NATIONAL ENERGY ISSUES

FRIDAY, JULY 13, 2001

U.S. SENATE,

COMMITTEE ON ENERGY AND NATURAL RESOURCES,

Washington, DC.

The committee met, pursuant to notice, at 9:35 a.m. in room SD366, Dirksen Senate Office Building, Hon. Jeff Bingaman, chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN,

U.S. SENATOR FROM NEW MEXICO

The CHAIRMAN. The hearing will come to order. Today's hearing will focus on proposals to expand existing programs to assist low income consumers to meet their energy needs and to weatherize their homes, also programs to encourage State energy plans and activities and proposals to improve the energy efficiency of buildings, particularly Federal buildings, appliances, and industry.

Yesterday we took testimony on a number of oil and gas supply issues. We will continue the efficiency theme next Tuesday with a hearing on vehicle issues, discussing energy research and development on Wednesday and renewables, distributed power technologies, and hydroelectric relicensing on Thursday, so as we move forward toward a markup of a balanced and comprehensive energy bill, I believe we are trying to have hearings that reflect that same balance of the array of energy options we have before us.

Increasing the efficient use of energy is the single most effective and least-cost policy for both the short term and the long term. Energy efficiency can reduce the demand for tight energy supplies and can reduce the upward pressure on energy prices. Energy efficiency allows us to maintain the same economic productivity and quality of life with less energy input, and efficiency helps us reduce pollution and environmental impacts associated with energy production and use.

There are some interesting statistics that the Alliance to Save Energy, a group that I have been associated with for many years, has come up with. Their analysis shows that energy efficiency provided the Nation with 27 quadrillion Btu's, or quads, or about 22 percent of U.S. energy consumption in 1999. This made energy efficiency the second leading source of energy in 1999, trailing oil consumption, which was 38 quads, but contributing more than natural gas (22 quads), coal (22 quads), nuclear (8 quads), and hydro (4 quads).

We have some excellent witnesses today, including the Assistant Secretary Garman, who is, of course, well-known and respected by

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all of us on this committee, so I will stop my remarks and defer to Senator Murkowski, Secretary Garman's former boss.

STATEMENT OF HON. FRANK H. MURKOWSKI, U.S. SENATOR FROM ALASKA

Senator MURKOWSKI. Thank you, Senator Bingaman. Although I think you and I both know that we usually work for our people, they seem to lay out our schedule and dictate the terms and conditions under which we come in, and I understand that it was your staff that set the hearing on Friday, as opposed to the usual procedure, but you have got a good crowd here, and obviously the Senate Energy Committee is working on Friday. The halls are a little hollow out there, but that is all right.

I am pleased to join you here this morning. It seems like only yesterday that we were here, and we were here yesterday. [Laughter.]

Senator MURKOWSKI. In any event, we are going to hear from a number of witnesses, as you have already outlined. I want you to know I support the measures to improve the energy efficiency and assist those low income families that are facing high energy bills in this country, but in addition to addressing the symptoms of our energy crisis, high energy bills, I am firmly committed to the belief that we must commit ourselves to solving the underlying crisis.

I stand certainly ready to work with you to move an energy bill to the full Senate for consideration, hopefully prior to the August recess, and I hope that we can collectively impress upon the Majority Leader the need to schedule time for the Senate floor. I would hope that we could have consideration for a comprehensive measure no later than the beginning of the week of July 30.

I recognize there are other priorities as well. In any event, we will seek to make sure that any energy bill that leaves this committee will have a balanced approach to our energy security needs. Obviously, that includes increased supply of conventional fuels, energy efficiency, using more technology, and expanded use of alternative fuels and renewables.

One of the things that I am rather interested in-evidently the second panel is going to focus on the debate for standards for central air conditioners and heat pumps. What has been lost in the debate is that, as I understand, the new Department of Energy standard will still increase energy efficiency by about 20 percent, which certainly is encouraging. The administration has proposed a 12SEER standard, standing for the seasonal energy efficiency ratio. Secretary Abraham recently noted that the new air conditioning standard will save enough electricity by 2030 to light all U.S. homes for more than 2 years. I do not know how much Alaska is going to contribute to that, but nevertheless, we will survive. We will make up for it some other way, perhaps chopping wood, but at the same time the 12-SEER standard will be affordable for consumers, provide a wide array of manufacturers' models to meet consumer needs.

The same is not true of the 30-percent increase proposed by the former administration's 13 SEER standard. The 13-SEER standard would have eliminated 84 percent of new air conditioner models and 66 percent of new heat pump models, which is a rather inter

esting comparison. In many instances, the installation of larger indoor coils required to meet the 13-SEER standard would increase cost to consumers by many hundreds of thousands of dollars.

I gather that the Justice Department found that the 13-SEER standard would impose disproportionate impacts on low income families, the same low income families that we are trying to help with the increased LIHEAP and weatherization funding. It would also drive many small manufacturers out of business, reduce consumer choice and competition. Perhaps this is just a plan to create additional demand for even more increases in LIHEAP and weatherization funding, but I do not want to make that inference. I will just refer to it.

Clearly, the administration made the right decision to opt for a 12-SEER standard, reasonable cost-effectiveness with real benefits. I hope we can move beyond the inconsistencies on the issue designed perhaps for finger-pointing and perhaps get on with the business of making the right choices for the American people: choices of balanced economic and environmental concerns, and our need for energy to grow in the next decade.

I hope that we can act quickly on a comprehensive package, and I would certainly like, again, to reiterate since 1973 the economy has grown 126 percent but our energy has only grown 30 percent. Clearly, advanced technology, American can-do spirit and ingenuity, have helped us to make great advances in efficiency, but even with these improvements we can expect that over the next 20 years, oil consumption will increase by one-third. There is no other way to move America. Electricity demand will increase by 45 percent, and natural gas consumption will increase by 50 percent.

Incidentally, I would like to thank my colleague, who was a floor manager late last night when Mr. Griles was voted by a voice vote, and there happened to be three Republicans there and two Democrats, and so it was a close vote, but he is out, and he is confirmed, so we are very pleased. I think it has been 53 days, but nevertheless perseverance does pay off, if you have got enough persever

ance.

In any event, I was propounding here on some realizations that oil consumption is going to increase by a third, electricity demand will increase by 45 percent, natural gas consumption will increase by 50 percent.

Now, these are real figures from real people who I think call it as it is. Efficiency and conservation are crucial parts of a balanced, comprehensive energy plan. They are cornerstones of a bipartisan plan that we have worked on as well as the President's plan, but many believe efficiency is the only answer to future energy demand. As these numbers indicate, it is clearly not enough to rely on efficiency alone to power our economic progress. Efforts to increase domestic energy production must go hand-in-hand with efficiency and conservation in order to turn this crisis around.

I would conclude with two thoughts. The standard of living in this country is based on the assumption that we are going to have an affordable and plentiful supply of energy. If we do not, that standard of living is going to change, and the economy is going to change, and our national security interests are going to change.

I am very pleased to see Hon. David Garman here. I have a list of questions for him that were submitted by Alan Steinbeck, and so when we get through with your presentation this morning, then you can expect to have Alan-I guess it is called getting even, but in any event, welcome.

[Laughter.]

The CHAIRMAN. Secretary Garman, why don't you go right ahead, please.

STATEMENT OF DAVID K. GARMAN, ASSISTANT SECRETARY, ENERGY EFFICIENCY AND RENEWABLE ENERGY, DEPARTMENT OF ENERGY

Mr. GARMAN. Thank you, Mr. Chairman. Mr. Chairman and members of the committee, thank you for the opportunity to testify on a variety of legislative measures related to the improvement of energy efficiency. Energy efficiency is a very important part of the administration's overall energy policy.

The national energy policy document released May 16 dedicates an entire chapter to the subject of energy efficiency, and another entire chapter to the importance of renewable energy. Moreover, 54 of the national energy policy's 105 recommendations relate directly or indirectly to the importance of increasing our energy efficiency or increasing our use of clean, renewable energy.

I have a chart or two that I would like to use to illustrate the manner in which we intend to approach our goal of increasing system efficiency. The first chart looks at electricity flow, which represents about a third of our total energy use. As the energy inputs on the left flow toward end uses on the right, you can see graphically how efficiency loss is resulting from conversion, transmission, and distribution of energy.

If we were to increase end-use efficiency-the next chart, please by 20 percent, therefore saving the equivalent of 2.1 quads of end-use energy, we would actually save 6.7 quads of energy input at the powerplant due to conversion losses in distribution and generation. This illustrates why increasing end-use efficiency is very important, but it is also why a focus on end use should not constitute the sum total of our efforts.

If we can employ technologies that increase end use efficiency and supply efficiency by 20 percent, then we could save 14.7 quads of energy inputs resulting in lower cost and fewer emissions. That is something, Mr. Chairman, your committee clearly recognizes, as evidenced by your hearings today and those scheduled for next week. Although today's focus is on end-use efficiency, next week's hearing will look beyond that to distributed generation and other technologies that can make our overall efficiency much better.

I commend you for this approach, which is in agreement with the approach embodied in the President's national energy policy. We are launching a new analytical effort at the Department of Energy to better understand and track trends in energy intensity. Surprisingly, while DOE has done this in the past on a one-time basis, it has never done this in a sustained and systematic manner.

We envision that this effort can contribute to national goals for energy efficiency improvements, and the sorts of improvements that could be made possible through technology and cooperative ef

forts with industry, State, consumers, local governments, utilities, and others. We are doing this, again, in direct response to the recommendation in the national energy policy that we make energy efficiency a national priority.

With respect to the specific provisions in legislation before the committee today, I would note that they are all well-intentioned, and with some modifications the administration is likely to be in a position to support many of them if they are part of a balanced, comprehensive approach that also addresses supply and infrastructure issues contained in the national energy policy document. My written testimony goes into specific detail on the measures before the committee, but in the small time I have got I would like to highlight just a few.

First of all, weatherization. The President has proposed $1.4 billion in additional funding for weatherization over the next 10 years. We urge that Congress adopt this increase, and appreciate the efforts of several on this committee who are working to ensure that the President's budget request in this area are fully met.

With respect to the State energy program, the President's budget request for the current fiscal year was $38 million, equal to the 2001 level. We are pleased that both the House and Senate committees fully funded this request in their Interior appropriations bills, and share the view embodied in legislation proposed by both the chairman and the ranking member that we can do more in this

area.

On the subject of energy-efficient schools, we believe there are substantial opportunities in increasing energy efficiency in schools, and we are working through our existing programs such as the rebuild America energy-smart schools campaign and a host of other works performed by States under the State energy program. We would like to work with you as you consider additional steps.

With respect to the Federal energy management program, or FEMP, we recognize that the Federal Government is the country's largest energy user, spending almost $8 billion annually on energy costs. We operate 500,000 facilities and almost 600,000 vehicles worldwide. President Bush in a May 3 directive to Federal agencies asked that immediate steps be taken to reduce energy use, particularly peak demand in supply-constrained areas such as California. Our efforts to promote energy efficiency in the Federal realm, however, will not be a short-term effort driven only by current concerns about energy supply. Instead, we would like to work with you to build a new culture of energy savings that pervades the way the Federal Government procures buildings, appliances, vehicles, and all of the other items we purchase.

I will stop with that overview and submit to any questions you might have. Thank you, Mr. Chairman.

[The prepared statement of Mr. Garman follows:]

PREPARED STATEMENT OF David K. GARMAN, ASSISTANT SECRETARY, ENERGY EFFICIENCY AND RENEWABLE ENERGY, DEPARTMENT OF ENERGY

Mr. Chairman and members of the Committee, thank you for this opportunity to testify on S. 352; Title XIII of S. 597; Sections 602-606 of S. 388; S. 95; and S.J. Res. 15. These measures, of course, all relate to the improvement of energy efficiency.