Energy efficiency is an important part of the Administration's overall energy policy. The National Energy Policy (NEP) document released May 16 dedicates an entire chapter to energy efficiency, and another chapter to the subject of renewable energy. Moreover, 54 of the NEP's 105 recommendations relate directly or indirectly to the importance of increasing our energy efficiency or increasing our use of clean, renewable energy.

When thinking about efficiency, it is useful to consider the nature of our energy systems. The charts on display (see attached)* look at electricity flow, which represents about a third of our total energy use. If we were to increase end-use efficiency by 20%, thereby saving the equivalent of 2.1 quadrillion BTUs (quads) of enduse energy, we would actually save 6.7 quads of energy inputs at the power plant due to conversion losses in generation and the losses associated with transmission and distribution. This illustrates why increasing end-use efficiency is very important but why it should not constitute the sum total of our efforts. If we can employ technologies that increase end-use efficiency and supply efficiency by 20%, then we could save 14.7 quads of energy inputs, resulting in lower costs and fewer emissions. This is something that your Committee recognizes, Mr. Chairman, as evidenced by your hearings today and those scheduled for next week. Although today's focus is on achieving end-use efficiency, next week the hearings will look beyond end-use savings to the removal of barriers to distributed generation and other technologies that can help us make our overall energy generation, transmission and distribution systems more efficient. I commend you for this approach, which is in close agreement with the approach embodied in the President's National Energy Policy.

Today, I want to take this opportunity to announce that we are launching a new analytical effort at the Department of Energy to better understand and track trends in national energy intensity. Surprisingly, while DOE has done this on a one-time basis, it has never done this in a sustained and systematic manner. We envision that this effort can eventually contribute to national goals for energy efficiency improvements made possible through technological advances and cooperative efforts with industry, state and local governments, consumers, utilities, and others. We are doing this in direct response to the recommendation in the National Energy Policy that energy efficiency be pursued as 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.

However, I must add an important note of caution. It is, of course, relatively easy to authorize new funding, but relatively difficult to appropriate it. The most generous of the bills before us would authorize $500 million annually for weatherization, $230 million annually for energy efficient schools, $125 million annually for State Energy Programs, and would require an expenditure of roughly $180 million in appropriated funds to create an Energy Bank to finance energy savings measures in federal agencies. That adds up to well above a billion dollars. The comparable level of appropriated funding in my office's 2001 budget was $153 million for weatherization and $38 million for State Energy Programs, or about $191 million. (I am_not including the $3.4 billion that would be authorized under one of the bills for Low Income Home Energy Assistance Program, as that is not one of DOE's programs.) As we work together in the weeks and months ahead to determine the appropriate authorization levels for these programs, I urge that there be some linkage between the authorized levels and a realistic expectation of the eventual appropriations that will follow. We also urge Congress to adopt the President's proposal to use $1.2b of ANWR bonus bids to fund R&D projects on solar power, wind energy, biomass power and fuels, geothermal energy and other alternative energy technologies.

WEATHERIZATION ASSISTANCE

The Weatherization Assistance Program provides services to eligible low-income persons, with emphasis on elderly persons, persons with disabilities and children. States (including the District of Columbia) voluntarily participate. Up to an average of $2500 per dwelling unit may be spent for purchase and installation of eligible weatherization materials, and energy audits are used to ensure that the measures employed in a given home are cost-effective.

The Weatherization Assistance Program has reduced the heating and cooling costs of low-income households by weatherizing more than 5 million homes since the program's inception in 1976. The President has proposed $1.4 billion in additional fund

*The charts have been retained in committee files.

ing for weatherization over the next ten years. The President's budget for FY 2002 proposed a $120 million increase from $153 million to $273 million, which will weatherize 123,000 homes-an increase of at least 48,000 homes over the number weatherized in the prior fiscal year. In its markup of the Interior and Related Agencies appropriations bill, the Senate Appropriations Committee, has provided only half the President's requested increase $60 million to bring the program to a level of $213 million. We hope that this shortfall will be addressed on the Floor.

We support an authorization level that accommodates the President's requests for increases in this program. Our recommended ramp-up of the program anticipates spending levels for the program as outlined in the table below.

Section 422 of the Energy Policy and Conservation Act statute authorizes "sums as may be necessary" for the Weatherization Assistance Program. Section 3 of S. 352 (Bingaman) would increase the weatherization program authorization to $310 million for each of the fiscal years through 2005.

Section 603 of S. 389 (Murkowski) would also increase the program authorization levels to $250 million in FY 2002; ramping up to $500 million in FY 2005. We note that the authorization levels in S. 389 for FY 2002 would fall $23 million short of the President's request. Unless modified, we would be unable to support this provision. Section 603 of S. 389 would also expand the eligibility of low-income households from 125% of the poverty level to 150% of the poverty level. We are not certain that this change is needed since states may, under current law, elect to use LIHEAP eligibility criteria in administering the DOE weatherization program. The LIHEAP eligibility criteria gives states the option of using the 150% poverty level figure or a figure of 60% of a state's median income as a basis of eligibility.

STATE ENERGY PROGRAM

States voluntarily participate in the State Energy Program (SEP) by submitting grant applications with energy plans to DOE. States are required to contribute 20% matching contributions, and SEP funds are used to finance a variety of projects, including building codes updates, installing eligible energy conservation measures, encouraging the use of clean fuel vehicles, and developing energy emergency plans.

The President's budget request for FY 2002 for State Energy Program funding was $38 million, equal to the FY 2001 level. We are pleased that the Senate Committee fully funded his request in the Interior appropriations bill.

Section 3 of S. 352 (Bingaman) would change the authorization levels for State Energy Conservation Grants from "such sums as may be necessary" to $75 million annually for fiscal years 2001-2005.

Section 604 of S. 389 (Murkowski) would also increase authorization levels for State Energy Conservation Grants compared to past practice in Congressional appropriations. S. 389 also appears to change the State Plan approval cycle from once a year to once every three years, a change that would streamline program administration at both the Federal and State levels. Finally, the Murkowski provision would appear to establish a goal of 25% improvement in a state's energy efficiency by 2010 (against a 1990 baseline).

This is probably an appropriate place to comment on the use of numerical goals in statutory language. Goals that are clearly defined and measurable can be quite useful. In the case of energy savings goals expressed under the Federal Energy Management Program (FEMP), the goals are expressed in terms of energy use per square foot of building space. This is a goal we can measure, understand, and pur

sue.

Unfortunately, the existing goal in section 364 of the Energy Policy and Conservation Act that S. 389 would amend has never been clearly defined. Is it per capita energy intensity? Is it energy use per unit of economic production? Should the goal be attributable to the actions of a State Energy Program, or should it also measure energy efficiency gains that occur as a consequence of market forces or structural changes in the economy? If the intent is to establish a goal that State Energy Programs can attribute to their activities, we can safely predict that you will hear the view from Governors and State Energy Officials that a 25% goal is unrealistic without substantial increases in appropriated funding.

I cannot tell you today what we believe the funding levels should be in subsequent fiscal years, as this is a component of both our ongoing 2003 budget formulation and a top-to-bottom strategic funding and performance review that is now underway for each of the 31 programs in my office.

ENERGY EFFICIENT SCHOOLS

Section 602 of the S. 389 (Murkowski) establishes an Energy Efficient Schools Program in the Department of Energy. Section 1302 of S. 597 (Bingaman) establishes a program within the Department of Education to promote energy efficient schools.

My office has several existing programs that speak to this issue. Through the "Rebuild America" Energy Smart Schools campaign, my office provides technical assistance for design and financing as well as conservation technology. We also do work in areas of alternative fuel school transportation and a number of supply side management strategies such as micro-cogeneration, combined heat and power, renewable energy and alternative fuel sources. A great deal of what we do is applicable to schools, about $2-3 million worth of our work is directed specifically to schools, not including school-related expenditures under the State Energy Program.

State Energy Programs can already use existing resources to promote energy efficient schools, and of course those efforts must be cost-shared. We view cost sharing with our state partners as a good way to leverage federal resources and ensure that they are directed where they will do the most good. Therefore, it is our preference to use the existing State Energy Programs to promote energy-efficient schools rather than authorizing a new program whose chances of receiving significant funding from the appropriators are unclear. As funds are available, they should be directed to existing programs that can achieve the desired goals we share.

If legislation is deemed necessary to provide greater federal emphasis on promoting energy-efficient schools, we recommend that the Department of Energy lead the effort in concert with the State Energy Offices. We do not believe that a Department of Education administered grant program as proposed in S. 597 would fully leverage the advantages that could be achieved through coordination with our existing energy efficiency programs and the ongoing efforts of the State Energy Offices.

FEDERAL ENERGY MANAGEMENT PROGRAM (FEMP) PROVISIONS

The Federal Government is the country's largest energy user, spending almost $8 billion annually on energy costs. We operate over 500,000 facilities and almost 600,000 vehicles worldwide. The President's National Energy Plan calls on Federal agencies to conserve energy and to reduce energy use during peak hours in areas where outages are likely. Since 1985, the federal government as a whole reduced energy use in its buildings by more than 20 percent in 1999 thereby achieving its year 2000 goal one year early. Our most recent figures for FY 2000 places our reduction at 22% over the 1985 baseline. This represents a $2.2 billion energy savings, expressed in year 2000 dollars.

President Bush, in a May 3rd directive to Federal Agencies, asked that immediate steps be taken to reduce energy use, particularly peak demand in supply-constrained areas such as California. Agencies achieved some important results, including participation in a load reduction exercise on May 24th. During that exercise, 114 Federal facilities, representing 20 different agencies and roughly 80% of the federal load in California, demonstrated reductions in peak demand approaching 10%. To reduce overall demand in California, we have dispatched teams to 25 of the larger sites in California to identify the immediate no-cost/low cost opportunities for reducing demand. These teams are at work now, and we have asked them to report by July 31.

These efforts are important for practical reasons. But they are also important for symbolic ones. We can tell America it must use energy more efficiently.. but if we fail to lead by example, we undermine our message.

It is our hope that energy efficiency in the federal realm will not be a short-term effort driven 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 that the Federal Government procures buildings, appliances, vehicles, and all of the other items we purchase.

Whenever the federal government builds a new building, we should strive to design and build it to achieve the "Energy Star" certification. When existing federal buildings are modernized, we should incorporate the energy and water conservation efforts that are cost effective over the life cycle of the facility.

Recently in Kansas City, DOE hosted a Federal Energy Management conference where hundreds of federal procurement officials, building engineers, and program managers gathered to learn the latest approaches to saving energy and money for the taxpayer. We are working to develop that new culture of energy savings among federal government procurement and buildings officials because it makes sense for the taxpayer and it is good for the environment. As an additional benefit, we also find that our workers prefer to work in a building that incorporates the latest energy savings technologies.

One of the keys to successful implementation of federal energy savings measures is through the use of Energy Savings Performance Contracts and Utility Energy Savings Contracts. These financed approaches are being employed to finance energy savings measures without using appropriated dollars. To date, Federal agencies have already leveraged more than $1.3 billion in private sector investment for projects that replace inefficient building systems with state-of-the-art equipment.

The Federal government can also make a difference by making smart purchasing decisions. The Federal government spends more than $10 billion each year on energy-using equipment. The joint DOE/EPA ENERGY STAR® program identifies energy efficient products so that all consumers, including Federal purchasers, can make informed decisions that save energy and money.

So we applaud the effort to address federal energy use in section 4 of S. 352 (Bingaman) and sections 605 and 606 of S. 389 (Murkowski), and would like to work with you to fashion a workable approach in this area. With respect to specific comments, I would offer the following:

Section 4 of S. 352 (Bingaman) would require federal agencies to undertake a comprehensive review of all practicable measures to conserve energy, water, or employ renewable energy resources and to implement measures to achieve 50% of the potential savings within 180 days. Candidly, a comprehensive review of all practicable measures that we could employ in 500,000 federal buildings, followed by the implementation of steps to achieve 50% of identified potential savings, could simply not be done in 180 days. Moreover, sufficient funds have not been provided for this purpose. Our challenge is to change the acquisition planning efforts, and we believe that will be a long-term effort.

S. 389 (Murkowski) would require agencies to reduce energy use per gross square foot by 30% by 2010 and 50% by 2020 relative to a 1990 baseline. The current goals, contained in the National Energy Conservation and Production Act, the Energy Policy Act, and Executive Order 13123 are to reduce energy use per gross square foot by 20% in 2000, 30% by 2005, and 35% by 2010 relative to a 1985 baseline. S. 389 represents an acceleration of these targets and a shifting of the baseline. Thus, it is a very ambitious goal. We believe we might be able to support such a goal were it contained in comprehensive legislation that also addresses the supply and infrastructure issues identified in the National Energy Policy document.

As mentioned earlier, Energy Savings Performance Contracts (ESPCs) are an important tool federal managers can use to achieve their energy savings goals. S. 389 (Murkowski) would extend authority for ESPCs five years, and S. 352 (Bingaman) would repeal the sunset provision entirely. At this time, we can support a five year extension of existing authority for ESPC's to allow us to further quantify the benefits they provide.

S. 389 (Murkowski) would allow utility contracts, which are preferred -source energy savings contracts entered into between federal facilities and the utilities that serve them, to increase from a maximum 10-year term to a maximum 25-year term. This is in line with the 25-year terms allowed ESPCs. However, 25-year ESPC contracts contain performance guarantees as well as provisions to ensure measurement and verification of energy savings. We would like to continue to work with you to ensure that any expansion of utility contracting includes assurances of guaranteed energy savings.

S. 352 (Bingaman) would allow ESPCs to be used for water conservation measures and for replacement facilities. The Administration has concerns regarding the use of ESPCs for replacement facilities. However, provided that it is included in comprehensive legislation that also addresses the supply and infrastructure issues identified in the Administration's National Energy Policy, we could support the use

of ESPCs to conserve water, although we have some technical suggestions that we would like to work out with your staff.

ENERGY BANK PROVISIONS

Both S. 95 (Kohl) and section 1301 of S. 597 (Bingaman) would create an "energy bank" to help in the funding of federal energy management projects. This is a wellintentioned effort, but I am concerned about the practical applications of this particular language. particularly when we haven't yet fully taken full advantage of the opportunities afforded by ESPCs and "super ESPCs."

S. 95 and section 1301 of S. 597 would capitalize the energy bank by collecting 5% of the utility budgets of federal agencies, or roughly $180 million per year. Sharply higher energy prices have already stressed the operations and management (O&M) budgets of many federal agencies in the near term. Requiring agencies to capitalize a new energy bank in the near term, during these times of high energy prices, even if they might produce savings over the long term, would create operational hardships and impair the ability of federal agencies to fulfill their missions. Moreover, the language of S. 95 and section 1301 of S. 597 is directed at projects with relatively short payback periods of three and seven years. Thus, the Energy Bank projects might "cherry pick" the energy-savings opportunities and actually result in fewer comprehensive energy savings projects.

We need to make sure we take full advantage of the opportunities afforded by ESPCs and Super ESPCs before we experiment with a new tool that could inadvertently result in fewer energy savings projects overall.

AIR CONDITIONING STANDARD

Finally, Mr. Chairman, I will comment on Senate Joint Resolution 15 (Boxer), a resolution of disapproval related to energy efficiency standards for residential air conditioners and heat pumps.

The purpose of S.J. Res. 15 is to force the Department of Energy to adopt new residential air conditioning and heat pump efficiency standards at the 13 SEER (Seasonal Energy Efficiency Ratio) performance level a performance level that represents a 30% improvement over the current standard. We oppose this resolution.

The current efficiency standard is 10 SEER for split air conditioning and heat pump systems and 9.7 SEER for single-package systems. Today, 78% of air conditioning and heat pump sales are at the 10 SEER performance level. Many consumers choose to purchase higher-performing air conditioners and heat pumps, and in some areas of the country this makes very good sense.

However, as a minimum, national standard, to be in effect for virtually all central air conditioners and heat pumps in all areas of the country, the Department of Energy intends to propose a 12 SEER performance level that represents a 20% improvement over the current standard.

It should be noted that the current Administration reviewed and adopted, without change, efficiency standards covering washing machines, water heaters, and commercial heating and cooling systems. Only in the case of residential air conditioners and heat pumps are we proposing any variation from the prior Administration.

We do not take this action lightly. In the current political atmosphere, the convenient and popular approach would have been to simply accept the 13 SEER standard. Our forthcoming supplemental notice of proposal will explain our reasons for withdrawing the 13 SEER standard and for proposing a 12 SEER standard as the maximum technologically feasible level that is economically justified.

With that, Mr. Chairman, let me say that I look forward to working with you and your staff on legislation to promote energy efficiency in the weeks and months ahead. I am pleased to answer any questions the Committee may have.

The CHAIRMAN. Well, thank you, and thanks for your relatively brief summary of things. We encourage that from all witnesses.

Let me just ask first, one of the statements contained in your testimony that you repeated here gives me a little concern. It says that the administration is prepared to support more ambitious goals for the Federal Government related to energy use, and then you add this qualifier of saying, if it is contained in comprehensive legislation that also addresses supply and infrastructure issues.

Now, we intend to do all that, but it sounds as though you think it is sort of, you will agree to go along with improvements in energy