Insitute a larger Energy related Tax designed to cover the required GHG reduction gap

Administration Commitment to seek Legislation
Capping GHG Emissions

STATEMENT OF WILLIAM E. DAVIS

Mr. DAVIS. Good morning, Chairman Sharp, and thank you and the committee for the invitation to be here today. I am very pleased and very honored to be able to present a statement on behalf of my company.

I'd like to speak to you today about my company's support for the President's Climate Change Action Plan and corresponding voluntary activities we are undertaking at Niagara Mohawk. I'd also like to share a few thoughts related to section 1605 of the Energy Policy Act.

Our internal program to stabilize company emissions of CO2 and other greenhouse gases is called the Niagara Mohawk Greenhouse Warming Action Program. From the beginning, this program was intended to be voluntary.

We announced the program in October 1992, which was 6 months before President Clinton's Earth Day message and about a year before the release of the Climate Change Action Plan.

With our program in place, I also felt it important last August to send a letter to Energy Secretary O'Leary indicating our company's commitment to stabilize CO2 emissions at or below 1990 levels consistent with the President's goal.

We intend to give our full support to the Department of Energy in efforts to ensure the success of the climate change action plan and the 1605 program. I'd like to spend a few minutes discussing the corporate philosophy behind our internal voluntary program and our support for the national program.

In framing our response to the global warming issue we relied heavily on three major policy cornerstones. The first of these was the study conducted by the National Academy of Sciences titled Policy Implications of Greenhouse Warming.

Essentially, we found ourselves in agreement with the conclusions of this study regarding the advisability of taking cost effective actions now to mitigate global warming rather than waiting for all scientific uncertainties to be resolved.

The second cornerstone is our Corporate Policy on Protection of the Environment. Many of the things that we have committed to in our corporate environmental policy are directly applicable to global warming mitigation strategies.

The third major policy influence is our view that voluntary action in response to important societal issues is usually if not always preferable to mandatory programs. And this is an important point.

I believe that voluntary efforts by their nature will be more flexible, more innovative, more inventive, most cost effective than command and control type government regulation. And for this reason, I endorse the approach taken in the President's Climate Change Action Plan.

I feel the plan will encourage the maximum participation on the part of individual companies such as ours in efforts to move the country toward stabilization of greenhouse gas emissions nationwide.

The written testimony I have submitted describes in more detail the types of voluntary activities we are undertaking and how they support various elements of the national action plan. And I'd briefly like to summarize some of those activities.

The first being internal and external energy efficiency and demand side management programs which are already avoiding hundreds of thousands of tons of CO2 emissions annually. Programs which actively promote the increased use of natural gas as well as participation in the EPA's natural gas star program.

Retirement of several of our older coal fired generating units by the year 2000, along with achievement of significant improvements in the performance of our nuclear units.

And our efforts also address developments of renewable energy resources. We currently operate the only commercial grade wind generators in the Northeast and we will be expanding this pilot project to six megawatts in the next phase.

The company was a founding member of the Utility Photovoltaic Solar Energy Group. And we also plan to increase our already substantial hydroelectric generating capability by approximately sixty megawatts.

Time doesn't allow a full description of the range of cost effective activities that we think will contribute to stabilizing greenhouse gas emissions. But a number of additional examples are included in my written testimony.

Let me turn now to section 1605. Niagara Mohawk is also committed to support the Department of Energy and its efforts to implement the President's climate change action plan through the Utility Climate Challenge Program and the section 1605 program for reporting voluntary reductions of greenhouse gases.

The 1605 program has the potential to alleviate a major concern of participating companies. The concern that companies which take an early and positive stance on voluntary reductions of environmental emissions such as CO2 will somehow be penalized for such actions in later regulatory programs. This became an important issue in the Acid Rain legislation, and it may be a chief reason for the 1605 provision.

Ultimately, the success of the 1605 program should be evaluated not just how well it achieves voluntary reductions and greenhouse gas emissions. It also should be measured on how well those reductions and those companies which actively supported the program are recognized in any future global warming policy or regulatory initiatives undertaken by the administration or the Congress.

There are a number of difficult institutional and technical issues which need to be thought through concerning section 1605. However, in light of Niagara Mohawk's interest in voluntary early reductions the company supports a program that will produce real, verifiable reductions that are recognized and acknowledged by as many of the parties involved as possible.

In closing, I'd like to point out that the kinds of activities that we at Niagara Mohawk are undertaking make sense for a number of different business and environmental reasons, and do not involve in our view uneconomic decisions.

The actions we are taking are fully consistent with our ongoing integrated electric resource planning process and we are in close communication with the New York Department of Public Service and State Energy Office in all of these areas.

Obviously, our situation may not be applicable to other utilities. Each company faces different circumstances and not all companies

can or should be expected to undertake the same responses to the climate challenge. The existence of a wide variety of appropriate responses underscores the importance of a voluntary effort.

In conclusion, the country has committed itself to certain goals related to global warming both internationally and nationally under two different administrations. And it is our intent at Niagara Mohawk to do what we can to help to achieve these goals. Thank you.

Mr. SHARP. Thank you very much, Mr. Davis. Mr. Jasinowski, we would be happy to hear from you now.

[The prepared statement of Mr. Davis follows:]

STATEMENT OF WILLIAM E. Davis, CHAIRMAN, NIAGARA MOHAWK POWER CORP.

In October 1992, about 6 months before President Clinton's Earth Day commitment to stabilize national greenhouse gas emissions and about 1 year prior to release of the President's Climate Change Action Plan, Niagara Mohawk Power Corp. announced its own program to address the global climate change issue. The company's Greenhouse Warming Action Program describes actions and programs the company will undertake with the intent to stabilize its emissions of CO2 and other greenhouse gases at or below 1990 levels. This testimony will describe the types of activities included in the corporate program and show how these activities link to the national plan.

First, however, this document will explain the corporate philosophy behind Niagara Mohawk's program in response to the threat of global warming.

In framing Niagara Mohawk's Greenhouse Warming Action_Program, the company relied heavily on three major policy cornerstones. The first of these is the study conducted by the National Academy of Sciences titled, Policy Implications of Greenhouse Warming. Essentially, Niagara Mohawk found itself in agreement with the basic conclusions of that major work. The NAS study concluded that although significant scientific uncertainties remain concerning climate change (and are likely to remain for some time), the magnitude of plausible negative effects is so large, and the lag time between countermeasures and climatic response is so long, that we are compelled to act now rather than wait for scientific uncertainties to be eliminated. The other major conclusion of the study, and equally as important as the first, is that there are a variety of positive response actions to reduce greenhouse gas emissions which can be taken at little or no cost, and in some cases, at a net economic gain.

The second cornerstone of the company's action program is its Corporate Policy on Protection of the Environment. Many of the things Niagara Mohawk has committed to in its corporate environmental policy are directly applicable to global warming mitigation strategies: vigorously implementing cost-effective energy efficiency and conservation programs, expanding the role of renewable and alternative energy resources, promoting more efficient energy supply technologies, and increasing our recycling efforts. These types of actions are generally recognized as being environmentally responsible, but also contribute to our climate change mitigation effort.

The third major policy influence leading to the company's Greenhouse Warming Action Program is Niagara Mohawk's view that voluntary action in response to an important societal issue is usually, if not always, preferable to a governmentallymandated program. The company believes voluntary efforts will by nature be more flexible, inventive, and cost-effective than government regulation, and will avoid the bureaucratic "overhead" and undesirable economic side effects that seem to come with regulatory programs, even those that employ market mechanisms. The company further believes that supporting voluntary efforts helps send a message to the world about the Nation's role as a leader on international issues, including global environmental issues. It is for these reasons that the company strongly supports the President's Climate Change Action Plan. Niagara Mohawk believes the Plan's flexible approach, which encourages voluntary efforts, will let companies choose cost-effective methods to move the country toward a stabilization of emissions nationwide. There are many elements of the company's Greenhouse Warming Action Program. First, since improved energy efficiency is such a fundamental component of the President's Climate Change Action Plan, it is important to note that Niagara Mohawk has a wide variety of demand-side management (DSM) programs designed to conserve energy and improve energy efficiency. The company has packaged many of its programs into a user-friendly menu called the Niagara Mohawk Reducing