I know that in the past 2 years we have relied heavily upon emergency funds to help us get through the winter season and avert any type of catastrophes for our households. The problem has been, it has been a crisis management approach, and it is after the fact, so our preference would be that the base level be increased and not just emergency contingency funds.

The CHAIRMAN. Ms. Choate, did you have a point of view?

Ms. CHOATE. I agree with Mary Ann that the base funding would be useful for the same reasons, not only that many States try to make plans in advance, such as Maine. We would borrow the money to start our program early to lock in prices in the summer `months, where the Federal funds are not received until October, and we cannot do that if we do not know what the base funding is going to be, or how much it will be, so it would make a difference.

The CHAIRMAN. The administration has proposed to direct a portion of Federal oil and gas royalties to the LIHEAP program during times of high oil and gas prices. Do either of you have a point of view on that proposal?

Ms. MANOOGIAN. Not specifically, and I do not know the details of the proposal. My only concern, again, is with respect to is that it makes the program much more vulnerable and volatile to what is going to happen, the amount of funds received from the royalties, in addition to, it is not clear to me if it is, again, going to be able to enable us to do the important and necessary program management that Ms. Choate and I have already identified.

The CHAIRMAN. Erik, let me ask you, obviously, in trying to move toward a more energy-efficient economy, one of the real obvious requirements which you are working on is this business of having an adequate workforce, a workforce that is adequately trained in how to do that. To what extent do you see that as a real bottleneck for getting from here to where we need to be?

I mean, is the problem that we have not adopted the right policies at the Federal level, or do we really have a shortage of people in the field all around this country who are trained to put in place the energy efficiency measures that we all think make sense?

Mr. EMBLEM. Mr. Chairman, the answer is yes to all three. We have had policies in the past that have exacerbated the problem, and we also have the issue of getting a workforce of trained individuals who are trained to implement these new technologies, and this energy-efficient equipment that is needed to properly ventilate the buildings.

We also deal with the Government and regulatory issues. After the energy crisis of the seventies, the ventilation rates for buildings were reduced by 67 percent. In 1970, they were 50 cfm per person. They were reduced to 5 cfm per person, and now they are back up to 20 cfm per person, but in the lag time, these buildings have been designed around changes in government regulations and government standards where we have to have people now that are able to go back into these buildings and assure that the proper ventilation rates and air conditioning is obtained, and it is through training.

The CHAIRMAN. Mr. Wagner, let me ask you about, at the current time, there is an executive order that requires a certain level of en

ergy efficiency to be built into new Federal energy, or Federal construction projects, is that right?

Mr. WAGNER. Yes, sir, and there is also a requirement to have sustainable type designs in buildings, yes, sir.

The CHAIRMAN. How effective is that requirement, the way it is presently operated?

Mr. WAGNER. It is effective, because oftentimes designers try. The problem is, sometimes there is a limit in terms of funding, in terms of the building, so you have a push and pull in terms of the type of things that you can implement in a building up front when you design it, but those requirements are definitely there.

The CHAIRMAN. Do you think there is a genuine effort by architects and others who are proceeding to construct new Federal buildings to build this in?

Mr. WAGNER. I think that there is a number of new ways of approaching buildings. We have seen it in the commercial sector a lot. I think it takes a lot of innovation that you do not see everywhere, but I think there are tremendous examples of buildings where you can build this in at a first cost, and it does not cost as much as you think it might.

The CHAIRMAN. And does that extend in this area of schools? We give a lot of speeches about how we want energy-efficient schools. Is there really anything in place Nation-wide that causes that planning and thinking to be built in as new schools are designed?

Mr. WAGNER. Well, there is probably nothing real comprehensive, because most of those designs are at the local level.

The Department of Energy does have some good school programs providing that type of assistance and guidance in that. The other thing we have got to think about is, we have got a huge inventory of schools out there, many old, that probably-well, we can concentrate on the few new ones being built, and many of them arethere are a lot of older buildings out there that are wasting 20 to 40 percent of the energy out there, and concentrating on trying to retrofit those for not only the indoor environment but also the energy savings I think is probably really where much of the focus needs to be.

The CHAIRMAN. What role do you see this committee or the Federal Government playing in causing that to happen? I am persuaded that we are way behind in adequate school construction in this country, and that there is going to have to be a very substantial increase in that effort over the next decade or so. How do we ensure that that construction be designed and accomplished in a way that makes sense?

Mr. WAGNER. Well, I think if there is Federal funding that has been discussed in the past, that might be available to localities for school construction, or to assist in school construction, we may want to think about requiring that certain standards of efficiency are met, as opposed to providing assistance and say, build whatever type of building you want, I think, because it will continue to cost you in operation and maintenance cost throughout the future, and waste money in the future, so if you build them right the first time, that is extremely important.

The CHAIRMAN. All right. Well, I think this is all useful testimony. We need to digest it all and try to understand it, and hope

fully get it reflected in the legislation that we try to enact here. Thank you very much.

Let us take a 5-minute break, and then we will have the next panel.

[Recess.]

The CHAIRMAN. Why don't we go ahead here. This is our third and final panel, and we are very glad to have them here. First, we have Mr. Steven Nadel, who is the executive director of the American Council for an Energy Efficient Economy here in Washington, thank you for being here. Mr. Clifford Rees, president of the Air Conditioning and Refrigeration Institute in Arlington, Virginia. We appreciate you being here.

Mr. David Parks, president of Goodman Manufacturing Company in Houston, Texas-thank you for being here and Dr. Malcolm O'Hagan, who is the president of the National Electrical Manufacturers Association in Rosslyn. Why don't you go ahead, and we will just go across in that order, if that works to everyone's satisfaction.

STATEMENT OF STEVEN NADEL, EXECUTIVE DIRECTOR, AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY Mr. NADEL. Thank you, Mr. Chairman. As you said, I am here representing the American Council for an Energy-Efficient Economy. We are a nonprofit organization dedicated to increasing energy efficiency as a means for both promoting economic prosperity and protecting the environment. I appreciate the opportunity to appear before this committee today.

In specific, I have been asked by committee staff to talk about the Federal efficiency standards program. Federal appliance and equipment efficiency standards were first adopted in 1987 because many market barriers inhibit the purchase of efficient appliances in the unregulated market. These barriers include rush purchases, when the existing appliance breaks down, and purchases by builders and landlords, who pay for the initial cost but do not pay operating costs.

Standards remove inefficient products from the market, but still leave consumers with a full range of products and services to choose among. These standards are one of the Federal Government's most effective energy-saving programs. They are already reducing peak electric demand by the equivalent of more than 200 powerplants, reducing consumer bills by about $9 billion annually. In order to provide additional cost-effective savings under this program, we recommend that Congress extends the standards program to several additional products. Congressional action is needed, because in many cases DOE lacks the authority to set new standards.

Congress should take three specific actions. First, under current law, DOE has authority to adopt new standards on consumer products. The same authority should be extended to commercial products, since many of the best opportunities for new standards are in the commercial sector.

Second, Congress should direct DOE to set standards on several products with large opportunities for energy savings, or for which additional technical work is needed before specific efficiency standards can be set. Products that fall into this category include resi

dential ceiling fans, a residential furnace and heat pump circulation fans, and refrigerated vending machines.

I would note that this provision is now included in legislation that passed the House Energy and Commerce subcommittee yesterday.

Third, Congress should set standards on specific products in cases where standards already developed by States, as well as current voluntary standards such as Energy Star standards, FEM standards, and industry standards provide a sufficient foundation for Federal action.

By adopting standards directly, instead of calling for a multiyear DOE rulemaking, Congress speeds up the date that savings begin to accrue. Also, direct congressional adoption frees up DOE resources for those products for which DOE data collection and analysis are truly needed. Products that fall into this category are distribution transformers, commercial refrigerators, exit signs, traffic lights, floor lighting fixtures for residences, ice-makers, commercial unit heaters, and consumer electronic equipment, and my written testimony provides written recommendations along these lines.

Consumer electronic equipment merits a little further discussion. This equipment is the source of the energy-wasting vampires that President Bush discussed in his June 28 remarks at the Department of Energy. This equipment continuously uses electricity, even when switched off.

President Bush has directed that Federal agencies only purchase equipment with standby power use of 1 watt or less. By adopting minimum efficiency standards at this same level, we can move these savings beyond the Federal Government to other users, and drive a stake through the heart of this energy waste.

Analysis by my organization indicates that adopting reasonable and cost-effective standards on these products will reduce U.S. electric use in 2020 by about 5 percent of projected residential and commercial use, and will reduce peak electrical demand by the equivalent of about 40 to 50 powerplants. We estimate that the benefits of these standards will be about five times greater than the cost, highly, highly cost-effective.

In addition to new standards, I wanted to briefly mention two other issues. First, there has been a lot of controversy during the last 6 months about the new standard for residential air conditioners and heat pumps. We strongly support the SEER 13 standard that was published in the Federal Register in January. The distance between a SEER 12 and a SEER 13 standard amounts to about 18,000 megawatts over the next 3 decades, equivalent to the production of 60 new powerplants.

By our calculations, based on current electricity price structures and reasonable estimates of the cost of a SEER 13 unit, the simple payback to the consumer to go from SEER 12 to SEER 13 is only about 3.8 years. It is quite cost-effective to consumers. As you noted in your initial remarks, part of the reason DOE came up with much higher numbers is, they are using 1996 summer electricity prices.

There has been a lot of changes in electricity markets over the last 5 years, and summer prices are higher. Winter prices may be lower, but summer prices are higher, and this needs to be reflected

in the DOE analysis. Also, as I believe the representative from Goodman Manufacturing will report, that as this new equipment moves from a niche product to a mass-produced product, cost should come down significantly relative to current cost, and therefore DOE has overestimated the cost. With reasonable cost estimates, with reasonable estimates of the electricity price, this SEER 13 standard is clearly cost-effective for American consumers.

Second, I wanted to note that DOE is many years behind the congressionally set schedule for revising some of the current efficiency standards. DOE does an annual process to set priorities for new rulemakings. We recommend that after DOE completes this process, in September or October of this year, that this committee schedule an oversight hearing to review DOE's standards plans for 2002. Such an oversight hearing should explore options for picking up the pace so that these rulemakings can be completed in a more timely manner, and perhaps also explore ways to have the rulemakings be a little bit less controversial.

In conclusion, I want to note that according to our analyses, expanded appliance and equipment efficiency standards are one of the most effective policies Congress could adopt this year to reduce U.S. energy use over the next 2 decades. The only other policies that we have analyzed with greater potential energy savings are CAFE standards on passenger vehicles and the utility sector systems benefit fund.

Efficiency standards can make a significant contribution towards bringing U.S. energy supply and demand into better balance, thereby improving the long-term reliability of our electric grid, also helping our environment, our rural economy, and individual consumer pocketbooks. Thank you very much.

[The prepared statement of Mr. Nadel follows:]

PREPARED STATEMENT OF STEVEN NADEL, EXECUTIVE DIRECTOR, AMERICAN COUNCIL FOR AN ENERGY-EFFICIENT ECONOMY

INTRODUCTION

ACEEE is a non-profit organization dedicated to increasing energy efficiency as a means for both promoting economic prosperity and protecting the environment. We were founded in 1980 and have contributed in key ways to energy legislation adopted during the past 20 years, including the Energy Policy Act of 1992 and the National Appliance Energy Conservation Act of 1987. I appreciate the opportunity to appear before this Committee. Specifically I have been asked to discuss the federal appliance and equipment standards program.

THE FEDERAL STANDARDS PROGRAM

Federal appliance and equipment efficiency standards were signed into law by President Reagan in 1987 and expanded under President Reagan in 1988 and President Bush in 1992. Minimum efficiency standards were adopted in order to address market failures, replace a patchwork of state standards, save consumers money, and reduce energy use and peak electrical demand. Among the market failures addressed by standards are lack of consumer awareness, rush purchases when an existing appliance breaks down, and purchases by builders and landlords who do not pay appliance operating costs and hence have no financial incentive to value efficiency. Standards remove inefficient products from the market but still leave consumers with a full range of products and features to choose among. Since adoption, standards have sharply cut the energy use of major energy using appliances and equipment while not interfering with manufacturers' ability to offer excellent performance and a wide array of features. For example, the typical refrigerator manufactured today uses less than half the energy of an average 1987 model, but is bigger and offers more features.