapest electricity and
    the--is the unit of electricity that we don't utilize. But the
    performance-based approach does seem to make an awful lot of
    sense to the Vermont electricity efficiency utility. How about
    to you?
        Dr. Hogan. So I think performance-based approaches really
    do make sense for all the reasons that people were raising
    earlier. You are not trying to pick a technology, you are
    trying to get to an outcome. So I think conceptually it really
    does make sense.
        I think the flip side of it is when builders are building a
    home, a lot of them say we just want to know what to do in this
    region that is going to meet that performance-based approach.
    They don't want to be doing detailed----
        Mr. Welch. So you would be glad to work with the committee
    or folks like Dr. Cassidy to focus on that performance-based
    outcome?
        Dr. Hogan. Yes.
        Mr. Welch. OK, thank you.
        Thank you very much, Mr. Chairman. I yield back.
        Mr. Whitfield. Peter, I knew you were from Vermont. I am
    sorry, I said New Hampshire.
        Mr. Welch. Well, that is OK, but----
        Mr. Whitfield. We are glad you are here.
        Mr. Welch. Thank you. It is good to be here.
        Mr. Whitfield. Well, that concludes the testimony of Mrs.
    Hogan and questions for her, so Dr. Hogan, thank you so much
    for being with us today. We look forward to working with you as
    we continue forward.
        At this time, I would like to call up the third and final
    panel. On the third panel, we have Mr. Kevin Kosisko, who is
    Vice President Service, North America ABB, and he is testifying
    on behalf of the National Electrical Manufacturers Association
    and the Industry Energy Efficiency Coalition. We have Ms.
    Britta MacIntosh, who is Vice President of Business
    Development, NORESCO, who is testifying on behalf of the
    Federal Performance Contracting Coalition. We have Mr. James
    Crouse, Executive Vice President of Sales and Marketing,
    Capstone Turbine Corporation, who is testifying on behalf of
    the U.S. Combined Heat and Power Association. We have Ms. Ellen
    Burt, Senior VP and Chief Customer Officer, Pacific Gas and
    Electric Company. We have Mr. Neal Elliott, Associate Director
    for Research, American Council for Energy Efficient Economy,
    and we have Mr. Ted Gayer, Co-Director, Economic Studies and
    Joseph Pechman Senior Fellow at the Brookings Institution.
        So I would like to welcome all of the members of this
    panel. Thank you for your patience, and thanks for agreeing to
    join us today to give us your views, thoughts, and expertise on
    this important subject. As you know, each one of you will be
    given 5 minutes for your opening statement, and I would remind
    you to just be sure that your microphone is on. You will notice
    a couple of boxes on the table in which--when it is green, it
    means talk. When it is red, it means stop, but we frequently go
    over, so--but anyway, welcome and we will begin with you, Mr.
    Kosisko.
        Mr. Kosisko. Kosisko.
        Mr. Whitfield. Kosisko. We will begin with you, and you are
    recognized for 5 minutes.

     STATEMENTS OF KEVIN C. KOSISKO, VICE PRESIDENT SERVICE, NORTH
         AMERICA, ABB, INC., ON BEHALF OF NATIONAL ELECTRICAL
      MANUFACTURERS ASSOCIATION AND INDUSTRIAL ENERGY EFFICIENCY
         COALITION; BRITTA MACINTOSH, VICE PRESIDENT, BUSINESS
        DEVELOPMENT, NORESCO, ON BEHALF OF FEDERAL PERFORMANCE
     CONTRACTING COALITION; JAMES CROUSE, EXECUTIVE VICE PRESIDENT
    OF SALES AND MARKETING, CAPSTONE TURBINE CORPORATION, ON BEHALF
      OF U.S. COMBINED HEAT AND POWER ASSOCIATION; HELEN A. BURT,
     SENIOR VICE PRESIDENT AND CHIEF CUSTOMER OFFICER, PACIFIC GAS
     AND ELECTRIC COMPANY; R. NEAL ELLIOTT, ASSOCIATE DIRECTOR OF
    RESEARCH, AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY; AND
    TED GAYER, CO-DIRECTOR, ECONOMIC STUDIES AND JOSEPH A. PECHMAN
                 SENIOR FELLOW, THE BROOKINGS INSTITUTE

                     STATEMENT OF KEVIN C. KOSISKO

        Mr. Kosisko. Chairman Whitfield, Ranking Member Rush, and
    members of the subcommittee. Thank you for allowing me to
    testify on the successes and opportunities for energy
    efficiency in the industrial sector.
        I am Kevin Kosisko, Vice President of Services for ABB in
    North America. I oversee services for asset management, process
    safety and industrial energy efficiency, as well as maintenance
    operations for ABB in the U.S., Canada and Mexico.
        By way of background, ABB is a Fortune 500 producer of
    power and automation products and services. We employ 147,000
    people in over 100 countries, providing energy efficient
    solutions for our industrial, utility, and government
    customers.
        I am honored to be here representing the National
    Electrical Manufacturers Association (NEMA) and the Industrial
    Energy Efficiency Coalition (IEEC).
        NEMA is the trade association of electrical equipment and
    medical imaging manufacturers. Its member companies produce
    everything from power transmission and distribution equipment
    to lighting systems, factory automation and controls and
    medical diagnostic imaging systems.
        The IEEC is a coalition of six of the largest global
    industrial automation and control system companies. Those
    companies are Eaton Corporation, GE, Rockwell Automation,
    Schneider Electric, and Siemens, in addition to ABB. We are
    technology providers that industry uses to make their processes
    more energy efficient, reduce costs and increase
    competitiveness.
        ABB and IEEC believe that energy efficiency is the
    cheapest, cleanest alternative fuel. It drives competition and
    industrial success, and the good news is that there are proven,
    available technologies that are already having an impact. My
    written statement offers examples of energy efficiency
    successes and case studies from each member of the IEEC. Yet
    together, our examples barely touch the breadth of current
    deployments and future possibilities.
        A recent survey of manufacturing executives demonstrates
    their understanding of the importance of energy efficiency and
    the impediments to its use. Executives report basing their
    energy efficiency investment decisions on cost benefit analyses
    and the price of energy far more than other considerations.
    Regulatory compliance was a distant third. Yet fewer than 40
    percent of those surveyed had invested in efficiency in the
    past 3 years. In the U.S., the situation is even starker with
    only 21 percent having invested in equipment to improve energy
    use in the last 3 years. The majority of those were in highly
    energy-intensive manufacturing industries such as mining,
    metals, chemical production, and petroleum refining. This gap
    between awareness and action was attributed to three key
    factors. Nearly half of the respondents cited the lack of clear
    business case as a reason for inaction. Twenty-eight percent
    identified inadequate funding or financing as a critical
    barrier, and a lack of adequate information on efficiency
    options was reported as the third greatest obstacle by 27
    percent of those executives surveyed.
        These responses point to the need for further education,
    benchmarking, and identification of available technologies and/
    or application, and to the importance of access to funding or
    financing to enable investments.
        Encouraging the efficiency enhancements needed to ensure
    our competitiveness will require both industry's and
    government's involvement. We must supply the missing
    information and provide the necessary funding. At ABB and the
    IEEC, we are striving to do just that. We work continually to
    educate manufacturers on available technologies and industrial
    best practices. We train engineers, assessors, and finance
    teams to provide accurate, reliable energy audits, and
    estimates on return on investment. We provide directly or
    assist in securing necessary financing, and we invest in
    ongoing research and development to continue innovation.
        In the areas of industrial energy efficiency, government
    has historically focused on reducing consumption in energy-
    intensive industries. While these industries represent a major
    portion of potential energy savings, the public sector has the
    ability to expand the visibility of conservation opportunities
    to industrial players both large and small. Hearings like this,
    well-informed Department of Energy and Environmental Protection
    Agency activities, and federal support for research, audit, and
    deployment programs all raise awareness of the availability and
    value of energy saving technologies. This is particularly true
    for the small and mid-sized companies with less knowledge of or
    expertise in newer efficiency tools. Tax policies and other
    incentives can encourage investment. Advanced systems that
    deploy networks of sensors, controls, and automation to achieve
    significant energy savings can benefit from incentives to
    provide a faster rate of return.
        Government is unique in its ability to support basic
    science and energy research, and State governments have the
    principle role in setting the grid investment policies and
    utility rate structures that enable deployment of critical line
    loss reduction, power quality management, and grid reliability
    technologies like Volt/VAr optimization.
        There is no doubt of the ability of the U.S. industry to
    compete and succeed. America's competitive edge is the high
    level of productivity of our workers and the technologies and
    processes we deploy to secure greater output from fewer
    resources, including energy. At ABB, at NEMA, and at the IEEC,
    we work daily to support that effort.
        Mr. Chairman, thank you for the opportunity to testify. I
    would ask that a copy of our latest energy efficiency white
    paper be included in the record, and I am happy to answer any
    questions the committee might have.
        [The prepared statement of Mr. Kosisko follows:]
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        Mr. Whitfield. Thank you. It will be included in the
    record.
        Ms. MacIntosh, you are recognized for 5 minutes.

                     STATEMENT OF BRITTA MACINTOSH

        Ms. MacIntosh. Good afternoon, Chairman Whitfield and
    members of the subcommittee.
        Mr. Whitfield. Is your microphone on?
        Ms. MacIntosh. Yes, sir. Can you hear me now?
        I am Britta MacIntosh, Vice President of Business
    Development for NORESCO, one of the largest energy service
    companies in the United States. NORESCO is part of UTC Climate,
    Controls and Security Systems, a unit of United Technologies
    Corporation, a leading provider to the aerospace and building
    systems industry worldwide. Thank you for the opportunity to
    appear to you--before you today on behalf of the Federal
    Performance Contracting Coalition.
        The FPCC is a coalition of energy services companies that,
    like NORESCO, implement projects that reduce federal spending
    on energy and maintenance using private sector funding. Our
    work is conducted using energy savings performance contracts,
    or ESPCs----
        Mr. Rush. Would you please speak into the mike?
        Ms. MacIntosh. Our work is conducted using energy savings
    performance contracts, or ESPCs. Since the 1990s, ESPC projects
    have reduced waste in federal utility bills. Across the
    industry, more than 570 comprehensive energy projects have been
    implemented by 25 federal agencies, creating $13 billion in
    guaranteed energy cost savings, and eliminating over 32
    trillion BTUs of annual energy demand. By using performance-
    based contracting to upgrade facility infrastructure, we
    deliver energy and maintenance savings to government and
    private sector entities. Performance-based contracting means
    our company's compensation is tied to the realization of
    savings for the projects we install. In other words, if we
    don't perform, we don't get paid. At NORESCO, our projects have
    delivered more than $3 billion in facility improvements at more
    than 2,000 sites.
        An ESPC redirects inefficient spending on energy into
    needed infrastructure improvements that conserve energy and
    dollars. Under an ESPC, energy services companies engineer and
    install upgrades for outdated and inefficient equipment
    financed by the energy services company and at no upfront cost
    to the government. An agency will repay the government over
    time--the company over time with funds saved on utility costs.
    The projected energy savings are guaranteed upfront by the
    company and are measured and verified during the contract
    period. At no time does the government pay more than it would
    have paid for utilities, had it not entered into an ESPC.
        In 2010, for example, NORESCO, working together with the
    architect for the Capitol, modernized the heating, cooling,
    water, temperature control, and lighting systems here in the
    Rayburn Building, and then also in the other House office
    buildings. This project has cut Congress's energy and water
    bills by more than $3.2 million annually.
        The Federal Government is the Nation's largest energy
    consumer, costing taxpayers over $7 billion annually. An
    aggressive government-wide effort to eliminate energy waste in
    buildings could easily cut that number by 20 percent or more.
        Despite the opportunity to better steward the taxpayer's
    investments in public facilities, several difficult obstacles
    stand in the way. I would like to talk about three of those.
        First, there is a lack of compliance with existing
    congressional mandates. In 2010, Congress directed agencies to
    audit their facilities to identify energy and water projects
    that would pay for themselves within 10 years or less.
    Currently, it is not clear where agencies stand on this audit
    process, because those comprehensive reports requested by
    Congress have not yet been delivered. Even less clear is where
    agencies stand on implementing the energy savings measures
    these audits have also identified. This information is critical
    to understanding how much taxpayer money is being wasted
    through inaction and inattention.
        Second, there is a lack of an apples to apples comparison
    between the use of appropriations and private sector investment
    to provide agencies and Congress with the information needed to
    make good decisions. Oak Ridge National Laboratory has outlined
    in multiple studies that facilities which use appropriated
    funds to replace outdated equipment failed to properly budget
    for the ongoing maintenance of the new equipment. ESPCs require
    the provision of ongoing maintenance and savings verification
    to ensure that long-term persistence of savings and proper
    operation of the equipment is achieved. In 2007, Congress also
    directed agencies to implement a uniform approach to
    maintenance and savings verification to ensure that the
    government realizes the promised savings from any efficiency
    upgrades, although most agencies have appeared to ignore this
    direction for appropriated projects. We recommend that you ask
    how agencies--that you ask agencies how and when this simple
    requirement will be implemented for all efficiency projects,
    regardless of how they are funded.
        Third, the current approval process for ESPC contracts is
    excessive, with multiple redundant layers of review in many
    agencies. Officials with limited knowledge of the facility,
    project, or recommended technologies are often required to
    review and sign off on projects before they can proceed.
    Congress should push agencies to streamline their review
    process, allowing more projects to begin generating savings
    more quickly.
        In order to confirm that we are making true progress toward
    meeting our Nation's energy and efficiency goals, Congress
    needs to complete--needs complete information about available
    energy savings opportunities at our agency's facilities, each
    agency's plans for implementation, and full transparency and
    accountability on all spending related to efficiency projects.
    We recommend that you take appropriate steps to ensure that
    prior congressional direction on these items is acted upon.
        Thank you again for your time and attention. I will be glad
    to answer any questions that you have.
        [The prepared statement of Ms. MacIntosh follows:]
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        Mr. Whitfield. Thank you, Ms. MacIntosh.
        Mr. Crouse, you are recognized for 5 minutes.

                       STATEMENT OF JAMES CROUSE

        Mr. Crouse. Can you hear me?
        Thank you. Chairman Whitfield, Ranking Member Rush, and
    distinguished members of the committee, my name is Jim Crouse
    and I am the Executive Vice President of Sales and Marketing
    for Capstone Turbine Corporation.
        Capstone is the world's leading producer of low emission
    microturbine systems. A microturbine is a small, fuel-flexible,
    typically sized 1 megawatt and below, and can be best described
    as a jet engine in a filing cabinet sized box. Other forms of
    combined heat and power, or CHP, we are able to provide either
    base load or backup power to deficiencies exponentially greater
    than the grid.
        I am delighted to be here today to testify on behalf of the
    U.S. Combined Heat and Power Association. USCHPA is a non-
    profit trade association formed in 1999 to promote deployment
    of CHP systems in the United States through education and
    advocacy.
        I am going to speak today about the opportunity for natural
    gas-fired CHP and the barriers to greater deployment of CHP
    that policy makers can address.
        Currently, there are 82 gigawatts, or about 7 percent of
    all U.S. generating capacity produced by CHP systems. The
    technical potential for additional CHP from existing sites in
    the U.S. is approximately 130 gigawatts, or 12 percent of the
    U.S. generation capacity. This is readily available capacity,
    provided policies are established to support further CHP
    deployment. Access to low cost U.S. natural gas resources makes
    supporting CHP a no-brainer, and is an easy route to lower
    emissions across the United States.
        Microturbines and other CHP systems are used by customers
    throughout the world in a variety of applications. Just to name
    a few examples, they can be used in onshore and offshore oil
    and gas sites, like the many transmission sites in Mr.
    McKinley's district, offshore platform in Mr. Scalise's
    district, military applications like the one at MacDill Air
    Force Base, offices like our government office project in Mr.
    Olsen's district, multi-unit residential buildings, hospitals,
    like the VA hospital in Mr. Dingell's district, schools and
    universities like--school in Ms. Capps's district, factories
    like American River Packaging in Ms. Matsui's district, hotels
    and other commercial sites like Proctor's theater in Mr.
    Tonko's district, and wastewater treatment plants, like the
    plants in Mr. Griffith's district and Ms. McMorris Rodgers's
    district.
        As referenced in my prepared remarks, CHP generally and
    Capstone specifically offers customers reliable off grid power
    that as witnessed during Superstorm Sandy provides critical
    power and thermal energy to hospitals, nursing homes, shelters,
    and data centers.
        Despite these opportunities, our company and the CHP
    industry continue to encounter numerous regulatory economic
    barriers that prevent greater deployment. There are pragmatic,
    cost effective solutions that policy makers can champion to
    mitigate these issues.
        To begin, we would like to see greater top level leadership
    from the government. While the recent Executive Order calling
    for 40 gigawatts of new CHP is helpful, we would be better
    served if the government were to lead by example through
    increased procurement of CHP to meet federal energy efficiency
    goals. Additionally, as the EPA implements Boiler MACT, CHP
    should be strongly encouraged as a compliance strategy for
    those currently burning coal or oil. As part of this process,
    facility managers faced with compliance can seek site-specific
    technical and cost information from the DOE's clean energy
    assistance centers. Similarly, we hope States will look to
    EPA's guidance on output-based emission regulations, which
    unlike input based standards, recognize both efficiency and
    pollution prevention benefits of CHP. Output-based standards
    encourage cost effective long-term pollution prevention through
    efficiency. Likewise, we were glad to hear FERC proposed
    reforms to small generator air connections. Interconnection
    continues to be a barrier, but we continue to work with our
    friends in the utility industry to demonstrate the benefits
    that CHP provides for the grid and for consumers as a clean,
    reliable, distributor resource. In addition, both States and
    utilities should include CHP in their energy planning policies.
    The CHP industry is eager to be an active stakeholder and
    support a fair, interconnected standards in CHP rates.
        Finally, we note that there are several technologies that
    currently benefit from government support through various
    levels of an investment tax credit. We believe the lack of
    parity in support levels for decentralized and renewable energy
    technologies blur the marketplace. We support parity in the
    treatment of various types of clean energy sources, and would
    encourage a focus on performance-based measures to best spur
    market competition.
        To wrap up, let me highlight again the opportunity exists
    today to generate clean, reliable power through CHP systems at
    existing industrial commercial sites across the United States
    using U.S. natural gas. We appreciate your help in overcoming
    these barriers that exist to greater deployment of our
    innovative U.S.-made technology.
        Thank you for the opportunity to testify at today's
    hearing, and I look forward to answering any questions you may
    have.
        [The prepared statement of Mr. Crouse follows:]
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        Mr. Whitfield. Thank you, Mr. Crouse.
        Ms. Burt, you are recognized for 5 minutes.

                       STATEMENT OF HELEN A. BURT

        Ms. Burt. Thank you. Good afternoon, Chairman Whitfield,
    Ranking Member Rush. Let me begin by thanking you and members
    of the committee for this opportunity to testify today. I am
    Helen Burt, Chief Customer Officer for Pacific Gas and Electric
    Company.
        PG&E is one of America's largest combined gas and electric
    utilities. We serve about 15 million people in northern and
    central California, and over the last 30-plus years, together
    with the State of California, we have helped customers achieve
    extraordinary benefits when it comes to energy productivity.
        For us, these efforts are about being smarter when it comes
    to using energy. They are not about making do with less. They
    are about doing more with the energy we consume, helping
    customers get the most value of their energy dollars. Working
    as partners, utilities and our State policy makers have been
    able to support and encourage innovation and adoption of new
    technologies, and we have developed the most successful
    customer energy efficiency programs in the country.
        Sometimes we are working with the end use customers like
    homeowners or small business owners. Other times we are moving
    further up the value chain, working directly with
    manufacturers, distributors, retailers, and contractors. The
    point is, we take a comprehensive approach and the results
    reflect that.
        If you look just at PG&E since our programs began some 30-
    odd years ago, the customer savings have been more than $20
    billion. We have also avoided the need to build more than 25
    power plants, saving all our customers money and providing
    tremendous environmental benefits.
        What is remarkable is that the potential gains look even
    greater today, thanks to the growing intersection between IT
    and energy. Technologies like SmartMeters are creating huge new
    opportunities. By enabling two-way communications on the grid,
    they are opening the door for wider adoption of advanced
    technologies like electric vehicles, smart thermostats, and
    other energy management tools. But most significantly, they are
    giving people more control over their energy bills. PG&E
    customers can now get near real time information on their
    energy usage. Last year, we were able to create an online tool
    called the Green Button, which allows them to download that
    data. They can then use various apps to help them understand
    and then come up with options to achieve savings.
        As significant as the potential is to achieve further
    gains, we need the right policies. These include constructive
    tax policies, support for research, development, and
    deployment, supportive regulatory and rate structures, codes
    and standards, and programs that empower consumers and help
    companies share best practices. As you and others in Congress
    consider ways to help drive further progress, I would to
    highlight several areas where our experience shows you can have
    the greatest impact.
        One is encouraging regulatory approaches that incent
    utilities to pursue efficiency. Many utilities still face
    strong disincentives, changing this one key to success. At
    PG&E, we now treat energy efficiency projects as a resource,
    just like we do new traditional generation facilities.
        Another area is improving regulatory consistency. Programs
    work best when everyone can operate from a consistent set of
    policies that they can count on for longer periods of time.
    That way, they can make multi-year commitments to support
    commercialization and deployment efforts.
        We also recommend encouraging consistent and clear methods
    for measuring and verifying the results of energy efficiency
    projects.
        A third area is encouraging public-private cooperation
    between utilities and government. For example, PG&E manages
    energy efficiency turnkey projects for federal customers
    through our Utility Energy Services Contracts Program. One
    effort now underway at the NASA Ames Research Center is
    expected to save more than $1.5 million annually in water and
    energy costs. Nationally, UESC projects are saving taxpayers
    roughly $400 million a year. We should continue to encourage
    these efforts.
        Finally, a fourth area is building codes and appliance
    standards. These provide a foundation for other energy
    efficiency efforts, and drive new technologies, programs, and
    practices.
        Our hope is to work collaboratively with many members of
    this committee, who are already exchanging good policy ideas
    around energy productivity. New ideas and approaches will
    evolve just as quickly as the technology around us. As PG&E in
    California has demonstrated, energy efficiency can save money,
    spur innovation, provide consumers with more choices, and make
    our economy more productive and benefit the environment.
        Thank you again for this opportunity. I look forward to
    answering your questions.
        [The prepared statement of Ms. Burt follows:]
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        Mr. Whitfield. Thank you.
        Mr. Elliott, you are recognized for 5 minutes.

                      STATEMENT OF R. NEAL ELLIOTT

        Mr. Elliott. Thank you, Chairman Whitfield, Ranking Member
    Rush, members of the committee. I appreciate the opportunity to
    speak today. My name is Neal Elliott. I am the Associate
    Director for Research at the American Council for an Energy
    Efficient Economy, frequently called ACEEE. We are a private,
    nonprofit, nonmember research institute based here in
    Washington, D.C.
        As Ranking Member Rush said in his opening remarks, ACEEE
    has looked at the impact of energy efficiency on the U.S.
    economy and found it to be a significant contributor to
    economic growth over the last 40 years. In particular, I would
    note that as has been noted by many of the witnesses so far
    today, energy efficiency represents the least cost energy
    resource in the U.S. economy, and a recent analysis suggests
    that in 2010 it contributed about half as much as all of the
    conventional resources to the U.S. economy.
        I mentioned in my written testimony five areas that we
    think the committee should consider for action in the coming
    Congress, and wanted to focus three of those in my oral
    remarks.
        The first, which is has come up several times, is appliance
    standards, and I wanted to mention that since 1987, with the
    passage of the EPCA, Energy Policy Conservation Act, energy
    standards have saved 3.4 quads of energy and that the standards
    that are in place today are projected to save $1.1 trillion
    through 2035.
        We have many other standards that are currently in
    development, and I wanted to bring to the attention of the
    committee that one of the important ways that these are being
    developed now is through a negotiated process in which the
    energy efficiency advocates, people--stakeholders such as PG&E
    and other utilities, and the manufacturers come together to
    develop consensus proposal. The Energy Policy Act of 2005
    enabled DOE to accept those consensus standards directly into
    rule and we have begun to see that move forward in the process.
    There are a number of negotiations that are currently underway.
    In the past, these negotiations have been enacted as part of
    the federal energy legislation, and we hope the committee will
    consider several of the provisions that are currently under
    development, as they look at legislation. This is a very
    efficient and effective way to bring consensus between the
    manufacturers and stakeholders, and move the market forward
    together.
        Second issue I wanted to raise to the committee is building
    codes. As has been noted, buildings consume approximately 40
    percent of the energy in the U.S. economy, and codes represent
    the easiest and most cost effective way for consumers to
    benefit from energy efficiency. It is important that we
    continue to revise and look at best practices that exist in
    terms of building codes, but it is also equally important that
    we focus on the implementation of the building codes in the
    marketplace. A building code on the books means nothing if the
    builders out there in the market are actually not implementing
    it, and we would encourage DOE to work with State and local
    governments to build the capacity, both within the enforcement
    side of this, but also work with the contracting community and
    building community out there to implement the codes so that the
    energy efficiency benefits are available to all customers.
        Finally, the last area I wanted to speak about is
    manufacturing. U.S. manufacturing sector is poised for a major
    expansion and reinvestment, and until recently, has not
    received a lot of attention at the federal level. In
    particular, we would recommend three things the Department
    should--the committee should consider.
        First, we think it is important that the DOE's
    manufacturing program be reenergized. There has been a lack of
    leadership for over a decade there, and we think there is some
    opportunities for it to move forward. Specifically, we would
    recommend that the Department be directed to establish an
    industrial steering committee to ensure a strong working
    relationship exists between manufacturers, the Department, and
    other stakeholders, and that that partnership should work to
    leverage private sector funding. In the past, this program R&D
    area has been among the most successful R&D efforts in the
    entire Federal Government, and was able to leverage $3 in
    private sector funding for every $1 that was spent by the
    Federal Government.
        Second, we think it is important to maintain a balance
    between your term R&D, long-term R&D, and deployment, and all
    of these need to be targeted in cooperation with the
    manufacturers so that we receive maximum efficiency.
        Finally, I wanted to mention the idea of smart
    manufacturing. This is--as we look, we have already mentioned
    intelligence in the marketplace. We think manufacturing will
    benefit from that and encourage you to direct the Department to
    initiate a smart manufacturing program to explore those
    resources.
        Thank you for the opportunity to present, and I look
    forward to questions. Thank you.
        [The prepared statement of Mr. Elliott follows:]
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        Mr. Whitfield. Well thank you, Mr. Elliott, and Mr. Gayer
    of the Brookings Institution, you are recognized for 5 minutes.

                         STATEMENT OF TED GAYER

        Mr. Gayer. Great, thank you. Chairman Whitfield, Ranking
    Member Rush, and members of the subcommittee, thank you very
    much for the opportunity to appear here today. My comments will
    cover the market incentives for energy efficiency innovation,
    the most cost effective means of reducing pollution stemming
    from energy use, and the limitations and problems associated
    with government energy efficiency mandates.
        First on market incentives. I believe that market prices
    are good at conveying information about the strength of
    consumer demand for a good, and the scarcity of supply for that
    good, allowing for a balancing of buyers and seller's interest.
    In the market for appliances, prices reflect how consumers
    value features such as energy efficiency and convenience. If
    the price of energy increases, consumers are willing to pay
    more for more efficient appliances, providing a clear incentive
    to suppliers to respond. The importance of energy prices for
    the bottom line of consumers and businesses provides a strong
    incentive for producers to provide the innovative energy
    efficient products we see arriving on the market today, and
    these market incentives account for the preponderance of energy
    efficiency gains that have been mentioned in this hearing
    today.
        In addition to providing incentives for energy efficiency,
    another important benefit of the market process is that
    consumers with different preferences can find products that
    best suit their needs. It is important to remember that there
    is no uniformly right amount of energy efficiency for any given
    product. However, market prices can provide misleading signals,
    to the extent that they do not account for the pollution costs
    stemming from energy use. In other words, the price that shows
    up on one's electric bill accounts for the private cost of
    energy, but it does not include any environmental--additional
    environmental damages that impact others due to one's energy
    use. Economists refer to these latter costs as ``negative
    externalities.'' The best approach to addressing this problem
    is for the government to price these costs directly. Consumers
    and businesses would then face the full cost of energy use and
    markets would respond through some combination of new
    technologies, alternative fuels, and conservation.
        There are a number of reasons why this market-oriented
    approach of setting a price on pollution is more cost-effective
    than regulations such as energy efficiency mandates. First, the
    one-size-fits-all energy efficiency mandates ignore the
    substantial diversity of preferences, financial resources, and
    personal situations that consumers and businesses must align in
    order to make their decisions. Second, energy efficiency
    mandates do not promote conservation. For example, an energy
    efficiency standard for air conditioners increases the
    incentive to run the air conditioners longer. Third, energy
    efficiency standards must squeeze energy reductions out of new
    products only, and can even create incentives for consumers and
    businesses to retain older, and thus less energy-efficient,
    products.
        In recent work I did with Kip Viscusi of Vanderbilt
    University, we examined a number of recent government
    regulations that mandate energy efficiency standards for
    vehicles and appliances. Despite the fact that these
    regulations frequently are touted as pollution-reducing
    initiatives, by the agencies' own estimates, they confirm that
    the environmental benefits tend to be quite small and are often
    outweighed by the costs that they estimate.
        In order to justify these regulations, the agencies assert
    that consumers and firms are making incorrect purchase choices
    and that they therefore benefit if product choices are
    restricted to those that meet the agencies' mandated standards.
    Dismissing consumer preferences outright in this way is a
    significant departure from the well-established principles for
    conducting cost-benefit analyses, both in the economics
    literature, and I would add, by the Administration's Office of
    Management and Budget.
        By claiming regulatory benefits from the correction of so-
    called ``consumer irrationality,'' agencies are shifting
    regulatory priorities from the important goal of reducing the
    harm individuals impose on others, through pollution, towards
    the nebulous and unsupported goal of reducing harm individuals
    cause to themselves by purchasing purportedly uneconomic
    products. This shift from environmental protection to consumer
    protection results in a host of costly regulations that are far
    less effective than a government policy that simply sets a
    price on pollution. It is important to emphasize that these
    costs are real and that they harm economic well-being. Raising
    the costs of consumer products and products used by businesses
    through government mandates does not lead to economic growth or
    job creation. It also establishes a dangerous precedent: If
    agencies can justify regulations on the unsubstantiated premise
    that consumers and businesses, but not the regulators, are
    irrational, then they can justify the expansive use of
    regulatory powers to control and constrain virtually all
    choices consumers and businesses make.
        To summarize, I believe that markets generally work well to
    provide incentives for energy efficiency and to satisfy
    consumers' diverse tastes. To the extent that prices fail to
    incorporate the environmental cost of energy use, the most
    sensible government response is to price the pollution costs
    directly, and then allow consumers and businesses to respond to
    the higher prices. Regulations and mandates are inferior
    policies, but still may be better than doing nothing if the
    benefits exceed the costs. Unfortunately, by the agencies' own
    estimates, many of these mandates lead to minimal environmental
    benefits that are far less than the costs that they estimate
    themselves. In an effort to justify these regulations, the
    agencies have deviated from well-established economic
    principles by asserting that consumers and businesses benefit
    from government mandates that restrict choice. The evidence for
    this view, I believe, is weak, and assuming that citizens are
    not capable of making sensible decisions that affect their own
    pocketbooks is not the right way to advance the important goal
    of enhancing the quality of our environment.
        Thank you very much.
        [The prepared statement of Mr. Gayer follows:]
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        Mr. Whitfield. Thank you, Mr. Gayer, and thank all of your
    for your testimony, and once again for being here with us
    today.
        Ms. Burt, I want to ask you a question to start off with. I
    notice in your testimony you were talking about the per capita
    use of energy in California has been flat since 1970, so we are
    talking about 30 or 40 years. You are talking about the new
    technologies that have been launched. You talked about the new
    policies of the government and working with the utilities. You
    talked about $20 billion in savings. You talked about the lack
    of necessity to build 25 new generating plants. With all of
    those efficiencies and everything else, why is it that the
    California electricity rates are among the highest in the
    country, with the exclusion of Alaska or Hawaii? You all have
    been so productive in so many ways. Why is it that electricity
    rates are so high out there?
        Ms. Burt. Well thank you, Mr. Chairman, for the question
    and for the opportunity.
        California electric rates are high, and matter of fact,
    they are within the top 25 across the country of major
    utilities. The bills of Californians, however, are among the
    lowest, and so I think you have to look at both of those in
    collaboration.
        Mr. Whitfield. How is that possible? How does that work?
        Ms. Burt. Well, energy rates in California are higher the
    more you use. It is an inclining tier structure and it is
    designed that way to encourage energy efficiency. The lower
    rates, though, however, are very comparable to other parts of
    the United States. And so when we talk about rates, that is one
    slice of it, but we actually work with our customers to lower
    their bills, and that is really what they are about. You know,
    again, we serve about 15 million Californians across northern
    and central California, and we have a wide variety of customer
    groups.
        Mr. Whitfield. What would you say the average per kilowatt
    hour is for industrial use in California?
        Ms. Burt. You know, Mr. Chairman, I don't have that with me
    directly but I can certainly get back to you with that
    information.
        Mr. Whitfield. I am assuming that it--I mean, I am not
    complaining about it or anything, but I am assuming it must be
    much higher, because if you have residential use really cutting
    down on their consumption, and then that is low as the average
    utility bill in America, that must mean the industrial use must
    be a lot more expensive.
        Ms. Burt. Thank you, Mr. Chairman, let me clarify a little
    bit more. We actually have energy efficiency programs that span
    across all of our customers. So within our energy users that
    are high industrial customers are refineries, and we have many
    in California. We have oil producers in California, we have
    food processors within our service territory. We have programs
    that work directly with each of those types of businesses to
    lower their energy costs----
        Mr. Whitfield. But even though the individual bills may be
    low, why is it that the production is so high, the cost?
        Ms. Burt. Well again, the energy policies across California
    are designed to encourage conservation, encourage energy
    efficiency. On the industrial side, however, again, what the
    industrial customer--and frankly, what our commercial customers
    and residential customers care about are the size of their
    monthly bills. And the size of their monthly bills are among
    the lowest in the Nation.
        Mr. Whitfield. The size of your----
        Ms. Burt. Of their monthly bills, so their usage is----
        Mr. Whitfield. And we are talking about who and here now,
    residential users?
        Ms. Burt. Mr. Chairman, actually all of our customers. The
    size of their monthly bills are among the lowest----
        Mr. Whitfield. Are among the lowest in the country?
        Ms. Burt. Yes, among the lowest in the country. They
    certainly aren't the lowest, but they are among the lowest.
        Mr. Whitfield. Mr. Crouse, let me ask you a question. The
    Section 433 prohibits the use of fossil fuels in new or
    modified federal buildings by the year 2030 or so. Now you were
    testifying on behalf of the Combined Heat and Power
    Association. Wouldn't a prohibition such as that make it more
    difficult on the adoption of high efficiency technologies, such
    as combined heat and power for federal buildings?
        Mr. Crouse. Well, I think it certainly could. One of the
    opportunities, though, is to look at biogas or other means of
    destructing organic waste to use, then, the fuel or the natural
    gas, the methane that comes off of the anaerobic digesters, or
    in some cases, gas that would come from other processes on
    those bases. The other, you know, option would be for us to
    look at using natural gas as a fuel, as a transition fuel, and
    look down the road at possibly using those new fuels that come
    online and the new products that would become available in that
    timeframe, to use them, including some of the new biofuels that
    are looking at being generated from algae and from other
    sources.
        Mr. Whitfield. OK. Mr. Kosisko, my time is running out, but
    I did pay attention to what you did with Archema down in my
    district. That $300,000 annual savings was quite impressive,
    and I want to thank you for mentioning that.
        At this time, I recognize the gentleman from Illinois, Mr.
    Rush, for 5 minutes.
        Mr. Rush. Ms. Burt, you talked in your testimony about
    PG&E's comprehensive approach to energy efficiency. You
    included different strata of individuals and demographic groups
    in your statement. The question that I have is do some of these
    outreach programs that you discussed, have you engaged young
    people, young students in some of this outreach and could you
    speak to the educational activities and initiatives that you
    have with the youngest of our citizens?
        Ms. Burt. Thank you, Mr. Rush. Yes, absolutely, Congressman
    Rush, we--our programs do contain a very large component of
    education, both--primarily in the post-high school area. In
    fact, we have three education centers across our service
    territory, one in Stockton, one in San Francisco, and one in
    the East Bay area that are really focused on training and
    developing even job skills within energy efficiency. We have
    got the oldest existing training facility in Stockton that has
    been in place since 1978, and I believe we have trained
    something in the neighborhood of over 91,000 people to really
    go out and be productive in the jobs arena around really being
    energy auditors, installing weatherization, all of the
    different phases of energy efficiency within those three
    centers. So we have a pretty broad record on that.
        Mr. Rush. So you create some jobs with these programs? I am
    trying to focus on young, even younger than high school. It
    seems the earlier we include energy efficiency and an
    understanding of the energy demand, energy sector, the energy
    issues, including costs, but also efficiencies, the earlier we
    include that in the education of our younger children, the more
    we change the culture. I think we will have some tremendous
    benefits. Do you engage, say, even at the grade school level?
        Ms. Burt. Yes, Congressman Rush, we do. We have several
    programs. One of them is our Solar Schools Program where we
    really engage elementary age students around energy in
    totality. So renewable resources, the value of solar--we
    actually install solar panels on schools and use them in
    demonstration--classroom demonstration pieces. We have a number
    of other classroom demonstrations, both around energy
    efficiency and energy in general within the school systems that
    are used throughout our service territory.
        Mr. Rush. In your opinion, how is the Federal Government
    faring in these areas? Are there some things that we are
    doing--are we doing enough as a Federal Government to raise the
    level of consciousness of our grade school-level students, high
    school-level students? Are we doing enough as a Federal
    Government?
        Ms. Burt. Thank you. That is a wonderful point. I think all
    of us can do more to engage the next generation around energy,
    and not just energy production, but using energy efficiency as
    a source of production. And I think learning what new
    technology--and again, the combining of really this new--the
    new IT and smart grid with what energy efficiency can do is
    going to be an amazing future for that generation. I think the
    Federal Government can do more. I think we can all do more to
    encourage education.
        Mr. Rush. Thank you, Mr. Chairman. I yield back.
        Mr. Whitfield. Gentleman yields back.
        At this time, I recognize the gentleman from Texas, Dr.
    Burgess, for 5 minutes.
        Mr. Burgess. Thank you, Mr. Chairman. I appreciate the
    recognition.
        Ms. MacIntosh, let me ask you. You heard the testimony of
    Dr. Hogan and the first panel. Do you work with the--with their
    office, the Department of Energy Efficiency and Renewable
    Energy?
        Ms. MacIntosh. We do. All of the member companies of the
    Federal Performance Contracting Coalition work hand-in-hand
    with the Department of Energy. They oversee the indefinite
    delivery and definite quantity contracts that we all operate
    under to implement energy savings performance contracting for
    the Federal Government.
        Mr. Burgess. Now you referenced that there, in fact, was a
    congressional mandate that required some of this performance
    standards. Do you recall when that congressional mandate was
    passed? In your written testimony, you referenced 1986 and said
    implementation was occurring in the '90s. So--and this is a
    well-established pattern, is that correct?
        Ms. MacIntosh. Correct.
        Mr. Burgess. This is not something that is new that should
    be----
        Ms. MacIntosh. Performance contracting? Oh, no.
        Dr. Burgess [continuing]. A surprise to----
        Ms. MacIntosh. It should not be a surprise to anyone.
        Dr. Burgess [continuing]. Dr. Hogan? Well----
        Mr. Whitfield. Ms. MacIntosh, would you mind using Mr.
    Crouse's microphone, because we--and----
        Ms. MacIntosh. Is this a little better?
        Mr. Whitfield. Yes, that is better.
        Mr. Burgess. Whoa, super. And you know, I was making the
    point--and not just an academic one--in Congress, we get
    criticized for passing mandates and then not living under them
    ourselves. I referenced how in my own personal life I have made
    energy efficiency decisions that were based upon what I would
    consider would be the correct market signals. And yet, we have
    a great big glorious federal building here, the Rayburn
    Building. I am fortunate enough to have an office here. Yes,
    indeed, they did change all the lighting around back in 2007 or
    2008, but when I look at the biggest source of energy loss, it
    has got to those single pane windows that are in existence in
    the Rayburn Building, in the Cannon Building, in the Longworth
    Building. I don't get to go over on the Senate side, but I
    suspect you have got the same thing over there. So did you do
    an audit for the Department of Energy on, say, the Rayburn
    Building, like we have mandated that other industries do on
    their structures?
        Ms. MacIntosh. Yes, that is correct, and that was done in
    the 2008-2009 timeframe. A comprehensive audit was performed
    for all of the House office buildings. The same was also done
    for the Senate office buildings.
        Mr. Burgess. Yes, we will ignore the Senate for right now,
    since they are ignoring us. Would it be fair to say that--I
    mean, lighting, yes, it is a significant expense. To me, it
    would have made more sense--I mean, had I been doing this in my
    private life and I wanted to change all my lighting, I would
    have waited until a bulb burned out and then replaced it with
    an LED or a CFL, if that was my inclination. To go in and
    change all the lights around--basically during a congressional
    recess, I mean, that was a pretty expensive undertaking. I have
    got no idea what happened to the old light bulbs. I hope they
    gave them to another country so that they could use them. But
    it almost seems like that was the obvious--the low-hanging
    fruit in this endeavor, but if you really want to look at where
    the energy efficiency exists in an older building like Rayburn
    or Cannon or Longworth, it is going to be in the window
    treatments, not in the lighting structures.
        Ms. MacIntosh. Mr. Terry, the beauty of the energy saving
    performance contracts--excuse me, Mr. Burgess--it was the
    direct line of sight. The beauty of the energy savings
    performance contracting program is that you are supposed to
    look at things from a holistic standpoint. So energy savings
    were generated from lighting, certainly, but that was really
    only one of the many measures that were implemented. The real
    meat of an ESPC, typically, is in the places you don't see. It
    is in the chiller plant, it is in the boiler plant, it is in
    the direct digital control systems of a facility that measure
    and monitor and modulate temperature, for example. All of those
    systems, including water systems as well, were addressed in all
    of these buildings. You know, that audit that was performed at
    the time is also intended to be a very comprehensive menu of
    opportunities that we could implement to generate savings.
        Mr. Burgess. Yes, we are going to run out of time. You
    notice the chairman has a very quick gavel----
        Ms. MacIntosh. Certainly.
        Dr. Burgess [continuing]. When it comes to me, but could
    you perhaps supply my office with that audit and perhaps
    provide us a little direction as to what has been implemented
    and what has been--what is waiting? Because again, I would like
    to give people some reassurance that we are living under the
    same rules that we are making for other people----
        Ms. MacIntosh. Agreed.
        Dr. Burgess [continuing]. And that the smart thing to do is
    to respond to appropriate market signals and not the
    congressional mandates.
        Thank you, Mr. Chairman, for your indulgence. I am going to
    yield back the final 2 seconds.
        Mr. Whitfield. You are welcome, Dr. Burgess. I gave you an
    extra 50 seconds the last time, so--at this time, I recognize
    the gentleman from California, Mr. McNerney, for 5 minutes.
        Mr. McNerney. Thank you, Mr. Chairman. I want to welcome
    you to Washington, Ms. Burt, for your testimony here this
    morning. I had the privilege of visiting a PG&E training
    facility in Stockton, and with Chris Foster--it was about a
    year ago, and it is certainly state-of-the-art. It is very
    impressive. Do you think that that facility and facilities like
    that are producing enough trained workers, or is there an
    additional need for additional facilities to meet the market
    demand right now?
        Ms. Burt. Thank you. Thank you very much, and it is a
    delight to be here, Congressman. We are certainly happy to be
    here from California.
        That facility in particularly and the other two, the sister
    facilities that we have, the facility in San Ramon, which
    really trains and really does a lot of research and work around
    the food industry and emerging technology, and then the one in
    San Francisco, which is really focused on architects and
    building and really design. I will tell you, they are kept
    consistently busy. And as you mentioned, the one in Stockton
    has actually been in existence since 1978, and we have produced
    91,000 trained workers. Our own workforce, we have about 700
    people directly working for--on my team that do energy
    efficiency, and then we hire in our communities another 2,000
    practitioners within weatherization, and these are contractors
    and we train them. We also trained a number of contractors in
    the most recent funding, the ARA funding that was available. So
    I must say that we don't find lack of need for training. There
    always seems to be--I looked at the Pacific Energy Center just
    the other day, and I think there were 950 separate classes that
    were being offered. And I know last year in that facility
    alone, we trained--and that, I think, is the smallest of our
    facilities--we trained about 8,000 workers.
        So it is certainly an area as energy efficiency becomes
    more a part of the solution nationally that we should look at,
    you know, and I think if we can get to the point where energy
    efficiency is considered in other places as it is in California
    as a part of the generation mix, just as a generation plant
    would be, then I think we may need to look at more training
    facilities.
        Mr. McNerney. Thank you. How do you see the EV market
    affecting PG&E's business plan over the next decade?
        Ms. Burt. Well, thank you again. We are very excited about
    the electric vehicle market. It does have challenges with it
    because again, the distribution grid traditionally built across
    our service territory as well as others is in need of
    upgrading. We are in the midst of making our grid much smarter
    to really integrate electric vehicles and other renewable
    resources, but we are very excited about electric vehicles and
    what they offer, particularly for the environmental benefits
    and for our customers' benefits. We know that in our service
    territory--I will tell you, my customers and your constituents
    are very excited about using electric vehicles. So I think you
    can expect to see us do more on that.
        Mr. McNerney. Thank you.
        Mr. Gayer, would you say that big improvements in energy
    efficiency would have a stimulative impact on the national
    economy?
        Mr. Gayer. I think that market-driven improvements in
    energy efficiency are good for the well-being of the economy
    for sure. When you get to certain programs to stimulate, I
    think it is a little bit dicier as far as whether or not it is
    worth the cost. You would have to really see what is the labor
    being employed and what would they have been doing otherwise.
    In a time of great unemployment, I think there is much more
    evidence that there is such a case, but if you are talking
    about the long sweep of history, I think the evidence is
    weaker. But certainly, energy innovation and energy efficiency
    innovation is good for the economy.
        Mr. McNerney. Thank you.
        Mr. Elliott, is there anything that you would--that would
    give us a better return on investment than energy efficiency in
    terms of energy investments?
        Mr. Elliott. Congressman, at this point I think energy
    efficiency represents one of the best investments that is
    available in the marketplace. We are in an environment right
    now, in spite of the current low natural gas prices, where many
    of the other energy sources are increasing in cost, as has
    already been noted in the case of gasoline pricing right now,
    and investment in energy efficiency represents an opportunity
    to improve the U.S. GDP by reducing outflow of funds to foreign
    countries. There is also the issue that investment in energy
    efficiency makes other technologies equally accessible. For
    example, investments in energy efficiency can enhance the cost
    effectiveness of renewable energy by reducing the amount of
    energy that is required.
        Mr. McNerney. Thank you, Mr. Chairman.
        Mr. Whitfield. Thank you.
        At this time, I recognize the gentleman from Ohio, Mr.
    Latta, for 5 minutes.
        Mr. Latta. Thank you, Mr. Chairman, and thank you very much
    to our panel for being with us today.
        If I could, Mr. Gayer, if I could start with you. I
    apologize for my voice. It is allergy season. But I found your
    testimony interesting, because you kind of hit home to my
    district. I represent 60,000 manufacturing jobs in northwest,
    west central Ohio that we--some of our companies are very
    large, some are very small. We have a great need for base load
    capacity out there, and I go through factories, I mean,
    literally all the time. And probably in the last, I am going to
    say 5 months, I have been through about 150 facilities in my
    district. And I find it interesting in your testimony what you
    are talking about, because I hear this from my folks back home
    all the time, you know. They see these mandates coming down
    from Washington, and again, they are in a global--most of these
    people are on a global marketplace and they are out there very
    concerned about making sure that they can produce a product
    that is competitive, that--not only in this country, but around
    the world.
        But in your testimony, I found it interesting. You were
    talking about that--you said there were a number of reasons why
    the market warranted an approach of setting a price of
    pollution as cost effective, and then regulations such as
    energy efficiency mandates, and you say that the one-size-fits-
    all energy efficiency mandates ignore the substantial diversity
    of preferences, financial resources, and personal situations.
    And I tell you, that hits home to my district. If I can just
    ask you, then, you know, when you talk about that, you said
    that--you testified that the energy efficiency standards could
    actually reverse some of the energy savings resulting in
    negligible environmental benefits. Could you expand on that?
        Mr. Gayer. Yes, sure. First, I think it is important in all
    these questions to distinguish between--a lot of people are
    talking about innovation and energy efficiency, and I think
    that is a good thing, and when it is driven by the market, it
    is accounting for their preferences and the diversity of taste
    and financial circumstances. The problem comes when you have an
    agency that essentially uses certain--imposes mandates and
    essentially is asserting that certain preferences are in some
    sense invalid.
        Mr. Latta. Could you give me a couple of examples of----
        Mr. Gayer. Well, I mean, it is a very simple thing. The way
    you do it is these net present value calculations. You look
    at--the agency will say well, we think for this appliance fuel
    costs are going to be this in the future. We think the
    appliance will last this long. We think you are going to use it
    this many times, and we kind of figure out is the higher cost
    today worth it for you to get the savings later, but it is not
    accounting for other characteristics of convenience and feature
    and your particular circumstance. And this happens, I think,
    most egregiously when it comes to commercial products. I mean,
    you have companies that--as I think you are alluding to, that
    are very narrow profit margins, they are in very competitive
    industries. Fuel costs might be a huge part of their operating
    costs, and essentially they are being told you are not doing a
    good job, considering the tradeoffs here, and I think my
    response to the presumption is they probably are doing a pretty
    good job of considering the tradeoffs, because they have
    circumstances that can't be measured from the regulator's
    perspective. And so the presumption should be that they
    actually know what they are talking about. Again, there are
    plenty of incentives for energy efficiency for that firm, and I
    think that is good, but we don't want--I don't think we should
    just mandate that--ignore their other preferences, and I think
    that is what the market is good at accommodating.
        My bigger point is a lot of the tech supporting these rules
    are written from the angle that they are helping the
    environment, but what I have just described is really consumer
    protection. It is not environmental protection, it is saying
    that you are making a mistake by buying an uneconomic product.
    We, the regulator, are going to correct that. I don't think
    there is evidence that there is a need for consumer protection,
    but my point is that is a very different thing than designing a
    regulation to say hey, we have got to worry about pollution.
    You have your circumstances, but you are not considering that
    you are emitting pollution. Let us address the pollution, and
    you wind up with very different regulations.
        Mr. Latta. Let me follow up for just a second where you
    were talking about consumers. You know, what is best for the
    consumers out there, then, the energy efficiency improvements
    for market forces, or energy efficiency from the regulators?
        Mr. Gayer. Oh, well certainly the former, because the
    former actually considers they get to consider the other
    tradeoffs and the other characteristics that either drive their
    consumer preferences, or in the case of businesses, buying
    these products, their bottom line. Essentially that is the
    premise, is I get--I am better at spending money that affects
    my bottom line than somebody else is, and the presumption
    should be that. Again, if you are trying to adjust
    environmental externalities, which I alluded to, I won't
    consider that in my consumption decision, and that is, I think,
    a strong role for the regulator there. But there needs to be a
    distinction between are we trying to protect the environment or
    are we really just consumer protection?
        Mr. Latta. All right. I think that, you know, again when I
    am going through my facilities back home that the folks back
    there, you know, they are worried about that bottom like, and
    you know, they all want to make sure that there is clean air
    and clean water. And at the same time, they want to make sure
    they are providing the jobs out there for the people in the
    communities, because that is absolutely central.
        Mr. Chairman, with that, I thank you for your indulgence
    and I yield back.
        Mr. Whitfield. Thank you.
        At this time, I recognize the gentleman from California,
    Mr. Waxman, for 5 minutes.
        Mr. Waxman. Thank you, Mr. Chairman.
        Energy efficiency standards set a minimum floor for the
    efficiency of appliances and other products. Over the last 25
    years, these standards have played a key role in improving the
    efficiency of the appliances we all have in our homes. They
    save consumers billions of dollars every year by lowering
    utility bills, but some economists argue that energy efficiency
    standards are a bad idea. They say that the costs of the
    standards outweigh the benefits, and that they reduce consumer
    choices. They also argue that any cost effective efficiency
    measures would be taken anyway, even without the standards, and
    Mr. Gayer made these arguments today.
        Dr. Elliott, what do you think? Do the costs of these
    standards outweigh the benefits, or do consumers come out
    ahead?
        Mr. Elliott. Congressman, I want to say that I am--in our
    view and based on our research, consumers do come out ahead,
    and I think we can get some very good examples on this. Perhaps
    one of the longest regulated products in the marketplace is the
    refrigerator today. My wife and I had the opportunity to
    replace one recently, and the number of choices that we had in
    buying this one compared to the one we bought 25 years ago, the
    amenity values, the cost, the--were all substantial.
        Mr. Waxman. Let me ask you this. Do the standards reduce or
    increase consumer choice?
        Mr. Elliott. I think our experience, at least looking at
    things like lighting products, looking at things like
    automobiles, looking at things like refrigerators, washing
    machines, they have increased our consumer choice. We have more
    options, we have more amenities. Part of this is a simple fact
    that we have stimulated the manufacturers to redesign products
    which they have no motivation otherwise to redesign.
        Mr. Waxman. You, in your testimony, talked about huge
    savings for major efficiency improvements. Would we have seen
    benefits in the absence of efficiency standards, or are there
    market barriers that would have prevented cost effective
    efficiency improvements from being made? You talked about an
    incentive for manufacturers. Are there barriers to them or they
    just don't think about it because they don't have to?
        Mr. Elliott. I mean, I think it is a complex issue, and as
    with most things, you know, these are not simple decisions. A
    lot of this comes down to information and we talk about in an
    economic environment where we have perfect information.
    Consumers don't have perfect information. They have lack of
    information. They are not given or don't have access or the
    time--we call that transaction cost--to be able to make the
    choices that may----
        Mr. Waxman. Well how about the choices that manufacturers
    make? Are there barriers to them making efficiency choices?
        Mr. Elliott. Absolutely. Part of it is there is no change
    in the marketplace. In the case of a manufacturer, if we have a
    static situation in the marketplace and there is no dynamic
    there, they are not going to necessarily innovate. And so the
    opportunity, I think, is standards allow them to innovate and
    we have seen over the last 25 years in the manufacturer's
    products that are regulated by standards coming to understand,
    and in many cases, they have been beneficial to the
    marketplace.
        Mr. Waxman. All right, thank you.
        Ms. Burt, PG&E has a lot of on-the-ground experience
    implementing programs to incentivize energy efficiency. Do
    consumers take every cost effective energy efficiency measure
    on their own, or are supporting policies necessary?
        Ms. Burt. Thank you, Congressman. We would agree that
    supporting policies are necessary and, in fact, we do make
    many, many, many of our programs available directly to the
    consumer. We also give them a lot of information. But that
    simply alone doesn't do the trick. We also have incentives to
    manufacturers, so for example, the manufacturer that is
    manufacturing a refrigerator, you know, our goal in California,
    as you probably know, is to work collaboratively with
    manufacturers across the country----
        Mr. Waxman. And you have done that very well. I am sort of
    moving forward because I only have a limited time, but I wanted
    to ask you, first of all, you testified PG&E efficiency
    programs result in energy savings that saved your customers $20
    billion and avoided the need to build 25 large power plants.
    These efficiency initiatives are cheaper than building new
    power plants, aren't they?
        Ms. Burt. Yes, sir, they are, and----
        Mr. Waxman. And what is PG&E's experience with appliance
    efficiency standards and State building codes? Are these
    onerous government mandates or are they cost effective ways to
    drive energy efficiency improvements?
        Ms. Burt. Well, thank you. Our view of codes and standards
    is they are part of the portfolio of energy efficiency. We work
    on codes and standards. We work upstream with manufacturers. We
    work with cities. We work with governments to create incentives
    before the standards are set. So it is not as though the
    standard is set first, you know. Our view of the world is let
    us incent the more energy efficient refrigerator, more energy
    efficient televisions, and then let the standard evolve as the
    market pulls. And that has really been very effective in
    California, as you know.
        Mr. Waxman. Well, I commend you for what you have done in
    California. Thank you very much.
        Mr. Whitfield. Gentleman's time is expired.
        I recognize the gentleman from Texas, Mr. Olson, for 5
    minutes.
        Mr. Olson. I thank the chairman and welcome the witnesses.
    You start here in the morning, now it is the afternoon. So
    thank you for your time, your expertise, and most importantly,
    your persistence.
        Mr. Kosisko, I would like to thank you for helping me to
    tour ABB's facility in Houston last year. In your testimony,
    you mentioned barriers to investment in industrial efficiency,
    lack of a clear business case, inadequate funds for financing,
    and a general lack of information. Could you expand on what
    NEMA and IEEC are doing? Is there a particular success story
    that stands out to you?
        Mr. Kosisko. Thank you, Congressman, for the question.
        NEMA, IEEC, and ABB are all working within the industry to
    increase awareness, which I think is one of the key impediments
    to adopting energy efficiency technologies into the industrial
    space. Let me give you an example. If you look at a typical
    industrial motor, for instance, that industrial motor, over its
    life cycle, 2 percent of its total cost to operate is the
    initial purchase price of that motor. Ninety-seven percent of
    the cost is the energy utilized over its lifetime, but yet,
    there are decisions made on a daily basis by various industrial
    customers on the initial procurement price of that motor, and I
    think it is widely made because of the lack of understanding
    and general information available. NEMA and IEEC within ABB, we
    do a lot to promote awareness and improve visibility of the
    types of products and systems and services that will help in
    industrial energy efficiency.
        Another example, we have a show each year, Automation and
    Power World, that we sponsor at ABB where we bring in over
    2,000 industrial users into a conference. We have over 400
    seminars. A good portion of those seminars are focused on
    energy efficiency and the types of products, systems, and
    services and other methods that could be used within the
    industrial environment to reduce energy consumption and make
    industry more competitive here in the United States.
        Mr. Olson. Now I am questioning--being from Texas, one
    thing I worry about is our grid reliability. Our State, our
    margin for excess capacity is very slim now, and that is
    largely because of overregulation by the Obama Administration,
    our vast growing population, and conflicting federal agency
    laws that force a power provider to choose between one agency
    and another in direct conflict. I used the last Congress to
    this Congress to adjust that factor, but I am intrigued by the
    Volt/VAr grid optimization technology you have. Can you tell me
    how that would work to improve the efficiency of the electric
    grid and improve grid reliability?
        Mr. Kosisko. We have several technologies that help
    actually improve the efficiency of transmission and
    distribution of power and grid reliability. One of the most
    predominant is our high voltage direct current technology and
    the transmission of energy. This allows for much lower losses
    in the transmission of high voltage across longer distances,
    and helps us to better connect the grid, whether it is with
    traditional power sources or whether it is with alternative
    power sources and renewable power sources. So that is just one
    example. It typically reduces losses by about 10 percent, which
    certainly is a terrific improvement when you look at the amount
    of energy that gets transmitted across those lines.
        We also provide software that helps manufacturers and grid
    and utilities to better manage the grid, improve its
    reliability, improve demand response so at peak seasons or at
    peak times during the day, we could better produce energy in a
    more effective way with lower cost fuels and better fuels. Just
    a few examples. So we have several technologies in that space.
        Mr. Olson. Thank you.
        My final question is to you, Mr. Crouse. In your oral
    testimony, you mentioned the Federal Government picking winners
    and losers in the energy sector, largely through the RFS,
    renewable fuel standards, as a challenge to combined heat and
    power. I am also aware of a company back home called TAS, which
    faces similar challenges. They are trying to do a waste heat to
    power model of operations. Can you briefly describe the
    differences between combined heat to power, waste heat to
    power, and microturbines?
        Mr. Crouse. Certainly, I will try. Thank you for the
    question, Congressman.
        You know, waste heat to power is typically taking an
    existing thermal energy store--source and using it in a device
    to generate additional electricity or make useful, you know,
    products or energy out of it. Microturbines and other CHP
    generation technologies are very similar in how our products
    are applied. We install the generator, and then the thermal
    energy is used typically with inside the facility of the host
    client to increase the overall efficiency of the plant. So we
    are able to use the electrical energy and the thermal energy to
    make hot water steam, chilled water. You know, one of the
    challenges we faced is the evaluation is far more complex for
    CHP than it is for changing light bulbs or putting in high
    efficiency motors or VFDs, so the challenge is customers tend
    to shy away from more complex transactions and/or payback
    scenarios than the simpler ones. That is one of the uphill
    battles that we have.
        Mr. Olson. Thanks. I am out of time. I yield back.
        Mr. Whitfield. Gentleman's time is expired.
        At this time, I recognize the gentleman from New York, Mr.
    Tonko, for 5 minutes.
        Mr. Tonko. Thank you, Mr. Chair.
        First, an observation. I have heard so many comments here
    today about--from the panel about what the market rule, what
    the private sector--the agents have changed and that things
    will happen, and I find it interesting. There was a great call
    for policies, for standards, for regulation, for incentives,
    for codes, for implementation of those items above, and calling
    for investments and R&D appeal. So I think it is a very telling
    statement here today.
        I would first go to Ms. MacIntosh, please. You state in
    your testimony that the barriers to increase usage of an ESPC
    are difficult to quantify. I would ask, what role do energy
    prices play in a decision to use an energy savings performance
    contract?
        Ms. MacIntosh. That is a very good question. Energy prices
    obviously dictate the breadth with which we can apply an energy
    savings performance contract to a facility, because all of the
    project implementation costs and care and feeding of an ESPC
    are covered by the energy savings and the energy cost savings
    that are generated by those improvements. The areas where you
    have high energy rates are obviously going to have an easier
    time of doing a performance contract than areas where energy
    rates are more competitive.
        Mr. Tonko. And then how are the changes in energy prices in
    the term of a contract addressed? How do those changes get
    incorporated into the contract?
        Ms. MacIntosh. What we do in the course of developing an
    energy savings performance contract is a lot of historical
    analysis of how energy rates have changed for that particular
    customer over time, and then we utilize a lot of sources
    through Department of Energy, through NIS, and other areas on
    what forward projections are supposed to be, and then we look
    to put together a conservative value on what we believe the
    energy prices are going to be, a floor, if you will, to utilize
    throughout the term of the contract.
        Mr. Tonko. Back in my New York State days working with
    energy policy and implementation, we held a hearing with data
    centers. Do you see the application with data centers being a
    real thing?
        Ms. MacIntosh. We are just starting to see that as a real
    possibility in energy savings performance contracting because
    of their high energy draw, and there is an awful lot of
    technology advancement that is happening in the IT and data
    center arena. So it certainly is an opportunity for us to
    incorporate ESPC in that market.
        Mr. Tonko. Thank you.
        Mr. Crouse, the barriers to expanded deployment of CHP may
    be many, but finding the upfront capital, I have to believe, is
    a big thing, the capital investment. Have the energy savings
    performance contracts been used much by the private sector to
    install CHP?
        Mr. Crouse. Certainly. We have customers that use the
    energy savings model in the private sector as well as in the
    government sector to deploy our technology and other CHP
    technologies.
        Mr. Tonko. And where in our industrial applications do you
    see some of the best opportunities?
        Mr. Crouse. You know, I think you need a customer that is
    using thermal energy--hot water, steam are the easiest sort of
    customers. Food processing, cheese, you know, customers in the
    plastics business are natural targets for us. So those are on
    the industrial side some of the low-hanging fruit, if you will.
        Mr. Tonko. And Mr. Elliott, I assume some of the resistance
    to new product efficiency standards is the cost to
    manufacturers of altering their product design and
    manufacturing process. What is the experience that you have
    with the product vendors, in terms of perhaps incorporating the
    message for efficiency of--efficiency standards?
        Mr. Elliott. There absolutely is a significant transaction
    cost for a manufacturer when they do reengineer their products
    or reengineer their products to incorporate energy efficiency.
    That said, that also gives them the opportunity to revise their
    manufacturing processes. For example, in the electric motor
    industry when we saw motor standards come in, we saw a
    consolidation of motor designs by the manufacturers and
    implementation of flexible manufacturing. So this actually
    allowed them to produce a higher quality product that was
    accepted by the marketplace as a--on the basis of its
    performance. So yes, there was cost occurred--incurred by the
    manufacturers, but what it did was really allow them, in the
    case of the motors, not only produce a product that met the
    customers' needs better, but also allowed them to compete
    globally against many of the low-cost producers who were not
    being able to produce a product of similar performance.
        Mr. Tonko. Thank you.
        Ms. Burt, just a comment to your earlier statement.
    Consumers don't pay rates, they pay bills, so I appreciated the
    statement that was being given.
        With that, Mr. Chair, I will yield back.
        Mr. Whitfield. Gentleman's time is expired.
        At this time, I recognize the gentleman from Virginia, Mr.
    Griffith, for 5 minutes.
        Mr. Griffith. Thank you, Mr. Chairman. I will follow up on
    some comments that were made earlier, and maybe in the previous
    panel for some of it. I would like to say--I am going to ask
    you a question in a minute about that Christiansburg facility,
    but I do look forward to going up there and seeing it in action
    at some point in time, but I am going to get you to do a little
    science on it for me, Mr. Crouse.
        Before that, I would like to say to you, Mr. Kosisko, thank
    you so much for having a facility in the Ninth District of
    Virginia. It is doing great work there, and our biggest problem
    is is that because it abuts a mountain, we have got to find
    space to expand, and I hope that it will still be in the Ninth
    District of Virginia, but we don't have that many flat places.
    But anything I can do to help you all find facilities for the
    current facility or anything else you would like to move to my
    district, I am more than happy to do, and I appreciate all the
    work that you are doing.
        Ms. MacIntosh, I would like to get a copy of the inventory
    or survey of the buildings on at least the House side as well.
    I love the windows, but I agree with Dr. Burgess, there has got
    to be something we can do a little more efficient than the
    current windows that we have. I will confess that I like to
    open those windows from time to time, particularly when the
    weather is nice, and I would hate to lose that, but also, I
    understand that we have got to have some energy efficiency.
        That being said, going back to a previous panel, I would
    comment that I do worry a bit about not having buildings that
    breathe a little bit, because then the indoor air pollution
    does go up, as Mr. McKinley pointed out, and so that is
    something we do have to put in the overall equation.
        Mr. Crouse, coming back to you, I would ask so that you can
    explain it to me, because I am not an engineer. I was a lawyer
    before I came to Congress. You have got a 65 kilowatt
    microturbine installation in the town Christiansburg waste
    water treatment plant, and you indicated in answers to
    questioned earlier that a lot of those facilities where these
    are located, they use it onsite. I am trying to figure out--and
    they may not, but does Christiansburg use that energy onsite,
    or does it--do they wheel it off somewhere else?
        Mr. Crouse. Thank you for the question, Congressman. They
    certainly use it onsite. Waste water treatment plants are
    unique in that they do a lot of water pumping. They also use
    the thermal energy to heat the digesters, so especially in the
    winter months, you know, to keep the chemical composition, the
    temperature correct in the digester, they use the thermal
    energy from their CHP system, and then the electricity is
    just--reduces the amount of purchase power that they have from
    the utility, because typically they do not generate enough
    digester gas to supply all of their electrical requirements at
    a waste water treatment plant.
        Mr. Griffith. All right. Thank you very much.
        I should mention that ABB does a lot. When I toured their
    facility there in Bland, I did note that they pointed out a lot
    of things that they were doing to keep their energy costs under
    control and to be very efficient at that facility. I would also
    have to note that I went back for, I don't know, a second or
    third tour to the large Volvo facility in my district, and they
    are doing all kinds of things. They have got a couple of
    windmills, they have got solar panels. They have installed
    passive solar in a number of places where there--because they
    are skilled at doing a lot of these things, they have actually
    done a lot of it themselves. But the one that I found the most
    interesting that I think folks maybe want to pay attention to
    is that somebody on their team--they have suggestion boxes and
    give out rewards. Somebody on their team figured out that
    because they have 2,000-plus people who are captive in the
    factory, they all know where the drink machines are and where
    the snack machines are, and so they took the light bulbs out of
    them and they were really surprised at how much electricity
    they saved. So when we are talking about efficiencies,
    sometimes simple things work very well in that regard.
        Mr. Gayer, I have only got a minute left, but I was
    wondering if you could comment on refrigerators since that came
    up earlier, because one of the things I have noticed is, well,
    I think we all ought to have the most efficient equipment that
    we can have. If you have got a refrigerator that is struggling
    on, you might stay there if the cost is high to do something
    else, and a lot of the innovations I have seen have been
    technologically driven as opposed to energy efficiency, because
    I can't imagine that water and ice in the door as opposed to
    having to reach inside is a whole lot more efficient. Maybe it
    is. Can you expand on that and help me out?
        Mr. Gayer. Yes, a few things. One is I agree with Mr.
    Elliott, the choice has expanded over the last few decades in
    all appliances, but I think that is market driven and certainly
    not due to mandates, which by their nature, restrict choice.
    And you are exactly right, one of the reasons these don't work
    that effectively or cost effectively to reduce energy is
    because people sometimes hang on to their older products
    longer, especially if it is a big ticket item, and it is going
    to cost more money due to a different--a new regulation.
        Mr. Griffith. And do you have any data that would indicate
    how much the price of a--percentage-wise or otherwise that--how
    much the price of a refrigerator has been impacted by----
        Mr. Gayer. I don't have it with me. There is a--primarily
    in the vehicles, when one deals with vehicles too. There is
    always an impact whenever you raise CAFE AE1 standards, you
    have to worry about you get a slower turnover of the fleet and
    new vehicles tend to be more fuel efficient. I don't have the
    numbers offhand, though.
        Mr. Griffith. All right, thank you, sir.
        Mr. Whitfield. Gentleman's time is expired.
        At this time, I recognize the gentlelady from California,
    Ms. Capps, for 5 minutes.
        Mrs. Capps. I want to thank the chairman for calling
    today's hearing. Thank you to all of our witnesses for a long
    day of testimony.
        I think it is a great topic. Increasing energy efficiency
    is critical to our Nation's energy future, and as is clear from
    today's testimony, the private sector is doing a great job of
    innovating and bringing new energy efficient technologies to
    customers. But the federal policy, I believe, also plays a
    critical role in this process. Neither the Federal Government
    nor the private sector on its own does as good a job as we want
    to have done when they all work together. But working together,
    these public-private partnerships can lead to great
    advancements that create jobs and can save consumers money, but
    also spur innovation and benefit the environment. I see it
    every day back home in my district on the Central Coast of
    California. I represent two world-class research universities:
    Cal-Poly San Luis Obispo and the University of California at
    Santa Barbara. Research conducted at these public universities
    is frequently spun off into very successful local companies
    which I have visited, like Soraa and Transphorm, and many
    others. These companies continue to innovate and develop new
    technologies, and they are creating jobs at the same time,
    spurring economic growth.
        So my first question is to you, Mr. Crouse. Your company is
    similarly innovating and staying at the forefront of your
    industry. In your testimony, you mentioned federal R&D funding
    as an important contributor to your company's growth. Could you
    elaborate on that just for a minute, because I want to ask
    other questions, too, but how has Capstone benefitted from
    federal R&D funding?
        Mr. Crouse. Thank you. I will be as quick as I can.
        The--we have several programs currently that we are working
    towards efficiency and reliability, so through the DOE, we have
    a 250 and a 370 kilo microturbine that we are developing that
    will improve the electrical efficiency of our product and
    broaden the number of applications it can go into to get higher
    overall efficiencies. And then we are working on other fuel
    types, syn gas and other things. Some of our original
    technology was developed in cooperation with the public sector
    as well.
        Mrs. Capps. So you are a good example for the rest of us.
        My second question goes to you, Ms. Burt. Of course, these
    energy efficient technologies not only create jobs and support
    small businesses, but they also benefit consumers. I want to
    focus on this intersection between technology and energy and
    how it really makes a difference in the lives of the people,
    and that is actually the bottom line. Ms. Burt, we all know how
    these technologies can reduce energy use in our homes and
    businesses, and lower cost for consumers, but I am curious
    about the efficiency improvements being made to our energy
    infrastructure. For example, could you discuss what efficiency
    technologies PG&E is deploying on the infrastructure side and
    how this is going to benefit consumers in the long run?
        Ms. Burt. Thank you. That is a very good point. We are--
    again, this is the intersection between technology and energy,
    and it is very evident in the smart grid that is being
    deployed. Within California and our distribution network, we
    are deploying a device called a FLISR, and that is not a very
    catchy name, but it stands for fault location isolation, and
    service restoration, and it literally takes any kind of
    interruption along the circuits that have the device from being
    a typical 1 to 2 hour outage to being less than 5 minutes. And
    as we deploy those, we have deployed--about 135 circuits are
    completely deployed to date. By the end of this year, we will
    have 400 circuits deployed, and I am really happy to say that
    in 2012, we had the highest reliability we have experienced in
    the history of our company. So we are quite pleased with how
    intelligence and energy efficiency works within the grid as
    well.
        Mrs. Capps. And when that disruption in service happens,
    you know, there is a ripple effect on how it impacts your
    customers.
        Finally, Ms. Burt, I want to touch on a key point that you
    made in your testimony about energy efficiency training. PG&E--
    and I am thinking about the facilities I have in my district--
    your Pacific Energy Center has been training students in energy
    efficiency for many years. I am curious about the demand for
    this kind of training. Have you seen enrollment in your
    training courses increasing in recent years? If so, why do you
    think that is? In other words, is this catching on?
        Ms. Burt. Thank you, Congresswoman. I do believe that we
    have seen enrollment increasing, particular with the ARRA
    funding and the weatherization and the cities and counties and
    the jobs that were created within the State of California. Our
    role in that--we weren't a part of the funding, but our role in
    that was to train and properly train----
        Mrs. Capps. Right.
        Ms. Burt [continuing]. The workforce. So we have seen a
    consistent increasing interest in these sorts of jobs, because
    they are very relevant.
        Mrs. Capps. And I saw this firsthand during the recession.
    The weatherization of older homes--what is it, any structure
    that is over 10 years old, maybe it is even less than that?
        Ms. Burt. Yes.
        Mr. Capps. Can benefit cost-wise, bottom line-wise, and
    then you can train unemployed people, give them a job. It is
    not very sophisticated in many ways, focusing on just older
    homes, putting in more efficient windows, window sills, the
    win-win with more people working, and the lower energy cost for
    maybe a couple living on a fixed income. It just--it does
    really--over the long haul really have an impact.
        Thank you very much for your time.
        Mr. Whitfield. The gentlelady's time is expired. At this
    time, I recognize the gentleman from Illinois, Mr. Kinzinger,
    for 5 minutes.
        Mr. Kinzinger. Thank you, Mr. Chairman, and thank you all
    for coming. I really appreciate it.
        As has been discussed today by our first few panels,
    improving energy efficiency in America will play a pivotal role
    in increasing U.S. energy productivity and making America more
    energy secure. The benefits from implementing energy saving
    techniques and technologies are felt by nearly every part of
    society through higher productivity, reduced energy costs,
    lessened environmental impacts, and a return of billions of
    dollars to our economy that was previously going to waste. As
    we move forward to promote adoption of energy saving
    technologies and improve awareness of their benefits, promoting
    the facts outside of the light of partisan politics will be
    crucial.
        Recently it was my honor to be nominated to serve as an
    honorary vice chair to the Alliance to Save Energy, a
    bipartisan group of members of Congress, corporate CEOs, and
    organizational leaders focused on promoting the benefits of
    energy saving technologies and encouraging their adoption. I am
    excited to be working with this diverse group, and believe it
    can serve as a model for problem solving across the partisan
    divides, which we kind of need nowadays.
        At this time, I ask unanimous consent that the Alliance
    Commission on National Energy Efficiency Policy Energy 2030
    Report be included for the record.
        Mr. Whitfield. Without objection.
        [The information appears at the conclusion of the hearing.]
        Mr. Kinzinger. The benefits of adopting energy efficient
    technologies are undeniable. Congress must work to educate
    consumers and businesses to these benefits, allowing for the
    private sector to move forward, upgrading our energy
    infrastructure.
        I want to commend private industry for taking the steps to
    ensure energy efficiency. I particularly want to thank the pay
    TV industry, which includes cable operators, Bell companies,
    satellite providers, and consumer electronics manufacturers for
    their agreement announced last year to make sure that
    consumers' set top boxes are even more energy efficient. This
    is a great precedent for the private sector, stepping up to the
    plate and doing the right thing without government mandates.
        Mr. Kosisko, in your testimony you mentioned a 2011 study
    by the Economist Business Intelligence Unit in which businesses
    were asked to identify the main barriers to investment and
    industrial energy efficiency. By far, the most popular response
    was a lack of clear cut financial case for the energy
    efficiency investments. How can government work with
    organizations and companies like yours to get out the facts and
    make the clear cut case for companies to make energy efficient
    upgrades?
        Mr. Kosisko. Thank you, Congressman. You know, as I
    mentioned before, I think that education, I think that
    promotion and creating visibility in the marketplace is going
    to be crucial to us moving forward. Certainly, you know, there
    is a competition for capital. When you look at private
    investment in industrial companies, they are going to make
    decisions based on how they can most effectively use the
    capital over the next 2 to 3 to 4 years. Some of these
    technologies have longer payback periods, so I think it is
    important that we provide the level of education so that they
    can make targeted decisions in certain technologies that will
    have shorter payback periods, produce results for them in a
    shorter timeframe, but also, I think that we need to look at
    what we can do in a smart way to promote them in using these
    technologies that may have longer payback periods, but will be
    crucial for us in maintaining our competitiveness from an
    industrial perspective in this global economy.
        Mr. Kinzinger. Well thank you, and I think even having
    these hearings is a good start.
        Ms. Burt, in your written testimony you commend the work
    and recommendations of the Alliance to Save Energy's Commission
    on National Energy Efficiency Policy, which issued a report,
    Energy 2030, highlighting several policies concerning existing
    technologies for policy makers to include to consider. Of those
    recommendations to increase energy productivity is for the
    government to lead by example. You also mentioned that Pacific
    Gas and Electric Company is currently completing a project for
    NASA Ames Research Center near Mountain View, California. This
    project encompasses more than 100 buildings and covers in
    excess of 2.5 million square feet, and allowed NASA to save 9
    gigawatt hours of electricity, 1.3 million therms of natural
    gas, and more than 15 million gallons of water annually. With
    results this substantial, could programs with similar amounts
    of savings be duplicated at other federal agencies? If so, what
    are the main challenges that we face in doing that?
        Ms. Burt. Yes, thank you, Congressman. They absolutely can
    be duplicated. In fact, we have three currently underway and 11
    that we are hoping to move forward with within our service
    territory. What are the main area of improvement is really in
    the contracting. What we have found is that as we work with
    NASA Ames, the VA, the IRS in Fresno, the FAA in another part
    of our service territory, it is a complete recontracting
    process. So if we could find some sort of simple
    standardization for these sorts of contracts for the utility
    services contracts, I think that would benefit both sides.
        Mr. Kinzinger. That sounds great, perfect time, too. I
    yield back.
        Mr. Whitfield. Thank you, Mr. Kinzinger.
        At this time, I recognize the gentleman from Illinois for
    an additional question.
        Mr. Rush. Ms. Burt, I do have one quick question. I am very
    impressed with what PG&E is doing in California, and are there
    similar programs that you are aware of in Illinois or Chicago,
    in terms of your training programs?
        Ms. Burt. Thank you, Congressman. I am just not that well-
    versed in Illinois. I am very, very well-versed in California,
    but not in Illinois.
        Mr. Whitfield. Thank you all very much, and before we
    conclude, I am just asking unanimous consent that the following
    materials and statements be entered into the record from Arkema
    Corporation, the American Chemistry Council, the Alliance for
    Industrial Efficiency, Heat is Power Association, and Pew
    Charitable Trust.
        Without objection, I would enter these into the record.
        [The information appears at the conclusion of the hearing.]
        Mr. Whitfield. Thank you all once again for your time and
    traveling to come to Washington. We appreciate your testimony
    and we look forward to working with all of you, and hope the
    next time we have a hearing on efficiency, which we will soon,
    that we will have just as many people stay throughout the
    entire hearing.
        So thank you all very much, and with that, the hearing is
    adjourned and the record will be open for 10 days.
        [Whereupon, at 1:36 p.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

                   Prepared statement of Hon. John D. Dingell

        Mr. Chairman, energy efficiency is one of the simpler ways
    for us to achieve energy independence and security. By making
    the vehicles, appliances, and buildings we use every day more
    efficient, we can get more bang for our energy buck.
        Recently, the cable industry announced new efficiency
    standards for the cable boxes we use to watch and record our
    favorite shows. These improvements will result in half of the
    energy currently consumed and estimates are that the new
    efficiencies will cut consumers' electricity bills by
    approximately $1.5 billion. To speed up efficiency improvements
    for existing boxes, the industry will release a software update
    that will immediately result in energy savings of 20 to 30
    percent on current devices.
        The cable industry is to be commended on this forward
    thinking to adopt practices that can take effect now and
    drastically improve efficiency moving forward. As our country
    looks to new sources of energy such as fossil, nuclear, and
    renewable, we must also look for the low-hanging fruit that
    help us address this issue.
        In addition to this innovative thinking by industry, I also
    believe that industry must continue to work with regulators
    because good energy policy and good economic policy go hand in
    hand. By collaborating with industry and consumer groups, the
    Federal government can develop standards that can be cost-
    effective for both industry and consumers while maintaining our
    energy security.
        There was a time, not too long ago, when we could work on a
    bipartisan basis to develop ways for American companies to
    compete and innovate. The Energy Independence and Security Act
    of 2007 was probably the most recent example of that
    bipartisanship. It was signed into law by President Bush and
    supported by many members of this committee on both sides of
    the aisle including the chairmen of this subcommittee and of
    the full committee.
        We cannot pretend that industry does not have good
    intentions or that Federal regulations are the root of all
    economic problems. We must all work together if want to find
    the best solutions to invest in our future and secure our
    energy independence and security.
                                  ----------

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