vvERO.
United States
Environmental Protection
Agency
Office of Environmental
Engineering and Technology
Washington DC 20460
EPA-600/9-82-009b
May 1^82
Research and Development
Federal Energy
Conservation Programs
Perspectives from the
Public and Private
Sectors: Volume II
Do not remove. This document
should be retained in the EPA
Region 5 Library Collection.
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Public Law 93-577
93rd Congress, S. 1283
December 31, 1974
an
To establish a national program for research and development in nonnuclear
energy sources.
Be it enacted by the Senate and House of Iteptesentatices of the
United States of America in Congress assembled,
SHORT TITLE
SECTION 1. This Act may be cited as the ''Federal Xoiumclear Energy
Research and Development Act of 1974".
FtJeral Non-
nuclear Energy
Research and
Development
Act of 1974.
42 USC 5901
note.
88 STAT. 1878
ENVIRONMENTAL EVALUATION'
SEC. 11. (a) The Council on Environmental Quality is authorized
and directed to carry out a continuing analysis of the effect of appli-
cation of nonnuclear energy technologies to evaluate
(1) the, adequacy of attention to energy conservation methods;
and
(2) the adequacy of attention to environmental protection and
the environmental consequences of the application of energy
technologies.
(b) The Council on Environmental Quality, in carrying out the
provisions of this section, may employ consultants or contractors and
may by fund transfer employ the services of other Federal agencies
for the conduct of studies and investigations.
(c) The Council on Environmental Quality shall hold annual public
hearings on the conduct of energy research and development and the
probable environmental consequences of trends in the development
and application of energy technologies. The transcript of the hearings
shall be published and made available to the public.
(d) The Council on Environmental Quality shall make such reports
to the President, the Administrator, and the Congress as it deems
appropriate, concerning the conduct of energy research and develop-
ment. The President as a part of the annual Environmental Policy
Report required by section 201 of the National Environmental Policy
Act of 1909 (42 U.'S.C. 4:U1) shall set forth the findings of the Council
on Environmental Quality concerning the probable environmental
consequences of trends in the development and application of energy
technologies.
42 USC 5910.
Hearings.
Transcript,
availability.
Report to
President,
Administra-
tor, and
Congress.
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EPA-600/9-82-009b
May 1982
\ Federal Energy Conservation Programs
s
Perspectives from the Public and Private Sectors
j1 Volume II
J
t Public Hearing
J, July 14 and 15, 1981
Washington, D.C.
Program Manager
Gregory Ondich
Office of Environmental Engineering and Technology
Office of Research and Development
U.S. Environmental Protection Agency
Washington, D.C. 20460
Prepared by
REAP Associates, Inc.
Washington, D.C.
Subcontract under Prime Contract 68-02-3669
Office of Research and Development
U.S. Environmental Protection Agency
Washington, D.C. 20460
U.S. Environmental Protection Agency
Region 5, Library (PL-12J)
77 West Jackson Boutevacd. 12th Floor
Chicago, IL 60604-3590 "*
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DISCLAIMER
This report has been reviewed by the Office of Research and Development, U.S.
Environmental Protection Agency, and approved for publication. Approval does not
signify that the contents necessarily reflect the views and policies of the U.S.
Environmental Protection Agency, nor does mention of trade names or commercial
products constitute endorsement or recommendation for use.
-------
FOREWORD
Section 11 of the Federal Research and Development Act (Public Law 93-577)
permits an annual public hearing "...on the adequacy of attention to energy
conservation methods and environmental consequences of the application of energy
technologies." Since 1978 the Environmental Protection Agency's Office of
Environmental Engineering and Technology has been responsible for conducting this
Hearing.
The results of the 1981 Section 11 hearing on Federal Energy Conservation
Programs are contained in two Volumes: Volume I, the Hearing Summary and Volume
II, the Hearing Transcript.
This report, Volume II, presents the transcript of the hearing and written
testimony from those who could not attend. Forty witnesses submitted oral
testimony and forty-seven individuals and organizations submitted written testimony.
The Section 11 hearing was held July 14 and 15, 1981 in Washington, D.C., at the
Office of Personnel Management Auditorium.
Herbert L. Wiser
Acting Director
Office of Environmental
Engineering and Technology
ill
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TABLE OF CONTENTS
FOREWORD iii
ORAL TESTIMONY v
JULY 1*, 1981, MORNING SESSION 1
JULY 14, 1981, AFTERNOON SESSION 95
JULY 15, 1981, MORNING SESSION 199
JULY 15, 1981, AFTERNOON SESSION 269
WRITTEN TESTIMONY
IV
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ORAL TESTIMONY
JULY 1*, 1981
MORNING SESSION
HEARING PANEL
Kurt Riegel Acting Director, Office of
Environmental Engineering and Technology
Environmental Protection Agency
3. Michael Power Director, Policy, Planning and Evaluation
Office of Conservation and Renewable Energy
Department of Energy
Andrew Glassberg Professional Staff
House Energy and Commerce Committee
John Pfeiffer Budget Examiner
Office of Management and Budget
PROCEEDINGS Page
Opening Statement, Kurt Riegel 2
Charles Guinn, New York State Energy Office 4
3ohn Armstrong, Minnesota State Energy Agency 8
Questions and Discussion 14
Alan Miller, Natural Resources Defense Council 19
Mark Cooper, Consumer Energy Council of America 30
Shirley Sutton, Americans for Energy Independence 34
Questions and Discussion 39
Ned Helme, National Governors' Association 49
Martin Klepper, Lane and Edson, P.C. 57
Questions and Discussion 62
David Moulton, Energy Conservation Coalition 66
Lewis Perelman, Private Citizen 86
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AFTERNOON SESSION
HEARING PANEL
Kurt Riegel Acting Director, Office of
Environmental Engineering and Technology
Environmental Protection Agency
3. Michael Power Director, Policy, Planning and Evaluation
Office of Conservation and Renewable Energy
Department of Energy
Andrew Glassberg Professional Staff
House Energy and Commerce Committee
John Pfeiffer Budget Examiner
Office of Management and Budget
PROCEEDINGS Page
Opening Statement, Kurt Riegel 96
Robert Pauls, City of Carbondale, Illinois 96
W. Kim Boas, Private Citizen 101
Randi Triant, New York State Alliance of Community
Action Agencies 103
Questions and Discussion 107
Betty Kahl, Rhode Island Jobs in Energy 110
Paul Danels, New York City Energy Office 113
Mart Kask, Puget Sound Council of Governments 117
Questions and Discussion 122
Floyd Ciruli, Colorado State Office of Energy Conservation 126
Betty Desper, Total Action Against Poverty 136
Charles Lawrence, New Jersey Energy Research Institute 140
Questions and Discussion
Joseph Prano, Community Improvement Program
Howard Brown, Middletown, Connecticut, Energy Advisor 153
Richard Kline, S.C. Appalachian Regional Council of Governments 157
Questions and Discussion 172
Anthony Maggiore, Milwaukee County Community Action Agency 175
Peter Robinson, Maynard Community Development Office 186
Keith Dorsey, National Black Caucus of State Legislators 189
vi
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Questions and Discussion
Neal Gale, Private Citizen 197
JULY 15, 1981
MORNING SESSION
HEARING PANEL
Kurt Riegel Acting Director, Office of
Environmental Engineering and Technology
Environmental Protection Agency
Eugene Frankel Professional Staff
House Science and Technology Committee
Ted Kapus Deputy Director
Buildings and Community Systems
Office of Conservation and Renewable Energy
Department of Energy
Gregory Ondich Section 1 1 Program Manager
Environmental Protection Agency
PROCEEDINGS Page
Opening Statement, Kurt Riegel 200
Carroll Benson, Dallas Power and Light Company 201
David Davia, Public Service Company of Colorado 208
John Russell, Edison Electric Institute
Questions and Answers 226
Sheldon Cady, Mineral Insulation Manufacturers' Association 237
Karen Anderson, American Public Power Association 2*1
Robert Naismith, Potomac Energy Group 2*5
Questions and Discussion 2*8
Robert Manahan, Thermal Insulation Manufacturers Association 25*
Richard Esteves, General Public Utilities Corporation 258
Questions and Discussion 263
VII
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AFTERNOON SESSION
HEARING PANEL
Gregory Ondich Section 11 Program Manager
Environmental Protection Agency
John Millhone Director
Buildings and Community Systems
Office of Conservation and Renewable Energy
Department of Energy
PROCEEDINGS Page
Opening Statement, Gregory Ondich 270
Randall Vosbeck, American Institute of Architects 270
Questions and Discussion 275
Alan Rimer, Management Improvement Corporation 276
John Harkins, Mechanical Contractors Association
of America 281
Questions and Discussion 285
Carol Allen, N.J. Community Action Program 290
Executive Directors Association
William Chandler, Environmental Policy Center 293
Katherine Ellett, League of Women Voters of Maryland 298
Questions and Discussion 305
Stanley Ezrol, Fusion Energy Foundation 314
Questions and Discussion 319
Closing Remarks, Gregory Ondich 321
vin
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WRITTEN TESTIMONY
Page
V. 3. Adduci, Motor Vehicle 324
Manufacturers Association
of the United States, Inc.
American Consulting 326
Engineers Council
Fred Armstrong 329
Portland Cement Association
Joseph A. Belanger 330
Office of Policy and Management
State of Connecticut
Eleanor Bell 334
Unitarian Universalist Service
Committee of Kansas
Glenn L. Bellamy 337
Heery Energy
Consultants, Inc.
John J. Benson 339
Construction Industry
Manufacturers Association
Roy Bishop 341
Office of Energy Conservation
Boston, Massachusetts
Robert F. Blanke 344
Orange and Rockland
Utilities, Inc.
Barbara Brown 345
Solar Times
U. K. Correspondent
Art Cantrall 347
Economic Opportunity Division
State of Washington
Clifford P. Case, III 349
National Recycling
Coalition, Inc.
Page
Edith Chase 351
Energy Chair
League of Women Voters of Ohio
Albert B. Csonka 362
Micro-Carburetor Corporation
Mike Dekalb 363
Energy Planner
Lincoln, Nebraska
Mary Durham 364
Rockland County Energy
Resources Coordinator
John V. Fashing 365
Dept. of Water and Power
Los Angeles, California
Marian S. Feeney 370
Energy/Resource Development
University of Rhode Island
Kelly Finn 372
Kansas City Citizen/Labor
Energy Coalition
Margaret P. Garland 374
Energy Office
State of Vermont
Governor J. Joseph Garrahy 377
State of Rhode Island
Michael German 381
American Gas Association
Sara Hamric 383
American Paper Institute, Inc.
Ralph B. Hirsch 385
League of American Wheelmen
IX
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Mari L. Hoffman
Private Citizen
Yakima, Washington
Avis E. Holmes
Detroit Energy Corporation
Consortium
Bill Home
Office of the Governor
State of South Carolina
J. A. Hunter
San Diego Gas and Electric
Wayne Johnson
Southern Gas and Electric
Susan Keller
The Community Network for
Appropriate Technologies
Patricia Kelly
Private Citizen
Pueblo, Colorado
William C. Kinard, P.E.
Private Citizen
Portland, Oregon
Thomas H. D. Mahoney
Department of Elder Affairs
State of Massachusetts
Montana Power Company
Chris Palmer
National Audubon Society
Patricia B. Pelkofer
Group Against Smog
and Pollution
Page
388
388
400
401
402
404
405
406
408
411
417
419
Gerald Roccapriore
Solar Power Institute, Inc.
Arthur H. Rosenfeld
Jeffrey P. Harris
Energy Efficient Buildings Program
Lawrence Berkeley Laboratory
Richard O. Silva
Energy Detectives, Inc.
Peter M. Stern
Northeast Utilities
Service Company
Elmer N. Stuetzer
Private Citizen
St. Louis, Missouri
Amy Timmer
Michigan Energy Administration
State of Michigan
Margaret Walker
Energy Office
State of Arizona
Jeter M. Watson
Conservation Council of Virginia
June Williams
Department of Energy and
Transportation
State of Mississippi
Ralph R. Willmer
Somerville, Cambridge
Economic Opportunity
Committee, Inc.
Harry Wuertenbaecher, Jr.
Union Electric Company
Page
421
423
430
433
435
439
444
448
451
452
455
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PROCEEDINGS
JULY 14, 1981
MORNING SESSION
HEARING PANEL
Kurt Riegel
3. Michael Power
Andrew Glassberg
John Pfeiffer
WITNESSES
Charles Guinn
John Armstrong
Alan Miller
Mark Cooper
Shirley Sutton
Ned Helme
Martin Klepper
David Moulton
Lewis Perelman
Acting Director, Office of
Environmental Engineering and Technology
Environmental Protection Agency
Director, Policy, Planning and Evaluation
Office of Conservation and Renewable Energy
Department of Energy
Professional Staff
House Energy and Commerce Committee
Budget Examiner
Office of Management and Budget
New York State Energy Office
Minnesota State Energy Agency
Natural Resources Defense Council
Consumer Energy Council of America
Americans for Energy Independence
National Governors' Association
Lane and Edson, P.C.
Energy Conservation Coalition
Private Citizen
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DR. RIEGEL: Good morning. I'd like to convene this Section 11 Hearing,
with a welcome to you, to the panelists and to the witnesses.
This activity, which we are conducting for the next two
days, has its origins in the Federal Nonnudear Energy Research
and Development Act of 1974. That act requires an annual
review of the Federal government's adequacy of attention to
both conservation and environment in its energy research and
development programs. The review responsibility originally
rested with the Council on Environmental Quality hut was passed
to the Environmental Protection Agency in an Executive Branch
reorganization in 1977. This meeting today represents EPA's
fourth annual public hearing to review the Department of Energy
research and development programs.
From year to year we have shifted the focus of our exami-
nation of the DOE programs. For the past two years we have
elected to look particularly closely at the conservation com-
ponent of those programs.
I think it's a particularly appropriate choice this year in
view of the fact that the Administration has proposed and is
in the process of implementing a number of changes in the
government's conservation programs. Changes have included,
for example, a de-emphasis of some of the kinds of Federal
activities that we have seen in the Department of Energy in
the past. I think one of the challenges to the panel this
morning, and to the witnesses who appear, will be to examine
those changes with a view toward helping us to work together to
make them as constructive as we can, so that both the Federal
and private sector components of the national conservation
effort are made as effective as possible. In addition, we
hope that private activities can be assisted and catalyzed
toward more effective results for the nation at large.
In the last two years we have seen a rather striking indica-
tion of the successes that conservation implemented nationwide
can have for the country. Oil imports declined strikingly.
One thing that we earnestly hope for is that the signals deli-
vered through higher prices, together with a greater public
awareness of conservation opportunities, will allow us indivi-
dually and in organizations to realize the cost-effective
conservation opportunities that remain open to us, not only
for the short-term but the long-term as well.
In the next two days, we expect to hear from about 45
witnesses, with additional written statements to be sumitted
for the record. This activity takes on a particularly impor-
tant role in our Section 11 proceedings this year, because we
have been unable for various reasons to precede this formal
public hearing phase with workshops as we have in the past.
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I hope we will be able to pursue three major areas of
questioning. First, with declining Federal investment in con-
servation activities for the coming years, I think it's impor-
tant that we examine the priorities for utilizing these smaller
Federal resources so that they will have the greatest possible
impact for our conservation objectives.
The issue is especially important in the state and local
area because the Senate and the House both are considering
energy block grant legislation to supplant existing categorical
programs. The question is how this kind of change can be
made most effective.
Secondly, we are interested in learning about private
sector programs that are likely to have a significant impact
and to take up where the Federal government has left off.
Thirdly, we come to a perennial question of how we can best
determine the effects of Federal efforts in the conservation
arena, how we can best monitor those effects and evaluate
them.
I'd like to introduce today's panelists. To my immediate
left is John Pfeiffer, from the Office of Management and Budget.
He is the budget examiner for the Department of Energy, speci-
fically that part of the program dealing with conservation, and
we're very happy to have his presence this morning and his
expert view of the DOE budgetary situation.
To his left is Andrew Glassberg, a House Energy and Com-
merce Committee staff member who is concerned with conservation
and renewable activities for that committee. Finally, to my
far left is Mike Power, the Director of the Office of Policy
Planning and Evaluation in the Department of Energy's Office
of Conservation and Renewable Energy. He has the responsibility
for a number of the analytical, oversight and evaluation acti-
vities, particularly in line with the last points that I men-
tioned for evaluating the effectiveness of the Federal invest-
ment and for keeping a handle on the effectiveness of the pri-
vate sector activities as well.
Well, I think with no further ado we will go immediately
to the witnesses. I am going to adopt the procedure of taking
the witnesses two or three at a time, and if the next witnesses
will prepare to come after the question and answer period to
replace the departing witnesses, we can cycle through the entire
list during the morning.
Our first two witnesses are Charles Guinn of the New York
State Energy Office, and John Armstrong of the Minnesota Energy
Agency, both of whom can bring a state perspective on some of
the programs that we're highlighting today.
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What I'd like you to do, is to summarize any prepared
statements that you have, then add any remarks that you feel are
appropriate. After each of you has spoken, we will then turn
the proceedings over to the panel to discuss your remarks at
greater length. So, Mr. Guinn, if you will start.
MR. GUINN: Thank you for providing the New York State Energy Office
with the opportunity to express its concerns about the new di-
rections of Federal energy policy and its impact on state and
local governments. This hearing comes at a very critical time
for state energy programs because their continuation is large-
ly dependent upon future Federal funding.
Congress' actions on the 1982 Federal budget will determine
whether many state energy offices survive and whether government
maintains its successful role in fostering energy conservation.
The Administration's dramatic shift away from any meaningful
role for the Federal government in energy conservation is most
unsettling since it represents a giant step backwards for both
New York and the nation.
Energy supply and demand, development of alternate fuel
sources and expediting conservation actions need a national
focus and a strong federal, state and local government partner-
ship. The Administration's decision to leave the energy conser-
vation field will destroy the healthy partnership among the Fed-
eral, state and local governments in implementing energy conser-
vation and renewable resource programs directed to an overriding
national goal.
We appear to be returning to the energy policies prior
to the 1973-1974 Arab Oil Embargo, a time when the nation was
unprepared and completely vulnerable. We saw the United States
the most powerful and technologically advanced country In
the free world brought to its knees by a small group of
nations, a fraction of our size.
Since that time, it has become only too apparent how
inextricably our economy and livelihood are tied to oil-
producing countries. This sudden and continuing energy aware-
ness caused by the embargo is a healthy and useful reaction,
as long as we respond to this awareness in a productive manner
focused on weaning us from OPEC oil.
The Administration's energy policy, to the extent it can
be categorized as a coherent set of actions and intended ac-
tions, has moved in the direction of eliminating what it per-
ceives as constraints on the production and use of energy.
The policy apparently holds that such actions are neces-
sary to let the energy marketplace function naturally and
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increase domestic energy production. Certainly, no one can
argue against an emphasis on increasing domestic energy produc-
tion to decrease our dependence upon OPEC oil, help ensure
future energy supplies and contribute to domestic economic
development. But, where does energy conservation the best
short term solution to our OPEC dependency fit into this
production-oriented energy policy?
Energy conservation is at best a tangential occurrence
emanating from this policy. The theory is that as the market-
place functions naturally, the rising energy prices a direct
result of the marketplace at work strategy will be a chief
impetus for energy conservation.
The government need not be involved in energy conservation,
this thinking holds, because consumers of all types will react
accordingly and quite naturally to the rising prices by saving
energy. I fully recognize that rising energy prices alone can
work satisfactorily in many instances as the prime means for
promoting and bringing about energy conservation. What we
must be concerned about, however, are those situations in
which rising energy prices alone will not bring about energy
conservation, at least not in an orderly manner or without
having a damaging impact.
What are these situations? There are at least three of
them. The first situation can be characterized as a market
imperfection. It is when financing of conservation improve-
ments for a consumer is not available at reasonable interest
rates or the consumer simply cannot afford the cost for the
improvement at virtually any borrowing rate.
Under such circumstances, which apply in many instances
to small businesses, schools or homeowners, among others,
rising energy costs will not result in maximum energy savings.
The rising costs will induce the consumer to take action, but
the consumer will not have the financial wherewithal to respond
fully. Loans at lower than market interest rates, grants or
tax credits represent forms of government assistance that are
necessary to enable consumers to convert the inducement caused
by higher energy costs into conservation actions.
The second situation in which higher energy prices alone
will not necessarily result in energy conservation also can be
called a marketplace imperfection. It is when a consumer does
not have sufficient objective information on which to decide
what conservation actions to take. Under these circumstances,
a consumer may respond to higher energy cost improperly, in
the sense of putting his money into other than the most energy
conserving actions, or not take action at all.
-------
In New York State, a case In point is the small industrial
sector. Professional energy auditors, consisting largely of
consulting engineering firms, generally do not market their
services to this sector because it has not proven to be profit-
able. We have been told that small industrial firms cannot or
will not pay a consultant the fee that is necessary to provide
energy audits of their plants.
Consequently, these firms, which have little, if any,
in-house energy conservation expertise, do not benefit from
outside expertise. In many instances, their sources of infor-
mation consist of representatives of equipment manufacturers
who are not very often sufficiently objective.
For such situations, which are just as applicable to
homeowners and small retailers as they are to small industries,
government-generated programs that provide sound information
to consumers are essential. For these consumers, a policy
that relies exclusively on higher energy costs to achieve
energy conservation will only partially accomplish its purpose.
The third and final situation in which higher energy
prices alone will fail to achieve energy conservation is where
institutional or marketplace barriers actually prevent the
higher prices from working. Examples of this situation are
apartment and office buildings. The owners of either building
type are typically not induced to save energy by rising energy
prices because their rental practices allow them to pass through
increased energy costs to building tenants.
As long as the availability of rental space is limited,
tenants have little choice but to pay increased costs. This
problem is especially acute in New York State. In New York
there are 2.25 million multi-family dwelling units representing
approximately 40 percent of the state's total housing stock.
Energy costs now account for as much as 40 percent of a multi-
family dwelling's operating costs, compared to under 10 percent
less than 10 years ago.
There are, of course, individual building owners who will
make conservation improvements to enhance the viability of a
property or for other reasons. Nevertheless, the fact remains
that the existing practices of the rental marketplace sub-
stantially ruin the clean, theoretical cause and effect rela-
tionship between higher energy prices and conservation that
the Reagan policy seems to be relying upon.
In this situation, necessary additional actions to achieve
conservation should entail mandatory efficiency standards or
conservation measures that have the effect of stepping over
current practices of the marketplace that otherwise are effec-
tive barriers to energy conservation.
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New York State, and virtually every other state in the
country as well, has heen combining Federal assistance from
such sources as the Energy Extension Service, the Energy Policy
and Conservation Act, and the Schools and Hospitals grant
program with state funds to provide programs that address these
situations in which rising energy prices alone will not bring
about energy conservation.
There are many examples of substantial, cost-effective
successes in the use of these funds.
Recently, my office completed energy savings evaluation
reports on four of our programs: the Energy Advisory Service
to Industry Program; the Boiler Efficiency Improvement Program;
the Oil Heat Efficiency Program; and, a portion of the Schools
and Hospitals Grant Program.
These four programs alone have saved New York State resi-
dents the equivalent of approximately 6 1/2 half million bar-
els of oil per year valued at over $220 million. The evalu-
ation reports indicate that these programs resulted in energy
savings which were valued at between 11 and 798 times the cost
of administering the programs.
I stress that these evaluations address only three programs
and a portion of another. I am sure that the evaluation reports
now being done for our other programs will add significantly
to the energy savings already calculated.
Notwithstanding the positive, practical uses of these Fed-
eral funds, all of the Federal assistance programs for states
mentioned above, and others as well, are proposed for elimina-
tion in the Federal 1982 budget, with the exception of the
Schools and Hospitals grant program for which a relatively
small amount of funds has been proposed by the Administration.
Should Congress not alter the Administration's intent,
the New York State Energy Office could be forced to reduce its
programming and staffing levels by 50 percent. The situation
would be worse in many states. To assume that state and local
governments will provide replacement funds for the lost Federal
assistance is to ignore fiscal realities. Already overpres-
sured state and local budgets simply cannot be regarded as
the substitute source of funds for these programs, particu-
larly because the Federal government is also eliminating fund-
ing for many other programs.
The specific impact of the Administration's energy conser-
vation policy will be to forego enormous opportunities to
save additional energy. The policy will also result in many
energy consumers homeowners, businesses, and institutions
not having the objective information and financing necessary
-------
for them to take proper energy conservation actions and meet
the rising energy costs.
The more general impact of the Federal policy is a backing
away from what must be an all-out effort to minimize the coun-
try's dependence on foreign sources of energy.
DR. RIEGEL: All right, thank you. Before going to questions from the
panel, we'll have testimony from John Armstrong.
MR. ARMSTRONG: I appreciate the opportunity to testify on how the "ade-
quacy of attention to conservation" can be assured, given the
new directions in Federal energy policy. I believe this sub-
ject is of critical importance to this country and applaud
your efforts to investigate it more thoroughly.
There are two important conclusions I have reached in
analyzing this question which I believe ought to frame govern-
ment policy toward energy conservation:
1) Energy conservation can be of major economic, military,
environmental, geo-political, and social value to the Uni-
ted States, and;
2) Government has a necessary and essential role in achieving
the nation's energy conservation potential. The corollary
to this last point, which answers the basic thrust of the
Issue Paper, is that reduced government action in conser-
vation will lead to reduction in the overall effort nation-
ally.
In discussing these points, I will try to answer specifi-
cally the questions posed in the Issue Paper.
First, it is my strong belief that both the country as a
whole and the current Federal Administration has greatly under-
estimated the value of energy conservation. I believe it is
fair to summarize numerous studies which have compared the full
range of U.S. energy options to say that improvements in the
efficiency of energy use will provide more energy at a lower
cost and more quickly than any other option for at least the
next 20 years. To quote just one such study: "The United States
can use 30 or 40 percent less energy than it does, with virtu-
ally no penalty for the way Americans live."!/ (Editor's Note:
References follow Mr. Armstrong's testimony.)
The Minnesota Energy Agency has estimated that the net
economic effect in the state of a $1 purchase of petroleum
products is $.55 compared with $2.21 for home energy conser-
vation..?/
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In a similar analysis, Stobaugh and Yergin estimated that
the true cost of imported oil to the U.S. was actualy 2.3 to
5.6 times its posted price owing to the negative economic
impacts of losing U. S. dollars to foreign countries. ±.'
Other studies have shown that an investment in energy
conservation will create more jobs than an equivalent invest-
ment in energy production. Indeed, "Emerging Consensus," a
recent study estimated that two-thirds of the growth in demand
for energy services between 1973 and 1978 was met by efficiency
improvements..£/ Less studied and more difficult to quantify
are the substantial strategic and geo-political benefits to be
gained from reduced oil imports.
The net result of all of these factors is that the benefits
of energy conservation are greatly undervalued or, conversely,
the costs of energy use are greatly underestimated. It is a
basic tenet of the new Federal energy policy that if prices
are deregulated, the market will bring about the optimal allo-
cation of energy investments. However, even at deregulated
prices, many of the opportunity costs of conservation (i.e.,
the true social costs of energy use) are not internalized into
the market price of energy, not to mention the practice of
pricing energy to the consumer at its average rather than
replacement cost, thus keeping the market price of energy far
below its true cost.
The distance between the experienced market price of energy
and its true social cost defines an area where the market will
not allocate energy investments optimally, and I believe, where
governments action is necessary and appropriate.
Government conservation expenditures in areas where the
market is not functioning should not be viewed as subsidies,
but as the economic purchase of energy at below its true re-
placement cost.
In addition to the conclusion that there is a sound econo-
mic basis for government action where market imperfections
exist, the role of government must also be examined where such
imperfections supposedly do not exist. The Energy Productivity
Center at the Carnegie-Mellon Institute demonstrated^/ that
consumers could have reduced fuel consumption by 25 percent
and costs by 17 percent given actual energy prices between
1973 and 1978, had they been truly minimizing long-run energy
costs.
In Minnesota, a survey of 90,000 utility customers in
1979 found that 55 percent of the homes had less than 6 inches
of insulation and 12 percent had none at all (recommended
level is 12-15 inches). Of these customers, 45 percent did
not turn their thermostats down at night and 9 percent turned
-------
them up, even though night-time setback costs nothing and can
save more than half as much as attic insulation.
Many studies have documented the substantial barriers
S f\ I
which exist to implementing price-responsive conservation.J>0/
Our own studies ' and those conducted by DOE and others (see
references) also indicate that most conservation programs have
been very cost effective. For example, an evaluation of our
boiler efficiency workshops showed a payback on all workshop-
associated costs of four months.i£/
The average payback on all costs associated with the Insti-
tutional Buildings Grants Program in Minnesota has been 3.2
years, with an annual savings to the state's taxpayers of $16
million.lZ/
An evaluation of our energy hotline found that 17 percent
of callers were influenced to take conservation action-:/ and
that 50 percent of those using regional information centers were
influenced to take conservation actions ..Lr/
The central question these hearings address, however, is
what impact withdrawal of Federal funds will have on the na-
tion's conservation effort?
First, it must be recognized that the cut in Federal funds
is falling, in many cases, on to-p of substantial state and local
cuts. The Minnesota Energy Agency has experienced a 61 percent
cut from FY '81 to FY '82 in total funding. State appropria-
tions to the MEA's Conservation Division dropped from $11,966,-
100 for the FY '80-'81 biennium to $1,180,322 for the biennium
which began July 1, 1981 a 90 percent reduction. Rescis-
sions and discontinued appropriations in state and Federal
funds amounted to over $10 million for the Conservation Divi-
sions last fiscal year alone and almost 90 percent of these
funds were grants to local units of government.
Although no data exist on the immediate impact on the pri-
vate sector, discussions with local engineering firms indicate
that business has slowed not only from loss of Federal and
state funds, but from disinterest, economic recession, and
high interest rates as well. The American Hotel and Motel
Association, for example, is discontinuing its 10-year conser-
vation program and many managers have simply decided to pass
costs on.
The exceedingly low profile on energy conservation by the
Reagan Administration is even affecting the level of interest
where grant funds are available. The number of technical as-
sistance grant applications from institutional buildings in
Minnesota dropped from 2,000 in Cycle II to only 67 in Cycle
III, even though funding levels were similar.
10
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State and local governments are responding in a variety of
ways to the withdrawal of funds. One important change has been
that conservation funding has shifted "off budget;" that is,
from general tax revenue to private investment through bonding.
In Minnesota, $11.25 million in direct conservation grants were
discontinued, while $27.5 million was approved by the legisla-
ture for municipal bonds for residential conservation and $50
million in bonding for district heating.
Second, many groups are increasing their efforts to act
cooperatively or to broaden their funding base by forming joint
public/private partnerships.
The Minnesota Energy Agency (MEA) has accelerated the rate
of transfer of its conservation programs to other institutions.
In fact, we have initiated a "foster parent" strategy of finding
or creating groups to carry on programs the MEA may have to
drop. For example, we are currently trying to establish a Min-
nesota Chapter of the Conference of Local Energy Officials
(CLEO) to continue some of our community outreach and technical
assistance functions. We are discussing the establishment of
a statewide public/private energy education funding consortium
to assume some of the substantial energy education efforts
which have been carried out by the Minnesota Department of
Education and the MEA.
The process of "institutionalizing" conservation programs
by establishing them in groups outside government is not new.
Indeed, it is an explicit goal of the Energy Extension Service.
Although a benefit of the change in Federal policy has been to
accelerate this process, it remains to be seen whether such
efforts will be successful.
The process of building energy capabilities at the local
level takes time. Direct technical assistance is usually re-
quired for a substantial period of time; funding sources must
be found and information-sharing networks established. One of
the considerable and often-overlooked benefits of the Federal
conservation programs has been this institutionalization pro-
cess. The sudden curtailment of Federal funds will not only
stop most current efforts, it threatens years of work the
states have put in, which is not yet complete.
As in Minnesota, I believe most state and local govern-
ments will not be able to continue functions formerly performed
with Federal funds. Conservation programs are likely to be a
low priority, and information/education programs in particular;
again because of lack of understanding of the benefits of con-
servation and because of the prevailing sentiment for supply-
side solutions.
11
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Even in Minnesota, where conservation is clearly our best
near-terra option and has widespread support, funding for the
development of alternative energy sources was increased from
$294,700 to $705,000, this year over last, whereas funds for
information dissemination were cut 29 percent.
The loss of Federal and state conservation funds, I expect,
will have a slowing on the nation's conservation efforts in
general. Information is essential if individuals and businesses
are to make the appropriate response to higher energy prices.
Such information has been an important contribution of the state
energy office and is essential in a period of rapidly changing
prices and technology.
Training and education efforts will also diminish, resul-
ting in a less "energy-skilled" work force. Those institutional,
legal, and many economic barriers which remain are likely to
be removed more slowly because their removal often requires
informed governmental action.
The Federal role during this critical period must be to
give the states greater flexibility and discretion in order to
adapt to local conditions and needs. Rules should be perform-
ance oriented and place greater emphasis on evaluation of effec-
tiveness and technical assistance. The formation of infor-
mation-sharing networks, such as CLEO, the Association of
State Energy Professionals, or the Energy Engineers Association
should be encouraged and assisted, particularly if the regional
DOE offices are discontinued.
Finally, studies ought to be initiated to monitor and
evaluate the impact of the change in Federal energy policy and
determine if the results truly are in the national interest.
Such studies could include case studies of individual states,
monitoring of efficiency improvements in major appliances,
transportation and industry, monitoring of investments in ener-
gy conservation and comparisons of theoretical price-responsive
conservation with that actually taking place.
As a society and a government, I believe we have danger-
ously underestimated the value of energy conservation. The
true social cost of energy may, in fact, be many times its
market price. If this is the case, the nation's energy problems
will not be solved primarily by the American people, as stated
in the Third National Energy Plan, but will be solved by forces
unperceived and often beyond their control.
To the extent that the market is not and cannot resolve
our energy problem, governmental action is a necessary and
legitimate means of achieving the broad, national interest.
12
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REFERENCES FOR MR. ARMSTRONG'S TESTIMONY
1. R. Stobaugh and D. Yergin, Energy Future, Report of the Energy Project
at the Harvard Business School, Random House, 1979.
2. 1980 Energy Policy and Conservation Biennial Report, Minnesota Energy
Agency, 1980.
3. Joint Economic Committee, Energy Conservation; Emerging Consensus,
Diverging Commitment, U.S. Congress, December, 1980.
4. R.W. Sant, Least-Cost Energy Strategies, Minimizing Consumer Costs
Through Competition, Energy Productivity Center, 1979.
5. Eric Hirst, et al. , Improving Energy Efficiency: The Effectiveness
of Government Action, Oak Ridge National Laboratory, 1981.
6. Energy Efficient Building Program Needs Assessment, Minnesota Energy
Agency, 1981.
7. An Evaluation Study of Community Energy Awareness Committees, Volume
1^, prepared for the Minnesota Energy Agency by the University of
Minnesota Center for Social Research, 1979.
8. Energy Hotline Evaluation: Effects of Two Energy Conservation
Telephon e Information Services on Their Client Populations in Minne-
sota, prepared for the Minnesota Energy Agency by the University of
Minnesota Center for Social Research, 1979.
9. Evaluation of the Energy Review, Minnesota Energy Agency 1981.
10. Evaluation of Austin Home Audit Program, Minnesota Energy Agency,1981.
11. Evaluation of November 1978 Minneapolis Energy Saver's Show, Minnesota
Energy Agency, 1979.
12. Minnesota Regional Information Centers : Evaluation of Services to
Client Populations, Minnesota Energy Agency, 1981.
13. The Solar Home Campaign: An Evaluation, prepared for the Minnesota
Energy Agency by the University of Minnesota Center for Social Re-
search, 1981.
14. The Potential for Utility Conservation Investments in Minnesota,
Minnesota Energy Agency, 1981, order establishing programs by the
Minnesota Public Utilities Commission.
15. Effectiveness of State - Sponsored Seminars in Stimulating Conserva-
tion Actions by Private Businesses, Minnesota Energy Agency, 1981.
16. Evaluation of Boiler Operator Workshops in Minnesota, Minnesota Energy
Agency, 1979.
17. Unpublished data supplied by Kevin Halbach on June 25, 1981, MFA
Activity Manager of Institutional Buildings Grants Program.
13
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DR. RIEGEL: Thank you very much. To open the questioning, I would like
to start with one of my own, to Mr. Guinn.
Both of you have suggested that there was some danger that
state energy office activities may he in jeopardy as a result
of Federal budgetary decisions. I would like to ask you if
this is the case in New York? If your office has been success-
ful and has developed a constituency in the state, has that
constituency resulted in increased budgetary support for your
programs at the state level?
MR. GUINN: The New York State Energy Office was created nearly five
years ago, during the late '70s a time when sunset law activity
was at its height in New York State. The energy office became
the first New York State agency to have a sunset provision in
its enabling legislation. I think DOE has a similar provision.
We have just completed our sunset hearing process. We
emerged unblemished on the hearing record since there were no
negative comments, and considerable praise regarding the wonder-
ful activities carried out. However, our budget in New York
State will go before the legislature on April 1. How we get
from today to 1982 may somewhat difficult. The second concern
is that energy conservation funds, a few million dollars, could
he lost between the cracks as the legislature deals with the
many programs, most such as health, education and welfare that
are much larger, that have been reduced substantially.
There is a certain threshold in the budget process of the
number of concerns that one can deal with at one point in time.
The New York State budget process and in particular the legis-
lative side of that budget process will have to deal with a
great deal of items.
I hope and I feel that we should emerge with increased
state fundings from all of this, but there's no doubt in my
mind that our programs will be reduced somewhat. I'm not sure
in what areas. The degree to which whatever minor Federal
money does occur is more flexible than what we've had in the
past would help. The degree to which the state legislature
provides the money in a flexible form will also help.
Just one aside; in New York we have reached the concensus
that conservation is something that we can do for ourselves.
We view the rapidly rising energy costs, if nothing else, to a
certain degree an attack upon the Northeast and the Midwest.
We have industries that unless they conserve energy better
than they have, they may not be around. So to some degree that
energy conservation may become an element of an economic devel-
opment strategy in some of the older and colder parts of the
country.
14
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A concern we all should have is the final HEAP program and
the weatherization program funding levels. I've heard a statistic
from New Jersey that the average utility bill in Newark is two
months behind. I don't know what a corresponding figure in New
York is, but there are many problems that seem to be developing
in the payment of bills from the past winter, which was a mild
winter. I'm concerned about what will happen in the years ahead
and how we can cope with the related problems.
These concerns are just for New York. Now for other states
I believe there are some 23 states where the legislature meets
every other year and this is the other year.
MR. POWER: Chuck, if I may ask, in your testimony you mention the eval-
uation of four programs that you've been conducting and just to
clarify the remarks, is this a correct interpretation that you
have saved, based on these estimates, $220 million a year from
these efforts? And in terms of their continuation, are they to
be continued as far as you know, and if not, why not?
MR. GUINN: Right. One of the things we found in New York is that the
marketplace must work fairly well in the auto transportation sec-
tor, convincing people to buy more efficient cars. And if they
don't have enough money, they don't drive. So demand declines;
but in the building sector the market forces just don't work well.
In New York, where we heat predominantly with oil, as op-
posed to most of the country which heats with gas, our prices
have been in a sense decontrolled for a long time. The differ-
ence of oil decontrol versus non-decontrol, especially when our
residual oil is 90 percent imported, wasn't all that much. So
we've been living in a world of world price energy for some time.
We found in the building sector that the marketplace does't
work all that well and it needs some help. Help was found to be
useful to small industry, commerical buildings at almost any
size, public housing, apartment buildings and other large buil-
dings. We have an Energy Advisory Service to Industry (EASI)
program, consisting of a number of retired engineers who work
for the state or actually for regional groups across the state,
paid for by Federal funds. These engineers go through a small
industry day audit and say here's what the firm can do to reduce
the demand for energy in its factory. This program, you would
think, based on the kind of philosophy of the free marketplace,
would be opposed violently by the professional engineering soci-
eties of New York. It was not.
It was supported and pushed hard by these societies, who
felt that if the EASI engineers can convince John J. Jones of
Acme Machine Company that he really needs a heat recovery sys-
em or whatever change in the process system, we'll design it,
but somebody's got convince him. When the vendor for a product
15
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goes walking through and says you need to buy one of my devices
in order to save considerable energy, John J. Jones Jones nay
say: "Yeah, and you tried to sell me something else last week."
So the "EASI" program has worked well in a fairly narrow, but
very important sector to New York's economy.
The boiler program we refer saving 800 times its invest-
ment in a year is one which I think a lot of states have. A
southern university I think it was Auburn or Mississippi State,
developed an excellent program whereby if you can get the right
people in a room and convince them that they should do some-
thing about improving their boiler systems, they will do it.
The difficulty has always been getting the right people in the
room.
The market forces may say that you are literally wasting
millions of dollars in your institution or your apartment
building or whatever, but unless the person operating the
boiler knows how to fix it, nothing is going to happen, unless
you fire him and/ or bring somebody who can operate the boiler
efficiently. This program works because state and local gov-
ernments can put a fair amount of pressure upon hospitals,
schools, public housing, commercial buildings through the local
realty boards, and others to send their boiler operators to a
class to learn to operate the boilers efficiently. You can
bring the right people. They will listen to what can be done,
they have a hands on learning experience where they actually
do what is necessary.
In the follow-up surveys which DOE makes us do in consider-
able detail, we found an incredible change in the consumption
patterns. Now, I think a free market buff could argue some of
the improvements would have happened anyhow, but it certainly
didn't happen before we demonstrated' what could be done and
improvements did happen after the classes.
The third point I'd like to make, I think this has been
proven by at least 20 studies, that if you can convince some-
body through an energy audit, be it a homeowner, a shopping
center owner, that they're wasting money, they will do some-
thing to reduce their energy use. Often because of front-end
cost limitations they won't do as much as they should,but
they will at least do the items that are fairly low cost and
also tend to have high payoff.
MR. POWER: I guess I'm still left wondering if this program is that
cost effective, would you would the state continue to do it?
MR. GUINN: We will find out in April. We will submit to our legisla-
ture funding requests to continue those programs that we think
are very cost effective. We also will continue a hotline pro-
gram that basically answers citizens' energy questions. We
16
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receive 5,000 or 6,000 calls a month, usually concerned with
what can I do to save energy. I've always thought that such
programs were very useful in the times of rapidly rising energy
costs, to be a shock absorber for the people who are searching
what steps to take and how to do them. This is a program that
New York certainly would want to continue. Whether it will or
not will depend upon the budget processes.
DR. RIEGEL: I'd like to ask John Armstrong a question. John, you argued
persuasively that conservation represents a very valuable ener-
gy resource to the nation and pointed out that this is being
pursued with some success in Minnesota.
On the other hand, you have pointed out that a number of
state-sponsored conservation activities and, in one case at
least, a private sector activity by the American Hotel and
Motel Association may be discontinued. Can you give us your
perspective on the extent to which these programs are being
discontinued because there's a perception that they have large-
ly achieved the intended results. Also to what extent do you
feel that these discontinuances are taking place with a large
unrealized opportunity likely to be foregone?
MR. ARMSTRONG: In the case of the Hotels and Motels, I think it is a com-
bination of things. They have been at it for 10 years. They
have achieved some results. On the other hand I think there's
a great deal more that can be done. So I think there are some
fairly large foregone results there; but it's a combination of
the mood of the times, lack of interest in energy conservation.
For the moment there is a lull in price rises so that the eco-
nomic pressure is not there and the fact that energy conserva-
tion, as for most businesses, is not their primary concern.
Their primary concern is doing what it is they feel they make
a profit at. One of the very useful functions of many of these
conservation programs has been to explain the benefit of reduc-
ing energy expenditures in terms that the individuals under-
stand. If it's a profit making business, in terms of an equiv-
alent amount of business they would have to do to generate
that amount of profit.
That was one of the ways the Hotel and Motel Association
originally got into it and I don't think this is necessarily
going to be the case across all sectors.
I still see quite a bit of activity in the industrial sec-
tor. There always has been and I think there will continue to
be, particularly in large industry. I would agree with Chuck
that small industry is quite a different case. But in large
industry, they have the capability to analyze their energy
consumption, to look at the cost benefits of various modifica-
tions; although our general experience is that they will apply
a much more stringent requirement on conservation investments
17
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than they would in their own business area. For example, we
see a six months to one year payback demanded for conservation
investment, whereas in the normal course of business they'll
look at a 20 to 30 percent rate of return (3-5 year payback) as
being pretty acceptable for a general business investment; so
there's a bias, even when they have all the data before them,
against conservation.
I think in the residential sector, if certain programs are
cut, there will similarly be a decline in activity. The pri-
vate sector won't move in and I think an important point to
realize is that the Federal conservation programs which supply
information and programs like the RCS provide a basis for
private sector action.
I've heard the banking community refer to the RCS program
as a transaction cost. They see the whole system of analyzing
a home, providing a uniform system of analysis and giving that
information to the homeowner, showing him contractors and where
to get loans, all as things which take place in order to get
the homeowner into the bank to get a loan.
These kinds of programs provide a very important basis for
private sector action and for local action. For example, the
$27 million in residential municipal bonds that I referred to
would not have taken place without the RCS program being in
place. Those programs specifically depend upon an audit, a
uniform audit, a trained cadre of individuals performing those
audits, consumer protection mechanisms and that whole system
being in place which any individual city and most states would
have a very difficult time developing on their own.
That system is now in place. All the protections and guar-
antees are there that need to be there for both cities and
other lending institutions to be comfortable in lending money
on that basis.
Even the IBG program, which provides its own funding source,
in a way has an important spillover effect in that the tools
generated for the program, the energy audit materials, the
training courses and so on again provide a uniform basis for
building analysis and for providing financing to institutions
and even commercial buildings. There's an important spillover
effect in the commercial sector from the institutional building
grants program.
Those kinds of effects of these programs are very unana-
lyzed. Most of the attention by the Department of Energy has
been directed towards the immediate payback of a very circum-
scribed area of impact of these programs. They want to see the
actual BTU savings of persons attending a boiler efficiency
18
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workshop, and those are usually done within a period of a year
after attending a workshop.
There are much broader institutionalizing kinds of effects
that I alluded to which are a very important 'benefit from these
programs and I think will be lost if they're taken away.
DR. RIEGEL: Well,as usual, we are suffering time pressure. I would like
to thank our first two witnesses for appearing and invite Alan
Miller and Mark Cooper, if they are here, to step forward.
We find that discussion has a tendency to go on longer than
we allow time for on the schedule. So, to the extent that it
is practical for you to summarize your statements, it would be
very helpful. If Shirley Sutton could come forward as well,
we will add her to the group. Let's begin with Alan Miller
from the Natural Resources Defense Council.
MR. MILLER: Thank you for inviting our participation. As most of you
know, the Council is a national nonprofit conservation organi-
zation with approximately 40,000 members concerned with protec-
tion of the environment and conservation of resources. Towards
those objectives, we have been extremely active in working
towards legislation and grass roots activity in support of
energy conservation and renewable energy technologies. My
comments will be brief, thanks in part to the creation of a new
organization, the Energy Conservation Coalition. The Coalition
was created to address one of the problems that we thought to
be among the greatest obstacles to conservation, the lack of
an organized constituency in support of energy conservation.
The Energy Conservation Coalition will be represented, I be-
lieve later this morning, by David Moulton. His comments are
far more detailed than mine.
My testimony is directed briefly toward two basic issues.
One, the question of "market forces" and their relationship to
the achievement of energy conservation objectives, and the
other to the impact of budget cuts on state and local programs
and from our experience as an environmental group, what we see
as the impact to date of the changes in Federal strategy. I
might note at the outset that there is a distinct difference
between the interest at the national level in achieving conser-
vation objectives and the interest at the state level. I think
that some of the comments made by the previous panel and some
concerns reflected in your questions about differences in state
programs and state priorities are due to differences in the na-
tional interest in conservation, the national security costs,
and the national environmental costs, which are not as clearly
responsibilities at the state level.
I think it's important since there are many program decis-
ions still to be made, however, to focus at least briefly on
19
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the specific obstacles to capturing all of the cost-effective
conservation opportunities. I think this will set the frame-
work.
First, there is the continuing impact of the disparity be-
tween Federal support for fossil and nuclear fuels in contrast
with support for conservation. It is important to note not
only the quantitative significance of such subsidies in the
past, which as frequently noted exceed at least $200 billion,
but the continuing effect of such subsidies. From a current
standpoint, that is more important than the simple quantifica-
tion of past subsidies.
Unfortunately, there are few such studies of the continuing
effect of past subsidies. One that I did discover, by Thomas
Sparrow, a professor of economics at Purdue University, has
attempted to do so and suggests that past subsidies represent
roughly 7 percent of the cost of nuclear power, three percent
of the cost of coal, 27 percent of the cost of oil, and 13 per-
cent of the cost of gas. These are current and continuing sub-
sidies which will not be addressed merely by the elimination
of current Federal subsidies.
Insofar as the current budget increases funding to various
aspects of nuclear energy, of course, this disparity will be
maintained. Therefore, one cannot say that completing fuels
will be priced on a free market basis.
Second, we see continuing problems because of state control
of electricity pricing, which for the most part continues to
reflect average imbedded cost-pricing principles and therefore
will not reflect the current realities of future electricity
costs. Because of this, the Ford Foundation study, The Next 20
Years, noted customers are discouraged from investing in energy
conservation or non-utility substitute fuels which may be cheap-
er than the cost of new supplies.
The third factor is that the end users are often not the
ones who are making the investments in the capital which deter-
mines energy operating costs. In particular, most buildings
are not owner-designed and the builder's incentive is to keep
down first costs and minimize his risks.
The buyer can add some, but not all, conservation features
later date and only at a much higher cost. We've had some very
dramatic data in the last few months indicating the signifi-
cance of this trend even within the past year. This data was
collected by the Air Conditioning and Refrigeration Institute
and made available to the Department of Energy by the Carrier
Corporation. This data indicates that, excluding California,
where mandatory appliance standards are in effect, the energy
efficiency of central air conditioners shipped during the last
20
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two years has actually declined nationwide. It is therefore
clear that even in a period of rising electricity prices the
incentive for builders to install more efficient air condition-
ers has simply not been adequate.
This problem is, of course, also true among landlords and
renters. The problem requires government solution. Finally,
in preparation for this, I made some effort to survey new
homes in the local area. This information doesn't seem to be
available very easily, exactly what is happening in the build-
ing marketplace. If one simply goes out on a few weekends and
looks at buildings, you'111 find the following.
First of all, out of 14 randomly selected developments
(I make no claim that this was scientifically selected), I saw
only one developer who had labels on the appliances in his
houses. In the other cases when I asked about the labels, the
people selling the buildings simply claimed ignorance of the
requirement that labels be shown.
Second, I found only in the most expensive houses, those
in the range of $150,000 or more, any use of overhangs or
attention to solar gain. When I asked about this, the sellers
indicated no knowledge of the impact of solar gain. They
sought to turn my direction toward other features of the houses
more commonly asked by those looking at their houses.
Finally, any effort to ask about the likely comparative
energy operating costs of buildings (which after all is the
ultimate issue), encountered a completely negative response.
There's simply no basis for people selling houses to tell you
anything more than specific features about the furnaces or
water heaters or type of windows that have been installed. I
think what was most distressing was the first point, that even
those items which are no cost or extremely low-cost items, such
as overhangs and proper siding to take advantage of solar gain,
are simply not being adopted in the marketplace.
This may reflect what I refer to as our fourth point, and
that is the difficulty of finding credible information concern-
ing energy costs both at the residential level and at the com-
mercial and business level.
Evaluating claims of conservation is a time-consuming and
technical task, not only for residential consumers looking at
houses, but equally so for small businesses and to some extent
even medium and larger businesses. One need only review a
few issues of the Energy User News and attempt to assess the
competing claims of energy conservation companies to under-
stand very quickly the difficulty of making some informed
judgement about the value of energy conservation technology.
21
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The Department of Energy has had several programs to ad-
dress the need for credible information. But in general, the
Administration's policy has been clearly that such information
should be supplied by the marketplace, not by the government.
We believe that the merit and need for these programs has
been amply demonstrated by several success stories, particular-
ly the energy analysis and diagnostic centers which provided
basic audit information for small businesses. More than 50
percent of the time industrial users took the advice of the
auditors and the savings were 10 times greater than the cost
of the program.
Fifth, there is the problem of capital shortage in energy-
intensive industries. We note that beyond simple housekeeping-
type improvements, which have been predominant in the past five
years, conservation improvements require substantial additional
expenditure in return for even greater future savings. Knowing
this fact, however, is of little benefit for those consumers
who lack the necessary funds and cannot obtain the credit. The
question is where such funds are going to come from.
The solar bank was an attempt to correct this problem.
Again, the Administration's position has been that such pro-
grams are not necessary, that tax credits will achieve the same
objectives. We believe that tax programs do not address the
problems of many low and moderate-income consumers and the IRS
returns bear this out. This point is addressed in the testi-
mony of the Conservation Coalition.
Six, we point to institutional and regulatory barriers.
We note that conservation even when conservation measures
are cost-effective and financing is available state and Fed-
eral regulation often get in the way. We support the emphasis
of the Administration on eliminating regulatory obstacles inso-
far as they obstruct energy conservation efforts, although we
haven't seen much evidence of specific programs designed to
achieve that end.
I think it was a paper of Mr. Power, in fact, which notes
that only further carefully conceived and sharply focused
government regulatory reform can mitigate these bottlenecks.
Finally, we would point to those national benefits, envi-
ronmental, social and national security, which are not reflec-
ted in the marketplace. Insofar as these truly are national
benefits, I think it is asking a great deal of state and local
governments to be as conscious of the need to develop state and
local programs to substitute for those at the Federal level.
The second area I want to address briefly is the impact of
Federal budget cuts on state and local conservation activities.
22
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The implication of the Administration's approach and, to some
extent your questions, is that perhaps if these programs are
necessary that they will be picked up by the state and local
governments.
We think there is substantial evidence that there will at
least be a serious gap between the end of Federal programs and
state programs, significant disruption in the continuity of
programs, layoffs of experts, termination of programs which
have developed expertise and public acceptance.
Given the range of Federal cuts and fiscal pressures facing
most state and local governments across the entire array of
social policy issues, it's extremely unlikely that most states
will be able to so quickly pick up programs terminated in such
abrupt fashion by the Federal government.
For evidence of this, I want to point to one program with
which I have some direct working familiarity in the District
of Columbia. The success of the energy office programs in the
District of Columbia, which have been virtually 100 percent
funded through Federal activities, has been proven by an energy
audit which indicated that these federally funded programs
saved the city more than 23 percent in the city government's
energy bills, or about $19 million.
Yet, the energy office in the current D. C. Government
budget process has so far been very unsuccessful in finding
substitute sources for Federal cutbacks. In the absence of
Federal funding, even the administration of the Residential
Conservation Service, which was likely to require only about
1 1/2 man-years, is very questionable.
The D.C. energy office has become so desperate for funds
to administer the energy audit requirements that it has asked
the local utility companies, Pepco and Washington Gas Light,
to roll in the costs of administering the program in their
utility rate base. That petition has been opposed by the
utilities. It is currently pending before the District of
Columbia Public Service Commission. There are some legal ques-
tions about whether the Commission could order it even if it
made good policy to do so. But it does indicate the short-term
difficulties in maintaining some continuity.
Even if this program is to be picked up later, I think
there would be a substantial cost in disruption and in time,
if the people who have developed the program leave the city
government, if the program is interrupted for some substantial
period of time. Regardless of what happens two or three years
from now, there will he a substantial cost to the nation in
having this disruption imposed on programs across the country.
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The B.C. experience indicates another general problem: The
allocation of remaining funds among likely activities is going
to reflect continuing mandates and legal responsibilities, many
of which remain on the books at the Federal level. Despite the
broad policy concern of the Administration to eliminate such
requirements, these changes in federal statutes may gradually
go into effect over a two or three year period. During that
time we're going to find that state and local governments are
going to be forced to put their remaining funds into compliance
with Federal activities. These governments remain liable for
compliance with Federal programs like the RCS and it is there-
fore those legal requirements, rather than any rational estab-
lishment of priorities, which will determine the allocation of
funds. The most discretionary programs, such as telephone hot-
lines and information services and long-range planning, will
almost certainly be the first to go, something that we've also
seen occur in the Federal government.
Federal efforts should continue to focus on information
transfer, particularly the transfer of ideas concerning program
financing which are now more than ever crucial at the state and
local level. Transition difficulties would be needlessly exac-
erbated if the Federal government simply withdraws, leaving
state and local governments with the problems.
Thank you.
FOLLOWING IS MR. MILLER'S FORMAL STATEMENT
Thank you for inviting the participation of the Natural
Resources Defense Council. NRDC is a national, nonprofit orga-
nization with more than 40,000 members devoted to protection
of the environmental and the conservation of resources. In
furtherance of these objectives, NRDC has actively promoted
both governmental and private efforts to accelerate energy con-
servation and the utilization of renewable energy technologies.
We have lobbied in support of several of the energy conserva-
tion programs at issue in these hearings, and we have carefully
monitored their implementation and impact. Because of our be-
lief that these issues have not been receiving sufficient
attention nationally, we also played an active role in the
creation of a new coalition of organizations concerned with
promoting energy conservation, the Energy Conservation Coali-
tion. A representative of the Coalition will also be presenting
testimony at these hearings.
My testimony will focus on two basic issues, the assumption
that "market forces" are basically adequate to induce businesses
and homeowners to adopt energy conservation measures, and the
impact of the budget cuts on state and local programs. Our
24
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point is not that energy conservation programs should necessar-
ily be immune from budget cuts. Rather we question the philo-
sophical assumptions underlying the allocation of funds made
available for energy programs.
I. "Market Forces" Will Not Bring About Sufficient Energy Con-
servation to Meet National Objectives
Despite the substantial amount of energy conservation activ-
ity in the last five years, enormous opportunities are going
uncaptured because of at least seven factors:
1. Subsidies to Fossil and Nuclear Fuels. A four-year study by
the Battelle Memorial Institute concluded that federal energy
incentives for oil, gas, coal, hydroelectricity, and nuclear
power amount to more than $217 billion (see attached table).
Merely eliminating current subsidies will not redress the effect
of these sunk subsidies. An analysis of the Battelle data by
Thomas Sparrow,a professor of economics and industrial engineer-
ing at Purdue University, estimates that past subsidies repre-
sent 7%, 3%, 27% and 13% of the cost of nuclear power, coal, oil,
and gas. Since the Administration's budget increases funding
to nuclear energy, this disparity in treatment of alternative
energy sources is maintained.
2. Average, Embedded Cost Pricing of Electricity. Most
electricity rates, and virtually all residential rates, are
based on an average of old, relatively low-cost powerplants and
much more costly new ones. The utility, but not the customer,
sees the true cost of additional units of electricity. The
result, according to the Ford Foundation study, Energy: The
Next Twenty Years, is that "[Cjustomers are discouraged from
investing in energy conservation or non-utility substitute
fuels which may be cheaper than the costs of new supplies a
utility is adding." The importance of this underpricing is
illustrated by a study of differences in electricity use re-
ported in the Wall Street Journal of February 5, 1981. Some
of the highest electricity bills were in cities with the lowest
electricity rates. The low rates caused people to use electri-
city "like there's no tomorrow," according to the authors of
the study.
3. Builders Don't Pay Operating Costs. Most buildings are not
ownerdesigned. The builder's incentive is to keep down first
cost and minimize his risk. Since energy conservation is only
one of many features of interest to prospective buyers, the
demand for conservation is not clearly expressed in the market.
The buyer can add some, but not all, conservation features at
a later date, and Only at a much higher cost. Similarly, most
appliances are bought by builders for whom first cost is the
primary consideration.
25
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The problem is dramatically illustrated by data collected
by the Air Conditioning and Refrigeration Institute concerning
the efficiency of central air conditioners. Eliminating data
obtained from California, where mandatory standards are already
in effect, the energy efficiency of central air conditioners
shipped during the last two years actually declined. Central
air conditioners are almost always purchased by the builder
rather than by the ultimate consumer.
Buildings occupied by renters are a similar problem. the
renter has a disincentive to make improvements which will bene-
fit the landlord, while the owner can simply pass on higher
energy costs. As a result of these problems, the Ford Founda-
tion study concluded that "the housing market is almost a
classic case in which intelligently conceived regulation has a
place."
4. Credible Information Is Not Readily Available. Indus-
trial and residential consumers face a bewildering array of
claims concerning the economics and performance of alternative
conservation investments. Evaluating these claims requires time
and technical expertise, both of which can be significant bur-
dens. To make a rational decision concerning the efficiency
of a new home requires knowledge of its energy use, current and
future energy cost, the likely rate of inflation, the effective-
ness of conservation measures, and other technical issues. The
Department of Energy has several programs to address the prob-
lem, but the Administration sees no need for any of them. The
merit and need for these programs is illustrated by the success
of the DDE-funded Energy Analysis and Diagnostic Centers, which
provide free energy audits for small firms. More than 50% of
the time, industrial users take the advice of the auditors and
the savings to the firms are equally impressive: a 99.4% rate
of return on the total investment.
5. Capital Shortages in Energy Intensive Industries. Once
simple housekeeping-type improvements are made, conservation
improvements require some additional expenditure in return for
substantial future savings. Knowing this, however, is of little
benefit for consumers who lack the necessary funds and who can-
not obtain credit. This is a problem for low and middle-income
consumers as well as many industries. As noted in a 1980
working paper issued by the House Committee on Science and Tech-
nology, many companies who would like to invest in energy con-
servation have either already exceeded their borrowing capacity,
are unable to borrow at reasonable rates, or are reluctant to
increase their debt in proportion to their equity because of
the possible adverse effect on their bond rating. Conservation
investments are also considered "risky by many of the sources
of debt capital, such as pension funds."
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6. Institutional and Regulatory Barriers. Even where con-
servation measures are cost-effective and financing is avail-
able, state and federal regulation may get in the way. Building
codes are a classic example; in many parts of the country build-
ing codes make it difficult or unnecessarily expensive to in-
stall a solar water heater. Summarizing this issue, a Depart-
ment of Energy strategy paper concludes that "[ijronically, only
further carefully conceived and sharply focused government regu-
latory reform can mitigate these bottlenecks."
7. Environmental and Social Benefits of Conservation Are Not
Reflected in Market Prices. In relation to supply alternatives,
conservation measures are clean and create more jobs. They also
reduce risks from future supply cutoffs, and increase the over-
all reliability of our energy distribution system. Some of these
benefits, such as protecting a wilderness area, have no market
price. Others simply are not well accounted for. For example,
the Harvard Business School Report, Energy Future, notes that
the cost of electricity from coal neglects many "externalities."
"In the mining and transportation stage, the costs include
acid drainage from mines and the disruption of life in Western
communities by noisy trains hauling coal. The costs are even
greater when coal is burned, for it releases sulfur dioxide
and a host of other pollutants. The cost include smoggy skies,
emphysema,and the (unknown) consequences for future generations
of increasing the temperature of the atmosphere by producing
carbon dioxide."
II. Federal Budget Cuts Will Seriously Set Back State and Local
Conservation Activities
Because of past subsidies, the federal role in supporting
state and local energy conservation activities has been sub-
stantial. The vast majority of state energy offices, as noted
in the Issue Paper prepared for these hearings, receive more
than 50% of their funding from the federal government, and in
many states essentially all of the funding for energy program
staffs comes from federal sources. To expect that states and
local governments will immediately fill the breach created by
federal cuts is simply incredible, given the range of federal
cuts and fiscal pressures facing most state and local govern-
ments. Thus, there is almost sure to be serious disruption in
state programs. Programs will end, experts will leave govern-
ment or move into other fields, and the last six years of in-
vestment in program development and expertise will be lost.
One need look no further than the District of Columbia to
illustrate the likely impact of federal cutbacks. Energy
programs carried out by the District of Columbia Energy Office
with federal funding have saved the city more than 23% on its
energy bills, or $19 million. Yet the Energy Office is so
strapped for funds that, in the absence of federal funding,
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its only hope for sufficient monies to administer the energy
audit requirements of the Residential Conservation Service is
to require these costs to be borne by the affected utilities.
The prospects for this approach, apart from its merits, are
poor. Ironically, energy costs are partly responsible for the
financial difficulties which have made it so hard for the City
to provide the needed monies.
The B.C. experience also illustrates another likely aspect
of the budget cuts. The allocation of remaining funds among
activities is likely to reflect continuing mandates and legal
responsibilities rather than a rational rethinking of priori-
ties. The most discretionary programs, like information
services and long-range planning, will almost certainly be
eliminated first regardless of their merits.
Federal efforts to continue information transferparticu-
larly the transfer of ideas concerning program financingare
now more important than ever. Transition difficulties will be
needlessly exacerbated if the federal government simply with-
draws, leaving state and local governments with the problems.
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TABLE 1. An Estimate of the Cost of Incentives Used to Stimulate Energy
Production in Billions of 1977 Dollars
Nuclear Hydro Coal Oil Gas Electricity Total
Taxation
Disbursements
Requirements
Traditional
Services
Nontraditional 15.1
Market Activity 1.8
Totals 18.0 15.33 9.71 101.3 16.50 56.58 217.42
Source: Battelle Memorial Institute, Pacific Northwest Laboratory,
"Incentives to Stimulate Solar Energy Use" (1980)
1.1
15.1
1.8
1.8 4.03
1.1
0.03 0.67
2.31
2.68
13.5 0.02
50.4 16.04 31.37
41.9 0.06
6.0 0.48
1.5 0.3
0.4 0.1 24.73
103.64
1.10
43.76
8.79
19.58
40.55
29
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DR. RIEGEL: Thank you very much. I think we will go through all three
witnesses before we open the floor for questions. Next is Mark
Cooper from the Consumer Energy Council of America.
MR. COOPER: Thank you, Mr. Chairman, and members of the panel. My name
is Mark Cooper. I am Director of Research of the Consumer Ener-
gy Council of America (CECA), CECA is a broad-based coalition
of major national consumer, labor, farm, public power, rural
electric cooperative, senior citizen, urban and low-income
organizations. I appreciate your giving CECA the opportunity
to contribute to the Environmental Protection Agency's review
of Federal energy conservation programs.
CECA has been actively involved in conducting research on
many of the issues that you open for comment in your review.
In fact, we have recently completed a major study entitled A
Comprehensive Analysis of the Costs and Benefits of Low-Income
Weatherization and Its Potential Relationship to Low-Income
Energy Assistance. I respectfully submit a copy of the report
for the record. (This report was reviewed, but not included in
the Transcript due to its length).
In my remarks today, I will highlight the key points of
the study and show how they relate to the broader context in
which the review panel is working. The review panel has iden-
tified four major policy goals embraced by the Administration
and related them to specific energy policy issues. The goals
are economic revitalization, enhanced national sec-'^'1'*-y, main-
tenance of the social safety net and fiscal restra . Given
these goals, policy-makers have a number of different options
available as a means to those ends. One of the energy policy
options, conservation, can work toward maximum fulfillment of
these national policy goals. Let us take each of the goals in
turn and see how conservation, in general, and low-income
weatherization, in particular, relates to it.
ECONOMIC REVITALIZATION
We believe that there are three economic principles upon
which an effective revitalization of the national economy
should be based:
Anti-inflationary impact: i.e., least cost per unit of
energy
Job creation: i.e., most labor intensive per dollar of
output
Balanced growth: i.e., stimulating economic activity in
all regions and industries, while
30
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utilizing a wide range of labor
skills
A careful review of the economic characteristics of the
various energy policy options shows that conservation is cer-
tainly a basis on which to build a rational energy/economic
policy. In the CECA study, we found that weatherization deliv-
ers energy at a cost between $15 and $40 per barrel of oil
equivalent. This makes it a cheaper way to expand the nation's
energy resources than any of the production options.
In addition, the energy efficiency option exhibits an
extremely high labor intensity, perhaps twice that of conven-
tional fossil fuel production. Moreover, with the moderate
skill levels that are required by energy conservation, the
conservation option has a tremendous potential for reaching
those who are most in need of employment.
Additionally, energy efficiency improvements create geo-
graphically widespread patterns of economic activity because
they are decentralized and do not rely on specific regional
natural resources. Therefore, they avoid massive transfers of
wealth from energy-consuming to energy-producing regions. Low-
income weatherization, in particular, creates jobs and keeps
resources where they are needed most, in the poorest communities
of the nation.
ENHANCED NATIONAL SECURITY
With respect to enhancing national security, it has become
clear over the last decade that a sound energy policy must be
a cornerstone of a strong defense policy. We must reduce our
vulnerability to foreign or domestic manipulations of supply,
to conventional or nuclear attack, to regional conflicts, or
to terrorist activities.
The development of alternatives to conventional sources
of supply, such as increased energy efficiency, would serve
this goal best. Conservation is domestic in origin, varied in
source and inherently decentralized. In the short-term, in-
creased energy efficiency represents the single most promising
means of expanding available energy resources. In the long-
term, the potential contribution of energy efficiency to the
nation's energy needs can be substantial indeed. The National
Academy of Sciences estimated that between one-quarter and
one-half of our energy needs could be supplied by increased
efficiency. Recent studies by the Solar Energy Research Insti-
tute, the Oak Ridge National Laboratory and the Congressional
Budget Office reaffirm this conclusion.
CECA's study, compiling data on the weatherization of
over 6,000 homes, suggests that these prior, theoretical esti-
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mates have not been gross overestimates, by any means. We
find that energy consumption can be reduced by almost 30 per-
cent with basic conservation measures and more extensive wea-
therizations can achieve cost-effective reductions in energy
consumption of almost 70 percent. Energy efficiency improve-
ments can make a massive contribution to secxiring the nation's
energy future and thereby enhancing our national security.
That contribution can reach its potential just as quickly as
we desire, by devoting increased resources to weatherization.
There are millions and millions of buildings that can make a
contribution to the nation's energy supply; they are waiting
to be weatherized.
MAINTAINING THE SOCIAL SAFETY NET
From the point of view of maintaining the social safety
net, there is absolutely no doubt that conservation must play
a crucial role. Energy is a basic subsistence commodity, and
low-income households have been forced to devote a debilitating
share of their incomes as much as one-third to this
single commodity alone. As energy costs rise higher and higher,
there is a serious danger that the economic viability of those
American households which live near to the poverty level will
be undermined. Energy policy must prevent more and more Ameri-
cans from being rendered poor by perpetually escalating energy
costs, while it relieves the burden that high energy prices
place on the poor.
In the long run, if we are to break the dependence of low-
income households on the safety net and to prevent more and
more Americans from being forced into a dependence on public
assistance, programs such as low-income weatherization and the
Solar and Conservation Bank, which permanently reduce energy
consumption and cut energy costs, must be maintained and expan-
ded. Programs such as these permit households to direct re-
sources away from necessities, such as energy, toward building
a firmer economic base within the household and investing in
human capital to enhance the earning capacity of the household.
Our study shows that low-income weatherization makes a
significant contribution to alleviating the burden that energy
costs place on the poor and near-poor. On average, weatheri-
zation constitutes an addition to income of almost 5 percent
for the average low-income household. That contribution will
increase over time as real energy prices rise.
If the goal is to maintain the social safety net which
protects low-income energy consumers, an approach which throws
low-income weatherization into a non-specific block grant is
unacceptable. Such an approach would prove disastrous for
low-income energy consumers. Under the Administration's ap-
proach, it is possible that weatherization would not be per-
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formed at all, since there are no requirements that funds be
spent for weatherization. At the very least, weatherization
would slow down considerably. Rural areas, where 40 percent
of the poor reside, would certainly be underserved.
Thus, for the low-income energy consumer, folding weather-
ization into a non-specific block grant could mean an increased
and perpetual dependence on other means of Federal assistance,
such as energy assistance payments for fuel bills. Furthermore,
we have accumulated too much expertise in the current low-
income weatherization program to abandon it. Folding weather-
ization into a non-specific block grant would eliminate many
of the tremendous benefits achieved by the current Department
of Energy program.
FISCAL RESTRAINT
It is obvious that conservation must be accorded the high-
est priority in energy policy. However, in times of fiscal
restraint, policymakers must carefully analyze whether someone
other than government can, or will, get the job done. Here we
disagree totally with the Administration's point of view. The
Administration deems that only high-cost, high-risk, long-term
projects are within it purview. This view overlooks the many
sectors of our society which are forced to struggle to survive
in the short-term.
From the corporate headquarters of the oil companies, a
$2000 weatherization and the industry required to deliver it
may look insignificant. But, in the reality of the snail
business sector and the low and moderate-income households of
our nation, faced with oppressive interest rates and a massive
overflow of resources to the energy industry, the problem
appears insurmountable. The poor and near-poor don't contem-
plate the high-risk, high-technology, long-term future; their
risks, which are very high indeed, are in surviving the next
winter.
Thus, rising energy prices pose a dilemma for those who
would rely on the market to solve the energy problem. At the
very same time that rising prices increase the incentive to
invest in energy efficiency, they rob households and businesses
of the capital to do so. The oil companies are swimming in
cash and engaging in an orgy of corporate takeovers, buy-outs
and mergers, while the poor and near-poor struggle to scrape
together the finances for a simple weatherization.
The evidence on this point, as contained in the Department
of Energy's Residential Consumption Survey, is quite clear.
The poor are just as likely as the non-poor to undertake no-cost
conservation measures, but only one-third as likely to take
costly conservation measures. In fact, between 1979 and 1980,
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the poor reduced their average investment in conservation by
16 percent, while the non-poor increased their average invest-
ment by about 2 percent. Capital is the critical constraint
in the market.
If one expects the market process to work, one cannot so
skew the distribution of resources at the outset as to make a
mockery of the very concept of a market and a misery of the
lives of those who do not possess resources. We believe that
the role of the Federal government is to assist those alter-
natives and those individuals that are directly disadvantaged
by rising energy prices. It must balance the scales, so to
speak, so that the balanced pattern of energy development,
which is clearly in the the nation's interest can be achieved,
and so that the very lives of the poor can be protected and
preserved.
CECA makes these observations and arguments on the basis
of the single largest review conducted to date on the results
of actual weatherizations. Our data base covers over 6000
houses in 25 states and includes data on about one out of every
500 homes weatherized in the Department of Energy's low-income
weatherization program. We have applied rigorous cost accoun-
ting procedures and stiff economic criteria to the available
data. We conclude that low-income weatherization should not
only be maintained as a separate program, but that it would be
wise to expand it as quickly as'possible.
Beyond that specific recommendation, the implications of
our analysis for the work of the review panel are clear. We
urge you to take your own stated goals to heart, to apply your
own criteria on a rigorous basis, to examine the evidence in
an objective fashion and, above al], to have the courage to
change your minds. Have the courage to take a close and fair
look at these programs which you Intended to defund or disman-
tle. Have the courage to find that they are of much greater
value than you originally thought. Have the courage to con-
clude that they deserve a more extensive Federal commitment
and demand more Federal resources than you anticipated.
If you do so, you will do a tremendous service to the na-
tion as a whole and to the specific groups which benefit from
these programs, the nation's low and moderate-income households.
households.
DR. RIEGEL: Thank you very much. Before turning to questions, we have a
final contribution from Shirley Sutton from the Americans for
Energy Independence.
MS. SUTTON: Mr. Chairman, members of the panel. I am Shirley Sutton,
Director of Community Programs for Americans for Energy Indepe-
dence (AFEI), a Washington-based nonprofit public interest or-
34
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ganizatton representing the business, labor, academic, reli-
gious and public interest communities. AFEI is privately funded
by business and labor.
A major AFEI purpose is to provide public energy informa-
tion programs encouraging the development of a strong national
energy policy of rapid development of our national energy re-
sources and capabilities, including conservation. My comments
are based on experiences I have gained as,we have worked with
many diverse groups and a variety of programs that involved
both the public and private sectors.
As AFEI Director of Community Programs, I have coordinated
energy education programs with business, labor, and other citi-
zen groups in local communities across the country; directed
an AFEI three-year community energy conservation and education
program in Pittsburgh, Pennsylvania, including fund-raising
efforts, and managed two DOE conservation grants. In addition,
I served on the DOE Consumer Affairs Advisory Committee for two
years and chaired a task force that evaluated DOE public infor-
mation programs.
It is from this perspective that I wish to address how the
"adequacy of attention to conservation can be assured given
the new direction of Federal energy policy." I will confine
my remarks to the impact of changes on public energy infor-
mation programs and residential conservation efforts, particu-
larly those for low and fixed-income persons.
1 would like to comment on two of your suggested topics
for general discussion that are derived from the Public Energy
Discussion Package for the Third Year National Energy Plan (NEP
III), and on the general questions you raise, regarding the
role of private firms and organizations and Federal, state and
local governments in the new Federal energy policy.
The DOE assumption in the NEP III discussion package that
"public spending should not be used to subsidize domestic
energy production and conservation since this buys us little
additional security and diverts capital, workers and initiative
from more productive uses elsewhere in the economy" is not
shared by AFEI.
AFEI believes that conservation will continue to play a
vital national role in directing the country to a more secure
energy future. Conservation, in the broadest sense, means
using our resources wisely, efficiently and productively. In
that respect, it becomes a vast domestic energy resource help-
ing to lessen our dependence on imported oil and saving sub-
stantial sums of money. The role that conservation will play
as an important energy source is acknowledged by so many
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respected sources that its importance to the national interest
cannot he questioned. Just a few of many diverse sources that
confirm the vital role that conservation can play includes:
Resources for the Future (Energy: The Next Twenty Years);
Consumer Energy Council of America (Analysis of the Costs and
Benefits of Low-Income Weatherization); Mellon Institute Pro-
ductivity Center (Least Cost Energy Strategy); U. S. League of
Savings Associations (Energy Saving Ideas in Home Building);
DOE Assistant Secretary for Policy and Control (Reducing Oil
Vulnerability1980 Report); various studies by Edison Electric
Institute, American Petroleum Institute, Gas Research Institute,
Solar Energy Research Institute.
The important question that remains is whether it will be
the public or private sector that will ensure the continuation
of conservation efforts. Throughout the recent budget cutting
process, Administration spokesmen have said that they expect
private volunteers and the marketplace to replace many curtailed
government programs. This philosophy also appears in the NEP
III discussion package. It states that "individuals and firms
in the private sector have incentives to produce and conserve
energy efficiently."
It may be that the commercial sector will find there is
no need for incentives or other government-sponsored programs
to bring about massive conservation efforts. I leave that to
others who are more knowledgeable in that area. However,
residential consumers, and particularly fixed-income residen-
tial consumers, do not have sufficient incentives, financial
resources or information to make meaningful investments of
time or money. Not only do they not have incentives, but our
experience in working with the public has shown us that people
still are not even aware of the full range of options open to
them to save energy and money. For the most part, people do
not know of help available to them from utilities, existing
governmental programs, social service agencies and other pri-
vate sources.
Half of our 67 million homes are without attic insulation
or storm windows. Reports from the Energy Forum in New England
show that impressive inroads have been made in New England,
where in Connecticut alone 37,000 energy audits were requested
and 23,000 were completed in a program supported by private
and public efforts. But audits are just the first step. There
are many roadblocks from start to finish in the process of
weatherizing homes. People don't know where to get the best
materials, whom to hire, how to perform the work, or where to
get the money to do the work necessary. Despite the success
of the audit program, the New England Forum tells us that many
citizens will not receive these services or others. Tenants,
elderly and low-income persons are now installing weatherization
measures at a rate of 5% annually, only half as fast as the
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national average. Moderate and upper-income homeowners reques-
ted the audit, while poorer and older homeowners did not. Ad-
ditional help is necessary to encourage these persons to use
the services offered.
Who will take on this responsibility? As mentioned, a num-
ber of utilities have good programs. Others have programs in
the planning stages. We hope that they will continue even
though they are no longer required to do so. Some major energy
companies support programs of public interest groups. But can
utilities, energy companies, the labor community, nonprofit
groups, or local governments take on this much needed role
without public funds or incentives?
I would like to bring to your attention one government
program that has been able to bring together all segments of
the community. It is the Community Energy Project of ACTION.
Although seed money is provided through government funds, the
project involves community volunteers and private investment.
Because of this, it is an extremely cost-effective program.
The CEP project is designed to launch a community on a "self-
help" program that uses all of its resources to provide conser-
vation help to everyone. However, it places special emphasis
on low to moderate-income persons. Not only do these persons
receive kits of low-cost,no-cost materials and training to go
with them, but volunteers are trained to do the work for those
who are unable to help themselves.
CEP programs have been demonstrably successful. During a
nine-week program, one small Massachusetts community mobilized
and 1,728 households saved 14% on their energy bills. ACTION
extended the CEP program to more than 18 communities in the
State of Massachusetts in 1980 and expanded to 30 in other
parts of the country during 1981-1982. However, the program's
base funding came to ACTION from DOE. That funding will no
doubt be cut. Who will pick it up? Will communities "self
start?" Our experience shows that they do not.
Our own community involvement project is an example of
how a private program can work. AFEI's Pittsburgh energy
education program was privately funded by the corporate and
labor communities. It organized all sectors of the community
to work together to help the Allegheny County area become
energy efficient. The program was highly successful in involv-
ing hundreds of organizations and through them, thousands of
individuals. However, at the end of three years, funding was
dropped due to the press of other commitments and new interests.
To date, we have been unsuccessful in locating funding for
more programs of this sort in other cities.
As a nonprofit organization dependent upon contributions
for survival, we understand how much time, effort - and very
37
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hard work - is necessary to persuade contributors to support
the activities of such an organization. Fund raising becomes
a major time-consuming element of staff operations. I do not
believe it will be possible for many nonprofit organizations
to mount the necessary effort that will enable them to carry
out programs that can substitute fully for the Federal programs
that will be cut. Not only will they not have the ability to
staff an ongoing fund-raising effort for conservation programs,
the money isn't even there.
A recent New York Times article quotes an Urban Institute
study estimating Federal budget reductions of $128.2 billion
for social welfare, health, arts, housing and food programs.
Currently corporate contributions to nonprofit groups only
total $2.55 billion. This is a gap that is impossible to fill,
even though some corporations are increasing their level of
giving. In fact, many corporate leaders are chagrined at hear-
ing continued statements that the private sector can close the
funding gap.
AFEI does not believe that the private sector or the mar-
ketplace can currently provide sufficient help or incentives
to enable enough residential consumers to participate fully in
much needed conservation programs.
We do not believe that state and local governments will be
able to take up the slack because their funding and program
delivery systems are also undergoing radical change. In effect,
we do not know, nor do we believe that anyone knows just what is
going to happen to many of our residential consumers who have to
choose, in many cases, between heat, food, clothing and shelter.
We believe the Federal government must carefully weigh the
decisions to cut programs that have shown they are helping peo-
ple to help themselves conserve energy and money when there
does not seem to be a chance they can be replaced.
AFEI has long been critical of excessive government regula-
tion and involvement in energy affairs. We agree that too much
public money has been spent on programs that were not properly
conceived and administered. However, we do believe there are
some roles the government must play where it is unlikelv that
the private sector will step in.
We would like to suggest that the Administration and Con-
gress monitor the effects of their current budget decisions in
terms of the social and financial impact on the residential
consumer. To help in the evaluation process and to plan for
the future, we suggest a partnership of government, private
and public interest sectors, to help residential consumers con-
serve energy, which is consistent with the national interest.
38
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DR. RIEGEL: Thank you. I will open the floor for discussion now.
MR. PFEIFFER: Mr. Cooper, I was curious as to what activities you expect
your member organizations to be concentrating on in this envir-
onment of reduced funding at the Federal level, for conserva-
tion programs?
MR. COOPER: Well, two activities. One is to continue to do research,
such as this report, and to monitor conservation activity. This
was done almost entirely from internal resources and since
we've released the report I've gotten another 500 or 600 houses
from a number of states.
The second activity which we're actively engaged in now is
developing a nonprofit public interest energy service company,
which will try and go into local communities and see if it can
raise resources to fill the gaps we have identified in deliver-
ing weatherization to low-income households. We will certainly
do the best we can in responding to the reduction in Federal
funding.
MR. GLASSBERG: I'd like to ask the witnesses what evidence they have seen
that would attribute conservation on the part of consumers or
businesses in the market directly to Federal involvement. In
the case of the weatherization program you can say that materi-
als were put into a house and you compare the cost energy
consumed before and after the weatherization took place. But
how about for other state and local conservation programs. Can
you draw that causal relationship?
MS. SUTTON: I can't quote give you figures right now. But I can say
that in the Pittsburgh area when we were involved in a program,
we worked with school districts. The school districts became
aware and involved, not only because of our program, but of
other kinds of things that were happening. There are numerous
school districts in the Pennsylvania area and all over the
country, as there are hospitals and other public institutions
that can quote you exact figures of savings that have been
realized through programs that they have been involved in. A
number of those were programs that were done with some Federal,
some DOE monies. ' These schools, hospitals programs and if
they're not available or you don't have them, I'd be glad to
gather some of those and provide them for you.
That's one sector. Of course the industrial community also
has some marvelous stories to tell of energy savings that they
have experienced. These are programs that have been done for
the most part with their own finances, however, they too are
interested in incentives and programs to help them but as far
as schools and hospitals, there are some very good figures
available in connection with that.
39
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MR. GLASSBERG: Well, that is also sort of a construction program similar
to the weatherization program?
MS. SUTTON: A construction program?
MR. GLASSBERG: Yes, in other words you put building materials or conserva-
tion measures into a building and can measure energy consump-
tion before and afterward.
MS. SUTTON: That's correct.
MR. GLASSBERG: Okay. Do you have any other
MR. COOPER: I think that you've certainly hit a difficult point in
terms of how you do cost benefit analysis on information pro-
grams or education programs, and it would probably only be a
decade or two from now when we go back and reconstruct aggre-
gates and sort of take apart every piece of information that
was generated in the interim.
Some historian will make some kind of factual historical
economic argument and say: "Well, yup, that's where the turning
point was." I think a similar problem exists in every program
where the benefit is not easily calculable. I mean, what is the
benefit of the next battleship? Do we measure it? Would we
have peace without it and so forth? What happens in these kinds
of situations is that you proceed with a general concept and a
general thrust, you observe general results and then much later
on you can go back and say: "My God, if we hadn't had that bat-
tleship or that fleet or that conservation program things would
have been much worse."
You reach conclusions, but to demand precision from infor-
mation programs and other types of general programs is very
difficult.
The other point should also be stated. Where you can get
precision, you should demand it. In weatherization programs, in
schools and hospitals programs, when you clearly and certainly
can identify a shift in policy, and measure its impact, you
should be on-ground today monitoring things. Within a year or
two or three you can know very precisely whether or not the cost
and benefits have turned, whether benefits have been increased
or not.
MR. GLASSBERG: But you agree that cost-benefit analysis cannot be applied
across the board for conservation programs with any precision.
MR. COOPER: Certainly not in the short term. In the slightly longer
term I think you start to construct the possibility of doing so.
For instance, suppose next year we institute a building labeling
program, which is a remote possibility; but suppose it were to
40
-------
happen. You might well look at the behavior of the building
industry over a decade or observe that within a short time lag
there was an increase in the energy efficiency of buildings.
You will have to have constructed a five-year data base before-
hand and a couple years after so that this type of precise cost
benefit, profit and loss calculation can be conducted. It still
can be difficult for non-specific objectives.
MR. POWER: I hate to promise anything; but partly in response to en-
couragement from last year's review we have increased efforts
to evaluate our programs and we've also instituted an effort to
strengthen the measurement of what we're calling conservation
indicators. And so hopefully within the next several months we
will have much more refined insights into what is actually going
on in the marketplace and I hope that that will be a helpful
piece of information.
Have you any thoughts about possible tradeoffs within the
low-income energy assistance payments program that is run by the
Health and Human Services Department?
MR. COOPER: Well, in the study we spent a lot of time developing a
theoretical model for how to make the tradeoff, and I do so with
a certain trepidation, because I don't think you simply throw
the thing into a block grant and let decisions work out. There
must be a careful process of fabricating the program. However,
there is no doubt that Federal dollars are better spent buying
weatherization than paying fuel bills. There may be some who
will say that if you don't pay fuel bills, then energy suppli-
ers will be hurt and there is a recycling on that production
side. However, I think it's clear enough that the benefits are
there.
Second, I think it is possible to manage the program so
that you do not have to stop delivering energy services in the
short term while you start increasing weatherization services.
We point out that a series of sequential purchases of smaller
packages of weatherization services is one way to sort of bal-
ance cost and benefits for the low-income population.
One of the problems, and I frankly admit it, is that this
could be an administrative nightmare. We're talking about three
or four trips back to households and program administrators tell
me that that's impossible. You may run the administrative
costs out of sight. In that case, what you need to do is to
have a bigger base to spread the management of assistance in
weatherization around. What that argues for is less of a narrow
local approach and more of a broader approach, where you can
balance off more weatherization with more assistance.
MR. GLASSBERG: I have one question for Alan Miller. In your testimony,
you ran through a number of market forces that will not induce
41
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conservation to the proper level, such as past and continuing
subsidies and state control of electricity prices, etc., and
you address these comments primarily focused as a justification
not to cut the budget for the next year's program.
How do your comments fit in with the present program, with
the past program? Have past conservation programs addressed
these needs adequately and if you had your way, how could we
reconfigure those programs in a greater or lesser budget situ-
ation?
MR. MILLER: That would probably be another set of testimony. I wouldn't
I'd certainly be the last to claim that the programs as
they've evolved have been the best way of doing things. I
think I just don't have a real crisp answer to that in a few
sentences.
MR. GLASSBERG: Is it okay if he could provide information for the record
on that?
DR. RIEGEL: Yes.
MR. MILLER: I'd be happy to do that.
************
SUPPLEMENTAL INFORMATION SUPPLIED BY MR. ALAN MILLER
At the July 14th hearing, Mr. Glassberg asked for comment
on the extent to which existing programs were responsive to
NRDC's concerns and how we would reconfigure programs within
the reduced funding levels. NRDC prepared an alternative
budget for the environment in conjunction with several other
conservation groups. (See attachment). Our budget would have
achieved the President's fiscal objectives but would have
allocated funds in a substantially different fashion. Specif-
ically, by cutting the Department of Energy nuclear and synthe-
tic fuels programs, we would save sufficient funds to reduce
the necessary cuts in solar and conservation. Details are
provided in the excerpt attached to these comments.
Given the cutbacks that have been made, we believe more
emphasis is necessary on assisting with the development of
state and local energy conservation programs. Both technical
and financial assistance is needed. The elimination of the
Presidential Clearinghouse on Community Energy Efficiency will
save very little money and was a serious mistake. Low-income
assistance, including the Conservation and Solar Bank, is
also a high priority. Regulatory programs, particularly the
RCS and appliance standards, will return substantial energy
savings for a small Federal expenditure. Research programs,
by contrast, offer some opportunity for cuts because many of
the firms being funded do not need financial assistance.
42
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ALTERNATIVE BUDGET PROPOSALS FOR THE ENVIRONMENT
FISCAL YEARS 1981 & 1982
Proposed by: Environmental Defense Fund, Environmental Policy Center,
Friends of the Earth, National Audubon Society, National
Parks and Conservation Association, National Wildlife
Federation, Natural Resources Defense Council, Sierra
Club, Wilderness Society March 18,1981
Solar Energy Research & Development
The DOE solar program is comprised of a variety of compo-
nent research and demonstration projects. Included in the
original $800 million funding were programs to promote wind,
photovoltaics, biomass, and active and passive solar systems.
These programs have suffered a cumulative reduction of some
77 percent, to $193 million for FY 82.
DOE Nuclear Programs
The DOE nuclear budget contains funds for a variety of
programs, ranging from cost-sharing reserach with the nuclear
industry to the development of third-generation technology of
only speculative impact on national energy security. Many of
these programs should be cut in line with the Administration's
stated desire to end unnecessary Federal involvement in the
energy marketplace. Despite the overriding need to restrain
Federal spending, DOE's civilian nuclear programs (fission and
fusion budgets) have received substantial increases in the
latest budget revisions.
Based on a program-by-program analysis of the nuclear
budget, we recommend significant cuts which include: zero-
budgeting the Advanced Nuclear Systems program and elimination
of the Clinch River Breeder and water cooled breeder programs,
neither of which will have any significant impact on the devel-
opment of world breeder technology, even if they were unsuc-
cessfully completed.
Additionally, an equitable program of budget cuts within
the DOE budget requires additional cuts in Magnetic Fusion
R&D. Even with full funding of magnetic fusion, no assessment
of the technology's potential impact on commercial electric
generation is expected to be available prior to 1995.
Although we have not included recommendations for DOE's
Defense Activities and Uranium Enrichment programs, significant
savings are also obtainable in these areas. For example,
stretching out the design and construction of the Portsmouth
Gaseous Centrifuge Enrichment facility by one third would save
$200+ million. Such a stretch-out is justified by the fact
that the construction schedule for the plant calls for instal-
43
-------
lation of centrifuge equipment which DOE itself claims will be
made obsolete on Portsmouth's projected opening day (1988),
by an ongoing Oak Ridge project which is intended to demon-
strate a process which is 50% more efficient.
Additionally, the enrichment capacity of Portsmouth GCEF, pro-
jected to cover over $8 billion, will not be needed until well
after the scheduled completion date.
DOE Synthetic Fuels Program
There are two primary sources of Federal funding which
are supporting the development of a synthetic fuels industry.
The "Energy Security Reserve" makes available $17.522 billion
for the development of a commercial synthetic fuels industry.
This money is to be administered by the Synthetic Fuels Corpor-
ation. However, until a chairman and board of directors are
selected for the Corporation, part of this money ($5 billion)
is being administered by the Department of Energy's "Alternative
Fuels Program." The Reagan Administration has recommended
that $.3 billion, originally designated for feasibility stu-
dies and cooperative agreements, be rescinded, and that the
remaining $5.3 billion be transferred to the Synthetic Fuels
Corporation, leaving it with a sum of $17.212 billion.
In addition, the Department of Energy's Fossil Energy
Program is subsidizing five large-scale synfuel demonstration
programs: Solvent Refined Coal I (SRC I) in Newman, KY; SRC
II in Morgantown, WV; a Medium Btu Gasification plant in Noble
County OH, and Perry County, II.
The Administration now plans to rescind FY 81 funds for
all of the DOE line-item synfuels demonstration projects except
SRC II which will continue to be funded for FY 81 because of
existing "international agreements." The Administration has
also proposed that no money be appropriated for any of the
projects in FY 82. The Carter Administration had requested
$802 million for FY 82. We support the Administration's re-
quests for these cuts. Additionally, we encourage the rescis-
sion of FY 81 funds for the SRC II project. If accepted, the
SRC II cut could yield savings of $162 million in FY 81 outlays.
Energy Conservation Programs
The Administration's proposed budget recommendations for
DOE's energy conservation programs represent a 77% reduction
from levels appropriated for FY 81. Such reductions would
effectively cancel major portions of the national energy stra-
tegy enacted by Congress over the last four years.
The proposed cuts in programs which are vital to the na-
tion's energy security future are not cost-effective. These
44
-------
programs, unlike many of DOF.'s long-term R&D efforts, offer an
immediate return in terms of energy saved, and of millions of
barrels of oil freed for other uses in the economy. Promoting
such efficiencies need not, and does not, involve curtailing
the end uses to which energy is put, but it does require a
constructive Federal role in increasing the efficiency of
energy use throughout American society.
The conservation budget of $700 million which we now pro-
pose would trim 20% from the Carter Administration's request
for FY82. This would allow for the continuation of essential
and highly successful federal energy conservation efforts,such
as the low-income weatherization program,schools and hospitals
program, state conservation planning grants, appliance effi-
ciency standards, and industrial, building and community sys-
tems, and transportation research and development.
Solar and Energy Conservation Bank
This program, authorized by Congress only last year, has
been eliminated in the Administration's revised budget, and
regulations will not be issued. FY 81 funding of $121 million
for the Bank is proposed for rescission as well. Intended to
promote residential, commercial, and agricultural energy con-
servation and solar energy investments, the Bank would have
subsidized loans for such installations to people who could
not take advantage of energy tax credits on their income tax
because of insufficient income. Only 8% of the nation's home-
owners with annual incomes under $21,000 have taken tax cred-
its, according to IRS figures. The bank is thus an essential
complement to the energy tax credits if energy conservation
and solar development are to be pursued in a comprehensive
national effort.
45
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FY 1982 ENERGY FUNCTION
Cons.
Fossil \ 6t
14%
Conservation
20%
PRESIDENT'S BUDGET
ENVIRONMENTAL ALTERNATIVE
-------
QJ
f
J
I
i
0
-/
-*
-,
-6
-f
-10
FY 1982 ENERGY FUNCTION
Budget Authority
(IN MILLIONS)
President's
Budget
Environmental
Alternative
-7*7
Conservation Solar
Nuclear
HUD Bank
-------
Energy Budget Comparison
(in millions)
Carter
Budget
Solar Energy Research & Development
FY 81 Budget Authority 585
Outlay 589
FY 82 Budget Authority 583
Outlay 589
DOE Nuclear Programs
FY 81 Budget Authority 1,396
Outlay 1,529
FY 82 Budget Authority 1,465
Outlay 1,847
Energy Conservation Programs
FY 81 Budget Authority 817
Outlay 735
FY 82 Budget Authority 922
Outlay 990
Solar and Energy Conservation Bank
FY 81 Budget Authority 121
Outlay 47
FY 82 Budget Authority 132
Outlay 149
President's
Revision
507
510
193
224
1,549
1,679
1,767
1,875
558
663
195
489
0
0
0
0
Environmental
Alternative
583
510
435
435
1,347
1,479
1,227
1,335
700
700
740
789
100
40
100
125
************
48
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DE. RIEGEL: Before asking Ned Helme and Martin Klepper to come forward
I'd like to ask you a question, Alan, as well. It's irresistible
to use your example of $19 million saving in the District of
Columbia Energy Office operation to ask this: If that operation
is, in fact, providing so large and so tangible and so valuable
a return, how could such an operation be discontinued ?
MR. MILLER: I think the answer to that is the same answer that the Ad-
ministration is giving in many hearings on the Hill right now
and that is that there are other economic objectives to which
city and state governments are responsive and political object-
ives that are often overriding, even when programs appear to be
cost-effective and publicly desirable.
My point for the purposes of this hearing is that in the
short term those pressures are going to make it very difficult
to replace, program by program, all of the services which would
be eliminated if all of these people are let go, and I've par-
ticipated in some of those hearings at the local level. And the
situation is that there are many, many programs that are being
explained and defended and justified in the same way, much as
there are at the Federal level. These are different times at
the state and local level just as the Administration is saying
at the Federal level and therefore there are going to be some
short-term dislocations and disruptions that the city is going
to endure.
I think over the long term that they're going to realize
that these programs ought to be picked up. But in the short
term, there's just no means of suddenly increasing local bud-
gets without major changes in tax policies. The case of the
the District of Columbia, as we all know, is unfortunately
complicated by the need to obtain congressional approval. So
it's not that simple to say just because a rational analytical
cost-benefit analysis proves that the program is justified that
politically the program is going to be retained.
It doesn't work that way at the local level any more than
it does at the Federal level.
DR. RIEGEL: Thank you. Now I'd like to ask Ned Helme and Martin Klepper
to step forward, please. Ned Helme represents the National Gov-
ernors' Association and Martin Klepper is from Lane and Edson.
Mr. Helme, would you begin?
MR. HELME: Thank you very much. I think what I'll do rather than read
my formal testimony, which will be in the record, I assume to
be kept with the permanent file and so forth, I'll just sum-
marize the major points I was going to make and have a little
more time for interchange in the time you've got.
49
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I'd start by saying that, as you know, the Governors have
been very supportive of the Administration's budget cuts. At
the winter meeting in February here in Washington, that was
the main source of discussion, the main subject. We came out
strongly in favor of the budget cuts and in favor of block
grants, but we indicated several areas, and not very many, I
think less than five areas in the entire Federal budget, where
we felt that the Administration's proposals were not proper and
reflective of the needs that we see for the country.
And the only one within the energy-environment area where
we indicated that was a problem was the state energy conserva-
tion grant programs. We came out strongly feeling that those
programs should not be eliminated. We would support some
cuts. We favor a cut; we were willing to support up to one-
third budget reduction for the weatherization, schools and
hospitals and the core programs, with the understanding that
we'd move toward a flexible block grant that would give the
states a great deal more flexibility to implement measures
that were appropriate to that particular state's needs and
resources and climate and so forth.
Given that, we've been testifying regularly on the Hill on
both appropriations and on the block grant legislation, pushing
very hard for the continuation of these programs in the short
run and their consolidation phasing into a block grant proposal
in the longer term.
There's basically four reasons why I think the Governors
identify these programs as so critical and singled them out as
a program they'd push for, in contrast to many other programs.
First, I think there's a feeling that as your previous
speakers indicated, there are a number of areas that the market
simply does not encourage conservation and our feeling is that
the state programs in providing technical assistance and in
providing information on the various types of measures and so
on and the savings that can be achieved with various measures,
those kinds of things were a real necessity out there. It
wasn't enough to simply say; "Well, energy prices are rising.
So therefore we can count on that to take care of conservation
and we don't need these programs anymore."
50
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There's a strong feeling on the Governors' part that there
were definite sectors of the economy that did not respond in
terms of conservation to market incentives.
Secondly, we felt that these programs are significantly
cost effective. I know Andy asked some questions of the earli-
er witnesses about whether you can show any real results. Sure,
the brick and mortar programs can show results, but what about
the other programs and I think the fact is that they can. There
are certainly some programs that you cannot measure effectively
in a cost benefit sense. But by the same token there are numbers
such as the audits for industrial boilers, small industrial
boiler operators, where we can show a significant result and
we've got, you know, the Price, Waterhouse. I'm sure John's
familiar with these. They're studies that show up to $5 per
$1 invested at the governmental level. So we think there's a
significant cost effectiveness to these programs. They're not
just paper pushing kind of programs as some people have charac-
terized them.
Thirdly, it's our feeling that they're programs that deal
with the low income groups and that was addressed very effect-
ively by your earlier panel. Our feeling is that that sector
or that group of the economy faces the most severe impacts
from fast rising energy prices and decontrol.
The Governors have always been in favor of decontrol, but
with the understanding that you take care of the needs of the
low income and our feeling is that the state energy conserva-
tion programs have moved in the direction of coupling the
audits that are done under RCS and they're done under individu-
al state programs with the delivery of weatherization and
things like that so that we see a real connection there and a
need for the energy office to carry out that sort of function.
Finally, though we're not faced currently with any kind
of oil shortage because of the oil glut that we're all aware
of, our feeling is that the states have the capacity and that's
been demonstrated in a number of GAO studies that have shown
that the states have been the key force when it comes to dealing
with the natural gas shortage, with the earlier coal strike in
'77, and with the '79 gasoline lines and so forth. And we think
it's critical that you maintain that basic capacity at the state
level to deal with those shortages. The Administration's pro-
posal to wipe out these programs would in essence, wipe out
many of the state emergency efforts and I think that's a criti-
cal need that while we may not need it this year or next,
we'll need it down the road and we shouldn't throw it away now
in a rush of budget cutting kind of frenzy.
Beyond that I'd like to give you a little background on
the survey we did. It's alluded to in your background paper.
51
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This winter we surveyed all 50 energy offices to get an idea
of what effect the proposed cutbacks would have on those energy
offices. Twenty-nine of the states are 80 percent or more
Federally funded. So you can see right off the bat we're talk-
ing about two-thirds or 60 percent of the states roughly,
would be close to being shut down by the proposed budget cut-
backs .
Twelve of the states fall in the category of from 50 to 80
percent Federally funded. The affect there would be not as
great but again fairly significant. Only nine states have up
to 50 percent of the money provided by the state government
itself. So it gives you an idea of these programs that have
been heavily Federally reliant. Now, I'm talking strictly
about the money that supports energy office staffing and the
SECP and EES. I'm not talking about brick and mortar money
for bond programs and weatherizing buildings and that sort of
thing. There are a number of states that have programs of
that sort, but it's a lot easier as you know, from political
prospective, to get support in the state legislature for brick
and mortar programs. Much more difficult to get something
that deals with information, and staffing and so forth.
In addition, it's sort of the picture of how states will
fare with this cutoff in Federal funds. I'd have to be direct
and say that states are trying to find ways to bring out, you
know, to get a little more support from their state legisla-
tures. However, given the timing of these budget cuts, it's
very tough to see any real I really can't see any real
prospect of any significant number of states being able to
replace these funds in any timely fashion. We're sure to see
a major hiatus in terms of lost capacity, lost staff, if we
were to go ahead with the budget reductions in '82 as are
proposed.
There are several reasons for this. First, there are 21
states that have biennial budgets. That means they've already
put together budget for a two-year period. Unless you can get
a special legislative session to go back in and make some
changes, it's very difficult to change that and usually that
follows the revenue estimates so that you don't have an extra
surplus in the second year that you can draw on if you're in
the second year of a biennium.
The problem with special sessions I've alluded to is that
it can be difficult to get the states to go back in special
session. Most legislatures have completed their '82 budget
considerations.
52
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Thirdly, to understand the effect of these budget cuts on
the states, you've got to look at this within the context of
the whole Federal budget. We're talking NGA's estimate is that
across the whole range of domestic assistance the Federal budget
cuts will reduce Federal aid to states by 37 percent. So when
we say well, yes, the states can take over the energy conserva-
tion program, we've got to remember that there are many other
programs competing at the state level for the same scarce state
resources, and while you do have some energy rich states who
may well be able to pick up some things, the bulk of the states
are in fiscal difficulty at the moment, particularly Northeast
and Midwest. They are in very severe economic difficulties.
So you're seeing significant cuts even without the Federal
cuts. So that to think that well, yeah, the state should take
it over and it will happen, I think that's a real fallacy and
we can't really expect to see that.
The final part of our survey that I want to allude to is
we did ask the states what their priorities were. If they face
these kind of cuts, which areas within their programs would
they emphasize and interestingly there's a tremendous variation
across the board. You couldn't pick one single program and
say, everybody wants to do this. It was it really varied
with the climate, with the situation, the particular resources
those states had.
Personally, we felt was a real strong argument for the
block grant because it points up the fact that in the Northeast
the weatherization program is clearly the key issue because
you've got heavy dependence on oil, high and low income popu-
lation, rough winters.
In the Southeast and the Southwest you've got a position
where they're looking more at the agricultural sectors as being
the place where they can make tremendous savings in conserva-
tion, more cost effective. They probably put more money into
that area. So we did not find any single area that you could
pencil in and say all right, this is the one thing the Federal
government should continue to support because that will cut
across all the states.
Our clear finding was that, in fact, making the money more
flexible and letting states target it made much more sense.
I guess the final point I'd like to make to you is that
these programs have been around roughly I guess six years now.
The states have done a lot of planning under the programs and
a lot of assessment of where the needs are for conservation,
that sort of thing. It's our feeling that this would be the
wrong time to be cutting off these programs, that we're now at
the point where we don't need to do as much planning. We know
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where the sectors are that we can make the real savings and it
would be a shame to cut it off at this point when you're really
getting down to implementation, getting involved in the local
governments and the program, that sort of thing. So I guess
that concludes my presentation I didn't mean to be quite so
long-winded, but that summarizes my remarks.
FOLLOWING IS MR. HELME'S FORMAL STATEMENT:
My Name is Ned Helme and I am Director of the National
Governors' Association Energy and Environment Program. I appre-
ciate the opportunity to testify before you this morning on
behalf of the National Governors' Association.
Before addressing the specific questions posed in the
Issue Paper issued in June for this hearing, I would like to
present the general position of the Governors regarding the
proposed changes to the state conservation grant programs.
The Governors met in Washington in late February for
their winter meeting. The focus of this year's meeting was on
the Administration's proposed budget cuts. In a major resolu-
tion, the Governors supported budget reductions and block
grants.
At the same time, they set forth certain priority budget
items where they differed with the Administration's proposals.
In energy and environmental programs, the Governors identified
the state conservation grant programs as the only area where
they opposed Administration proposals to eliminate most of
these programs. NGA has suggested instead consolidation of
the existing programs into an energy block grant with 1/3 less
funding then was available in FY 81. An energy block grant
would allow states to direct dollars to the measures which
would be most cost-effective in that specific area.
The Continued Need for the State Conservation Program
The Governors have selected the continued funding of the
state energy conservation grant programs as our top priority
for the following reasons:
o First, in a world of rapidly rising energy prices, state and
local governments have served as the primary delivery mechanism
for information and technical assistance necessary to consumers
in taking energy savings actions. Although rising energy
prices have increasingly motivated companies and individuals
to seek energy conserving methods, many consumers do not have
either the front-end funds or accurate information necessary
to undertake cost-effective energy savings actions. States,
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through the State Energy Conservation Program (SECP) and the
Energy Extension Service (EES) have been responding to these
needs. Over time, these same programs have been drawn upon to
provide support for additional federal initiatives such as the
Residential Conservation Service Program and the Energy Emer-
gency Conservation Program.
o Second, these programs have proven themselves cost-effective.
Numerous studies have shown five fold or greater returns for
every governmental dollar invested in the state programs.
o Third, state-administered programs have targeted assistance
to low-income individuals who feel more intensely the burden
of rapidly rising energy costs. States are now moving to
couple home energy audits under the Residential Conservation
Service Program with the delivery of low-income weatherization.
o Fourth, the states have acted as the first line of defense
in responding to fuel shortages. It is crucial to the health
and safety of the people of this nation that the capacity at
the state level to deal with major oil supply disruptions be
further developed and maintained.
A further description of the state grant programs and
examples of state efforts are included in the fact sheet at-
tached to my testimony.
Impact on the States
I would now like to describe to you the results of a
recent NGA survey on the impact of the proposed energy budget
cuts on the states. NGA conducted a survey this winter of the
impact of proposed federal budget cuts on state energy programs.
The survey results indicate that the total withdrawal of feder-
al support for FY 82 as proposed in the Administration's budget
will severely impact the states' ability to carry out conserva-
tion and emergency programs.
As noted in the EPA Issue Paper, the majority of states
indicated that their energy offices were 80% or more federally
funded, with the bulk of federal funding coming from the SECP
and EES programs. Twelve state offices were between 50% and
80% federally supported, and nine states indicated the energy
office was 50% or more state supported. As these figures
indicate, there is a strong likelihood that many state energy
offices could be closed if federal funds are eliminated in FY
82. Functions may, in some cases, be picked up by other state
agencies. In many cases the functions will be eliminated
altogether.
In response to potential cuts, many states are attempting
to rally support for state funding for continuation of priority
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conservation activities. It appears unlikely that many states
will he able to provide any significant support in FY 82 to
replace federal dollars for the state energy office activities.
In our survey, states cited major problems with the timing of
the withdrawal of federal funds. Most state legislatures have
already completed consideration of FY 82 budgets. Even if a
state had sufficient revenue to take over financing of the
programs, it would be unable to do so unless a special legis-
lative session were called. In addition, twenty-one states
have biennial budgets. These states would have even greater
difficulty in obtaining state support to replace federal funds.
States are constitutionally required to maintain a balanced
budget and a number face limitations on annual increases in
spending. Finally, states are being asked to absorb signifi-
cant federal cuts across the board (estimated to total 37% of
FY 81 federal appropriations to states) including major cuts
in social services and transportation and, in some cases, face
their own severe fiscal difficulties.
State Priorities
The NGA survey questioned the states on their priorities
given the proposed federal cuts. Most states indicated that
they are currently assessing their priorities and reevaluating
the programs. Final decisions on priorities will depend upon
the final level of federal support. Responses also showed
that when these priorities are finally chosen they will vary
a great deal among states. Priorities mentioned included low-
income weatherization, general conservation activities, resi-
dential conservation programs, transportation conservation,
schools and hospitals, renewable resources activities, emergen-
cy preparedness, and assistance to local government.
Current State Conservation Efforts
The EPA Issue Paper requested additional information on
state and local conservation activities. In the past the NGA
has published a number of reports on state conservation activi-
ties. Our most recent published report is "Ensuring our Energy
Future: State Initiatives for the 80's" which I am submitting
with my testimony. (This report was reviewed but not included
in the Transcript due to its length). In January of this year,
we began to assemble an information bank on state energy pro-
grams collecting summaries prepared by states of their activi-
ties and other relevant reports and documents. We are currently
working on compiling this information into a useful fashion.
Examples of these state measures are included in the attached
fact sheet on "Energy Conservation in the States."
Once again, I want to thank you for the opportunity to
testify this morning. I will be happy to respond to any ques-
tions you might have.
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DR. RIEGEL: All right. Thank you. Mr. Klepper.
MR. KLEPPER: Thank you very much, Dr. Riegel. My name is Martin Klepper.
I appreciate the opportunity to testify today.
I am an attorney with the Washington, D. C. law firm of
Lane & Edson, and have been working for the last four years in
the field of energy conservation. I've been working on behalf
of both public and private sector clients.
We've been working with some major national underwriters in
developing tax exempt bond programs to finance energy conserva-
tion. We've been working with leasing companies and companies
that are called equity syndicators that are interested in
raising capital for energy conservation purposes.
We've been working with a variety of state and local govern-
ments in the public sector. We recently completed a study for
HUD in cooperation with the New York City Energy Office, look-
ing at financing opportunities for small and medium sized
industry in New York City that wanted to undertake energy
conservation measures.
We've done work with the State of Massachusetts, with the
National Association of Counties, the National Association of
State Legislatures, primarily in the area of assisting them in
identifying financing mechanisms for energy conservation pro-
gram.
I've had a unique opportunity as well, by serving as
chairman of an Energy Law Committee of the American Bar Associ-
ation in the Section of Real Property, Probate and trust law,
to talk with attorneys throughout the country who are dealing
with the same issues, and while I'm appearing here today in my
personal capacity and not as a representative of any client,
the comments that I'm going to make and the suggestions are
the kinds of suggestions that I think would be of extreme help
and assistance to the variety of both public and private sector
groups that we've been working with.
I've tried to give these clients a message and that's the
message that private sector financing can work. I'm going to
be talking today only about the financing of energy conserva-
tion.
It can work, but there's a lot of assistance that's needed
and it's a long road to go before we're going to have very
active involvement of the private sector in financing energy
conservation.
I'm going to suggest for your consideration six very
specific types of legislative changes that I think would make
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it an awful lot easier and that would facilitate private sector
financing for energy conservation.
These deal with leasing, tax exempt financing, the estab-
lishment of energy service companies, assistance in utility
involvement in financing energy conservation.
There's a willingness that we found on the part of local
government to solve the energy conservation problem. I think
that state and local government is probably far ahead of the
public, both private and business sectors, within the country
in terms of recognizing the savings potential, recognizing the
benefit to their community from energy conservation. It's a
little bit of government pull rather than demand push in terms
of government willing to take some steps to encourage the
private sector activity in energy conservation.
We found that local government generally doesn't have the
expertise in the financing area. Those individuals who are
responsible for energy planning at the city, county or state
level often are not well versed and well schooled in the mecha-
nics of tax exempt financing or government municipal finance.
They don't have the resources to retain the kinds of financial
consultants that they might be able to afford if they were
financing a $100 million nuclear facility. They don't have
the support either from Federal funds or from state funds.
Finally, there's really no direct working relationship that's
been established between the energy offices, between the people
who are responsible for energy planning at the local level,
and the financial institutions in the community, the banks,
the insurance companies, the underwriters, even the utilities.
In some communities, they're starting to develop those
relationships. The energy offices are going out and trying to
talk with the financial community, but that is a very long,
slow process.
Business, for its part, is really not interested now on a
relative basis in involving themselves in energy conservation
on the local level. When I say local, I'm talking about loans
or providing financing for $2,000 or $2,500 worth of retrofit
for thousands of single family homes in the city or for dealing
with the problems of multi-family buildings or a large number
of nonprofit buildings within a community. If they have an
alternative, private financing firms will use their time, ef-
fort and resources to finance a $50 million gasohol facility or
a $30 million hydroelectric plants.
In terms of the return on investment, on their investment
in those projects, private firms are much more interested in
the larger projects than the smaller ones. So that even though
on an economic basis you can look at any energy conservation
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investment and determine that it's extremely cost effective,
that it has a very high rate of return, that it's a rational
economic investment, it's unlikely that that alone is going to
be enough to entice the financial community to actively and
aggressively pursue the energy conservation market.
In working with some of these companies, we've come across
problems, if you will, in Federal legislation that make it
very difficult even for those companies that are interested
and willing to take fairly significant risk in trying to devel-
op financing in the energy conservation area. The suggestions
that I'm going to make - I think are all consistent with the
Reagan Administration's approach, which is to let the private
sector provide the financing. But I think there's a need to
assist local and state governments, loosen some of the tax law
provisions, for example, so that local and state government
have the tools where they show the interest and the initiative
to act on their own to create financing opportunities.
For example, in the leasing area there are a number of
restrictions on the use of leasing that prevent a company that
wants to lease energy conservation equipment for a building
from obtaining the tax credits that would otherwise be availa-
ble. There's a limitation, for example, that the lease term
cannot be more than one-half of the useful life of the equip-
ment. Well, it is very difficult for a company that's buying
a boiler with a 15 year life to lease that boiler on an econo-
mic basis to a property owner if the lease cannot exceed seven
and one-half years. If the lease is for more than seven and
one-half years, the owner loses the tax credit and the tax
credit will probably be an important inducement to that type
of activity in the first place.
So that even though the tax credit exists, because of
the restrictions on leasing, those tax credits cannot be used
by private financial institutions to provide the capital that
the property owner might not have.
For a property owner who doesn't have the capital, the
tax credit is meaningless. He cannot obtain the credit if he
doesn't have the capital to buy the equipment.
There's a provision called the at risk limitation that
the Administration is proposing to impose on leasing. That, I
think would further delay, if not prevent, the implementation
of leasing for energy conservation because it would make it
that much more difficult to raise capital from the private
sector to be used for leasing energy conservation equipment.
With regard to tax credits, one area that our firm has
spent a lot of time looking at is the area of multi-family
housing. There is virtually no Federal incentive available
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for energy* conservation in the multi-family housing sector.
A bill has recently been introduced in the House by Represen-
tative Schneider from Rhode Island that would provide a 20
percent tax credit for multi-family property owners. I think
that would be a very important incentive in giving them the
first step, the step that they need to encourage energy conser-
vation investment.
I think it's important that the existing tax credits have
their termination dates extended. That's probably not high on
anybody's agenda right now. But in terms of business planning,
in terms of enticing private financial institutions into ener-
gy conservation, if they look at tax credits that expire in
1982 or 1985, and that's an important incentive for their in-
vestment, and they expect it to take a year or a year and a
half before their program is established and on its feet, it's
unlikely they're going to want to make that investment if the
tax credit is going to terminate in another two years and if
they don't have some assurance it will continue.
Tax exempt bonds are one of the most attractive means of
financing energy conservation because they can provide much
lower interest rate loans to property owners over a much longer
term than is available from bank financing or from any other
alternative source.
In trying to structure tax exempt bond programs I'm talking
now about a revenue bond, not a general obligation bond, a
bond program that would not rely on the full faith and credit
of the city but would rely solely on the security that would
be behind the bonds. There are a number of problems that
have been raised primarily by the Mortgage Subsidy Bond Act,
also known as the Ullman Bill. That law, among other things,
permits energy conservation bonds to be issued for loans to
single family homeowners for energy purposes, but it restricts
those bonds in a number of respects. The restrictions were
really intended to be restrictions on single family mortgage
revenue bonds not on energy conservation bonds. But energy
conservation bonds are included under the definition of a home
improvement loan. Therefore, the Mortgage Subsidy Bond Act
limits the amount of bonds that a city, that a state or that a
county can issue. On policy grounds, even at the time the
legislation was enacted, I don't think that it was the intent
of Congress to restrict a city's ability to use tax exempt
bonds for energy purposes.
The limits in the Mortgage Subsidy Bond Act that ought to
be changed include the overall state limit on the amount of
bonds that can be issued. It seems to me that any bonds that
are issued for energy conservation purposes are in the public
interest, particularly if they are saving energy, or if they
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are conservation measures that result from recommended RCS
measures.
There's a limit on the issuance of multi-family bonds that
requires that the bond proceeds only be used for apartment
buildings that have 20 percent low income tenants. Well, that
might be a rational limitation when you're dealing with a
mortgage revenue, bond, but when you're dealing with energy
conservation, if it's in the national interest to save energy
in a low income building, it's also in our interest to save
energy in an upper income building.
Finally, there's a prohibition on taking tax credits if
you use the proceeds of revenue bonds. That might again have
made sense in connection with certain types of energy invest-
ments, but I don't think it makes sense in connection with the
energy conservation investments.
And in the industrial sector, industrial development reve-
nue bonds can be used to finance energy conservation for indus-
try, but the problem is that there's a limit called the
small issue exemption which makes it very hard to structure
a bond issue with a lot of $50,000 or $100,000 energy conserva-
tion items. The size of the bond issue is too small to warrant
or justify the interest of the financial institutions. If the
law were simply changed to permit an aggregation of 20 or 30
specific projects in one bond issue, then you would have under-
writers interested in providing the capital, raising the funds
for these types of loans.
In the multi-family sector, Congress required HUD to adopt
an insurance program, a loan insurance program. HUD came out
with regulations called the Section 241 program last August,
but they have not issued guidelines to their regional offices
so that that Federal insurance program for multi-family build-
ings is not effective and cannot be used.
We have a couple of clients who are interested in setting
up energy service companies. One of the problems that they
face is the possibility of being regulated as a utility. If
they go into the business of providing the heat, light and
electricity in a building and they're willing to pay all the
costs of installing energy conservation measures and they're
willing to take the risk that their measures will be effective,
they still may not be able to do that in some states because
they'd be deemed to be utilities and they'd be regulated as a
utility.
I think that the Federal government can help support some
of what I call long term research and development in developing
some of these financing techniques. We now have all the tech-
nological answers that we need for energy conservation. We
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already acknowledge that energy conservation is a relatively
riskless investment, that the technology exists and yet the
infra-structure, the technical advice, the models for financing
some of these investments do not exist and that ought to be
just as much within the category of research and development
in terms of use of DOE funds as designing the answer to energy
conservation in buildings 10 years down the road when no one
has the mechanism, the means of .paying for those measures that
were designed or invented 10 years ago.
Finally, in terms of a broader Federal role, I'd like to
suggest that there's a need for a corporation like the National
Corporation for Housing Partnerships which was created by
Congress back in 1970 to provide a mechanism, a model, for
financing low income housing production. That same model can
be used to create a national corporation for energy conserva-
tion, a separate nonprofit corporation. It would only need
Federal funding to get on its feet and to get started. That
corporation would have the flexibility and the ability to
raise private capital through a stock issue, or through an
issue of limited partnership interests. It would go about
creating the mechanism, creating the models and demonstrating
to the financial community that energy conservation is a viable
valid investment of their time and resources.
The National Corporation for Housing Partnerships is now
a completely independent, very successful corporation. There
are literally hundreds, if not thousands of real estate limited
partnerships that are used to finance low income housing in
the country, all modeled on work initiated by NHP.
The second alternative for a broader Federal role is to
create a regional corporation for energy conservation, some-
thing like TVA or BPA, in those areas of the country where
they don't necessarily have the same need for the supply of
energy or the control of energy that TVA and BPA have, but
where they have similar needs in terms of utilizing their
resources to save energy, to upgrade the efficiency of their
plant, of their equipment and of their buildings.
New England is a prime example of an area that I think
needs that kind of regional cooperation and support that could
involve both public and private sector financial assistance.
Thank you.
DR. RIEGEL: Thank you very much. Questions and discussion?
MR. POWER: Just to comment and ask a question of Martin Klepper. We
have been working on the financial implications of conservation
more in recent years. We've I think finally gotten some recog-
nition that the size of investment, if you will, is much great-
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er in energy conservation that it is in energy production in
the U. S. If you consider items, such as consumer durable
goods which produce a stream of services like an automobile or
refrigerator, as an investment and I think this is a new
look, a new way of approaching conservation it gives a dif-
ferent perspective and I think that your comments are very well
received. I'd really enjoy a chance to chat more about that.
I think that the question being how we can examine some of
these specific changes and DOE is looking at some of these.
I think in the context of current Administration philosophy,
we are looking at ways, new institutional ideas. So specific
suggestions would be very, very much appreciated.
I think that in terms of where we go, we're trying to
create specific investment calculations in our procedures so
that decision makers will have a better idea of what can be
achieved by conservation. From your experience, do you have
any specifics as to why some of the conservation measures that
look so good in terms of the engineering analysis or the
financial analysis, aren't undertaken by the private sector?
I assume that you're saying it's not just the fact that the
investments need to look better, it's there's also something
beyond that that's holding things up.
MR. KLEPPER: There are a range of reasons that people don't install
energy conservation measures, and it depends, I mean there are
different reasons for different sectors. I will be happy to
submit for the record the report that we did for HUD in which
we identified the barriers to energy conservation in the indus-
trial sector and they ranged from little things like the fact
that the plant manager who's responsible for energy conserva-
tion, looks bad if he can recommend a million dollar savings
because the question is why didn't he recommend it last year
or, why is there that much waste in the plant. Yet he's the
person with the technical knowledge who's probably going to be
approached by the person selling the equipment and he's the
one who understands the potential savings. (This report was
reviewed, but not included in the Transcript due to its length).
There's a lack of incentive in the industrial area on the
part of the corporation because there are competing demands
for capital. The employee who wants to expand his shoe sales
department by adding three new people or by building a new
wing to the office building to support his expansion doesn't
have any greater empire if there's energy conservation, even
if conservation produces dollar savings which drop immediately
to the bottom line profit.
There are a whole range of similar reasons that apply to
the multi-family area and the single family area. If you talk
to the people in Oregon where they have the zero interest loan
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program they tell you that they only had 60 percent or
something like a 60 percent response rate. They went out
and performed 100 audits and said: "Here's the energy savings
that we recommend. We'll install this basically for free.
We'll only ask you to repay the principal at the time you sell
the house, no interest." And only 60 out of 100 people signed
up. They couldn't believe it. It reminds me of the statement
that if you stand on 42nd Street and 5th Avenue, and hand out
$1 bills, a lot of people are going to walk by and not take
one. There are a lot of hassles involved in applying for a
loan, finding the right person to give you the loan, meeting
the different credit requirements of different institutions.
The loan is only one part of it. Letting somebody you don't
know come into your house and spend two days drilling holes in
your walls or up in your attic, et cetera, is another hassle.
We need to overcome a lot of those barriers and economic incen-
tives is one way to do it without forcing people to do it,
without mandating conservation by the Portland approach.
DR. RIEGEL: I have a question for Ned Helme about the provision for
emergency response or crisis management events that we have
had to contend with in the past and that I think all of us
realize could recur if conditions were right.
Many of the states, of course, did go through very severe
energy emergencies. Is it your feeling that this experience
is somehow insufficient to motivate the states to act unilater-
ally to provide for contingency arrangements?
MR. HELME: I think the problem is a problem of timing in terms of the
funding and that's why I alluded to the difficulties in the
phasing of this decision. I think, in fact, that many states
would rate the emergency preparedness part of their operation
high on the list of something they'd want to preserve. But as
a good example, when the Administration in March repealed the
existing allocation rules and repealed the state set aside
program which gave the states five percent of the fuel to
allocate and so on, a number of states lost their allocation
officers, immediately lost the authority and people left.
There was a real morale problem for the states in a number of
programs, not just this program. Where there's a perception
that this is all going to go away and nobody thinks it's impor-
tant anymore, you start to lose the top people and something
like that, dealing with emergencies is a function of a small
group of people who really know the business, know the industry
contracts, can get the fuel where they need to get it in an
emergency, understand the coal industry in the case of a coal
strike, that sort of thing. So it's really staff, it's people
that you're talking about and there's a problem in keeping
them when the money dries up essentially.
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It's not a great cost, I'm not going to say it's $100
million to do that job but it is difficult to maintain that
funding and just as you know how complex it is here in terms
of the Federal budget, when once the cuts go through, it's
very hard to turn that around. It's the same situation at the
state level or the state legislature. Once they act on the
budget it's very hard to turn it around, if they assume that
they're going to have Federal money to pay for those people
and in many cases they do.
DR. RIEGEL: Thank you very much.
MR. GLASSBERG: Just a minute, I want to ask another question.
DR. RIEGEL:
Oh, yes. Go ahead.
MR. GLASSBERG This is for Ned again. You mentioned that the state grant
programs have been around for about six years now. Originally
they were intended to serve very specific purposes. It seems
that those purposes have either been served or there's been a
move away from those directions. Could you comment on how the
directions in which the program has moved in have they been
good directions, do they need to move in other directions that
they haven't moved in, could they
MR. HELME:
I think they have been good directions and you're right,
they have moved. There are some programs that added things
like procurement and right turn on red, all those things that
have been done essentially. As I said earlier, it laid the
groundwork, the planning. They went out and they looked at
all the sectors where they could make conservation improve-
ments and I think what you find now is that states are focusing
their attention on pieces of that that have the best payoff,
the most cost-effective payoff.
Beyond that I think the renewables
only been addressed by a small number
area is one
of states.
that has
It's not
really part of SECP and EES currently and that's an area that
I think there's a lot of potential. And if we saw a shift from
the more stringent mandatory requirements to a broader mandate,
I think you'd see a lot more initiative in that area than you
have to date. So I think there are some new areas that haven't
been touched and it would help if legislation allowed that
sort of activity to be pursued.
DR. RIEGEL:
Okay. Thank you. David Moulton and Lewis Perelman are next
up.
These will be the final two morning witnesses. The agenda
calls for us to recess at noon for lunch and we will reconvene
again at 1:00 o'clock.
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David Moulton is from the Energy Conservation Coalition.
Lewis Perelman from the Jet Propulsion Laboratory and we will
begin with Mr. Moulton.
MR. MOULTON: Thank you. I am a Policy Director of the Energy Conserva-
tion Coalition which is an umbrella nonpartisan, nonprofit
alliance of public interest organizations, formed to publicize
and promote energy conservation. The organizations serving on
its Board represent over six million members, making the coali-
tion the nation's largest organization dedicated solely to
increasing energy efficiency.
The members include the Federation of American Scientists,
the Environmental Policy Institute, the National Consumers
League, the National Wildlife Federation, the Union of Concerned
Scientists, the Environmental Defense Fund and National Con-
sumer Law Center and Natural Resources Defense Council, National
Audubon Society, Friends of the Earth, Solar Lobby, Conservation
Foundation, League of Women Voters, Conservation Foundation of
New England and the Sierra Club.
The Energy Conservation Coalition (ECC) appreciates this op-
portunity to address this nation's "adequacy of attention to en-
ergy conservation methods" in accordance with Section 11 of the
Federal Nonnuclear Energy Research and Development Act of 1974.
The Coalition believes that this subject is critical not only to
our energy future, but also to the economic well-being and na-
tional security of our country. Few issues rival energy in its
fundamental relevance to the success or failure of both domestic
and foreign policy. And few solutions to our current energy
problem are as promising as energy conservation.
Since the Arab oil embargo of 1973, great strides have been
made toward recognizing the special role that efficient energy
use can play in our society. A series of comprehensive analy-
ses of national energy demand has been made, which almost uni-
formly emphasize that reducing energy waste offers the best
near-term option for achieving a reduction in oil imports at a
reasonable cost, a reasonable speed, and with reasonable cer-
tainty in this decade .J.' Moreover, energy conservation will
remain a critical energy "source for the foreseeable future.
For purposes of this hearing, we have assumed that the
value of energy conservation is undisputed. We are asking whe-
ther we as a nation are taking adequate steps to achieve energy
conservation.
Tlie Energy Conservation Coalition believes that current at-
tention to energy conservation methods is woefully inadequate.
The Administration has severely reduced federal energy con-
servation programs on the premise that rising energy costs will
66
-------
encourage all the conservation we need. This reflects a danger-
ous and unjustified complacency with the status quo.
Our foreign oil imports averaged around six million barrels
per day for the first five months of 1981. It is true that this
is the lowest level of imports since 1975, and represents a con-
siderable achievement relative to the most recent past. But more
importantly,it is the same level that we were importing in 1973
when the Arab oil embargo hit our economy like a shock-wave,
causing double-digit inflation and the worst recession since
World War II. A recent report of the Senate Energy Committee on
world oil politics concluded that "(a) major oil supply inter-
ruption appears to be inevitable within the next decade."'
This fact alone dictates a strong federal interest in the
pace of energy conservation in this country.
Instead, the Administration rejects any responsibility for
the level of oil imports or the pace of energy conservation.
It appears to be sleeping on the so-called "glut" the tempo-
rary condition of oversupply that has prevented rapid energy
inflation during the Iran-Iraq war. This "glut" is due in part
to the strong national commitment to energy conservation that
previous administrations have espoused. But it can be wiped out
in a matter of weeks by a single member of OPEC Saudi Arabia.
The Energy Conservation Coalition believes that at least
three steps must be taken before the federal energy conserva-
tion program can be considered "adequate".
RECOMMENDATION #1: SET MEANINGFUL GOALS AND PRIORITIES
First, the Administration must develop meaningful goals and
priorities for energy conservation before decisions can be made
on a rational and consistent basis.
Even the previous Administration failed to take that step.
Last year, for example, the Office of Technology Assessment
harshly criticized the conservation program for lacking any
meaningful goals or priorities. ~J Similar criticisms have been
voiced repeatedly by the General Accounting Office. Most re-
cently, in a June 17 letter to the energy committees of Congress,
GAO wrote that "major decisions on the Federal Government's role
in fostering energy conservation continue to be made without a
clear understanding of energy, conservation's contribution in
resolving national energy problems in a timely manner. "Z.'
The basis of these criticisms is fundamental: unless the
government sets meaningful goals and priorities, it has no means
for determining the relative value of alternative energy con-
servation methods. Programs will be stopped, started and sty-
67
-------
mied haphazardly, without regard to need. Tax dollars will be
misallocated and wasted for lack of focus and direction.
To its credit, the previous Administration responded to
the past criticism by initiating a hroad analysis of the poten-
tial for energy conservation by the year 2000. Begun in July
1979, under the direction of DOE and the Solar Energy Research
Institute (SERI), this 18-month study reviewed each sector of
energy end use and attempted to quantify the amount of energy
that could be saved by the year 2000 using strict economic prin-
ciples and assuming a strong growth-oriented full-employment
economy.
The SERI report concluded that we could actually reduce
current energy consumption by over 20 percent by the year 2000
without sacrificing other national goals. End use demand in
that year would be 33 percent less than under current policy.
The potential for each sector is shown on the Table 1 on the
following page.
As the report indicates, these are goals, not forecasts.
But as indicators of the potential for energy conservation
that is realistically achievable, these goals can serve as a
benchmark against which to measure progress in energy conserva-
tion. When one considers that renewable energy sources, accord-
ing to the report, could contribute another 12 to 22 quads by
the year 2000, it is clear that an enormous opportunity exists
to gain control over our energy future.
The Reagan Administration took office as this study was
completed. Unfortunately, the new Administration has failed to
adopt meaningful goals and priorities. This is true not only
of its energy conservation program, but of its entire energy
program. Officially, its policy is to shun setting any goals
or targets, and to reject any federal involvement in leading
the nation towards more efficient energy use._' Moreover, it
suggests that decisions about energy conservation will be made
outside a comprehensive framework and without serious analysis.
The goals laid out in the SERI report were not accepted,
and no attempt has been made to replace them. This reaction
to the most thorough review of energy conservation potential
to date does not augur well for energy conservation.
RECOMMENDATION #2: ADDRESS MARKET BARRIERS
Second, the Administration must devote attention to identi-
fying the limits of market forces to encourage energy conserva-
tion. Without a thorough understanding of the barriers to ener-
gy conservation, the Administration is not in a position to de-
cide whether existing programs are properly focussed to address
real problems.
68
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END-USE ENERGY DEMAND POTENTIALS
ON
Yfear 2000
Residential Buildings
Commercial Buildings
Industry
Agriculture
Personal Transportation
Freight Transportation
TOTAL
-^Without 50C gas tax
Source: Report on Building A
1977
(QUADS)
16.2
10.4
29.1
1.6
15.1
4.3
76.7
Sustainable
Baseline
(QUADS)
21.95
13.30
39.70
2.18
13.26
7.2 - 8.7
97.59-99.09
Future, prepared by
Economic Potential v.
Potential Baseline
(QUADS) (PERCENT)
11.06 -50
7.26 -45
29.40 -26
1.7 -22
7.6 - 11.4-/ -14 -
5.7 - 6.0 -17 -
61.91 -66.01 -32 -
the Solar Energy Research
-42
-34
-38
Institute, reprinted by Committee on Energy and Commerce, U.S. House of Representatives,
Committee Print 97-K, April, 1981, pp. xxvii, 3, 81, 124.
Table 1
-------
Consumers and businesses require extremely high rates of
return on energy efficiency investments much higher than
seems rational to an economist. In a recent review done by
Robert Williams of Princeton".' the evidence revealed:
In an analysis done by the National Association of Home-
builders, homeowners applied discount rates from 20 per-
cent to 150 percent on energy efficiency investments.
In an analysis done by Oak Ridge National Laboratory,
median households applied a 47 percent discount rate on
energy efficiency investments.
In an analysis done on room air conditioners, the dis-
count rate averaged from 15 to 25 percent, and rose to
89 percent for poor households.
Volkswagen will only make fuel efficiency investments
for new cars that correspond to a 52 percent discount
rate for the owner.
Data from the SERI report indicates that commercial build-
ing owners apply a discount rate of 65 percent or more to
energy efficiency investments.
Industrial investment standards imply discount rates of
40-110 percent.
If the market were working "properly", these discount rates
would be much lower and economic waste would be avoided. If we
pursue policies that do not address this problem, we are miss-
ing enormous cost-effective opportunities to bring our energy
future under control.
Other evidence of the degree to which the real world falls
short of the perfect market can be gleaned from tax data on the
residential energy credit. Despite sharply rising oil and gas
prices from 1977-1979, the data shows a decline of 8 percent in
investment in energy conservation per capita.Z/
Similarly, recent data prepared by the Carrier Corporation
indicates that from 1979-1980, despite rapidly rising electri-
city prices, the efficiency of central air-conditioners actu-
ally declined nationally after eliminating data on California
sales (where mandatory state standards have been adopted).
Central air-conditioners are purchased with little regard with
little regard for the preference of individual consumers be-
cause they are usually "contractor-installed" before the con-
sumer buys a house. The dominating factor is the contractor's
desire to minimize first cost, not to minimize the life-cycle
cost.
70
-------
A useful summary of these imperfections with respect to
appliances was given in 1977 by former Congressman David Stock-
man (now Director of the Office of Management and Budget) in
his additional views to the House report on the National Energy
Act:
There is some reason to doubt that market forces alone will
bring about the needed shift to more efficient appliances.
Numerous witnesses appearing before the subcommittee testi-
fied that the average consumer looks for a payback from
higher purchase prices within 3 years. In the case of an
appliance with a useful life of 10 years, this short pay-
back horizon severely limits the amount of higher purchase
price the consumer will accept in choosing a more efficient
product over a cheaper, less efficient product. A second
reason to doubt the efficacy of higher electric prices in
changing consumer appliance buying habits is the lack of
information that would enable consumers to judge the rela-
tive efficiency of competing products, as well as a wide-
spread lack of understanding of the little information
that is available. A third reason that would support a
regulatory approach is that the appliances in many new re-
sidential units are not purchased by the user, but are pur-
chased by the builder, who will continue to seek appliances
with the lowest initial cost without regard to increasing
electric rates.
In the face of these factors inhibiting the operation
of market forces in the consumer appliance sector, a regu-
latory program designed to impose life-cycle cost purchas-
ing on the consumer appears justified..-/
Some of these imperfections are institutional, some are
informational, and some are economic. The Energy Conservation
Coalition believes that all these imperfections are part of the
energy market, and result in significantly less investment in
energy efficiency than economic theory would predict. A recent
DOE report calculated that the American economy is $100 billion
behind what economic models predict should have occurred in
energy efficiency investment in buildings through 1979.2.' Pro-
fessor Arthur Rosenfeld of Lawrence Berkeley Laboratory has
translated this sluggish conservation of 6 to 17 years in gas-
heated houses and 14 to 25 years in electrically heated houses.
(See following pages, Tables 2 and 3) Paul MacAvoy made the
same point on a broader scale in a recent New York Times article
when he wrote:
"The demand side of the world oil market is dominated by
conditions that stubbornly refuse to surrender to the
conservation ethic, or to the urgings for new energy-effi-
cient technology. Increases in price reduce demand, but
71
-------
ZL
Energy use for space conditioning in an average
new U.S. house (gas heating) (mm Btu/yr)
03
0
O
0
ta
-* I
«3
^j
o
z
Ol
cr
ro
5
£. -^
I S.
5 3-
1 i
S V)
< 0»
o
(C
(3
ro
o
3
"8 2.
-------
cz.
cr
oo
II
£ 2.
3
2. 3
2 S
> Q
§
u
8
i
i
s
9
§
3*
f
5-
3
i
3
I
Energy use for space conditioning in an average
new U.S. house (electric resistance heating)
(thousand kWh/yr)
ro
I
o
I
ro
I
a>
i
(0
(D
~J
03
o _
-n
(0
CD
-------
only with a five-to-ten-year lag, and only by 30 percent
as much as any percentage price increase..127
In addition to these market imperfections, an adequate en-
ergy conservation policy must explicitly address two other
problems which bear on the ability of the market to realize our
conservation potential social equity and basic research.
Equity; Energy is a necessity. Its use can be curtailed only
so far before cutbacks threaten the health of consumers and
businesses. Much of the potential for energy conservation will
never be captured unless consumers possess the means and knowl-
edge to invest in additional efficiency once outright waste has
been curtailed. This requires capital and reliable information
which individuals and small businesses often lack. Low-income
families are particularly incapable of responding to higher
prices by investing in energy efficiency. Their only choice
is to reduce their standard of living unless programs are avail-
able to make energy efficiency investment financially practical.
I think Marty Klepper very adequately addressed the issue of the
kinds of barriers that prevent what appear to be very economic
investments from actually occurring in the marketplace.
Research; Basic research in the field of energy conservation is
a particularly peculiar problem, especially in buildings. The
building industry is highly decentralized and fragmented and has
little ability to support research and development. It is un-
likely that Federally sponsored research aimed at understanding
the flow of energy through a building or quantifying and miti-
gating problems of indoor air pollution will ever be undertaken
by private companies when funds are cut by this Administration.
Yet, unless we have a thorough understanding of those problems,
much investment in energy conservation will be wasted.
The Energy Conservation Coalition believes that to be ade-
quate, the energy conservation program must recognize that the
free market contains these imperfections and that decisions to
eliminate or expand existing programs should be made, in part,
according to whether they increase or reduce these imperfec-
tions.
RECOMMENDATION #3: ACKNOWLEDGE NATIONAL INTEREST IN ACHIEVING
CONSERVATION BEYOND MARKET LEVEL
Third, the Administration's energy conservation program in-
adequately accounts for the value to the nation of reducing oil
imports.
The impact of embargos, or threats of embargos, on our
national security justifies national energy conservation goals
that exceed what is economically -justifiable for the indivi-
dual consumer. This issue was explored in last year's Section
74
-------
11 hearings and report. The concept is as valid today as it
was a year ago. Implicit in this recommendation is the premise
that despite the oil import reductions we have experienced in
1980-81, 6.0 million barrels of oil per day (over a third of it
from the Middle East) is a dangerous and undesirable level of
imports and should not be tolerated.
The recommendations above are offered as the necessary pre-
requisites of rational decision-making in energy conservation.
To summarize, they include:
1) setting meaningful goals and priorities;
2) identifying market imperfections and inequities;
3) recognizing the value of oil import reductions beyond
what the market can accomplish alone.
Current energy conservation policy has been made without
reference to this fundamental framework. The President's bud-
get eliminates, almost without comment:
Residential Conservation Service
Commercial and Apartment Conservation Service
Building Energy Performance Standards (both mandatory and
voluntary)
Residential Energy Efficiency Program (demonstration of
innovative delivery systems)
Appliance Efficiency Standards
Small Business program
Consumer Products program
Analysis and Technical Transfer
Emergency Building Temperature Restrictions
Industrial Efficiency Program
Transportation Systems Utilization
Appropriate Technology
State and Local Programs, including
*Schools and Hospitals (originally cut by 50 percent,
later in Reconciliation, by 100 percent)
75
-------
*State energy offices
*Weatherization
*Emergency planning
*Energy Extension Service
The Solar and Energy Conservation Bank
The federal energy conservation budget would be cut by the
Administration from $999 million to $199 million80 percent.il/
Other then to assert generally that tax credits and higher
energy prices will pick up where these programs are eliminated,
the Administration has not offered even the most rudimentary
cost-benefit analysis of these radical cuts.
With regard to the residnetial tax credit, the Energy Con-
servation Coalition believes that this is an important but in-
sufficient stimulus to increased energy conservation. It is
insufficient because as a practical matter, the credit is use-
ful to too narrow a segment of the American public. Recent
tax data show that the wealthiest 25 percent of America's in-
dividual taxpayers claimed over 65 percent of the total claimed
in both 1978 and 1979.il/ Eighty million owners and tenants
are eligible and yet only 4.9 million taxpayers used the cre-
dit last year. It is not an attractive program unless the tax-
payer 1) is a homeowner, not a renter; 2) can afford the en-
tire up-front capital investment; 3) can afford to wait for a
period of months to claim the benefit of the credit; 4) is in
an income bracket high enough to create tax liability; and
5) has information on the availability of the credit.
An adequate energy conservation progran must make energy
efficiency investment a realistic opportunity for all Ameri-
cans. Programs designed to supplement the tax credit include
the low-income weatherization program at DOE and the Solar
Energy and Energy Conservation Bank at HUD. These programs
have been specifically designed to reach the majority of Amer-
icans who have not been able to take advantage of the tax cre-
dit. The weatherization program appears to be particularly
cost-effective, saving an average of 26 percent of the energy
in each weatherized house at a cost far below the cost of
heating fuel.lJLL I believe Mark Cooper earlier today addressed
the findings of his study from which my data was taken. Yet,
the Administration has proposed eliminating funding for both
programs.
Internal DOE documents provide evidence that many other pro-
grams slated for elimination may be cost-effective. In a March
3, 1981 DOE memorandum assessing the cost-effectiveness of pro-
76
-------
grams within the jurisdiction of Buildings and Community Systems
at DOE, it was estimated that the cost per barrel of energy
saved from 1980-2000 was as follows:
Voluntary BEPS $ 5
Buildings Conservation (RCS) $17
Appliance Standards $ 3
Consumer Products $ 4
Analysis & Tech Transfer $ 3
Community Systems $16
Small Business $ 6
If these programs were maintained, cumulative energy savings
would reach 53 quads by the year 2000, at an average cost of
less than $10 per barrel. (See on the following page, the DOE
memorandum dated March 3, 1981, "Effects of Rescission and Bud-
get Cuts on the BCS Portfolio.")
Similarly, careful analysis of DOE's industrial conserva-
tion program shows that eliminating that program would eliminate
an estimated annual savings of 9 quads. (See Tables 4, 5 and 6)
There is no evidence that decision-makers at DOE have made
any attempt to refute these documents, or to incorporate them
into their decisions.
These documents are exactly the kind of analysis that the
Energy Conservation Coalition would expect to be undertaken in
a rational decision process. But they apparently are not being
used. Nowhere has this Administration explained why achieving
these savings at such bargain prices is undesirable for the
nation.
Finally, the Administration has made no attempt to target
its energy budget cuts on those programs which the market could
conceivably absorb. For example, one of the healthiest, most
prosperous sectors of today's economy is the oil and gas sector.
In an era of fiscal austerity, subsidies and incentives to that
industry could be eliminated with the least adverse impact on
national goals. Yet the Administration has left virtually un-
touched an estimated $5 billion in oil and gas tax subsidies
which alone account for half the $10 billion in energy supply
expenditures in the federal budget. (See Table 7). In con-
trast, the Administration is cutting energy conservation pro-
grams which were designed specifically to address the problems
that the market does not adequately address.
77
-------
UNITED STATES DEPARTMENT OF ENERGY
DATE: March 3, 1981
SUBJECT: Effects of Rescission and Budget Cuts on the BCS Portfolio
Energy savings estimates and the cost of saving one harrel of oil equiv-
alent have been estimated for BCS program elements. These estimates have
been made under the assumption of 100% funding, 50% reduction in funding,
and 100% reduction of funding. These estimates were derived using the
ORNL and Threshold Models and divisional inputs on project priorities
under budget reduction scenarios.
Compared with the ORNL's models used last year, the models have been im-
proved by 1) modifying the manner in which the efficiency of new build-
ings is calculated, 2) the appliances are retired, and 3) by updating
most cost efficiency curves. The model still assumes, however, that if
a level of efficient products/structures are demanded, industry will sup-
ply what is demanded. Last year, no models were used directly to esti-
mate the energy demand reduction resulting from Community Systems acti-
vities. This year the potential for savings was identified through the
BNL Reference Energy Systems model and the Systems Analysis Branch case
analysis. BNL District Heating model inputs and Community Systems per-
sonnel inputs were also used this year to estimate energy savings for the
division. Of course, a new and higher set of energy price projections
were used in all model runs.
The results show significant differences between the 1980 and 1981 esti-
mates of energy savings and associated costs per barrel of savings.
Cumulative energy savings are lower for three programs, while they are
augmented in the remaining four. In general, the cost per barrel of
energy savings is substantially lower than indicated by last year's es-
timates.
The reduction In the dollars per barrel reflects the improvements in the
models. These improvements, coupled with the higher energy price streams,
have resulted in lower energy demand in the base case. This has made the
change in energy demand smaller and at the same time has made the change
in private investment proportionately smaller.
The table below shows last year's estimates in savings and $/BBL compared
with the full funding case of this year.
78
-------
United States Department of Energy
March 3, 1981 Memorandum (continued)
1980
ESTIMATES
PROGRAM ELEMENTS
Quads
$/BBL
1981
ESTIMATES
Quads
$/BBL
Building Systems 41.6 7.40 14.8 3.75
Buildings Conservation 7.8 24.25 10.2 17.20
Services
Appliance Standards 16.2 9.62 10.9 2.67
Technology and Consumer 7.4 1.88 4.3 3.78
Products
Analysis and Technology 12.6 6.09 15.0 3.06
Transfer
Community Systems 6.3 7.48 10.0 15.93
Small Business 1.4 10.38 5.5 5.50
Attached are Tables 4, 5 and 6 showing levels of funding and the energy
saving estimates (based on normalized Threshold Runs) for the projects
deleted for a 50% reduction. Note also that some energy savings will
occur due to past and current BCS activities even if BCS is "zeroed" out.
SPECIFIC IMPACTS OF FY 1981 RESCISSION AND ZERO BUDGET IN FY 1982
Industrial Energy Conservation
The Reagan budget of $43 million in FY 1981 and $0 in FY 1982 prompted a
recent detailed analysis and replanning of the Industrial Program in both
years. The analysis was based strictly on the assumption that $43.0 mil-
lion is the only future funding for the program with FY 1982 and subse-
quent years without additional authority.
As required by prudency, some efforts previously planned for FY 1981 were
not begun in order to fund efforts through completion. Costs were esti-
mated for close out of projects also. These costs would be within the
$43.0 million of FY 1981 funding.
The specific project impacts have been listed in two categories: those
which will be closed out after significant investment but prior to com-
pletion of all objectives, and those identified opportunities which will
not be started. The following tables summarize the projects in these two
categories.
79
-------
03/02/11
ENEIUf 3AVING3 rHOJECTlONJ FOI UUII DlttOS AND COHHUMITI 8T3TEHS
I riOCtAH ILEMENTl B131C BUDGET
COST
(blllloni of 1910 I
TOT
no r«ii iirtu
Diilldlnf ay«t«i( 0.2}) 9.3) 9.56
(IDErs)
Dulldlni &r>t>«l .2)) 7.5 |.l
U« .09] 21.2 27. «
&»11 Gualn<» .OU9 5.11 5.19
iom BCS o.9» at. 92 n.r>t
196)
Q Mill HHBOC
O.II «.I2 »5.«
.09 2.57 >S.i
O.JJ J.J« (0.2
0.0] 1.0 5.2
0.12 5.«5 20.6
0.12 ».» 20.6
0.0 0.0 0.0
0.21 2.6 M.2
0.67 20.16 1*9-7
1990
Q HH« HMOOC
0.31 T.«2 6]. 6
0.2] 2.57 39.6
0.$ l«.) (6.0
0.) 6.) Jl. 6
0.12 5.65 20.6
0.) 10.2 91.6
.13 IDS 56.76
0.26 2.6 *(.2
l.tt «5.59 ))6.«6
1S95
i
Q MHB HHBOt
0.»5 IO.M 77. «
0.27 ].a« 16. «
0.5 l».5 16.0
o.<] a.« 7«.o
O.I 5.61 17.2
O.M H.6 75.7
.31 11.35 56.7
0.21 2.6 11.2
2.0« SO. 21 350.96
2000
q HUB HHBOC
O.S7 ll.l* 91.04
0.35 «.07 60.2
O.S !«.$ 16.0
0.47 1.9« 10. 1
O.I S.ll IT. 2
0.56 19.1 96.1
.33 11.35 S6.7
0.21 2.6 «1.2
2.20 52.1* 371.3%
CUMULATIVE TOTAL
1910 - 2000 t/i
TOT ACTUAL OIL
QUADS OIL CQUIV
*
M.I 110.6 2515.6 J.75
9.0 17.0 15H.O S.OO
10.2 364.] 1751.4 IT. 2
10.9 1*1.9 117«.l 2.67
4.J ITJ.T 739.6 J.7B
t!>.0 421.4 2510.0 ].06
1 10.00 25S.O 1720.0 15.9)
5.5 104.4 946.0 5.5
S3.S 1133.0 9210.6 9.54
00
o
Table 4
-------
PROJECTS CLOSED CUT PRIOR TO COMPLETION
WASTE EK23GY REDUCTION
Reradiant Recuperator
Air Fuel Ratio Controller
Oxygen Eariciraent
Large Passage Ceraaic Recuperator
Water-Ta-Warer Heat Puap
2iCOP Heat Puap
Waste Oil Utilization
Waste Fired Brielc **"!.»
Liquid Fuel Pros Waste Rasearcn
Enrrgy ?roa Waste Water
(5000)
INVESTMENT
TO DATE
5 2,322
766
845
835
AOO
3,325
3,500
797
671
461
COST TO
COMPLETE
S 700
300
100
1,400
3,000
340
1,000
1,000
500
1,500
SUBTOTAL - WASTE ENERC7 REDUCTION
513,932
5 9,840
ESTDiATED
ANOTAL
SAVINGS (QUASS),
.15
.12
.20
.12
.10
.30
.16
.50
.50
.07
2.22
INDUSTRIAL PROCESS ETTICTZNCT
Coal In Aluainua Reaelt
Glass Pellet Preheat
Direct Reduction Of Aluoima
Inert Anode
AlumintSE Cathode >
Hot Inspection/ Steel
Freeze Concentration
7oaa Processing
Chemical Separation - Critical Tluid
Sensor Development
Energy Recovery - Dryers
Cutting Tool Coatings
5 3,740
600
4,155
S20
2,400
2,563
876
658
981
675
270
31
5 3,000
2,750
7,500
4,000
1,500
1,072
5,000
860
3,000
1,025
736
83
.03
.06
.70
.20
.20
.30
.05
.05
.40
.15
.06
.01
SUBTOTAL - INDUSTRIAL PROCESS E7TTCIENCT
517,574
$30,526
2.21
COGENERATTON
Single Stage ORC
Coal Fired Brayton Cycle
Sceaa Diesel
Sobanaospheric Bray tuu
SUBTOTAL - CCGEERATIOS
TOTAL - PROJECTS STOPPED 3E?ORE COHHJTIOH
5 300
8,000
30,000
2,000
.25
.60
.85
5.28
Table 5
81
-------
PROJECTS WHICH WILL KOT BE STARTED
~~~ESTIMATED
POTENTIAL
ANNUAL
WASTE ENERC7 REDUCTION SAVINGS (QUADS)
Tluidic Teaperamre Sensor -03
District Heating Recuperator -20
Biphase Concentrator -06
Slagging Burner -20
Cheaical Heat Puap -10
Wood "ired Luaber Dryer -03
Mobile Tire Pyrolysis -04
Coaainution And Blasting .02
Liquid Fuel Troa Waste Pilot -07
Tluidized Bed Waste Heat Boiler (1 Project) .20
High Teaperature Burner Duct Recuperator (1 Project) -30,-
SUBTOTAL - WASTE ENERGT REDUCTION 123
INDUSTRIAL PROCESS ETTICIENC?
Cement Particle Size Control -10
Coke Pellet Process
Toracoke Process
Advanced Copper Sneltiug -01
Hydropyrolvsis - Cheaical Burning -20
Efficient Motor 3evelopment -20
Computer Controls - Hanuf acmring -1-5
Advanced Catalytic Reactor 50
Methane Transport -50
Dessicant Lunber I>rying -01
Bav Pulp Process . -os
Energy Integrated ?ar=s (3 Projects) -01
Citrus Process Development -0^
Mechanical Vapor Recompression -O6
Energy Conservation Meat Aad Dairy -03
Crop Drying Systea Deaonscration -03
Vegetable Oil Continuous Process -°3
SUBTOTAL - INDUSTRIAL PRCCZSS ETICTiNCT 1-95
^ _ COGINZRATIOK __ ,
Brayton Topping Systea (2 Projects) -25
Large Bottoeing Cycle -01
Theraionic Topping '°°
SUBTOTAL - COGiNiRAIIOH -35
AND DSPT-OTMS
ZADC (10 Universities). -0*
Industrial Workshops -OI
Technology lapleaeatation Prograas ~
SUBTOTAL - Ei?L2SNTAIION AND DEPLJEEST -02
TOTAL - PROJECTS WHICH WILL SCT BE STARTED 3.57
Table 6
G2
-------
COMPARATIVE TABLE OF
TAX EXPENDITURES AND BUDGET OUTLAYS
IN THE
FEDERAL ENERGY BUDGET
baavom
Energy.
Consavatoon:
Ta trowditure (outlay equivalent)
Outlays
Total
Ta expenditures as a percsit of total
Suopty;
Ta CTpoKfetuTts (wifiay equivalent) ,.._.,..._._..
ftrttoyj
Tits'
Ta expenditures as a permit of total
Totafc
Ta tipHKfiturs (outtjy Kjuivalwt) ,._.»_,,,. .
rvrtia^
To*?'
Ta expenditure as a percsit of total
fesMlf*
13«
1
720
570
U90
55.9
7,715
*,575
r 12^90
613
3,435
5,140
13,575
62.1
1JJ1 | 190
325
750
1,575
513
9.520
5.725
15.245
52.4
10.345
6,480
16,825
51.5
895
1.065
1,950
45.7
10,375
5.235
17,110
53.6
11.770
7,300
19.070
51.7
mHa or ce. a tSxxOB On tot «ne!
t Due «a» « «M » BOB
-------
The severe market distortions condoned by our government reflect a deeply-
rooted system of subsidies and tax advantages that contine to work against
energy conservation.
Similarly, the Administration's budget favors nuclear power, an energy
source which has only a marginal impact on our basic problem liquid
fuels. The Administration has proposed increasing the nuclear fission
budget by $337 million in FY 82 40 percent higher than the Carter
budget. Clearly, as long as the Administration continues to protect
supply options from the marketplace, it cannot cut the conservation
budget on the grounds that the marketplace should control demand.
FOOTNOTES
\J. See, e.g., Solar Energy Research Institute, A New Prosperity: Building
~~ A Sustainable Future, (Andover Mass.: Brick House Publishing, 1981);
John H. Gibbons and William V. Chandler, EnergyThe Conservation
Revolution (New York: Plenum Press, 1981); Marc H. Ross and Robert
H. Williams, Our Energy: Regaining Control (New York: McGraw-Hill,
1981); Henry Kendall and Steven Nadis, Eds., Energy Strategies:
Toward a Solar Future, (Cambridge, Mass.: Ballinger: 1980); Hans H.
Landsberg, Chairman, et al. , Energy: The Next Twenty Years, Report
by a study group sponsored by the Ford Foundation and administered
by Resources for the Future (Cambridge, Mass.: Ballinger Publishing
Company, 1979); National Research Council, Energy in Transition:
1985-2010, Final Report of the Committee on Nuclear and Alternative
Energy Systems, National Academy of Sciences (San Francisco: W. H.
Freeman and Co., 1979); Robert Stobaugh and Daniel Yergin, Eds.,
Energy Future, Report of the Energy Project at the Harvard Business
School (New York: Random House, 1979); Roger Sant et al., The Least
Cost Energy Strategy, The Energy Productivity Center, Mellon Insti-
tute(Pittsburgh:Carnegie-Mellon University Press, 1979); Domes-
tic Policy Review Panel, The Domestic Policy Review of Solar Energy,
A Response Memorandum to the President of the United States (U.S.
Department of Energy, February 1979) TID-22834.
2/ The Geopolitics of Oil, United States Senate, Committee on Energy
~~ and Natural Resources, Publication No. 96-119, December 1980, p. 71.
3/ U.S. Congress, Office of Technology Assessment, Conservation and
~ Solar Energy Programs of the Department of Energy,"1980.
4/ United States General Accounting Office, Views on Energy Conservation
~ and the Federal Government's Role." EMD-81-82, June 17, 1982, p.l.
See also, The Federal Government Should Establish and Meet Energy
Conservation Goals, EMD 78-32, June 30, 1978.
5/ See, e.g., Executive Communication from the Acting General Counsel
~~ of DOE to the President of Senate, as reprinted in Senate Report No.
97081, p. 19.
84
-------
6/ Letter from Dr. Robert Williams to Senator Mark Hatfield, June 19,
~ 1981, pp. 5-7.
TJ "Congressional Study of Tax Credit Highlights: Barriers to Conserva-
tion Investment" in Energy Conservation Bulletin, Vol. 1, No. 1,
June/July 1981, p. 5.
8/ "Additional views of Representative Dave Stockman", Report of the Ad
~~ Hoc Committee on Energy on H.R. 8444, House Report No. 95-543, Vol.
II, p. 604.
9_/ Reducing Oil Vulnerability, U.S. Department of Energy, November 10,
1980, p. 23.
10/ New York Times, Sunday, 11/23/80, "To OPEC, With Many Thanks", by
Paul W. MacAvoy.
ll/ This includes HUD's Solar and Energy Conservation Bank with DOE con-
servation budget, but excludes Energy Impact Assistance which appears
in DOE's energy conservation budget but which is not an energy con-
servation program.
12/ See Congressional Research Service, Residential Energy Tax Credits,
by Salvatore Lazzari, March 12, 1981.
13/ See, e.g., A Comprehensive Analysis of the Costs and Benefits of Low-
Income Weatherization and its Potential Relationship to Low-Income
Energy Assistance, prepared by the Consumer Energy Council of America
Research Foundation, June 2, 1981.
85
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DR. RIEGEL: All right. Thank you very much. Lewis Perelman, from the
Jet Propulsion Laboratory will speak now and then we'll go to
questions.
DR. PERELMAN: Thank you. Let me begin with a disclaimer that my comments
here today are purely personal and do not represent official
views of either the Jet Propulsion Laboratory, Cal Tech, NASA,
DOE or anybody else that I'm aware of.
Last year, in its Section 11 review, the EPA paid particu-
lar attention to the problem of the evaluation of conservation
and solar energy programs carried out by the Department of
Energy. I was one of the people who participated in that
review; I thought it would be useful to follow up on that
investigation and report some of the things that have happened
in the year since and what's going on now.
By way of background, I should mention that EPA's interest
in evaluation of these programs was consistent with the concern
expressed by other Federal agencies such as the Office of
Technology Assessment, the General Accounting Office and Office
of Management and Budget, that a number of programs in the
Department of Energy, including conservation and solar programs,
had not been producing information sufficient to evaluate or
judge the performance and productivity of those programs.
Also, of course, part of the law which established the
Department of Energy included a title, Title X, the so-called
"sunset" provision which required a comprehensive review of
all Department of Energy programs to be performed, leading to
a report from the President to the Congress on January 15th of
1982. Therefore, this year the process of developing that
report has been implemented.
My own involvement in this area was initiated approximately
three and a half years ago when I was on the staff of the
Solar Energy Research Institute, where I had responsibilities
in the Program Evaluation Branch for developing methods to
evaluate solar energy programs for the Federal Government.
Later, I went to the Jet Propulsion Laboratory where I've
been working on several solar energy and conservation programs
for the Department of Energy. Last year I was asked to parti-
cipate in the EPA review as an expert of sorts on evaluation.
Partly as a result of that review, Mike Power's office at DOE
initiated some efforts to plan more systematic evaluations of
these programs. I was asked as a representative of JPL to
work for the Office of what was then called Solar Applications
for Buildings, within the Conservataion and Solar Division of
DOE, to help them in cooperation with Mike's office to develop
specific plans for an evaluation process.
86
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I've been working in DOE headquarters since January of
this year on this problem. Along the line in the last several
months, our efforts in planning overall evaluation rather
quickly turned to the immediate problem of develolping a re-
sponse for the sunset provision of the DOE Act, and this has
occupied most of our attention for the last several months.
I want to talk today evidently rather briefly both
about what has been going on in the development of the sunset
response, and more generally about what we've been doing on pro-
gram evaluation, based on my personal view of those processes.
The sunset provisions were added as Title X of the DOE
Organization Act almost as an afterthought. A bill to estab-
lish a Federal government-wide sunset review process was pend-
ing in the Congress at the same time that the DOE Act was
passed. The provisions of that sunset bill which was called
S-2 in the 95th Congress were taken essentially intact and
added to the DOE Act.
The key to the sunset concept, as it was developed ini-
tially in the State of Colorado (where I worked in the state
governments) and later in other state governments, was to make
major government departments, regulatory agencies, etc., sub-
ject to a periodic legislative review, to see whether they
needed to continue to exist. The concept of doing a sunset
review was that it should lead to a "go or no-go" decision by
the legislature: whether to reauthorize the existence of the
agency, or to abolish it, or to change its mission or level of
funding in some dramatic way. That decisive provision was
included originally in Title X of the DOE Act, but in the
conference committee it was removed. The procedures for carry-
ing out the sunset assessment work were retained, but the
ultimate decision the go no-go decision was removed.
So there's no contingency that anything has to happen as a
result of this sunset study being performed.
That's where this sunset task came from. It's significant,
perhaps, that the Senate ultimately decided not to pass S-2
perhaps to some extent because expert witnesses who testified
indicated that the procedures called for could not really be
implemented in an effective way. Nevertheless, the Department
of Energy has this requirement to meet and we've been working
on satisfying it.
There are numerous problems in doing this. Overall, there's
a confused mandate from the Congress about exactly what it is
they want us to do. As I've mentioned, there is no specific
decision or outcome which is contingent upon the performance
of this sunset report.
87
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The ordering of the questions in the law itself is very
confusing and arbitrary. Specific questions are very ambiguous
and difficult to interpret. There's no request for environmen-
tal impact assessment though we assume that that was intended
and we're doing it anyway. One of the questions asks for the
impact for increases, decreases, or termination of funding of
major programs, and yet, with the reorientation of budget
priorities of the new Administration, it's been virtually
impossible to answer that question in any concrete way without
further guidance from the Congress about what they really want
to know.
And several questions ask for assessment of the economic,
health and other kinds of program impacts, but it's not clear
whether they want to know impacts that have happened in the
past or impacts that would happen in the future if programs
were continued under different scenarios.
So it's very difficult to answer these questions even with
information which already exists.
Also, I should note that there's no requirement in the
law for public participation in this sunset review process.
It seems kind of strange that the Congress should not want to
know how the Department of Energy, which has spent tens of
billions of dollars, has affected the public.
The implied intent of Title X was to evaluate the overall
performance of the Department of Energy over the last four
years, yet the law never required any actual evaluation process
to be implemented during that time which would have produced
the information to be reported in this review. It's virtually
impossible at this stage to go back and retrospectively create
that evaluation.
Also, as I've indicated but will emphasize again, there
is no real demand for the results of this study. The key
decisions about the future direction of the Department of
Energy are now being made, to some extent by OMB through its
budget planning processes, and to some extent by the Congress
itself through its response to the President's budget request
and its own deliberations on the budget. Significant changes
in the direction, character, levels of effort, and so forth
of the Department of Energy are now being made without any
information provided by the so-called sunset review.
It seems avident that by the time the sunset report is
available, many of the critical energy program decisions will
have become history. Also, the President or at least the
Administration through the Department of Energy's office in
charge of this study has made it clear that the sunset
report will not be used as an input to the President's deci-
-------
sions on either the abolition of the Department or any reor-
ganization that he may choose to implement. So again, there's
no contingency to which this study is important.
The prospects for where this sunset review is likely to
lead don't seem to be terribly exciting. I think the Admini-
stration has been honest in attempting to meet the requirements
of the law. The staff that I've worked within the Department
of Energy have been making, I think, a quite earnest effort to
try to provide accurate and informative answers to the questions
that have been posed, given the great confusion about what we
really are supposed to do.
But the Administration does not seem to look at this
sunset review as an urgent input to any of its own decisions;
rather, it is simply trying to carry out a legal mandate.
Congress, on the other hand, also does not seem to have
any great requirements that they're expecting to be met by
this assessment. As I said before, it's not likely that there's
going to be much real evaluation of DOE's performance as a
result of this study, because in the past there hasn't been
much evaluation performed that would provide that information.
So most of the information in this report is likely to be,
more or less, off-the-shelf information that has been reported
through hearings, program plans, and other documents, and that
has been seen before.
To a large extent, therefore, the sunset document will,
if anything, rationalize decisions which have already been
made, and simply describe what those decisions were, without
providing the sense of real alternatives that the Congress
presumably was looking for.
On the plus side, I think there has been some conscious-
ness-raising as a result of this process. I think many DOE
program managers have become aware of the paucity of evaluation
that has existed over the last several years, and have been
confronted with their own inabil-ity at this point to document
what they have really accomplished, or what the problems of
their programs have been, in any thorough way.
Yet, on the other hand, the very vacuousness of the sunset
exercise, and the confusing aspects of it, to a large extent
have reduced morale and undermined enthusiasm for doing evalua-
tion in the future.
Overall, I would say this constitutes a lost opportunity
both for the executive branch and for the Congress. A large
number of person-years of effort and a large amount of money
are being invested in producing this sunset document. It
could be used to inform the decisions that the Congress is
89
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making, it could be used to help the President in his delibera-
tions about what the future of the Department should be, and
yet it isn't being applied in that manner.
In regard to program evaluation in general, our efforts
on evaluation planning have been curtailed by the intense
effort that's had to go into the sunset review. Starting with
last year's EPA review, the most significant progress in the
four years that I've been involved in the DOE solar program
has been made, under the direction of Mike Power's office, to
begin planning actual evaluation of DOE programs.
In my testimony that I submitted to EPA in writing last
year, I listed a number of barriers to making evaluation happen.
I'll simply say that all those barriers still exist. Some of
them have been intensified by the change in Administration.
Among the current barriers to any future development of evalua-
tion of energy programs is the fact that the budget process
has taken on a very different character from the way it has
been practiced in the past. This has made the real appli-
cation of evaluation information even less likely to occur
than in the past, when it was virtually unknown.
Second, as I've said the Title X process to some extent
has discouraged program managers from thinking that anybody
really wants to see evaluative information. And third, the
ultimate and most important observation is that the Congress
itself is not showing a genuine commitment to having programs
evaluated in an objective way, and to using that information
in its own decision making.
Also, for evaluation to take place, the same requirements
that I indicated last year still exist, and they are three.
One is that somebody at a high level, meaning on the executive
side or the Congressional side or both, has to make an explicit
commitment that evaluation not only will be done but will be
used by decision makers in making decisions. Second, there
has to be organizational responsibility assigned to somebody
to carry out evaluation on a full-time continuing basis. And
third, the resources necessary to do evaluation thoroughly
have to be provided. None of those requirements yet have been
or now are being satisfied.
Some recommendations I would make are, first of all and
perhaps.primarily, that the Congress needs to take the lead in
this situation. Evaluation can be a valuable tool. It can be
a valuable part of creating a more coherent, effective, and
efficient national energy program, if the Congress will actually
use the information that is produced. So far the Congress has
not shown a real interest in doing that.
90
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Second, the Title X sunset review process is not irre-
trievably lost at this point. I think it still could be sal-
vaged as a useful activity if certain things were done. One
of these is that it would probably be necessary to defer the
reporting date of January 15, 1982 to some later time. There's
not enough time now to do the kind of thorough or trenchant
job that would contribute interesting information to decisions
that the Congress and the President want to make about the
Department of Energy.
The Congress is going to have to clarify its guidance, to
indicate exactly how this review is to be carried out. What
do the questions really mean? What does the Congress want to
know? There's too much ambiguity and uncertainty in the exist-
ing guidance, and that really can't be resolved on the executive
side because we don't know what the Congress' wants to hear.
Also, if there's going to be more than simply off-the-shelf
information provided, there's going to have to be funding
allocated to perform some fairly thorough analysis and evalua-
tion of both future options and past performance. Some re-
sources beyond what have already been allocated will have to
be invested to carry out those studies.
And finally, it will have to be demonstrated that some-
thing is contingent on the performance of the sunset review,
that some decision will rest on the outcome of the information
which is provided, if the review is not going to be simply a
hollow paper exercise.
I want to add a conclusion to respond to the overall
function of the EPA hearing. The more decentralized approach
to energy programs which the hearing document describes and
which the current Administration foresees not only in the
conservation area but perhaps also in renewable and other
energy programs, is demonstrated, for example, in the call for
a block-grant approach to funding. I personally think that in
many ways this is a promising alternative and a potentially
useful way to proceed. But evaluation would be the key to
making that strategy a successful one. If one is going to
have a large number of state and local programs carrying out
what in the past has been more highly centralized and more
focused at the Federal level, it's critical to have good,
reliable evaluation of those activities, for two reasons.
One is that, if there's Federal funding involved, the
Federal government has a right to know what is being done and
what's being accomplished with the money that it is dispensing.
Evaluation will be necessary to produce that information.
Second, and perhaps even more important, a large number
of diversified state and local programs 50, 100, 1000,
o -i
? I
-------
whatever are in effect 50 or 100 or 1000 program experiments
on how to achieve certain kinds of national energy objectives.
The value of that diversity is best captured by measuring and
documenting the experience of those programs, so that state
and local agencies can learn from each other's experience, and
so that the Federal government can understand how different
program strategies actually can be used to achieve the most
cost-effective results.
Evaluation is the key to making that kind of stragegy
successful, and for the reasons I've indicated earlier, we
are not now making any substantial progress toward establishing
a real energy program evaluation capacity.
DR. RIEGEL: Thank you. Questions and discussion?
MR. POWER: Maybe I could ask David to elaborate a little bit on the
image that you have of a national conservation plan. Could
you elaborate on what that would look like if you had one,
what elements would it contain and to what level of depth and
specificity it would go?
MR. MOULTON: Well, the criticism that I have voiced in the testimony
is based not so much on any particular plan that we have in
mind but on our concern that some effort be undertaken to
decide where we want to go.
Many of the decisions that are currently being made appear
to have no relationship to the overall effort that in the past
has been a national commitment to energy conservation. I
don't think the Administration's position is that energy conser-
vation is no longer important. Secretary Edwards has frequently
said that he thinks it is important.
Rut we're trying to get some kind of a handle on what that
means in terms of where the Department thinks our nation should
be heading, whether there's some relationship between that
concern and our energy imports, whether there is some relation-
ship between that concern and the overall effort to hold down
energy inflation. The purpose of goal setting is not to set
up some sort of national energy plan but simply to have some
idea of where we're going so that as time goes by and evalua-
tions take place, we have some sense of whether we're making
progress. If we don't know where we want to go, we don't know
whether we're getting any closer from day to day. I know
there is evaluation going on at the Department of Energy. But
in public statements there is no relationship between the
results of those evaluations and what actually is decided in
national policy. The National Energy Plan, NEP 3 that is
about to be released by the Administration is an example.
What I've seen of it so far in draft form appears to be written
in a closed room somewhere without making any attempt to tie
92
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in all the evidence that is available and that could make the
decision appear more rational.
As it is, it kind of floats free and everyone questions
whether it has any relationship to any kind of goals. That's
the problem. There's just a perception that there is no direc-
tion.
DR. RIEGEL: We are overtime, unfortunately, so I think we will conclude
with our thanks. We will reconvene again at 1:00 for the after-
noon session.
(Whereupon, at 12:13 p.m., the hearing adjourned for the noon
recess).
93
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94
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PROCEEDINGS
3ULY 14, 1981
AFTERNOON SESSION
HEARING PANEL
Kurt Riegel
J. Michael Power
Andrew Glassberg
John Pfeiffer
WITNESSES
Robert Pauls
W. Kim Boas
Randi Triant
Betty Kahl
Paul Danels
Mart Kask
Floyd Ciruli
Betty Desper
Charles Lawrence
Joseph Prano
Howard Brown
Richard Kline
Anthony Maggiore
Peter Robinson
Keith Dorsey
Neal Gale
Acting Director, Office of
Environmental Engineering and Technology
Environmental Protection Agency
Director, Policy, Planning and Evaluation
Office of Conservation and Renewable Energy
Department of Energy
Professional Staff
House Energy and Commerce Committee
Budget Examiner
Office of Management and Budget
City of Carbondale, Illinois
Private Citizen
New York State Alliance of Community Action Agencies
Rhode Island Jobs in Energy
New York City Energy Office
Puget Sound Council of Governments
Colorado State Office of Energy Conservation
Total Action Against Poverty
New Jersey Energy Research Institute
Community Improvement Program
Middletown, Connecticut, Energy Advisor
S.C. Appalachian Regional Council of Governments
Milwaukee County Community Action Agency
Maynard Community Development Office
National Black Caucus of State Legislators
Private Citizen
95
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DR. RIEGEL: I'd like to welcome the next three witnesses here this
afternoon. Randi Triant, from the New York Community Action
Program; Kim Boas from the City of Dayton in Ohio; and Robert
Pauls, the City of Carbondale in Illinois.
We have a very long witness list this afternoon and I'd
like to ask the participants to keep their remarks short. I
will remind you again that prepared statements will be looked
at very carefully as a part of the record in compiling our
report. To the extent that you can simply summarize the
prepared statement, it might expedite the discussion to follow.
So let's start with Robert Pauls from the City of Carbon-
dale.
MR. PAULS: Hi. My name is Robert Pauls. I am the Energy Coordinator
for the City of Carbondale, Illinois. It's nice to see some
of you again, back again this year. When I decided to come
here, I debated several strategies for a presentation to make
to this group. My initial tendency was to, at the risk of
offending my born-again solar/ conservation advocate friends,
toe the company line and preach the heavenly glory of the in-
surmountable opportunities of the Reagan Administration's
supply side economics.
You know what I mean by supply side economics: "Strength
through exhaustion, burn America first, no one ever conserved
their way to greatness, and you can't waste energy you can't
afford."
Well, I decided I just couldn't do that. I couldn't preach
what I've come to call punk energy policy which rewrites his-
tory's great one liners to be amended now to read, "What's
that you say, the poor have no bread, well, let them eat block
grants the low regulation brand with 25 percent fewer
kilocalories."
In foregoing the first strategy, I thought that maybe I
could go to Washington D. C., this time instead of cup in
hand, begging for administrative mercy, for fiscal reprieve,
bare my solar soul and confess to others' past mismanagement,
fraud and abuse of taxpayer dollars for hackneyed, Federal
energy conservation programs and solar demonstration programs,
L.I.E.A.P. largesse in income transfer payments to the util-
ities in the guise of welfare for the truly needy, and the
near invisible, like the so-called stealth bomber, emergency
energy contingency plans.
96
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After much thought and procrastination, I decided that
come hellish war over Mideast oil or high prices at home, I
just couldn't do that. I must in all conscience fight back
what I consider to be, in agreement with Dennis Hayes, "the
open war on solar energy" and conservation by the Secretary of
Energy - Edwards and the President. I cannot stand by and see
America's best energy hopes methodically destroyed by fission
and fusion fussbudgets and oil oligarchies.
The Administration's attack on communities, their social
and economic fabric, will be fought on the homefront, in the
homes, businesses, cities and counties, and the fourth estate
of this country to counteract this new trend.
The war will be won in municipalities, such as ray own,
Carbondale, where from one perspective we seem to be playing
right into the hands of the new Administration by doing our
own thing, doing what the feds couldn't do, make a transition
to a conservation and renewables based economy one based on
our design, our own money, and our own vision of a safe and
sane future.
In Carbondale, we are preparing quite possibly in Ayatollah
style, to sever the hand that has quite frankly fed us in the
past, that has given us lots of money, the hand that has given
us the so-called Federal free lunch.
A feasibility report on the creation of what we believe to
be a truly comprehensive municipal solar utility (or MSU) for
Carbondale has just been completed, some 280 pages of an energy
menu, and we are about to partake of it. It is presently
undergoing a fast - track internal review. (This report was
reviewed, but not included in the Transcript due to its length).
Our MSU model was created by the Shawnee Solar Project,
which is a non-for-profit corporation in the City of Carbondale
and with it, we are proposing a Community Energy Development
Fund comprising an innovative energy consumption tax, of all
things, and direct but not necessarily essential, contributions
from the local investor-owned utility (IOU). They will be
likely the prime sources in the short run, but we are anticipa-
ting a complex merging of other creative financing mechanisms
to meet the marketing needs of our community.
97
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With this capital pool, our MSU proposes to provide four
intertwined program measures: 1) an energy audit and quality
assurance program, not so new; 2) an expanded energy education
program, something we've been doing for five, six years; 3>
an MSU conservation loan fund; and 4) a renewable energy pro-
duction capacity characterized by dispersed solar, hydro, and
cogeneration facilities.
If the federal menu of possible energy funds makes it out
of the Reagan kitchen, Carbondale will cautiously approach
these new greenbacks, this lunch, knowing full well that they
have more of a similarity to hors d 'oeuvres than a full lunch
finger sandwiches, if you will, that tend to reach out and
grasp communities and specify their destiny which may be in
conflict with what is really needed in that community.
The separate program measures we have for the MSU are not
all that unique in America. The different elements are in
existence in different communities in different forms. We
think ours is going to be a little bit different. Our skilled
energy auditors and combination "loan-a-ranger" will prescribe
like a house doctor and sell conservation like a new car
salesman. Other staff will make loans like your Uncle Fay and
educate you like Mr. Wizard. Others will make this all possi-
ble, but mostly our own citizens.
We propose to do this all in a municipality of some 27,000
people situated in the heart of high sulfur coal country and
what I term nuclear madness. We shall force our own future.
It has been said that if the only tool you have is a hammer,
you perceive all of your problems as nails. Well, that was
maybe the occasion in Carbondale. We drove our first nail on
our city vehicle fleet gasoline allocations back in '74, and
things have changed considerably since then. We've used Feder-
al monies, state monies, where we can, but we've done an awful
lot on our own too. Our new tool chest has swollen to where
we are no longer referred to as the Davis, California of the
Midwest. The recent comment, this week, in fact, was that
we're becoming the Wall Street in conservation and solar crea-
tivity. We now wield hammers, pliers, wrenches, levers and an
array of acronyms: HUD, CDBG, IBOP, SECP, F,ES, RCS, INR,
CIPS, ICC, SIUC, STC, SERI, DOE, EPA, MASEC, GERPDC, NACT,
SRAP SCATGP, NSHCIC and others too numerous to mention. Least
of all we use DOE and most of all we use S.E.L.F..
The Carbondale Energy Division which has been in existence
about a year and a half was created without outside funds in
mid-fiscal year, response which is absolutely unique for our
town. We did it in to unmitigated problems that either the
Federal or the state government could not handle or the market
place wouldn't approach.
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As I said, energy initiatives began in '74. Since that
time, I could characterize energy in Carbondale as one long
evolutionary energy education project interspersed, interrupted
by 300 brief public pauses to catch our breath.
There have been that many workshops in Carbondale, 300 in
the last four years. Other communities are now considering
entry into the energy conservation and survival game are going
to have a much harder time at it than we have. They have some
of us to look for examples, but they are also faced with some
rather large problems.
In Carbondale, we've got things sort of, you know, gentle
and nice already. We have an Appropriate Technology Resource
Center run by that same not-for-profit group. We've done the
whole array of projects that everybody talks about: from
infrared thermography to promoting bicycling, recycling, gar-
dening, solar greenhousing, energy auditing, alcohol fuels,
solar this, solar that, low cost/no cost conservation, wind
power, cogeneration and energy impact assessments, the works.
Carbondale has adopted a comprehensive energy plan, gone
out and really tried to make right the concept of public parti-
pation and make sure that what we do is truly our mandate and
not something falsely touted by others, such as occurs in
this town.
Many groups in Carbondale and especially the government,
now educate on energy, cajole, plead, beg, borrow, and as a
measure of last resort, mandate. Carbondale now has an energy
efficiency building code in a state without one. City govern-
ment enters the court to argue for utility reform, to assist
other local units of government to ask at no charge to answer
the myriad of phone calls from cold, freezing widows and out-
raged students, a whole list of things.
Carbondale is really where it's at now because of the
interest by its citizens as early as '74, some federal money
and unfailing support by its City Council on every single
energy measure that we have brought before it, and probably
it's been most assisted by the non-existent or inconsistent
state and Federal energy policy.
My intent in all this rambling has not been to act as a
head of tourism for Carbondale and say, come on out there,
it's all great. I've just been trying to say that we've come
a long way because we've had a long time to do it. Other
communities are not in the same boat. The demise of conserva-
tion and solar funds on the Federal scene, I think, are disas-
trous.
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Other communities cannot do what we have done, even if
they wanted to. We can't progress that much farther if we're
continuously facing increasing escalating fuel prices, and
accelerated natural gas deregulation. On that subject alone,
we're expecting, if deregulation is accelerated, our current
$25 million capital export that we currently lose now for
energy payments is going to, quadruple, $100 million a year
from a town of 27,000. Removal of the alleged regulatory
burden referred to in the National Energy Plan, and this
possible four fold increase in gas costs are going to devastate
our economy.
It's going to do more than that. It's going to cloud a
myriad of social issues, stifle freedom, threaten our internal
security and make reality the essential question shall I
heat or eat?
President Reagan's war policy on conservation and solar
really must crease. We must stop driving petropigs and living
in sieves. Price signals will work so poorly and make much
greater problems than exist under the threat of overregulation.
Coordinated efforts by all levels (and even we admitting that,
yes, we sometimes need the Feds,) will be necessary.
Without being too over dramatic and this may sound so, I
say given the choice, having made the most of my energy career
and the resources we have available to us, I choose as my last
lament, which I hope fervently the President shares, to not be
that from Anthony and Cleopatra, where Anthony utters upon
assessing his own bloody incompetence, "Not dead?" We don't
need that alternative.
The energy future is of our own making. The death throes
need not begin now. We have the potential in the hinterlands
to make the changes with or without the Federal government,
but it would sure help if we had them with us.
I have tried to make my remarks brief. I could go on for
six hours on municipal solar utility. I don't think that's
necessary unless you have questions.
DR. RIEGEL: Thank you very much. Before turning to Kim Boas, I'd like
to take advantage of a note I wrote myself this morning. The
first point is that at the morning session many of the witnes-
ses and panelists were very effective in making arguments
respecting conservation and its value and desirability now
and for the future.
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To the extent that it's possible to step beyond points
relating to conservation alone to the appropriate Federal role
and actions in pursuing the wisest course, we would certainly
appreciate those kinds of suggestions during these hearings.
The second point, mostly for the benefit of the future
speakers this afternoon, is that my arithmetic tells me that
we have an average of seven minutes per speaker, and with that,
we'll move on to Kim Boas from Dayton.
MR. BOAS: Although I am employed by the City of Dayton, I cannot
officially represent the City Government. My opinions are my
own and do not reflect the City of Dayton's position in regard
to Federal conservation programs. I can speak only of my
experiences in working with the City of Dayton.
For the past four years I have been employed as Energy
Analyst for the City of Dayton, Ohio. I like to say that I am
the City's Energy Program for I have worked with community
energy planning, community involvement and internal energy
management. My testimony concerns these three areas and the
Federal government's role in these efforts.
Since 1978 the City of Dayton has been involved in the
Comprehensive Community Energy Management Program, a Department
of Energy program to provide local governments with the means
to develop energy plans to deal with local energy concerns.
It was this program which brought the City to hire me from its
General Fund - not the grant. So it can be said that without
a Federal involvement in local energy conservation that a
position such as mine with the City of Dayton would not have
been created.
This would have been a detriment to the City's internal
energy effort, which through implementation of energy audit
recommendations will save over $100,000 this year in five of
the City's major facilities. Three of these buildings' energy
audits are currently being considered for Federal matching
grants under the Title III program. Although Title III does
not offer much incentive for local government involvement, I
felt that recouping any amount of Federal grant money, no
matter how small, will help induce more interest on the part
of Department Directors and Division Superintendents to have
their facilities audited.
One concern I have with Title III, besides the lack of
Federal funds for local government energy conservation measures
implementation, is the poor timing in the notification of parti-
pants. Notice of impending deadlines always seems to appear
at the last minute, which constrains participation on my part.
Most local energy offices have small staffs and have other job
commitments in addition to filing grant applications and in
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many local energy offices the staff consists of, as in my posi-
tion, one person. Other people involved in Title III are main-
tenance staff and also have little time to deal with short dead-
lines. A consistently timed Title III Program would be valuable
to all participants.
In addition to Title III and the CCEM Program, for the past
year, I have been assisting in the development of a community
involvement weatherization program with the local Community Ac-
tion Agency. This program, known as Project CASE or Community
Action Saves Energy, was created through the Department of
and developed in the ACTION Agency. It is a small-scale pro-
gram in Federal terms, but the local impact promises to be very
significant. Initial funding is from ACTION with additional
funds available through the Department of Energy's Weatheriza-
tion Assistance Program. These Federal dollars will not only
launch the program but purchase weatherization kits for the
low-income and elderly participants. Because of the community
involvement aspect of this program, not only will volunteers
provide staffing and training, but the local business community
will be involved by supplying training materials and materials
for additional weatherization kits.
It is probably true that the small amount of money this
program needed from the Federal government might have been
raised locally, but again I believe it was the commitment of
the Federal government to its conservation program which made
the very concept possible. A great disservice will be done if
that visible commitment is removed.
I have addressed by viewpoint from the local level with
Federal conservation programs I have been involved with di-
rectly. I would like to combine my comments on the other con-
servation programs with the general questions addressed in the
Section 11 issue paper.
The Ohio state government's Department of Energy is depen-
dent upon Federal funds in addition to state monies for its
operation. The new austerity budget at the state level has no
funds for the Ohio Department of Energy and it is expected that
ODOE will be dismantled within a year. So in addressing the
first question on assuming new responsibilities, it can be seen
that the state is not interested in this new burden. Nor can
local governments such as the City of Dayton assume a role
even approximating the Federal or state role in conservation.
The activities of private and public organizations getting
priority pertain to increasing revenue. As a consequence, all
energy using sectors will be at a disadvantage simply because
increasing revenue will not equal the rise of operating costs
due to rising energy prices.
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The situation (the Federal shift in conservation policy)
has not really congealed adequately for new initiatives and
opportunities to be noticed in the marketplace. It might be
that the Federal government's role in this transition period
should be to act as an information source on potential oppor-
tunities opening in the marketplace for conservation-related
businesses to develop.
In the evaluation of the Federal government's new energy
policies and programs, it might be wise to prove its point of
conservation as a function of the marketplace. This might be
done by comparing past programs, the level of conservation
achieved and program costs with the new programs and their
conservation and cost levels.
I would like to thank the Environmental Protection Agency
for its invitation to participate in the Section 11 Public
Hearings. I appreciate their interest in my efforts and my
opinions on energy conservation.
DR. RIEGEL: Thank you. Our last witness before turning to questions
and discussion is Randi Triant.
MS. TRIANT: Good afternoon, my name is Randi Triant. I am the para-
legal for the New York State Alliance of Community Action Agen-
cies. We are the statewide communicating and coordinating arm
of the 49 local CAA's throughout New York State. I welcome
this opportunity to provide recommendations on the adequacy of
the Federal conservation program.
The anti-poverty mandate of CAA's, and our years of experi-
ence in energy conservation establishes a record of advocacy
on behalf of some three million low-income energy consumers in
New York State. I would therefore like to very briefly present
two policy areas which must be addressed if our conservation
endeavors are to continue to be successful in the coming years
of budgetary austerity and energy scarcity. These two policy
areas are the New York State Weatherization Assistance Program
and the New York State Home Insulation Energy Conservation
Program.
Though the beginning years of the Weatherization Assistance
Program were riddled with problems of CETA labor allocation and
strict administrative regulations, the 80's began a new
efficient management plan designed to result in an increase in
completed projects and a more productive overall program. This
management plan has proved successful. During 1980, the Divi-
sion of Economic Opportunity began to monitor production and
vouchering very closely. Monthly training sessions for new
subgrantee Weatherization and fiscal staff members in addition
to other regular training sessions held for subgrantee staff
were practiced. These sessions were developed to provide
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training of all uniform statewide weatherization procedures.
In addition, DEO began to require on-site audits of each com-
pleted project by local agency personnel who were not involved
in the work performed at that site. Thus, workmanship and allo-
cation of weatherization materials were to be checked thorough-
ly. Finally, DEO recommended placement of fiscal staff in the
field offices to provide bookkeeping services and answer any
question regarding the financial aspect of the weatherization
project.
We realize that the present Administration's budget cuts
will severely impact the availability of CETA labor. We recog-
nize that we will be forced to look to private industry to pro-
vide the labor needed to continue the program. However, our
relationship with private construction firms has been success-
full in the past and it will continue to be so in the future.
The involvement DEO and CAA's have had in weatherization
has insured a steady expenditure of program funds to meet the
clearly identified need of elderly people. Originally funded
for 2 million dollars in FY 77, FY 81 appropriations increased
to 18 million dollars with an additional 9 million dollars to
be appropriated if funds are available and production is
maintained.
The program has shown marked improvement in the number of
units completed. While in 1978 only 4,000 homes were weathe-
rized in New York State, 17,054 units were completed in FY 79,
and 22,000 in FY 1980. Clearly, the program is highly produc-
tive in helping the poor and the elderly cope with the energy
crisis. In fact, New York was the top producer in weatheriza-
tion in the country through August 1980. However, the program
can only continue this production rate as long as the funds
are provided.
According to the Division of Economic Opportunity's
Weatherization Assistance Program Management Plan, which was
submitted to the U. S. Department of Energy in December 1980,
2,748,222, or 15.5% of the total New York State population,
live at or below the standard 125% of poverty level. The
elderly comprise approximately 1/5 of this figure. Without
adequate resources, this population is unable to pay for rising
fuel bills or improvements designed to increase energy effi-
ciency, insure lower bills in the future and thus, lower energy
assistance expenditures by government in the future. To simply
receive case assistance is not enough. The homes of the poor
must be weatherized in order to insure optimum warmth. A full
oil tank cannot keep the house warm if there is little or no
insulation, no storm windows and drafty doorways.
Despite the success of the program and continued need for
it, the Administration has proposed transferring the current
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Federal Weatherization Program into the Community Development
Block Grant with no additional funding of its own. As a result,
it will be forced to compete with sewer and highway projects,
projects which have long been a community priority. Secretary
Schweiker's Energy and Emergency Block Grant Program has no
provision that would limit administrative costs. No follow-up
report would be required on population served or benefits
paid. No deadline for processing applications would be stipu-
lated. No priority for the would-be handicapped would be
given. And 10% of the funds could be transferred to another
Health and Human Services block grant at the discretion of the
state. The quintessence of this proposal is the repeal provi-
sion, which would allow the legislation authorizing all the
different categorical programs to be eliminated in the event
the block grant approach does not work. Not only would the
Weatherization Assistance Program have to first compete with
other Human Services programs, but should the proposed block
grants fail, we will be forced to go back and introduce new
legislation authorizing this much needed program.
The Weatherization Assistance Program was intended to enable
low-income families to save money on home heating costs through
adding improvements to their houses such as insulation, weather-
stripping and storm windows. That such improvements decrease
heating costs is indisputable. CAA's can and will continue to
weatherize thousands of homes a year only as long as the pro-
gram is supported administratively and financially. Most indi-
vidual states are not able to appropriate enough funds to main-
tain the program as it is today.
We have finally started to solve the problems which hindered
Weatherization programs throughout New York State. We cannot
now in the face of considerable success begin an entirely new
program and believe that success will continue.
A second issue of importance in consideration is the acces-
sibility of energy audits and improvements to the aging housing
stock of the Northeast. The Federal program charged with this
responsibility is the Residential Conservation Service (RCS)
and within New York State, it operates in conjunction with
the Home Insulation and Energy Conservation Act in HIECA. I
would like to talk about the status of HIECA and improvements
in this area for improved home conservation.
HIECA includes three types of audits; the "A" audit on
which a utility inspects a home and provides a pay-back analy-
sis for $10; a "B" audit in which a utility provides a text of
instructions for site inspection by the homeowner and a pay-
back analysis for $3; and a "C" audit in which a utility pro-
vides audit workbooks for a customer to do both site inspection
and the payback analysis. This last class of audit is free.
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Once the audit is conducted, the utility provides the
customer with a list of contractors in the area who can install
the energy conservation measures. In addition, each utility
has made arrangements with at least two hanks in its area to
offer loans for these improvements. The interest rate is
generally between 9% and 11%.
The minimum allowable amount that can be loaned is $200.
The maximum amount loaned is $2,500 for a one-family house;
$3,500 for a two-family house; $4,000 for a three-family house;
$4,500 for a four-family house. These loans can be extended
up to seven years.
Solar and wind construction loans have a maximum of $1,500
higher than the above scale and can be extended up to fifteen
years.
In practice, this sensible framework has been inadequate.
After more than two years, less than 2% of eligible 1-3 family
households have received audits. Less than one tenth of one
percent of eligible households have received HIFCA loans. In
fact, only 6% of households that completed audits have also
completed suggested improvments with HIECA financing.
There are generally four areas conspicuouslv demanding
improvement in the NYS HIECA program; improvements which apply
equally to RCS and future Federal initiatives in conservation:
1) Utilities have been inactive and ineffective in perfor-
ming community outreach and publicity for energy audits
and improvement loans. Community based organizations
or state energy offices should be given this responsi-
bility if we expect it to reach the truly low-income
homeowner or energy consumer.
2) The fee of $10 or even $3 prohibits otherwise curious
and interested consumers from availing themselves of
the program. Energy audits should be free.
3) Low estimates of potential saving from improvements
are provided by utilities to HIECA participants. Cal-
culations are not updated frequently enough to keep up
with the ever-rising cost of home fuel supplies. State
energy offices should be charged with the responsibili-
ty for monitoring payback analysis.
4) Current procedures for HIECA loans result in a large
number of defaults, which has disillusioned many utili-
ty companies and prevented their optimum cooperation.
Homeowners taking advantage of HIECA should ideally
be able to pay for conservation improvements out of
the savings of fuel interest free loans with lower
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monthly payments would be a more sensible alternative
to the present 10% interest charge.
Rather than decreasing interest on loans, the utilities are
encouraging increasingly strict terms for HIECA loans; Roches-
ter Electric & Gas wants credit checks on each HIECA partici-
pant. Needless to say, this would negate the very intention
of insulating low-income, older homes and diminish the rate of
participation even further.
This is not the time to make HIECA more restrictive.
Amid the many HIECA amendments in NYS recently, one bill passed
which extended energy audits (but not utility loans) to multiple
dwellings. The same bill requires utilities to provide train-
ing for employees in conducting audits and offers free post
inspection.
The NYS alliance of CAP's encourages the EPA to consider
our recommendations on HIECA and the sense of momentum and
support for the program in the 1981 session of the NYS Legis-
lature. Federal and state initiatives in RCS and HIECA should
be compatible. Federal RCS regulations can be improved to
ensure a better HIECA program in NYS and a greater uniformity
in energy audit/conservation programs throughout the country.
As non-profit, private organizations, CAA's are willing to
extend their role in Weatherization and HIECA. Continued
participation of CAA's will only be possible through continued
financial support and compatible regulatory guidelines from
the Federal government, assuring that the programs operate
in the best interest of low-income consumers.
I might also add as a post note that since the writing of
this testimony, the $10 fee is no longer allowable, and the
audits are now completely free. That was recently passed in
the legislature.
DR. RIEGEL: Thank you. Questions and discussion?
MR. GLASSBERG: Yeah, I have a question for Mr. Pauls. Have you found
that your activities in Carbondale have ebbed and flowed
with the ebb and flow of Federal funds. In other words
MR. PAULS: Not at all, not one bit.
MR. GLASSBERG: In other words, the local initiative has carried your
program through almost independently of how the Federal funds
have flowed to your community?
MR. PAULS: It's like the less money there is sometimes, the more crea-
tive and innovative you can become. You find the sources,
being the financial or human resources, in different sectors.
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We've tried to utilize, and when I say we, I'm talking
about many different groups in town, tried to utilize a whole
range of services, and it's worked. It's pretty tight some-
times. Staffs of one agency, for example, swell and shrink
between 50 and 5, and that doesn't make for great job security,
but it gets the job done.
MR. GLASSBERG: If I could follow up on that for a second, would you feel
that if money were to flow to local governments to allow
innovative projects, such as those in Carbondale, do you think
it would force good programs, if those monies were to be on a
competitive basis so that there would have to be sufficient
intiative at the local level in order to get Federal funding?
MR. PAULS: Well,whenever you're talking competitive program,it depends
on who's doing the evaluation and what your criteria are. I
think there will be a great tendency to have some innovation,
but there will also be a tendency for more homogeneity from
the evaluators.
In some sense, the block grant principle is nice in that
it says the community can decide its own solutions according
to its own problems. It just depends on how you structure it.
MR. POWER: Just a question about this Municipal Solar Utility. Do you
have a write-up on that, and what was the plan around which
that was confronted? Did you create your own institutional
framework? You might describe some of the basic principles.
MR. PAULS: A quick summary. The program was a research study. It was
was co-funded by the city for $5000, and the state kicked in 45.
It was a one-year project. It went through three different
phases. It: was looking at the free lunch from the Feds at
first and looking into the conservation bank in the second
phase, and all those things just fell aside, and we were
sort of glad, because it ended up bringing us all back home
and looking at what was possible there.
The format was that we subcontracted it to a non-profit
group in our community, and they did a hell of a good job
researching what is available, what the legal issues are,
what's possible within the statutory constitutional limits
within our state for both home rule and non-home rule cities.
I don't know if I've answered your question properly.
MR. POWER: I guess any comment you might have about reaction of
existing entities, like utilities and banks and community
authorities, how they've reacted to the creation of this entity,
if it's occurred yet.
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MR. PAULS: I'll give you the reaction of four different groups. The
utilities when they were approached with this initially, infor-
mally, the first question was after understanding the concept,
have you talked to any other communities about this, like oh,
boy, we're not ready for this.
As for the community, we talked to the citizen utility
reform kind of groups, which we have a big one in our area, and
they seemed to be very supportive of it. The homeowners
association is supportive of it. We think we have our Chamber of
Commerce to back it, and the reaction of the city administ-
ration, which is different than City Council, is, hey, the
model may not be exactly what we're going to do, but it sure
makes sense. It's within the purview of local government to
help public welfare and something we ought to look at, even
though maybe not in the final form that the model talks about.
As for the City Council, they have not acted on it formally
ordinance wise, but they're gung ho. They want to go with it.
One quick comment on Randi's testimony. I think she is
outlining the problems of energy audits that we have tried to
overcome in our structuring of this. The success of a program
is very much on how you market it and how you define your
clientele. The problem there seems to be, I don't know, you've
got a lot of them there, but we're hoping that you can sell
the program, not simply put it out there and say, come get me.
You have to educate so that people want it.
DR. RIEGEL: I wonder, Randi, if you've run across any perception in
the public that the audit is in any sense perceived as unreli-
able or does not provide information beyond that which most
homeowners already have available to them before the audit is
conducted. Is that a part of the marketing problem aside
from the $10 charge that you mentioned as a barrier before?
MS. TRIANT: Yes, very much so, especially throughout New York State I
think we're being confronted with the problem that when the
utilities are given the go-ahead on an audit, somebody does
sign up for it, for a large part, they are not doing an ade-
quate job in the audit, and, as a result, simply by word of
mouth, people are telling other people that the audit really
isn't worth their time and effort.
What's happening is that the utility representative will
come in and do a five-minute audit and won't thoroughly check
the insulation, won't get into the attic, won't get into the
basement and check the oil tank or whatever needs to be checked.
As a result, the Alliance is going to be conducting a survey
because recent legislation has a provision, and this has passed
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also this session, which will enable CAP's to be an entity that
will be able to do audits.
Something like a subcontracting system will be set up with
the utilities and the CAP's. The CAP's are doing a much better
job, especially when it comes in terms of low-income people.
They're more likely to turn to a CAP and say, well, we know
them, for other services, and they know them personally, and
the CAP's have the time to go in and thoroughly check the
houses.
As a result, it's kind of changing more or less toward the
CAP dominated kind of procedure.
DR. RIEGEL: The next three scheduled speakers are Betty Kahl, Paul
Danels, and Mart Kask, if they are all present. Mr. Kask is
with the Puget Sound Council of Governments; Betty Kahl is
from Rhode Island Jobs and Energy organization, and Paul Danels
is with the New York City Energy Office.
Let's start with Betty Kahl.
MS. KAHL: Good afternoon. My name is Betty Kahl. I am a VISTA
Volunteer and a community organizer for a national community
based organization: Congress for a Working America. Congress
for a Working America has organizations in Rhode Island and in
Milwaukee, Wisconsin. I work for the Rhode Island group,
Rhode Island Jobs in Energy.
Rhode Island Jobs in Energy has been designated a Community
Energy Project by ACTION. We have also just been appointed to
coordinate Rhode Island's participation in the International
Energy Days Competition. Our organization's basic goal is to
make ongoing human needs and dignity the United States' first
priority through actions rooted in citizen participation, and
focused on those most in need, by creating and perpetuating a
full employment program that:
o continually creates employment for those who are or
potentially will be unemployed and for those who are
underemployed
o produces goods and services that will meet human needs,
improve the quality of life,and respect the environment
o and builds economic security for all within a stable
peacetime economy
We are focusing on energy because of the job creation potential
in the fields of energy conservation and weatherization.
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Last January, the Rhode Island Jobs in Energy Project, in
conjunction with a local Senior agency and the City of Pawtuc-
ket, Rhode Island, ran a low cost/no cost weatherization program
for seniors. The money for the materials came originally from
the Department of Energy as part of the Low Income Energy As-
sistance Program to the State of Rhode Island's Department of
Community Affairs. The state then purchased low cost/no cost
weatherization kits and distributed them to the Department of
Elderly Affairs and the state Community Action Programs. In
trying to track down these kits, we found that not very many
people knew about them, and even fewer could tell us where
they were or how to gain access to them. But persistence pre-
vailed and we were authorized to distribute 500 weatheriza-
tion kits. Through the Pawtucket Public Service CETA program
we hired and trained eight previously unemployed people to
install the kits in senior households. In February, we con-
vinced the Blackstone Valley of Rhode Island.
In addition, we conducted informational low cost/no cost
weatherization seminars in which we demonstrated and explained
to hundreds of Rhode Islanders weatherization techniques to
keep them warmer and reduce their fuel bills.
In talking with people we find they are uninformed or
have wrong ideas about energy conservation. Rising fuel bills
alone are not enough to make most people take steps to save
energy; this is especially true of renters. Reasons for
failure to weatherize are many:
o people receive their fuel bills only after they have
consumed the energy, so they are less likely to take
preventatlve steps to conserve
o folks cannot see energy escaping and most weatheriza-
tion materials are not clearly visible
o many, many people are not aware of low cost/no cost
weatherization techniques and feel they must spend
thousands of dollars on insulation to see any reduction
of their fuel bills
o many of the seniors we worked with were unable to
install even the low cost weatherization materials
themselves
o renters generally assume that they need the landlord's
permission for any type of weatherization measure
o those who do try to weatherize are often confused about
what their homes need as well as what kinds of energy-
saving materials to buy
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o those people who are able to purchase materials need to
know the proper ways to install them
Getting information across to people is extremely effective
when done in a small meeting approach, preferably in someone's
home. Large group presentations are generally boring, more
cumbersome, and it is much more difficult to demonstrate the
proper installation of weatherization materials than simply
have an oral presentation; and better yet to have the house-
meeting participants practice caulking or weatherstripping win-
dows and doors.
The Residential Conservation Service Program, known locally
as RISE, Rhode Islanders' Saving Energy, provides an energy
audit that identifies what is needed, makes recommendations
about materials and contractors, and perhaps most importantly,
gets people actively involved in learning about the weatheriza-
tion needs of their own homes. We have found door-to-door
canvassing a very good way to convince people to have an energy
audit done of their home. Another method we are going to do
this fall is to have people get an infrared photograph (which
are provided free from RISE as well) of the heat loss from
their homes. The photos demonstrate very graphically (thus
actually allowing folks to see heat escaping from windows and
doors) the process of infiltration.
Many more major weatherization measures would be undertaken
by homeowners if affordable financing were readily available.
Currently with interest rates at approximately 18% financing
is an enormous problem. If we could offer people loans at
anywhere from 3-10%, much of the weatherization problems for
middle-class homeowners would solve themselves.
As we see it, two possibilities currently exist for middle-
class people. The Rhode Island Mortgage and Finance Corporation
may be able to offer loans for energy conservation at from
12-15% interest. In addition, some monies from Community
Development Block Grants may be funneled into low-interest
weatherization loans. However, as you know, block grants are
to be cut approximately 25% overall in the coming years.
Also, those monies have traditionally gone to support housing
code enforcement and the 312 Rehabilitation Loan Program. So
redirecting any money for low-interest weatherization loans
will be very difficult.
Working class people need no-interest loans to be able to
do major home weatherization. And even poorer people must
depend on subsidies to insure manageable fuel bills this winter.
Utility companies, banks, private industry, and/or local,
state, and Federal governments must provide the necessary
financing mentioned above. If they do not, the middle-class
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will become even more discontented, poorer people will face
harder choices with fewer and fewer resources, and this country
will continue to deplete its economy by spending $100 billion
dollars a year on foreign oil.
In conclusion, I feel that our country has a choice of
economic priorities. We can either continue to subsidize big
business (and big oil) or we can make a commitment to stimulate
the economy by putting people back to work. I am fearful that
most of the work we and others have done this year and others
have done this year is going to go down the drain in light of
the budget cuts. But I am even more outraged that in this
country many people are going to face next winter having to
choose between heating their homes or feeding their families,
and in the end when all the testimony is read and your report
has been written, a lot of people will have frozen to death.
DR. RIEGEL: All right, thank you. Next is Paul Danels.
MR. DANELS: My name is Paul Danels, and I am Legislative Counsel and
Director of the Utility Analysis Unit for the New York City
Energy Office. The Energy Office is responsible for the formu-
lation and coordination of the City's Energy Policy. On be-
half of Mayor Koch and Robert M. Herzog, Director of the New
York City Energy Office, I'd like to thank you for the opportu-
nity to present the City's views on Federal energy conservation
efforts for the Environmental Protection Agency's Section 11
Program Review.
The Reagan Administration has embarked upon a new course
for the nation's energy policy, one which places the primary
responsibility for energy, and particularly the areas of con-
servation and renewables squarely in the marketplace. The
thrust of this new approach is that a free market functioning
in the absence of distortions and imperfections is the best
framework for the allocation of our energy resources.
To spearhead this policy, the President decontrolled the
price of domestic oil as one of his first acts of office.
Beyond this first step, however, little else has been done.
If the energy marketplace could be made free of distortions
by simply decontrolling oil prices, this policy would be both
acceptable and effective. Yet decontrol alone does not consti-
tute an effective energy policy. Decontrol is not sufficient
to correct marketplace imperfections which have persisted and
have become virtually institutionalized over several decades.
On the contrary, it is necessary to insure that all the
components of a free market are in place before we begin to
rely solely on its ability to foster economically and socially
rational decisions on energy.
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A key element of a fully functioning free market is the
availability of, and access to, accurate and credible informa-
tion about various energy options. Currently, the information
about these energy options, especially about conservation and
renewable options is in disarray.
Energy consumers often have no idea as to what opportunities
are available to improve the efficiency of their energy use
or to utilize less expensive fuel sources. For example, in
New York City, we have found that many homeowners and land-
lords are unaware of even simple, low-cost ways to improve
their energy efficiency and a result, reduce their energy
costs, even though the price of heating oil has risen astrono-
mically during the past few years.
In those areas where information is available, there are
oftentimes no established criteria by which it can be evaluated.
Thus, consumers are faced with good and bad products, but
without any means to distinguish among them.
This produces an enormous uncertainty among energy users
about available energy efficiency opportunities, often result-
ing in a total lack of consumer action.
This inactivity, in turn, impedes the timely development
of the role of energy conservation in the marketplace.
Although it would be inappropriate for any governmental
agency to endorse one product over another, it is reasonable
and appropriate for government to educate the public regarding
energy alternatives. By providing information which fosters
rational decision-making in the energy marketplace, the availa-
bility of credible information about how energy is used and
the opportunities which exist to use it more efficiently need
to be improved, prior to an optimal marketplace allocation of
energy resources.
However, providing better quality information addresses
only one of the problems which unbalance the energy marketplace.
Currently, different energy alternatives have unequal access
to financing mechanisms.
Thus, access to capital rather than energy efficiency is
often the determining factor in energy decision-making. For
example, the decision of an electric utility to expand genera-
ting capacity cannot be compared with that of a homeowner's
decision to purchase more efficient air conditioners. Finan-
cing conditions, such as interest rates and terms of repayment,
are hardly comparable for these two options, and are often
skewed favorably towards the utility, despite the fact that in
many cases a more rapid turnover of appliances such as air
conditioners is actually the better energy and economic deci-
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sion, providing a more economically favorable result at a lower
cost and at a shorter time.
It is necessary that we as energy planners at all levels
of government take the necessary actions to insure equal access
to capital and equal financing conditions for all energy op-
tions. Only with these measures in place can we have confi-
dence that the market will operate most efficiently.
Thus, rather than allowing us to operate in a perfect
world as the Administration had hoped, decontrol has provided
only one piece of a larger mosaic of actions which are necessary
to promote greater energy efficiency. In fact, in absence of
all the necessary conditions for the marketplace to operate
efficiently, the decontrol of oil will only exacerbate the sys-
temic problems which impede progress towards a more efficient
economy.
By raising the cost of energy even higher, decontrol has
forced energy users to commit more of their already limited
budgets to direct energy purchases, making it increasingly
difficult for them to invest in energy conserving measures.
We must address the inequities of decontrol to insure that its
benefit and burdens are distributed fairly.
An aggressive program aimed at improving energy efficiency
is clearly the best approach. We agree with the Administra-
tion's view that energy conservation activities are best car-
ried out on a decentralized level through programs run by state
and local governments, as well as by private organizations.
This is particularly true of cities, since by their very
nature, they lend themselves well to efficient site-specific
applications of technologies such as district heating and
cogeneration.
Thus, a shift in responsibility for these activities to
the local level can, in fact, produce a more efficient imple-
mentation of energy conservation programs by removing a layer
of Federal bureaucracy. However, without the financial resour-
ces to carry out these programs, the new Federal initiatives
to restore local control will have no effect at all.
Simply stated, without funding, local energy conservation
programs will be severely limited and possibly curtailed alto-
gether.
For some time now, New York City has been preparing to
assume a greater role in controlling its energy future. The
City's Energy Office has completed a detailed end-use analysis
of local energy demand as well as a comparative economic analy-
sis of local electric generation and conservation options.
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We have instituted a far-reaching educational program to
better inform city energy users about ways to achieve greater
levels of efficiency. We have also moved ahead with major
projects to utilize garbage as an energy source, to study the
feasibility of district heating in the City, and to improve
the efficiency of energy use in city-owned buildings, to name
just a few.
The city will try to carry out these and other programs in
light of the new budget cuts, but, frankly, our efforts will
be hampered if the Federal government does indeed choose to
abdicate their present responsibility to insure program funding.
If Federal funding for energy conservation is severely cut,
it is likely that many current activities will be reduced in
scope or eliminated altogether. Unfortunately, it is often
the big ticket or sexy technologies which get priority, while
the neighborhood and household scale opportunities go unnoticed.
Yet in many cases, these decentralized programs such as weather-
ization provide the greatest amount of energy savings for the
least cost.
Furthermore, these programs often have immediate and posi-
tive impacts for thousands of individual households. Their
elimination will result in a large negative impact on middle
and lower income households nationwide.
The Federal government can go a long way towards promoting
increased energy efficiency without burdening states and cities
with excessive regulation. Energy block grants should be pro-
vided to cities affording them the opportunity to create locally
appropriate programs x^ithout imposing unnecessary controls.
In addition, research and development efforts should be ex-
panded in the area of energy conservation, relieving state
and local governments of this costly, and risky, burden.
Demonstration projects which clearly show the energy and
economic benefits of conservation activity should be established
in all areas of the country, each being geared to meet local
needs and problems.
The Federal governnent should work with state and local
officials to establish neighborhood energy centers. These
centers could be used to distribute information to local resi-
dents and businesses about energy conservation opportunities
while also serving as a neighborhood energy monitoring center.
Data on local energy use could then be collected along with
information about local firms which provide energy-related
services. This information could then be disseminated to those
seeking to use these services, providing a degree of quality
control which does not currently exist in this market.
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Over the past several years, we have all learned two very
important lessons about energy. The first is that uncertainty
is pervasive in the planning process. Our perspectives on the
past have given us little knowledge about what to expect in
the future.
Second, there is no single solution to our energy needs.
Different areas of the country face dissimilar problems and
opportunities. Thus, it is impossible to embark upon a single
narrowly defined national energy policy. It is necessary,
however, that energy planners recognize this uncertainty and
the diversity of options and provide programs which are suffi-
ciently flexible to achieve those goals which are consistent
with local needs as well as national interests.
A set of successful government and private sector initia-
tives aimed at improving energy efficiency use can do this at
a lower cost than any other alternative. Furthermore, the
available evidence indicates that not only is an energy con-
servation strategy the least cost, most environmentally benign
approach, but that it is economically productive in terms of
creating new employment opportunities.
Given these benefits, it would seem that the Federal gov-
ernment should be fostering the development of thousands of
local energy conservation programs rather than insuring their
demise through short-sighted budget cutting. A more efficient
energy system is a national priority, and the Federal government
has an important role to play if it is to become a reality.
It must be remembered that energy is not just a national
or international issue. Based on their knowledge of local
institutions, business and residents, cities are best equipped
to develop energy programs which are feasible and realistic to
implement at the local level.
Cities need the support of a reasonable and consistent
national framework for energy policy and access to the resources
necessary to achieve locally appropriate goals. The Federal
government must recognize these needs and take actions which
will insure that cities can make their contribution. Thank
you.
DR. RIEGEL: Thank you. Mart Kask is the Executive Director of the Puget
Sound Council of Governments in Seattle.
MR. KASK: Thank you. I have given out my testimony.
a couple of points in very short form.
I will underline
The Council of Governments is an association of cities and
counties around the Puget Sound Area, the central city being
the City of Seattle. Our organization was formed in 1957 to
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deal with area wide problems, such as water quality, air
quality, transportation, housing and now energy.
I flew over yesterday, and it rained in Seattle. Rain in
Seattle and the Puget Sound area is energy. We collect the
water behind dams during the summertime and melt the snow
back in the spring, we generate hydropower.
The dams built on the Columbia and its tributaries have
reached saturation. We no longer have dam sites and, therefore,
we have run out of hydropower, but nevertheless, the population
in the State of Washington keeps growing. Our current 1980
population is about 4 1/2 million and expected to grow to about
6 million by the year 2000. We need more electricity.
Then we need to resort to thermal power, such as coal
fired plants and nuclear plants. We know that the cost of
thermal power is considerably more than hydropower. To give
you an example, the current hydropower at the retail end is
about 17 to 22 mils, and we are talking about 40 to 60 mil
nuclear power, and also up to 80 mils in some coal fired plant
situations.
It became a question to us in the Northwest: Who's entitled
to the cheap hydropower, and. who must pay the high price of
thermal power? And we tried to solve that at the local level.
However, since our hydropower contributes to the power supply
in four states, it became a Federal issue.
Congress in the last session enacted the Northwest Power
Bill which, in essence, does three things. It melts the low-
cost hydropower with the higher cost of nuclear power. It
calls for guarantee of purchase of power by the Bonneville
Power Administration of any new power plants, and also calls
for a substantial conservation effort on the part of local
government, states, the Federal government, prior to commitment
to construction of nuclear or thermal power.
This act was enacted by Congress, and we are now implement-
ing this act. But prior to the passage of the act, the Bonne-
ville Power Administration began to outline some of the things
that it can do with local governments.
They contracted with the Puget Sound Council of Governments
to develop a local government workbook. The workbook is
designed to enable local governments to identify what can be
done in the area of conservation. What can be done by whom,
and not all actions are necessarily actions of local government.
Some can be done by utilities, some by local governments,
some by individuals, and many are obviously joint efforts.
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The workbook is in a simple form. It identifies 20 ques-
tions that can be answered yes or no, and if the answer is
yes, we have, for instance, in the city a zoning and subdivi-
sion code that takes into consideration energy conservation.
Then you go to the next question, and it sort of gradually
builds up to some pretty high-powered questions leading to
questions of garbage burning projects among cities, counties,
and also many of our water supply systems, our gravity systems
coming from the hills, and we have discovered that many of
them are available to install a low-head hydro projects in there
and generate some electricity.
So the workbook goes through this array of 20 questions
starting with very simple questions and leading to very inten-
sive kinds of projects. If the answer is yes, then it
points out in the book what is the next step that can be taken
and what are the specifics one has to follow in order to bring
this project on line.
There is incentive for doing that because the Bonneville
Power Administration provides some capital for the construction
of these projects and also buys the power generated as a
result of these projects or the conservation generated by
these projects.
The second effort we are carrying out is the application
of this workbook. We have received a grant from BPA to apply
this in one of our counties. What we will do and have done is
we go and sit down with each City Council and their administra-
tive people and go through the workbook and identify what they
have and what are their potentials for energy conservation.
Once these are identified, that's where we leave the city or
county on their own to take the next step and prepare a speci-
fic program for action and work with the utility and the BPA
for the implementation of the project.
The net result is conservation, which is a supply of energy.
This is what we're doing. I appreciate the opportunity to
discuss this with you. We are very excited about it, and I
think that the results that we have achieved will be even
greater when we complete these projects and lead to imple-
mentation. Thank you.
*************
FOLLOWING IS MR. KASK'S WRITTEN STATEMENT
The Puget Sound Council of Governments is an association
of local governments with the primary purpose of policy devel-
opment and regional coordination in the planning of programs,
projects and activities in the local government sector. The
Puget Sound Council of Governments has 56 local government
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members including four counties and four Indian tribes. The
constituency of the elected officials representing the 56
local government members comprises over 50 percent of the
population of the State of Washington.
The local government members of the Puget Sound Council
are working, together with private firms, the state government
and other local agencies, to prepare to assume their new energy
management responsibilities. A program to take a hands-on
approach to solving energy management problems at the local
level has evolved over the past two years. A year ago the
Puget Sound Council completed a workbook for use by local
general purpose governments as a guide to preparing local
energy management plans. The content and format of the three-
volume manual was shaped by the results of a PSCOG survey of
1000 local governments in the four-state Pacific Northwest
Region.
The workbook recommends a planning process built around
a simple but comprehensive exercise one in which the local
staff gives yes and no answers to twenty questions. The answers
help them select local energy management actions tailored to
the needs of their particular community. A favorable response
to the workbook and its unique approach has led to the funding
by the U.S. Department of Energy of an energy management plan-
ning implementation pilot project.
During the first phase of the pilot project, each of the
study area's local general purpose governments will be guided
through the workbook's 20-question exercise in two-to-three
hour meetings with key local staff and elected officials.
During this same period an orientation meeting for local energy
advocacy and economic interest groups within the study area
will be hosted. Attendees will be briefed on the scope and
expectations of the project and asked if and how they might
like to participate in the formulation of the energy management
plan. Opportunities for participation in the project will be
offered by a special citizen's advisory group made up of ap-
pointed local representatives and other citizens.
The Subregional Councils of the Puget Sound Council will
become the coordinating bodies for development of the energy
management plan. Technical advisory committees to the Subre-
gional Councils will be asked to expand to include local elec-
trical utilities' staff and other local experts to advise
other local experts to advise the councils on technical issues
to be addressed in the course of the project.
After all eligible local governments in the study area
have completed the 20-question workbook exercise, a report on
the findings will be prepared and circulated as a first step
toward formulating a regional energy management plan. The
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contents and scope of the final plan will depend on the results
of the workshops and local plans, which will form the hasis of
the final document. Some common themes are already emerging:
updated building, zoning and subdivision codes; a program to
audit local local government buildings; and contingency plans
for emergency energy curtailment.
It is hoped that when specific conservation and renewable
resource projects are identified, these projects will receive
priority from the utilities and the private sector as well as
the local governments. The whole intent of the program is
that by working through this process together, public and
private agencies can agree on what energy management actions
must be done, how to to get them done, and then proceed to
implement the actions cooperatively.
The Pacific Northwest Power Act has provided great incen-
tives for implementing cost-effective electrical management ac-
tions. Through this Act BPA can fund planning activities such
as our program, that lead to cost-effective energy projects.
It also overcomes economic inhibitors inherent in large scale
energy supply systems. The economic inhibitors primarily con-
sist of the retail cost of conservation and renewable resource
actions being greater than large scale systems' retail costs,
even though the marginal costs for new large scale systems
exceed the marginal costs for conservation and direct applica-
tion renewable resource activities. The result is that it
costs more for the consumer to implement the most cost-effec-
tive projects because the burden of financing conservation
and direct source renewable resource activities must be borne
directly and totally by the consumer. The Pacific Northwest
Power Act allows the marginal costs of the more cost-effec-
tive consumer oriented activities to be melded into the rates
of the large regional system, thereby allowing the more cost-
effective energy to be made available to the region without
a penalty to consumers.
The federal government can greatly assist local governments,
other energy consumers and energy suppliers by implementing
similar legislation to the Pacific Northwest Power Act for
other energy forms. One bill that helps to do this is the
state and local government energy block grant bill. This
bill, providing approximately $60 million for local energy
strategies and implementation, would be of great benefit to
local governments. An additional incentive that should be
included in this bill, however, is an incentive that encourages
local governments to work through councils of governments and
other associations of local governments to plan for and imple-
ment energy management actions. The economies of scale for
coordinated programs are great, especially in the planning
period. Our pilot project has demonstrated this to the extent
that our other local government members have asked us to imple-
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ment similar activities for them. One of the main reasons for
their request is the cost-effectiveness of working through the
PSCOG.
I very much appreciate this opportunity to share with you
what we are doing and heartily recommend similar programs for
implementation throughout the nation for all energy forms.
Because of the Pacific Northwest Power Act, the greatest need
in the Pacific Northwest is for legislation to implement for
oil and natural gas programs similar to those authorized by
the Power Act for electrical energy.
DR. RIEGEL: Thank you. We are now ready for questions and discussion.
MR. POWER: Mr. Danels, I was curious as to why the City of Carbondale
has a thriving conservation program with almost no Federal
resources, and the City of New York asserts that in the absence
of Federal resources, it would have no Federal conservation
program at all.
MR. DANELS: Well, for example, one problem we have is with the weather-
ization program. In its attempt to cut Federal bureaucracy,
the Department of Energy insists on different tests for eligi-
bility for Federal program monies for weatherization than
every other Federal agency, that is, using census tracts for
certification for eligibles.
By using individual apartment dweller eligibility, that
is, going into the ghetto and certifying families in each
dwelling unit, when there are maybe 18, 20, 25, 50, 150 dwel-
ling units that have to be certified all together before a
building can be done, it makes it virtually impossible for
the program to operate.
That's one example of how if DOE were to come around with
HUD and all the other Federal agencies to certify eligibility
for programs, it would make the implementation of the program
much better.
Now our conservation efforts also hinge on a different set
of circumstances energy-wise in New York City. I really don't
know the energy situation in Carbondale. In New York City,
we don't heat with electricity. We heat with heating oil,
delivered by trucks to homes and apartments, and mainly multi-
family dwellings.
Teaching an electrical utility about insulation of homes
when they're not going to save a kilowatt, and in any case,
have a 50 percent over capacity in the system as well and a
shrinking demand in the system or a very small growth in demand,
makes it very difficult to get utilities in the area, particu-
larly our major utility, Con Edison, to aggressively pursue
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conservation in New York City when the demand is very flat in
the first place.
So we have to look for alternatives other than the market-
place to stimulate conservation if we're going to reduce our
oil dependence. It's very difficult to convince a utility
that sells electricity to get homeowners and apartment dwellers
to conserve oil, which is not their thing. They don't heat
homes. Con Edison doesn't heat our homes. We don't have
electrical heat.
They had it upstate where it's a half cent a kilowatt
hour, but we're now paying 17 cents a kilowatt hour for elec-
tricity.
MR. POWER: I had two questions for Betty Kahl. One was a remark in
your presentation where you said you felt that if you could
offer people low interest loans that that would be very attrac-
tive, and the other, I guess, issue was where you said you'd
like to provide no interest support for lower income households.
Have you done any analysis looking at the LIEAP program
just to see what kind of trade-offs exist in terms of providing
it seems to imply that you would suggest that people just
have to depend upon the assistance payments, but have you
looked at any economic trade-offs between weatherizing and
just paying lump sum payments?
MS. KAHL: Well, I guess I would not recommend reducing the LIEAP pro-
gram and giving that payment to people to weatherize their
homes, because I don't think they would do it, because at that
level, I don't think people generally are aware enough about
what to do, how to do it, and I'm afraid the resources would
not be readily available for them to do so.
Plus, their main concern at that point when that money
comes through is paying last month's oil bill. It's not like
they have money that's just saved away so that they can get
some weatherization. The money is going to pay last month's
oil bill, and the contractor, the oil man is calling them up
right then and saying, hey, we're going to cut your oil off,
or the gas company is going to cut the gas off unless last
month's bill is paid.
People are continually behind in their payments because it
is so expensive, and because they live in substandard housing
in which the energy efficiency is very, very low.
I can see requiring some low interest weatherization pro-
grams be tied into the LIEAP program, but only if you're not
going to take away money from the LIEAP program to pay for the
low interest weatherization, because when you do that, there's
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going to be a time lag, I think , in the time it's going to
take to get people's homes weatherized, and in that difference
of time, people are going to have some real problems heating
their houses.
MR. POWER: Do you attempt to identify weatherization candidates based
on the LIEAP program?
MS. KAHL: That's what our program was. All the weatherization candi-
dates were LIEAP recipients.
DR. RIEGEL: A number of witnesses today have pointed out the rationale
for continued Federal involvement in conservation activities.
They cite market imperfections, the inability of the market
to reflect certain forces in pricing and investment decisions,
and others. Paul, you were one of those witnesses, and you
pointed out that information plays a critical role in assisting
a consumer or investor who may have a chance to come out better
for an investment than by foregoing it.
Are there any particular Federal information activities
that you see as being meritorious and that the Department of
Energy ought to keep in mind as it looks toward the future and
its changed priorities?
MR. DANELS: Well, first in the area of information, to give you a good
example that we've encountered, we encouraged the Public Devel-
opment Corporation, which is an industrial development corpora-
tion to develop industrial parks in the city, to embark upon
an audit program. They could not give away free audits to
firms in the city when they first started until we became
involved with them.
We began to just knock on doors, and then we got the con-
tractors to offer a guarantee, along with their audit, that if
they were to institute these measures, they would have certain
energy savings. Otherwise, the firm would make up the differ-
ence. That the businessmen understood.
So it's that information. I mean these are businessmen
who we were talking to, not homeowners. These are people who
are looking at their bottom line. But then again, when energy
is maybe 3 to 5 percent of a business' operating cost, and
you're reducing it to 2 1/2 percent, you'd have a lot of talking
to do. And these are business people with sound business
experience, and they're interested not just in net, but in net
net. The auditing firm could go in and demonstrate on a cost
basis, less than a five-year payback. Often under the Type A
audits we offered, there was less than a one-year payback on
some of the measures.
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They still couldn't sell it until they got in there and
did a hard sell on the companies. These are not just the engi-
neers, but the mechanical people.
Now in the other area, there's a terrific opportunity for
what I think is a very low cost program, and that is the loan
guarantee program for looking into the new urban technologies
for resource recovery, district heating, cogeneration on de-
centralized systems, and energy cells. These are things that
every city in the country can take advantage of.
We see terrific potential for cogenerating district heat-
ing. But these resource recovery plants are extremely specu-
lative, if you think of what Monsanto tried to do in Baltimore
a few years ago and the colossal failure of their effort. It
was tried again up in New England with some more success, but
to ask a municipality, which has its back up against the wall
because of the Federal laws against landfills, and no more
ocean dumping and with good reason, because of the leachate
problems and other environmental problems, we understand. We'd
love to burn garbage, but nobody really knows how to do it,
and the European experience isn't necessarily transferable
given the mixture of the garbage we have to deal with. These
are problems that the cities across the country are facing.
We think it's an appropriate role for the Federal govern-
ment to provide loan guarantees, if not the direct loans.
Give the loan guarantees so that we can go to the private
sector and have access to the market, because these are consi-
dered by bankers to be exotic technologies in the same way as
the conservation technologies.
Talk to the bankers. We go and we talk to our banks all
the time. We're part of the Office of Fconomic Development.
When you talk to them about conservation, it's still exotic.
It still has not yet reached the levels of the man who gives
the loan to even Helmsley Speer to do work in their apartment
buildings, and to say the least, the owners of 19 unit build-
ings built in 1895 that are leaking like hell, and we can't
get them fixed up, because they can't get a loan at less than
21 percent interest, and that shoots the payback period when
you hit that kind of interest rate. So we must get to the
banking community and get them to understand that there is a
reasonable payback, that we're not talking about exotic tech-
nologies. We're beginning to do that through our office, but
it would help a lot if we had some sound information coming.
Instead of negative information about conservation, positive
information about the value of conservation and its cost-effec-
tiveness and the value of it as a tool for economic efficiency
in our system.
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Then I think in the financial community, as
business community, things would improve.
well as the
DR. RIEGEL: Thanks very much. We'll go on now to the next three wit-
nesses: Floyd Ciruli, Betty Desper, and Charles Lawrence.
Floyd Ciruli is from the Colorado Energy Conservation Office.
Betty Desper is from the Total Action Against Poverty organi-
zation, and Charles Lawrence is from the New Jersey Energy
Research Institute.
MR. CIRULI:
Thank you, gentlemen. It's a pleasure to be here today
and discuss with you
the potential impacts
the new direction of energy policy and
of the significant Federal budget cuts.
I represent the State Office of Energy Conservation in
Colorado. We were formed in 1977 on the basis of an executive
order from our Governor. The Office is still authorized by
executive order, not as a reflection of the type or quality
of work that's done, because we do, in fact, administer many
successful programs, but rather as a reflection of the ongoing
lack of a concensus as to how long energy conservation is a
vital need in the State of Colorado, even though the evidence
points out that conservation is the best way to go in terms of
our import and fuel pricing problems.
The Office is active in five major areas of energy conser-
vation: The Office plans, monitors and evaluates energy acti-
vities for the state and local governments, this including
developing the State Energy Conservation Plan; the Office
informs state and local government and the public on energy
conservation problems and activities; the Office prepares for
energy emergencies; the Office coordinates all state and
local government energy conservation problems and activities;
and the Office manages energy programs such as the Energy
Extension Service, the Residential Conservation Service and
the Institutional Building Grants Program.
Energy emergency planning is one of my jobs, and Colorado
will continue to be active on that even though there have been
rescissions of much of the Federal budget in emergency planning.
Our Office is mandated to coordinate state and local energy
conservation programs, including LIEAP, Weatherization, and
EES. I'm here today to discuss with you our Office's efforts
at coordination. Because we realized that conservation and
assistance programs were probably in some trouble in terms of
Federal support last January, OEC began a study to see how we
could best survive and keep some of these programs alive; how
to pick those that are best and most needed, how to coordinate
them between state agencies and how to fund them. That study
is being introduced into the testimony today. (This report was
reviewed,but not included in the Transcript due to its length.)
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I would also like to introduce a statement from Governor
Lamm and from Mr. Joe Zettell, the Acting Director of the
Colorado Office of Energy Conservation. Both statements point
out that conservation in Colorado has worked, that the programs
have by and large met their objectives and that Colorado is on
the forefront in terms of solar and other conservation activi-
ties.
We have a large weatherization program. It allocated about
$5 million. We have a LIFAP program under our Department of
Social Services that distributed about $25 million this winter.
It was a very, very mild winter. That was the main reason
we were able to meet the identified public assistance needs.
Our program directors feel there will be probably substantially
less funds next year, even in the face of increased prices.
The "Management and Coordination" study outlines in some
detail potential options for improving the delivery systems in
Weatherization, LIEAP and energy conservation.
The study has 35 overall recommendations largely discussing
the way current programs are operating and can be improved.
For example, the idea of one-stop shopping is introduced where
an individual who is on LIEAP can get weatherization, can get
an audit, can move right through the assistance-conservation
system.
One clear problem the study identifies is that LIEAP has a
tendency to fund chronic energy assistance households in need,
but never get them off that continuum. It is not able to re-
duce their vulnerability by getting them some weatherization,
by getting their home audited, because by and large the programs
are fragmented in different departments.
They are delivered by different systems and any coordination
that went on was going on out in the field and was largely hit
and miss.
The study concludes that the new fiscal environment requires
the Governor, state planners and program administrators prepare
for two possible eventualities:
(1) unless state and local money make up the difference, FY82
funds for energy assistance/conservation programs will be
substantially reduced from the recent past over $1
million less in conservation funds, and potentially $8
million less in energy assistance;
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(2) if block grants are adopted, the states will rapidly become
the focal point for a massive battle between programs and
their support groups: administrators, legislators, consul-
tants, and clients. Unless that struggle is anticipated
by state government and accommodated by some structure,
final program decisions could be the outcome of a survival
of the best-connected or most vocal, as opposed to any
rational planning criteria. But the federal government
must recognize the increased state burdens in administra-
tive costs and continuing public needs.
I haven't followed what's going on in Washington during
the last weeks, and I know it changes almost daily in some of
these House and Senate committees as to what will be in a
block grant, what won't be in a block grant or if there will
be block grants at all, or just more categorical programs with
some flexibility or no funding at all.
But, as I pointed out, if the block grants are adopted
here in Washington, then there is going to be a major battle
in Denver between current administrative group, client groups
and their representatives, consultants and legislators, sort
of our own iron triangle will then make planning and coordina-
tion really difficult. This makes it imperative, given the
fact there's going to be less money, that these programs be
sorted out in a rational and intelligent fashion to the extent
possible.
There is, of course, significant legal and programmatic
momentum to continue current policies and bureaucracies. But
a window of opportunity is opening during the next two years
that may provide Colorado an occasion to pick its best programs,
create some new structures, and deliver needed services in
the least bureaucratic and most cost-effective manner possible.
We're prepared to adapt to the budget cuts and Governor Lamm
and the National Governors' Association are working in that di-
rection.
It is premature to conment upon the level of support that
can be expected from the Colorado State Legislature for energy
assistance and conservation programs because of the current
lack of information on exactly what Federal support that can
be expected in FY82. However, the Legislature is prepared to
go back into session later this summer or fall to consider the
issue once the Federal budget and program authorizations are
more firmly established.
It should be pointed out that the Office of Energy Conser-
vation, which is over 90% federally funded, has reduced its
staff 50 percent since January of 1981 and could be terminated
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in January of 1982 unless Federal or state funds are provided.
Currently there is no state funding for DEC.
The "Management and Coordination" study outlines in some
detail potential options improving the delivery systems in
Weatherization, LIEAP and energy conservation and I am pre-
pared to address any questions that this committee might have.
In conclusion, Colorado's energy assistance and conserva-
tion programs have heen successful in meeting real needs.
The problems of increased energy costs and oil import depen-
dence continues. And although we are prepared to accept our
share of budget reductions, the federal government must realize
that the state will have a difficult transition period during
program and funding changes and should provide maximum support
for our efforts.
The idea of my testimony today, at least partially, was
to help sensitize the policy leaders to the fact that we are
going to have significantly increased burdens in administrative
costs and that, although flexibility is something we desire,
it brings with it a lot of responsibility in terms of making
these programs work at the local level, and and we could use
policy support at this level to help do that. I think that
will be enough opening statement and I'll be happy to answer
questions when you get back to me.
STATEMENT OF GOVERNOR RICHARD LAMM
Given the facts of diminishing supply and escalating cost,
the conservation of energy will continue to be a major challenge
facing this country over the next few decades. Colorado has
made much progress in this regard. We can hold our heads high
in relation to many other states. But while we have made
significant strides, the facts of supply and cost will require
new initiatives in Colorado homes and businesses.
I would like to review the progress we have made in Colorado
and the distance we still must travel in ad lusting to new
energy realities.
Projected energy consumption in Colorado decreased by 5.2
percent in 1979, and by 7.7 percent in 1980. The 1980 savings
is the equivalent of the current natural gas and electricity
needs of the City of Grand Junction for the next 20 years.
Residential energy use, which accounts for 1° percent of
total energy use in Colorado, was 5 percent less than projec-
tions in 1980.
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In November of 1980, one million Coloradans received Low
Cost/No Cost booklets outlining 14 energy saving tips which
could be taken in the home at minimal cost. Through this
program, large numbers of Coloradans caulked, weatherstripped
and insulated their homes and businesses; turned down thermo-
stats; turned off unnecessary lights; and installed a water
flow restrictor in their shower heads which cuts hot water use
by 25 percent.
Studies show that people who invest $500 in energy conser-
vation measures such as weatherstripping, insulation and storm
windows will be making money back in four years or less. For
example, a Colorado homeowner using natural gas could cut his
heating bill from $3,551 to $2,644 over a four-year period
from 1981 to 1985. This savings of $887 would result in a net
of $387 after subtracting the $500 investment.
The number of solar systems installed throughout Colorado
in the past two years appears to have doubled from the previous
two years, to a total of 3000 systems. These 3000 solar
systems saved 309 billion Btu's in 1979-80, or enough natural
gas to heat 2700 homes for a year.
These individual efforts have been given impetus by actions
of the Colorado Legislature. On this issue, the legislative
and executive branches have worked together most constructively,
making Colorado a leader in conservation, solar and renewable
energy issues.
Colorado taxpayers can take advantage of some of the high-
est tax credits in the country for installing solar and other
renewable energy systems and for upgrading the energy efficien-
cy of existing homes and buildings.
Under Colorado's model code for energy efficient buildings,
more than 100,000 energy efficient homes and buildings have
been constructed. This model code has been adopted by 87
percent of the local jurisdictions in Colorado.
Colorado has been especially cognizant of the needs of
low-income and elderly citizens, living on fixed incomes and
facing skyrocketing energy costs. The State Legislature provi-
ded $12 million in utility relief for the elderly and disabled,
which was later supplemented by $28 million in federal funds
to help pay utility bills for low-income families. Additional-
ly the State administers a $5.2 million federal program for wea-
therization. Through this program, the number of low-income
homes weatherized each month has risen a spectacular 115 per-
cent, from 196 homes to 423. We must expand the State's weather-
ization programs to insulate the homes of over 400,000 Colora-
dans living on $12,000 per year or less.
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Schools, hospitals and local governments throughout Colora-
do reduced energy consumption dramatically under the Institu-
tional Building Grants Program, coordinated by the Colorado
Office of Energy Conservation. More than 550 institutions
have participated in this program, saving 1.6 trillion Btu's
an amount equal to the energy contained in 300,000 barrels
of crude oil, or enough energy to operate 250 schools for one
year. State government itself has invested significant dollars
in improving the energy efficiency of State buildings.
In the area of transportation, gasoline consumption was
down 3 percent in 1979 and nearly 5 percent in 1980. One-third
of the individuals employed in the Denver metropolitan area
used public transportation, carpools, vanpools, or rode bicy-
cles or walked to get to work in 1980.
Coloradans have recognized that conservation is the cheap-
est, safest and most productive alternative to increasingly
expensive conventional fuels, and the most effective way to
combat the crisis of energy costs. And we have accomplished
this without sacrificing comfort or economic growth.
But while we can be justifiably proud of what we've done,
we cannot be complacent. Despite the fact that we, as Colora-
dans, are using less energy, we continue to pay more for it.
Natural gas rates have been rising 20 to 30 percent per year;
electricity has been ascending an average of 10 percent annual-
ly. A study by the Colorado Energy Research Institute (CERI)
reports that natural gas bills for a typical Colorado homeowner
will rise by 63 percent over the next year alone if the coming
winter is a normal one. Natural gas bills could rise as much
as 137 percent next year if the winter is an unusually cold
one.
The progress we have made in the field of conservation
and renewable energy resources is but a small step on a long
road.
Coloradans have taken the low cost/no cost steps to save
energy. They now face major investments required for alterna-
tive sources of energy, such as solar, to further reduce their
consumption of fossil fuels and stem the tide of increasing
prices. These investments face them just as their discretion-
ary incomes are being devoured by the very price increases
they are trying to avoid.
We must make nore financing available to homeowners who
wish to make their homes more energy efficient. We must take
measures such as the establishment of bonding authorities
which would make low interest conservation loans; or the
extension of corporate tax credits to lending institutions
which offer reasonable loans for conservation investments;
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or the extension of tax credits for conservation of renewable
energy measures to taxpayers regardless of their tax liability.
Colorado has indeed come a long way, further than many
other states. But there is no time to gloat. Energy conserva-
tion is certainly an idea whose time has arrived. Non-renewable
resources are, by definition, finite. The law of supply and
demand tells us that finite resources will escalate in cost
as the supply dwindles. Without minimizing the importance of
new exploration and development, it is becoming increasingly
clear that conservation is the cheapest and most efficient
form of energy development. Insulated attics and walls can
be energy sources every bit as valuable as new and deeper
wells.
STATEMENT OF JOSEPH H. ZETTEL
Like most Americans, we applaud the Administration and
Congress' efforts to reduce budgets; however, we are con-
cerned that energy funds are not fairly allocated between
energy resources.
1.0 Real world of energy problems resides in the States
1.1 This is where energy is produced with all its
impacts.
1.2 This is where energy is used with all its benefits,
problems, and costs.
1.3 The Administration's efforts to abandon funding
for energy conservation imposes a major problem on
Coloradans who are being clobbered by rising natur-
al gas prices. Present phased de-control schedules
already approved by Congress mean that next win-
ter's home heating natural gas bills will be 24%
higher than this year's, if we have a normal win-
ter; and 46% higher if we have an unusually cold
winter. Total decontrol of natural gas advocated
in some quarters, would result in an unbearable
burden on our citizens far exceeding the above
projects. Total de-control at this time is not
warranted.
1.4 The free market approach proposed by the Admini-
s'tration advances the theory that rising natural
gas costs will reduce use. The validity of this
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theory is questionable because there are limits as
to how low indoor temperature can be maintained
in the winter without health problems arising.
Furthermore, trying to heat even cold homes that
are heat sieves is very costly.
1.5 The only hope for the homeowner/occupant to reduce
the impact on the wallet lies in home weatheriza-
tion. Improving the thermal characteristics of
millions of homes in America is a horrendous task.
The ultimate in cooperative effort between federal,
state, and private sectors is required. The build-
iung materials infrastructure can play an important
role in getting the job done. State offices of
energy conservation can continue to provide a ma-
jor public role in conservation. It is ironic that
funding for state energy offices has been curtailed
for FY 81 and may be canceled for FY 82.
2.0 Role of State Energy Conservation Offices.
2.1 Maintain Energy Extension Service Offices throughout
the state.
2.2 Provide complete package of energy conservation
information about ways to reduce natural gas con-
sumption through weatherization and conservation
in every day living.
2.3 Participate in energy audit program for residences
- work with utilities, Residential Conservation
Service.
2.4 Participate in establishing financing packages for
weatherization of residences at low-interest rates
and easy terms.
2.5 Promote energy conservation assistance for the
poor and aged on fixed incomes. Senator Hart's
"Retrofit Voucher" idea has merit.
2.6 Promote education in energy conservation at all
ages and levels of society.
2.7 Assist businesses combat rising energy prices which
impact their costs and profits.
3.0 Role of Federal Government.
3.1 Federal government should begin to withdraw its
support of state energy conservation by providing
block grants to the states to be used for states'
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energy conservation programs speciftc to that
state's requirements.
3.2 These block grants should continue until the states
are ready to provide funding independent of federal
aid. Possibly one to two years.
3.3 Past errors in over-control by the federal govern-
ment of energy prices have contributed to today's
problems.
4.0 The states are targets of energy problems such as
rising energy costs and the perils of petroleum short-
ages due to international problems beyond the states'
control.
4.1 Temporarily, the federal government must share the
states' energy problems even though the federal
government is a long way from the firing line.
State government, citizens, takes all the heat
from irate constituencies when problems of cost
and supply arise.
5.0 Balanced approach to energy survival.
5.1 Nation needs bridge to energy future - carry us
from gas and oil era to future era of solar photo-
voltaics and other high technologiy energy systems
such as safe nuclear options.
5.2 Bridge consists of many planks such as:
5.21 Energy conservation - quickest and least ex-
pensive.
5.22 Dwindling oil and gas reserves.
5.23 Coal - most abundant fossil resource.
5.24 Nuclear fission - electric power generation.
5.25 Solar, thermal, space and hot water heating.
5.26 Synfuels from oil shale and coal resources.
6.0 All energy planks need continued activity whether
that activity be research, demonstration and/or commer-
cialization.
6.1 Too many eggs in too few baskets can be disastrous
if the baskets break.
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7.0 Overexpenditure on nuclear power at the expense of
solar, energy conservation, and other important planks
of the energy hridge is wrong.
7.1 We strongly urge that your national energy plan #3
contain a balanced approach through judicious allo-
cation of limited federal energy funds.
8.0 Average Coloradan cannot play an important role in
production of the oil, gas, and/or nuclear planks of
the bridge.
9.0 But the average person can make a major contribution
toward energy independence through efforts in energy
conservation and use of solar technology, thereby re-
ducing the rate of depletion of our valued fossil en-
ergy resources and at the same time reducing the
financial burden of millions of Americans to save
energy will provide 20-25% reduction in energy use at
very low cost to consumers and government.
10.0 Energy conservation has already shown remarkable suc-
cess.
10.1 Total energy consumption in Colorado was reduced
by 8% in 1980 below normal expectancies.
10.2 Nationally, the rate of annual increase in elec-
trical consumption was less than 2%, in contrast
with about 7% in the earlier 1970's.
10.3 Motor fuel consumption in 1980 was reduced by
about 15% below normal expectancies.
10.4 This success story is worthy of recognition and
continued support.
11.0 Emergency planning for motor fuel shortages.
11.1 Dependence on Mid-East oil can result in severe
shortages through war, Russian intervention, or
political chicanery.
11.2 States need contingency plans to handle motor fuel
shortages - also completely developed implementa-
tion and management plans.
11.3 Federal government cannot create crises in energy
supply and then not share with the states the
burden of coping with petroleum shortages. Our
policies in the Middle East, regardless of valid-
ity, can cause states serious problems.
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11.4 Block grants to states can keep emergency planning
alive until the states assume this function.
12.0 Recommendations.
12.1 Established balanced approach to important energy
systems.
12.11 Don't over-expend on nuclear at the expense
of other important energy resources.
12.12 Support states' efforts in:
12.121 Energy conservation - both residen-
tial and business conservation.
12.122 Energy Extension Service activity.
12.123 Emergency planning for major liquid
petroleum shortages.
12.13 Provide transition period for states to assume
fiscal responsibilities for energy conserva-
tion and solar programs.
12.14 Achieve the above within budget cut funds by
directing some of the nuclear funds to other
important options such as energy conservation
and solar.
DR. RIEGEL: Thank you.
MS. DESPER: I am Betty Desper, Director of Housing for Total Action
Against Poverty. I have operated a weatherization program at
TAP since 1975 and we were one of the first community action
agencies in the nation to weatherize homes of low income fami-
lies. As of June 30, 1981 TAP has weatherized 1,400 houses in
our service area. This area includes 5 counties and 6 cities
in southwestern Virginia and geographically is mostly rural
in nature and encompasses 2,243 square miles.
The Virginia Association of Community Action Agencies
(VACAA) is the state level operator for the program.
At present there are 29 agencies that operate weatheriza-
tion programs throughout the state. Of these agencies 15 are
community action agencies, 6 are area agencies on aging, 4
local government and 4 single-purpose agencies.
The Virginia Winterization Program has been in operation
since 1976, and presently covers about 85% of the state. It
is funded by a grant from the Department of Energy (DOE) to
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the State Department of Welfare. Welfare contracts the funds
to operate the program to VACAA.
As of the end of 1980, Virginia ranked 12th in numher of
homes weatherized nationwide under DOE funding, hut only 19th
in total funding allocations during the same period. (Virginia
had weatherized 2.76% of all homes done nationwide under DOE
funding, yet received only 1.6% of total funding allocations
during the same period.)
21,313 homes had been weatherized across the state as of
February 28, 1981. 15,665 of these were weatherized under DOE
funds. (The rest were weatherized under funds from the Commun-
ity Services Administration, which sponsored the program before
DOE took it over in 1978.)
In Virginia, homes show an average 31% per year fuel sav-
ings after they have been weatherized by the program.
The program has saved the equivalent of about 5.5 million
barrels of oil since its inception. Of the total number of
homes weatherized to date:
About 83% have been owner-occupied units.
About 17% have been owner-occupied rental units.
About 75% have been in rural areas.
About 25% have been in urban areas.
Virginia will receive about $3 million from DOE for wea-
therization for FY 1981. The FY 1980 grant was about $3.2
million.
In Virginia, according to 1975 figures:
245,000 households have income below 125% of the poverty
level
734,000 individuals comprise these households.
113,000of these households have elderly residents.
30,000 of these households have handicapped residents.
53% of these households live in their own housing.
47%of these households livein rented housing.
54% of these households live in rural areas.
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46% of these households live in urban areas.
Based on DOE allocation and production figures through
1980, Virginia is spending an average $840 per home (including
materials and local and state level operational costs) to do
weatherization. Comparing this figure with our current average
materials cost per home ($511) shows that we are putting 61%
of our funds into weatherization materials which benefit low-
income people for many years.
In response to the question on the Administration's energy
conservation policy I would first like to address the possibil-
ity of the weatherization program being transferred from DOE
to HUD to be included in their CDBG program.
I believe that it would be an administrative disaster.
For example, HUD has no previous experience, no trained person-
nel and no mechanism in place to continue the effective admini-
stration of the program.
Additional Federal dollars would be required to effectively
monitor and evaluate the program, not taking into account the
length of time involved for the transistion which would literal-
ly stop production of weatherization activities and decrease
service to low-income families.
Secondly many rural localities do not receive CDBG set
aside grants. Qualified families in these areas would not be
able to receive these services.
According to the proposed regulations, each locality would
determine what programs had priority in their jurisdiction.
Localities that receive these funds have already made long term
commitments to their citizens for high cost structural and
infrastructural improvements.
Let us not kid ourselves about continued funding for wea-
therization through the block grant approach. When programs
and/or agencies are in competition for a Imited amount of
funds the needs of poor people are often overlooked. It will
then become a matter of who can write the best proposal and
who has the most clout with elected officials.
I understand that Congress is considering several alterna-
tives pertaining to the weatherization program.
The most logical and cost-effective solution would be to
maintain the program in DOE as a categorical grant with the
reduced level of funding.
DOE has successfully managed and implemented the program
since 1978. The mechanisms are already established and in
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operation for quality control, monitoring and evaluation, and
cost-effectiveness. Trained and experienced personnel have
established communication with all state agencies to effective-
ly work out all administrative procedures and regulations.
To even consider combining weatherization with other pro-
grams would seriously jeopardize the effective continuation
of the program.
Another important issue affecting the operation of the
weatherization program is the proposed elimination of the
Community Services Administration (CSA). To my knowledge the
majority of agencies that operate weatherization programs are
funded by CSA. Few other agencies have the experience to ef-
fectively administer the program without decreasing services
and increasing administrative costs.
I believe it will be necessary to take a good look at
weatherization services. The weatherization of houses is not
a program that can be implemented like other federally funded
programs. In my agency alone we maintain a fleet of 8 vehicles,
retain warehouses in 5 locations, supervise a crew of 43 work-
ers. Inventory of all tools, equipment and materials with a
yearly budget of $180,000. Business and accounting proce-
dures had to be established and utilized for successful opera-
tion. Our inventory control system was so effective that it
was adopted by the state. Safety rules and regulations must
be enforced. Quality control measures have to be initiated
and last but not least Federal, state and local regulations
have to be adhered to. Any agency that operates a weather-
ization program is running a top notch business that requires
all the skills that are necessary to succeed in the private
sector.
For these reasons, before any new regulations are passed, I
would recommend that Congress get input from experienced field
personnel who have actually administered a successful program.
In my opinion and from my own experience I do not believe
that there are any agencies that could successfully and cost-
effectively operate this program as well as community action
agencies with DOE as the funding source.
Why change sponsors when CAA's have six years of valuable
and very successful experience?
In response to the elimination of the CETA program, which
has provided approximately 80% of all labor for the program,
Virginia has adopted labor waiver procedures, which allows
agencies who produce to hire production crews which will enable
the program to continue at a reduced level.
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Also the federal regs have been changed to allow for other
supportive measures.
As to the possible limited amount of allowable funds per
house ($1,000-$2,000) or ($200.00-$300.00), it has been our
experience that it is better to provide complete weatherization
of a house as opposed to minimum infiltration measures.
Complete weatherization of houses would decrease the number
of units weatherized but it is my belief that band-aid measures
are never adequate or cost-effective.
The weatherization program is cost-effective (cutting
energy consumption from 20%-50%), helps to ease pressure upon
the government in the long run as energy prices continue to
rise, provides jobs, stimulates growth of conservation, weather-
ization businesses, provides a measure of self-reliance for
low-income, assists the national policy of reducing consumption
of fossil fuels, and is the only means to help minimize the
need and size of energy assistance.
In order to help the poor better help themselves, weatheri-
zation/conservation assistance should be a higher priority.
Study after study has found that conservation is the least
cost and fastest method of energy production, is cost-effective
and becomes even more so with each energy price hike.
The energy problems of the poor will only worsen if a
concerted weatherization/conservation effort does not occur
immediately.
I would sincerely hope that the panel and all persons
involved in the critical decisions affecting this program
seriously consider all information received at this hearing
for the successful continued operation of the weatherization
assistance program.
I would like to thank you for inviting me to this hearing
and giving me the opportunity to speak today.
DR. RIEGEL: Thank you. The last witness for this group is Charles
Lawrence.
DR. LAWRENCE: Mr. Chairman and members of the panel, for the record, my
name is Charles Lawrence, and I'm the Executive Director of
the New Jersey Energy Research Institute in Parsippany, New
Jersey. I am pleased to have the opportunity to testify before
you on behalf of my Board of Trustees.
We believe the Energy Institute is unique in the United
States. It was initiated by the private sector in 1977, not
to conduct research, but to act as a catalyst in stimulating
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projects with near term results in energy conservation and
energy production. It is a management organization hacked hy
the technical resources and brain power of the most diversi-
fied membership of any such organization in the country.
Furthermore, our charter mandates the use of existing
facilities and expertise among its industrial and university
members rather than by the expansion of the staff of the New
Jersey Energy Research Institute.
Among the members are Johnson and Johnson, Prudential Insur-
ance Company of America, EXXON Research and Engineering, RCA
Laboratories, Public Service Electric and Gas Company, Jersey
Central Power and Light Company, the Port Authority of New York
and New Jersey. We have three universities sitting on the board
as well, namely Princeton University, New Jersey Institute of
Technology, Stevens Institute of Technology. We have Tishman
Realty and Construction Company, the Lummus Company, Englehard
Industries Division, Widmer and Ernst, E. R. Squibb and we
do have input from the State of New Jersey Government as well,
namely the New Jersey Department of Environmental Protection.
Commissioner English sits on our board and our Governor,
Brendan Byrne is on our board as well.
As you see, many of the companies are national in business
activitity and several, in fact, are international, and they co-
ver a wide spectrum of forms of business.
I believe this distinguished panel will be especially inter-
ested in knowing that the Energy Institute has benefited from a
close working relationship with the U.S. Department of Energy,
but has sought relatively little in the way of federal monetarv
support.
The bulk of our operating funds come from the private sector
with modest amounts of federal money for initial study and plan-
ning purposes.
We believe it is this relationship and stimulus that has
been responsible for many of our achievements. Before descri-
bing some of them, let me explain that our most effective role
has been in the area of addressing institutional constraints
that often prevent or delay otherwise technically sound pro-
jects from succeeding.
Technical considerations are often less important than the
non-technical factors present in trying to implement proposals.
I would like to now report on the major projects that the Insti-
tute has undertaken since its inception and then on what might
be termed conservation, but I would more accurately call them
projects in energy system planning.
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They are private sector projects, that is, they have been
built or will be built with the bulk of the funding from private
capital.
In each case, however, as I've mentioned before, there have
been federal funds made available from the U.S. Department of
Energy and the Argonne National Laboratory for initial study
and planning purposes.
The first project I'd like to discuss, I think it's gained
quite a bit of prominence over the years, is the City of Tren-
ton Integrated Community Energy System, what we call the ICFS.
This has been studied now for four years, and is a study
that will result in the construction of the nation's first
urban cogeneration facility at a cost of about $22 million in
our capital city of Trenton. It will produce high temperature
hot water for space heating and cooling as its primary product,
and as a byproduct, electricity. In other words, this is the
reverse of the common total energy system.
Four million square feet of office, residential and hospi-
tal space will be served in the downtown urban renewal area of
Trenton. Incidentally, Trenton State Prison will be served as
well. It will have an overall efficiency of some 65 percent,
which is about double that of- our utility's net power plant
average, and the system will be operated only when there is a
need for heating or cooling in the buildings.
The electricity produced will be delivered to the local
utility grid, and all customers in the Trenton area will con-
tinue to receive electricity from this local utility. We will
not in any way disturb the conventional means of selling elec-
tricity. That remains the purview, the prerogative, the busi-
ness of PSE&G. I might add that about 70 percent of the floor
space that we will heat and air condition will be State of New
Jersey buildings.
The total project cost in the testimony I've submitted pre-
viously indicated $20 million dollars. Well, you know how bad
inflation is, it's now $22 million for the total funding to
completion. The project will be finished in, I would say two
years. Ground breaking will be September 21, 1981. The total
research funding from Uncle Sam will be about $1.3 million.
The next project I'd like to talk about is a 26-story
office building known as Park Plaza in downtown Newark. This
building is owned by Rockefeller Center, Inc., and leased to
PSE&G, Public Service Electric and Gas, as their new corporate
headquarters.
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This building is equipped to monitor building energy use
patterns and to measure the effectiveness of the various pro-
grams that we have installed and will be installing.
It is important to note that the studies will involve the
architectural and engineering communities in the Metropolitan
New York area as well, within a radius, I would say easily of
25 miles from Newark.
The New Jersey Institute of Technology and the Stevens
Institute of Technology will have specific roles to carry on
in this building. In fact, we have convinced the two institu-
tions to work into their curriculum, data and opportunities
for their students to do master's and doctor's research within
the building.
The instrumentation built into this structure will enable
it to be used as a living laboratory, something, I hope, that
doesn't upset Rockefeller Center or PSE&G, for the next 20
years. The information coming out of it is expected to have,
with all due respect, significant influence on national build-
ing codes and general energy management planning techniques in
the building community.
But, I'd like to point out again, I know that many, many
conservation and study projects have been undertaken in build-
ings even before the embargo. In fact, I was part of this
activity when I was with the City of New York Administration
under John Lindsay.
Here we have one of the major builders and investors in
the United States, namely RCI and the Tishman Corporation,
engaged in this activity which, believe me, gentlemen, will
have the very decided effect on the private building community,
not only throughout the United States, but worldwide. The
total project is $80 million. The Federal research funding to
completion is a shade under a million, $950,000. Incidentally,
I might add that as we are collecting data, which will be
coming in this spring and summer, a number of manufacturers of
lighting equipment, and fenestration, and several other types
of proprietary devices have very willingly agreed to install
their apparatus at no charge just for the benefit of seeing
its performance in a real life situation.
The newest project we have is the redevelopment of the
waterfront properties in Jersey City and Hoboken. NJERI and
one its members, the Port Authority of New York and New Jersey,
are working with the Argonne National Laboratory in developing
the abandoned and decaying areas in New Jersey on the water-
front for residential and light commercial purposes.
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The intent is to investigate and determine the most energy
effective plan while we're still in the design stage for the
new community. The projected total project cost will be in
the order of half a billion, $500 million. The total energy
research funding, and I hope it doesn't stop at this level, I
hope to get more, is $95,000.
We are not totally insensitive to the needs of our young
children. We have been involved in a program which has been
rather successful and promises even greater success known as
the Student Exposition on Energy Resources, with the acronym
SEER. I don't want you to think that our only interest is with
big business. The SEER program aims to educate school children,
and for that matter, their teachers, as to their obligation as
future business and government leaders and workers to seek new
energy sources and more efficient energy utilization. This is
done by helping the children construct working models of their
novel ideas, and we hold an exposition once a year within the
state and now this is being done on a national basis. Now the
total project within New Jersey has been $40,000, completely
contributed by the private sector. We have never sought nor
will we seek Federal research subsidy for this.
We have interest in coal research. NJERI has assembled
and worked with experts in coal technology of the leading
universities in Pennsylvania, Delaware and New Jersey in devel-
oping a team that could address and help solve problems that
are impeding the wider use of coal in the Northeast.
We are rather concerned, because we have very heavy depen-
dence on the use of oil. Our major utilities in the state
depend either on oil or to some extent on nuclear power.
This coal research project has $30,000 expended thus far.
Again, we have not sought Federal research funding.
NJERI has been requested by and has assisted several of
our municipalities in energy problem solutions and management.
NJERI provides expertise from our membership, and I point out
that this is done without charge, that these communities would
not otherwise be able to obtain.
For example, NJERI is working with Red Bank, Rahway and
Jersey City at the present time in looking into the feasibility
of district heating and solid waste as fuel.
Another major project which I hope will be announced momen-
tarily for final signing of papers is the Union County Solid
Waste Project. NJERI serves on the Union County Solid Waste
Task Force and helped the City of Rahway make its decision to
become the host community for a 2000-ton a day solid waste
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energy facility that will displace the current use of 750,000
barrels of oil per year.
This facility will use the proven European method of water-
wall incineration and will provide steam to New Jersey's second
largest pharmaceutical company. It will also generate electri-
city and it's NJERI's desire to help establish within Rahway
the district heating system.
Incidentally, about the only indigenous resource we have,
energy resource other than sun and wind is garbage. We have a
great deal of garbage. We have high population density. Our
state has the highest energy density in the union, and we are
looking forward very much to being able to use our major re-
source, garbage, as fuel.
As you can see, the Energy Institute has a charter and
operations that are consistent with the policies of the present
Administration. You don't hear that very often, do you?
It is the catalyst for carrying our research projects with
maximum private sector initiative and minimal federal assist-
ance. Thank you.
DR. RIEGEL: Thank you. We can turn to questions now.
MR. GLASSBERG: Yes, a question for Mr. Ciruli. With respect to more
flexible grants to states and localities to do energy conserva-
tion, "'you mentioned that in the State of Colorado with more
limited funds you would run into a state iron triangle situa-
tion. Is the panel to infer from that comment that the claim
for flexibility at the state and local level for programs in
order to do more rational energy conservation programs that
are applicable to those local areas should be is tempered
by the political realities that these programs will be competing
for funds and decisions might be made more on a political
basis rather than on an energy conservation basis?
MR. CIRULI: There is absolutely no doubt that in the state the Governor
will definitely have to create a structure to adapt the block
grants to current state needs and he's doing that now in terms
of evaluating these programs; that's what my study was about.
A couple of other factors are involved. One, if there
should be a block grant, we need to be honest about the fact
that it won't save that much administrative money. So there
will be some additional burden on the state.
Secondly, the grants need to be shaped in a way in Washing-
ton in which a lot of programs that belong in a block grant
aren't allowed to lobby their way out of it, so that what's
left are a few minor programs. For example, putting energy
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planning and EES in a block grant, but leaving out the other
major programs, such as weatherization, that really could use
some consolidation. So programs need to be designed in D.C.
that will mediate these issues.
For example, if LIEAP has some element of weatherization
as a part of it, it definitely has to be coordinated with the
other major weatherization program. It simply would not make
sense to leave the program fragmented, because LIEAP in our
state is administered by the Department of Social Services, an
excellent agency at getting a check to a person, not particu-
larly good at outreach functions or at referring people to
conservation, because they use new employees, temporarily hired
for the short winter season, who are inundated with paperwork
to make sure the LIEAP checks are delivered to the right person
on time.
That job alone overwhelms them at their intake point and
undermines their ability to do all those other functions in
terms of referrals and outreach and moving a person along into
energy conservation. So I think that if a block grant came
down that encouraged putting LIEAP together with weatherization
and EES, it would be excellent.
But there's no doubt there is definitely going to be a
political struggle, a political sorting out that has to take
place at the state level, regardless of what happens in D.C.
To some extent, the legislature, the current bureaucracies that
manage these programs, and of course, the Governor will be
involved. So at both ends there is going to be a political
tussle to try and deliver these programs as best as possible
with limited funds.
MR. GLASSBERG: Which programs do you think will receive the highest
priority in Colorado?
MR. CIRULI: I think that the two programs that would get the highest
priority are energy assistance i.e., LIEAP, particularly in
the light of our natural gas price increases and weatherization,
both programs that have proven themselves.
Now weatherization has a problem of losing its delivery
system in terms of CSA. Most of these local CAP's are non-
profit and maybe can survive by finding new sources of funds,
but in the short term, there is going to be tremendous admini-
strative hardship. We are beginning to shut down weatheriza-
tion right now in many of our cities.
My office is in charge of the Energy Extension Service,
the RCS and IBGP programs, and in terms of saving wasted Btu's,
the programs we administer are the most cost-effective. But
they are dealing primarily with a marketing strategy to a
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middle class clientele, and to that extent, they would probably
be put on a priority list below helping people with emergency
needs. This is one reason why our office got involved with
the coordination study. We feel there's a definite role for
DEC in coordinating these programs, or possibly having one
office to handle the referrals and make sure that once a LIEAP
recipient is identified as having a housing unit in need of
weatherization that the service would be provided. Currently
no agency does that. It's kind of a haphazard referral system
between the agencies.
One of the block grants had an interesting aspect to it,
and that was the idea that for local governments to get funds
it would have to do an energy assessment, and then a certain
amount of these funds, 20 percent, would then be channeled to
them. It's an excellent idea. Very few of our communities
have done good energy assessments of what they should be focus-
ing on in terms of local energy supply, use and needs.
So that we see it as a good strategy to get better energy
conservation planning at the local level.
MR. POWER: I'd like to ask Dr. Lawrence if he could describe what kind
of administrative arrangements are there between your clients,
if you will, and the institute.
Do you receive compensation or is this done on a voluntary
basis? You know, how confident are the recipients of this
advice in the quality of information they didn't pay for if it
isn't paid for?
DR. LAWRENCE: Invariably those involved in the projects, if you look
through them, and I may just refer back to them in the order I
gave them, the City of Trenton, that involved one of our board
members to begin with, PSE&G.
I think we were essentially asked to get involved with
this largely at the request of the U.S. Department of Energy,
to shepherd this activity. The City of Trenton simultaneously
made the request and Park Plaza, Tishman again, PSE&G, are
board members.
I have never run into a question where our particular
judgment on the part of the board or reports were ever ques-
tioned as to validity. That aspect has never come up. You're
the first one that's raised it.
MR. POWER: Are the services provided free?
DR. LAWRENCE: If a town comes to us, they get this at no charge. In fact,
the reason why we can do so much for so little money is, of
course, that the members of the institute have assessments,
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dues, that they pay in, and simultaneously, they provide in
kind, service with their staff.
We call upon Princeton to do studies. The Port Authority
is doing studies, so forth and so on. This is a choice, a
determination, a vote on the part of the board members which
meet every other month.
MR. PFEIFFER: Ms. Desper, I was curious as to what the prospects are for
the continuation of Total Action Against Poverty if the federal
funds for CAA's are cut in '82, will your organization be
able to continue?
MS. DESPER: Well, in my housing component alone, we use very little CSA
funds. We have many resources hopefully we will, but at a
reduced level. I've talked with my Executive Director, Mr. Ted
Edlich, and he's very optimistic. We have a rehab program too
that we operate with the housing authority in the inner city
that we get CD funds for, so hopefully that will continue.
We have a housing counselling program that was funded by
HUD up until this year, and I'm not sure what's going to happen
with that yet, but we do have other resources of funds and hope-
fully could survive on a very limited basis.
MR. PFEIFFER: Do you expect a weatherization effort to be able to con-
tinue?
MS. DESPER: We have, at one point in the Program as I mentioned in
my report, we had 43 people onboard. I now have nine, and
most of these were CETA people that I have picked up and put
on staff more or less on faith.
We've been allocated a certain amount of State Department
of Welfare through VACAA, and if we produce, we get a certain
amount of money back as program support, and hopefully I can
pay their salaries, with the change in the Federal regs that
allow you to pay for off-site personnel.
So if we can produce, and given the fact that we can conti-
nue to get enough funds, I would hope we could keep a weatheri-
zation program in place until we get through the transition or
whatever is going to happen.
I do see us surviving.
MR. PFEIFFER: I have one other question. Do you really think it makes
sense to continue with a program that does complete weatheriza-
tion and as a result serves a very small proportion of the
needy rather than one that does partial or low-cost weather-
ization services and serves a great many more people.
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MS. DESPER: Well, we did both, and we found that actually with trained
personnel, we could probably do as many houses as we could with
the low cost/no cost program, which we didn't find effective.
We felt that it saved very little fuel to the homeowners. For
instance, if you insulated an attic for a family, and all the
heat goes out the windows, you really haven't helped them that
much, because there's not enough money really to be effective.
That was why we decided or we felt like it was better to fully
weatherize a house.
DR. RIEGEL: Just before we take a short break, I'd like to thank the
three witnesses for appearing. We'll reconvene at 3:10.
(Whereupon, a brief recess was called.)
DR. RIEGEL: I would like to get together again now,if we could, please.
The next witnesses are Joseph Prano from the City of Terre
Haute, Indiana; Richard Kline from the Appalachian Regional
Commission; and Howard Brown, energy advisor for Middletown,
Connecticut.
Okay. Mr. Prano, if you could begin.
MR. PRANO: First off, I would like to issue a disclaimer before the
City of Terre Haute. Our agency just happens to be located in
Terre Haute, Indiana.
I guess that will lead into parentage and why I'm here. I
was the Director of the weatherization program for Vigo County
and the county offices in the city of Terre Haute, and it was
under the CAP program originally in 1979 when I went aboard,
but we had a problem that some of the CAP agencies may have
had.
The weatherizatiion program was a very small part of its
overall activities. In fact, weatherization in Vigo County was
only 4 percent of the agency's function when I went aboard
in September of '79. In March of 1980, I had built the program
to $2.3 million, and it had become 84 percent of the agency's
activities, and because of that, it now took on a new focal
point.
Before, it was something that you didn't worry whether or
not you received funding or continued funding for to where
everything evolved around it, and because of the problems that
it built by growing so quick, the inner struggles required the
Department of Energy, upon recommendation of the state, to
pull the program away from the CAP agency.
At that time, I had to look for a new parent, because I
could not adopt the weatherization program for myself, and one
thing we did with building the program is we started a coali-
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tion of the union, the Carpenters' Local 133, and I made a
suggestion to them that they become the parents for the wea-
therlzation program, and they submitted a proposal under their
not-for-profit charter, their funds which are their health and
welfare, and they were granted the weatherization program
which they delegated back to me, and we continued weatherizing
homes.
We averaged 250 homes a month completed, spending an average
of $525 in materials. We lost our CETA personnel under the
CAP program on October 31 of 1979.
We operated the program without CETA, per se, and we devel-
oped other state employment projects into it. A lot of bypro-
duct benefits were training, and we also got people into the
union who would have never had the opportunity to become a part
of it, and we created job skills through our training, and ex-
posed them to the world of existing on your own merits.
So, you know, people may look upon CETA as a loss; we
looked at it as a benefit, because we were able to employ func-
tions that DOE allowed us to do that Department of Labor would
not allow us.
There was interagency agreement, but all rules and regula-
tions weren't combined to make it- work. Okay. We had overrid-
ing regulations. Like, I couldn't, for example, subsidize De-
partment of Labor employees by more than 10 percent, which
means that I couldn't effectively upgrade them into a union
trainee program, because of the fact that their wages would no
longer be in line with the maximum increase, which means that
because I was teaching people to be more independent and do
more and teaching them how to do that, that I could not hire
them onto our program if they come from CETA or those types
of, agencies that had restrictions. So it took on a whole
new outlook and naturally, as you all are aware, weatherization
in Indiana ceased to exist on March 13 of this year. The
reason for that is, we ran out of operating capital.
Here's another inefficiency of government. If you are
pushed to produce more, and we were all told by Federal Regis-
ter and by the Department of Energy that we will be funded
based upon our accomplishment. The states that were not pro-
ducing would be funded at a smaller level.
The state in turn passed it down to the individual agency.
We had 31 operational arms of the weatherization program in the
Indiana, and every one of them worked at different levels.
But what happens here, because we produced more, we ended
up with the biggest part of the state's funding.
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In fact, we were operating at 26 percent of the state's al-
location, which in my opinion is unfair because of the fact that
we had only one county of the 92 counties that exist in Indiana
under our sponsorship. So we were able to complete one-third of
our households, our eligible households in one calendar year,
where other agencies were only able to complete maybe 1 or 2
percent of their total eligible households.
So there needs to he a lot of things turned around on that
basis. I have submitted a proposal to the State of Indiana,
not knowing who the funding source is going to be, for a state-
wide weatherization program sponsored by the Indiana State
Council of Carpenters, so we can operate the same thing but turn
around and try to be fairer in our distribution of allocations
to the entire state.
I could go on and on and on about all of the benefits of
our project. Some of you have probably heard about it. If you
have any questions, I'll answer them at the end of this. Thank
you.
(Following are specific recommendations submitted by Mr. Prano
on the Weatherization Assistance Program (WAP)).
1. Maintaining Weatherization.
The maintaining of Weatherization with DOE would give every
State a clearing house to transfer the needed reports and/or
review house which where-by they can receive opinions or deci-
sions from as they relate to the allowable activities of WAP.
If it is not done thru DOE I strongly would support that the
weatherization program be maintained as a categorical funded
project, with assurances that this activity be consistent with
the program objectives.
2. Benefits of WAP to fixed income individuals.
The benefits of this type of program are very numerous not
just in the conservation and the logic of us all reducing waste
but more significantly as this relates to those on fixed income,
who are forced to reduce but cannot afford to do so properly.
The WAP project can be measured in real dollars not only in
savings but as it relates to each project undertaken. When you
consider a 40% reduction in consumption and a maintenance of a
more uniformly heated/cooled dwelling, this becomes the most
logical project we can undertake. The benefits of: jobs, job
skill development, training of future private weatherization
employees and/or specialists, these are just to name a few of
the by-product benefits if properly implemented are as equally
beneficial as the project itself. The next logical step is to
correlate this with LIEAP.
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3. Uniting WAP with Low Income Energy Assistance Program (LIE-
AP)
Running LIEAP with WAP can produce many more by-product ben-
efits, one being application eligibility forms and the correla-
tion of these two good programs, plus the amount of assistance
provided under LIEAP could be reduced by the amount of reduced
consumption after weatherization, thus allowing WAP funds and
LIEAP funds to reach more of the eligible households. Person
power needs are somewhat reduced by combining these similar pro-
jects and this would then directly reflect to the amount of peo-
ple serviced and the cost of administrative overhead. From a
business/management point this too is very logical.
4. Suggestion for Statewide Proposal.
Statewide special purpose programs could be set up espe-
cially with these two projects (WAP & LIEAP). One suggestion is
the one proposal we have submitted to the State of Indiana.
This one asks the state to select as their sub-grantee the Indi-
ana State Council of Carpenters to be designated as the service
delivery arm for WAP in Indiana. We feel this would allow us
to come up with a fairer distribution of the State funding levels
and afford us a better way of implementing uniformity to the
states' eligible applicants.
5. Reporting of project activities.
It would be very useful to have a central reporting of all
the activities of WAP as I suggest in (1.), this will be the only
way the nation as a whole may benefit from the exasperations of
others who have gone the trial and error route and need to share
the successes to the general public so they know where their dol-
lars are going. In so doing we are continually educating the
people of the ongoing need for conservation and helping to de-
velop a growth in the industry by publishing all the statisti-
cal data that could be generated from a central clearinghouse
reporting system. In my opinion all projects should be report-
ed on and should be responsive to where the funding source for
without reports you create an opportunity for abuse and project
neglect that would subsequently jeopardize all fundings of any
kind.
6. Future funding of projects.
We should know in advance if possible what our next two-
year projections for funding will be and what lies beyond
that. The reason for this is so we can develop the strategy
as to where do we go from here. We are looking towards that
area and it is our opinion that what we have proposed to the
State will allow us to do just that. We intend to be set up
to spin-off into the private sectors competing for the private
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DR. RIEGEL:
MR. BROWN:
dollars by demonstrating our abilities to deliver the WAP ef-
fectively, cost-efficiently and thru a General Contractorship
that will remain ongoing. Through our project we want to de-
monstrate that the construction-oriented projects that the
Federal Government is involved in may be best served thru
this type of mechanism. We do need to have our goals laid out
in advance and we do need to know the future funding levels at
least two, preferably three years ahead, so we can complete
what we start wihout opening ourselves to liabilities that can-
not perpetuate the goodwill we have worked long and hard to
develop. (See Appendix, Volume III for Mr. Prano's proposal
for the State of Indiana).
Thank you. Mr. Brown is next.
I'd like to introduce myself first. I am a trained city
planner who for the last 12 years has been involved in resource
management issues from the neighborhood level to the interna-
tional level, and I'm a lecturer in resource planning at Wes-
leyan University.
I'm here in a particular capacity. For the last two years,
I have been serving on a very part-time basis as energy advisor
to the Mayor of Middletown, Connecticut, which is a small commu-
nity of 40,000 people in the center of Connecticut, and a pro-
gram a community which has taken part in a very unusual Fed-
eral program which I'd like to discuss with you. But I'd like
to take a minute, if it's okay, to say something in general
about energy conservation programs, and then to address the
community energy project of the Federal ACTION Agency in that
context of our experience in Middletown with that program.
As someone who has been involved in energy programs for a
long time, and many, many different programs, I'd like to take
this opportunity to express my strong support in the need for
the Federal government to remain involved in energy conserva-
tion and small-scale applications of solar and alternative en-
ergy technologies. I feel that these programs are extremely
consistent with the present Administration's approach to the
marketplace and moving the country towards reliance on the
marketplace to solve its energy problems.
I have been doing some research, which, if I hadn't come here
on such short notice, I could have possibly finished to bring,
the work looks at the impact of energy conservation and alter-
native energy technologies on communities, the economic impact
of these kinds of programs compared to, for example, traditional
economic development, for example, what are the benefits to a
community which helps its citizens save money, energy dollars,
compared to the economic benefits of bringing in new business
which will consume energy into a community.
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Preliminarily, the research shows that saving energy can he
one of the most sophisticated and effective ways of stimulating
a local or state economy that exists.
Now in defending energy conservation solar programs, I want
to make it clear that I'm not defending or advocating all of the
particular programs which have been run by the Department of
Energy and other programs, because I feel there has been very
much waste and inefficiency in the way that numerous programs
have been run. But I'm not here to discuss that specifically.
I feel that the programs which should be left at the end of
the budget cutting procedures should be those which neet a set
of very specific and useful criteria, that they should not be
programs that subsidize bureaucracy, but ones which minimize
overhead and minimize immediate impacts. There should be
programs to encourage conservation at all levels and at all
sectors to encourage small-scale solar and other alternative
technologies and the diversity of those in the marketplace and
to protect the marketplace in the energy field.
Particularly I feel one area which has been enormously omit-
ted is the area of passive solar energy, and omitted and misun-
derstood. But to do these kinds of programs, I think it's impor-
tant that specific program targets be evaluated on the basis of
their ability to serve as initiators and motivators to communi-
ties, small businesses and others to get started on programs,
not to fund from beginning to end with enormous Federal grants
and programs.
The programs need to encourage they need to include in-
centives, like tax incentives, incentives to state and local
governments to run loan programs. The RCS program, for example,
for energy audits by utilities, loans and grant programs for
non-profit organizations, small grants can have an enormous im-
pact and an example of that is the Department of Energy Small
Grants Programs which has taken given into the hands of peo-
ple who don't have access to capitalvery small amounts of
money. It has a low operating overhead. The selection of
grants is made by volunteers on a state by state basis. It's
locally controlled. It's an extremely effective program that's
had an enormous impact. PURPA is a regulatory program which
has the effect of protecting, not retarding the marketplace,
and I think that regulations need to be evaluated on that
basis, not all thrown out.
Now, in converting to a marketplace energy economy, I think
it's extremely important to recognize the need that we have to
help the poor and the near poor who cannot afford to capitalize
the transition to an energy-efficient society, and there are
ways of helping those people which can be cost-effective to them
-------
and to the government and to local economies, and I think that
we need to look at those programs as well.
Now, specifically, one program which meets the criterion,
I think, very effectively that I wanted to talk about a little
bit today is the Community Energy Project which is run by the
Federal ACTION Agency under an interagency agreement with the
Department of Energy, which supplies funding for the program.
This particular program began in a pilot project in Fitch-
burg, Massachusetts about three years ago. The program was de-
signed to use the techniques and philosophy of DOE's no cost/
low cost program, but to do it by putting the power of organi-
zation into the hands of the local community in which case Fed-
eral funding would only be used as an incentive to help get the
program off the ground, to motivate the local community, and a
kind of catalyst. In addition, the ACTION agency provides
a kind of ongoing technical support when it's necessary.
The City of Middletown was one of 18 cities selected in
the United States to be the next round after the first pilot
project for carrying out this program. The program is short
term. It has immediate impact. It has a single objective,
reaching a lot of people very quickly. Its success depends
completely on citizen mobilization, the use of volunteer
agencies. It often does, as in the case of Middletown, utilize
volunteers and community groups like the Girl Scouts,the Police-
men's Benevolent Association and others.
Local businesses and banks have gotten involved, the utili-
ties. There is virtually no bureaucracy. A coordinator who was
hired on a six-month basis for the term of the program. When
the program was over, everyone understood the coordinator would
leave.
Because the funding is minimal, it absolutely requires crea-
tivity and imagination on the part of the communities to make
them work with the amount of money available and in piecing to-
gether the other resources. It does not require a lot of tech-
nical understanding. It's a self-help program. Most people do
it themselves.
People in it are responsible for taking their own energy fu-
ture into their own hands. The communities that have done it
have developed enormous pride in this program as being selected
as the cities to do it, and often they give it their own name.
Each program has had its own name, its own ground rules, its own
approach, and it has worked effectively in the large number of
cases.
Now, one other characteristic of the program is that it does
not involve the imposition of a lot of Federal regulations on the
155
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community in terms of how it should be carried out.
In Middletown, when some members of the city government be-
gan talking to the ACTION Agency about making Middletown the
site, I had just come onboard into the city government and was
extremely skeptical of the program and of the city jumping
quickly into a program as the people from ACTION were encour-
aging it to do. They were saying that, no, you don't really
need to do a lot of preparation. You really just need to get
in there and get your hands dirty and do this thing.
I had had enough experience with Federal programs to know
that usually they didn't work in communities. The outreach as-
pect is usually a failure, just as it involves subsidizing po-
sitions, et cetera.
We reluctantly got involved in the program. We began to
we started late, in fact ACTION actually began to be annoyed
with us for sort of spinning our wheels a little bit at the
beginning in getting started. We finally brought a coordina-
tor onboard and began piecing together parts of the program.
We set up an executive board of community organizations
which began developing plans and set a goal of reaching 800
households out of 10,000 in the community.
The program was to run for six months. We gave it a name
called MSER, Middletowners for Saving Energy Resources. We de-
signed workshops. We began to contact landlords to overcome
some of the traditional problems of energy conservation in ten-
ant, rental housing.
We began to get local businesses involved. Businesses star-
ted contributing in-kind contributions, the printing of materi-
als and numerous other things, loaning office supplies, all as-
pects of operations. The local press became enthusiastic. The
local realty association became so enthusiastic, they organized
a large energy fair to kick off this program.
In carrying out the program, we found that it far surpassed
the initial goal reaching 1200 or 12 percent of the entire hou-
sing stock of the city, and the program was so successful that
it was selected by a private foundation as one of five cities
to carry on in a second round, and we intend to go from 12 per-
cent to 25 percent of the city's housing stock to reach in the
second six-month phase of the program.
The local utilities, as I said, have played a large role as
well. Now all of this grew out of a $5000 ACTION grant and a
commitment by the Department of Energy for this program and to
make available some of its weatherization funds through its re-
gional office to be used for the purchase of kits.
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In addition to the direct impact of the program, which
is saving Middletown residents thousands and thousands of dol-
lars, the program was cut off at the end of six months, because
that's what it was designed to do, and the interest in the pro-
gram on the part of the community was increasing geometrically.
That is, the people coming to the workshops for the training
to install their kits was increasing so rapidly, and it was
stopped right at the peak of its success.
The program, at least as important as that, kicked off in-
terest in the community in other energy conservation programs.
Now the City of Middletown has considered seriously floating a
million dollars worth of general bonds for the purpose of making
low-interest loans to members of the community for more compre-
hensive energy conservation programs. It has served as a model
for several legislative efforts, and the bills that passed the
state legislature, and it has served as an impetus to improve
the effectiveness of the local weatherization program.
Now, I want to go back to the whole just to conclude for a
moment, and say that as we experience this shift of responsi-
bility from the Federal to the local level that's going on
under the present Administration, municipalities are increas-
ingly being left with the responsibility of dealing with the
impacts of rising energy prices and the energy crisis in gener-
al, and without the resources and the responsibilities and the
experience to deal with it. Programs need to be designed to
allow and encourage communities to effectively take on this
problem. People are going to be cold. The Federal government
is not going to be taking responsibility for keeping people
warm.
State government is also not accepting that responsibility
and where it has, it has demonstrated itself in most cases to
be a miserable failure. So programs need to be designed, as I
said, to help cities, and I feel very, very strongly that this
community Action program, this community energy program with
the ACTION agency is one of several examples of extremely crea-
tive low cost to the government programs which can have a very
significant impact on at the grass-roots levels. Thank you.
DR. RIEGEL: Thank you. Next is Dr. Richard Kline who comes to us as a
Spartanburg City Councilman and Chairman of the Energy Subcom-
mittee of the South Carolina Appalachian Regional Council of
Governments.
DR. KLINE: Thank you for the introduction. By way of professional
training, I'm also a chemical engineer with a Ph.D. Degree in
engineering from MIT.
neer and am a member
Engineers.
I'm employed by W. R. Grace as an engi-
of the American Institute of Chemical
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In preparing for this talk, I polled the municipalities in
the six-county northwestern region of South Carolina and compa-
nies of the members of the Chemical Engineering Society and also
got input from the League of Women Voters. My presentation to-
day, which basically follows the outlines of your issues prepar-
er, is a composite of my own experience and the information that
I've gotten from these people.
I'd like to say first that people in our region rather
strongly support the new Administration's initiatives to allow
the free market to handle the energy problem. As a practical
matter, the rising cost of energy is the only reason that
people in our area have any serious interest at all in conser-
vation or generation of energy from other sources. We take
pride in other considerations, such as patriotism, social
concern, et cetera; but these are not the reasons that we
make economic decisions.
As to the previous Administration's policy, Attachment #1
which is on the seventh page of my paper, lists the 12 grant ap-
plications that came through for energy conservation in our re-
gion last year. In addition to the amount of money asked for and
the amount received, we have compiled a rough estimate of the
cost that each organization incurred in asking for this monev.
The costs of applying for the grants were on the average roughly
10 percent of the amount of money that the groups received,
and a number of qualifying applications were not funded to any
extent at all.
As to the effect of the new Administration's policy, I think
the first and most important thing to realize is that the local
governments in our region view ourselves primarily as providers
of traditional governmental services: roads, water, sewage,
public safety, parks and recreation, et cetera. We view energy
conservation as it impacts us, as something that we wil] do our-
selves to make our organizations more efficient. Therefore,
we will probably continue without the Federal funding, albeit
at a reduced level, funding the energy conservation measures
that we are doing.
My second attachment is a three page list of the energy con-
servation measures being taken by the City of Spartanburg.
We're probably the most active city in the region, but the
measures that we're taking are typical of the measures that
are being taken throughout the region.
The industries in our region generally don't publicize their
energy plans, but they are engaged in energy conservation for
the sane reasons we are, economic. And the concensus among them
is that they want the Federal government to leave them alone.
They got nothing from the grant program. They expect nothing
from the new program either.
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ATTACHMENT #1
FEDERAL ENERGY GRANT APPLICATIONS FROM THE SOUTH CAROLINA APPALACHIAN REGION
Amount Amount Application
Purpose Requested
Applicant
Gaffney, Easley,
Seneca, and Greer
Boards of Public
Works
Dollars Received
Received Preparation Costs per Dollar Cost
Alcohol Fuel Demon- $337,500
stration Project
Appalachian Resource Greenville-Spartan- 82,000
Recovery Study Com- burg Incinerator;
mittee Resource/Energy Recovery
Studies
City of Seneca
City of Easley
City of Spartanburg
City of Spartanburg
City of Spartanburg
City of Greenville
City of Seneca
Seneca Incinerator 15,000*
Easley Incinerator 15,000*
Energy Conservation 17,014
at City Hall
Solar Energy for Swim 49,250
Center
Energy Conservation 28,125
at Rec. Centers
(4 applications total)
Solar Heat Reflective 17,434
Film
700 kw Low Head Hydro- 40,000**
electric Generator
City of South Carolina ARC Energy Plan Update
for Grant Qualification
$285,000 $10,650
15,000 7,650
15,000
15,000
17,000
1,050
800
1,050
1,050
4,300
1,310
3,250
1,500
TOTAL
* Applications solicited by state.
** Loan only.
*** Total for all applications.
$601,323 $347,000 $32,610
$26.76
1.96
3.49**
18.75
2.66***
$10.64
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ATTACHMENT #2
CITY OF SPARTANBURG: ENERGY CONSERVATION MEASURES
At City Hall:
Install a microprocessor controlled energy
management system, using a 50/50 state
grants. (3 year payback)
Install a demand recorder to register demand
for every 30 minute period of the day.
(Duke Power, which hills on a peak demand
load system, provided the recorder.)
Start cooking on the electric stove in the
jail only after 5 pm. to reduce peak demand
load.
Replace sixty 300 watt incandescent lights
in the jail with sixty 80 watt fluorescent
lights.
Conduct energy conservation seminars for City
employees.
Change outside lights to high pressure sodium.*
Add one 400 watt high pressure sodium floodlight
and turn off seventeen 150 watt lights.
Turn off loading area and garage lights.
Add R-16 insulation with new roof.
Install an air lock on front entrance.
Blend waste oil into boiler fuel oil.
Add wall insulation.
Add economizer cycles to air conditioning/
heating units.
Add cooling tower and boiler controls.
Install an ORSAT analyzer in the boiler flue
to improve boiler efficiency.
Net Savings:
$71,198/5 yr.
11,418/5 yr.
1,209/5 yr.
2,888/5 yr.
$.70/gal.
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ATTACHMENT #2 (continued)
DR. RICHARD KLINE'S TESTIMONY
Set up employee carpools, if possible in as-
sociation with the County.*
At the Recreation Centers:
Keep gym lights off when possible.
Put stage lights on separate switch.*
Install attic fans.
Install Marvair water heater that uses air
conditioning exhaust heat (or heat pump in
winter) in fire stateion and rec. centers.
Turn off oil burning heaters at one center.
Readjust day care center timers.
Replace propane with natural gas at one
center.
Install solar heater in swim center.*
Add insulation at 3 rec. centers.*
Add economizers to air conditioner/heating
units at 2 rec. centers.*
Install a microprocessor energy management
control system at 2 rec. centers.*
Modify a boiler flue opening to retain inci-
dental heat.*
At the City Garage:
Change car wash rate schedule.
Install a waste oil heater.*
Waste Collection and Disposal;
Construct a solid waste compactor/transfer
station to minimize vehicular trips to the
landfill.
Net Savings:
$22,751/10 yr.
750/5 yr.
4,925/5 yr.
22,710/5 yr.
4.6 year payback
4-10 year paybacks
4-5 year paybacks
4-5 year paybacks
4 year payback
1,300/5 yr.
$.70/gal.
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ATTACHMENT #2 (continued)
DR. RICHARD KLINE'S TESTIMONY
Install a power factor controller, which
reduces electrical use by electric motors
constantly under varying loads, at the
transfer station and a pumping station.*
Optimize the rate schedule at the transfer
station.
Investigate economics of methane recovery
from landfill.*
Net Saving:
1,613/5 yr,
Vehicular Savings:
Purchase exclusively compact police cars, and
sub-compacts for administrative personnel.
Purchase economy sizetf pickup trucks.
Evaluate XPCL gasoline additive as a gasoline
mileage extender.
Evaluate Econo-mist carburetors.*
Evaluate automobile gasoline pre-heater.*
Convert all gasoline powered city cars to
compressed natural gas. (2 year payback)
Apply for DOE grant to test electric cars.
(Greenville, S.C. got the grant.)
Miscellaneous Savings:
Replace 2 meters with one at a city building,
and 4 meters with one at another city
building.
Install photo-cell switches on outside lights
at city buildings.
Install photo-cell on parking garage lights.*
Replace bad 40 watt fluorescents with energy
saving 35 watt fluorescents.
$259,652/5 yr,
7,250/5 yr.
1,447/5 yr.
5,000/5 yr.
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ATTACHMENT #2 (continued)
DR. RICHARD KLINE'S TESTIMONY
Net Saving:
Install timers on hot water heaters, reduce 1,440/5 yr.
water heater temperatures to 100 degrees,
turn off or time ciculating hot water, and disconnect
outdoor shower where vandals could run hot water.
Install water heater insulation jackets on 8 760/5 yr.
units.*
Turn off building heat and air conditioning nights
and weekends.*
Shade air conditioner.*
*Not yet implemented.
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The one area of energy conservation at the governmental le-
vel that will probably suffer is joint programs. We have, for
example, four cities going together for an alcohol fuels
program whereby 120 vehicles will be run on alcohol, which will
be generated from peach and textile waste producsts. With
programs of this type, the coordination is best when the local
governmental agencies can get the money from somewhere else
and don't have to fight among themselves as to the funding
formula. For this admittedly political reason, programs like
this will probably be slowed under the new policy.
The one area where there will be serious slowdown is the low-
income area. Although the upper and middle income people in our
area are seriously going ahead with their own conservation mea-
sures, including aggressively seeking out the information to do
them, the low-income people simply cannot afford this. This is
the area that we feel the Federal government will have to concen-
trate on, and I'll get into that in a few minutes.
As a transition policy consideration, we would recommend
that you consider funding some more of the grant applications
throughout the nation in which the local governments have
invested a great deal of time and money. Many of these appli-
cations are basically sound applications. They were made in a
good faith expectation that the Federal policies would con-
tinue; and although we support the change from individual
grants to block grants, because of the inefficiency in the
individual grants, we would like some consideration - grand-
fathering, if you will - for the transitional period.
In our area, the phase-out of Federal programs will have a
rather mixed effect: We are getting no energy impact assist-
ance.
The schools and hospital conservation program, which the new
Administration is proposing to fund, is ironically the one which
would do best if left alone. The counties, which run schools and
hospitals, have strong financial positions. They are able to
generate revenue for conservation measures, if necessary, by the
issuing of bonds, and they've consistently supported both hospi-
tals and education.
The weatherization program, as I've said before, probably
will not be carried out at anything approaching the scale that it
was previously. We might expect some municipalities to put on a
limited effort, and private agencies, under charitable auspices
such as the United Way, might continue to some extent. We can't
predict the extent at this time. The State of South Carolina
has an energy office, which is primarily run on Federal funds,
as the League of Women Voters of Greenville (Attachment #3),
has noted. Probably as these Federal funds are reduced, the
state's commitment to overall energy policy will be reduced, and
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ATTACHMENT #3
ENERGY POLICY STATEMENT OF THE GREENVILLE, S.C. COUNTY LEAGUE OF WOMEN
VOTERS
It is the League of Women Voters' position that conservation of energy
should be the keystone of U.S. national energy strategy. Conservation can
extend the use of present nonrenewable resources and other environmentally
benign sources and technologies. The League opposes the administration
plan to slash over 77% from conservation programs and more than 62% from
solar.
Administration cuts are based on the assumption that higher energy
costs and tax incentives alone will take care of energy conservation and
encourage the use of solar. Higher prices have had a significant effect.
But higher prices will not provide capital to the vast number of individuals
and businesses who can use conservation and solar. Higher prices and tax
incentives will not enable tenants to control the design and operation of
the residences and office buildings they occupy and whose energy operating
costs they pay. Higher prices will not ensure that we achieve the maximum
cost-effective improvements in efficiency, even though such improvements are
clearly in the national interest.
The League of Women Voters maintains that federally funded conservation
and solar programs are needed to expedite market forces. They provide the
diversity of approaches needed to help break down institutional barriers
to use of these resources. The Solar and Conservation Bank, for instance,
was designed specifically to assist those who would not be expected to bene-
fit from tax credits. These programs can assist citizens in the large num-
ber of small applications of solar and conservation technologies.
Proposals to axe the Solar and Conservation Bank, building and appliance
standards, utility audit programs, funds for state energy offices, and pub-
lic outreach programs fly in the face of all recent energy studies. More-
over, these conservation programs, plus low-income weatherization funds,
are critical in reducing the impact on consumers of rising energy costs.
The 1978 report of the S.C. Energy Task Force Conference declared that
lack of public knowledge is the greatest single barrier to the development
of alternative energy sources of all kinds in South Carolina. Yet many sig-
nificant conservation efforts in the state are federally funded: the Gover-
nor's Office on Energy, the energy extension services, the energy programs
of the S.C. Appalachian Council of Governments, the Appalachian Regional
Commission, and the Southern Solar Energy Center. Major state monies have
gone to fund the state legislative committee on energy and the newly proposed
energy research center at Clemson, which will conduct industry oriented pro-
jects. In addition, the state has provided required matching funds for the
Governor's Office on Energy. Additional state support of this office is
among the lowest in the nation. The office exists mainly to implement
federal programs.
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we would hope that you will take this into account in your pro-
grams. I note that you have some funds allocated for state plan-
ning in the new program.
The Energy Extension Service is being supplemented now very
aggressively from many, many sources: private books that are
published, articles in Popular Science, and symposia put on by
the local tech schools, colleges, and universities. In fact, I
will tell you personally that until you brought it to my atten-
tion in your position paper, I, as the local regional energy
chairman, didn't know of its existence. So I think we could pro-
bably do without it.
The emergency energy conservation measures are being carried
on by the state. As I've mentioned, they will probably go on at
a reduced level. There is some emergency planning being done at
the local county level by Civil Defense authorities, although
this is applicable only to particular counties and badly needs
to be supplemented by state and national plans.
The Residential Conservation Service is being carried on
aggressively by the utilities, especially by our local elec-
tric company, and they will probably continue to do what is man-
dated and, in some cases, a bit more. I doubt that the local
governments will get into this service, although the professio-
nal home builders association may go ahead with programs like
this on their own as an advertising means.
The state energy office should be continued. We need an
overall energy plan for the State of South Carolina and also
an office which can concentrate resources on statewide programs,
such as a proposed Energy Research Center at Clemson University.
That's merely one example.
The weatherization and low-income assistance program, as
I've mentioned, is the one which is most likely to suffer
seriously. I would recommend the alternate proposal that you
set forth: That this be put into a block grant with the LIEAP
program and funded as a separate block grant, rather than being
put into community development. To be quite honest with you,
if you give us community development block grant money, we will
use it for roads, sidewalks, extension of the sewer lines,
parks in lower income areas, and things like this, before we
would use it for specific programs that benefit specific in-
dividuals, however justified these may be. As to the low-income
energy assistance program, I would recommend based on the
experience in our area that monies from this program be allowed
to be transferred to weatherization. We've had very good luck
with our local community action agency in the Piedmont area in
the weatherization program.
The same agency was given last year money to handle low-in-
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come energy assistance. That money went to the first thousand
qualifying recipients out of an estimating 30,000 who could
use it. In essence, a handful of coins was thrown off the bal-
cony to the peasants below. I don't want to sound disparaging,
but that was the effect, however well intentioned the program.
In addition, we see advantages to weatherization. Weatheri-
zation is a permanent benefit to low-income people, whereas en-
ergy assistance is something that will have to be given to the
same people year after year. The weatherization programs
tend to reduce national demand for energy and benefit everybody
including the poor people not receiving them. Whereas the
energy assistance programs provide more dollars to compete
for the same scarce resources and have an inflationary effect.
Also, the weatherization programs can employ presently low-
income semi-skilled workers in the CETA program and other
programs and provide a double benefit for low-income people.
In addition to this program, we'd like to see a modifica-
tion in the rules so that the 3 percent community develop-
ment loan programs can be used for weatherization. At present,
if we use them, we are restricted to a few community develop-
ment areas, and the houses must be brought up entirely to
code. We'd like to be able to offer this program to the upper
low-income people, basically the ones who can take on a loan
program, citywide, and we would like the requirement waived
that the houses be brought up to code, with the requirement
instead that they be merely habitable houses, so that we could
impact a larger number of people.
We feel that the funding level of this program, a snail
amount of money to many houses or a large amount to a few
houses, should be on a cost/benefit ratio. The formula will
have to vary depending on the part of the country. Obviously
New York and Maine are going to need more extensive weatheriza-
tion than South Carolina.
We feel that the CETA and other semi-skilled low-income peo-
ple can best be hired under this program by private agencies and
the local contractors, if possible. This gives them permanent
jobs as opposed to CETA jobs which will terminate in 18 months,
and it gives them their foot on the ladder into the lucrative
construction industry. Incentives could be given in terms of
preferential consideration for qualifying contractors to hire
these people.
Finally, on the area of evaluation, the philosophy of the
new Administration basically is that the free market should
handle this. Conservation is a local problem. We accept the
challenge. But by the same token, since you've said this is
our problem, you really don't need the detailed information
that you needed in the past as to how we're doing.
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Now obviously you will need a detailed evaluation of how the
grant money that you give us is being spent. To the largest ex-
tent possible, I'd recommend that the detailed evaluation he
after the fact, so that qualifying local governments do not have
to spend a large amount of money in advance applying for grants
they will not get.
In addition, detailed information should be gotten from the
large energy producers who can easily supply it at relatively
little cost, from professional societies, from research institu-
tions, and from sampling with brief questionnaires to the other
groups.
Thank you very much for allowing me to make this presenta-
tion.
(Following are additional comments submitted by Dr. Kline on July 17, 1981
Attachment #4
COMMENTS OF THE APPALACHIAN REGIONAL COUNCIL OF GOVERNMENTS
AND ITS ENERGY SUBCOMMITTEE ON THE NATIONAL ENERGY PLAN AND
ITS REGIONAL APPLICATION
OUTLINE
I. Conservation
II. Electric Power
III. Renewable Energy Sources
IV. Fossil Fuels
V. Nuclear Energy
VI. Environmental Considerations
VII. Economic Incentives
CONSERVATION
The Council of Governments supports South Carolina's emphasis on conser-
vation. Energy conservation which avoids waste and provides jobs if consis-
tent with economic growth. To encourage conservation, the Council of Gov-
ernments itself can provide information to consumers and other appropriate
groups.
Housing; Local governments should co-ordinate their efforts so as to
encourage the construction of low and moderate income housing in areas where
industry and other major sources of employment are located, so as to reduce
the cost and fuel expenditure involved in transporting employees to work.
The use of solar design principles, especially for the construction of low
and moderate income housing, should be encouraged.
The programs of public and private agencies to weatherize the homes of
low income people should be encouraged and expanded. Durable materials
should be used, with priority being given to homes that are structurally
sound. Agencies involved in weatherization should co-ordinate their efforts
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with local planners and redevelopment authorities to assure that buildings
to be weatherized are not targeted for early demolition.
Transportation: Ridesharing and vanpooling should be encouraged. Local
governments should set up voluntary ridesharing programs for their employees
in co-ordination with other employers in their areas. State and local laws
should be modified so as to remove legal impediments to ridesharing arrange-
ments, as recommended by the Department of Transportation.
The construction of a network of pedestrian and bicycle paths to supple-
ment motor vehicular roads should be encouraged. A portion of state highway
funds equal to at least 1% of the total should be set aside for this purpose.
Provisions should be made for a network of fuel depots to keep emergen-
cy vehicles, such as ambulances, supplied with fuel when on extended trips
during periods of fuel shortage.
ELECTRIC POWER
Hydroelectric resources should be developed, since hydroelectric power
has no pollution or waste disposal problems and costs, on the average, 1/6
as much as nuclear power to produce. Existing hydroelectric sites can be
upgraded, and pumped storage capability can be added in some cases. Develop-
ment of low head hydroelectric resources should be encouraged, with the aban-
doned mill dams in the Piedmont region being restored for electric power co-
generation and load levelling. The Council of Governments should develop
figures for the management of suitable local industries regarding the profi-
tability of electric power cogeneration.
Interruptible service should be actively promoted, and the media should
be encouraged to give consumers information on peak power demand hours, so
that they can avoid using optional equipment at those times. This informa-
tion could be included in weather reports.
Electric cars should be further developed for short range use, and the
development of solar powered batteries for these cars should be encouraged.
RENEWABLE ENERGY SOURCES
The National Energy Plan should place more emphasis on the development
of the Nation's renewable sources of energy, since development and utiliza-
tion of non-renewable energy resources will not adequately address the Na-
tion's long-term energy needs. The Nation's capacity to utilize solar and
geothermal resources should be enhanced.
The Council of Governments supports the development of a National Solar
Technology Clearinghouse to provide useful information to builders and home-
owners on small-scale application of solar technology. State tax incentives
should also be provided for the use of solar energy.
The National Energy Plan should include a policy that encourages the
utilization of refuse for the production of energy. Incineration of munici-
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pal trash to produce steam and/or electric power for sale to local industry
should be actively pursued.
Gasohol should be made predominantly from non-food products, and oil and
gas should not be used to fire the stills.
FOSSIL FUELS
The Nation must exercise caution while attempting to accomplish the
near-term objective of the Ntional Energy Strategy. The United States
must not deplete its own non-renewable energy resources just to reduce the
importation of foreign oil.
The use of natural gas and propane gas as an automotive fuel should be
encouraged.
The Council of Governments feels that the National Energy Plan should
emphasize the utilization of currently available fluidized bed technology
for coal. Use of this technology would enable the Nation to more efficient-
ly utilize its non-renewable coal resources during the near-term future.
NUCLEAR ENERGY
The Council of Governments supports the prudent development of nuclear
powered electric generating facilities within the State and Nation as long
as the potential development risks (safety, security, waste disposal, etc.)
are adequately addressed during all phases of project planning, development,
and operation. However, we should not become over-dependent on nuclear pow-
er because the waste disposal problem is still far from being resolved, and
because of the possibility that all reactors should be closed because of
a major accident anywhere.
The Council of Governments supports the production of nuclear fuels
(enriched uranium) for use within the United States, but the United States
should view sales of nuclear fuels to foreign nations cautiously because
of the unstable world situation.
The Council of governments supports research efforts to develop safe and
effective breeder and fusion reactors because these technologies may suc-
cessfully address the Nation's long-term energy needs. However, due to the
infancy of current breeder and fusion technology, the Nation's short-tern
development emphasis should be focused on the rapid development of other
energy technologies.
The Council of Governments supports the position that a National policy
regarding the permanent disposal of nuclear wastes should be developed imme-
diately, and that a series of permanent nuclear waste disposal sites should
be established in the United States. Further, South Carolina should seri-
ously consider phasing out the acceptance of nuclear wastes from other states
for "temporary" storage. South Carolina's existing temporary storage capa-
city should be reserved exclusively for nuclear wastes generated by facili-
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ties located within the State, unless a specific exception is made hy the
State government.
ENVIRONMENTAL CONSIDERATIONS
The Council of Governments feels that the National Energy Plan should
specifically address the trade-offs that must be made between the environ-
ment and energy production. The federal government should develop a bal-
anced and coordinated energy strategy that adequately addresses both the
environmental and economic needs of the nation.
ECONOMIC INCENTIVES
The Council of Governments is opposed to the Windfall Profits Tax.
(This was the only resolution that was not unanimouslv endorsed.)
ATTACHMENT #5
(1) The Energy Extension Service: The Federal Government has prepared
many excellent books and reports on the practical aspects of energy conser-
vation and generation, which would be more valuable if they were more gene-
rally accessible. These should be offered free or at nominal cost to public
libraries, colleges, and technical schools, and local governments should be
informed of this action. In the present transitional period of governmental
cutbacks, these local institutions, which are the natural contact points for
the public seeking information, would be delighted to be able to receive
useful material at little cost.
A significant quantity of material to be distributed could probably
be obtained by emptying the Federal warehouses, and the rest could be pro-
duced by re-printing the appropriate publications, a process that is consi-
derably cheaper than was the printing of the original publication.
(2) Low Income Weatherization: In my testimony, I favored low income wea-
therization over LIEAP, whereas Mr. K. Dorsey of the National Black Caucus
of State Legislators attached equal significance to both programs. On re-
flection, I feel that the apparent disagreement is due to differences in
regional needs.
In South Carolina, the substantial majority of the population still
lives in single family houses, ranging in value from shacks to mansions.
The older structures, inhabited primarily by low income people, were built
before the start of the energy shortage and do not have storm windows,
insulation, or other forms of Weatherization. These are usually owned by
the low income people themselves and should be weatherized before any
LIEAP program is implemented.
On the other hand, it is probable that many of Mr. Dorsey's legislators
represent inner city districts, where the predominant form of housing is the
rental apartment. Here, the tenant usually pays for the utilities and is
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not in a position to weatherize the building, whereas the landlord generally
would not qualify for low income aid and would have little to gain from a
program that would merely reduce his tenants' expenses. While some program
needs to be developed to stimulate weatherization of these buildings, LIEAP
may well be the only short-range option to keep these apartments liveable.
This difference appears to me to underscore the wisdom of lumping Low
Income Weatherization and LIEAP together into a single block grant program
and allowing local governments to adjust the emphasis between the two pro-
grams as their individual situations and priorities dictate.
DR. RIEGEL: Thank you. Open for questions. I'll take the Chairman's
prerogative and begin with a question of my own. Dr. Kline, I
was interested in a number of your observations and in particu-
lar the well thought out remark that energy assistance funds
are more in the nature of a continually accruing expense, while
weatherization is a one-shot kind of investment that is likely
to provide dividends for a long time to come.
I was also very interested in your remark that the schools
and hospitals program is perhaps in the strongest position to be
cut loose from future Federal involvement and support. I wonder
if you could elaborate on why you feel that sector is particular-
ly likely to be able to do well in terms of conservation invest-
ment without any continuing Federal involvement, and to what ex-
tent your local situation might be extrapolated to the rest of
the country.
DR. KLINE: Well, I can only argue from our local situation, but both
the schools and hospitals are financed countrywide in our area.
We have a very strong and growing tax base from the industry
that is moving into our area from all over the world, and the
county governments have consistently shown support for the hos-
pitals. The school districts have independent taxing authority,
and they have seen very little consumer resistance to raising
taxes as necessary. So the money is there, and I'm sure that
the Council of Governments, the state, and the local municipali-
ties would be able to help them with technical advice in terms
of the appropriate conservation measures.
MR. POWER: I'd just like to ask Mr. Brown to elaborate a little bit
more on the problems of the low-income households in the Middle-
town experience. Do you feel that the Middletown experience
suggests that they don't need any additional help other than
the community self help that was catalyzed, kicked off in a
sense by this very small grant from ACTION?
MR. BROWN: I'm not sure I understand the question. When you say don't
need any additional help, do you mean no further programs of
that sort, or do you mean no massive sort of Federal assistance?
MR. POWER: I didn't hear in your remarks specific treatment of how the
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low-income households would fare, whether they would get enough
help from the kind of measures that you saw being created, the
kind of institutional measures, the bonding and so on, or whe-
ther you were implying that we still needed to do weatheriza-
tion, but given that, we were going to also be benefited from
this other apparatus.
MR. BROWN: I think there's lots of need and room for other programs. I
was trying to say that those Federal programs need to be organ-
ized according to the kind of criterion I was stating, like this
particular program was. Dr. Kline mentioned the schools and
hospitals program. It's not dealing with low-income households,
but it's a program with a good goal. A lot of schools and hos-
pitals need some encouragement to sort of get off dead center and
do something about it, but that program is so laden with bureau-
cracy and format that a lot of agencies just simply don't want to
bother with it.
I think that Federal programs have to be designed to have the
maximum impact with the least assistance. The City of Middle-
town does use HUD funding, for example, for its rehabilitation
program, and we have designed some very, very innovative uses
of low cost passive solar and conservation now in every build-
ing, including housing that's being redeveloped. It's part of
the city's revitalization program.
Another example is about 30 percent of the city's housing
stock is tenant owned. The Department of Housing and Urban De-
velopment is spending millions and millions of dollars on energy
conservation programs at one end of its building, and at the
other end, has a program where it makes its funds available
for the construction and subsidy of low-income housing. They
encourage the private sector to build low and moderate income
housing.
Landlords who own HUD subsidized apartments have to apply to
HUD for rent increases. This is an enormous impact on the city's
housing. Increasing energy costs is a perfect example of how
a landlord can go and apply.
There is no HUD regulation which encourages landlords to
use any of the money that they get in rent increases for energy
conservation; therefore, because of Federal regulations, energy
is being not only wasted, but here is an opportunity to save
hundreds of thousands of barrels of oil without spending
one Federal cent.
We simply need to be thinking out programs in this way, and I
think there is a very strong need for Federal assistance in en-
ergy conservation programs, particularly in revitalization of
energy communities, of rundown communities, et cetera. But I
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just think that they have to be innovative in the way that
this particular program is.
MR. PFEIFFER: Mr. Prano, when the weatherization program ran out of funds
this spring, was there any hope of getting any money from the
state to continue those efforts?
Does the state contribute any money to weatherization in
Indiana?
MR. PRANO: No, absolutely not, and, in fact, in our political govern-
ment it's not even to be addressed, because it would be in de-
fiance of the Presidential direction if the state continued
to support a program that may or may not continue under Federal
guidelines.
MR. PFEIFFER: How do you feel how easy do you feel it would be to move
toward using this lowincome energy assistance program as a
source of funds for low-cost weatherization?
MR. PRANO: Well, when I was with the CAP agency, I was also Director
of the Energy Crisis Assistance Program and also some other
energy conservation money that we could use for weatherization.
I agree with most of the speakers. At least, weatherization
is something we can measure; it's there. It's permanent if it's
installed properly. You can see its benefits virtually for the
existence of the household, and with the energy or LIEAP pro-
gram, you know, you're paying a permanent subsidy and you're
automatically teaching people to come to you with their hand
out.
We had this happen in our agency. They automatically waited
for the state announced funding date to bring in their utility
bills. We, in turn, subsidized in the private sector, nor-
mally a business has to charge to its clients the amount of bad
business that it does. The utilities do it also, but then they
pick up a big percentage of their net profits by us providing
LIEP assistance, especially on a continual basis, so I'd say
a better formula for funding would be if a house had not re-
ceived weatherization then it should be eligible for whatever
the established criteria is for maximum amount of assistance
under LIEAP. But if it received weatherization and it reduced
the amount of assistance or need by 40 percent, then that
LIEAP assistance should be reduced proportionately so it'd be
fair for everybody.
It's not fair for one person to get a house weatherized,
get $400 worth of LIEAP assistance and get everything else, when
there's still a lot of people out there who have not gotten the
first thing, including food stamps or whatever.
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DR. RIEGEL: I'd like to thank our witnesses for very interesting presen-
tations indeed, and to invite the next three witnesses to come
forward: Anthony Maggiore, Keith Dorsey, and Peter Robinson.
Anthony Maggiore comes to us from the Wisconsin Community Action
Program, Keith Dorsey from the National Black Caucus of State
Legislators, and Peter Robinson from the City of Maynard, Mas-
sachusetts.
MR. MAGGIORE: My name is Anthony J. Maggiore, Jr. I am the Associate Di-
rector for the Community Relations-Social Development Commis-
sion - a public intergovernmental social planning and Community
Action Agency in Milwaukee County. Until recently, I was also
a member of the Fuel Oil Marketing Advisory Committee of the
U.S. Department of Energy and served as Chairperson of a
committee which published reports on Low Income Energy Assist-
ance Programs in 1979 and 1980. A copy of the latest report
dated July, 1980 and titled "Low Income Energy Assistance
Programs - A Profile of Need and Policy Options" is submitted
to the committee for the record. (This report was reviewed, but
not included in the Transcript due to its length.)
I want to thank you for the opportunity to testify before
your committee on the needs of low income people and the national
weatherization program.
The major issues confronting all energy consumers today are
partially the result of a government policy which promotes in-
creased costs for energy in order to promote needed conservation
and increased domestic production. In my opinion, another
policy is essential, a policy which relieves low income and
elderly of the immediate and intolerable burdens imposed by
this policy of increased costs. Without such a policy, the
health and safety even the lives of low income persons,
and especially the elderly, will be jeopardized.
During this testimony, I will attempt to outline the impact
of rising energy costs on low-income households, comments regar-
ding the DOE low income weatherization programs, some brief com-
ment on the Administration's proposal, and my response to the
1981 Section 11 review issues.
I. IMPACT OF RISING ENERGY PRICES ON LOW INCOME HOUSEHOLDS
A report published in July, 1980 by the Fuel Oil Marketing
Advisory Committee (FOMAC) of the U.S. Department of Energy
finds that, overall the poor:
1. will expend at least 35% of their income directly on
energy and will spend at least 21% of their income on
household energy;
2. will still continue to pay nearly 4 times more the per-
175
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centage of their income on household energy than the
average American household;
3. suffered a loss in average total income in real terms
since 1971, making the acquisition of adequate energy
for this group more difficult;
4. have lost over $6 Billion in purchasing power in 1980
due to increases in energy costs;
5. have experienced, in certain regions of the country, a
particularly harsh and disproportionate burden in paying
for energy;
6. have less ability to offset increased energy costs
through product substitution in the marketplace than
for any other necessity utilized by poor households;
7. use less than 50% of the total energy consumed by the
average American household and 25% less household en-
ergy;
8. will continue, by necessity, to occupy low-quality,
energy inefficient housing stock that further penalizes
them in their effort to cut energy costs; and,
9. lack financial resources to implement significant addi-
tional conservation improvements.
II. DOE LOW-INCOME WEATHERIZATION PROGRAM
As energy prices continue to rise, the need for conservation be-
comes even more acute. A number of basic realities must be ac-
knowledged if a long-term solution to the energy needs of the
poor is to be found:
1. The residential structures of low-income people tend to be
in poor condition and less energy efficient than those of
higher income families. As a recent national housing survey
shows, basic energy conserving features are more likely to
be absent in the housing of the poor and near poor. (See
Table 1).
2. This lack of energy efficiency results in annual fuel bills
substantially higher than they should be.
3. In terms of simple conservation measures, such as thermostat
set-backs, caulking, and weatherstripping, the poor have
already conserved as much as possible. Yet, they lack the
necessary funds to invest in additional conservation such
as weatherization and use of alternative energy sources
which would result in greater energy savings. A recent DOE
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TABLE 2
EXISTING ENERGY-RELATED CHARACTERISTICS BY 1977 FAMILY INCOME _!/
(Winter 1978-79)
TOTAL
STORM WINDOWS
All windows covered
Some windows covered
No windows covered
STORM DOORS
All doors covered
Some doors covered
No doors covered
ATTIC INSULATION
Have insulation
No insulation
Don't know
HAVE WALL INSULATION
Yes
No
Don't know
I/ Source: U.S. Department
Less than
$5,000
100%
30
19
52
30
18
52
41
37
22
28
44
27
of Energy,
$5,000
to
$9,999
100%
34
20
46
38
22
41
57
29
13
41
34
24
1977 FAMILY INCOME
$10,000 $15,000 $20,000
to to to
$14,999
100%
39
19
43
36
21
42
68
19
14
51
25
24
Residential Energy
$19,999 $24,999
100%
48
18
34
41
25
34
74
15
11
56
25
19
Consumption
100%
43
25
32
39
25
34
80
9
11
57
23
20
Survey :
$25,000
or
More
100%
48
22
30
37
31
31
86
9
5
63
18
19
Conservation ,
Washington, D.C., February, 1980, p. 31.
-------
survey of conservation behavior shows that the poor are
just as likely as the average income households to take
cost-free conservation measures (such as shutting off rooms;
see Table 2). However, as the cost of conservation mea-
sures increase (such as adding insulation) the poor are
less likely than average income households to implement
such measures.
The Federal weatherization program has been in existence
since 1973. The program was developed and administered by the
Community Services Administration in response to the impact of
OPEC price increases on low-income households. Through congres-
sional action, the program was transferred to the U.S. Depart-
ment of Energy (DOE) in 1977. Under the DOE program, grants
are made to states, which generally subcontract to community
action agencies to serve as local delivery mechanisms. Most
geographic areas of the county are presently being served by
the program.
Though the DOE weatherization program initially had serious
management and coordination problems, during the past year, the
program has improved significantly. For example, during the
calendar year 1979 the DOE program weatherized 144,000 housing
units throughout the country. During calendar year 1980, the
DOE program has weatherized over 311,000 housing units - an
increase of over 100%.
Recent studies of the DOE weatherization programs in Indi-
ana, Michigan, Minnesota, Pennsylvania, Utah, Washington and
Wisconsin indicated an annual household energy saving of 20-
25%. Since current data indicates that low income households
on the average, spend at least 21% of their income on house-
hold energy (in the Midwest and Northeast region of the U.S.
it is over 30%), the 20-25% energy conservation saving is ne-
cessary for the household to have sufficient finances to pur-
chase food, shelter, clothing, etc.
The national weatherization program serves eligible low-
income households with a priority placed on the elderly and
handicapped. The recent success of the program has documented
clearly the effectiveness of the program and the financial
relief provided to the household's receiving services.
III. THE ADMINISTRATION'S PROPOSAL
The Administration has proposed that the existing Depart-
ment of Energy (DOE) low-income weatherization program be
phased out during FY 81. The legislative authority for the
program would be transferred to the Department of Housing and
Urban Development (HUD) without explicit line item funding.
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TABLE 2
CONSERVATION EFFORTS UNDERTAKEN IN 1978 BY 1977 FAMILY INCOME _!/
(Percentage of Households)
Type of Conservation
Measure:
ROOMS CLOSED OFF
Yes
No
No answer
ADDED INEXPENSIVE INSULATION
Yes
No
ADDED INEXPENSIVE EQUIPMENT
Yes
No
ADDED EXPENSIVE INSULATION
Yes
No
ADDED EXPENSIVE EQUIPMENT
Yes
No
I/ Source: U.S. Department
Less than
$5,000
28
59
13
18
82
4
96
3
97
3
97
of Energy,
1977 FAMILY INCOME
$5,000 $10,000 $15,000
to to to
$9,999 $14,999 $19,999
33
55
12
23
77
4
96
3
97
3
97
31
56
13
26
74
7
93
6
94
5
95
Residential Energy
31
61
8
32
68
8
92
6
94
5
95
Consumption
$20,000
to
$24,999
32
57
11
31
69
11
89
8
92
7
93
Survey:
$25,000
or
More
30
60
10
27
73
12
88
9
91
8
92
Conservation,
Washington, D.C., February, 1980, pp. 31, 115.
-------
The program would be one of several activities eligible for
funding from HUD's Community Development Block Grant (CDBG)
program.
The impact of the Administration's proposal would assure
the demise of the low-income weatherization program. The
program would be competing for funds with CDBG and Urban De-
velopment Action Grant (UDAG) programs. As always, the poor
would lose in such competition.
The Administration's proposal would yield the following problem:
1. The CDBG program is, by itself, a $4 billion program
with strong competing interests for its funds at the
local level. The considerably smaller weatherization
program (FY 81 appropriation - $182 million) would be
lost in the midst of such a wide ranging program.
There would not necessarily be any targeting to weather-
ization since competing interests include streets and
sewer projects, housing authorities, water projects,
downtown development projects, neighborhood parks, etc.
Since the other competing interests have considerably
more political power than low income people, the poor
would lose in such competition. In addition, if CDBG
is restructure to allow more flexibility to local gov-
ernment, it is highly probable that such block grant
monies will be utilized to offset fiscal pressures on
the local tax dollar-further jeopardizing the continu-
ation of the low income weatherization program at the
low income weatherization program at the local level.
2. CDBG is primarily an urban program whereas the DOE wea-
therization program is a rural and urban program. For
example, almost 75% of the FY 80 CDBG funding was allo-
cated to large cities and urban counties, while the re-
maining 25% was allocated to less populated areas.
3. The household income eligibility guidelines between the
two programs are significantly different. The CDBG eli-
gibility guidelines are more lenient than current DOE-
0MB eligibility guidelines. CDBG currently serves low
and moderate income households and the DOE weatheriza-
tion program serves poverty households as defined by
OMB. Thus, the program would not be targeted to the
most needy households.
4. Linkages between the weatherization programs and the
fuel assistance program would be difficult to achieve
since they would have differing income eligibility
guidelines and would operate under two different block
grant programs (weatherization-local block grant, fuel
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assistance - state block grant). Such linkages are im-
portant if a national goal is to reduce the need for fuel
assistance through weatherization of low-income dwell-
ings.
5. There would be no national standards of services or re-
quirements as well as no national policy regarding wea-
therization of low-income dwellings. National weather-
ization standards developed over the past 7 years by
the Department of Energy, Community Services Administra-
tion, National Bureau of Standards, and other Federal
agencies may not be utilized by local governments
under the Administration's proposal. Thus, if the
program continues on a local level, "the wheel may be
reinvented" at substantial administrative cost and hard-
ship to low-income households.
6. The currently effectively operating weatherization
program with trained personnel, management systems in
place with existing space, vehicles, tools, and equip-
ment would be dismantled. It would be cost inefficient
to dismantle the current program and at a later date,
when consumer conservation becomes popular again, estab-
lish a new program.
Finally, the poor cannot afford "conservation through price
increases", as they simply do not have the resources to make
conservation improvements and at the same time, cannot af-
ford to pay their fuel utility bills. The energy problems
of the poor will only worsen if a national, targeted wea-
therization/ conservation effort for low-income households
does not exist.
IV. RESPONSE TO THE SECTION 11 1981 ISSUES FUNDING MECHANISM
AND STRUCTURAL ISSUES
A. In light of the proposed changes, how can the nation
maintain an effective low-income weatherization pro-
gram?
As indicated previously,, the Administration's propo-
sals do not assure the maintenance or even the continu-
ance of an effective low-income weatherization program.
The continuation of the program can only be assured
through categorical funding or modifications of current
block grant proposals whereby the continuance of the
program is mandated.
B. If weatherization is tansferred into the HUD Community
Development Block Grant, what agencies would be effec-
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tive sponsors at the community level?
The current agencies operating the program - community
action agencies, non-profit organizations, and in some
localities, local units of government.
Such agencies have dramatically improved the program
from a management disaster (due largely to lack of
staff from the Department of Labor CETA Program) to an
effective and successful activity.
The President's proposal regarding the Community Ser-
vices Administration does not, generally, jeopardize
the existence and continuation of community action
agencies, the major local sponsor of the low-income
weatherization program. The majority of community ac-
tion agencies are non-profit organizations that receive
most of their funds from sources other than the Commu-
nity Services Administration released a report on
April 30, 1981 that stated "of nearly 900 CAA's (Commu-
nity Action Agencies) reporting in FY 1980 only $288
Million was provided to CAA's from the Community Ser-
vices Administration and over $1.7 Billion was received
from other Federal, state, and private sources."
The report also indicated that such agencies served over
25 million poor and near-poor during the period covered
by the report.
C. How can problems involved in transferring the program
from one agency to another be minimized?
Such problems can be greatly reduced by retaining and
continuing existing local sponsors of the program. As
indicated previously, current local sponsors of the pro-
gram have trained personnel, management systems in
place, vehicles, tools, equipment, and such supplies
and arrangements that are necessary for program contin-
uation.
Nationally, such problems can be minimized by transfer-
ring existing national staff to the new agency. Since
the low-income weatherization program has already exper-
ienced one transfer to a new agency (CSA to DOE), it
would be inadvisable, from a programmatic and producti-
vity perspective, to promote or initiate actions regard-
ing national staff that would interrupt the continuity
and performance of a successful program.
In addition, continuation of current national perform-
ance, and service standards and income eligibility
guidelines, would minimize the negative impact of na-
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tional organizational changes on low-income households
receiving services.
IMPLEMENTATION ISSUES
A. If a state decides to phase out community action agencies,
how can their resources and expenses be transferred to the
new weatherization sponsor?
As indicated previously, community action agencies are not
dependent on the Community Services Administration and
states' sources of funds for their continued existence.
Such agencies are, generally non-profit organizations that
recieve a variety of Federal, state, local, and private
funds.
If some community action agencies were phased out, their re-
sources and experience can be transferred to new weatheriza-
tion sponsors by the following:
1. Transfer to the new sponsor ownership of vehicles, e-
quipment, supplies, etc.,
2. Employment of existing staff by the new sponsor,
3. Local training programs.
It should be understood that if the above was necessary, the
interruption of the existing program through local organiza-
tional changes would disrupt program operations and services
for a period of time and performance standards would be com-
promised.
B. Should LIEAP funds be utilized for weatherization? How can
the LIEAP program coordinate its activities with the wea-
therization program at the state and/or local level?
The option to utilize LIEAP funds for weatherization should
be available to the states. A percentage limitation should
be placed on transferring energy assistance benefits to wea-
therization. It should be noted that in northern and east-
ern states a low-income household's health and safety can
be jeopardized in a weatherized house if there is insuffi-
cient fuel to heat the house. Weatherization does not re-
move the need for fuel assistance. Therefore, such options
should be utilized only when it does not jeopardize the
health and safety of low-income families and the elderly.
Coordination of the activities of the LIEAP and weatheriza-
tion programs can best be designed when Congress determines
whether or not both programs are categorical in nature or
block grants. Coordination between the two programs would
be difficult to achieve if the Administration's proposals
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were enacted by Congress. The Administration has proposed
that the LIEAP program be funded through state block grants
and as mentioned earlier, the low-income weatherization
programs be funded, at the discretion of local government,
as one of several activities of CDBG local block grant pro-
grams. The Administration's proposal does not include any
requirements or even suggestions regarding coordination act-
ivities of both programs. Thus, if the Administration's
proposal were enacted, coordination would depend upon the
state design of the LIEAP program and local governments'
decision as to whether or not it will fund the low-income
weatherization program and if so, the design of such a
program.
C. What is the most equitable and cost-effective weatherization
program? Should the Federal government continue to provide
substantial assistance ($1000-$2000/Unit) to a relatively
smaller number of houses? Or, should the program be re-
structured to provide minimal weatherization ($200-$300)
to a large number of units?
The most equitable and cost-effective weatherization program
would be for the Federal government to provide assistance in
the unit cost range of $1000-$2000 per unit.
The Federal fiscal appropriations for the program has limi-
ted, severely, the number of households that can be served.
Such appropriations need to be increased dramatically.
It appears that we have two options:
1. Fund the low income weatherization program at a realis-
tic, level, in order to conserve energy, relieve the
energy fiscal burden on low income households, and
reduce future costs of the LIEAP program
OK
2. Continue, out of political and practical necessity, to
annually increase LIEAP funding to protect the health
and safety of low incone households and the elderly.
Our national priorities appear to be confused. We plan to
allocate $1.875 Billion for LIEAP during the next fiscal
year, and maybe $150 Million for weatherization, or none at
all. Yet, the weatherization program will save energy,
reduce the energy cost burden of low-income households, and
reduce the need for yearly increases in the LIEAP program.
Common sense would dictate that a significantly increased
weatherization program resulting in long-term housing bene-
fits would be more preferable to increasing the cost of the
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LIEAP program that does not yield such benefits and does not
save energy.
Until we, as a nation, plan and act logically regarding the
energy problems confronting poor people, we will continue to
spend money foolishly and at the same time not achieve our
intended objective.
D. How can CETA workers be retained in the weatherization in-
dustry?
Many CETA workers who were previously employed in the wea-
therization program have been retained in the weatheriza-
tion industry. Since the CETA program, for all practical
purposes, has been phased out over the past year, the ques-
tion today is not completely relevant. It appears that many
CETA workers have been absorbed into the weatherization pro-
gram subsidized by DOE funds.
Additionally, large numbers of CETA workers have been laid
off and are, currently, unemployed receiving unemployment
compensation or welfare.
Finally, the following recommendations are proposed to EPA:
1. Section 11 should adequately address the impact of ri-
sing energy prices on the 14 million low-income house-
holds in the United States;
2. Section 11 should recommend legislative, budgetary, re-
gulatory, and administrative solutions to the energy
problems confronting low-income households.
3. Such recommendations should include continuation of the
current national weatherization, energy fuel assist-
ance, state and local conservation programs at, mini-
mally, last year's funding levels;
4. Such recommendations should also include continuation
of the existing solar and alternative energy programs,
especially where such programs utilize technologies
that are renewable, low cost, and labor intensive. An
example of a successful program in this area is the
National Center for Appropriate Technology.
An increased versus decreased government role is needed in
the implementation of energy policy, especially as such pol-
icies impact on consumers. The average citizen, especially
low-income people, cannot possibly compete with the power
and influence of the business community in Washington, B.C.,
state capitals, or local municipalities. Low-income people
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and the average middle class citizen need the strong role of
government to protect their interests.
As stated earlier, "conservation through price" is not pos-
sible for low-income people since their incomes cannot tolerate
the burden of rising energy costs.
Thank you.
DR. RIEGEL: Thank you. Peter Robinson is the Executive Director of
the Maynard Community Development Office.
MR. ROBINSON: Good afternoon. It's a pleasure to have this opportunity
to talk to you. A little on my own background. I've been
in the energy consulting business for a few years, and I am
currently the Director for Public Affairs for the Association
of Energy Engineers in New England.
My main reason for being in community development is lati-
tude. It gives me an opportunity to put a lot of different
fields together. The purpose of these hearings is to determine
how to maintain an adequate level of attention towards the
existing energy program imperatives.
You'll probably hear some accusations that the Federal gov-
ernment is abandoning underprivileged and-low income citizens,
but I happen to be encouraged by the new directions of the Fed-
eral energy policy.
Decentralization itself is highly desirable since it allows
programmatic adaptation to the needs of the different regions.
As for funding cutbacks, these will affect programs in di-
rect proportion to the cuts effectuated in the new budget.
Market projections indicate rising prices of energy commodi-
ties, and they should be considered accurate in spite of a
temporary hiatus.
The current glut of oil can be relied on only so long as it
is politically expedient to the needs of the area. The politi-
cal history of the Middle East is consistent only in its incon-
sistency. When projecting a continued rise in the price of en-
ergy, market forces will be created to enforce ongoing conserva-
tion efforts.
It's natural to look to state and local units of government
to take over many of the activities that were previously funded
by the Federal government; however, these units of government
are faced with the same trend toward less government, less
regulation and less taxation. This seems to contraindicate
any involvement of these units of government with actual imple-
mentation of conservation retrofits. In Massachusetts, propo-
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sition 2 1/2 is tearing away and many say, gutting the effect-
iveness of state and local governments. This indicates that
state and local governments will not be able to maintain present
levels of services let alone extend themselves to additional
expenditures in the name of conservation.
Major cities are not the only areas that are on the brink of
bankruptcy. Many of our smaller towns at the heart of America
are for the first time experiencing financial difficulties.
Government efforts to date have been needlessly complicated
and expensive due to the multiple levels of administration which
have been needed to insure regulatory compliance. This mountain
of regulations is the root and cause of the trend away from big
government and its attendant evils.
In the course of aligning itself with consumer oriented
groups, the government has unwittingly adopted an adversarial
position in relationship to business.
This position is simultaneously a foundation block and a
stumbling block for all resulting legislation. The purpose of
business has never been, nor will it ever be, fleecing the pub-
lic. Business has always endeavored to supply goods and ser-
vices to the public at an affordable price; albeit, with an
acceptable profit margin. This means that business is doubly
accountable to the public since they must be responsive to
consumers as well as to their stockholders or investors.
Federal government has a mandate to rationalize and reduce
needless expenditure. This means that very possibly a great
many programs will have to be dropped. It is, therefore, rea-
sonable to assume that the private sector will take the lead
in offering the consumers reasonable alternatives to those
activities which were previously subsidized. Adequate atten-
tion to conservation can be assured by encouraging business
to take over many, if not all of the activities previously
subsidized.
Program cutbacks will inevitably reflect the amount of the
cuts. Zero funding will, in many cases, result in total cessa-
tion of activity in the affected areas. Hopefully some of these
projects will be resurrected by business when market economics
indicate potential for a profit.
It behooves the Federal government to assist and encourage
the assumption of these activities by the private sector. Gov-
ernment regulatory involvement has done nothing to date to dis-
courage their efforts.
In order to entice business to prioritize conservation ef-
forts, it Is necessary to allow it to continue to exist. For
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business, existence is predicated on a reasonable profit, wbicb
is necessary to remain in and do more business, stimulating
the economy.
Examples of efforts in innovative financing at the state
level. One innovation involved is having a utility company is-
sue grant subsidies to consumers for weatherization retrofits.
Needless to say, the utility was not particularly enthused.
NECPA mandates that the utilities supply consumers with en-
ergy audits, and otherwise refrain from entering allied weather-
ization or financial fields. Since the passage of NECPA, it's
become apparent that under the restrictions of NECPA, no one
else cares to become involved in these fields. There has been
a great deal of negative public commentary on the hidden costs
of legislative energy audits. In Massachusetts, the are "hid-
den" on all gas and electric utility bills as "RCS charges,
30c." 30c times 2.6 million utility bills translates to a
cost of over $100 per audit, even if they achieve their target
figures.
Virtually no one has seen fit to comment on the fact that
free audits have always been available from the insulation in-
dustry. The most noteworthy of these provides a free "thermal
analysis", so as not to compare with their legislated energy
audit. The audit includes a cost estimate with simple payback
calculations, a full three-year warranty on work performed,
and also includes a free thermographic inspection to test for
and correct voids. Strangely enough, this program is offered
by a utility company which was grandfathered into the insula-
tion business under NECPA.
The banking and investment industries are beginning to
enter the industrial retrofit business with the concept of
avoided cost financing. This concept uses the savings genera-
ted by the retrofit to make the payments on the equipment.
Although final costs are frequently higher than if the measures
had been fully capitalized, this means of financing is highly
attractive to a large number of institutions, including munici-
palities confronted with tax cuts at the state level. Avoided
cost financing turns out to be more interesting to them than
the schools and hospitals program, since that program requires
that they front 100 percent of the cost against the possibility
of the 50 percent fund match. Several banks are currently
investigating the feasibility of an energy management and
financial planning package which works in conjunction with
avoided cost financing. In this way, a consumer may realize a
return on investment while simultaneously lowering fuel bills.
Federal government must make every effort to assist business
and industry in their forthcoming ventures into the field of en-
ergy conservation. Some means of assistance are: one, informa-
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tion and market analysis; two, program development and synthes-
sis; three, removal of inhibitory legislation; four, promotion
of enabling legislation; five, formation of a loan guarantee
pool to allow low income participation in the new financing
packages; and six, formation of a subscriber paid interactive
energy information network which would utilize existing data
communication technology. The interactive mode should greatly
facilitate monitoring and evaluation of the new programs as
well as suggesting new directions for further business partici-
pation. In summary, the Federal government in general, and
the Department of Energy in particular, are invaluable sources
of information which can be utilized to stimulate economic
recovery and revitalization of various industry sectors.
Promotion of enabling legislation will allow a synthesis or
combination of business, industry and banking interests for the
welfare of the nation.
DR. RIEGEL: Thank you very much. Next on the agenda is Mr. Keith Dor-
sey, representing the National Black Caucus of State Legisla-
tors.
MR. DORSEY: Good afternoon. I'm the special assistant to the National
Black Caucus of State Legislators, and I'm here actually to pre-
sent testimony of the Honorable Larry Young who is a member of
the Maryland House of Delegates and the Executive Director of
the National Black Caucus of State Legislators as well as the
Chairman of its Energy Committee.
STATEMENT OF MR. LARRY YOUNG
It is a pleasure for me to be here today to address the
topic of Federal energy conservation programs and their adequa-
cy or inadequacy. This is a most important process because
energy conservation is one of the most significant tools we
have as a nation to become energy secure. While I will not dis-
pute that energy production must take an important role - it has
to - nevertheless, conservation still remains the cheapest and
most cost-efficient source of energy we have.
According to one source, energy conservation programs have
helped over the last two years to reduce U.S. oil imports from a
peak of 8.8 million barrels per day to about 5.6 million barrels
per day. In 1980 alone, this amounted to savings in the amount
of $25 billion in the cost of U.S. oil imports.
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So I cone to this hearing today with mixed emotions on the
Administration program to cut 70-80% of the funding for DOE con-
servation programs. The budget cuts, while looking nice in hud-
get columns, in fact will not only destroy valuable ongoing, ef-
fective programs hut will also foreclose valuable payoffs in the
future. I believe the long-term impacts will be substantial and
that the budget cuts are at best a gimmick to reduce Federal out-
lays without considering the impact of the cuts.
Not only are Federal conservation programs effective for our
nation as a whole, but they are especially effective for minori-
ty and low-income constituencies - represented by me and other
members of the National Black Caucus of State Legislators -
as energy prices continue to rise.
In this regard, I believe the Administration has violated
one of its own principles as presented in the National Energy
Plan III Discussion Paper that stated:
"Formulation of energy policy must be sensitive to the needs
of the poor. But energy policy should not be used as an in-
come transfer program. For example, holding energy prices
down for rich and poor alike is an ineffective way to help
the poor."
Energy conservation programs do not hold down energy prices -
they offset the impact of rising prices. Oil decontrol has oc-
curred and natural gas decontrol is next. Decontrolling pricing
may encourage production of more oil and gas, hut producing more
energy will not help minorities and the low-income to pay their
fuel bills. Therefore, the only long-term solution available is
a vigorous conservation effort aimed at reducing fuel consump-
tion by the low income, with a reseulting reduction in their
energy costs.
The items outlined in the EPA Public Hearing Issue Paper
are interesting points that I will try to answer in a general
fashion from the perspective of a state legislator.
I think that most state and local energy agencies are cur-
rently wondering about their mere existence. The state and lo-
cal responsibilities in the area of energy conservation were
primarily responsibilities vested by the Federal government and
funded with Federal dollars. With the budget problems that most
states and local governments are currently facing, I do not
think they are in a position to pick up new energy functions
overnight. In fact, under the current budget proposal, 37 of
50 state energy offices could be eliminated. This is an action
that would destroy the partnership and undermine confidence be-
tween the Federal, state and local governments.
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The Reagan Administration simply has moved too quickly in
phasing out Federal involvement. This phase-out should have
occurred over a period of years, say five for example, with
the state's share of costs gradually increasing. The 21 states
with biennial budgets probably will react by cutting back on
energy staff and programs in the short-term.
The first activities to be phased-out by states will likely
include all or most of the Federal energy programs administered
by the states. In blunt terms, the money is just not there.
You can expect the Energy Extension Service, Residential Con-
servation Service, Emergency Energy Conservation Planning, to
name a few, to end.
Local governments can only pick up new functions with some
source of funding, be it Federal or state, or local taxing
policy, and I think that all three of these potential sources
will not be able to provide the resources needed to keep
these current conservation programs operating.
Information exchange will be severely curtailed, both by
the closing of DOE Regional Offices and the severe curtailment
of DOE outreach and training grants. I think it will be up to
the governmental public interest organizations to form "net-
works" to continue the exchange of data. However, even these
"networks" will suffer because many of the Federal grants for
energy outreach have been cut.
In regards to alternative financing for energy conservation,
certainly the private sector will not help out. Conservation
runs contrary to their philosophy of produce and sell. Tax
incentives and tax credits are fine except they have no rele-
vance to the poor who pay no taxes. One of the best alter-
native financing plans that I have seen is the proposal being
advanced by other state and local government groups to estab-
lish a separate energy block grant to preserve Federal spending
for energy conservation and give states and localities more
latitude in using the money. I tend to agree with this quote
from Mayor Walsh from Warwick, Rhode Island who said:
The Federal Government cannot and should not dictate how
we run our cities ... However, there is a Federal responsi-
bility which cannot be abandoned.
I next want to look at the weatherization program. I am
very concerned over the current Reagan Administration proposal.
To fold the weatherization program into the Department of
Housing and Urban Development's Community Development Block
Grants, with no accompanying transfer of funds for weatheri-
zation, and in fact an overall decrease in CDBG funds. This
move will virtually eliminate the weatherization program for
low-income households.
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The current delivery mechanism (Federal categorical grant
to the state, which contracts money to local agencies), has
proven effective. It assures even provision of services,
greater quality control, and more effective training and moni-
toring of the personnel providing weatherization services.
Local agencies already are given much authority in running
the program, with the state primarily as administrator of the
program.
I have the following concerns about the proposal to fold
weatherization into local CDBG funds:
1. The primary purpose of Community Development Block Grants
and the purpose of the weatherization program are different.
The purpose of the CDBG program is to develop communities
according to the various developmental needs in the indivi-
dual recipient communities. The purpose of the weatheriza-
tion program is to help those with limited resources to
conserve energy.
2. Some areas of a state, particularly rural areas, would
receive no weatherization funds at all, since CDBG funds
are distributed unevenly in states, with the hulk going to
cities and towns. In Region III, for example, 38 percent
of eligible clients live in rural areas, ranging from 20
percent rural in Maryland to 81 percent rural in West
Virginia.
B. IMPLEMENTATION ISSUES
(1) At this point, I don't think it is really clear who
the new sponsors will be. If it turns out to be local
government agencies, I think the potential will exist
for a serious weakening of the program.
(2) Low income energy assistance funds should not be used
for Weatherization. The programs have two separate
goals. Many local community action agencies have coor-
dinated the programs by requiring individuals receiving
energy assistance funds to have their homes weatherized.
I think this is very important.
(3) The method of program operation over the last year is
the most effective approach. Experience in Region III
demonstrates the advantages of administering the wea-
therization program from the state level. When the or-
iginal CSA weatherization program began operation in
1975-1976, the Region III states were the only states
in the nation funded on the state level. Funding for
other states went directly from the Federal government
to individual local agencies. The states in Region
III were soon far more productive than other weatheri-
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zation program in the nation. Local agencies in the
states in Region III had the highest material quality
standards, most efficient crews and paid less for
materials than other regions. Since 1976 in Region
III alone, 115,000 homes have been weatherized, at a
current average materials cost per unit of $450.00. I
think the current approach of making available $1,000
per unit makes the most sense and is the most cost-
effective method.
(4) It certainly would be difficult to move CETA workers
into the industry. For one, some CETA workers do not
have the skills that are needed for them to be hired
by private building contractors. Many CETA workers
would be displaced, but others would have the chance
to continue working because they already possess the
necessary skills. This question needs much more study.
The Low Income Energy Assistance Program, not part of a
block grant, should maintain its own separate identity. Provi-
ding financial aid to the poor is too important a task to
dilute by allowing these funds to be used for other functions.
Before I close my remarks, I just want to say this: I
think efforts to aid the poor with their energy needs will
receive priority attention in the Congress. If-low income
assistance efforts are curtailed, cruel decisions must be made
- the heat or eat scenario. "Conservation through price", the
cornerstone of the Reagan program, is not a viable option for
the poor.
Information should be collected by DOE to at least keep
tabs on what is available in each state. I think surveys of
government, companies and homeowners makes sense. However, I
still don't believe that the Federal role should end with just
surveys.
Probably the most important study that could be undertaken
would measure the relative position of the low income now in
regards to energy, and then compile information monthly to see
if individuals are getting better off or worse off. This kind
of data would help government bodies and citizens know whether
the Reagan energy policy is living up to its promises.
In closing, Federal conservation programs should be the
backbone of our national energy policy. As a nation, we never
have produced all of our energy needs and we probably never
will. Remember, even though we only obtain about 15% of our
oil requirements from the Persian Gulf, in the even of a
global cutoff, we would lose 35 to 45% of our total require-
ments because of our participation in an International Energy
Agency agreement which requires the sharing of the remaining
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supply among all members. According to a recent Lawrence
Livermore National Laboratory study, such a sudden reduction
in U.S. oil supplies could trigger the worst economic rever-
sal the nation has suffered since the depression. Conserva-
tional programs are important and they cannot and should not
be eliminated.
Thank you.
DR. RIEGEL: Thank you, Mr. Dorsey. I turn now to the panel for ques-
tions and discussion.
MR. GLASSBERG: I have a question for Mr. Maggiore. Is the present wea-
therization program too restrictive either in the legislation
or the regulations with respect to the types of weatherization
activities that can take place?
In other words, is the program too oriented toward certain
types of activities that might be more applicable to the North-
east, Midwest and not as applicable to South Carolina or Arizo-
na in different types of building construction, and, also do
you have any data on what the implications would be for a re-
duced funding level for the weatherization program down to $150
million, and what that would mean in terms of reduced levels
of weatherization?
MR. MAGGIORE: In terms of the guidelines, they are a bit restrictive and
not as applicable in a minor way though, not a major way, to
South and Southwest and to big and small cities.
One of the problems that has existed in the weatherization
program from its inception is weatherizing dwellings in large
cities. That has not been adequately addressed.
Let me say this, though, the program has dramatically
improved by at least 300 percent in comparison to what it
was. The administration on the part of the DOE staff now is
very decisive. It was quite different than the previous pro-
gram. So though it's improved, areas of future improvement
in my estimation would be some of the specifications as it
relates to the part of the country you live and whether you
live in small cities or big cities, small towns and big cities.
Relative to the funding level, the DOE during 1980 weather-
ized 311,000 homes, a dramatic increase from the previous year
when the program was plagued with problems, literally almost
double the number of homes in 1980.
At the current DOE spending level ($300 million at least
for the past six months at that rate), if the funding level was
$150 million, the current effort would be cut in half. That is
assuming that in the event, the block grant for energy assist-
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ance went through and if there was a limitation or percentage
there they could use for weatherization, that might reduce the
nature of the cut on a state and local level, but by and large
I would say at this point, a minimum of 50 percent based on
two reasons one, current level of funding for the last six
months; two, the reduction of CETA slots.
With the reduction of CETA slots, it's a minimum of 50
percent reduction at $150 million. In fact, to be precise, I
might say it's a 60 percent reduction. We can't underestimate
the impact of the CETA dollars that have been phased out.
and are being further phased out by the end of September. So
it's probably close to the 60 percent reduction, and that
means not only in dollars, but in production as well.
DR. RIEGEL: I have a question for Mr. Dorsey. You correctly point out
that the weatherization program and the Low Income Energy
Assistance Program have quite different objectives. Meanwhile,
we find ourselves this year contemplating shrinking resources
and perhaps the necessity of addressing ourselves to making
trade-offs in areas where it is sometimes not entirely attrac-
tive to do so.
A witness who appeared before you, Richard Kline, suggested
that investment in the weatherization program was in a sense
more meritorious for the long term than the low-income assist-
ance program, and also made remarks about the relative funding
levels of the two programs.
Do you have any additional comments on the balance between
those two?
MR. DORSEY: Well, I'd just like to state that they are both equally
important, in light of the forthcoming potential forthcoming
legislation regarding the deregulation of natural gas, where
it's been predicted that for all consuming groups across the
nation, the costs will double by next year if there were imme-
diate deregulation. With that, and the rising fuel oil costs,
without an immediate continuation of the weatherization program,
you will find the low-income families who are the ones who are
most in need of weatherization will be spending not only more
for their fuel costs, heating costs, but a greater percentage
because of the inadequate shape of the housing that they're
using.
So we believe it's very important that the two have to go
hand in hand; one, to cut down on the waste of energy with the
weatherization program, and, two, to offset the immediate
impact of deregulation on low-income families. We have to
continue with low-income assistance. So I would say it would
go hand in hand.
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MR. POWER: I'd like to ask Mr. Robinson about the regional energy
planning mode. I was curious about that. One of the effects
of the phase-out of state programs will be to reduce the amount
of information coming to us on what the states are planning to
do, how they see their individual situations.
Do you see a way that that might be undertaken on a basis
other than having the Federal government sponsor it?
MR. ROBINSON: I think that it might need an initial kick-off by the
Federal government, but once it was in place it would be self-
supporting.
I talked to about 40 towns in my area, and they have
objection to a subscriber fee of a couple of hundred a month.
In a lot of cases, these towns are small and have no data
processing equipment and could use it.
This would give them an excuse to buy it and make use of
it through word processing or accounting as well as receiving
energy information or community development information that
they don't have.
I find myself doing a great deal of research finding infor-
mation and the town next-door doesn't have it. I see no reason
not to have an information clearinghouse, and when presented
by, say, electronic mail, it could just go through say a chief
executive officer of the town or city manager for executive
decision. Here's the information, are you interested? Here's
the information we would like. It could be interactive. So
you could find out just what is going there.
The government has a habit and is very good at compiling
statistics, but the information often dead ends; it's not put
to use, and the statistics can be very valuable to indicate
trends or opportunities of many different natures.
This represents a savings to the towns, because to set up
a local energy office costs $30-100,000 a year. The trend in
the face of budget cutting, say take Joe Purchasing Agent,
and, say, hey, you're the energy manager. The guy is already
doing a full-time job; so as a consequence nothing happens.
If, for a nominal subscriber fee, they can have the infor-
mation available on the executive level where it would go
anyway, if you have an energy manager looking for information,
he still has to present it to the chief executive. This way,
you're shortcutting the whole routine.
DR. RIEGEL: I'd like to thank the panel, and then inform you that
there's been a slight schedule change. We have one final
witness, Mr. Neal Gale of Philadelphia.
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MR. GALE: My name is Neal Gale,and I am speaking today out of my con-
cern for the well being of our planet.
The purpose of my testimony is to expand the focus of
these hearings beyond the question "can energy conservation
programs survive the withdrawal of Federal support?" It is
not that I think that this question is unimportant. I am sure
that many people will answer it competently, and show that
energy conservation will be diminished. This undesirable result
must be addressed, and I acknowledge those who have undertaken
this task. They have given me space to carry the discussion
further.
I want to include a look at the more distant consequences
of this turnabout in our national energy policy. The shift
away from conservation and renewable resources is manifest in
the proposed Department of Energy budget - which includes more
money for the nuclear industry and less money for conservation
and renewables. The justification for this is found on page
five of the issue paper for these hearings; point five of the
guidelines established to form the third National Energy Plan:
"Federal public spending for enrgy purposes should be
limited to those areas where the private sector is unlikely
to invest sufficiently, such as in high cost, long lead
time technologies, with substantial prospects of high pay-
off. Public spending should not be used to subsidize
domestic energy production and conservation since this
buys us little additional security, and diverts capital,
workers and initiative from more productive uses elsewhere
in the economy."
This position is enhanced by the stated intention of the
Department of Energy to allow free market forces to determine
the viability and growth of energy technologies. The result
is that conservation and renewable resources will not be sup-
ported by the Federal Government, while the nuclear industry
is clearly given a leg up. This is a dangerous hypocrisy.
We are being asked in these hearings to identify the effects
of this program on energy conservation. I think that it is
important to look at the entire picture, and ask what will be
the results in terms of the survivability of the planet.
In as much as the Federal government disseminates informa-
tion, swaying public attitudes, the open abandonment of energy
conservation and renewable resources, in favor of the nuclear
industry, is wrong. It demonstrates tacit approval of the
industry, and effectively turns attention away from the ques-
tions surrounding nuclear development.
What is generally unspoken and unquestioned is that the
197
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reduction of government support for energy conservation pro-
grams is being accompanied by the silent commitment to a nucle-
ar future. Such a commitment is permanent. The consequences
will be with us virtually forever. That is why we must consi-
der all aspects of this choice. The people who will inhabit
that nuclear future will not be able to turn back - to choose
a non-nuclear world. We are choosing for them.
I am not pretending to be an expert in the field of nuclear
energy, and I realize that I am stretching the stated purpose
of these hearings by including a statement about it. I believe,
however, that we can no longer afford to pretend that we can
ignore this problem. It will not disappear by magic or science
or faith or luck. We must take responsibility for it now.
This requires a willingness to own the problem in a personal
way. To examine the problem with an open mind - being guided
by the truth that is revealed there. Not to dismiss the prob-
lem as someone else's.
I would like to suggest a few topics to facilitate such
an examination by anyone seeking this responsibility:
* The infringement of civil liberties by the military and
/or intelligence agencies,in an atmosphere of nuclear
terrorism and sabotage.
* The possibility of civilian nuclear power plants being
used against U.S. citizens, by hostile foreign govern-
ments, in time of war.
* The on-going poisoning of our food and water supplies,
with plutonium and other nuclear byproducts.
* The increasing probability of nuclear annihilation as
nuclear weapon technology and materials are exported
around the world.
DR. RIEGEL: All right. Discussion? Thank you very much for appearing
with us today. I'd also like to extend my thanks to the panel
for assisting EPA in the Section 11 review this year. As
I pointed out, these hearings are more crucial to the Section
11 proceedings than in years past, because there has been no
prior workshop activity leading up to these hearings.
We will be looking at all of the formal statements and at
the discussion very closely in preparing our final report.
(Whereupon, the meeting adjourned at 4:55 p.m., July 14, 1981.)
198
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PROCEEDINGS
JULY 15, 1981
MORNING SESSION
HEARING PANEL
Kurt Riegel
Eugene Frankel
Ted Kapus
Gregory Ondich
WITNESSES
Carroll Benson
David Davia
Richard Russell
Sheldon Cady
Karen Anderson
Robert Naismith
Robert Manahan
Richard Esteves
Acting Director, Office of
Environmental Engineering and Technology
Environmental Protection Agency
Professional Staff
House Science and Technology Committee
Deputy Director
Buildings and Community Systems
Office of Conservation and Renewable Energy
Department of Energy
Section 11 Program Manager
Environmental Protection Agency
Dallas Power and Light Company
Public Service Company of Colorado
Edison Electric Institute
Mineral Insulation Manufacturers' Association
American Public Power Association
Potomac Energy Group
Thermal Insulation Manufacturers Association
General Public Utilities Corporation
199
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DR. RIEGEL: Good morning. I'd like to welcome everyone here this
morning to the hearing that the Environmental Protection
Agency is conducting this year under Section 11 of the Federal
Nonnuclear Energy Research and Development Act.
This is the act that created the Energy Research and Devel-
opment Administration in 1974 and and that contained the so-
called "Section 11" provision, charging the Council on Environ-
mental Quality to review annually the programs of the Energy
Research and Development Administration, now the Department
of Energy, with respect to the adequacy of treatment to hoth
conservation and environment.
That responsibility was transferred within the executive
branch from the Council on Environmental Quality to the Envi-
ronmental Protection Agency in 1977. This year's Section 11
review is the fourth annual review that we have conducted of
Department of Energy programs.
From year to year, we have shifted focus from one part of
the energy research program to another, and this really repre-
sents the second look that we have made at the conservation
element of the program. We feel it is particularly appropriate
to look at the Federal conservation programs this year, because
the Administration has announced fundamental new directions in
pursuit of our national energy objectives. A conspicuous
feature of that new direction is de-emphasis of Federal in-
volvement and investment in conservation, but with a reaffir-
mation of the importance of conservation in the national pic-
ture and a public statement by the Administration that conser-
vation responsiblities most efficiently and effectively are
to be picked up by state and local governments and the private
sector.
A fundamental purpose of this year's review then is to ad-
dress this problem of transition of a rather large and ambi-
tious Federal program to one which is less resource-intensive,
but which nonetheless intends to have a large and important
impact on the energy picture for this country.
Just a few words about how we would like to run things this
morning. Many of the witnesses, who incidentally represent a
very diverse set of backgrounds and experience, will arrive
with prepared statements. I assure you that these statements
will be put into the official record of this hearing.
I would ask the witnesses to the extent that that they can
to summarize those prepared statements so that we can turn
rather quickly to questions and discussion involving members
of the panel.
200
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I'm Kurt Riegel, from the Environmental Protection Agency.
At my far left is Greg Ondich, who is also with the Environmen-
tal Protection Agency and has been the Program Manager for this
year's Section 11 process. Representing John Millhone from
the Department of Energy is Ted Kapus who will be here for at
least a portion of this morning's proceedings. He is the Depu-
ty Director for the Buildings Conservation Program; and then
finally, to my immediate left is Eugene Frankel, from the House
Science and Technology Committee.
With no further discussion then, I would like to turn this
morning to our witnesses.
We will begin with Mr. Carroll Benson from Dallas Power and
Light.
MR. BENSON: Thank you. I'm Carroll Benson, Director of Program Devel-
opment for Dallas Power and Light Company, and by way of in-
formation, DP&L is a metropolitan utility serving approximate-
ly 450,000 customers in the city limits of Dallas, Texas.
We appreciate the opportunity to be here this morning and
to discuss the changing role of the private sector in future
conservation activities. Before I begin that discussion, I'd
like to say that we have no serious quarrel with the public
discussion package for the third national energy plan that was
published by DOE in March of 1981.
Despite the events of June 26 in the House of Representa-
tives, we are convinced that the underlying assumptions of the
Administration regarding a return of these responsibilities to
the private sector are correct and that in the final analysis
the roles of government and the private sector will be restruc-
tured.
The focus of this hearing, as we understand it, is to
evaluate the role and reaction of the private sector to this
change in philosophy, and particular emphasis has been reques-
ted by EPA on preparations for assuming these new responsibili-
ties, which activities will receive priority, what new initia-
tives or opportunities may develop, and finally what the Fede-
ral government's proper role may be and some methods for the
government to monitor the effects of this new direction.
Addressing each of these in order, I would have to say
that DP&L has had some difficulty in determining any new re-
sponsibilities. We've been a leading advocate of wise energy
usage for many, many years, and in fact, our company was recog-
nized by the President in a White House ceremony in January
1981, and I'll quote, "for its outstanding contribution to
America's economic and national security through exemplary
leadership in the national effort to achieve energy efficiency."
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I offer this comment on the President's Award for Energy
Efficiency not as a brag on our part, but as evidence of our
early and continuing commitment to wise energy use. The award
was based on over 30 distinct conservation oriented programs
offered by DP&L to its customers, none of which were required
by any, and I'll repeat, any governmental entity.
Our programs emphasizing wise energy use and the control-
lable relationship between energy usage and cost will continue
to receive priority emphasis in all of our customer communica-
tion programs. Those programs which have particular signifi-
cance in terms of peak demand reduction and/or load factor im-
provement will receive emphasis.
The philosophical shift in the government's energy program
emphasis proposed by the Administration has not directly crea-
ted any new initiatives or opportunities for our company, but
may in the future as institutional and regulatory barriers to
program operation are removed.
Specifically I'm referring to innovative cogeneration and
small power production options that may be available, as well
as the opportunity for creative financial incentives and con-
servation measure installation programs.
Although the opportunity was not created by government dis-
involvement, I would like to take just a minute to desribe
DP&L's latest program.
Panel members, the same chart is in the back of your pac-
kage. Effective May 4 of this year, the Dallas Power and
Light Company through its Your Energy Share Program began
assisting customers with the purchase of high efficiency cool-
ing and heating heating equipment as well as solar and heat
recovery devices to supplement electric water heating systems.
(See Tables 1 and 2).
Your Energy Shares are monetary incentives to help custo-
mers offset the increased cost of high efficiency equipment
and can be applied as payment on the customer's electric ser-
vice bill. As the cost comparison in Table 3 illustrates, re-
placement of a four-ton central cooling unit with a SEER of 6.0
in a typical home in Dallas which has gas heating with a simil-
ar sized heat pump with an EER of 8 will yield a net payback
to the customer in less than five years at current energy costs,
and thereafter produce a net annual energy savings of better
than $400 per year using current dollars.
Those numbers include the Your Energy Share incentive, which
is shown down at the bottom and in this case would be $320, or
$80 per ton. That's a certificate that we actually provide to
the customer which he can use to pay his utility bill.
202
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RESIDENTIAL
TABLE 1
YES
YOUR ENERGY %-IARK
How Does It Work?
1. When you buy equipment* that meets YES
Program standards, you become eligible for
Your Energy Shares.
2. Your dealer or contractor will provide a
form for you to send to DP&L.
3. A DP&L representative will contact you to
verify installation.
4. After verification, DP&L will send you Your
Energy Shares that you can redeem for
electric service.
" Installed after May 3, 1981
How To Earn Your Energy Shares
The more energy efficient the equipment,
the more energy shares you will receive.
Equipment that qualifies for the YES Program is
based on its efficiency rating. See reverse side
for details.
New Homes
To qualify under the YES Program, new
houses, condominiums and apartments must
be certified energy efficient according to
DP&L's E-OK rating system. Ask your builder
about E-OK standards, or call a DP&L
representative at 698-7000 for a free E-OK
booklet.
YES
YOUR ENERGY SI-IARII
YOUR ENERGY SHARE INCENTIVES
AIR CONDITIONERS
Central systems
Window units
12,OOOBtu and
below
Window units
12,001 Btu and
above
Efficiency
Rating of
8.5-10.49
$60 per ton
$60 per unit
$100 per unit
Efficiency
Rating of
10.5 and higher
$120 per ton
$120 per unit
$180 per unit
Central systems
Window units
12,000 Btu and
below
Window units
12,001 Btu and
above
HEAT PUMPS
Efficiency
Rating of
8.0-10.49
$80 per ton
$80 per unit
Efficiency
Rating of
10.5 and higher
$140 per ton
$140 per unit
$120 per unit $200 per unit
Solar-assisted Electric Water Heating
$120 per system or device
Heat-recovery System for Electric Water Heating
$120 per system or device
Credit:
Example:
Example
$60/ton with efficiency rating of
8.5-10.49
4 ton with efficiency rating of 9 0
4 X $60 = $240
$240 Energy Share Credit to Customer
7-81
203
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MUL7IFAMILY
TABLE 2
YES
YOUR ENERGY SHARE
How Does It Work?
1. When you install equipment that meets YES
Program standards, you become eligible for
Your Energy Shares.
2. Your dealer or contractor will provide a form
for you to send to DP&L.
3. A DP&L representative will contact you to
verify installation.
4. After verification, DP&L will arrange for Your
Energy Shares to be credited to your electric
service account.
How To Earn your Energy Shares
The more energy efficient the equipment,
the more energy shares you will receive.
Equipment that qualifies for the YES Program is
based on its efficiency rating. See reverse side
for details.
New Construction
To qualify under the YES Program, multifamily
units must be certified energy efficient
according to DP&L's E-OK rating system. Ask
your representative about E-OK standards, or
call DP&L at 698-7528 for E-OK information.
YES
YCXJR ENERGY SHARE
YOUR ENERGY SHARE QUALIFICATIONS
AIR CONDITIONERS
Central systems
Window units
12,OOOBtu and
below
Window units
12,001 Btu and
above
Central systems
Window units
Efficiency
Rating of
8.5-10.49
$60 per ton
$60 per unit
$100 per unit
HEAT PUMPS
Efficiency
Rating of
8.0-10.49
$80 per ton
$80 per unit
Efficiency
Rating of
10.5 and higher
$120 per ton
$120 per unit
$180 per unit
Efficiency
Rating of
10.5 and higher
$140 per ton
$140 per unit
12,000 Btu and
below
Window units $120 per unit $200 per unit
12,001 Btu and
above
Solar-assisted Electric Water Heating
$120 per system or device
Heat-recovery System for Electric Water Heating
$120 per system or device
Example
Credit: $60/ton with efficiency rating of
8.5-10.49
Example: 2 ton with efficiency rating of 9.0
2 X $60 = $120
$120 Energy Share Credit per unit
7-81
NATIONAL
ENEMY
WATCH
204
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TABLE 3
/?.-
to
O
U!
SIZE: 2000 square feet
COOLING UNIT: 4 ton (6.0 SEER)
GAS HEATING
INSULATION:
ceiling R-13
walls R-7
floor none
THERMOSTAT SETTING: 78° summer
72° winter
HEATING USAGE: 875 ccf
HEATING COST: $333 per season
COOLING UNIT USAGE: 11,200 KWH
COOLING COST: $728 per season
COOLING UNIT DEMAND: 8.0 KW
COST TO REPLACE COOLING
UNIT WITH SAME EFFICIENCY: $1,200
SIZE: 2000 square feet
HEAT PUMP: 4 ton (8.0 EER)
INSULATION:
ceiling
walls
floor
R-13
R-7
none
THERMOSTAT SETTING: 78° summer
72° winter
HEATING USAGE: 6,156 KWH
HEATING COST: $215 per season
COOLING UNIT USAGE: 8,400 KWH
COOLING COST: $546 per season
COOLING UNIT DEMAND: 6.0 KW
COST TO REPLACE COOLING UNIT WITH
HEAT PUMP: $3,000
YES INCENTIVE: $320
PAY BACK: $3000^$ 11200_ $32p=$1480=4.9years
(heating savings: $118 $300
& (cooling savings: $182)
-------
At the same time this efficiency changeout occurs, DP&L's
summer systems peak, is reduced by 2 kilowatts. We can consi-
der this system peak as permanently deferred construction and
ultimately it will lead to a reduction in the need for fu-
ture facilities expansion. It will improve our existing equip-
ment utilization, and it will reduce our requirements for new
capital, actions all of which slow the rise in energy costs
faced by the company's customers.
In the second example (see Table 4), just changing the air
conditioning results in a net 2.1 year payback and thereafter
a $273 seasonal savings in cooling costs. Again these are
based on current dollars. This replacement, from a unit with
6 SEER to 9.6 SEER equipment, will reduce DP&L's system peak
by 3 kilowatts and can also be considered as permanently de-
ferred construction.
The same incentives are available for new construction
meeting DP&L's National Energy Watch E-OK Home Conservation
Construction Standard a standard, incidentally, which exceeds
the levels required by the Residential Conservation Service and
which was instituted two years prior to the passage of NECPA.
Meeting the conservation construction standard also allows for
smaller equipment sizing, yielding yet another increment of
peak demand reduction.
The YES program is applicable to all residential housing,
including multi-family, and has been highly successful in its
first two months of operation.
Within the next month, DP&L will institute its newest Your
Energy Share load management activity for all customers. In
this program DP&L will pay the cost differential between popular
and high efficiency lower wattage fluorescent lamps. Payment
will be made directly to dealers and distributors of lamps, and
within six months to one year we expect that regular fluores-
cent lamps will no longer be stocked in the Dallas area.
Other peak reduction load factor improvement programs may
include demand limiters, sharing interruptible loads between
groups of buildings, radio controlled and temperature sensitive
demand limiting of non-critical loads, such as electric water
heating and swimming pool filter pumps, as well as thermal
storage systems for large building air conditioning.
The overall goal of these load management programs is to
reduce the Dallas Power and Light system peak by 206 megawatts
in 1985. Your Energy Shares is a part of an overall Texas
Utilities Companies System goal of reducing the 1985 peak by
1000 megawatts, the equivalent of one large power plant.
206
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TABLE 4
o
i
SIZE: 2000 square feet
COOLING UNIT: 4 ton (6.0 SEER)
INSULATION:
ceiling
walls
floor
R-13
R-7
none
THERMOSTAT SETTING: 78° summer
COOLING UNIT USAGE: 1 1 ,200 KWH
COOLING COST: $728 per season
COOLING UNIT DEMAND: 8.0 KW
COST TO REPLACE COOLING
UNIT WITH SAME EFFICIENCY: $1 ,200
SIZE: 2000 square feet
COOLING UNIT: 4 ton (9.6 SEER)
INSULATION:
ceiling R-13
walls R-7
floor none
THERMOSTAT SETTING: 78° summer
COOLING UNIT USAGE: 7,000 KWH
COOLING COST: $455 per season
COOLING UNIT DEMAND: 5.0 KW
COST TO REPLACE COOLING
UNIT WITH HIGH EFFICIENCY: $2,000
JYES INCENTIVE: $240 )
PAYBACK: $20qp-$1200$240 =$560 =2.1 years
(cooling savings: $273) $273
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We view the proper role of government as a facilitator and
information exchange medium for new and innovative initiatives.
In those areas where barriers exist, government should seek
ways to assist in their removal, and rather than talking about
the reasons why ideas won't work, we need to work together to
discover how they can be made to.
We need an unbiased information exchange regarding what is
being done, how and where it's being done, in order to stimu-
late additional activities. We also view the government's role
as that of a goal and objective setter for a rational and co-
herent energy future, not as a specifier of how to achieve
those goals and not as an advocate for any particular favored
source of energy.
Evaluation and monitoring are always difficult and thorny
issues, and we suggest, however, that the private sector makes
its living through evaluation and monitoring of its activities
to determine which are profitable, and, therefore, to be ini-
tiated or continued. The private sector, therefore, is in an
excellent position to provide suggestions on specific programs,
suggestions which may have more merit and practicality than
those proposed by government personnel or their paid consult-
ants.
We earnestly solicit the opportunity to help evaluate pro-
posed and active programs and to be involved in the decision
making process through participation, advisory commitees, task
force activities and other avenues of cooperation.
Rather than rehash past successes and failures, we prefer
to look instead to the future, a future which portends an era
of improved cooperation, innovation and shared achievements
between government and the private sector. In the final analy-
sis, we have the same objective in view a stable, growing
economy which is not dependent on foreign suppliers for signi-
ficant portions of our energy.
The only practical way to get to that point in our judgment
is to unleash the creativity of American free enterprise.
Thank you.
DR. RIEGEL: Thank you very much. We, of course, will be coming back
with questions and discussion, but right now, I would like to
move on to David Davia from Public Service Company of Colorado.
MR. DAVIA: Thank you. First, I would like to thank EPA and the gov-
ernment for asking for this review and for showing concern with
this country's energy future. As stated, I am David Davia
with the Public Service Company of Colorado. We are a combina-
208
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tion gas and electric utility with a total of 820,512 electric
customers and 680,615 gas customers. We serve approximately
70% of the population in the State of Colorado.
During May, 1981, our average residential cost for electri-
city for customers in the Denver area was $.059/kWh; gas was
$3.59/mcf ($.43/ therm) this compared with $.04/kWh and $2.54/
mcf just one year ago.
Currently, we have 100 field representatives involved with
residential audits and conservation; 30 field engineers doing
commercial audits and other conservation activities; 7 employ-
ees working full time in our Conservation Center and 10 employ-
ees in Training and Program Development working on training
for our residential auditors. In addition, we have a gas lab
and other various support groups.
Our experience with residential conservation is as follows:
*Residential R-30 Attic Insulation Program (started Sep-
tember, 1975)
75,000 homes inspected
34,500 homes insulated under our program
75 contractors used to install material
Gas use reduced by 12% overall (corrected for weather)
Approximately 40% of jobs sold financed on monthly
utility bill
*Air infiltration test involving 90 homes
Final Report 3rd quarter 1981
*Furnace derate and testing on 90 homes
Final Report 4th quarter 1981
*Residential Audit Program started in 1979
20,893 audits requested
15,633 audits complete
4,973 request cancelled
*RCS type audit with computer assist started May 1981
4,419 audits requested
1,216 audits complete
309 request cancelled
*Conservation Center, Conservation Booklets, and Customer
Programs in the last 12 months:
(started January, 1980)
16,706 customers have visited the center
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33,746 customers have called for conservation informa-
tion
266,238 customers have entered conservation product
drawings
35,637 conservation brochures picked up or mailed out
Under general question Number One, you ask, "How are pri-
vate firms, state governments, and local agencies preparing to
assume their new responsibilities?"
First of all, we do not feel these are "new responsibili-
ties", we had these responsibilities before NECPA and we will
have them after RCS and all other programs have run their
course. We feel that since 1975 our company, along with the
Edison Electric Institute, the American Gas Association and
many other utilities, displayed extreme innovation with market-
ing conservation. Remember that a regulated utility is the
most efficient way to provide gas and electric service to cus-
tomers. In the past when each new power plant added to the
system meant lower rates for everyone, utilities were out
marketing for more growth. Now that we see today's market
180° changed from the past we see utilities marketing conserva-
tion very actively.
We at Public Service feel that our existing programs would
be much further along had we not had to take the last two
years to develop and comply with the RCS Program.
Whatever happens to RCS, CACS, REEP, or BEPS we will con-
tinue to deal with our customers in maximizing their energy
efficiency while managing demand and cost through whatever pro-
grams are necessary.
If I may digress for a moment and report that conservation
in our area is occurring mostly with natural gas. We have seen
a substantial reduction in gas use for space heating and water
heating. This is supported by an American Gas Association
(AGA) report dated March 20, 1981, that showed, and I quote,
"The highest rate of decline in gas consumption was 3.6% per
year in the mountain region". Our own data supports that
finding we show from 1973 to 1979 a reduction in gas use
of 3.5% per year.
The electric side of our Company shows just the opposite
is happening. We see electric use increasing both as a func-
tion of more use per customer and also growth due to steady
in-migration to our energy areas. In our 1979 statistical
review we see average annual residential consumption in 1979
at 5913 kWh's, up from 4,621 kWh's in 1969. This is due to
increased appliance load and increased saturation of new types
210
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of appliances. The following numbers point to some of the
problems:
water bed heaters -12% saturation
second refrigerator in use - 14.7% saturation
second food freezer in use - 3.8% saturation
These along with a greater dependence on electrical energy
show demand problems which are not being addressed fully by
any Federal program. Our problem is with demand more than
energy.
As to your question Number Two, "Which activities will
get priority form public and private organizations and what
will be the consequences if some activities are discontinued?"
We feel an energy audit done on site with the homeowner is
the best way to diagnose the energy ills of a home. Although
most people feel that conservation is labor intensive, which
it is, it is also education intensive. Therefore, we will
continue to pursue programs like the Residential Home Energy
Audits which completely evaluate the customer's thermal envel-
ope, appliance use, general conservation opportunities, load
management, habits habits and attitudes. These programs will
be supported additionally by our Conservation Center with its
state wide hotline, conservation booklets and programs for
group presentations designed to meet the needs of particular
groups through proper education. We are now training 60 audit-
ors to do audits in low income housing in the Denver area and
have also done a master conservation program and low income
grant writing program.
An issue which continues to get greater interest by our
company and many other companies is residential space heating
equipment. We have found that existing equipment has a number
of problems which include oversizing, seasonal efficiencies
of 45% to 65% with some as low as 30% and very poor or non-
existent maintenance.
We are removings our test equipment on 90 derated furnace
sites and are currently developing a furnace tune-up program,
both of which should show us the most cost-effective way to
direct future conservation efforts in this overlooked area
of heating equipment.
Of note here is the fact that in the field of energy con-
servation and solar heating the government has encouraged
activity in the hardware arena. We do not agree with this
policy because customers may buy the big ticket item for its
tax value and completely miss the boat on energy savings. A
211
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good example here are storm windows. We know that in most
cases caulking and weatherstripping are much more cost-effect-
ive than an additional pane of glass. Most buyers never check
for such things as thermal breaks or infiltration rates and
thus buy windows which do not perform. The homeowner is left
with two panes of glass to maintain but no reduction in energy
used. The solar buyer in Colorado is motivated by statements
like, "Buy solar for its 70% state and federal benefits".
Also, because the solar credit is 70% and the conservation
credit is only 35%, solar must be of greater importance, at
least that is what the homeowner thinks. We know this is not
the case. Nevertheless, many people are doing one of two
things. Either they do solar installations before any conser-
vation is addressed or they are waiting for a solar "miracle"
and not doing any conservation at all.
The one glaring error in this entire program is that gas
furnaces are not addressed straight on. You are encouraged to
fix what you have by adding a vent damper or an electric igni-
tion", but this at best is just using the "band aid" approach.
If we could initiate some sort of incentive replacement pro-
gram that would encourage existing 45-65% seasonal efficient
heating equipment to be replaced with newer appliances which
are available, are 85-95% efficient and replacement of these
older units looks cost-effective in today's market.
Point Three, "Have any new initiatives or opportunities
been created as a result of the shift in Federal energy conser-
vation programs?"
The initiatives and opportunities have been for those
people or organizations who do not fall under one of these
"cradle to grave" Federal programs.
As a result of the RCS listing requirements and $15 price
limit, we have seen many companies want to contract for servi-
ces, want to be consultants, offer computer software and
offer solar site selectors. Auditing companies which we do
not wish to use in our program threaten law suits. Contractors
yell "foul" as to the way the state originated and maintains
the master list.
Initiatives and opportunities? No. It's more like confu-
sion and aggravation with constant change.
Point Four, "What is the Federal government's proper role
in the period of transition?"
We feel that the government should do more directing in
the area of education, product specification and results.
Utilities along with the private contractors can develop the
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necessary programs and procedures needed to carry out conserva-
tion and load management.
Although this argument has been used and used again, the
market system works and works well. As the price goes up,
usage goes down. We know that people need energy as much as
food and other essentials. But the fact still remains that
we are living in homes that still waste 30% to 50% of the
energy purchased. Until this pattern of waste is changed the
buying public will continue to be frustrated by higher monthly
bills.
Utility companies have been, and are, very willing to
help. It's much easier to talk to a customer about conserva-
tion rather than a high bill. But if everyone is recommending
storm windows and insulation and the installed products do
not perform, or are unsafe or installed improperly, no one
is any further ahead. If conservation and load management are
not done right the first time, they will have to be redone.
If the government would educate the potential buyer about
how and what to buy and not spend all your regulatory effort
with people watching the way other people are doing a job,
success would be of much greater magnitude.
Utilities are not banks; we are not code bodies. By our
granting loans and doing inspections, we duplicate services
which are already available. Audits and conservation inform-
tion should be done by utilities. The sale of equipment to
correct problems and improve efficiency should be left to
the private sector.
Point Five, "How should the Federal government evaluate
and monitor the effects of its new energy policies and program
changes?"
If you are doing conservation programs, you should make
sure they are cost-effective, are supported with customer
demand and have results with measurable reduction in peak
demand or energy used. Each region should be monitored to see
what results are being attained.
As stated earlier, this company along with many other
utilities are very interested in load management, conservation,
improved efficiencies, and and customer attitude. We will
continue to strive for improvement in all these areas. It's a
big job that utilities, government agencies, and the consuming
public all have a very important role in.
I feel that the low income people need immediate help not
with paying bills, but with reducing energy waste in their
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homes. I know programs like the Low Income Energy Assistance
Program (LIEAP) are necessary for the interim but they should
not be the only cure. LIEAP recipients should have audits and
have weatherization done, in addition to financial help.
Weatherization programs should be run by agencies looking
for results not jobs. We worked on low income projects
where the manager of the program was more interested in getting
a grant for a computer than reduced energy use for the poor
people he should have been helping. We have seen programs
where bad material and poor management add future problems.
These programs do not get the results our tax dollars are
being spent for.
In summary, we feel that utilities have a place in conser-
vation doing audits and customer education. The RCS program
should be modified to reduce the burden on utilities. Items
like contractor list, follow up inspections, arranging loans
and installations and massive recordkeeping should be removed.
Flexibility on a regional or state-by-state basis should be
stressed.
The government should reduce and modify its role in trying
to be all things to all people, and allow each region of the
United States to respond to this common problem of energy
conservation and load management in a way that brings results
and an eventual solution to this menacing problem.
Thank you.
DR. RIEGEL: Thank you. We now turn to Mr. John Russell from the Long
Island Lighting Company.
MR. RUSSELL: Thank you. My name is Jack Russell, Vice President of the
Long Island Lighting Company and Immediate Past Chairman of
the Customer Relations, Conservation and Energy Management
Executive Advisory Committee of the Edison Electric Institute.
Today, I am speaking on behalf of the Institute's members
which serve 77% of all 89.5 million ultimate customers served
by the electric utility industry.
On behalf of EEI and its member companies, I appreciate
the opportunity of presenting the electric utility industry
view on the DOE conservation programs and to provide some
insight into what EEI companies, particularly my own, are doing
in the conservation arena.
The necessity of conservation is well established. Some
view conservation as an energy source; some have declared it
the moral equivalent to war; and many organizations have
committed themselves to its cause.
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But what is conservation?
- Customers view conservation as a way to alleviate the
increased cost of energy.
- Utilities view conservation as a way of saving fuel and
capital expenditures. Perhaps, more importantly, conser-
vation should strive to improve economic efficiency, al-
though more correctly stated, economic efficiency should
fuel conservation because the driving force for conserva-
tion is economics.
For "energy conservation" to be truly effective, both of
the previously stated objectives have to be fulfilled. When
the electric utility saves, the customer will save, and it is
therefore in the customer's best interest that the utility
save energy in a cost-effective manner. For example, let's
look at a typical customer and the way he can conserve.
First - A customer decides "I won't turn on my air condi-
tioner until I can't stand it anymore!" This may be a common
response from customers, particularly as the cost of energy
continues to rise. There are, of course, different levels
of tolerance among customers as to when the degree of discom-
fort overrides the perceived value of the savings.
Depending of course on the particular electric system,
the first effect certainly will be a savings in fuel. For
some utilities this fuel will be oil. But what effect does
this response have on the utility's load shape? In many cases,
this will cause a system spike which results in little or no
capacity savings. The end result is the least desirable type
of conservation from both the utility's and customer's view-
points, i.e., the utility doesn't save on capacity and the
customer is uncomfortable for much of the summer and the utili-
ty still has to file for additional rate increases.
The second type of energy conservation category involves
measures such as customer action to upgrade the thermal treat-
ment of his or her home, or the use of more efficient equipment
(air conditioning, heat pump, or other electric appliances)
or through the use of thermal storage.
The thermal storage approach to energy conservation in-
volves a deliberate attempt to improve load shape. Depending
upon the utility, thermal storage may save fuel or change the
mix of fuels consumed. If this methodology achieves widespread
use it may become the best method of energy conservation from
a utility viewpoint. Even though, with thermal storage, there
are losses associated with the storage, these losses may be
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made up for by using more efficient offpeak generation. In
any event increased insulation, highly efficient appliances
or thermal storage achieve the double benefit of saving custo-
mers money and improving utility load factors.
Because of the unique load characteristics of each company,
conservation programs are much more cost-effective when these
characteristics are taken into account. The RCS program is
a national concept that ignores the individual company chara-
teristics. And which, we believe, will prove to be very costly
to utilities and their customers.
The cost of the RCS program (some $4.9 billion dollars,
according to DOE) does not justify the incremental energy
savings that will result from the program. The electric utili-
ties are already involved in programs that are locally cost
justified, and that meet a majority of the goals of RCS.
Therefore, any savings attributable to RCS are actually only
the difference in savings (if any) between RCS and existing
or planned utility programs. To comply with the Federal RCS
program, utilities will have to stop or reduce the activities
of these existing programs that are a benefit to the end use
and the company itself. The RCS program is only one approach
to energy conservation and is probably not the best approach
for many utilities and their customers.
I can give you some concrete data on what the expected
customer response to RCS based on the experience in New York
State, which has had an RCS-like program in effect since June
of 1978. This program was passed into law despite a 1977
statistically reliable study financed by the Federal and state
governments and New York State utilities which concluded that
as of January, 1977, over three million dwellings in the state
had some attic insulation, over 60% had some wall insulation,
and about 80% had storm protection on all windows and doors.
Thirty percent of those homes had received some additional in-
sulation between 1974 and late 1976, and the owners of an
additional 30% planned to add additional insulation in 1978.
The utilities have implemented excellent programs in com-
pliance with the New York State law and those customers who
avail themselves of the Class A audit get a good value for the
$10.00 fee they pay. The balance of the $79.00 to $95.00 cost
of the audit is picked up by the body of the rate payers.
However, from June 15, 1978 to September 30, 1980, out of
the 3.5 million eligible households in New York State, only
58,089 or 1.6% have availed themselves of a Class A audit.
The overall cost of the program to the rate payers of New
York State has been $7.8 million, of which only $411,000 or 5%
has been recovered through audit fees.
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If we include the 250,000 consumers who asked for Class C
audits, which are nothing more than a do-it-yourself audit
booklet, the program can be said to have reached 9.0% of the
eligible households.
Now to those critics who would say the utility industry
has not tried hard enough, I would cite the results of the
program of the New York State Power Authority in the territory
of certain municipal utilities who had done little to promote
conservation previously. They gave the audits away free and
report spending over $3.00 per customer served to market the
audits. Their results show that only 16 1/2% of the customers
took advantage of the free audits and that 37% of those audited
indicated they had already implemented conservation measures
before the auditor came.
The RCS Survey
EEI has conducted a survey in which the responding companies
serve over 80% of all investor-owned utilities' eligible
residential customers. According to the results of this survey
the response to the RCS program will only be approximately
3%. Because of this, we question the wisdom of the Federal
government imposing a program on the American consumer under
which the vast majority of rate payers, who initiate and pay
for their own conservation measures, will subsidize 95% of the
cost of the audit service for those few consumers who will
avail themselves of this all but free ride under RCS. In
addition to the expected response, some points of interest
obtained from our survey are:
1. Only 12 companies have expressed interest in financing
conservation measures.
2. Only 4 companies are installing any conservation measure
under the RCS program all the rest will be contracted
to outside contractors.
3. Investor-owned utilities will spend in excess of $24
million just for outside contractors in the first
year. (Computer time, training, etc.)
4. Investor-owned electric utilities will spend $142 mil-
lion just in announcements for the first year.
5. The cost of an individual audit is over $120. This is
in contrast to DOE's analysis that states a cost of
$62.50/audit.
6. Post audit inspections will add at least $70 million
over 5 years to the cost of the program for our members.
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As a summary, it appears that DOE's overall cost estimation
is not far off, if they assumed a 3% response, not 7%. To
handle a 7% response as projected by DOE, the cost would proba-
bly double the $4.9 billion.
GAGS and BEPS
Changing gears for a few moments, the cost justification
of the Commercial and Apartment Conservation Service (CACS)
program likewise is suspicious. DOE's own research has "indi-
cated that similar (non-Federal) utility programs have achieved
the significant participation and energy savings projected
for the Proposed Rule (CACS) case without mandatory goals" (46
Fed Reg 4500). This suggests to me that once again the pro-
gram's cost to the private sector will not justify the benefit,
especially since the private sector's involvement will acceler-
ate with the recent decontrol of oil prices and gas deregula-
tion.
In addition, the Energy Performance Standards for New
Buildings (BEPS) as originally proposed, is a classic example
of a program whose goal has already been satisfied by the
private sector and local government. Forty-seven states have
energy conservation codes and standards in effect and working.
DOE on the other hand to date has spent $50 million on a program
that is yet to be implemented. The proposed rule published
in November of 1979 received so much criticism that Congress
saw fit to direct DOE to postpone promulgation of a final rule
for two years. It seems logical that the best solution would
be a statutory repeal of the BEPS program.
A much better approach is to allow the free market economy
to determine the amount and type of energy conservation we
need. The Energy Information Administration in their annual
report to Congress, concur stating "that energy conservation
- not government regulation!" (U.S. Department of Energy,
Notice of Public Hearings and Staff Working Paper, March,
1981, DOE/PE-0022).
The free market approach assumes that consumers will act
in their own self-interest, if given the economic incentive and
the information on how to accomplish the task. From a utility
standpoint, the free market dictates that some energy conserva-
tion alternatives are more valuable than others. As previous-
ly stated, the value to the utility will depend upon two
criteria. First, what effect the conservation will have on
the fuel that the utility is using to generate electricity.
Often the savings will result in a reduction in oil use, if
the conservation alternativse reduce the need for an oil
generated peaking unit.
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Second, what effect will the conservation alternative have
on electric system plant requirements such as generation trans-
mission, distribution and load curve?
The economics to a utility of a brand of energy conservation
depends on the effect of that particular brand of energy con-
servation on each of the two types of savings. From an over-
all utility viewpoint, the best conservation option saves in
both categories followed by those that reduce capacity (plant)
requirements.
What are the utilities doing?
As energy costs have escalated, the public has demanded
that electric utilities involve themselves with energy conser-
vation. Accordingly, electric utilities have organized energy
conservation programs with the purpose of reducing the use
of critical fuels, minimizing the need for costly new genera-
ting facilities and helping homeowners manage the size of
their energy bills. As an example, more than 170 electric
utilities are participating in the National Energy Watch or-
ganized by EEI. Energy conservation is not a new topic for
electric utilities. For more than 20 years, electric utilities
have successfully lobbied builders to surpass the HUD minimum
property standards for insulation requirements. Electric utili-
ties have also provided homeowners with energy conservation
pamphlets covering such topics as wise use of appliances and
energy referral services. They have sponsored energy use
seminars, panel discussions, advertisements, all with the theme,
energy conservation. Examples of what utilities are doing
are published in a study by EPRI with initial results of 80
utility thermal storage projects and 93 load control ongoing
at this time.
What are some of the programs utilities are involved in today?
Long before "conservation" became a buzzword, the Long
Island Lighting Company (LILCO) was telling the people of the
community it serves that the efficient use of energy makes
good sense. The rising cost of all energy forms has probably
been more effective than our many programs in convincing
the consumer that an investment in conservation not only
saves limited resources of oil and natural gas, but also
saves money. The results of price elasticity and the combined
conservation efforts of our customer, our company, and other
private sector companies and governmental agencies have been
dramatic.
For example, in LILCO's service territory, dramatic reduc-
tions have taken place in residential space heating energy
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usage in the past ten years. In 1970 our average electric
space heating customer used 21,327 kilowatt hours. By 1980
the annual average use had dropped 5519 kWh or 26% to 15,818
kWh!
Statistics of the local oil heating association show that
over the same ten years oil heating customers on Long Island
reduced their usage 17.3% from 1500 gallons to 1150 gallons
per year! In 1970, LILCO's average residential gas space
heating customer had an annual use of 188.6 MCF of gas. By
1980 this annual usage had dropped to 157.6 MCF of gas. This
is a reduction of 31.0 MCF per customer or 16.4 percent!
Because Long Island is primarily an oil heating area, we served
only an average of 137,400 gas space heating customers over
this span of time. However, we were able to serve almost
24,000 additional space heating customers from this conserva-
tion of gas. And these new gas customers formerly heated
their homes with oil.
We are now taking a major step forward in serving the new
markets created by consumer awareness of conservation. A new
company, called LILCO Energy Systems, Inc. is being formed.
The new company, a wholly-owned susidiary of the Long Island
Lighting Company, will market energy efficient, fuel conserving
equipment. The subsidiary is planned as a non-regulated corpor-
ation which will operate in the marketplace in competition with
any others who wish to offer similar services. Consumers who
deal with ULCO Energy Systems can have confidence in the pro-
duct line, not only because of the service reputation of the
parent company, but also because high quality equipment, pro-
perly installed, and properly serviced, will be the hallmark
of the new company. Installation work will be subcontracted
to experienced contractors with good reputations for quality
workmanship and good service.
Initially, the new company will have two product lines -
high efficiency gas heating equipment and solar water heating
systems. But these two product lines are only the beginning.
We expect to expand into solar space heating, solar systems
for business use, and certain types of electric heat pumps.
We are also looking to a future with electric vehicles and
photovoltaic cells for the direct conversion of sunlight
into electricity, just as soon as technological advancement
makes these devices commercially practical.
Our studies have shown that there has been very little
marketing on Long Island of high efficiency gas heating equip-
ment which consumers can buy to replace aging heating systems.
These new systems cannot only save money for the customer
who buys them, but can also provide another benefit. The
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gas they save can be made available to their consumers who
wish to heat their homes with gas. LILCO has extensive exper-
ence with gas heating equipment, so this seemed like one of
the best areas in which to begin the new business. Experi-
enced LILCO employees will form the core of the new company.
Another line in which the company has considerable exper-
tise is solar water heating equipment. Our initial solar
water heating demonstration program, that began in October,
1978, involved over 650 homeowners. The results of the program
have shown that the combination of solar energy and a backup
electric system that uses electricity at off-peak periods can
halve energy consumption and water heating fuel bills. In
addition, the greater use of electricity generated at off-peak
periods financially benefits all LILCO customers.
No doubt you are wondering what if any effect this new
subsidiary will have on our ratepayers. I've already mentioned
that its success will free up additional gas supply for
those who need it for home heating and that the increased use
of our electric facilities at offpeak periods will help to
moderate electric rates. However, the costs and revenues of
LILCO Energy Systems will be entirely separate from those of
Long Island Lighting, and will, in themselves, have no direct
effect on rates.
The money to capitalize this new business will come from
our shareowners. Although the investment is not large, in re-
turn for taking the risk in this venture, the shareowners will
rightfully expect to earn a return. Because ratepayer money
is not involved, this subsidiary will not be regulated by the
Public Service Commission. This is a distinct advantage in
that the organization will be able to respond rapidly to chang-
ing conditions without the time lag that inevitably occurs un-
der regulation. The subsidiary will also be able to make its
own decisions on the types of equipment to market and how to
best market it. The future of LILCO Energy Systems will be
determined solely by what the consumer needs and wants, and how
how well it serves those needs. Free market economics in eff-
ect.
We believe that endeavors such as this which utilize the
vast technical and marketing resources of the utility industry
are the best way to promote energy conservation among this
nation's gas and electric users without placing non-effective
cost burdens upon the already escalating rates.
Another example is Oklahoma Gas and Electric. In the
summer of 1980, Oklahoma Gas and Electric began a test to
measure the reduction in peak demand when ceiling insulation
is added to typical residential homes with central air condi-
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tioning. The company had six additional inches of attic in-
sulation installed in each home in the spring of 1980, in pre-
paration for the experiment. Test results indicated an 11%
drop in summertime peak demand and a 10% reduction in kilowatt
hour consumption. All this was done without the constraints
associated with the RCS program.
In addition, OG&E has a "Peaks" program which is aimed at
reducing the peak demand. The reduction is to be achieved by
incorporating radio-controlled devices to cycle off air-condi-
tioners for brief periods of time or through the use of tempera-
ture sensitive devices that cycle air-conditioners. The "Peaks"
program is projected to reduce demand requirements by 50 MW.
Oklahoma Gas and Electric's major load management program
has been titled "Residential Load Mangement." This is a program
that will help control the demand of a residence through:
1. Insulation
2. Air conditioning system replacement
3. Reduction in A/C requirements
This program is estimated to save 275 MW over the next 5
years.
Three major conservation programs that Arizona Public Ser-
vice Company has in effect at this time are:
1. APS is using the "INTERCOM" system in their residential
weatherization program. This system is a computerized
energy audit program enabling in-depth analysis of
structures. The program requires R-30 in the ceiling
and R-ll in the walls, "hot tap" water heat recovery
and the use of high E.E.R. air conditioning. APS has
published and distributed an "Energy Consumers Guide"
which displays various energy profiles and costs and
equipment information. This audit is designed specifi-
cally for APS customers and does not include many
non-cost effective components of the RCS program.
2. APS is participating in the DOE/Booz, Allen electric
vehicle program and has taken delivery of 20 Jet
pickup trucks and seven sedans. They are planning on
using this fleet for meter reading and other duties
around Phoenix.
3. APS has introduced an on-site computerized energy
audit system for commercial and small industrial (less
than 100 kW) customers. The program includes 13 oppor-
tunity areas for analysis and provides a print-out of
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the solutions. The system is a comppletely indepen-
dent system and can be programmed in the field for
special applications.
Iowa Electric is in the process of conducting four energy
conservation programs:
1. A pilot program using 24 electric thermal storage
furnaces to determine the operating characteristics,
the electric system effects and possible customer sav-
ings.
2. Iowa Electric is beginning the construction of a
service center in 1981 and plans to install demonstra-
tion units which will include, but not be limited to,
solar; electric thermal storage; solar assisted heat
pump; and infrared heat, both gas and electric. This
will benefit other design communities in Iowa that are
investigating similar complexes.
3. A pilot program of add-on heat pumps operating in
conjunction with oil or propane furnaces to be imple-
mented this year. The purpose is to determine customer
savings and electric system effect.
4. A program to purchase approximately six electric vehi-
cles in 1981 for the utility fleet in Cedar Rapids,
Iowa. The purpose of this project is to determine
operating characteristics, climactic problems and the
electric system effect.
Public Service Electric and Gas of New Jersey has a
solar water heating program that is aimed at creating an envir-
onment whereby customers of the company can obtain a sound
engineered and cost-effective solar installation. Two standard
installations will be available in six zones of the PSE&G
Service Area: one with an electric back-up, the other using a
"two tank" system using existing gas water heaters as back-up.
The contractors selected will be given hands-on training
to insure that their knowledge of the specific systems and
installation techniques meet the company's standards.
The utility will provide a warranty and service for a
five-year period. In the "two tank" installation, the warranty
will not cover the existing gas-fired water heater.
In March of 1980, PG&E came forward with an innovative
proposal to offer zero interest financing to customers who
install certain costeffective conservation measures. In
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PG&E's proposal, repayment of the principal amount financed
would be made upon sale of the property.
The Weatherization ZIP program is just one example of
PG&E's expanded program plans for the next three years. The
company's customer-related conservation program plans for
1981, 1982 and 1983 include:
1. The Homes, Appliances, and Systems Program - which
focuses on more energy efficient designs and features
in new construction and promotes the sale and use of
energy-efficient appliances. The program also encour-
ages efficiency in lighting, heating, ventilation and
air conditioning systems;
2. The Community and Consumer Services Program - which
assists cities, counties, municipalities and other gov-
ernment entities, with their conservation efforts and
provides conservation assistance to low income and
disadvantaged customers;
3. The Commercial-Industrial Agricultural Services (C-I-A)
Program which provides services, incentives, informa-
tion and instruction to C-I-A customers through compre-
hensive audit, energy management and support programs;
and,
4. Program Evaluation Activities - which center around
measuring the impacts of PG&E's conservation programs
on the need for energy resources.
In addition to the other customer-related programs mentioned
above, PG&E has seven other conservation programs, including:
1. The Conservation Research Development and Demonstration
Program which examines the latest in conservation con-
cepts and technologies;
2. The Load Management and Load Management Research and
Development Program - which encourages off peak usage
by all PG&E customers;
3. The Cogeneration and Solid Wastes Program - which is
designed to encourage the development of cogeneration
plants and the use of solid waste and biomass as fuels;
4. The Conservation Voltage Regulation Program - which
saves energy by reducing the annual average service
voltage delivered to PG&E customers;
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5. The Energy from Biomass Program - which currently
involves the production of gas from landfill projects
and agricultural waste products;
6. The PG&E Facilities Program - which reflects the
efforts made by various departments within PG&E related
to reducing energy usage; and,
7. The Street Lighting Conversion Program which will
convert approximately 250,000 street lights in PG&E's
service territory to high pressure sodium vapor lamps.
Texas Utilities has one of the newest and most innovative
programs that I know of, entitled "Buy Back Capacity", Mr.
Carroll Benson will discuss this in detail later in the hearing.
Because of time constraints, I have discussed just a few utili-
ty programs in detail. These are not that unique, I could
have used Georgia Power, Potomac Electric Power, Southern
California Edison, Alabama, Iowa Power or any of the other
companies participating in the NEW program. All these programs
are functioning without the RCS constraints. These programs
are some highlights of the residential programs on-going, EEI
also has documentation on similar programs in the commercial
industrial sector for any interested parties.
Results of existing free market response to the oil price in-
crease of 1973:
a. Effects on load and energy use
1. Growth of electricity consumption since 1973 has dropped
to 1/2 of the growth of electricity consumption prior
to the 1973 oil embargo.
2. Capacity growth also went from 6% per year expected to
3% actual since 1973.
3. Electricity use for non-weather related uses in house-
holds has decreased since 1973 by approximately 25%.
4. In LILCO service area, average residential electric
consumption for non-space conditioning uses in the
year following the Arab oil embargo dropped 9% and in
1980 the electric use is still 6.5% less than it was
in 1973.
Conclusion
In conclusion, the Edison Electric Institute is in complete
agreement with the present Admininistration's attitude towards
conservation, stated in the President's Economic Recovery Pro-
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gram Budget Reduction of Energy Conservation Programs of Febru-
ary 18, and I quote, "Motivated by rising energy costs and
substantial Federal tax credits, individuals, businesses and
other institutions are undertaking major conservation efforts."
Evidence of these conservation efforts is clear ... "Some
Federal conservation programs are, therefore, no longer neces-
sary, while others may impede private initiatives by imposing
too great a regulatory burden on the public." However, until
changes in funding or the statute are completed, RCS and the
CACS program will continue and the electric utilities will
have to live with the programs. Private firms, especially
electric utilities, have assumed the responsibility of provi-
ding energy conservation programs to the public. The results
of conservation are significant, yet no Federal program is
universally adopted at this time.
From a purely practical point of view, many utilities have
no choice but to pursue load and energy management initiatives.
Contrary to what some believe, the demand for electricity con-
tinues to grow, albeit at lower rates. Yet high interest rates,
regulatory burdens and capital market constraints coupled with
other factors make it difficult (and in some cases, impossible)
for utilities to continue building generation plants at a
price customers are willing to pay. As a result, utilities
in this situation have no choice but to attempt to slow load
growth and reduce or obviate the need for new generation
capacity. There is evidence to support the proposition that
energy and load management techniques can free up capacity for
other customers, at a price less than what those customers
would otherwise pay.
The electric utility industry has been involved in cost-
effective conservation. It would be an injustice if these
programs are shelved just to fulfill the requirements of a
Federal program that is cost intensive and benefits such a
small number of individuals.
I would close by echoing Mr. Benson's comments on the
role of government in a future partnership with the private
industry. Thank you.
DR. RIEGEL: Thank you very much. I would like now to throw it open to
questions and discussion on these three very important and
useful contributions that have been made.
MR. ONDICH: I have a question for Mr. Benson. In the two months since
the YES program has been implemented, how many of your custo-
mers have taken advantage of it? secondly, a lot of the programs
you talked about had to do with, what I would consider, middle
income programs. Does your company offer any specifc assistance
to low income families, audits, or whatever.
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MR. BENSON: In the first two months since the program began, we've
had approximately 1200 participants, and we have not yet done
any advertising on our own. Utilities have normal billing
cycles that they run through, and in the summertime, our bil-
ling inserts are typically directed toward air conditioning
and how to control the size of your utility bill, and we have
to run through a pre-planned cycle before we can insert adverti-
sing and other items.
So this month our YES program bill insert is running. The
1200 that have taken advantage of the program thus far have
been by word of mouth or by dealer advertisement.
Programs for low income include this program. 95 percent
of the housing stock in Dallas, Texas has some form of air
conditioning, and this program is applicable to window units
as well as to central air conditioning systems. In the bro-
chures in back of the testimony package, there are outlined
what the company does in the form of an incentive for a custo-
mer who replaces a central unit. So since 95 percent of the
housing stock is air conditioned with one or more window units
or central air conditioning, this program is just as applica-
ble and perhaps even more advantageous to the low-income
folks, because it helps them to buy an efficient piece of
equipment at a reduced price, which will also lower their cool-
ing costs from now on.
Other programs that we have for low-income folks include a
program we're very proud of called Dallas Con*Serve. It was a
part of the package that the President recognized in January.
It's not mentioned in the testimony.
It's a pyramid type organization where we go to civic
clubs and principally to churches, and provide education to a
core group of people within these organizations who, in turn,
have made a commitment not only to weatherize their own home,
but to go out and weatherize five homes of people who are
either unable or financially not in a position to do that
for themselves.
This program has been extremely successful. We anticipate
the weatherization of 50,000 low-income homes in Dallas during
1981 through this program. We have any number of other low in-
come programs - referral programs in operation. We have a pro-
gram we call Special Friend, where a customer who is in danger
of interruption of service for non-payment of his bill can au-
tomatically include a third party notification provision so
that when the possibility of service disruption for non-payment
comes up, a third and responsible party can automatically be
notified. This would be particularly useful for elderly
folks who tend to misplace their bills and problems like that.
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They can notify a brother, sister, daughter, even an agency
who might be in a position to provide some assistance.
MR. RUSSELL: Could I comment on the low income situation? I'd like you
to know that our division in EEI this year held a three-day
dialogue with consumer organizations on the question of assist-
ance to low-income people with regard to their utility bills.
We had representatives from many national organizations, to
governmental organizations, Health and Human Services, DOE,
we had the National Council of Churches, the National Urban
League, NAACP, American Association of Retired People.
We had a couple of consumer lawyers, and the list went on,
a number of utilities. We spent two and a half days just
exploring this whole issue, and 1 see that we have two basic
problems. One of the problems is, do you help these people
pay their bills today, with grants, such as the heat program,
or do you weatherize. Or how do you put those two things
together. I think we came to the conclusion that in the
short range, you're not going to solve the weatherization
problem overnight.
It's very complex, and it's very different from the prob-
lems that relate to the average homeowner. You're absolutely
correct that these programs appeal to and can be picked up by
the middle income type of person who owns his own home, and
some of the upper middle income people today who are feeling
the effects of the price question now, such as the question of
affordability any more.
I think there's a danger if you try to tie the two programs
together, you know, there is some indication of that. On the
weatherization side, in suburban utilities, and, of course,
you can't generalize too much, but I know from my experience
that much of the low-income housing stock is rental, single
family, all dilapidated type of housing, and we have found
that there's little incentive to the owner, because the low
income family pays the bill.
Very often, they're paying it with government money through
various programs, either Social Services or things like the
grant program, and that the local welfare and Social Service
authorities don't want to push the landlords too much, because
they're afaid of that housing stock for these low-income people
drying up.
Now, in order to demonstrate what this problem is, I mean
anybody can take and do calculations and show what can be
saved, but I think there are unique problems here. So out of
that dialogue, the utilities have agreed to undertake a little
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demonstration program which is under development right now
in which we will get at least 10 homes in each of the 50 states
that are basically low income rental units where the people
are subsisting through government funds, and we will upgrade
those homes, and we'll make case studies out of them. Out of
the case studies, we'll be able to, I think, define, within
about a year, what the unique problems are.
This isn't a question of saying an uninsulated house needs
six inches of insulation. We think it goes further than that,
and that the current programs are not reaching this group of
people. Now, come of the things that we hear being done at
other places also add to that, but I think it's a two-pronged
problem, and it needs a lot of addressing. I don't think RCS
is going to reach it, even if you give the audits away.
MR. OND1CH: Are you just starting that program?
MR. RUSSELL: In the 50 states, that program is just being started,
yes. It just came out of a dialogue which we had in the begin-
ning of April, and it's given to one of the committees in EEI
which is developing it now. Some of the companies are already
looking for the homes.
It will take about a year, a year and a half. One of the
criteria is going to be that we have to be able to know what
the heating and utility bills were in those homes in the year
prior to starting under the old system.
MR. FRANKEL: Could I follow up on that? Do you see anything wrong with
the utilities actually assuming the responsibilities that are
now carried out by the weatherization program, and going into
poor people's homes, weatherizing them, and then putting the
cost of that weatherization into the consumers' rates so that
the consumer sees the same bill but
MR. RUSSELL: I can give you a general answer, and that is, I think that
any such program should have to be shown to have a cost avoi-
dance effect within the territory of the utility involved. I
don't think that you should expect the whole base of rate
payers to pay, you know, to go in and weatherize the house of
a landlord who won't do it on his own.
MR. FRANKEL: I wasn't talking about subsidy. I was talking about direct
payment out of the utility bill of the cost of weatherization.
Often, it's the renter who sees the utility bill so he'll see
nothing different, the same utility bill, only half of it will
go to fuel and half of it will go to
MR. RUSSELL: As I say, the utility should be able to show a cost avoi-
dance. It shouldn't cost other rate payers.
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MR. FRANKEL: But you have no resistance to doing that kind of a program?
MR. RUSSELL: I'd have to look at the program, and I think it has to have
those basic parameters.
MR. DAVIA: I'd like to make a couple of comments on that. We have
worked with a lot of low-income types of housing and some low
income programs. The problem I see is the weatherization
people do not address heating equipment adequately, and it's a
recurring problem, because in many of the homes we're look-
ing at where the energy use is three to four times more per
square foot for that type of house than it is for the middle
class house, you've got maintenance problems which would be
solved mainly by changing a furnace filter.
The other thing is that a lot of these weatherization
programs are addressing specific items like broken windows.
Broken windows are the biggest cause of infiltration problems
nationally and a lot of times they're not addressed. They
throw the insulation in the attic, put on windows, they're
putting vent dampers on furnaces that are in crawl spaces.
It's really idiotic, but that's happening out there. So it's
maintenance, and it's ongoing, and that's the biggest problem
with some of the weatherization.
MR. RUSSELL: I can give you an example. In our own territory of looking
for homes to fulfill the 10 houses we're going to do, we can
upon a house in which the landlord had replaced the oil burner
with a brand new, modern, efficient oil burner, hadn't weather-
ized the house efficiently. The customer wasn't able to pay
the oil bill. So they had an empty oil tank, and they had
spent the whole winter heating the house with plug-in electric
heaters, and insufficiently weatherized house.
So you see, what I'm saying to you is that there are unique
problems here. It's not just go in and do nice things and
resolve the problem. You take this low income house, you
spend money, a rental house, and you upgrade it, and maybe the
landlord decides now he doesn't want that low income family in
there, and he boots them out, and they go off someplace else,
and he rents it to a higher income person.
You can't broad brush that problem.
MR. BENSON: Real quickly, I think there's a more generic question here,
and that is whether there is a role for the federal government
in determining whether or not utilities should or should not
run a specific kind of a program in their service territory,
and I think the thrust of, at least my understanding of, the
direction government would like to move is away from that
kind of a program.
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The program being discussed is outside the bounds of virtu-
ally anything that's been proposed or thought of seriously.
The free market will create plenty of opportunities, and if
it's in the best interest of the ratepayers in a particular
service area, that program will go, and if it's not in their
best interest, the program won't go, and it should not go
because of some government fiat.
MR. RUSSELL: I'll give you a good example. Mr. Benson's program is an
excellent one demonstrating a cost avoidance feature. If I
come to my company right now, and some would look at a program
like that, governmental people typically have looked at a
program like that and say everybody should have that program.
When you come to my company, we are going to build genera-
tion for oil back-out, okay, and we're not going to have a
capacity problem for the balance of this century as we can
see it. So we wouldn't want to turn around and spend money in
that way in our territory. I'm not being critical of his
program. For his purposes, that'll be great, but to spend
money because there won't be a cost avoidance, because we're
going to have to build capacity anyway, we have to direct our
efforts in a different way, and I think that's the point
we're trying to make here.
DR. RIEGEL: I'd like to make a point and also ask Mr. Benson about
the YES program. This is one of the clearest examples that I
have seen of a company taking a position and clearly articula-
ting to the public its view of what I will call the even-hand-
edness of investment in production versus investment in conser-
vation. If I understand the program clearly, you are indeed
putting the utility's money where its mouth is, in investing
through rebates that are redeemable for electric energy pur-
poses for a number of conservation investment.
I think for many utility service areas that is entirely
appropriate, because as you rightly point out, the avoided
costs or deferred costs of major capital investment has a
value not only to the customer but to the utility, provided
the utility is adequately rewarded for that kind of investment.
I have two basic questions. One is whether you have come
to any conclusions about how activities of the Department of
Energy or the Federal government could help to foster that
kind of evenhanded investment by other utilities where it is
appropriate around the country. Secondly, could you give us a
tangible update on how the program is going.
Are you finding that indeed the YES shares are being snap-
ped up with enthusiasm in your service area? Do you see in
the future anything like a parity in investment, the stream of
investment dollars going into the conservation option versus
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the new central facility option?
MR. BENSON: Well, with respect to your first question, I see the role
that government might play, as I mentioned in the testimony
earlier, as an information gatherer of this kind of program
and a disseminate of this kind of program, and as a facilita-
tor in terms of helping to remove any barriers that might
exist to the operation of programs like this.
Until the Energy Security Act was passed last summer, there
was some question whether a program such as this could have
been offered, and by government fiat, utilities were prohibited
from becoming involved in the installation and financing
business. Congress wisely changed the requirements of NECPA
by the Energy Security Act and removed that prohibition, and
these are the kinds of roles that I see government playing -
now that the free economy needs to operate as a free economy -
and government's proper role is to work with the free economy
to help remove any barriers that might exist, and not to advo-
cate any particular scenario. Report that this is what's hap-
pening this is what apparently has worked. Government should
suggest that companies as entrepreneurs who have shareholders
who demand a return on their investment ought to see whether
or not this program might be applicable in their area as well.
The second question was, what's been the response to YES.
We've had 1200 customers receive YES incentives in two months.
We initially designed the program and set the incentive level
at a point that we thought would get between 40 and 50 percent
of the market. We're talking about 40 to 50 percent of the
air conditioners which fail would be replaced by high efficiency
equipment, 40 to 50 percent of all the new equipment that's
purchased and installed on our lines would be high efficiency
equipment and the same in new construction.
Our expectations range on the order of 60 to 75 percent as
a result of the program over a five-year period. It's been
fantastically successful. Obviously with a limited staff and
dollars to devote to the program, there's only so much that
our folks can do. So we have to depend on the dealers and dis-
tributors to carry the ball to the public, and they've done
that in a terribly unique and aggressive fashion.
We see ads running in the newspaper where one dealer will
say, go out and make your best deal, bring the deal to me on
paper, and I'll beat it by $5 and I'll install your unit for
free. People are actually comparison shopping for efficiency,
and there's a two-stage level in the incentive payment; if
you buy a unit between 8 and 10 1/2 EER, you get one kind of
an incentive. If you buy 10 1/2 or above, you get a much
larger incentive.
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So the customer now has a reason for looking at the tag
that's on the equipment that says what the EER is. Up till
now, there's been no justification really for looking at
that. He has attached a monetary significance to that tag,
and we think the program is going to be really phenomenal.
It is only the beginning. The program is applicable to
all residential structures, multi-family and otherwise, It
covers 95 percent of our customers since 95 percent of the
housing stock has some form of air conditioning. The payment
goes to the tenant or to the person who buys the unit. Many
of the apartments, for instance, are unairconditioned and the
tenants have purchased room air conditioners for air condition-
ing purposes.
Payment of the incentive is made only to those persons
who pay a utility bill. No assignment of the incentive is
permitted in existing housing (99+%) for this part of the
program.
The second program is the lighting program which will
virtually eliminate fluorescent tubes like those right over
there. Instead of 40-watt fluorescent lamps, we'll go to a
33-watt fluorescent lamp, and as soon as the program is up
and operational, within a year or so, those lamps won't be
stocked any more, and we pick up 7 watts per lamp forever in
terms of peak reduction as well as the customer getting the
same lighting level for less money. We've got some other pro-
grams that will be coming over the next year, year and a half
or so. You don't build Rome in a day. You must start brick
by brick.
MR. FRANKEL: Let me follow up on that with a question. To transfer
information about this program to other utilities that might
be interested, is that a proper role for the Federal government
or for the trade association, Edison Electric Institute, and
does Edison Electric Institute have a program to inform other
utilities of successful programs that have been carried out?
MR. BENSON: Certainly. To a great extent, the information gathering
and information exchange activity is duplicative, but I would
submit that the Institute deals solely with member companies,
and the Federal government has a role not only in dealing with
member companies in the association, but also the public at
large, and particularly other governmental agencies.
MR. RUSSELL: Within the industry and the division of which I was chair-
man this past year, at an executive advisory committee level
which hit 65 or 70 vice presidents which take the bulk of the
customers in our industry and they meet regularly and exchange
information, and below us, we have what are called subject
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area committees, and our subject area committees, some with
150-200 members representing all the utilities, the commercial
area, the residential area, the major function of those commit-
tees is a day-to-day gathering and dissemination on programs
of this type, and regular reports are disseminated.
MR. FRANKEL: I want to ask another question along those lines. There's
a general philosophical agreement with the thrust of the Presi-
dent's program that often obscures the actual details of what
is being done.
Now the government has several different tools it uses to
motivate energy conservation. There's R&D, information pro-
grams, incentives and regulations, and I'd like to cover each of
those.
For the R&D area, Mr. Davia, are you aware that there was
a program in the Department of Energy which the man on my left
knows something about, called the technology and consumer pro-
ducts program that was trying to develop very efficient burners
and boilers, gas fired heat pumps which could have an efficiency
of 150 percent, electric heat pumps which improved efficiency
by 25 percent.
Do you think that that program, the technology and consumer
products program, was an appropriate Federal program, and do
you agree with the Administration's decision to terminate it?
MR. DAVIA: Well, I'm not fully aware of all the details of that pro-
gram, but I do know that there is a common problem, and that
is that we're trying to replace existing heating systems with
more efficient ones and the market is not ready, because the
thing I'm getting from heating contractors in our area is
that they go out and try to sell an efficient unit that has a
seasonable efficiency of greater than 85 percent, and the
customer is not buying it.
It's $200 to $300 more, and they cannot understand that
that's going to use that much more or less energy, and, there-
fore, I think any time we can generate interest in replacing
air conditioners, electric heating, gas heating with more
efficient, that's good. I do not know the details.
MR. FRANKEL: Do you think it's appropriate for the Federal government
to do research and development to generate products that
would improve energy efficiency?
MR. DAVIA: Yes, the government and private industry working together,
Lenox, Hydro-Pulse, all those others. One thing I might add
is that on heating equipment, what we see happening again with
low-income people is that the existing heating equipment they
have will not perform and will not supply enough heat to the
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structure, because of poor maintenance, poor design and just
rundown equipment.
So what they try to do is supplement that heat with elec-
tric or with gas ranges. Last winter I went into many homes
where the humidity level would be about 80 to 90 percent, be-
cause all four top burners and the oven were on in the home
pumping all that into the house in a means to try to keep warm.
If weatherization or whatever had corrected the problem
with the furnace, that wouldn't have happened, and the health
and everything else wouldn't go downhill on those customers.
MR. RUSSELL: I'd like to make a comment on that if I could. I think
that, for instance, now there's pretty good incentive for the
manufacturers to get into efficiency R&D on the standard
types of of equipment that are being used.
I find that sometimes there are inventors, entrepreneurs,
manufacturers, who are hesitant in some cases in getting into
governmental programs, because the inertia that gets involved
with it, and I had a particular case in mind of oil burner
that would save 15-20 percent that the inventors took to Sweden
and Switzerland and put on the market in this country probably
within a year, developed by a couple of NASA engineers in
their time off. They didn't want to deal with a governmental
program. But where I think there is a role for government is
in the development of technologies where there's promise,
but there is a definite short term market available.
I'm talking about photovoltaics, electric vehicles, that
type of thing. The government, I think, can provide some
longer range R&D money and efforts and things like that.
I don't necessarily see where the government has to get into
having a manufacturer improving the efficiency of his gas burn-
er. So let's see something newer than that. The incentive is
there.
The reason my company is going into doing that is, as Mr.
Davia pointed out before, too many people are spending money
maintaining equipment which can never get up to a seasonal
efficiency of more than 40 or 50 percent when they ought to be
spending money in replacing that equipment.
Now there is enough equipment there that's already good,
and we're going to sell that to our customers and they're
going to benefit by a 15 to 30 percent savings in gas and
money and we're going to benefit because we're going to recover
that gas and sell it to other customers and backout oil.
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MR. FRANKEL: Mr. Davia, if people aren't making these cost-effective
decisions to purchase new energy efficient equipment like gas
furnaces that we talked about, do you feel that there's a need
for a greater Federal incentive, or should the utilities have
some sort of a program to help meet the upfront financing
costs of these, or should we just wait until the market takes
care of the problem itself?
MR. DAVIA: Well, I think that waiting for the market to take care of
itself is going to be the longest scenario. We see furnaces
that are 30 percent efficient that will never wear out.
They can take a direct hit because they were so overbuilt
initially and, you know, they'll still continue to perk away
in that basement.
The problem is that there's no incentive right now federal-
ly or state for replacement furnaces. There are replacement
burners for oil furnaces, but a large percentage of the homes
are heated with natural gas, and if the incentive for replace-
ment all you have to do is write a tax credit that said, we
will give an X percent tax credit for any furnace that is
installed and is greater than 85 percent in seasonal efficiency.
That would be an incentive, and I think the private sector
is ready, waiting in the wings with enough material and techno-
logy that it doesn't have to be developed, it's there, but the
consuming public is not aware of it, and any time, you know,
furnace contractors do not have a great credibility in the
market a lot of times, because people make replacements that
are unnecessary and things like that. So they go in with a
credibility problem and a lot of times customers are very
leery of them and will not let them explain that this is more
efficient or we're going to save you money.
So that's the kind of trigger or hot button, I think,
that's necessary to get this market going.
MR. RUSSELL: Those things are not being sold by the private contractors,
and I think that you could refine the Federal government's
role by again looking at them stimulating through tax credits
the early adoption of some of these activities.
We started with our solar demonstration program, solar
water heat demonstration program in 1978, October. We had a
goal of putting in 650 units, and we sold them to customers,
installed them. We restricted greatly the size of the family
and the orientation of the house and so forth to get a homo-
genous sample.
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At that time, we were calculating that when a customer
converted from oil water heating or electric water heating,
it was about a 15-year payback. We completed two years ahead
of schedule on those 650 units. By the time we got through,
we were calculating the payback to be about seven years each,
and that's due to two specific factors, the first factor being
backed out, the sharp increase, and the second, the federal tax
credit. I think this has demonstrated to people in our area
that solar water heating is viable, and I think that in order
to get people to look at efficient equipment that the Federal
government could have a role there too, and then when it be-
comes understood, you know, and the paybacks are really there
without the credits, the government can start to phase the
credit out, but they can bring the public awareness to bear
out when you're trying to develop a new type of action on the
part of the consumer.
DR. RIEGEL: Well, I hate to bring this discussion to a close, but we
have another half-dozen witnesses or so this morning and I
feel the press of time. I'd like to thank all three of you
for appearing with us this morning.
break now and convene
DR. RIEGEL:
MR. CADY:
We're going to take a very short
again at 10:30 sharp.
(Whereupon, a brief recess was called.)
We'd like to get started again. As in the past, we'd like
you to summarize your statements to the extent possible, and
we will turn as quickly as we can thereafter to the dialogue
between the witnesses and panel.
Let's begin with Mr. Sheldon Cady from the Mineral Insula-
tion Manufacturers' Association. Did I get that right?
Close. Good morning, thank you. My name is Sheldon H.
Cady. I am Executive Vice President of the Mineral Insulation
Manufacturers' Association (MIMA), of Summit, New Jersey.
The membership of 48-year old MIMA consists of a majority
of the manufacturers of mineral fiber insulations for buildings.
This includes both rock wool and glass fiber products manufac-
tured as batts, blankets, and loose wool. I am speaking on
behalf of most, but not all, of MIMA's members.
As an Association, MIMA has been active for well over the
past decade in educating the consumer, agencies of the Federal
government and state legislatures regarding the measures neces-
sary to achieve the goal of energy efficiency in our nation.
The efforts of the Reagan Administration to reduce the cost
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and other negative aspects of unnecessary government regulation
are applauded by our industry.
The efforts to reduce Federal activities concerned with
building construction could, however, do great harm if needed
national guidelines and low cost programs were swept out along
with those costs that are excessive or whose requirements are
an unnecessary burden. This is particularly true of attempts
to improve energy efficiency through proper building design and
construction. "National" standards prepared with the homeown-
er's interests in mind are required to provide guidelines for
reliable, cost-effective energy conservation measures.
Without these standards, the desired improvements in the
thermal performance of buildings are unlikely to be accom-
plished.
We agree that higher energy costs provide an incentive to
conserve energy and also that enforcement of thermal perform-
ance standards can be carried out at many local levels by
building inspectors. Unfortunately, there are many areas of
the country that are not covered by any energy conservation
standards and poorly informed home buyers can unknowingly
purchase improperly insulated homes resulting in excessive
heating and cooling costs.
We cannot agree with the Administration's concept that
"Free market forces establish acceptable performance" of cur-
rent housing construction. It is obvious that this concept
can result in unacceptably high costs of heating and cooling
in some new homes. Builders and prospective homeowners are
entitled to a reliable and unbiased Federal recommendation
for minimum acceptable thermal performance levels.
The nation is already confused by too many guidelines and
standards relating to thermal performance of houses. To elimi-
nate the Federal standards and replace them with a multiplici-
ty of local and state codes is not a satisfactory alternative.
The vast majority of current standards (other than Federal)
are based on ASHRAE Standard 90, which contains data now over
seven years old and are totally inadequate when curent projec-
ted energy costs are considered. A three year lead time is
normally required to effect changes in the Model Building
Code. After this is accomplished the changes must be adopted
by the states in a lengthy process. To eliminate Federal
standards and replace them with a multiplicity of local and
state codes is not a satisfactory alternative. The overall
effect is to ignore the homeowner's plight in attemping to
keep home operating costs below his mortgage payments.
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Without a unified regulatory system, our industry faces
tremendous problems if 50 different states enact 50 individual
standards for thermal efficiency. Even though this is counter
to the Administration's program of decentralization we feel
that, in the interests of business efficiency, central rules
and regulations are necessary. Fragmentation of 50 states
involved in legislation would increase the cost of services
both to our industry and to the consumer.
One example, which our industry has already experienced,
will illustrate this point. In enacting thermal efficiency
legislation, individual states have required information each
considers appropriate to be printed on packages of insula-
tion. While some of this information is standard to all,
several neighboring states have required additional and dif-
ferent information to be added to the bag label. The products
of one manufacturing plant may be shipped into as many as a
dozen different states. Shipment of different bags to each
state is economically unfeasible and realistically impractica-
ble. Supplying all of the varied information required by all
states on one package would result in an assembly of information
that would be overwhelming and unreadable. In either case,
the consumer loses. Similar expressions of individuality,
multiplied by 50, are an appalling prospect for the industry
to face.
We specifically recommend the following:
o DOE's R&D work on the residential portion of BEPS be
expedited and completed so that the costly and volumi-
nous technical effort (now largely accomplished) can
be finalized into simplified guidelines for use by the
builder and building code authorities.
o When the BEPS activity within DOE has produced the
simplified thermal performance guidelines, these should
be nationally publicized as the new recommended stan-
dards for acceptable energy efficient construction and
be promoted for adoption by the states.
o HUD, FMHA and the VA should continue to enforce their
present minimum thermal performance requirements for
federally insured housing until the states are prepared
to implement this responsibility with federally pro-
mulgated simplified BEPS guidelines for one and two-
family residences.
o For other than federally insured housing, DOE should
promote the use of the FmHA Thermal Performance Stan-
dards as the recommended minimums for new construction
for the interim period.
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EPA's charge from Congress "to carry out a continuing
analysis of the adequacy of attention to energy conservation"
leads us to a second issue. In our viewpoint, the consumer's
attention to conservation has been inadequate.
Since the early seventies our industry has been calling
attention to the need for public education and information
programs on the benefits of retrofit actions to the building
owner. The private sector alone cannot accomplish this although
we have tried, and are trying. For instance:
The Committee for Home Energy Conservation (CHEC) was
organized by leaders in industry, labor, government, consumer
and civic groups in 1979 under the auspices of the National
Institute of Building Sciences (NIBS). Its purpose was to
build consumer awareness of the benefits of reducing energy
waste in homes with a basic checklist of ten major steps,
called the Big-Ten Checklist. As a result of an in-depth
publicity campaign, it is estimated that roughly two-thirds of
the families in the country have received copies of the
Big-Ten Checklist through 1980. The CHEC Committee was recon-
stituted recently to consider other ways to get the message
across.
We suggest that the government should take steps to heigh-
ten the awareness of the public for savings possible from
conservation activities. There is a precedent for this. In
World War II coal had to be conserved because of transportation
problems and the government took steps to launch a vigorous
campaign to encourage energy efficiency. A heat loss limita-
tion was set by the War Production Board. The FHA extended
its insurance terms to encourage insulation. The Office of
War Information scheduled a fuel conservation drive on the
radio and in the press and the private sector also actively
participated in the program.
A cooperative effort by all concerned, led by the govern-
ment, is as appropriate in the 1980's as it was in the 1940's.
We strongly urge everyone concerned with keeping energy
use and home heating and cooling costs within reasonable bounds
to support these recommendations and work to bring about
legislated actions which will eliminate wasteful use of our
natural resources. Thank you.
DR. RIEGEL: Thank you, Sheldon. I'd like now to move to Karen Anderson
from the American Public Power Association.
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MS. ANDERSON: Good morning. My name is Karen Anderson and I am the
Energy Conservation Manager of the American Public Power Asso-
ciation. APPA is the national trade association for the
nation's 2,200 local, publicly owned electric utilities.
APPA's perspective on the Department of Energy's "adequacy
of attention to energy conservation methods" is somewhat unique,
because we have members that are intimately affected by DOE
programs like the Residential Conservation Service and many
others that are not directly affected. The public power sys-
tems that we represent range in size from the town of Sever-
ance, Kansas with 52 electric meters, to the City of Los Ange-
les, with 1.1 million electric meters.
Only 45 public power systems are large enough to fall
under the mandate of programs such as the Residential Conserva-
tion Service. Unfortunately, the experience of our members
would indicate that a detailed, prescriptive and costly program
like RCS is not worth the money and effort being lavished on
it. The audit procedures are complex, overly-analytical, and
time-consuming. The municipal electric utility of Knoxville,
Tennessee, for example, has completed close to 20,000 audits a
year. They plan to increase this to 64 audits a day by having
16 employees make four audits each. But, under RCS, the utili-
ty will need to send out eight teams of two auditors. Each
team will be able to perform only two audits per day redu-
cing the total number of audits from 64 to 16.
Even more distressingly, there is evidence that implementa-
tion of RCS has thwarted existing conservation programs that
worked. One municipal utility, for example, employed commer-
cial insulation salesmen as auditors. The crew was trained
and carefully supervised by the utility. Customers were hap-
py with the audit service and the end result the number of
installations performed was far more successful than other
utility audit programs. The practice was eliminated by RCS.
In another case, the Palo Alto, CA municipal utility
developed its home insulation program using four local firms
as subcontractors. The firms were selected under open and
fair bidding processes and provided insulation services at a
set rate. Two years into the program, the utility noted
that insulation prices in surrounding metropolitan areas were
almost twice as high as those provided to its customers under
the utility program. This practice, too, was outlawed by RCS.
In a final instance, let me cite the conservation program
of a municipal utility that is too small to come under RCS.
This spring, voters in Burlington, Vermont approved a $2 mil-
lion bond issue for conservation and load management. Half
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of the money will go to cover the cost of purchasing and in-
stalling a sophisticated load management system. The remaining
$1 million will be spent directly on customer conservation
on wholesale purchase and utility installation of shower flow
restrictors, water heater jackets and outlet gaskets. While
in the home, the utility representative will take other low-cost
action, such as turning the water heater thermostat and showing
the owner where caulking is needed.
The Burlington conservation program benefits everyone
local suppliers, who sell more conservation devices to the
city, the customers of the utlity, and the utility itself,
which expects to save 2 to 9 million KWH/yr from the program.
Burlington is fortunate in that it is a small community. Its
cost-effective, simple conservation program would be illegal
under RCS. Additionally, if the utility has decided to finance
customer conservation measures, it would be precluded from
doing so under provisions of the Windfall Profits Tax Act.
Federal impediments to utility conservation such as
prohibitions on publicly-owned utility financing conservation
measures using their regular method of raising capital tax-
free municipal bonds, or prohibitions on utility conservation
devices are major obstacles that should be eliminated.
APPA's experience with federally-mandated utility conservation
programs has been discouraging and is the basis for our recom-
mendation that the forthcoming Commercial and Apartment Conser-
vation Service Program (CACS), required under the Energy Secur-
ity Act, be implemented on a voluntary basis. The reasoning
is not to give utilities relief from assuming conservation
responsibilities, but to assure development of a variety of
approaches to commercial and apartment conservation. The re-
sults of all these experiences should be instructive in point-
ing the way to programs that work and that are cost-effective
for consumers and the utility.
It is APPA's position that Federal conservation programs
are useful and welcome where they support and enhance local
initiatives, but that they are non-productive, and may actually
result in less conservation when they consist of prescrip-
tive, inflexible rules for the entire country.
What kinds of conservation programs can we expect from
public power systems now that the Reagan Administration is
de-emphaeizing mandatory utility programs? We are noting an
overall increase in the number of public power systems develop-
ing energy management programs. Not surprisingly, these pro-
grams are as varied as the communities served by the public
power systems. Let me provide a few examples.
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In Kissimmee, Florida (population: 16,000), the municipal
utility is using monies from a gas supplier refund to provide
customers with 20 percent rebates for installation of approved
solar and conservation measures in their homes and commercial
buildings. The improvements will save an estimated 90,000
kwh per year.
In Newport, Oregon, the local public power system has an-
nounced it will pay costs of installing insulation and other
conservation in the homes of its electric heat customers if
the cost of doing so is less than would be required to meet
the utility's energy needs through construction of new genera-
ting capacity.
The Sacramento Municipal Utility District has a passive
solar home program, where the main objective is to increase the
use of passive solar design, thereby reducing the impact of
new homes on the utility's air conditioning peak demand and
annual energy use. To do this, SMUD provides free computer
analysis of home designs submitted by local builders, which
simulate the heating and cooling requirements of the proposed
new residences. If the design requires at least 50 percent
less energy annually to heat and cool than a typical home,
then SMUD will provide marketing assistance. The program has
already attracted the participation of some of the area's
largest volume homebuilders and the utility plans to expand
it soon to a larger range of housing types condominiums,
cluster homes, and maybe apartments.
A close look at the kinds of energy management activities
under way reveals that electric utilities are not just furn-
ishing kilowatt hours anymore. They are helping cities set
energy efficiency standards for new construction. They are
in their customers' attics, installing insulation, or in the
basement, helping to turn the customers' water heaters into
pseudo-peaking plants. Utilities are bringing on staff solar
specialists. One public power system looking toward a future
fuel supply of waste wood chips even has a department forester
as a full-time employee.
The umbrella term for all this new activity is "energy
services planning" and it is the direct result of the new
economics of electric power production. A decade of sharply
higher costs is signalling utilities that they cannot consider
themselves monopolies anymore. Increased costs are rendering
utilities susceptible to competition and consumers are
already investing in alternatives, from wood stoves to solar
hot water heaters.
Energy services planning is a concept derived from the
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premise that the consumer is interested in certain energy
services heat, lighting, operation of various appliances,
rather than electricity per se. Basically, the energy services
concept has four elements:
1. Emphasis on provision of consumer services (as opposed
to simply selling electricity or some other form of energy).
2. A goal of meeting demand for a given level of service
in the most cost-effective manner (including the possibility
that the result will be a reduction in use of electric capacity
and energy.
3. Planning ahead on a variety of alternatives stretching
from end-use controls through consumer-utility cooperative ener-
gy endeavors to conventional power plant construction (with
the objective of determining the least-cost answer for any
planning period).
4. Utility investment or assistance in putting in place
energy facilities which save consumers money (even though such
aid may be outside traditional generation, transmission and
distribution projects and may involve consumption rather than
supply).
Energy services planning offers cities the chance to blend
services economically, e.g. off-electric peak pumping for sew-
age disposal, introduction of a turbine-generator in connection
with the local water supply reservoir, downtown heating and/or
power production by incinerating garbage, cogeneration from
a city hospital use of waste heat from generating facilities
to distill alcohol to fuel city vehicles, tapping of methane
gas at sanitary landfills and sewage disposal plants to burn
under boilers.
The new economics of power supply is causing a revival
of interest in decentralized power production in smaller
units. Small scale hydro-electric installations are experien-
cing a renaissance ... municipal waste-to-energy programs are
under way ... cogeneration arrangements are being worked out
with local industries, and many more. In the future, it is
not difficult to envision public power systems more involved
in the business of installing, servicing and/or operating
dispersed energy production equipment (such as photovoltaic
arrays on customer roofs) as opposed to supplying electric
power only from large central station power production plants.
APPA believes increasing numbers of public power systems
will become involved in energy services planning because it
will be in their best economic interest to do so. The Federal
government can help by identifying and removing legal, techni-
cal or environmental barriers that stand in the way of coordi-
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nated energy activities. Further, the Federal government can
help encourage communities toward energy services planning
with educational materials, conferences, etc. that inform
and bring together the various sectors who must be involved in
such planning. The success of energy services planning may in
the end rest on institutional questions: whether city planners
will coordinate with the electric department, whether the
water department will incorporate a new solar utility, etc.
Only when all affected interests within a community are willing
to work toward a common goal of energy security and controlled
energy prices will the concept of energy services be turned to
reality.
DR. RIEGEL: Thank you. The next presentation is from Robert Naismith
who is President of the Potomac Energy Group.
MR. NAISMITH: Thank you. My name is Robert Naismith, and I'm President
of the Potomac Energy Group. I'm a licensed professional
engineer with 22 years of experience in energy systems. During
the last seven years we have been primarily involved in
building conservation issues. This work has included both
volunteer work and for profit funded efforts.
Two years ago we founded Potomac Energy Group as a small
for-profit business to fulfill what we perceived as a strong
need for private sector energy services. We provide a wide
spectrum of services for private clients, as well as state
and Federal agencies.
Our primary focus is in working with what we call indivi-
dual energy consuming decisionmakers, homeowners, home builders,
building inspectors, heating contractors, building owners.
In our outreach program, we have done things such as devel-
op a cost cutting clinic for homeowners which was probably one
of the most successful programs under EPCA in that it reached
over 50,000 people in the State of Virginia alone and was
adopted, at least in part, by 19 other states.
In the last three months, I have personally conducted
workshops for over 400 builders in two states and seminars for
heating contractors and oil dealers in four cities. It is
this direct experience with the needs and reactions of working
level decision-makers in small business that I wish to share
with you today.
My first impression is that the concept of the policy of
using price as an incentive for energy conservation is working
very well. The attendance at our meetings, the attentiveness
of our audiences, and the response to our recommendations,
both in our seminars and for our private clients, is clearly
driven by the cost of energy and little else.
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It is also clear that we're getting increasing attention
in our private sector from energy prices, and this is true
whether we're talking about individual homeowners or multi-
family or small commercial buildings, all of which we do.
In this environment, we ask ourselves what do we see as
the role for DOE in an environment where their resources are
limited, and we see three things that are particularly impor-
tant. We see a real need to fund basic research and evalua-
tion efforts which would not otherwise be taken. This work
is really critical to the practitioner in the field. The
work must be focused in large part on buildings which are
occupied by real people, and which are built by conventional
construction practices.
Unless the work is directed towards this real world exist-
ing building stock, it's of limited use to the practitioner.
Work, for example, like the Twin Rivers work in Princeton
has been extremely helpful to the practitioner.
The work at Brookhaven on furnaces and that sort of thing
has been very helpful. We see the need for evaluation of new
techniques and equipment. So both the practitioner and the
public has some sort of unbiased evaluation of the worth of
new products as they come on the market.
If there is no independent evaluation, the consumers and
practitioners together are left in sort of a wasteland or a
thicket of unsupported manufacturers' claims, and that very
significantly affects how much investment will be made and
how much risk will be taken by people who are trying to respond
to the price.
In particular, we see several areas that we think should
be emphasized. The effects of retrofit options on the control
and mechanical systems in single-family dwellings needs to be
worked very carefully.
The Twin Rivers work is excellent on the shell of single-
family dwellings. We would like to see more work in the mecha-
nical and control systems, the shells. And the environmental
effect, such as solar and the other parts of the environment for
both single family and multi-family, we see as important.
We see little work being done at present on multi-family
retrofit options, and their effectiveness, and we see that as
an important area. Also, improved field evaluation techniques
and analytical tools are very important. When we evaluate a
building, the payback on an individual option may vary from
three to seven years, depending on whether or not we missed the
R value in a roof assembly by two or three.
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In one case, the investment is going to be very attractive
for the building owner and look like a great investment. In
the other case, it's going to look like a very marginal invest-
ment at best, and so our analytical and examination tools need
to be improved. The second critical need we see is for good
focused localized energy information.
First off, it must be accurate, based on the research ei-
ther of the Department of Energy or others, and in that in-
stance, it's important that the information be timely. It's
much more important to the practitioner to have information
promptly even those where it's identified as preliminary than
to have research quality information years downstream.
Our clients, the building owners, must make decisions.
We need the data as quickly as possible. Secondly, the informa-
tion must be on a localized or regionalized basis. When we
talk to buildings about passive solar, the issues are enormous-
ly different whether we're talking to Houston or Boston.
When we did some work for the weatherization program, we
found many excellent programs which would work in one locality
or one region, but which would work disastrously in others.
It's very difficult to write rules and regulations and be pre-
scriptive on a national basis and get good effects every place.
In general, we find the text or information that's done
on a national basis is either so general it's not to be useful,
or so confusing with exceptions for locations and that sort of
thing as to be confusing and not good information for the people
to think it's important that the information that be supplied
be localized, whether that means it is produced locally or whe-
ther it is produced centrally and localized in its outreach is
a separate issue, but it has to be localized.
Thirdly, it's very important that the information be pre-
sented in the terms of the people to receive it. We very often
see information on heating systems which is written in terms
of the academic or the engineer rather than the trade practi-
tioner who is really going to be the person who has to make the
decisions about whether his company is going to try to market
these devices and how they're going to be installed, so we see
a need for very focused, very directed language.
The third need that we see, and it's sort of out of our
area, but we see a critical need to provide for those who
can't provide for themselves. Our clients, the people that we
do work for, clearly are responding to price, and we think
that's a healthy way to provide incentives for conservation.
But we never see the people who can't afford to respond. Pro-
viding for them, it seems to me, is a legitimate form of gov-
ernment activity.
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So, in summary, we feel that a greater emphasis on the mar-
ket and price will result in substantial reductions in the a-
mount of energy used in buildings, and a corresponding dimin-
ished load on our environment. We feel, however, that it's
critical that the limited resources be carefully focused on re-
search, information and assistance programs, as I've mentioned.
Thank you.
DR. RIEGEL: Thank you. I'd now like to turn to the panel for questions
and discussion. Ted Kapus?
MR. KAPUS: Thank you. I appreciate your calling on me first this time
because I got cut off before. I have a question for Mr. Nai-
sniith, is it?
MR. NAISMITH: Yes.
MR. KAPUS: You had mentioned that the first area of interest that DOE
should contine its involvement in is the basic research and
evaluation which would not otherwise be undertaken. Now basic
R&D can really be broken down into two areas, that which normal-
ly would not be undertaken for various reasons, and I agree with
you there, but there's another area that's somewhat shaded.
Would you agree it would be a reasonable involvement for
the Federal government on technologies that had to be accelera-
ted into the marketplace?
I know the Department of Energy's research area and a
number of its programs have been involved in helping to accel-
erate the introduction of this energy efficient technologies
by three to five years. Do you feel that's a worthwhile
role?
MR . NAISMITH: I think the reduction of risk on a new technology is
an important function of government; however, the acceleration
of the marketing process or the interaction with the market
itself, I'm not sure couldn't be better done by the private
sector. But I agree that the identification of new techn-
nologies the reduction of the risk to the point that they
can be picked up by the private sector is important.
MR. KAPUS: If I may move then to Karen. You had mentioned a stimula-
tion of interest as a result of the new economics in decen-
tralized power production, the small-scale hydroelectric in-
stallations experiencing a renaissance in municipal waste to
energy conversion programs.
I've been given to understand that because of the high
risk and the high cost involved in the waste to energy conver-
sion programs that if Federal support in this area is with-
drawn, there would be no continuation of these programs. Is
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this a reasonable assumption, or are you given to believe
otherwise?
MS. ANDERSON: I think in a climate of high interest rates any major pro-
ject like that becomes more questionable. Our members do
have access to tax exempt bond funding, which still is much
higher these days than they're used to paying. But the City of
Columbus, for example, is going ahead with its solid waste
fired plant. Most cities that can justify the thing can justi-
fy it without Nashville is going ahead with the second
installation. I can think of a number that are going to go
ahead whether the Federal government can help them or not.
But again, not as many would as if they had the assistance.
MR. KAPUS: One area that was conspicuous by its omission here was that
you made no reference whatsoever to the concept of district
heating and cooling. Was that intentional?
MS. ANDERSON: No, I think I did or I meant to. I didn't explain it very
well. We're very keen on district heating, and we would very
much like to see, as you probably know, increased Federal sup-
port for district heating. That's one technology where a lot
of systems in Minnesota, for example, very small towns have
existing district heating systems that are becoming very expen-
sive to maintain. They're not the latest technology. They're
using steam instead of hot water. They're leaking, and it
almost pays the city to scrap the whole system.
We'd rather see some help from the Federal government to
invest in a new, more efficient system.
MR. KAPUS: It's really not a new technology, but it's a costly one.
MS. ANDERSON: Yes.
MR. KAPUS: Thank you. One last question before I get off. Mr. Cady,
I realize it would be of no assistance vis-a-vis having to
deal with a patch quilt of state standards, but just as a
thought, had the association or the industry ever given any
thought to generating and monitoring and standards program
for the insulation industry itself? Certain appliance manufac-
turers have done this.
MR. CADY: Yes, we have considered it, but would we be believable? We
could be claimed to be tooting our own horn, selling our own
products, if we set insulation levels at the ones we thought
were appropriate. R-60 sometimes is appropriate, but I don't
know how you get it in the attic, so we would rather have some
independent source of standards rather than from our viewpoint.
MR. KAPUS: I appreciate it, thank you.
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MR. FRANKEL: Let me ask some more questions on the specifics of the
Reagan program. Do you think that the increase in energy
prices justifies an 80 percent reduction in Federal funding
of conservation?
MR. NAISMITH: Is that directed to me?
MR. FRANKEL: Anyone who wants to respond.
MR. NAISMITH: I think price is the most effective thing that we see oper-
ating out there, and it's hard for me to say whether 80 percent
is the right number, and those are not judgments that I
make. But the most effective programs that I find tend not to
cost very much, and the biggest effect I find in people who
have to make decisions about what they're going to, whether
they're building owners or homeonwers or whatever, I find
that very strongly driven by price and nothing else.
So at least philosophically it seems to me that price is
going to give the right signals, whether it's enough and whe-
ther the budget should be 72 percent or 80 percent or 43 per-
cent, that's a separate issue. But I do see prices being very
effective out there.
MR. FRANKEL: I'm talking about a cut of 80 percent.
MR. NAISMITH: Yes, I know.
MR. FRANKEL: Let me be specific then. A number of you have mentioned
information and you talk about the need for local information.
There was one program in DOE that attempted to generate that
kind of information called the Energy Extension Service, and
in many cases the Energy Extension Service has coordinated its
activities with the local municipal utility, redoubled the
impact on a certain town.
We've always thought that program was a pretty well run
program, because they allowed it to be run locally, and the
other program, I think, we would support continued funding for
is, of course, the low income weatherization assistance program.
There's nothing to replace that, and it's just that those
people need help.
MR. CADY: Also in answer to that, it also seemed to me that the DOE
extension service was a duplication of a very successful one
that has been in place for years, the Department of Agriculture
group, and I never could figure out why there were two, when
one was working effectively.
MR. NAISMITH: I think there's also a legitimate issue about quantity.
When we suggested information is needed, one of the problems
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MR. ONDICH:
that many of the decision makers have had in the past is that
there's been an enormous amount of information that it is very
difficult for them to sort through it and make decisions.
I think a limited output of very focused information could
be done fairly efficiently in terms of cost.
1 have a question for APPA. We were talking, as you
probably heard, with the earlier group of witnesses about
low income assistance programs. Some of your testimony ad-
dressed these types of programs, but are you doing any thing
as specific as the EEI. 50-state, 10-unit study that directed
towards low-income tenants.
MS. ANDERSON: Well, we're not exactly the size of EEI. We have a total
of 30 staff members. We're a small outfit, non-profit. We
never would have the money to do that. What we try to do is
take examples of programs that our members have developed,
cost-effective programs, and play them up as best we can in our
magazine and our newsletter and things like that, when you've
got 2200 basically towns out there. It's a little hard to
coordinate their activities as if you had 300 major size
utilities. So we're not doing anything directly.
DR. RIEGEL: I have a question for Sheldon Cady. You argued very
strongly for preservation of building energy performance
standards, as I understood it, for reasons that had to do with
a fear of a multiplicity of conflicting state regulations
that might affect either the insulation manufacturing industry
or perhaps some other industries as well, home building opera-
tors that may operate across state lines, and so forth. Yes-
terday we heard from many people who testified that reductions
in funds proposed by this Administration for state programs
would lead either to the closing or a striking reduction in
the scale of activities in state energy offices. If you
consider that fact, I wonder if one consequence might be that
the conflicting state regulation in the standards area which
you mentioned may, in fact, be forthcoming. Another thing
that I frankly wonder about and would like your reaction to is
whether you feel that the states will be relying more exten-
sively in the future on natural competitive forces that will
be developing within the home building industry and improve-
ments in the technology and in the general level of expertise
and knowledgeability about conservation, the techniques to
employ to see that houses are built to quality and high per-
formance, or whether you feel that a strong pressure will con-
tinue to exist at the state level for regulatory action.
MR. CADY: That's a long question with lots of subquestions. The
very first part I want to emphasize is that I did not argue in
favor of BEPS, and I want to get that cleared up. I was argu-
ing in favor of the research that had been paid for and accom-
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plished under BEPS and the use of that for other purposes as
far as standards are concerned.
A widespread education program would help to accomplish
the level of competition that you were mentioning in the last
part of your question, and that would undoubtedly be helpful
to the consumer and the industry involved in energy conserva-
tion.
If state energy offices were eliminated, who would assume
responsibility for energy conservation? It would be left
again to the marketplace, I assume. Does would the mar-
ketplace I'm answering your question with a question.
Would the marketplace in the future be adequately informed?
I doubt it very much, and we're overregulated without a
doubt, and I'm in the awkward position of saying, okay, get
rid of some regulations, but not us.
I'm aware of what I'm doing in this thing, and I'm sure
there are plenty of people who are doing that too, but we do
feel that voluntary not regulations but voluntary standards
are entirely appropriate.
MR. NAISMITH: Can I comment on the issue of regulation, building codes
and the BEPS thing? We talk to builders a lot, and we also
do a lot of training programs for building code officials,
and so we work in that area a fair amount.
The real example of what happens when one tries to regulate
the level of insulation in homes, for example, is the 90-75
based codes. My data on that says that first off in almost
any market area, it is impossible for a builder to sell a home
if it is only made to the 90-75 based codes.
And whether you talk about NAHB survey, whosever survey
you take, the market is demanding a much higher level of
insulation than the 90-75 code generally.
Now, of course, there are always some marginal operators.
How we deal with them, I'm not sure, but the market is doing a
nice job of being aware of the fact that insulation and storm
windows and tightening the house is important, and the market
is strong enough in that feeling that it's driving builders
who tend to avert risk if they can to putting in much tighter
homes, much more energy efficient homes than are required by
the regulations in most places. So I think we don't have a
lot of babes in the woods out there. I think the market is
responding, and whether it's enough and whether we may need
to press it more may be a valid issue. But there really is a
lot of information out there, and there's a lot of response,
and the builders are finding it, and they're building houses
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which reflect it, and they're way ahead of the regulation in
most areas.
You just can't sell a house if it's only made to 90-75 base
standards in most market areas where I talk to the builders.
MR. CADY: You missed my presentation, but I inferred the same thing.
They're completely inadequate, but my question is what percen-
tage of the builders are doing this properly and what percen-
tage are not. Nobody knows, of course.
MR. FRANKEL: Also, we've heard data that even the best current practice
is still 50 percent less energy efficient than is economically
cost-effective over even, let's say, seven years occupancy of
a house that many builders don't realize just how much more
energy you can squeeze out of a house.
You can put a lot more insulation in, you can also put
vapor barriers, triple glazing. There are a lot of conserva-
tion techniques that are still not part of common practice,
yet are from the consumer's point of view, very, very cost-
effective.
MR. ONDICH: As a follow-up on Gene's question, Alan Miller NRDC, yest-
erday said he surveyed, 18 to 20 building sites in the Northern
Virginia area, and his informal survey indicated that builders
in these high interest times are not installing overhangs,
high efficiency furnaces, or adequate insulation because of
the cost.
MR. NAISMITH: Part of that I agree with. I think, in general, we'll
find that the insulation is going in. There are many issues
in terms of how one deals with the energy efficiency of homes
other than the shell that are not well understood, and that's
one of the things I specifically mentioned.
We have a lot of understanding, I think, and a lot of
response for insulation and storm windows. We don't have
nearly as much response in terms of quality control, in terms
of passive solar, although we're seeing much more of that, in
terms of selecting mechanical systems on some sort of optimum
basis, and we're now seeing builders beginning to respond to
the question of what sort of mechanical system should they
use. But that information process is very early, very meager,
not very widespread. The one about insulation and storm win-
dows, I think, is much more generally understood.
MR. KAPUS: Are you running into a problem in your circles now that
the houses are becoming tighter, are the builders showing any
kind of concern for air quality within the structure itself?
MR. NAISMITH: We look at a lot of buildings, and we're not finding very
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many buildings that we think are getting below the half air
change per hour that I feel is going to get us into problems.
We are finding lots of other things that are happening.
For example we're finding houses where the fireplace is getting
its air supply by pulling it down the chimney of the gas
furnace, because that's the only opening in the shell. See,
that's the kind of interaction that we're getting into, and
one of the areas I specifically mentioned in terms of inter-
action, and what's going on, we're seeing lots of subtle things
that are happening out there that need to be understood much
better, which is why we think this whole business of looking at
existing houses with conventional techniques is really impor-
tant.
MR. FRANKEL: One of the things I feel I'm hearing you say, all three of
you in different ways, is that even though prices are a very
strong motivating factor, there are still market barriers,
market imperfections and that it is in areas such as lack
of good information, sometimes lack of upfront capital, lack
of understanding of how equipment works there still is a
proper governmental role to play.
Is that an accurate paraphrase of what you said?
MR. NAISMITH: Yes, how large that government role is is an issue certain-
ly. Certainly an important critical government role.
DR. RIEGEL: Well, I wish to thank the witnesses for appearing with us
today and to ask the following people to come forward, if
they are all here. Richard Esteves, Alan Rimer, if he's in
the room, and Robert Manahan. We'll begin with Mr. Manahan.
Mr. Manahan is with the Thermal Insulation Manufacturers
Association.
MR. MANAHAN: Good morning. As Kurt pointed out, my name is Robert C.
Manahan, representing the Thermal Insulation Manufacturers
Association. The membership of this 41-year-old association
consists of a majority of manufacturers of insulation products
for a wide range of applications in power and process indus-
tries, in air handling systems, high temperature specialty
work in the form of refractory fibers, as well as insulation
for building envelopes the roof, the wall and for pre-
engineered metal buildings.
In fact, TIMA is virtually the entire producing segment
of the insulation industry dedicated to our country's most
vital need, conservation of energy. Through TIMA, both its
individual member companies and the public are benefitted by
the identification and definition of increasingly effective
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methods for reducing energy waste to a minimum and for creating
opportunities for better energy utilization.
The specter of Americans once again waiting in gas lines
is a possibility that will continue to exist as long as we
depend on foreign sources of oil. Obviously, energy conserva-
tion measures must be implemented by this nation's motorists
and automobile manufacturers to lessen the possibility of gas
lines, but conservation measures shouldn't begin and end with
the gas pumps.
There is also a staggering potential for energy saving
within the nation's industrial sector. At current cost, indus-
try can save well over $23 billion in the 10 years or one bill-
ion barrels of oil equivalent, and if energy costs continue to
skyrocket, industrial energy conservation will have an even more
salutory effect on the nation's economy.
An extensive TIMA study of 15 of the most energy intensive
industrial groups in our economy shows that industry can
sharply reduce Amerca's dependence on foreign oil simply by
employing insulation, a well known conservation measure.
Industrial use of insulation may seem like an obvious
solution to most people, but the unfortunate fact is that
industry as a whole has not committed itself to a full-scale
energy conservation program.
Energy cutting measures employed by industry to date have
primarily been simple, housekeeping items such as repairing
broken windows, turning off equipment and lights when not in
use, and setting back thermostats. With minimal capital in-
vestment, these have increased awareness in a sense and ef-
fected an immediate, if modest, savings.
However, to its credit, it is encouraging to note that the
Industrial Energy Efficiency Improvement Program, created under
the Energy Policy and Conservation Act, reported a weighted
average energy efficiency improvement of 15.4 percent at the
close of 1979 as compared with 1972 efficiencies.
Total energy savings for the reporting corporations in
1979 amounted to 2.2 quadrillion BTU's per year, the equivalent
of over one million barrels of oil per day, compared to what
would have been required in 1972 energy per unit of output
levels.
The DOE 1979 annual report to the Congress and to the
President indicated that the most significant low cost improve-
ment of energy conservation measures is the use of increased
insulation and in process equipment.
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But according to our TIMA survey, there is still a need
for true long-terra energy conservation in industry. This can
only be accomplished by the application of high performance
insulations to industrial equipment and piping, resulting in
savings of hundreds of thousands of barrels of oil equivalent
each day.
The cost of bringing current insulation levels up to energy
efficient standards is a necessity which will result in a
dramatic return on investment for business and the nation.
TIMA conducted the study and it's entitled, "Industrial
Survey of Steam Process Piping Insulation," which exposed an
unquestionable need for industrial energy conservation. The
TIMA study focused on steam process piping which comprises 42
percent of total industry use. In all, 15 Standard Industrial
Classification groups representing 85 percent of total indus-
trial energy use were examined. These groups included the
chemical, lumber, paper, petroleum, plastics, food, metals,
stone, glass and clay industries.
TIMA completed the study by researching the insulation
practices of 500 typical industrial plants representative of
the entire country, as well as each one of the industrial
classifications. The report reveals that there are 325 million
feet, two and a half times around the globe, of steam process
piping in use by these industries in the 15 groups.
Nearly 72 million feet of this type of piping is complete-
ly uninsulated. The rest of the piping on the average is
under-insulated by today's standards, with only about 1.7
inch thickness on large piping, that's above two inches, and
one inch on small piping. To meet today's and tomorrow's
higher fuel costs, these thicknesses should increase, on the
average, to three inches on large pipes and two inches on
small. These were calculated using TIMA's ETI, that's Economic
Thickness of Insulation computer program.
The wasted energy that results from uninsulated and under-
insulated steam piping, we have estimated at 305,000 barrels
of oil equivalent per day. At $22.33 per barrel of oil
equivalent, the cost for this is $6.8 million per day or $2.3
billion per year, more than is used by the entire rubber and
plastics industry, and exceeds the combined total of textile
and lumber industry use.
The study points out that the total cost of insulating
bare pipe and replacing existing insulation with a more effec-
tive type would be $6.2 billion. But the study went on to say
that the payback period would be an astonishingly short 30
months based on the average price per barrel of oil equivalent.
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Future savings would be even greater as the cost of energy
continues to rise.
The TIMA study suggests support of Senate Bill 750, enti-
tled "Industrial Energy Efficiency and Fuel Conversion Tax
Incentive Act of 1980" introduced by Senator Wallop of Wyoming
and its companion House measure, H-2650. These will serve as
amendments to the Internal Revenue Code, and addenda to the
National Energy Act of 1978.
The bills raise the tax credit allowed for new energy
conservation investments from 10 percent to 20 percent. This,
in addition to the 10 percent investment tax credit established
in the 1978 Energy Act, makes for a total of about 30 percent
for new conservation investments.
Additionally I invite your attention to Senate Bill S-1288
entitled "Commercial Business Energy Tax Credit Act of 1981"
introduced by Senator D. Durenburger, and this seems to fill a
void and encourages greater conservation by commercial busi-
nesses through greater use of energy saving equipment. It,
too, provides a 20 percent energy Federal income tax credit
for installing insulation in an existing industrial, retail or
commercial building or facility.
Qualifying property would include not only insulation, but
also a variety of other items designed to reduce heat loss or
gain when put in place after 1980 and before 1987 with a useful
life of at least three years.
One would assume that the return on investment for insula-
tion is so attractive that it is a top priority capital expen-
diture and that bare surfaces and poorly insulated pipe and
equipment would be autmatically insulated, just like poorly
insulated attics. Yet there are still 32 million under-insul-
ated houses in America, and, as the study shows, 253 million
feet of underinsulated steam pipe.
The disinterest in Insulating possibly stems from high
interest rates and economic uncertainty which cause management
to pare down its list of investments. Conservation invest-
ments often are the first to be cut or eliminated unfortunately.
The obvious need for insulation has been clearly substan-
tiated in the TIMA study. If it takes tax credits or other
incentives to encourage conservation, it is a wise investment
for the future of America. The sooner we lessen our dependen-
cy on foreign oil sources, the stronger we become as a nation.
Industrial energy conservation will be expensive. Yet bil-
lions of dollars are being spent by the auto industry to save
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gasoline, and millions are spent on home insulation, which
does qualify for a tax credit.
Americans must choose the most direct and effective means
of conserving energy. Considerable time and taxes have been
spent in research and development of the Department of Ener-
gy's Building Energy Performance Standards, BEPS, for commer-
cial buildings. Implementation of the long delayed standards
has been stopped or put on hold because of controversy over
its prescriptive nature and added building costs. Yet even
BEPS is projected to save only 216,000 barrels of oil equiva-
lent per day, in comparison with the 305,000 barrels estimated
saved if industry follows the common sense insulation method.
TIMA believes that it is past time for industrial users
of energy to make the financial commitments needed for major
savings that must be achieved in the future if we are to lessen
our dependence on foreign fuels. Incentives such as those in
the referenced legislation may be the best means of attracting
scarce investment capital to energy conserving uses. Energy
saved in the industrial sector and commercial buildings is an
achievement that is worthy of national attention and encourage-
ment.
DR. RIEGEL: Thank you very much. Before turning to questions, we'll
hear from Mr. Esteves.
MR. ESTEVES: Good morning, I'm sorry for being late. I had a little
trouble getting around the beltway.
My name is Richard Esteves. I'm head of Conservation
Programs for General Public Utilities. We're by no means one
of the largest companies in the United States, but we do have
the enviable pleasure of owning Three Mile Island and being
in a very capacity-short situation.
We are purchasing enormous amounts of outside power from
neighboring utilities, and even from Canada. So it's to our
corporate benefit and especially the benefit of our customers
to do whatever we can to reduce the need for electric usage
in our service territory, especially during any on-peak periods
when purchased power costs go up, and I'm just talking about
the base energy costs, go up about 10^ a kilowatt hour.
We've had instances where we're buying power from other
utilities at about 15
-------
Now let me turn to the subject of the meeting, which is
what happens now with the proposed changes in regulations and
what's going to happen with conservation efforts.
Our general feeling is: "Them that wants to will, them that
don't want to, won't!" I'm not talking here about utilities,
regulatory bodies and institutions.
We've seen over the past three or four years a number of
major regulatory steps to increase conservation in the United
States. Yet we can look at these programs and see a widely
divergent effectiveness within the programs depending upon
locality and local circumstances. Yet they're all coming under
the same set of guidelines and regulations.
Why? It goes back to the people who are trying to imple-
ment the programs or are claiming to try to implement the
programs. It's a matter of local concern, and it's a matter
of local effectiveness. I do not believe, and the company
does not believe that the way to do this is through an exten-
sive set of regulations at the Federal level. However, we
do strongly encourage the continuation of a number of develop-
ment efforts and research efforts in the energy conservation
field.
Someone earlier mentioned the Twin Rivers project. This
is the type of thing that we need, an examination of what is
currently available and a very objective in-depth analysis
of the cost-effectiveness of that program. Our own R&D pro-
grams are frequently looked upon somewhat askance by utility
regulators or by the manufacturers or by the builders or by
consumers.
When we have had an independent body, such as the National
Bureau of Standards or the Environmental Protection Agency or
the DOE that we can say has completed this study that we have
faith in, and here are the results and we recommend that you
move along in this area, we've gotten good response from that.
Let me take an example outside of the energy field. For
years, we've had tire evaluations which were completely volun-
tary and nobody paid any attention to them until fairly recent-
ly, when the marketplace picked it up. Now there are a number
of tire manufacturers that are advertising that they're in
compliance with these voluntary standards. I believe that
is what is happening in a number of areas in the energy field,
that thermal insulation people and others are picking up
information and data that was published as a result of studies
by the DOE and others and saying this is what we can do at
your local place, and the pricing mechanism is forcing that
into the marketplace now, much faster than the Federal regula-
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tory programs or the local regulatory programs were doing
prior to this.
I think this morning Dick Russell from LILCO discussed the
RCS program. I have the pleasure of working with two RCS
programs, one in Pennsylvania and one in New Jersey.
These two are approved by DOE and yet there are items in
one state that were specifically not approved by DOE for the
other state. There are items in one state which had previously
been thrown out and were put back in within a couple of months.
Yet in both states, responses to the RCS offer is significant-
ly less than one percent. Our Pennsylvania Electric Company
had previously put out an offer of its own, and the response
to that was well over five percent. I believe someone else
mentioned this morning a New York Power Authority effort to
which response was 16 percent.
I'm not saying that the auditing program is not a good
program. It is a good program. It's an outstanding program.
It is a necessary program. However, I do not believe that
it's going to be effective unless the people at the local
level are interested in doing this program, and the same is
true of many of the other programs that were going under
evaluation.
Now, I guess it comes back to the old story of you can
lead a horse to water, but you can't make it drink. Well,
some of the regulations proposed that, maybe if you beat it
over the head a couple of times, it'll start drinking. Well,
some of these horses are pretty muleheaded, and they'll just
wind up sticking their muzzle in the water and swishing it
around a little bit, and you'll think they're drinking. I
think that's what's happening with a lot of the proposed pro-
grams.
The question came up earlier about whether or not the
pricing mechanism is sufficient now to justify an 80 percent
cut in the budget. That presupposes that the previous budget
was cost-effective, and we have seen in many cases where that
program was not cost-effective.
I don't know if it deserves an 80 percent cut, but I do
firmly believe that the previous budget was not cost-effective
and was not cost justified. So even before we got into the
pricing mechanism, I think we have to examine the value of the
individual programs.
I'd like to do that quickly with a couple of programs in
particular. The RCS program, I believe, is a good concept.
I believe much of the work that was done at Oak Ridge in evalu-
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ating audit procedures, cost benefit analysis and this sort of
things is extremely valuable.
We have incorporated much of that information into our
own efforts and recommendations. What has not been valuable
is the requirement for each state to have a uniform system
across the state and for all the states to have their program
approved at the Federal level. This has resulted in some very
significant problems in implementation at the local level, and
it has certainly undermined the ability of the local utility
companies or the oil manufacturers or others to develop a
program which they believe is cost-effective for them and for
their customers.
The commercial program I'm not that familiar with except
that I did notice in the cost benefit analysis which was done
as part of this, there was a significant difference between
the base program in which there were mandatory rules and the
optional program which was totally voluntary. The significant
difference that came about was in the response of customers,
the building owners and the builders, and yet this was not
affected by whether or not the rules were mandatory or volun-
tary. I really don't see an appreciable need for a commercial
program.
Information services - I would like to separate information
services into two parts. One is information provided to the
conservation industry which is a very wide group involving
the solar industry, the insulation industry, utilities, energy
producers, everyone else which is more of a research effort.
This has been extremely valuable. Under no circumstances
do I suggest that we cut those back, and I would urge that
there be more work done in this area. The other side is consu-
mer information.
Time after time, our own evaluations of what our customers
are interested in learning from us is that they have had it
with conservation information, unless they're about to do some-
thing themselves. They say that they've already done as
much as they can reasonably do, and don't send them any more
information on conservation. When they want conservation,
then they'll come and ask us for it, and we've seen this time
after time.
I suspect that the information that is generally provided
by utilities across the country is the same. It's probably
the same as that which is provided by DOE and by the National
Solar Institute Clearinghouse, by the manufacturers, and many
others. You find a significant repetition of this effort.
I believe that many of the consumer information programs
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that are being cut back or being suggested for cutbacks are
duplications of existing efforts, and as such will not be sig-
nificantly missed. What will be missed if they are cut back
are those efforts which border the differential between a
strict research effort and the ability to get that information
into the commercial marketplace.
The weatherization question, as I understand it, is between
weatherization as a separate program and that of rolling it
into a block grant for state use. I must go back again to
the idea that you can't force a state or an organization to
do something it does not want to do, and whether this be with
weatherization or anything else, it still holds true.
Again, I have the pleasure of working with two separate
weatherization organizations, one in New Jersey and one in
Pennsylvania. In New Jersey, there was a good deal of money
spent on weatherization, and in my home county, I know the
people rather well, and they're very conscientious people.
However, their feeling was one that if the people wanted
weatherization, they were going to see to it that they went by
the book. For example, in the entire county, there was one
location where you could sign up for weatherization services,
and you had to do that in person.
We tried to get weatherization forms put in our local
business offices for our own indigent customers. That state
refused to do that because they had to screen the individual
applicants, and perhaps there is a reason for this. I don't
know, but the fact is that that state was not interested in
doing more.
In the other state, they were much more interested, a
much more out-going program, so much so that we wanted to
assist them, and we had a program that would save a particular
user of electric water heating approximately $88 to $100 a
year. It required some equipment. We offered to purchase and
give them the equipment. They said, fine, that they would
like to do that, but that it would take them about a year to
process the changes in their standards in order to allow
their work people to install that equipment.
Incidentally, by the time we got around to doing so, the
cutbacks came, and they said, no, we can't do it, because
we're waiting until the weatherization program has settled
down. Again, they stated that they had a plan approved by
Washington, and that they could not deviate significantly from
that plan without going through public hearings and approvals.
One last thing on the weatherization program: there's a
fuel assistance program which has been very successful in
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temporarily alleviating hardships for people who are short on
heating fuel. However, in neither of the states which I was
involved were they using the applicants for fuel assistance as
a target group for the weatherization program.
In one state, they refused to do that, because they're
handled by two different departments, and in the other state,
they're requested to do that at our suggestion and were told
they could not do so because it was confidential information
and that they would even refuse to do a special mailing to
those people because that was invasion of privacy. These are
important considerations, invasion of privacy and others, but
yet I feel that many of the people who are requesting fuel
assistance would have benefitted significantly and would have
been very happy to have been informed and to have been solici-
ted for free insulation and other materials.
I would like to indicate one thing, and that is I'm a
member of the EEI, investor owned utilities, and we have some
excellent programs, and many of our individual members have
outstanding programs.
However, some of the very best programs I've seen in the
United States are coming out of public power companies, and I
know Karen was here a little while ago speaking about this. I
believe that the reason for this is not because of the profit
question, but simply because they have much greater flexibility
on a local level and do not have to concern themselves signifi-
cantly with getting regulatory approvals.
Time after time, utilities have been able to go to an REA
co-op and suggest to them programs which we've taken six months
or a year to get developed and get approved as part of our way
of doing things, and they've been able to put it into effect
in three weeks or a month. I wish that we had that flexibility.
I believe anything that will help move the decision-making
process closer to the customer, closer to the point where the
customer interacts with the company or the energy supplier or
the service suppliers, the insulation manufacturer, the closer
you can get that decision process to the contact point, the
more effective the program is going to be. Thank you.
DR. RIEGEL: Thank you very much, Mr. Esteves. We'd like to go now to
discussion involving members of the panel.
MR. ONDICH: I have a question for Mr. Manahan. For those 500 industri-
al plants surveyed in your study, did you find any difference
in the types of cost accounting system used for energy expenses
in those plants, Do you think that would influence their decis-
ion in any way toward energy conservation measures?
MR. MANAHAN:
Possibly so. I'm not sure that the report actually high-
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lighted the differences, however. There are a lot of personal
prejudices and so forth on how various firms approach a common
problem of that nature based on previous experience and proxi-
mity to local production points that sort of thing which
reflect on economics, but I don't think the report actually
highlighted the differences.
MR. FRANKEL: Mr. Manahan, I must admit I'm shocked by your testimony,
because after all of the presentations we've had this morning,
telling us how increased prices were going to send the sig-
nals that are needed to effect all this energy conservation,
now you're telling us that with signal that you can get a
30-month payback these industrial firms are not responding,
and I'm wondering why aren't they responding. Why do we need
an additional tax credit such as you're proposing if the market-
place is, in effect, sending them this very clear price signal?
MR. MANAHAN: Well, we can only observe on what we have perceived, and
what we have perceived is a rather intense study in the last
four and a half to five years. We have seen by actual accoun-
ting the thicknesses of insulation on the average increasing
only as little as about a quarter of an inch on large diameter
piping and as little as two-tenths of an inch on small dia-
meter piping, and that, to us, doesn't translate into a drama-
tic shift in the recognition of the need to conserve energy.
MR. FRANKEL: Why won't industry do it on its own with a 30 month payback?
MR. MANAHAN: I think all industry today is pretty well strapped for
disposable funds. Granted, some industry, perhaps the chemical
and oil industry in the recent past, the last year and a
half, two years, have experienced an improvement, a substantial
improvement in profits. It wasn't too long before that I
think that most all of the firms were suffering in profit
generation.
Again, I think there are reasons for that, possibly an
overburden of regulatory requirements that soaked up their
energies, their resources, their time, directed at, in many
cases, much needed improvements, but perhaps also trying to
respond to an overkill posture.
MR. FRANKEL: Isn't industry aware of this potential savings?
MR. MANAHAN: We're doing our best to carry the message to them. One
thing that we've started I think is rather unique. It happened
right here in Washington as recently as May 14 where we collec-
tively with the National Bureau of Standards, the National
Institute of Building Sciences, the National Insulation Con-
tractors, the union itself, that is the Asbestos Workers, con-
ducted a full day seminar/workshop on the merits of proper
insulation materials, their thicknesses, their application
techniques.
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It, unfortunately, became, in my judgment, more of a seminar
than a workshop, but at any rate, it was fairly well attended.
I think there were something like 130, perhaps largely govern-
ment personnel, but some private sector people there. The
results were such that we were encouraged to proceed on with a
like program to other sections of the country, and the planning
committee has had two meetings to program a similar seminar/
workshop for the City of Houston, probably early next year. I
think mid-February is being looked at as a possibility.
The emphasis in the new program will be to try and get back
to more of a workshop technique where we engage, somehow, the
audience in the actual problem solving techniques that will
be demonstrated there.
MR. FRANKEL: Are you aware of the study by Bob Marley at the DOE Policy
Office, where he argues that of the 15 or 16 percent energy
efficiency improvement by industry only about 3 percent is a
response to increased prices. The remainder is the continua-
tion of trends that existed before 1973 when energy prices
were, in fact, declining, and industry was still improving its
efficiency by about 2 percent per year, also of switches by
consumers to less energy intensive products as the more energy
intensive products become more costly, also a switch to more
labor intensive industrial practices which are less efficient
from a productivity point of view, but use less energy. Thus
only a very small fraction of the actual response that industry
has made so far can be attributed to direct response to higher
prices. Do you know about this study?
MR. MANAHAN: No, I'm not acquainted with that particular study. My
associate handles DOE and I don't have that much traffic with
them personally.
MR. KAPUS: Just one question of Mr. Esteves. Early this morning the
implication was advanced that the probability is high with
some of the cuts that a good portion of the state energy of-
fices are going to be eliminated. From your perspective, what
kind of an impact, if any, would that have on your firm if
they were eliminated say in New Jersey and Pennsylvania?
Do you rely a great deal upon interfacing with them?
MR. ESTEVES: No, we don't. The state energy offices to date in those
two states have not had a significant impact on the public or
the commercial sector, although the potential for assistance
is significant, and has been. To date, I think the results
have been relatively small compared to what was available
prior to that in the legislative branches through the energy
committees and through the normal regulatory agencies that
were set up at that time.
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MR. KAPUS: Thank you.
MR. FRANKEL: Mr. Esteves, I share your distaste for Federal regulatory
programs that overly specify what a state or another organiza-
tion is supposed to do.
In the case of the weatherization program, there are two
problems that are often raised with the Administration proposal.
One is that it's one thing to fold weatherization into block
grants, but then when you cut the block grants by 25 percent,
and the weatherization has to compete with existing programs
for a smaller pie, it seems to many people that it's very
likely that, in fact, what you will see is quite a lot less
weatherization.
The second problem with the overall block grant approach
is that from time to time states have chosen to take block
grants intended for one purpose and use them for something
entirely different, such as taking a block grant designed to
improve housing in low income areas and build a country club
in an upper middle class residence. It's that kind of abuse
of these Federal programs that leads to these kinds of regula-
tions. So my question, I think, is how do you deal with those
two problems, with the concept of folding weatherization into
a block grant program?
MR. ESTEVES: I believe the block grant programs have review procedures
that are supposed to preclude that type of activity in which
money in a block grant is used for items which are not counted
in the block grant. If that sort of activity is taking place,
and I'm sure it has taken place, the problem is not necessarily
in the block grant procedure, because that could happen in
individual allocation procedures as well.
As far as your first question is concerned about having a
smaller pie, that is a difficult question. I do not like
seeing the weatherization program cut, whether it be done di-
rectly in terms of a 25 percent cut in a weatherization line
item or whether it be lumped in with a number of other programs
and all the programs cut by 25 percent.
I think that whatever its merits that it should be handled
locally. I personally believe in a weatherization program.
I think there are some difficulties with it which I'd like to
see corrected, but as I say, I believe in it, and my company
believes in it very strongly. I would not want to see anything
that would harm it.
I do, however, believe that the decision as to what is
most important for the locality should be made by the locality.
We've had many instances in which block grants that were meant
for one thing were used for police and fire protection. That's
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probably the most common item for a misallocation of grant
money in our part of the country, which is the greater metropo-
litan New York area.
I don't like that happening. But it was certainly the deci-
sion of the local people that to them it was worth more to
spend money on that item, at least in the short run, than it
was to spend it on whatever the grant was meant to be for.
DR. RIEGEL: I would like to thank our final two witnesses this morn-
ing, Mr. Manahan, and Mr. Esteves. It is now the lunch hour
and we will break, reconvening again promptly at 1:00. We have
a roster list of approximately 10 more witnesses for the after-
noon, and I look forward to seeing you then.
(Whereupon, the meeting recessed for luncheon.)
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HEARING PANEL
Gregory Ondich
John Miilhone
PROCEEDINGS
JULY 15, 1981
AFTERNOON SESSION
Section 11 Program Manager
Environmental Protection Agency
Director
Buildings and Community Systems
Office of Conservation and Renewable Energy
Department of Energy
WITNESSES
Randall Vosbeck
Alan Rimer
John Hark ins
Carol Allen
William Chandler
Katherine Ellett
Stanley Ezrol
American Institute of Architects
Management Improvement Corporation
Mechanical Contractors Association of America
N.3. Community Action Program
Executive Directors Association
Environmental Policy Center
League of Women Voters of Maryland
Fusion Energy Foundation
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MR. ONDICH: Good afternoon. My name is Gregory Ondich. I will
chairing the hearing session this afternoon.
be
MR. RIMER:
We have some changes for those who are following this
afternoon's schedule. Dr. Riegel and Dr. Frankel won't be
joining us on the panel, but we are pleased to have join us Mr.
John Millhone who is Director of Buildings and Research in the
DOE Office of Conservation and Renewable Energy.
Those are the changes on the panel. As far as the witnes-
ses are concerned, we are also having some changes this after-
noon.
As you can see, Mr. Rimer will be one of our witnesses in
the first session followed by Mr. Vosbeck, President of the
American Institute of Architects, and Mr. Harkins representing
the Mechanical Contractors Association of America.
For those who may be joining us this afternoon for the
first time, I would like to note the changes from the scheduled
witness list. Both Mr. Manahan from the Thermal Insulation
Manufacturers Association and Mr. Cady from the Mineral Insula-
tion Manufacturers' Association testified this morning, and
unfortunately, Mr. Roccapriore from the Solar Power Institute
will not be able to join us. Likewise, we will have some
changes later this afternoon. I have just learned that Ms.
Habib from the National Wildlike Federation will not be able
to join us. I will advise you of the other changes as we
proceed.
Now, I would like to start with the first group of witness-
es this afternoon. What I would like to do is follow the same
procedure that Dr. Riegel used. We will have each of the
witnesses present testimony, then we will have some discussion
about that testimony following all three witnesses.
How much time do we have?
MR. ONDICH: We would like to keep your comments to about 10 minutes, if
we could, Al.
MR. RIMER: Are you looking at breaking this at say quarter to two or
something?
MR. ONDICH: For your group we would like to finish the presentation and
discussion in about 45 minutes, then another group of three;
breaking after that. With that, why don't we start on the far
right with Mr. Vosbeck from the American Institute of Archi-
tects.
MR. VOSBECK: Thank you.
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MR. ONDICH: One more administrative thing the microphone; you might
want to move the other one.
MR. VOSBECK: Thank you. I am Randy Vosbeck, and I'm President of the
American Institute of Architects, and I'm also a practicing
architect in Alexandria, Virginia. Also, today, I am represent-
ing the Passive Solar Industries Council which is an umbrella
group of construction industry organizations which are inter-
ested in promoting passive solar building design.
I'd like to talk to you a little bit about AIA's and the
passive solar building industry's views on some of the recent
directions of the Federal energy conservation efforts which
appears to be guided by two general principles: The first,
higher energy prices will speed up conservation efforts: and
the second that the private sector will be able to pick up
activities that were previously carried out by the Federal gov-
ernment. I'm going to focus my comments on two areas of the
Federal conservation program: First, information dissemination
on buildings and energy use to the design profession and the
building community, and, second, the research priorities for
improving the energy efficiency in buildings.
These two areas, information dissemination and buildings
research, are beginning to feel the real impact of these new
Federal directions. First, let me comment that since 1973,
our AIA members, architects throughout the country have report-
ed a perceptible increase in the number of clients who are
concerned about energy operating costs and are demanding that
buildings be designed to use less energy.
Now, obviously there are several reasons for this. First,
obviously higher energy costs have a significant impact. Addi-
tionally, the availability and use of better technical informa-
tion by both building designers and clients has helped.
And, lastly, designers and owners have, I think, a genuine
concern for the impact on our nation's economy of the diminish-
ing supplies and increasing demand of fossil fuels.
Most building designers can show their clients the economic
benefits of more efficient buildings. Many design profession-
als can now tell clients the payback periods for a variety of
design options, and, in turn, clients use this information
when making their investment decisions.
We feel that most of this information and most of this
capability is a direct result of the Federal energy conserva-
tion program. Five years ago, such terms as energy audit,
retrofit, thermal mass, solar access, daylighting, life cycle
costing were not commonly used terms in the design and building
industry.
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This information flow has speeded up innovation in the
building industry; design manuals, seminars, computer programs
provide tangible design information for designers willing to
try new solutions. This design information and criteria are
important to encourage building design innovation by architects
and engineers.
However, we know that the trial and error approach is not
appropriate for the building industry. A building constructed
with an energy approach that is not based on proven design
criteria and then non-functional cannot be thrown away. You
can't throw away a building.
The Federal program has both speeded up the transfer of
information as well as increased the availability of it. We
know that this information has produced a better informed
design community and a better informed clientele, and without
a question, this is yielding a better stock of buildings.
Unfortunately, we now find this information flow about to
be cut off. Funds for seminars and conferences have been
severely reduced, and the printing and availability of most
publications has been eliminated. Now, of course, industry
will be able to pick up some portion of these information disse-
mination activities. My own organization, the American Insti-
tute of Architects, has begun an unprecedented energy education
program called the Energy Professional Development Program,
and the AIA is spending about a dollar out of every $12 of our
membership dues on this program, about a million dollar program,
to educate and train our members on energy conscious design,
and we'd like to point out that our energy education program
is a direct out-growth of the AIA research corporation's
participation started back in 1976 in the HUD/DOE buildings
energy performance standards program.
While building a base for a regulatory program, we found
out how to increase the proficiency of architects to design
energy efficient buildings. We plan to reach over 8000 design
firms with this energy education program. Our current schedule
calls for about 200 educational seminars in the next three
years. But I think it's important to point out, and we want
you to know that there are many types of information activities
that the AIA or other segments of our industry just cannot
take over.
We cannot reduce large scale computer programs such as
DOE-2 and BLAST into simulation programs for hand-held calcula-
tors that our small practitioners so urgently need, and I
really don't think the computer industry is going to provide
this for us either. We cannot educate the banking and invest-
ment communities about the benefits of energy efficient build-
ings, and this is desperately needed. And we cannot conduct
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valuable research on materials and building systems that we
need to improve energy efficiency which brings me to my next
point of concern.
The next generation of energy and building research, as
we understand it, the new directions of DOE call for a basic
R&D approach for building products and components with the
primary emphasis on long-term high risk research with unknown
potential benefits and less emphasis on demonstration, commer-
cialization and understanding the performance of occupied build-
ings. We understand that most all research projects have been
eliminated that have potential to help the industry solve its
short and mid-term problems. Now, as an architect and a build-
ing designer, I'm dismayed when I see that this high risk em-
phasis has eliminated many ongoing research projects, many of
which are close to providing solutions to technical problems
that the industry cannot solve itself.
I question the economic efficiency of turning off poten-
tially beneficial projects in midstream. The entire building
industry is made up for the most part of small firms. Most
architectural firms, for example, contain nine or fewer members.
These small firms will not be able to pick up the integrated
research on a national scale that has characterized much of
the Federal buildings research. A design firm cannot go to
product and component manufacturers and ask them to provide
coordinated research for materials and systems.
The building industry just cannot underwrite national pro-
grams on energy performance in buildings. We cannot instru-
ment and monitor the performance of a nationwide sample of
occupied buildings. We will not be able to advance the metho-
dology of estimating the energy performance of various design
options.
We must stress that, in spite of the construction, indus-
try's annual contribution of about $127 billion to our nation's
economy, we're a very diverse and fragmented industry, and I
might add, the construction industry is quite soft right now
in many parts of the country.
We all know the state of the housing industry and high in-
terest rates have slowed commercial and industrial construction
as well. We should not expect our construction industry to pick
up this additional burden. I believe that one result of less
federal involvement in the development of computer programs will
be the proliferation of proprietary computer programs that model
and estimate energy performance. One large development and con-
struction firm has already developed an innovative program that
predicts energy performance. They sell its analysis through a
service to other design firms. This practice means that the
user will always be dependent on the service and unlikely to
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learn the effects of his design decisions on the program out-
come. One of the greatest needs of the building industry is
to understand how effectively to retrofit existing buildings.
Both residential and commercial projects are needed. 80 per-
cent of the existing building stock will still be here in the
year 2000. Effective retrofit is a most difficult problem for
designers. Retrofit options are frequently in conflict with
fire and safety codes. To meet all the conflicting codes is
frequently a very time consuming and expensive proposition and
existing tax credits are not adequate incentives for building
owners to take on this capital intensive venture.
It's our assessment that DOE has not yet begun to scratch
the surface in encouraging retrofitting of existing buildings.
Without some continued Federal assistance, building designers
will not be able to solve the problems that accompany energy
efficient buildings. The interior air quality of super-in-
sulated buildings and the psychological effects of buildings
with fewer windows are just two of the problems that require
additional investigation.
I wish I could be optimistic that the new program direc-
tions would create new opportunities or efficient allocation
of the remaining resources. However, we question the wisdom
of allocating the remaining Federal funds to high risk projects,
especially when some short-term studies need just a small
amount of additional assistance to conclude them.
How can the Federal government help during the period of
transition? My answer is simple. Let the building industry
assist you to allocate the remaining resources to problems
that really need solving. We believe we know best what kind
of research and information is needed to provide more energy
efficiency.
We're willing to accept a leaner Federal budget, but we
must voice our strong concern about the few remaining funds
going to uses that may assist us five years or further in the
future, particularly now when the entire industry is lacking
vitality.
Allocation to industry priorities will help us get through
the slump until the industry is on the upswing and able to
begin to take on more responsibilities. So as the American
Institute of Architects' current president and as an architec-
tural practitioner, I'm less than optimistic about the abili-
ties of a fragmented industry such as ours to carry out the
components of a successful research program that would provide
architects and engineers with the tools and the information
they need to carry out energy conscious design.
Therefore, I'm asking you to consider our priorities for a
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redirected program, coupled with industry effort to push energy
efficiency forward, a limited amount of Federal assistance will
enable us to move toward meeting the goal put forth by DOE's
Solar Energy Research Institute, that is a reduction of 30 per-
cent by the year 2000 for energy use in the environment. Do
not let the lack of information and new research impede the
building industry from attaining this important goal. Thank
you.
MR. ONDICH: Thank you, Mr. Vosbeck. I recall your assistant telling me
that you had to leave early. Is that still the case?
MR. VOSBECK: Yes.
MR. ONDICH: I will make a small change in that regard, particularly
since you mentioned this about a week ago to me, and ask if
Mr. Millhone would have any questions of Mr. Vosbeck?
MR. MILLHONE: I appreciate the thought that was given to your prepared
remarks, and the suggestion of closer cooperation in determin-
ing the use of funds that are available and think that's a con-
structive suggestion that DOE should look at right away.
I had just one question that occurred to me. In your dis-
cussion of the importance of focusing on the retrofit of exist-
ing buildings, do you see the need there as primarily one of re-
search or of information dissemination or one of financial in-
centives?
MR. VOSBECK: Well, Mr. Millhone, I think that a balance is needed. I
think that we must have some financial incentives, and the
financial incentives obviously to the building owners for the
most part. Building designers though are faced with needing
some research on just how to approach the redo of these build-
ings that were designed, you know, 20, 30, 40 years ago with
no energy efficiency in mind, and just how to accommodate an
efficient mechanical system into a building shell that is not
designed for it, how to diminish window sizes, how to do some
of this retrofitting within some of the life safety code re-
quirements we have now has gotten to be a major concern for
many architects around the country. So I think it's sort of a
combination of the three things that are needed.
MR. ONDICH: I just have one question. When you suggested the building
industry assist the federal government in the direction of
future research, what mechanisms would you recommend?
MR. VOSBECK: Well, I don't know that I've got a specific answer on that,
but it seems to me that there is not much of a communication
dialogue now between most of the industry and DOE. Somehow
we've got to, I think, start talking to each other more than
we have been of late, so that we can so you can hear our
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concerns, and we can hear yours. But as to a precise mecha-
nism, I don't know that I have one other than just start estab-
lishing a communication dialogue. It's not now existing other
than in meetings like this, and this is one of the first, and,
you know, I hope that we can expand on this kind of a meeting
in a less formal way and really sit down across the tahle and
talk about some of our concerns with the appropriate people.
MR. ONDICH: Thank you. With that, I would like to move on to the next
witness, Mr. Alan Rimer, from MICA.
MR. RIMER: I'm Alan Rimer from the Management Improvement Corporation
of America in Durham, North Carolina. I'm Senior Vice Presi-
dent of the division that deals with energy studies and identi-
fies energy conservation (cost reduction) measures for our
clients in both the public and private sectors.
In March of 1981, of this year, the Department of Energy
outlined in their public discussion package for the national
energy plan a statement which I think is key to the testimony
that I'd like to give, and that is that the government's role
is to establish sound public policies which are based on econo-
mic principles and national security concerns and a due regard
for environmental value, so that individuals, and this is the
part I'd like to emphasize, and firms in the private sector
have the incentives to produce and conserve energy efficient-
ly. This should all be consistent with the national energy
policies.
So the objectives of this testimony that I'd like to give
are threefold. First, is to offer a private sector company's
perspective on some of the issues which affect the development
and implementation of a functional comprehensive energy conser-
vation program which is an integral part of the national energy
plan. Also to offer some recommendations on the government's
role in conservation given the changing funding environment.
And finally to discuss very briefly what our firm has done to
assist public and private sector clients in the conservation
effort in light of some of these changes. I believe this will
highlight some of the problems that are inherent in the program
now.
I personally view conservation of energy as an increase in
productivity utilizing a finite set of energy resources, and
on that basis, an increase in productivity for a private or
public sector organization results either in more profit or
lower taxes with the same capital and personal resource base
available.
So in this context, energy conservation really has to be
viewed as an investment in the future value of society without
sounding too high-falutin'. It's our view that the purchasers
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of conservation programs, whether they're public or private,
really lack sufficient incentives at this particular point in
time to employ energy conservation measures at a rate which is
consistent with what the DOE and the national interest has in
mind at the present time.
Our firm believes that private firms in partnership with
state and the Federal DOE's can do much to speed up this con-
servation awareness. There's been a lot said in the hearing
about the role of government in conservation. Daily, we in
the private sector are exposed to ever increasing energy
costs at a time when energy supplies are dwindling. Conserva-
tion is no longer a luxury, obviously, but rather a staple ne-
cessity for our very existence.
From a private perspective, we believe that the Federal/
state conservation efforts have some short-comings, one of
which is a lack of a central energy conservation strategy.
Most aspects of the program, except possibly the weatherization
assistance program and the solar information network, are not
results focused. The program emphasis tends towards regulation
and paperwork instead of problem solving.
We believe that a simple transfer of conservation activi-
ties to the states is not going to promote energy conservation.
Why? Because we personally experience impediments at both the
Federal and state levels with respect to implementation of a
rational conservation program for both public and private
clients, the public being local governments whom we deal with
almost exclusively.
In the past, the Department of Energy has treated the
conservation program almost as if it was a stepchild, and has
been slow to formulate policies that are consistent with the
overall mission of DOE. These problems, of course, have ameli-
orated in the past couple of years. However, the undertain
funding and future of DOE has promoted a new round of skepti-
cism among both private and public entities. Where are the
programs going? In this hiatus, people are postponing deci-
sions on conservation programs. This undesirable effect has
significant national ramifications primarily in the ineffective-
ly used energy resources.
As with any organization, direction must come from the top
and pass through the organization. Inducements such as grants
are slow to filter down from DOE, through state governments,
to the client. As an example, one of our recent clients, a ma-
jor hospital in our region, was approached to have an energy
conservation engineering study done for them by our firm. Some
18 months elapsed before the study was undertaken. The hospi-
tal stated that money was probably (as it subsequently was)
forthcoming from a DOE program to complete the study. The
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study fee was slightly more than $29,000 and when the study was
completed, it identified first year savings of nearly $229,000
in energy costs, with implementation costs of slightly less than
three quarters of a million dollars. Further, a few minor
changes in their existing energy management system would have
resulted in immediate energy savings which would have more than
paid for the cost of the study in less than 5 months. But they
waited, and in waiting, they suffered in terms of the expense,
and so did the nation in a sense. The point of this simply is
that the Federal and state programs offered impediments to
exactly what we're trying to do and that's to conserve energy.
The states are slow to respond too, because they're not
sure that their own initiatives are going to be in line with
what the Federal government has in mind. They can only respond
to the Federal mandate when the Federal folks understand what
it is that they want. That often means that the state cannot
effectively manage even their own programs, because they are
not sure how they will interface with potential or proposed gov-
ernment programs.
The moral that I'd like to draw from these examples is
that we believe a framework is necessary for conservation
activities which involves not only the DOE and the state agen-
cies, but has the input of private firms, not unlike Mr. Vos-
beck with the AIA and with the Mechanical Contractors Associa-
tion, etc. We believe that with those groups, participating
in a partnership with the private sector, and with the proper
incentives for energy conservation offered, can go a long
way towards at least beginning to implement nationwide some of
the programs.
We believe that there is little to be gained by shifting
programs between governmental agencies (Federal and State).
An increase in the involvement of local communities and private
sector companies should be fostered because of the profit mo-
tive is a strong incentive to produce results in a competitive
marketplace. Local governments are closest to the problem
(need) and can work closely with private business to achieve
energy conservation.
I have some very specific recommendations which I'll end
with. They're divided into three different parts, the Federal,
the state and the local governments. MICA believes that while
education of public officials and private customers on the
vast potential for conservation techniques can impact very
significantly on their particular economic picture, they need
the proper incentives to follow through with their programs.
In the private sector, such incentives might take the form
of increased tax incentives and/or tax credits where applicable.
In the public sector, such incentives might take the form of
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grants for good projects after implementation.
Specifically, steps the federal government should take in-
clude:
- Define the conservation program's goals and objectives.
- Provide dates for implementation of various facets of the
program and then stick to them.
- Provide tax incentives for energy work - studies as well
as equipment.
- Expand research and development funding (through direct
grants) to private organizations and individuals.
- Allow for patents to be retained by investors under the
appropriate technology programs.
- Provide for personnel transfers from public agencies.
- Convince the President and Congress to provide the neces-
sary funding.
- In short, be consistent with the initially stated goals
and policies.
State governments should take these initiatives:
- Tax incentives for energv conservation measures.
- Have State Clearinghouse for energy information - send to
local governments.
- Establish community wide load shed blocks for block con-
trol of demand and usage.
- Establish community based energy task forces to assist in
energy conservation measures.
Local governments, where we believe most of the initia-
tives should be taken, should take these initiatives:
- Establish energy offices at the local level.
- Offer property tax breaks for energy efficient structures.
- Remove code restrictions which impede conservation mea-
sures.
- Establish community programs which help in the area of in-
formation dissemination.
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We also feel community-based energy task forces should be
established where that's practical to assist in energy conser-
vation measure definition for that particular community.
MICA is an example of a private sector firm, which from its
founding, has addressed the question of energy conservation
from an economic viewpoint. MICA, as a corporation, identifies
productivity improvement ideas for clients (both public and
private) in all sectors of the economy. One of the company's
services, the TEMP Service (Total Energy Management Program) is
offered to public and private clients including:
* Communities * Housing Authorities
* Office Building Owners * Private Colleges
* Condominiums * Shopping Malls
* Nursing Homes * Hospitals
* Motels * Hotels
* Industrial Plants
TEMP is a comprehensive energy conservation and cost reduc-
tion service which is results oriented, profit motivated. In
the TEMP program, MICA uses a staff of professiional engineers
to examine a prospect's facility through the use of a "walk-
through" survey to identify what can be done to reduce energy
consumption by identifying energy cost reduction potentials.
Such potentials range from changes in the building envelope
(insulation, insulating glass, etc.) to energy management sys-
tems to control electrical demand and consumption. Once poten-
tial corrective measures have been identified, MICA will pro-
pose to the client identify and describe corrective actions to
be taken. Another alternative is for the client to sign a TEMP
Service Agreement to install an energy conservation measure
such as an energy management system. In the latter arrangement,
MICA provides the client with a turn-key package for each ener-
gy conservation measure or for all of the measures grouped to-
gether. This package includes the necessary engineering design
work, equipment, supplies, and installation labor. In short,
MICA identifies, initially without charge, the client's energy
problems and then provides a total solution for that identified
problem.
MICA brings certain important attributes to this program:
- MICA's staff is comprised of registered professional en-
gineers with specific experience and training in energy
conservation.
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- MICA does not manufacture, sell, or distribute any equip-
ment. Thus, MICA is able to eliminate vendor bias which
allows them to custom fit equipment to a particular cli-
ent's needs.
- MICA provides the TEMP service on a turn-key basis.
- MICA guarantees to produce energy dollar savings in ex-
cess of the cost incurred for the implementation.
- MICA can arrange complete third party financing of the
TEMP service packages.
The results oriented approach of MICA permits the client to
see the results (to which everyone has contributed some portion
of the effort). For private sector companies, the decreased
energy costs from ECMs result in higher profits. For public
sector clients, decreased energy costs result in lower taxes.
A well thought out and implemented energy conservation po-
licy will significantly stimulate the goal of energy independ-
ence with the proper mix of private and governmental programs
to aid the implementation.
In summary, we believe that there's little to be gained by
shifting programs between various governmental agencies. We
really honestly believe that there needs to be developed a
very strong partnership between the Federal, state and local
governments as well as consultants and that we take that and
move with it and the existing programs of DOE into a more
rational basis for conservation into the year 2000.
MR. ONDICH: Thank you. Next is Mr. John Harkins representing the Me-
chanical Contractors Association.
MR. HARKINS: Good afternoon, Mr. Chairman and members of the panel. The
Mechanical Contractors Association, known as MCAA, appreciates
this opportunity to comment regarding the national energy poli-
cy.
I'm John Harkins, a mechanical contractor from Lansdowne,
Pennsylvania. I'm also the Chairman of the National Energy
Committee for MCAA as well as a director on the national board.
MCAA is a construction trade association of about 1700
firms, employing approximately 180,000 persons. Our members
build systems that move fluids, both liquid and gas. This in-
cludes the fabrication and installation of heating, ventilating,
air conditioning, plumbing and process piping systems, and fur-
ther encompasses service, maintenance and the testing, adjust-
ing and balancing of these systems. Our work affects multi-
residential, commercial, public and industrial facilities.
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The equipment MCAA members install is the principal user of
energy in buildings, and energy is the key to our industry.
Consequently, we are deeply concerned about conservation and the
effective use of our nation's fuel resources.
Although the United States has begun to improve our energy
position since the Oil Embargo of 1973, this nation still faces
serious problems in our energy supply and demand. MCAA has had
an Energy Committee even before the OPEC embargo. This Commit-
tee has worked to educate our members .on the nation's energy
problems and what they can do to promote energy conservation.
We have done this through such measures as newsletters, bulle-
tins , reports and a series of educational seminars and work-
shops. MCAA also participates in the standards developments
process and inter-association and government activities related
to energy. We believe firmly that the resolution of our energy
problems requires a governmental and industry teamwork approach.
The present policy of the Reagan Administration to reduce
government intervention in the energy area and encourage the
free enterprise sector to develop sources of energy is commend-
able. There is no single answer to our energy problems. It is
still necessary for the Federal government to take action in
certain areas. Our energy problems can only be solved through
a broad undertaking by working in many directions at once
on a planned and phased basis.
The opportunities in both the public and private sector in
the energy field are enormous, and many businesses are seizing
them. However, to be effective the national energy effort must
be focused, guided and well-coordinated.
As an association, MCAA has developed recommendations for a
comprehensive national energy policy, which is enclosed with our
written statement. (This report was reviewed, but not included
in the Transcript due to its length). In the interest of time
I will not cover the entire plan, but comment on one facet
that we consider essential to any practical energy program
and that is energy conservation.
CONSERVATION
Conservation of energy in residential, commercial and indus-
trial buildings, in appliances and in transportation is the
most promising immediate, relatively untapped source of energy.
It is the cheapest, most environmentally safe and most produc-
tive method of increasing our nation's energy supply. Signifi-
cant conservation can take place in the transportation sector,
but it is in the buildings that the most savings can be made.
Estimates show that our energy usage could be cut between
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30 and 50 percent through effective conservation measures in
buildings with little or no change in comfort. Existing com-
mercial and industrial buildings can be retrofitted (renovated)
to be much more energy-efficient. These savings can amount to
a reduction of more than 3 million equivalent barrels of oil per
day. In addition, energy conservation can reduce energy costs
to consumers considerably.
The commercial building sector alone uses approximately 16
percent of the nation's total energy consumption. Our nation
has an inventory of 24 billion feet of floor space in commer-
cial, institutional and other buildings, many of which have been
overheated in winter, overcooled in summer, and overventilated
and lighted year round. Experts agree that these buildings,
on the average, waste between 40 and 50 percent of the energy
consumed. Therefore the savings can be substantial.
In addition, conservation means immediate savings in energy.
Much of the engineering knowledge and technology for making
existing buildings more energy efficient currently is available.
Conservation is not just a matter of installing more insula-
tion and double glazing windows. There are other important
areas involved, such as the efficiency of heating and cooling
equipment, proper temperature control equipment, and more effi-
ciency of heating and cooling equipment, proper temperature con-
trol equipment and more efficient means of lighting.
A major problem is to convince building owners to accomplish
energy conservation. In this vein, MCAA seminars in recent
years have stressed procedures and techniques to assist our mem-
bers to market energy conservation work. The practical experi-
ence of our members is that building owners need to be assvired
an adequate economic return on their investment or a payback
within 2-3 years. In some cases the necessary payback is possi-
ble and can be shown through proper engineering calculations,
but in many cases even the present prices of energy are not suf-
ficient inducements.
This industry has been dismayed bv the current shortage of
accumulated capital by manufacturing companies and real estate
investors. Of monies which are available for capital invest-
ment, particularly in the industrial sector, large amounts are
being allocated to meet stringent requirements for air and wa-
ter pollution control. Although practical standards are neces-
sary from a social view, expenditures for impractical standards
do not contribute in a real sense to growth of industrial capa-
city, which in turn, produces more goods and jobs.
We heartily agree with the Reagan Administration's actions in
reviewing existing standards and legislation and strongly en-
dorse Administration efforts to reduce or repeal those that are
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impractical and unrealistic. The barriers to conservation are
therefore not technical but economic, social and political. To
overcome these barriers, we need a strong government policy that
advocates and fosters conservation.
RECOMMENDATIONS ON RETROFIT APPLICATIONS
Retrofit Applications. To assure that immediate steps are
taken to conserve energy in existing buildings and that the ne-
cessary monetary incentive for owners is available we recommend
the following:
1. Residential Energy Conservation. The incentives pro-
vided homeowners under the National Energy Act should be expand-
ed. They should preferably include reimbursements or tax cre-
dits up to 50 percent of retrofit costs (with rebates for lower
income groups) to install energy conservation improvements.
2. Commercial and Industrial Property, Energy Conservation
Program. Because of the diversity and the extent of energy
that can be saved in the commercial and industrial sectors, we
strongly recommend that incentives under the National Energy
Act be expanded to incorporate:
a. Tax credits of 40 percent of retrofit costs.
b. Low interest loans to owners, builders, and developers
of commercial property and industries for energy con-
serving measures in new as well as existing buildings.
c. Loans to owners, builders or developers for engineering
studies to determine the cost-effectiveness of proposed
energy-saving changes in buildings and systems of com-
mercial and industrial establishments.
d. A system of rebates for each barrel of oil or the equi-
valent in natural gas or electricity saved in commer-
cial and industrial establishments through retrofit
and other conservation measures.
The measures outlined above are covered in more detail in
the MCAA "Recommendations for a National Energy Policy" enclosed
for the record with this statement. They will significantly im-
prove our nation's energy posture. The great advantages of this
plan are that:
It encourages conservation of energy in a manner that can
be quickly instituted and will produce an almost immediate
payoff in fuel saved.
It relies heavily on public encouragement of and cooperation
with private industry; and
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It encourages the private sector to become deeply involved.
MCAA considers these governmental incentives to be short
range, transitional actions. In the long range, rising costs
of energy will bring economic forces into full play and people
will conserve energy because of its high price alone. Even
now the nation is consuming energy at a lower rate than 3-4
years ago. Temporary governmental incentives will accelerate
the process until the market place can take over completely.
EDUCATING THE PUBLIC AND GARNERING SUPPORT
A primary and perhaps the most important step in resolving
our national energy problem is to convince the American public
that a national energy problem does, in fact, exist, that it
is serious, and that they are the key element of the solution.
A major national public relations should be initiated to
educate the public on the energy problem and its solutions.
It should be dynamic, sustained, imaginative and a central part
of any national effort. The educational program is a task for
both the government and private sector working in concert.
CONCLUSION
This nation can delay no longer in squarely facing our ex-
tensive energy problems. We must recognize that each single
solution is needed and has its place. However, we should de-
termine the most promising, practical approaches and concen-
trate on accomplishing them rapidly and effectively. The na-
tion can and must reach a consensus by bringing all factions
and single answers into a cohesive, multifaceted and long-range
plan. Only a determined approach will overcome the problems
facing us, make us energy self-sufficient and able to continue
our strong role as a world power.
MCAA recognizes that this program calls for government
involvement, including financial incentives at a time when the
Administration and the country are calling for less government,
less federal spending and no inflation. MCAA strongly endorses
those worthy objectives and believes that our proposals in the
long run will aid in their achievement through increased employ-
ment, decreased balance of payments and reduced dependence on
foreign oil.
Thank you for this opportunity to comment. I will be
pleased to respond to any questions.
MR. ONDICH: Thank you Mr. Harkins. I would like to start out with a
question of Mr. Rimer. We heard this morning from the Thermal
Insulation Manufacturers Association, some distressing inform-
ation. They did a survey of 500 industrial firms to determine
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the level of insulation use. What they learned was that these
500 plants were not insulating as you might expect with rising
energy prices.
In your experience have you found the same results and is
there any reason to believe a residential survey would be
significantly different?
MR. RIMER: We don't do work in the residential area. We do in the
industrial area. We do in residential as it relates to doing
block control in smaller communities, but the residential work
is not as it would be for small air conditioning systems.
In the industrial plants, we do do a lot of work, and the
problem, I think, has been faced very squarely by Mr. Harkins
and by the testimony this morning. The incentives these
industries think they need are either tax incentives, some
form of tax incentive, a tax credit or some other means to get
that payback down in the two to three year period which we're
finding most of these people need.
Insulation sometimes takes anywhere from two to five years
to pay back depending on the installation.
MR. ONDICH: I believe they were talking about 30 months.
MR. RIMER: Well, that's kind of in the midband there. We've found
some that have extended as long as five years, some that are
two years. These people need something that will pay that
back more quickly. A credit could, of course, accommodate
that.
MR. ONDICH: So you do not think the rise in prices is sufficient?
MR. RIMER: Not now, very definitely not. We're working with Duke
Power in their service area in the conservation effort with a
number of plants, and Duke's a very efficient utility. It has
fairly low rates, but the industries in that area are very,
very hesitant. Their capital resources are very, very thin
right now. They need to spend it to upgrade their product
lines in order to become more competitive at the product
level. So retrofitting their HVAC system or insulating steam
lines, it's a very low priority, in spite of the fact that
that energy cost is really affecting that bottom line.
They need to get it down below a two-year payback in order
to feel comfortable. Apartment owners are worse, a year to a
year and a half for them, and that's across the board. In New
York City, in particular, we're finding they don't want to do
anything unless it will pay back in 12 to 18 months; there's
no interest.
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MR. ONDICH: I would like to move to Mr. Harkins for a second question.
Since you are a national organization, do you see any regional
areas, the Northeast or the mid-atlantic states where some of
these industrial firms may be picking up conservation measures
because they are more directly affected by fuel prices than in
other parts of the country.
MR. HARKINS: Well, the industrial section is picking up much more rapid-
ly than the commercial section, and as for regions that it
would be picking up in, it would be basically climatal effect
as I know it. The Sun Belt wouldn't be as influenced, and
sure, the incentive would not be there as greatly as it would
be up in the Northeast section in the case of insulation or
heat loss, that type of thing.
MR. MILLHONE: I have a question that occurred to me sort of combining
input from both of the witnesses. One was the comment by Mr.
Rimer about the audit that cost $29,000, if I remember correct-
ly, with a four-month payback and management savings that
would, in terms of just the operation and maintenance, that
would pay for itself fairly quickly and then provide additional
savings from the retrofit. I think that we are all familiar
with similar instances, maybe some not as dramatic as that.
The other point that was made is that the hope of some
sort of Federal incentive might cause people to forego action
waiting for the Federal financial incentives to be sweetened.
This might cause the hesitancy of building owners or industrial
plant owners to take actions that already would provide fairly
significant savings.
The questions that occur, I think, to anyone hearing this
is why isn't more retrofit occurring immediately with this
kind of potential, and, secondly, is there a counterproductive
effect of discussing enriched Federal financial incentives in
leading people to forego things that they ought to be doing
right now based on the present financial incentives?
If either or both of you would like to comment on that.
MR. RIMER: Do you want to start?
MR. HARKINS: Okay. I hope I don't take up all the time. Well, I'll
let Mr. Rimer address the counterproductive thing, because he
experienced it. We have experienced it too, and we're aware
of his sample.
As we find the marketplace in the commercial side, the
ability to pass through the cost leaves no incentive for the
commercial owner of real estate to upgrade this system. With
investors on the industrial side, everybody is profit-oriented,
and you must turn a profit, or who cares about three years
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from now. If we don't make a profit in the corporate structure,
we don't move up, or our corporation doesn't have earnings,
etc., etc.
So the guys who really get the attention are the fellows
who can produce the widget hy taking funds from the corporation
and making the widget go out the door properly. Many times
they have tax incentives themselves, equipment, building, depre-
ciation incentives. Here we have a segment of the industry
which we are identifying as an industry in its own right, and
it has very little incentive to compete with the already exist-
ing incentives that are known and have heen proven.
There is also in the eye of the spender a hesitancy to
believe. He asked for a two-year payback which is 50 percent
return on his investment, a three years payback, a 35 percent
return on his investment. When he's assured that it will
happen, he really may not even believe that too. It'll go
back to the other area where he can make his investment and he
knows that he can get his profit out of that whereas this is a
relatively new thing within less than 10 years, and he's say-
ing, well, give me a greater tax incentive or give me some-
thing more, or I'll put my money where I know it's safe, he-
cause I'll be in business two or three years from now with
this thing. If it goes wrong, I may not be here, that sort of
thing.
That's how I can answer that, and I reserve the other
answer for Mr. Rimer.
MR. RIMER: I think the question is very perceptive, and the view that
you can give of taking energy and energy savings or conserva-
tion in industry and trying to convince that person that it's
a good idea is to say that you're really adding on another
foot to the industry. You're giving them another two feet of
production line, because you're really giving them additional
money to either make more widgets and make more money or you're
actually bringing something to the bottom line.
In the school program and in the hospital program and
local government program which we're familiar with as well as
the industrial program, I think we found many of the clients
that we've served absolutely unwilling to take the government
money. They want to move ahead. They are convinced that
there is no advantage to them in taking a small grant and then
filing all the paperwork when they can go out and do the study
and implement much more quickly.
I think part of that is not really the government's fault.
I don't thi-k it's anybody's fault. It's just a matter of the
program getting started and having all of those initial impedi-
ments that created the problems in the program.
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Here we are, we finally got a program set up that appears
to have at least some general, forward-moving direction, and
we're going to undercut it. I'm all for reducing the Federal
budget too, but I think we have to look very carefully at the
potential national interests that are being lost here, and
that's why I say I think it's a very good question. I don't
know a real answer to it.
I don't know where the incentive picture lies here. I
think it's a question that this whole hearing in many peripher-
al ways has addressed. Everybody said we needed incentives,
but what are they? How do we best fit that in with Reagan's
economic programs which I think are sound and are going to
demonstrate their validity in time, that we need those incen-
tives now.
MR. MILLHONE: Just a couple of what I hope will be quick questions and
answers. Mr. Harkins, does the Mechanical Contractors Associa-
tion of America undertake any research activity for more
efficient HVAC equipment?
MR. HARKINS: Well, we do so through contributions to ASHRAE per se as a
technical society. We do not propose ourselves to be technical
people and develop standards in that aspect.
MR. MILLHONE: Mr. Rimer, you mentioned the desirability of their being
local, state and Federal energy programs. Do you think it
should be the Federal government's responsibility to pay the
cost of the state and local programs or should those govern-
ments pay the cost of their own program?
MR. RIMER: I think the government should pay the cost of their own
programs to the extent that they can and maintain a national
program. If that means that a certain amount of seed money
has to come from the Federal government, I think that should
be provided to the extent possible. But I think the local
and state governments should do as much as they can themselves
and many states have. But we hear all of the states saying,
oh, we're going to go out of business if you don't give us the
money. So there may be some seed money necessary to keep
them going.
MR. MILLHONE: From your perspective, I guess, in North Carolina, how
have you seen the program over the last few years?
MR. RIMER: I think locally it's become somewhat stronger, because
North Carolina, South Carolina, to some extent, Virginia, have
forced the local communities to do a little bit more than I
know some of the northern states have, so that the local pro-
gram has gotten strong because of workshops and the like.
The state program itself is relatively weak if the DOE
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takes the money out of it, because the state has not taken as
much initiative as they should to provide state funding. They
will. Our legislature is looking this fall to do something
about it if, in fact, funds are cut off, because they recognize
the importance of it.
MR. ONDICH: As an observation, we had Dr. Kline, a City Councilman from
Spartanburg, South Carolina, state that his community did not
seek Federal assistance. They had an adequate tax base, sup-
ported by the industries that are relocating in that general
area.
MR. RIMER: That's great for the Southeast, and I'd love to be from
there. I was born and raised in the Northeast, and we have a
real problem up there. Energy costs are two to three times as
high. It's a real problem.
MR. ONDICH: Okay. Again thank you, and I would like to move on to the
next three witnesses, Carol Allen, from the New Jersey Commun-
ity Action Program, Bill Chandler from the Environmental Policy
Center and Katherine Ellett from the League of Women Voters.
Since we have significantly changed our scheduling, I would
like to try to get back closer to that schedule and start with
Carol Allen from the New Jersey Community Action Program.
MS. ALLEN: I work for the Community Action Program's Executive Direc-
tor's Association of New Jersey, a research and information
statewide office for 23 Community Action Agencies in the State
of New Jersey.
Community Action Agencies are the deliverers of Federal
and other anti-poverty programs in local communities. The
Community Action Agencies are the local deliverers of the low
income weatherization program which was started by the U. S.
Community Service Administration, and later, when expanded,
became the DOE program, but in many, many cases Community
Action Agencies have continued to be the deliverers of the
program.
I am first and foremost an advocate of that program as a
Federal program, and, secondly, an advocate of energy conserva-
tion as a national effort.
Energy conservation is a national need. The Federal energy
legislation of the past five years was created deliberately as
a national response to the energy crisis. Programs such as
Low Income Weatherization, the Schools and Hospitals Program,
Residential Conservation Service and Energy Extension Service
should be funded by Congress.
State and local government programs are also important,
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but they are only supplements to a big national priority enab-
ling efficient energy use.
If our representatives in Washington look at the national
energy picture from the point of view of individual households
or small businesses or institutions such as schools and hospi-
tals, the burden of escalating energy prices in the past 10
years has been overwhelming. Before the 1970's, building de-
sign, location and energy use was based upon false assumptions
about the availability of abundant oil, electricity and natural
gas at affordable prices. There is no need to reiterate what
happened to energy prices after 1973. Consumer and business
demand continuing at unchanged levels contributed to the price
increases. Since energy is a necessity, it is price inelastic
in the short run; price inelastic means that demand does not
decrease rapidly despite price increases.
The immediate need was for mobilization of information and
planning to sensibly reduce energy consumption. Federal legis-
lation from 1975 to 1978 set into motion appropriate Federal
government leadership with the authorization of national energy
conservation programs.
Research shows that the weatherization of homes in the form
of storm doors, windows, insulation, caulking and so forth
results in substantial savings in energy consumption. A study
by U. S. Community Services Administration and the National
Bureau of Standards shows that just over $1000 per dwelling
in weatherization costs can result in a 39 percent reduction
in fuel bills.
The DOE low-income weatherization program helps people who
lack the capital or the borrowing power to make energy saving
improvements. I would like to commend for the record informa-
tion already presented in this series of hearings, the Consumer
Energy Council's extensive research. They gave testimony yes-
terday and also presented a very thick volume of research which
has been read into the record. I commend also the DOE Fuel
Oil Marketing Subcommittee research which was read into this
record yesterday. Those both document the need for and the
consequences of low income energy conservation assistance.
Income eligibility in the weatherization programs is based
upon 125 percent of poverty income guidelines. That means peo-
ple who couldn't really afford any kind of real capital expen-
diture. The same people are eligible for financial assistance
in paying their fuel bills; therefore, it makes sense to pro-
vide a more lasting solution to fuel bill problems by making
houses more energy efficient.
There are also those elderly people with different spend-
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ing habits who will deprive themselves of adequate heat at
today's energy prices. So weatherproofing their dwellings ena-
bles them to live in a more comfortable and healthy environ-
ment. Low income weatherization programs have been in effect
for a few years, but there are still 13 million low-income
residences that need to be weatherized.
The need for weatherization is specific and enormous. It
should be maintained as a specific Federal program with direct
funding and guidelines. It has taken a while to arrive at the
right program design, and it would be impossible for 50
states to assess needs and implement weatherization at the
scale needed by the 14 million low income elderly and handi-
capped households in this country.
The idea that low-income energy assistance programs should
be discouraged as Federal energy policy because they're income
transfer programs is very poor logic in my opinion.
The income transfer has already been set in motion with
the rising energy prices. The transfer is from consumers to
corporations. It affects poor people in a very regressive
way, because they pay a higher percent of their total income
for energy.
Home energy consumption is not discretionary spending.
The only way poor people can consume fewer thermal units of
energy is by using it more efficiently. It is too important
to leave to states. Weatherization started as a Federal pro-
gram and needs to remain there.
Senator Cohen of Maine, when he introduced a low-income
weatherization act to the U. S. Senate, quoted a study by
Urban Systems Research and Engineering in Cambridge, Massa-
chusetts, where they confirmed that actual energy savings of
16 to 35 percent were resulting from DOE's weatherization
assistance. He saw it in terms of the actual saving of
energy, that one million homes already weatherized represented
saving of five million barrels of oil a year.
If we take a price of $36 a barrel, this could represent
a savings of up to $185 million, and this has, of course, a
positive impact on U. S. balance of payments deficit problems,
and the problems of the strength of the dollar, and it reduces
our dependence on foreign oil.
He's just talking here about low-income weatherization.
This does not take into account all the middle-income people
who may, through other kinds of incentives, choose to conserve
through their own investments. If we were to weatherize all
low income homes in need within the next 10 years, the pro lee-
ted energy savings would be 339 million barrels of oil a year,
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about 16 percent of the oil we currently import. If the price
of a barrel of oil were to remain constant at today's world
price of $36 a barrel, this would represent a savings of over
$12 billion, and one can assume that the price of oil will
exceed today's price. So the savings will be even greater.
Clearly it is in our nation's best interest to reduce
energy consumption. This morning I attended hearings where
Senator Weicker, whose proposed bill S1166 is a weatherization
and state and local energy conservation block grant bill,
heard various testimonies. Senator Weicker's proposal is that
65 percent of state and local energy conservation money be
allocated to low income weatherization for the next fiscal
year.
His comment was that is is not really government spending,
but it is government investment to invest in energy conserva-
tion of poor people's houses.
MR. ONDICH: Thank you, Ms. Allen. We'll come back with questions after
we hear from the other witnesses. Next is Bill Chandler from
the Environmental Policy Center.
MR. CHANDLER: Thank you very much. My name is William Chandler, and I
represent the Environmental Policy Center. My comments today
reflect nine years of experience in energy conservation re-
search, including work I did in co-authoring the book ENERGY:
The Conservation Revolution. I have also served as a consul-
tant to the Congressional Office of Technology Assessment on
a review of the Department of Energy's conservation programs.
Since the Environmental Protection Agency's mandate re-
quires that it address the broad question which is, "Is enough
attention being paid to energy conservation?" I'll begin with
this assertion, that our policies for achieving energy conser-
vation are terribly inadequate.
The Reagan Administration's recent efforts in this regard
are, moreover, counterproductive, and I will refer to these
shortcomings as I describe examples of policies that I believe
are necessary to fully capture our energy conservation oppor-
tunities.
I'd like to begin with the first example of automobile
fuel economy. Automobile fuel economy may be the single most
important energy conservation measure available to us. The
truth of this is evident in that the quantity of gasoline that
we consume almost exactly equals the quantity of oil that we
import. Since most gasoline is consumed in private cars and
since the efficiency of cars can be improved from the 15
miles per gallon that the fleet on the road today averages to
50, even 60 miles per gallon, it is clear then that gasoline
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consumption in cars should be our first priority. Indeed, the
difference in the year 2000 between oil savings that the market
is likely to effect and that which is both technically and
economically feasible is probably equal to about two million
barrels of oil per day.
The Reagan Administration asserts that the deregulation
of oil prices will bring about all the gasoline conservation
that is warranted, that is that the market will take care of
the problem. Figure 1 which I have attached to my testimony
indicates why this probably won't be the case. (see Figure 1)
The figure shows how if a driver of a car that obtains 15
miles per gallon can save 5 cents per mile by trading in his
car that gets 15 for a car that gets 25 miles per gallon, then
the savings, as I said equals about 5 cents per mile.
The savings decreases, however, if you go from say 25
miles per gallon to 50 miles per gallon to the point where
you're saving 1 to 2 cents per vehicle mile. This is not
enough of an incentive, in ny opinion, to overcome the consu-
mer's reluctance to pay a higher first cost for the car even
though the consumer would save money over the life cycle of
that investment, that is over the first three years of the
life of that car. That's because consumers in general avoid
higher first costs even when to do so costs them money over
the life cycle of the product they purchase.
This is a problem in all areas of energy conservation,
except perhaps in industry. This problem may explain why
Europeans who have for years been paying prices of $2 to $3
per gallon of gasoline drive cars that average only about 25
miles per gallon.
It's ironic then that one of the first actions that the
Reagan Administration took when entering office was to put up
barriers to the importation of fuel efficient cars. The export
restrictions forced upon the Japanese will drive up the cost
of the average fuel efficient auto for sale in the United
States by about $300 per car.
This cost incidentally will be equal to the fuel savings
of buying that car that would accrue over the first year of
use of the car. So the Reagan Administration not only is not
paying enough attention to energy conservation, it's making
conservation harder to achieve.
The second example turns to industrial energy conservation.
It is often supposed that industry will capture, in response
to the potential for cost savings, all the opportunities for
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energy conservation that are both technically and economically
feasible. I believe that this supposition is incorrect.
Most industrial plants were built when energy cost the
equivalent of about $5 per barrel, and so that makes most U.S.
industry obsolete with respect to today's energy prices with
respect to the energy conservation potential that the price
increases of the 1970's have dictated.
In fact, a recent study by the Environmental Policy Insti-
tute has estimated that the need to increase investment in
industry for energy conservation alone amounts to something
like $20 billion per year. Industry is not making these in-
vestments because of the high cost of capital, particularly
to those manufacturing industries that have very large debts.
A number of senators, including Senator Malcolm Wallop,
have offered a bill which would help solve this problem. It
would make part of the needed capital available through an
investment tax credit of 20 percent for investments in energy
efficiency in industry.
Since the investment tax credit gives the best "bang for
the buck," as it were, or in other words, the greatest amount
of private investment per dollar of Federal revenue lost, this
bill could have a most beneficial effect; but the Reagan Admin-
istration has not supported this legislation. This aspect of
Reagan policy further exemplifies the Administration's incon-
sistency on matters of market interference.
Instead, the Reagan Administration's economic recovery plan
will only make matters worse. It will allocate vast sums of
money to electric utilities and oil refiners, thus providing
even greater subsidies for energy consumption.
My last example is in the buildings sector, and it refers
to the glaring error made by the Reagan Administration and its
ill-advised attempt to repeal authority for about a dozen
energy conservation programs, including Low Income Weatheri-
zation, Appliance Energy Standards, the Energy Extension Ser-
vices, the Residential Conservation Service, and others.
These programs were specifically designed to fill the gap
left by the marketplace in providing reliable information,
technical assistance and financing for energy conservation.
Fortunately, these programs probably will not be repealed, but
that is not to say that they will be supported adequately.
Table 1, (see attached) also attached to my testimony, shows
the distressing fact that the present level of funding for low
income weatherization would require an unbelievable 40 years
to weatherize even at a modest level the homes of America's
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Table 1: Low Income Weatherization
LOW INCOME HOME WEATHERIZATION
The Need
16 Million Low Income Homes X $500 per Home = S3 Billion
The Federal Response
Weatherization Program = S200 Miliion per Year
The Result
$8 Billion - S2CO Million per Year = 40 Years
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neediest. The Reagan Administration, unbelievably in my
opinion, would devastate the weatherization program.
Another program for which Reagan sought repeal is the Ap-
pliance Efficiency Standards. Appliances can be made much
more efficient than the market now demands. Figure 2 shows
the efficiency of a typical refrigerator relaive to its cost.
One can see from this chart that small increases in the pur-
chase price of refrigerators can greatly increase their effi-
ciency. The problem, again, is that the consumer reacts more
to first costs than to life-cycle costs. Moreover, the con-
sumer does not even pay the marginal cost of electricity; he
or she pays the average cost. The consumer does not "see" cor-
rect price signals, a situation that makes it impossible for the
market to work adequately. This fact is the major justifica-
tion for appliance efficiency standards: standards will, quite
simply, save both consumers and society lots of money.
In summary, I have cited a few critical examples of how
the Administration has paid far too little attention to energy
conservation. There are, of course, many others.
The fault lies not just in the leadership in the Department
of Energy, but throughout the administrative agencies. The
Office of Technology Assessment has urged that Congress provide
DOE with an era of stability in order to implement the energy
conservation programs for which DOE does have responsibility.
This, I believe, is a sound recommendation.
But the actions of each agency impinge upon energy consump-
tion; therefore, each agency should review its proposed actions
for their impacts on conservation and without such attention,
fiascos such as that represented by the automobile import
restrictions inevitably will be repeated.
Thank you.
MR. ONDICH: Thank you, Mr. Chandler. We will move on to our last wit-
ness in this segment, Katherine Ellett.
MS. ELLETT: Thank you. My name is Kathy Ellett, and today I'm repre-
senting the League of Women Voters of Maryland. We have about
3000 members in the State of Maryland. I am the First Vice
Chairman and Energy Director.
The League of Women Voters of the United States has been
involved in energy issues at all levels, local, state and
national, since 1974. We began our energy concerns at that
time with the rather obvious need for something to be done
about energy, and our first concern was for conservation.
We have always looked at conservation of any resource in a
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very positive sense. Don't waste it, use it efficiently. It
doesn't have to be a negative. We know, everyone knows that
we are terribly wasteful with energy in this country. We can
be more efficient without changing our standard of living or
giving up things.
The League of Women Voters of the United States testified
before the House and Senate Budget Committee on their revised
1982 budget. I have included their statement on solar and
conservation programs in my testimony, my written testimony,
because they could not send a witness today.
Our concern is for the drastic cuts that have been recom-
mended in the solar/conservation budgets. We simply do not
feel that market forces are going to take care of all these
things. Higher prices already have had a beneficial effect,
but they cannot carry the burden alone.
Most of the technical reasons why this is true have already
been discussed. Either I've already heard them this afternoon,
or reference has been made to them, but they have been brought
up in these hearings.
So I would like to spend the time addressing myself to
experience in the State of Maryland. Maryland has an energy
office. It was organized in 1973 in response to an emergency
situation. A good bit of its funding has been from the Federal
government but not all of it.
I have been to many hearings at the state level during the
General Assembly sessions. The legislators are very concerned
about energy conservation and doing something about the crisis
in general. However, they have a very serious problem of cuts
across the board.
They are directly responsible to their constituents, and
their constituents can get at them very readily and very easily.
I don't think it's likely that they can replace all of these
programs immediately. So to take them away from the states
immediately poses severe problems. We in the League have had
a lot of pass-through grants. They've been for very small
amounts of money.
A lot of other voluntary organizations have received money
also. We have done various public education type things with
this money. It has been well spent, and I have included with
my remarks some examples of the publications that we've put
out. We don't think that loss of that kind of money will be a
big tragedy. Public education is something the league has
been doing for 60 years, and we will continue to do it without
any Federal money.
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There are certain things, however, that the Maryland Energy
Office has done and needs to continue to do that it really
can't do effectively without help from the Federal government.
I think all the programs that are in place are important
and worthy of Federal involvement, but the three I'm going to
mention are ones that the Maryland Energy Office feels they
cannot carry out without Federal involvement. First is the
ability to provide technical information to all sorts of small
businesses and industries. A state the size of Maryland with
some 4 million in population doesn't have the resources to
pick up on this kind of technical information, let alone
dispense it, so that there needs to be some kind of information
transfer bank.
This has just barely gotten started, as I understand it in
DOE, and it's beginning to function well. It doesn't make
sense for every single state to do all the research and all
the information gathering and buy big computers and so on
to get in touch. That still cuts them off from what people
are doing all over the rest of the country.
This is properly a Federal function, a clearinghouse,
somewhere to get information and a way you can give your infor-
mation so other people can get ahold of it, and, lastly, the
ability to provide energy audits and advice to local govern-
ments. Again, it's helpful to have some kind of support. For
instance, the Residential Conservation Service (the Federal
mandate that it has to be done) is something industry won't do
unless they're absolutely required to do it.
I mention that the state is under severe fiscal restraints,
and, therefore, they cannot really pick up on this stuff imme-
diately. A certain amount of it, I think, Maryland will re-
place, but obviously with a three-month legislative session,
they're not going to do it overnight, and there are a lot of
other things they're going to have to address first.
I would like to close then with some particular things
that we think is the Federal government's responsibility.
First, it should establish and work towards specific goals
for energy conservation. Someone earlier mentioned the lack
of any kind of direction or priority setting. We have had
this at the state level with the state conservation plan.
Everybody then knows they're supposed to get 15 percent by
the first year or whatever, and this is helpful, because then
they can set out and say, okay, this is the way we're going to
reach that goal, and the public knows that that's the way it's
being reached, and they're more likely to cooperate.
Second, the Federal government should be encouraged in
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carrying out and doing or encouraging research on more effi-
cient ways to use energy, as well as the evaluation of the
conservation techniques. Again, each state should not have to
do this for themselves. It doesn't make good sense. Each
state shouldn't do the research on how well a house can be
insulated or how these programs can be evaluated. There is a
concern about indoor air quality. Every state shouldn't have
to do research on that.
Establish and maintain an information transfer system. I
mentioned that earlier. Assess and work to remove the many
institutional barriers to the attainment of maximum conserva-
tion efforts. Again, this is something that has to happen
throughout the whole country because all the components that
go in in the building industry are not made in each state.
They may be made in any state, and they're marketed through-
out the whole country, something that has to be coordinated
at the Federal level.
Five, continue the energy assistance programs. This is
very important. It has to be done, and, again, the trade-off
has to be there. If people's homes are not weatherized at
all, then their energy costs will simply go up and up and up,
and we know we have to help them pay those costs for health's
sake. Every citizen is entitled to a decent standard of living.
My last remark the League feels very strongly about, treat
all energy sources equally. The Federal government should ei-
ther remove all subsidies for conventional energy supplies,
including nuclear energy, or distribute, which is what we
would prefer, what subsidies are allowed evenly across the
board, and conservation should get an equal share to any other
domestic source.
We believe that strong national leadership is essential to
any effort in conservation and solar. If the nation's leaders
act as though conservation were not important or convey the
idea that it is not necessary, the public will act accordingly,
and we believe that this will have severe consequences for
our economic health and for our national security.
Thank you.
FOLLOWING IS MS. ELLETT's WRITTEN STATEMENT:
July 15, 1981
The League of Women Voters has been involved in energy is-
sues at local, state, and national levels since 1974. Our
first, and continuing, concern has been for increased public
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awareness of the advantages of using any energy source in the
most efficient way possible. Thus we have emphasized con-
servationnot in a negative way but as a rational solution to
immediate energy needs.
The League of Woman Voters of the United States included the
following statement in their testimony to the Senate and House
Budget Committees on the revised 1982 budget:
"We are dismayed at the drastic cuts in both the solar and
conservation budgets. We oppose the Administration plan to
slash over 77% from conservation and more than 62% from sol-
ar. The Solar and Conservation Bank should not he stran-
gled just eight months after its birth.
The Administration cuts are proposed on the assumption that
higher energy costs and tax incentives alone will take care
of energy conservation and encourage the use of solar. Of
course, higher prices will have, indeed already have had, a
significant-effect; and for that reason we supported gradu-
ate decontrol of the price of oil and new natural gas. But
higher prices will not provide capital to the vast number
of individuals and business who can use conservation and
solar. Higher prices and tax incentives will not enable
tenants to control the design and operation of the residen-
ces and office buildings they occupy and whose energy oper-
ating costs they pay. Higher prices will not ensure that
we achieve the maximum cost.effective improvements in effi-
ciency, even though such improvements are clearly in the
national interest.
In sum, we believe that federally funded conservation and
solar programs are needed to expedite "market forces."
They provide the diversity of approaches needed to help
break down institutional barriers to use of these resource.
The Bank, for instance, was designed specifically to assist
those who would not be expected to benefit from tax credits.
These programs can assist citizens in the large number of
small applications of solar and conservation technologies.
Ignoring all recent major energy studies and without new
analysis, the Administration axes the Solar and Conserva-
tion Bank, building and appliance standards, utility audit
programs, funds for state energy offices, and public out-
reach programs. Crippling reductions for local school
and hospital conservation programs are proposed."
The Maryland Energy Office (MEO) has been very effective in
organizing and promoting energy conservation throughout the
state. They have been a ready soucre of information, both
technical and general, to local governments, business and
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industries, volunteer organizations, public interest groups
and private citizens. Maryland has a good State Energy Conser-
vation Plan and we feel the State has so far met the annual
goals that are established by this plan. There has been
demonstrable growth in conserving activities and use of passive
and active solar energy in Maryland.
The League of Women Voters of Maryland has been the recipi-
ent of grants to carry out several projects promoting energy
conservation and educating the public. Specifically:
* We published a fact sheet entitled "Energy Conservation...
It's Good Business" which documented the response of state
business and industry to the increased price of energy fol-
lowing the 1973 crisis.
* In 1978-79 we reviewed local government programs and activi-
ties relating to energy conservation in order to increase
the awareness of local officials, county government employ-
ees and the general public.
* In 1980-81 we focused our review on a survey of local energy
coordinators, other selected officials responsible for energy
conservation outreach and assistance programs, selected school
officials and teachers. Information obtained in these inter-
views was made public in a variety of ways including publica-
tions, reports, forums, meetings with elected officials,
newspaper articles and radio talk shows.
* We cosponsored a Solar Homes Tour which was attended by some
12,000 people statewide.
These programs and activities would not have been possible
on a statewide basis without the support necessary to fund
printing, promoting, publicity, etc.
If the Administration's proposed cuts are approved by Con-
gress, the Maryland Energy Office will be severely affected.
It would probably be reduced to a few people who would know
what to do in an emergency situation, but could not carry out
necessary actions themselves. There is historical precedence
for this conclusion. In particular there are certain functions
now being performed by the office that would nave to be cur-
tailed without continuing federal programs. These Include:
* The ability to provide technical information and advice to
small and large business and industries on the efficiency
of energy use thru the Technical Assistance Program.
* The ability to obtain, analyze and transfer information of
all kinds to the citizenry.
3Q3
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* The ability to provide energy audits and advice to local
governments.
The State Government is under severe fiscal constraints and
it does not seem likely that they will be able to pick up most
of these very necessary programs. Consequently, we believe
that the Federal government has the responsibility to actively
support energy conservation by carrying out the following:
1. Establish and work toward specific goals for energy conserva-
tion.
2. Carry out by doing or encouraging research on more efficient
ways to use energy as well as evaluation of conservation
techniques.
3. Establish and maintain an information transfer system.
4. Assess and work to remove the many institutional barriers to
the attainment of maximum conservation efforts. Market
forces are not sufficient to accomplish this. (addressed
earlier)
5. Continue energy assistance programs to ensure a decent level
of health and living standard for all citizens.
6. Treat all energy sources equally. the federal government
should either remove all subsidies for conventional energy
supplies, including nuclear, or distribute what subsidies
are allowed evenly to all sources of supply, including
conservation.
We believe that strong leadership is essential in this area.
If the country's leaders seem to think that conserving is not
very important, the vast majority of the public will act accord-
ingly. That could have serious consequences on our economic
health and national security.
MR. ONDICH: Thank you, Ms. Ellett. I would like to open it up for
questions and begin with a question of Carol Allen from the New
Jersey Community Action program.
We heard over the last two days a great deal about the Wea-
therization Program. We had a representative from the New York
Community Action Program yesterday talk about utility spillover
effects to the weatherization programs - audit programs infor-
mation dissemination programs and so on. Apparently these util-
ity programs helped the New York CAP Agencies.
This morning we had a representative from General Public
Utilities that services part of New Jersey, and there was very
little discussion about what GPU was doing on their own, or in
30.4
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conjunction with local organizations. Are there any other pro-
grams within the state that specifically help the weatheriza-
tion program?
That's the first part of the question. The second part
Secondly, how does the New Jersey Weatherization Program work
with the Low Income Energy Assistance Program, LIEAP.
MS. ALLEN: Okay. The first one is national Residential Conservation
Service program which was a DOE program and part of the Nation-
al Energy Act in 1977 or '78. It was a mandated program in
that each state held hearings and had certain goals whereby
utilities are to provide audits to people and also to provide
them lists of contractors that could make energy conservation
modifications and lists of lending agencies. A step in be-
tween the audit and this list that was to give back to the
person a list of the cost-effective modifications which would
be recommended for the particular person's dwelling.
The New Jersey State Department of Energy had already
anticipated, a year earlier, a program which is called HESP,
Home Energy Savings Program, so they had a kind of program
going the year before RCS came in. We still have our HESP,
and I'm also familiar with the New York Program which is called
HIECA, which is the RCS program.
HESP is a potentially good program; however, it has very
little for low-income people. When they were setting up HESP,
according to Federal guidelines, I testified and suggested
several things that they might do specifically for low-income
people with the idea that low-income people wouldn't probably
get into the contracting and the borrowing and so forth. I
also said I didn't think that low-income people would ask for
a $10 audit even though the cost of an audit is probably more
like $100, and with all the follow-up of the cost-effective
modifications.
Low-income people would not elect to spend $10 without
knowing why or what it was going to lead to. So I said why
didn't they give the audits free, and they said there's one
group of people who receive a utility allowance, elderly and
handicapped who received a state utility allowance, who are
usually identifiable on utility bills because of being in that
category. They're actually certified through another pharma-
ceutical assistance program. So they have a card called the
PAA card with which they get low cost prescription drugs.
That comes out of the casino gambling fund. So they also get
a utility allowance out of the same casino gambling money. So
they were easily identifiable on utility bills.
The State DOE said, okay, if they ask for a free audit, we
won't have the utilities charge them the $10. That left out
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the rest, non-elderly, non-handicapped, the so-called working
poor, the AFDC recipients. There was nothing provided for
them. They have another state DOE program, a hotline, which
takes the input, actually takes the calls. It's a toll free
number for HESP. So people that are low-income people and
identify themselves as such, first of all, will be referred to
their nearest low income weatherization program. They will
receive some information such as how they can do a self audit,
and some low cost/no cost tips, another kind of energy savings.
So, to answer your question about the utility connection,
it's a very, very important subject. In fact, I have asked
the National Community Action Agency Association at their
annual meeting to have a workshop and bring together people
from all over who can talk about this. I think there are some
good ideas out there. For example, the Tennessee Valley Au-
thority has provided very low interest loans for woodstoves
and solar devices for people, and then all the way out in
California, and similarly in Washington and Oregon, they have
interest free loans on solar implementation and on conservation
with some kind of a buy back arrangement, so it's essentially
costless.
In the New England states, they're trying to get new legis-
lation passed. Every state either has a bill or a proposed
bill to get very, very low interest loans for conservation.
As far as New York goes, I understand that, in the HIECA program,
the utilities lend at their rate of return, 9 to 11 percent.
They lend to people, and I know of a couple of specific
utilities in the southern tier of New York State who have very
good cooperative programs of helping, working with Community
Action Agencies, where the utility actually does all the audits
for the low income weatherization program.
One part of the low-income weatherization program is the
initial audit and assessment, and in this case, the utility
does it, which, in a sense, might reduce the cost of the low
income weatherization services by 10 percent or so.
But that's very local, and I think it's very specific to
one company. So I would say, in summary, that there are things
out there, but they're not really working for low-income people
yet.
I hate to criticize. I hate to go into a hearing and
criticize New Jersey RCS, because it's an important energy
conservation program. It might be for middle income people to
take advantage of, so I don't like to be harsh, but I have to
say that there is not a great deal there for poor people.
MR. ONDICH: We learned yesterday that the audits are now free under
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the New York HIECA Program.
WAP Program in New Jersey?
Could you tell us about the LIEAP/
MS. ALLEN: You mean how they connect?
MR. ONDICH: Yes, if they connect.
MS. ALLEN: The LIEAP people asked me to write two paragraphs to put in
the LIEAP state plan about the weatherization which I did, and
I included mention of the low cost/no cost information on the
DOE hot line. They put it in the LIEAP plan, and it went out
to all the county welfare offices who were delivering the LIEAP
plan. To the extent that people get into a conscientious social
service office where the person dealing with them is interested
in more than one thing, they get needed information and servi-
ces. This often happens in the CAP agency where we now have
something called the Energy Crisis Intervention Program, which
does a number of things for people, including information and
referrals.
There's a section called Access which means providing peo-
ple with access to all other programs, and that means referring
them to other assistance programs. That is the only formal
connection. The weatherization program usually has a backlog.
So it may not be a great blessing to be referred to it at any
given month of the year, because chances are it would be a few
months in arrears. So the person wouldn't get taken care of,
perhaps, through the next season.
So that connection is the paper connection, and, to the ex-
tent that people make referrals, then more people sign up for
weatherization.
MR. ONDICH: How do you think the proposed changes in going from cate-
gorical program funding for weatherization into block grants
would affect the weatherization program in the State of New
Jersey?
MS. ALLEN: I think it would significantly threaten low income weather-
ization assistance. I don't like to use the word program, be-
cause we may be talking about something else, not the same
thing, but the concept of low income weatherization assistance
would be greatly threatened.
Senator Weicker is coming in with his bill that says 65
percent of perhaps $336 million for state and local conserva-
tion programs, but this morning in testimony, the Associations
such as Counties, State Legislatures, Governors, Municipalities,
and Mayors all came in together saying they wanted to see a
maximum of maybe 30 percent of that state and local block grant
for low income weatherization.
3Q7
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But they believed that 65 percent was too high because of
regional differences, because of the need for flexibility and
so forth. A number of senators, more regional than partisan,
come in very strongly for low-income weatherization assistance.
Two that I mentioned, Cohen and Weicker and also Senator
Chafee from Rhode Island and Senator Heinz from Pennsylvania,
have all come in very strongly for a low income weatherization
program. One of the problems with putting it into the commun-
ity development block grant, as has been proposed, was pointed
out by Senator Heinz, who says that most of his poor people in
Pennsylvania are rural, and they're outside of cities, so the
HUD programs wouldn't reach them even if they had a weatheriza-
tion component.
There's some advantage in an urban type program for wea-
therizing public housing and big multi-family dwellings occu-
pied by renters. Those have been rather hard to get at through
low income weatherization programs so there is a need for
something there.
As I said at the beginning, I'm an advocate of a Federal
low income weatherization program as such, because I think
it's the only way to get that particular job done.
MR. ONDICH: Thank you. John?
MR. MILLHONE: I have a couple of questions. Although I'm not familiar
with its details, I know that there is some consideration by
the Health and Human Services Department in changing its rules
so that some of the assistance payments can be used for wea-
therization investments, assuming that the payoff is in a rela-
tively short period of time.
The linkage of weatherization to assistance programs is
something that many people have seen would make a great deal
of sense for some time. Is there any reason why a state can't
do that now, or do you support that approach? Is that something
that has some local difficulties that are not apparent to those
of us who look at the desirability of joining those programs
from the national level?
MS. ALLEN: Okay. Let me speak from my experience. I have sat on the
advisory committees of the low income energy assistance program.
Since fuel assistance is in HHS, it comes down to the NJ Depart-
ment of Human Services. There's another state agency in New
Jersey, the Department of Community Affairs, which administers
the DOE weatherization program. I've sat through planning ses-
sions where they've had to institute programs based upon Federal
regulations, funding requirements, and grant processing.
In the case of the Fuel Bill Assistance Program, there is
3Q8
-------
a design of a state plan where certain choices are made by the
state as to how it will do the fuel bill assistance.
Both groups get mixed in a great many details. Therefore,
I see no bureaucratic advantage in bringing them together
because that would mean that all these people would have to
learn the details of the other program. It seems to me from
my observation that they already have enough details to deal
with. A referral system should be conducted. In the state
plan for fuel bill assistance, there were a couple of para-
graphs directing the certifier to ask the person if they would
like to sign up for low income weatherization and send it to
the nearest agency.
That's the referral system. What you may be looking for
is some kind of a real overlap where there would be kind of a
research connection such as identifying those people with
really outlandish fuel bills. Tony Maggiore, of the Fuel Oil
Marketing Subcommittee Study on Fuel Assistance might say that
the connection is to find those people who have the most out-
landish fuel bills. That's why a vendor payment method is
recommended, because it lets the social agency see the bill
and analyze the person's energy costs. The social service
agent could go over bills with people and try and see if they
can come to some understanding of alternatives to paying so
much for fuel.
In that sense, there is a connection in terms of seeking
out those people who need weatherization assistance most or
who need fuel burner efficiency modification or in some cases
who need alternative energy sources more. There is that con-
nection, and that has not been proposed in any program yet.
Chances are if it happened there would probably be a third
agency connected which would do just that. I have the greatest
of respect for these State government departments when they
deal with these very hard questions of how to help people with
these great problems with limited amounts of money. But I
don't see them being able to pick up and do another thing,
which is to put programs together.
They've had to change agencies, as you know, in various
ways from year to year. Programs have moved from one agency
to the other, and there's a multi-layered approach. I don't
see, at the state level, 50 states being able to efficiently
design fuel assistance and weatherization programs separately
or both in combination.
Maybe Massachusetts and Wisconsin would do fine, and the
rest of the states would probably get completely bogged down.
MR. MILLHONE: I'm afraid you're right, that sometimes the state bureau-
3Q9
-------
cracies are as difficult to get together to do something effi-
ciently as Federal bureaucracies. I can say that having been
a state bureaucrat at one time, head of the Minnesota Energy
Agency and Chairman of the Fuel Oil Marketing Advisory Commit-
tee that tried to develop what we thought was a good plan to
do this.
Mr. Chandler, a quick question. In your list of programs
that were being excised, you didn't mention building energy
performance standards. I wondered if that was just an over-
sight or if you had particular sympathy with the Administra-
tion's effort to eliminate that one.
MR. CHANDLER: That was a keen observation that I left out building energy
performance standards. I didn't emphasize that mainly because
of the acts that Congress has already taken to change BEPS
which I think effectively diminishes the effectiveness or the
hope that the program will accomplish what it originally was
intended to accomplish.
MR. MILLHONE: The new Administration is seeking to deregulate the price
of energy. Are there any implications of such a policy, if it
is pursued successfully, that you think that policy should
have as far as the policies of the prior Administration? That
is, I don't think I asked the question very clearly, but if we
do proceed to deregulate energy prices, are there implica-
tions that you see should occur as far as some of these prior
Administration policies, such as appliance standards, BEPS,
RCS or what have you, or should we be doing the same things
under the current Administration in those areas as had been
proposed be done during the prior Administration.
MR. CHANDLER: Let me answer it in two parts. First, I think from a strict
natural resources management point of view, deregulation of
energy prices makes a lot of sense. I think a great deal of
the problems that we've experienced were due to oil price regu-
lations. I think natural gas price decontrol would have a
beneficial effect. However, I think you have to couple price
decontrol with at least two sorts of policies, the first being
a policy that takes care of the equity problems to make sure
that those who get virtually crushed by rapid price increases
are taken care of, and specifically T mean that the weatheriza-
tion program should be increased many fold.
The second policy that has to be implemented with price
decontrol is some sort of policy to take care of the macroeco-
nomic effects of shifting large amounts of money from one
sector of the economy to another, in other words, from consu-
mers to energy companies.
In terms of whether programs such as appliance efficiency
standards, even building energy performance standards are need-
310
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ed, I think you can make a very good argument, very good case
that they still will be needed for several reasons, most impor-
tant of which is the fact that consumers don't see the full
marginal price of energy, especially electric or utility consu-
mers who get a price signal that reflects the average cost of
energy and not the cost to society which is the marginal
cost; and because of informational problems, the market just
does not work perfectly.
So from a societal point of view, I think you can still
defend every one of these programs.
MR. MILLHONE: Thank you. Ms. Ellett, I don't want to ask an unfair ques-
tion, and I know asking for specific information is difficult,
because I've been asked for specific information when I've
been on the other side, but I'm curious about the relationship
between the amount of money that Maryland is spending on its
energy programs and the total state budget. What I'm getting
at, of course, is what percentage is being spent on energy
programs in your state, and my hypothesis is that it would be
a fraction of one percent, and then my question would be do
the Governor and lawmakers of the state really feel as if
energy is that low a priority in terms of all the other things
that they have to deal with.
I want to tell you where I'm going before I ask.
MS. ELLETT: I can't tell you the specific numbers except that it is a
small amount. They give a lot of rhetorical support to energy
problems. I think the main problem in the immediate future,
say the next two years, for instance, is that there will be
public pressure for expenditures of money in many areas such as
education; financing education is one that is particularly
big in our state. It may be big in all the states right now
because of the cutbacks.
Cutbacks have been proposed across the board in all pro-
grams at the federal level, so that I don't see them feeling
they can give energy programs a big priority and pick up on
these things right away.
Then the state energy office might be disbanded again which
has happened before. Not entirely disbanded, but they won't
have the money to keep people there so the office can do very
little, and then when things get squared away again, they start
hiring. It's been too much of a seesaw for them to work effec-
tively, and that's why I think cutting these programs out sud-
denly, or drastically reducing them suddenly is not fair to the
states.
Yes, maybe the states can and should be spending more money
in many, many areas, but this has to be a gradual process. It
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shouldn't be
not been cut
level. It's
the state if
circle, and,
signal sent
need to pick
not just the
a sudden reversal. The tax, for instance, has
yet, so the money is still going to the Federal
not there for the people in the state to give to
the state has to raise more taxes. It's a vicious
therefore, needs to be a more gradual, definitive
to the states so they know in advance what they
up on, I think this applies to all the programs,
ones on energy conservation.
Then, again, there are the programs I particularly men-
tioned that a state can't handle efficiently by itself.
MR. ONDICH: To follow up on Mr. Millhone's question, and, I do not
want to ask for unfair specifics - what about the Maryland
programs? Over the last two days we have had a lot of discus-
sion about a number of programs, the weatherization assistance
program and programs in general that assist low income indivi-
duals.
Most of your discussion and recommendations do not specifi-
cally address these programs. Do you have any specific comments
about them - those in the State of Maryland?
MS. ELLETT: I don't know a great deal about the programs personally.
I haven't recently talked to anyone in Health and Human Ser-
vices.
In regards to the weatherization program, again, it's
pretty much what you've already heard. For the State of Mary-
land it's mostly necessary in rural areas rather than in the
cities. People don't live in their own homes. So the problem
is getting at the rental properties, and every year that sub-
ject is discussed by by the state legislators in hearings about
how they can get landlords to do something, plug up leaky
buildings. In many cases it can't be done on a remotely feasi-
ble economic basis.
They just don't know what to do. I don't know what to do
either. I haven't heard a reasonable answer to what can be
done about rental property. The League's position on low income
assistance is essentially what you just heard Mr. Chandler
saying. We are in favor of the decontrol of prices. We think
that it is necessary so the public gets the right signal about
how to use natural resources.
At the same time, we would prefer this to be gradual, and
you have to have some kind of low income assistance program.
I did ask some of the people at the Maryland Energy Office
about the coupling of the weatherization and the LIEAP program,
and they preferred not to see that done, mostly because it's
essentially getting at two different populations.
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They don't see any real advantages to combining, and they
felt some instinctive disadvantages might be inherent in that.
MR. ONDICH: Thank you very much. I am looking at my schedule, and I
believe we have only one remaining witness, Stanley Ezrol from
the Fusion Energy Foundation. Is Mr. Ezrol here? If he's
not, I would like to take a break for about ten minutes, and
we will reconvene at 3:00.
(Whereupon a brief recess was called.)
MR. EZROL: I think the point to be made to people, including the audi-
ence, who have had a chance or will have a chance to look at
what I wrote afterwards is that I think the philosophy behind
the United States conservation program has been in error.
The idea that's been repeated over and over again is that a
barrel of energy, a barrel of oil saved through conservation,
is the equivalent of producing a barrel of oil at less cost.
That's been repeated in many different ways. Now the fact
of the matter is, there are two points to be made. The first
is that that is almost obviously false. It should be recog-
nized as false on two counts. One is that I think the history
of the 1970's is one which demonstrates that there is, first
of all, very significant cost in attempts to save energy through
conservation. Anyone who drives long distances, I drive be-
tween Washington and New York City relatively frequently, I
think, either has no respect for themselves and their own
time, or they recognize it's a reduction in living standards
to drive at 55 miles an hour.
It's not something that we've saved at no cost. We have a
situation where due to changes in standards for air condition-
ing and heating, we have elderly people who have died because
their homes haven't been heated to the levels that maybe they
used to heat their homes to.
Otherwise, it's just a lot less comfortable to work in
buildings of 80 degrees than it is to work at buildings of 70
or 72 degrees and people who work in those conditions are less
productive than they would be otherwise.
There is significant cost that's been involved in the
energy conservation efforts that we've made so far and if we
continue in that direction, there will be added significant
unit costs. You know, the fundamental thing which should be
obvious is that the certain level of energy that you use, call
that 100 percent for arguments' sake, the theoretical maximum
that you can save through conservation is that amount.
There's no way that you can get any more energy than that
amount through conservation. Now the other thing which should
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be obvious is that the more you reduce your energy consumption
below that 100 percent, the more difficult it is going to be
to reduce more, and there might be an easy one or two percent
saving which is, you know, if there are people who take barrels
of oil out in the middle of the street and burn them for kicks,
you know, there's not very much cost involved in saying don't
do that any more, but once you get beyond that, you have to in-
vest in various kinds of technologies and devices, and I'm sure
you've heard all about them in the last couple of days.
You've got to do all sorts of things to reduce the saving
below that level which involves investment of technology, an
investment of scientific manpower, and an investment in terms of
human living standards and comfort.
Now, on the other hand, there's such a thing as producing
energy and producing new energy technologies which is what the
human race has historically done when it's faced situations of
energy shortage.
We've brought new resources into play. Coal wasn't always
a resource for man, but when he discovered how to mine it effi-
ciently and how to burn it efficiently it became a very impor-
tant resource. Oil wasn't a resource until about 125 years ago.
It has become a very important resource.
I fundamentally reject the idea that there is some limited
quantity of resources that we have and that therefore we have to
adjust our technology or our use of technology to some fixed
limited amount of resources. The fact of the matter is that we
have coming on line the use of uranium in its various forms,
deuterium, tritium, in controlled fusion reactions to produce
energy, and the history of investment in these sorts of new en-
ergy technologies is that the more you invest in them, the grea-
ter your return is.
In other words, the curve of investment from creating new
technologies goes something like this whereas your current in
terms of return per investment in conservation technologies goes
something like that. So, therefore, it's fundamentally more ef-
ficient to invest in those new technologies so that from the
standpoint of the conservation program, the thing to look at
are things like magnetohydrodynamic uses of coal which give you
a higher energy return per investment input, and frankly I
would like to see a lot of the conservation funds shifted into
R&D and advanced technologies although that might be beyond
the scope of the hearings here. Frankly, that's the only thing
that can be done to save the nation.
The other point I would like to make is that there is an
ecology movement in this country. There's a conservationist
movement in this country, and you've heard from spokesmen of
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the Environmental Policy Center, at least they were scheduled
to testify today. There are other organizations of that sort.
These people are on the public record as being liars, and
just to refer one incident of that sort, I witnessed the lunch-
eon speaker at an Environmental Policy Center Conference on
Water Resources which was held here in Washington this past
March who was someone who's gone under the names of Abby Hoff-
man and Barry Fried. He's a convicted cocaine pusher.
What he said at that conference to the great applause of
the Environmental Policy people who were in attendance is that
we have a certain point of view to push and the way to describe
that point of view in terms of water policy was the revival of
worship of river gods and other sorts of ceremonial celebra-
tions of pagan river gods.
He said in terms of pushing our political point of view,
ignore facts, ignore science. That's the enemy's weapon,
that's not our weapon, so that's what I nean by being on the
public record as being liars.
Another case which I think is worth looking at is an
organization called the Club of Rome, which has an affiliated
organization in the United States, called the United States
Association for the Club of Rome. They were the sponsors of
the study called Limits to Growth which was published, I be-
lieve the year was 1969, and if you trace back a lot of the
debate over conservation in this country, that book is probably
the most widely distributed and most widely cited source for
the need to cut back in consumption of energy resources as
well as other resources.
Elizabeth Dodson Gray who is a member of the Board of
Directors of the U.S. Association for the Club of Rome has
published widely on the topic of ecology, and stated at a
membership meeting of that organization in Washington, actually
Chevy Chase, Maryland, in the beginning of this year, that her
purpose is not strictly conservation. It's not strictly ecolo-
gy, but her purpose is to eradicate the Judeo-Christian system
of morality.
Her specific quarrel with the Judeo-Christian system of
morality is that it places man as morally superior to nature,
and she equated that placing of man in a position of dominance
over nature as being the equivalent of the Nazis who thought
that the Aryan race was superior to the Jewish race or to
other races.
So from my standpoint, the United States is a republic,
the United States Constitution embodies a certain respect for
the dignity of man which emphatically insists that man is
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superior to nature and emphatically continues the Judeo-Chris-
tian tradition which is that the earth, nature, the living
things on the earth, the resources that are here, are here for
man to subdue and to use to his own purposes, that we are not
the slave of nature, as Elizabeth Dodson Gray would have it.
So when looking at the so-called authoritative studies of
the Club of Rome and of organizations whose leaders are members
of the Club of Rome. If you want to look at those, there are a
number of them in the ecology movement, you have to ask yourself
to what extent can we trust the conclusions of people who
start from the premise that man has no dignity. That's all
I'd like to say.
FOLLOWING IS MR. STANLEY EZROL'S WRITTEN STATEMENT
Conservation can never produce energy. United States con-
servation policy will continue to be totally incompetent unless
a vicious lie which has served as the philosophical basis of
that policy is eliminated from consideration. Before describ-
ing and disabling this untruth which lies behind most of the
testimony you have heard yesterday and today, I want to alert
you to the seriousness of the situation the perpetrators of
this fraud publicly state their intention not only to undermine
the United States and its Constitution, but to eliminate con-
structors of this republic. Consult the published works of the
sponsors of the Forrester and Meadows Limits to Growth which
provides the impetus for energy conservation for the last dozen
years I refer to Club of Rome spokesthing Elizabeth Dodson
Gray, calling her thing with no intended malice but adopting my
usage to her own moral self description as a thing morally equi-
valent to inorganic objects, who claims the urgent task of eco-
logists, conservationists, and friends of the eartb to be the
destruction of the Judeo-Christian system because of the found-
ing injunction of that system to man to "Be fruitful and multi-
ply, and replenish the earth, and subdue it and have dominion
over the fish of the sea, and over the fowl of the air, and over
every living thing."
The point to be made is that this nation is in the process
of destroying itself, at least in part by accepting the lie that
failure to use energy is the equivalent of producing energy.
This is not the case because the pagan ecologist view of
resources as being provided in limited quantities to man at the
fluctuating whim of various little nature deities is simply not
true. All of Man's resources are defined by the technologies
Man has created. Man has abided by the Biblical injunction to
be fruitful and replenish the earth by developing increasingly
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energy-dense technologies which bring increasing proportions of
organic and inorganic nature under his dominion.
A barrel of oil saved is not the equivalent of a barrel of
oil produced because the second barrel implies the production
of oil producing facilities. More importantly, we must be in a
situation where the production of the energy equivalent of a
barrel of oil represents advances in technology which bring new
resources such as Uranium, Deuterium, and Tritium under man's
dominion as energy resources. The investment of capital in en-
ergy conservation can never expand the energy resource base
for that reason so-called "conservation technologies" are pure
waste.
To elaborate: Denis Hayes has claimed and frequently been
quoted in his lying claim that United States energy consumption
can be reduced 50% without reducing living standards. He can
make this claim only by ignoring what human life is. For him,
the additional hours of travel time caused by the 55 Mile per
Hour speed limit are not reductions in living standards; the
drastic or total curtailment of the ability of the average
American to travel between cities would be acceptable; the in-
gestion of fifty pounds of algae to replace the protein equiva-
lent of one pound of meat would, according to Hayes, result in
a cost-free savings in energy usage. To this brutish, conser-
vationist view of human nature, I counterpose a statement by
American Economist E. Peskine Smith:
Man's office in the world is that of engineer; all his real
power is mental. It is a waste of power for him to take
that upon himself which can be better and more cheaply ac-
complished by brute matter. He ceases to do so just as, by
studying the laws which his Creator has imposed upon the
material world, he rises to his Creator's design and be-
comes its master.
It is manifest, too, that there is a law of constant pro-
gress in man's appropriation of natural forces independent
of the discovery of any new motive powers. Every machine
facilitates the construction of new ones. It cheapens them;
it enables us to undertake those previously impossible with-
out regard to cost for want of the necessary quantity and
duration of force; and it liberates men from physical toil,
to study and experiment. Each new truth discovered is the
key to a whole magazine, and each new art the parent of a
thousand.
The fact of the matter is that the capital investment al-
ready mis-directed into conservation measures throughout the
seventies has not only resulted in palpable declines in United
States living standards, but has been a deduction from our po-
tential ability to develop new energy producing technologies.
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You may still object that there is real energy waste and
that we must use energy more efficiently. We should use energy
more efficiently, but conservation is inherently inefficient.
High energy density technologies like Magnetohydrodynamic tech-
nologies make the burning of fossil fuel more efficient. By
contrast, the efficiency of conservation measures declines as
their intensity increases. That is, the more you conserve, the
more difficult it becomes to realize "savings" from the conser-
vation effort. Even the most horribly LSD-deranged ecologiest
must admit that the absolute savings from energy conservation
must be less than 100% of the energy used prior to commencement
of conservation efforts, less the energy expended in the con-
servation effort. The closer we get to this limit (and it is
not possible to get very close at all without slaughtering the
human race wholesale), the more effort, and, indeed, energy we
require to realize additional reductions in consumption. This
is analogous to the situation which oil shale extraction engi-
neers can explain to you. The more you squeeze a rock, the
less oil you get per pound of pressure applied. The same is
true of blood.
The history of the exponential increases in the levels of
energy man has made available for his own use demonstrates that
investment in advanced energy producing technologies yields the
opposite result: a greater return is realized per unit of addi-
tional investment as the level of investment is increased.
I wish to conclude with some remarks on the national secur-
ity implications of conservation policy. As many observers,
including former C.I.A. Director, and Secretary of Defense and
Energy James R. Schlesinger, have noted, diminishing reserves
of energy and other resources will potentially lead to great and
small wars over remaining supplies. If this pressure is accep-
ted, the conclusion is inescapable that conservation measures
which direct investment away from the production of new resour-
ces and away from high energy-dense technologies which have di-
rect weapons applications, tend to condemn us to a situation
where we will have to fight for resources with inferior techno-
logies and an industrial base which has been decimated by this
mis-direction of capital investment.
MR. ONDICH: The focus of these Hearings is energy conservation, as it
existed and how it may exist in the future.
The concerns that we heard over the last two days have
been about a number of very specific programs in energy conser-
vation, and a lot of people have come here very concerned
about how low income individuals are going to survive if some
of the assistance is eliminated. We are not talking about
very sophisticated technology, putting a new window in, wea-
therstripping and caulking. In fact, these are quite unsoph-
isticated.
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How do you respond to this? I think your concern is the
development of technologies that are quite sophisticated and
not the direction and focus of these hearings.
MR. EZROL: The thing that we're up against is that what you're really
opening up here is a discussion not only of weatherizing, you're
opening up a discussion of the artificially high cost of energy
at this point which, you know, certainly goes well beyond the
range of the EPA's authority.
Again, the general point to be made, and in terms of speci-
fics, you know, obviously if there's a broken window, it should
be fixed and so on, but the general point to be made is that
the long run efficiency of building new housing is higher than
the efficiency of going back and retrofitting existing housing.
Now we have a problem given that the Reagan Administration
doesn't seem inclined to adopt this sort of economic policy.
It would make it possible to build new and more effective hous-
ing. It also doesn't seem inclined to give much help to people
who currently cannot pay their oil bill, given the cost of oil
currently, and can't afford to do the other sorts of things
that might be done with the housing they have.
That's a problem. The Reagan Administration has, I think,
a severe problem in the economic area, and I think if you look
at the way that certain aspects of Reagan's policies have been
adopted in Britain and other places, I think these things may
eventually translate into the same sort of political upheavals
that we've seen elsewhere.
That's a problem that I would like to correct. In terms
of levels of investment, I think I recall the figure, $184 mil-
lion for things like weatherization aid. If you look at, you
know, the entire fusion research and development budget which
I think comes in somewhere under $400 million, in other words,
roughly double weatherization, you know, looking at the economy
as a whole, you've got weatherization which has at best margi-
nal impact on the economy, in other words, at best you're
going to be saving, you know, somewhere in the range of a few
percentage points of home heating costs which themselves are a
few percentage points of our entire energy consumption, as
opposed to something like fusion, which could over the next 20
years double, and that's sort of a rough figure, but I think
it's in the right order of magnitude, double the energy output
of the United States between, say, now and the end of the cen-
tury.
Beyond that, it could multiply the energy output of the
United States by many orders of magnitude. So that in terms
of balancing one against the other, it should seem fairly
obvious that, you know, first of all lowering the cost of oil,
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lowering the cost of energy generally may be much more effec-
tive in terms of helping people who are currently in situ-
ations where they're too poor to afford the energy or where
they're not living in properly heated housing and so on.
Beyond that, the investment that we put into developing
new technologies is far more effective than going hack and
trying to squeeze, you know, a few more percentage points and
efficiency out of the already low energy production levels
that we've got now.
MR. ONDICH: Okay. That is all the questions I have. Do you have any
other statement?
MR. EZROL:
That's it.
MR. ONDICH: Again, I appreciate your coming. This concludes the Sec-
tion 11 Hearings for 1981. We open the hearing record for two
weeks following the close of today's session for anyone who
would like to submit testimony. If anyone seeks additional
information about the Section 11 process, we would be very
receptive to that request; you can send for information to
the Environmental Protection Agency, Office of Research and
Development (RD-681), 401 M Street, S. W., Washington, D.C.,
20460.
(Whereupon, the meeting adjourned at 3:45 p.m., July 15, 1981.)
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V. J« ADDUCI WRITTEN
President and Chief Executive Officer TESTIMONY
Motor Vehicle Manufacturers Association
of the United States, Inc.
1909 K Street, N.W. Suite 300
Washington, D.C., 20006
The Motor Vehicle Manufacturers Association of the United States,
Inc. (MVMA) appreciates this opportunity to express its views on the impor-
tant subject of energy conservation. MVMA represents a group of companies
whose primary business is the manufacturing, assembling, and distributing
of motor vehicles and motor vehicle related products. Although not consi-
dered an energy intensive industry, the members of the MVMA are vitally
concerned with industrial energy conservation.
MVMA is encouraged by the changes in government energy policy made by
the Administration thus far. We wholeheartedly support the Administra-
tion's drive to develop an energy policy focused on market realities. As
most recently discussed in the July 1981, Department of Energy report,
"Securing America's Energy Policy Plan," MVMA endorses the new Administra-
tion's decision to break clearly and openly with past energy policies that
relied so heavily on federal regulatory intervention. We also agree with
the energy conservation philosophy discussed in the DOE report. Reliance
on market forces and the decisions of individuals and businesses, unen-
cumbered by artifical government subsidies or regulatory controls, will
produce cost-effective improvement in energy usage.
MVMA members have participated in the DOE voluntary energy conserva-
tion reporting program, formerly the joint U.S. Department of Commerce/
Federal Energy Administration program, for approximately seven years.
The most recent MVMA report submitted indicated an improvement in energy
efficiency by the member companies of 25.4 percent through 1980 from the
energy usage in 1972, the base year. These results typify the excellent
results of U.S. industrial conservation. The DOE's Office of Industrial
Programs data indicates that industrial energy use efficiency has improved
steadily since 1972. Corporations reporting under this program reduced
their demand for energy in 1979 by more than 2.2 quadrillion Btu, compared
to what would have been used at 1972 efficiency levels of energy consump-
tion. This is an outstanding accomplishment in view of the fact that
industrial output increased by 17 percent over this period (according to
the U.S. Department of Commerce, "1980 Industrial Outlook.")
These accomplishments by industry have been achieved solely on a
voluntary basis and are unsurpassed by any other sector in the economy.
These improvements have resulted from sound business decisions during a
period of rapidly rising energy prices. Industry will continue to voluntar-
ily improve energy efficiency in response to the economics of the market
system. MVMA anticipates that these economic pressures will increase and
that progress will accelerate, as natural gas prices are decontrolled as
oil prices have been.
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The American motor vehicle industry currently faces serious foreign
competition which, led by the Japanese, has made sizable inroads into the
North American markets. A government task force has estimated that a
Japanese car imported into the United States has a $1,000-$1,500 cost
advantage over a comparable U.S. car. MVMA members can meet this competi-
tion successfully, but suppportive government economic and regulatory
policies are needed to allow the American economy to recover. MVMA sup-
ports the Administration's economic recovery program and believes full
implementation of it is especially critical to the recovery of the U.S.
motor vehicle industry. MVMA believes it is particularly important that
DOE, EPA and other government agencies deliver quickly on the President's
promise to reduce burdensome regulatory programs.
MVMA applauds the Administration's efforts which already have elimina-
ted or modified a variety of unnecessary and costly DOE regulatory programs
including the Federal Emergency Building Temperature Restrictions, the
Energy Information Administration Survey of Manufacturing Industries Energy
Consumption Study, and the Building Energy Performance Standards. Further-
more, MVMA supports the Administration's reductions in spending for DOE
programs. The Administration's proposals for freeing up market forces,
improving investment incentives and bringing about economic recovery will
foster the adoption of conservation measures without the need for the
current federal, state and local conservation programs.
MVMA endorses the Administration's proposed budget reductions to
mandatory state and local conservation programs. The promotion of manda-
tory conservation programs at the state and local levels has been increas-
ing. Several states have enacted mandatory conservation regulations involv-
ing lighting for new and existing buildings, boiler combustion efficiency,
maintenance of oil-fired heating equipment, and temperature controls for
heating, ventilating and air conditioning equipment. These regulations
have resulted in the expenditure of a substantial number of manhours to
compile and maintain survey information, reports and records, without
commensurate cost savings. Rising energy costs will continue to provide a
more than adequate incentive to conserve energy? therefore these mandatory
state programs are unnecessary.
MVMA believes that free-market mechanisms should be relied upon both
to reduce vulnerability to energy supply interruptions and to respond to
such interruptions should they occur. MVMA consistently opposed many of
the standby Federal Emergency Energy Conservation Plans compressed work
week and restrictions on uses of motor vehicles proposed by the previous
Administration. We are pleased that the present administration has revoked
those inflexible and potentially burdensome conservation schemes.
MVMA supports the basic format of the current Office of Industrial
Program's (OIP) reporting program which allows corporations to confidential-
ly report individual corporate energy efficiency data through trade associ-
ation consolidated reports to DOE. MVMA agrees with DOE's current position
which allows industry to set its own conservation targets and report energy
efficiency in a manner which is consistent with each organization's exist-
ing internal reporting procedures.
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However, MVMA strongly disagrees with efforts by OIP, initiated during
1980, to require additional reporting on the basis of multiple SIC (Stand-
ard Industrial Classification) codes. These efforts would cause the program
to become excessively complex and onerous for MVMA reporting firms and
would lead to the provision of incomplete energy consumption data. MVMA
supports the concept that currently allows reporting in the single SIC
code of the manufactured end product of the corporation. MVMA reporting
companies do not separately meter energy use for different product lines
and many plants with complex product mixes has no other means available to
them to readily identify energy by SIC code. MVMA member companies do
not design, operate, manage or measure energy conservation or energy con-
sumption by SIC codes.
Finally, MVMA recommends that DOE completely reassess the OIP's recov-
ered materials reporting program. The current program is not cost effect-
ive and is of questionable value. DOE should discontinue this portion of
the industrial reporting program until a full assessment can be made with
proper input from industry.
In summary, MVMA opposes mandatory energy conservation schemes and
supports the Administration's efforts to further eliminate the mandatory
and burdensome elements of existing federal energy conservation programs.
MVMA members will continue to support voluntary industrial energy conserva-
tion programs which have proven to be successful.
The American Consulting Engineers Council
1015 15th Street, N.W.
Washington, D.C. 20005
FEDERAL ENERGY CONSERVATION PROGRAMS
We have listened to the litany of witnesses, at the EPA energy con-
servation hearings, lamenting the loss of funds for energy conservation
and the effect it is likely to have on their respective interests. It is
worthy to note that those expressing the most discontent with a decreased
federal role are those who have benefitted most by it in the past.
The American Consulting Engineers Council (ACEC) does not view a
lesser federal role as detrimental to the cause of energy conservation in
America, On the contrary, fewer government programs will result in less
federal spending, thereby bolstering the economy. The ACEC has been and
is increasing its role in the energy conservation area. We are not alone
in this effort. You have heard the testimony of The American Institute of
Architects outlining their million-^dollar program on energy conscious
design.
There is a proper federal role in all this. It is in the area of
research and information dissemination. Working closer with trade associa-
tions to develop and get information into the proper hands is one way the
Federal Government can help. Trade associations like ACEC have access to
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that portion of the private sector that can turn government research into
practical application. The Research and Management Foundation of the ACEC
stands ready to assist in this undertaking.
How are private firms preparing to assume their new responsibilities
in giving adequate attention to energy conservation?
ACTIVITIES OF THE ENERGY EXTENSION SEEVICE
The American Consulting Engineers Council, a trade association for
over 3700 professional engineering firms, has been involved in energy
conservation since before it was considered an issue. We are design engi-
neers whose members have designed huge undertakings like the mechanical
and electrical systems for the United Nations Building, the Sears Tower,
as well as the New York and San Francisco subways. We have also designed
many small buildings that incorporate passive solar and other state of the
art energy conservation measures. Consulting engineers are professionals,
whom engineers themselves go to for advice and problem-solving.
The Energy Extension Service provides information and technical as-
sistance to individuals, small business and local governments. There is
no need to convince our members of the importance of energy conservation
and they accept their share of the responsibility in moving toward an
energy efficient and independent America. What follows is a more specific
description of some of the activities concerning energy conservation in
which we are involved. Please note: The sentence at the beginning of
this paragraph describing the Energy Extension Service could easily apply
to ACEC. ACEC is embarking on a large scale professionally handled public
relations program to educate the government and private sector on who and
what consulting engineers are and the services they provide. This pro-
gram is designed to reach the energy conservation community from government
officials to school and hospital administrators to corporation energy
managers. Our point is that those who are serious about energy conserva-
tion and want professional technical assistance can get it. The members
of ACEC are available and have the capabilities and expertise to provide
it. Moreover, we are determined that no one should go without the assist-
ance they need. We have just taken out full-page ads in the "Energy Users
News" and the membership directory of the Building Owners and Managers
Association announcing our energy services and listing firms all over the
country that may be contacted. We intend to continue this practice and
expand to other publications that will reach the widest possible audience.
In addition, our 50 state and regional offices have and are producing
energy directories to be distributed to local officials and businessmen.
These directories will list local firms involved in the energy area. The
Energy Conmittee of ACEC has produced a slide show entitled "If It's Energy,
It's Engineering" that will be used by our members for presentations before
local civic groups. This show contains 102 slides depicting energy con-
servation projects and the role engineers have played in them. It is
designed to encouraged investment in conservation and point out the econo-
mic advantages. We point these things out to show how the private sector
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is responding to energy conservation needs and how there is less need for
government programs.
We would like to make one other point in regard to the Energy Exten-
sion Service. A recent publication by the Solar Energy Research Institute
(SERI) lists state offices and contacts for energy conservation programs
and solar energy. Each state having three offices to contact if you have
questions about energy conservation makes absolutely no sense. This is
an example of duplication or triplication and overlapping of government
programs.
THE RESIDENTIAL CONSERVATION SERVICE
The Residential Conservation Service (RCS) which includes the Commer-
cial and Apartment Conservation Service (CACS) is another program with
which we are concerned. Our concern is not that individual residences and
business should not receive energy audits but where those audits should
come from. The members of the American Consulting Engineers Council are
in the business of providing energy audits to individuals, businesses,
apartments and industry. Having utilities required to perform audits if
requested by their custmers is no longer necessary because of the increased
awareness on the part of the American people for energy conservation and
the availability of consulting engineers and others to supply these serv-
ices. There is no longer a need to insert the utilities as a middleman
between the recipients of energy audits and those who provide the service.
That is what the RCS and CACS programs do and results not only in another
level of bureaucracy but an unneeded penetration of government regulation
into the business world.
SCHOOLS AND HOSPITALS PROGRAM
As an association whose members have done many energy audits of schools
and hospitals, we support the reauthorization of the program and think it
worthwhile, but at the reduced levels of the Reagan administration.
ACEC is aware of the critical GAO report on the program and has some
ideas of its own on how it can be improved. GAO contends that money for
the program is not being used effectively because a disproportionate
amount is going into Phase II design, purchase, and installation of energy
conservation measures, when it might be better used in Phase I energy
audits.
We recommended a larger portion of the Phase II money go for technical
assistance. By using professional engineers to specify the cheapest yet
most efficient items when a school or hospital needs an energy overhaul, a
more cost-efficient building will result. It is a lot more efficient to
spend $20 to specify a fan than to spend $20,000 to buy one that may be
larger or smaller than necessary.
An energy audit, the way some people approach it, seems a simple
process very often shown performed by complete novices with little training.
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A school or hospital is not a private residence. It needs a lot more
detailed study by someone properly trained and competent. Care taken when
choosing who will perform technical analyses can save thousands of dollars
when ordering and operating equipment. It is at this critical stage in
the energy retrofit process that the most damage or good can be done. The
more money spent at this juncture will increase exponentially the benefits
when the process is completed.
SUMMARY
In sum, although we question the current level of government activity
in the energy conservation area and generally support the Reagan Admini-
stration's funding levels, we also support a federal presence as mentioned
earlier in the statement. Federal monitoring of energy activity and a
program of supplying information and results of research activity would
play a vital roled in achieving this country's energy goals.
FRED ARMSTRONG
Assistant Director,
Government Services-Construction
Portland Cement Association
Suite 700
1730 Rhode Island Ave., N.W.
Washington, D.C. 20036
We wish to take this opportunity to ccrmaent on an assessment of the
adequacy of attention to energy efficiency and conservation now being
undertaken by your department, in compliance with Public Law 93-577.
While there are many approaches to conservation methods, we believe
Section 11, Public Law 93-577, "Federal Non-Nuclear Energy Research and
Development Act of 1974," provides a much broader mandate for oversight of
federal conservation activities beyond those proposals outlined in your
June, 1981 Issue Paper For Public Hearings. Since Congress does not define
"adequacy of attention," the section is broad enough to include a review
of federal agency actions taken, or to be taken, to encourage, or mandate
energy conservation in programs funded by federal grants or financial
assistance.
There are several laws which refer, or mandated energy conservation
by recipents of federal aid, to affect a reduction of the importation of
petroleum. Section 403, Public Law 95620, "Powerplant and Industrial
Fuel Act of 1978," serves this purpose very well. Executive Order 12185,
issued to implement the Act, expands and compliments this policy. Federal
agencies which administer programs of financial assistance are directed to
take actions that maximize the efficient use of energy and conserve natural
gas and petroleum. Further, such agencies are required to issue regulations
imposing conservation requirements as a condition of continuing to receive
the assistance. Which such regulations, or revised regulations, may have
focused attention on the need for conservation, the EPA assessment should
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include an inquiry into subsequent agency actions to determine the success
of the program.
We understand EPA's desire to confine its assessment activities to
the spirit of the President's energy policy, to rely on free market forces
and a far reaching program of regulatory relief to induce conservation.
This approach agrees with the Administration's policy that, "reducing oil
imports at any cost is not a proper criteria for the nation's energy secur-
ity and economic health". We agree that the importance of oil, tempered
with regard for its cost and use, should continue if we are to remain a
viable trading partner with the rest of the world. However, conservation
of the product, and its derivative products, through the use of alternative
materials that are of lesser cost, produce equal or greater life cycle
uses, domestically produced, and are proven to be energy efficient, should
be given priority consideration. We believe this approach is one of many
activities that will serve to bring more positive attention to the need
for energy efficiency and conservation.
Until such time as Congressional Acts, that mandate energy conserva-
tion to reduced the importance of petroleum are repealed, and the National
Energy Policy implemented, the EPA effort under Section 11, Pulic Law
93-577 should be expanded to include an inquiry into those federal agency
actions to carry out the purpose of existing statutes.
JOSEPH A. BEIANGER, Director
Energy Research and Policy
State of Connecticut
Office of Policy and Management
80 Washington Street
Hartford, Connecticut 06115
The President's overall policy of reducing government's involvement
in the economic sphere of this country has led to three major shifts in
the direction of federal energy policy: petroleum prices have been decon-
trolled, the Energy Emergency Allocations Act was repealed, and drastic
funding cutbacks in energy conservation programs have been recommended.
These federal actions have already begun to have significant direct impacts
on all energy consumers in the State of Connecticut. In addition, they
have narrowed the range of activities in which the state government can
be active as it seeks to encourage both diversification of the fuels used
in the state and reduction in the over reliance on any single form of
energy, while at the same time protecting the quality of our environment.
Connecticut relies upon petroleum products to provide 70 percent of
all of its energy needs. This is a considerably higher proportion than
that for the nation as a whole. Increases in the prices of these fuels,
which have occurred frequently, thus have had and will continue to have
much broader and deeper impacts throughout every sector of the economy of
the state than there will be in other regions of the nation. Because
fifty four percent of the generating capacity of the electric utilities
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within the state are fired with petroleum products, price escalations have
also significantly affected the price of electricity to all users (see
Table 1).
In assessing whether the private sector will respond to market deter-
mined prices in ways which will lead to the most efficient use of society's
scarce resources, several long term impacts on the State of Connecticut
become apparent:
1. Increasingly higher fuel prices will lead to conservation activi-
ties on the part of the residential, commercial, industrial, and
transportation sectors. The experience since the Arab oil embargo
of 1973 has indicated that rising energy prices are the strongest
forces in changing energy consumption patterns. Several western
European nations, where the cost of energy is higher than it is
here, have compiled better conservation records than has the
United States. Results of surveys conducted by the Connecticut
Energy Division also reveal that high cost is the largest motivat-
ing force for energy conservation among state residents.
2. Certain segments of our society and sectors of the economy are
unable to respond directly to market price signals in appropriate
fashion. For example, despite their desire to do so, low income
groups and persons on fixed incomes cannot afford to purchase
insulating materials; tenants do not have the incentive to insulate
buildings they do not own; and transit districts frequently do
not have additional buses to add to their systms when the demand
for public transportation increases.
3. As shifts are made away from the use of petroleum products,
there are various incentives to act in ways which could have
significant detrimental environmental impacts. In the residential
sector, rapidly increasing home heating oil prices could lead to
the increased use of coal stoves. While the sulfur content of
coal for home use is currently limited to one percent in Connec-
ticut, it would not be readily possible to prevent purchases or
sales of higher sulfur coal.
The industrial sector uses petroleum products for a variety
of its processes. Connecticut's air pollution standards are
somewhat stricter than those of the other New England states,
primarily because a large portion of the air pollutants found in
Connecticut come from out of the state, most notably from the
Midwest and Mid-Atlantic regions. Increased petroleum prices in
the industrial sector could lead to significant pressures on
state government to relax the existing air quality standards, and
this could have serious long term impacts on the health of all of
the citizens of the state.
The electric utilities, in their own efforts to keep costs
down while meeting the electrical demand, could seek permission
from the appropriate authorities both to convert some of their
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Table 1
Oil Use in Connecticut and the United States
by Sector: 1978
Residential
Commercial
Industrial
Transportation
Connecticut
72.6
80.
66.
100.0
U. S.
39.8
55.9
37.2
97.4
SOURCE: State Energy Data Report, U. S. Dept. of Energy, April 1980
Table 2
Fuel Oil Prices in Connecticut and the United States
1973, 1979, 1980
($/MMBTU)
1973
1979
1980
SOURCE:
Connecticut
1.62
6.48
8.02
U. S.
1.63
5.24
7.04
Basic Petroleum Data Book, American Petroleum Institute, January 1981
and Connecticut Energy Division Price Survey
Table 3
Average Cost Per Kilowatthour in Connecticut,
by Sector: 1970 - 1980
(C/Kwh)
1970
1974
1978
1980
SOURCE:
Residential
2.3
4.1
4.7
6.4
Commercial
2.2
3.8
4.4
6.4
Industrial
1.4
2.9
3.5
5.5
Connecticut Energy Outlook: 1980/81: Annual Report of the
Connecticut Energy Advisory Board, and Uniform Statistical
Report - Year Ended December 31, 1980 for Northeast
Utilities and the United Illuminating Company.
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generating units to burning coal, as has already happened in
Connecticut, and to purchase higher sulfur content oil, as has
occurred in neighboring states. These too would add to air qual-
ity problems.
There is a vast array of evidence which indicates that conservation
is the most cost-effective means to respond to rising fuel prices. Cer-
tainly since the 1973 oil embargo conservation activities have taken place
in all of the sectors of the state's economy. As fuel prices continue to
rise, the potential for highly cost-effective conservation measures continu-
es to exist. In addition to reducing direct energy expenditures, conserva-
tion has a variety of other beneficial effects on both the economy and the
enviornment of the state. Reduced demand for petroleum products in the
existing market determined price situation could lead to an overall reduc-
tion in fuel prices; lower fuel expenditures resulting from conservation
activities would reduce the pressures to relax or trangress environmental
quality standards; large levels of conservation practices will both post-
pone the need for additional electric generating units and provide a longer
period during which diversification of energy forms and greater use of
renewable resource technologies can take place; and because conservation
is more cost-effective than other means of responding to rising energy
prices, implementation of conservation measures lead to a more efficient
allocation of society's scarce resources than would otherwise occur.
The effectiveness and scope of private conservation activity can be
greatly enhanced through public programs aimed at developing both infor-
mation sharing networks between energy users and conseration experts and
public information dissemination programs, and the creation of incentives of
various kinds for consumers to implement conservation measures. Those
segments of society which are unable to respond to market price signals,
and thus will continue to suffer the most from energy price rises, also
can benefit from publicly funded programs.
Approximately 65 percent of the State of Connecticut's energy conser-
vation efforts have been federally funded. The proposed federal cutbacks
will thus have a significant impact on the state's ability to promote
conservation, which in turn will lead to a greater possiblity that the
long term environmental and socio-economic impacts discussed above will
result.
It is the federal government's stated policy to promote the efficient
use of society's resources through reliance upon market determined price
signals rather than through direct government involvement. This can only
occur when the public is informed about what the available alternatives are,
about what the overall cost-effectiveness of each of its options is, and when
groups bypassd by the market mechanisms are provided with support. The Off-
ice of Policy and Management, in its recent report to the State Legislature
on energy policy, has identified these activities as it primary strategies in
dealing with the future of energy use and supply in the state over the next
twenty years. (This report was reviewed but not included in the Transcript
due to its length).
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Continuation of the federal conservation programs identified in this
review process would provide Connecticut and other states with the means
to promote the President's basic energy goals. I therefore urge that
these federal programs be maintained at their full funding levels.
ELEANOR BELL, Energy Representative
Unitarian Universalist Service Committee
of Kansas (UUSC/K)
1206 MacVicar
Tbpeka, Kansas 66604
lhank you for the opportunity to participate in the evaluation of
energy conservation measures. I have enclosed an energy policy statement
for our organization that defines the context for our concerns.
BACKGROUND
Although the present evaluation focuses on nonnuclear energy technolo-
gies, government policies have created an artificial interrelationship
between nuclear and nonnuclear that distorts the perspective on each, and
the two cannot be wholly separated.
Independent scientific evaluation reveals that various solutions to
energy problems compare as follows:
o Conservation: In view of sharply increasing energy costs (in
terms of real incomei. e. , gross national productenergy costs
have doubled in ten years), conservation is the most efficient
short-to-inedium range response to the energy crisis. Current
rates of implementation of conservation measures will effect a
reduction of power needs by the year 2000 to three-fourths that
previously projected. It is estimated that one quad per year can
be saved; the nation currently uses 76 quads per year.
o Alternate technologies; These technologiesutilizing renewable
energy sourcesarethe necessary medium-to-long range approach,
with coal the transition fuel of choice. 1b rely on any limited
fuel source is to consign ourselves to chronic crisis.
Appropriate implementation of these measures has been retarded by
inequitable federal funding. The least acceptable approach to the energy
crisisi.e. , nuclear powerhas been heavily subsidized to the detriment
of ultimate solutions. Government priorities for nuclear power generation
have had the effect of discouraging conservation by projecting an erron-
eous implication that nuclear generation will create a panacea of ample
low-cost power. In addition, oil companies have been buying up alternate
technology enterprisesnot to develop simple, low-cost efficient systems,
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but to control development (1) by retarding it to assure high prices for
oil and (2) by developing expensive and complex systems in order to continue
their control of energy marketing.
THE ISSUES
We of UUSC/K are concerned that this present hearing may be merely a
technical compliance with the Section 11 mandate rather than a sincere
effort toward effective implementation of conservation measures. This
concern derives from the following rationale:
o With virtually no exception, business and industry have never
voluntarily accepted responsibility for the public welfare unless
it coincided with corporate financial interests.
o Current government policies promote a favorable climate for busi-
ness and industrial growth while destroying many incentives for
aggressive pursuit of conservation.
o Federal funds to be made available to the states for all programs
formerly administered nationally represent larger cuts than the
amount of administrative savings to be realized. Since apportion-
ment at the state level will be made primarily by business and
industrial leaders (in or through state governments), programs
with a negative financial impact on the corporate structure will
be largely eliminated from funding.
o The components of the resource construct cannot be unitized in
terms of state boundaries. Two of the most criticalair and
waterare particularly fluid and cannot be wholly regulated on a
state-by-state basis. Similarly, business and industry are fre-
quently multi-state operations and are in a position to play dif-
fering state laws against each other to their own economic advan-
tage and often to the detriment of effective conservation.
o Energy conservation is a universal concern, and ideally we should
be moving toward world-wide guidelines; to retreat from federal
control policies is a retreat from reality.
In the context of these serious reservations, then, we respond to
your general questions as follows:
Question: How are private firms, state governments and local agencies
preparing to assume their new responsibilities?
Answer: In the absence of uniform guidelines, each of these entities
will establish individual priorities within narrow parameters of parochial
concern. The result will be a fragmented, inefficient response that will
weaken the long-range impact.
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Question: Which activities will get priority from public and private
organizations and what will be the consequences if some activities are
discontinued?
Answer: Priorities will be determined on the basis of short-term
economic consideration. Long range programsmany of which might ultimate-
ly be more effectivelywill likely be terminated. Discontinuation of
energy assistance programs for low income population could result in criti-
cal hardship.
Question: Have any new initiatives, opportunities or efficiencies
been created as a result of the shift in Federal energy conservation pro-
grams?
Answer: The shift may accelerate energy costs more rapidly thereby
creating a stronger economic motivation for conservation.
Question: How can the Federal government assist in this period of
transition?
Answer: Possibly the most effective use of the reduced funding would
be an educational program targeted primarily at business and industry as
well as power providers. There is impressive documentation for the finan-
cial feasibility of conservation measures, and this should be placed in
the hands of those who would be motivated by such knowledge. In addition,
small business needs instruction in techniques for marketing conservation
systems and feasible financing plans for small consumers.
Question: How should the Federal government evaluate and monitor the
effects of its new energy policies and program changes?
Answer: This appears to be a moot question as effective evaluation
and monitoring procedures require funding.
CONCLUSIONS
Given current policies, it appears that the most realistic prospect
for energy conservation derives from the motivation of sharply rising
energy costs. UUSC/K is not in a position to assess the detailed ramifica-
tions of the individual programs listed on pages 10 and 11 of the EPA
Issue Paper. However, we feel our role is to impact as significantly as
possible on broad policy determination. When appropriate parameters are
defined, individual programs can be structured to meet specific needs.
ENERGY POLICY STATEMENT COMPILED FOR THE UNITARIAN UNIVERSALIST SERVICE
COMMITTEE OF KANSAS
Members of UUSC/K are committed to energy policies defined in terms
of human safety, conservation, ecological preservation, and financial
feasibility. Within these parameters, we subscribe to the following:
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o Conservation of resources must be encouraged by such measures as
economic incentives and mandatory standards of utilization such as
construction codes.
o Safety for the human populationboth short term and long termmust
be accorded primary consideration in the determination of future
energy production operations. This includes the area of fuels (ac-
quisition, processing, utilizing); production (construction of fa-
cilities, operations, shut-down or de-commissioning; and disposal
of waste products.
o Energy technology must focus on simplicity; the least complex pro-
cesses that can be efficiently employed must be initiated.
o All energy-related processes must be compatible with ecological
preservation.
o All energy-related processes must be economically feasible. Energy
is useless to both producer and consumer if the purchase price is
prohibitive.
o Energy consumers at all levels must be offered incentives to
utilize available resources to provide themselves with all or
part of their own energy by whatever feasible process is locally
available to them.
o "Gimmick" processes advocated as energy solutions must be avoided.
These processes usually benefit special interest groups who ration-
alize them in terms of energy. They go largely unchallenged because
others are unaware that they actually exacerbate energy problems.
o If utility companies are to continue to operate as protected
monopolies, regulatory agencies must be structured for the protec-
tion of consumers at all levels. They must not be allowed vulnera-
bility to pressure from special interest groups.
It is our conviction that safe and practical energy policies can and
must be formulated within these parameters to assure an adequate suppy of
energy, equitable distribution, and appropriate rate structures.
GLENN L. BELLAMY
Project Energy Manager
Heery Energy Consultants, Inc.
880 West Peachtree Street, N.W.
Atlanta, Georgia 30367
President Reagan's energy budget proposals are of serious concern to
all Americans.
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Solar energy and conservation programs are being cut and in many
cases eliminated. Cuts are deeper than anywhere else in the budget, yet
other less promising energy sources such as nuclear energy are scheduled
for increase spending. Also, are the President's advisors aware that the
conservation program has already done more, faster and at less expense
than anything else in America to reduce oil imports? We have just scratched
the surface in adopting already available cost effective energy conserva-
tion measures. Solar and other renewable sources second only to conserva-
tion can also economically reduce oil imports and to provide more domestic
energy.
The shifts in the energy budget have been described by the Reagan
administration spokesman as strictly exercises to trim the Federal budget.
I do not believe this to be true. If the budgets were being trimmed for
purely economic reasons, then the nuclear budget would not be increased by
36% while the solar budget was cut by 67% and the conservation budget cut
by more than 75%. Isn't the so-called free market good enough for the
nuclear and oil industries?
Instead of taking a paring knife to some of the fat in solar programs,
Secretary Edwards has taken a meat axe to the muscles of the solar programs.
Secretary Edwards has said repeatedly that he is acting on behalf of a
mandate received in the last election. He claims that a vote for Reagan
was a vote for nuclear power, yet at exactly the time of the election a
national Gallup Poll found that of seven possible energy sources solar was
by far the most preferred with adult Americans and nuclear was by far the
least preferred. The most recent Gallup Poll reinforces this same conclu-
sion.
I do not ask for an increase in Federal spending, only that there be
a fair and just system in spending cuts. In other words, not to make the
deepest cuts in the most promising areas such as solar and energy conserva-
tion while increasing expenditures in much less promising areas such as
nuclear energy. The D.O.E.'s energy policy under President Reagan states
specifically "the government's role is not to select and promote favored
sources of energy. Doing so risks wasting the nation's resources". If
this is Reagan's policy, then why is he favoring nuclear energy?
Inasfar as environmental protection is concerned, I do not think
there is any doubt that the environment of the United States will be much
less affected by solar and other renewable energy sources than it will be
by conventional energy source or nuclear power.
I believe the Federal tax incentives of energy conservation and
solar energy in the commercial industrial sector are inadequate and should
be increased. I also believe that depreciation periods for solar energy
equipment should be foreshortened.
If we go back to the policies of the early and mid 1970's, as seems
to be happening, then we are asking for a real energy "crisis" to follow
our present energy "problem".
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JOHN J. BENSON
Secretary and Executive Vice President
Construction Industry Manufacturers Association
1700 Marine Plaza
Milwaukee, Wisconsin 53202
The Construction Industry Manufacturers Association (CIMA) is a U.S.
trade association which has for over 60 years represented manufacturers
of construction equipment and major components. The approximately 200
domestic firms which are CIMA members account for about 95 percent of the
U.S. dollar volume of this industry, which ships over $17 billion in pro-
ducts annually. CIMA speaks in behalf of the industry in various matters
and is action-oriented to industry problems through co-operative industry
effort.
CIMA members are deeply involved in energy conservation efforts . . .
as fuel costs soar,, energy efficiency becomes a competitive necessity. At
larger companies, entire staffs have been formed with this as their single
objective. Energy experts on CIMA member company staffs have usually
regarded reports to the federal government as requirements that "go with
the territory," and have compiled cooperatively despite the allocation
of time and treasury required. Indeed, CIMA was quick to participate in
the Department of Energy's (DOE's) "Industrial Energy Conservation/Report-
ing Program," recognizing that industrial energy efficiency improvement
reports can be useful to both government and industry alike. In this
regard, you should note that CIMA's industrial energy efficiency percentage
improvement noted on CIMA's Consolidated 1980 Energy Report to DOE shows a
consolidated 1980 association energy efficiency improvement percentage of
24.5% when compared with 1972 consolidated association calendar year data
(9.5% in excess of DOE's 1980 industry target of 15%).
We feel that any new legislative and/or administrative proposals to
extend industrial energy efficiency improvement reporting beyond calendar
year 1980 should extend such program in substantially the same format as
the present program, including the present rules which provide the identi-
fied corporate reporters can report in the "voluntary" program via trade
association consolidated energy efficiency improvement reports to DOE as
an option to "mandated" direct corporate energy efficiency improvement
reports to DOE.
We feel that DOE "listened" to industry when the current reporting
program (i.e., "DOE's Industrial Energy Conservation/ Reporting Program")
was designed including DOE's current program reporting form and program
reporting rules-this includes limiting reporting to two digits for all
identified SIC code classifications. We do not see any need for changes
and overhaul of such program forms and or program rules for any industrial
energy efficiency improvement reporting mandated by Congress and/or the
U.S. President beyond calendar year 1980.
We strongly support the concept of the present "voluntary" reporting
program which assures industrial participants of confidentiality of indivi-
dual corporate data. We feel such confidentiality is one of the hallmarks
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of this program and is absolutely necessary to protect individual business
corporations from being forced to disclose confidential company data to
their competitors.
We are strongly convinced that any future DOE industrial energy effi-
ciency improvement reporting program should authorize industrial reporters
(i.e., both associations and corporations) to use calendar year 1972 as a
base period from Which to measure industrial energy efficiency improvement
data. Mandating a new base period later than 1972 would mislead both
Congress and the American people since many industrial energy conservation
initiatives would have implemented prior to the new base measurement
period.
We believe that if new industrial energy efficiency improvement
targets are necessary for the period from the present to December 31,
1985, such targets should be established on a cooperative basis between
DOE and industry. (In this regard, please see the enclosed CIMA letter to
DOE dated January 22, 1980 suggesting an energy efficiency improvement
target for CIMA of 9.9% for a reporting period from 1980-1985, Letter
Attached).
Finally, we believe that in any future industrial reporting program,
energy reports for captive foundry operations (SIC Code 33) must be author-
ized for reporting in the SIC Code classification of the end product
produced by the reporting association or corporation (in the case of CIMA,
this would be SIC Code 35). We feel this qualification is absolutely
necessary to assure that for industrial reporters.
In summary, should DOE's "Industrial Energy Conservation/ Reporting
Program" be retained beyond calendar year 1980, CIMA strongly urges reten-
tion in accordance with the present format, under the present rules, and
on the present DOE forms. In addition, should you need further assistance,
guidance or constructive Garments in regard to this most important issue,
please contact Steve Pitzner of this office nad a mutally beneficial meet-
ing will be arranged and/or additional constructive written comments will
be submitted.
ATTACHMENT
Mr. Ernest Loeb
U.S. Department of Energy
Conservation & Solar Applications
Industrial Programs CS-40
Industrial Reporting Branch
Porrestal Building
Washington, D.C. 20585
Dear Ernie:
This letter is written on behalf of CIMA member companies presently par-
ticipating in CIMA's "Industrial Energy Conservation/Reporting Program"
under the auspices and guidance of the U.S. Department of Energy. Any
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reference in this letter to "CMA" or the "Association" should be con-
strued to mean these CMA member companies and only these CMA member
companies.
The purpose of this letter is to advise you that CMA has established a
voluntary energy efficiency improvement target for this Association for
a future reporting period; i.e. , calendar year 1980 through calendar year
1985. Such target is expressed as a percentage improvement in the ratio
(Btu's consumed per ton produced) for calendar year 1985, with calendar
year 1980 serving as the base year.
After careful consideration and review within the Association, we have con-
cluded that the most appropriate energy efficiency improvement target for
CMA for such reporting period would be 9. 9%. We believe this target is
most ambitious, but we think it is attainable, given the strong commitment
of CMA member companies to reduce energy usage through all feasible energy
conservation initiatives.
It should be noted that this energy efficiency improvement (1980-1985) would
be in addition to previous " CMA energy efficiency improvements from 1972-
1979 (19.6% for the first six months of 1979 against the first six months of
1972). The new target represents an approximate 30% improvement in 1985 when
compared with 1972.
CMA has voluntarily established the indicated target for such future repor-
ting period. We trust that DOE will consider CMA's past performance and
realize such target is most appropriate for this Association. If requested,
we would be pleased to meet with DOE representatives to discuss this matter
in greater detail.
Very Truly yours,
CMA
Steven R. Pritzner
Administrator
ROY BISHOP
Director, Office of Energy Conservation
One City Hall Square
Room 813
Boston, Massachusetts 02201
The Boston Office of Energy Conservation was established in September
1980 with a mandate from Mayor Kevin H. White to reduce energy consumption
by all City departments, as well as to promote energy conservation across
all energy use sectors in the community.
The Office of Energy Conservation believes that we must come to grips
with the problems of: a lack of information on energy conservation, a lack
of incentives for implementing energy conservation, a lack of skills for
performing weatherization tasks, and a lack of financing for energy conser-
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vation improvements. Therefore, we have defined our objectives as follows:
o to reduce energy consumption in all sectors, especially the munici-
pal, residential, and small business sectors
o to inform and educate these sectors about the importance of energy
conservation and renewable energy resources
o to inform users about existing financial mechanisms and incentives
for conservation and to encourage the development of others
o to develop a comprehensive community energy planning and policy
process and role.
Currently, our programs in these areas primarily focus on:
o municipal energy projects for the reduction of energy consumption
in city buildings, vehicle fleets, and street lighting; and resource
recovery, training and education programs
o neighborhood energy projects which focus on encouraging conservation
in the rental market; the formation of neighborhood energy commit-
tees; and assistance to small businesses
o private sector initiatives which include utility rate case inter-
vention; development of conservation financing programs with local
banks; and the establishment of an emergency oil delivery program.
In addition, we maintain an outreach and public information program,
as well as a research and planning program which provides information to
the staff and other city departments, develops data on energy use, analyzes
energy issues in the preparation of energy legislation, and identifies
resources for program development.
Energy conservation is a high priority for Boston. In 1980, the City
itself spent $32 million on municipal energy consumption while the
residential sector in Boston spent approximately $350 million for heating,
lighting, cooling and transportation. In 1980, our community exported a
total of approximately $1 billion for energy. This represents a tremen-
dous drain on our local economy. Conservation, for Boston means more dol-
lars and jobs in the local economy - while not conserving means higher
costs for fewer municipal services. The best case for pursuing energy
conservation, for our city and for the nation, is the cost of not follow-
ing this option.
At a time when energy conservation is of crucial importance to the
very survival of cities and regions, it is unfortunate that local and
state governments are unable to focus efforts and resources in this area.
In Massachusetts, municipalities are being forced to concentrate resources
on providing essential services due to the passage of a property tax reform
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measure which has sharply reduced the revenues the city can rely upon for
meeting operating and other costs. Therefore, although energy is of seri-
ous interest to Boston, which is concerned with encouraging and implement-
ing energy conservation, we will not be able to devote the level of staff,
resources, and attention to this issue as we would like.
It is questionable as to how the federal administration can assure
that an adequate amount of attention to conservation be paid while cutting
already inadequate conservation and renewable energy programs. The argu-
ment is that the market forces of higher energy prices will force many
consumers to pay attention to conservation however, many may not be
able to pay any attention to conservation options by virtue of financial,
information, and skills constraints.
Low and moderate income families already consume the least amount of
energy. In Roxbury, a predominately low-income Boston neighborhood, the
median annual income is $6300 with annual energy expenditures of between
40% and 50%. These people, as well as many others, simply do not have the
cash or skills to invest in conservation they are already struggling to
keep minimally warm. In addition, it is unlikely that such institutional
problems as that of weatherizing the rental market will be solved by higher
energy prices alone. Since 73% of Boston's housing is tenant occupied,
this group is of major concern to the City. What is needed for the resi-
dential and other energy use sectors is information, assistance, training,
and financial incentives.
Our office is prepared to attempt to assume a number of the responsi-
bilities that the federal government is virtually abandoning. We plan to
provide energy conservation information and assistance to individuals and
groups and to work with the private sector to initiate conservation finan-
cing^ programs . However, our priorities will remain in the area of munici-
pal energy conservation the economics of budget cuts and inflation
force us to focus on energy use by city departments.
It is likely that many of the conservation programs being sharply
reduced or discontinued, such as the Conservation and Solar Bank, the
Residential Conservation Service, the Weatherization Program, the Schools
and Hospitals Program, and the Energy Extension Service will leave a
vacuum that a local government, or many local governments cannot possi-
bly hope to fill. For example, the Schools and Hospials Program has
enabled Boston to invest in energy conservation measures in a number of
city buildings, as well as to train staff in energy auditing. In 1980,
Boston received over $100,000 under this program for energy conservation
measures in city facilities. This program has saved Boston a substantial
amount of money. Without these funds for energy improvements we would not
have been able to do this work because we could not have targeted operating
monies into such measures.
In the area of consumer energy conservation program, we believe that
an auditing program such as the Residential Conservation Service is essen-
tial and should not be eliminated. In Massachusetts, the Residential
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Conservation Service is law. However, the budget cutting climate in our
state may also endanger this program. The Residential Conservation Service
provides a nationwide mandate for energy conservation, while relying upon
the private sector as the primary participant. Elimination of this program
and the planned Commercial and Apartment Conservation Service will leave a
gap that no city or state initiative can fill. The federal committment to
conservation that this program has illustrated has been essential to its
widespread acceptance and success.
It is difficult to assess the federal government's proper role in
this time of transition while holding to the belief that the national
government is substantially altering its energy role by greatly reducing
state and local conservation programs. The federal government's role is
to set an example and be a leader by providing consumers, business, indus-
try, and local governments with needed information, assistance, support,
and training. It is impossible for us to succeed at building an energy
"capacity" in Boston without the active support of the federal government.
We cannot fill the role of helping the consumer, the poor, the elderly,
and the business person when we are struggling to initiate and maintain
our own energy efficiency programs.
It is neither a cost-effective nor a compassionate energy policy
which relies solely on marketplace prices and forces to encourage conserva-
tion without providing the incentives that traditional energy sources have
received for many years. The transition that we will be experiencing as a
result of the federal shift in energy policy will be a painful one.
ROBERT F. BLANKE
Orange and Rockland Utilities, Inc.
One Blue Hill Plaza
Pearl River, New York 10965
Orange and Rockland Utilities, Inc. has been promoting energy conser-
vation since 1973. Other utilities have sponsored interest-free loans for
energy conservation prior to any federal/state mandates. Conservation
programs allow the utility industry to maximize existing plant capacity
and defer the cost of building new plants. With continued high interest
rates, utilities, on their own and without government intervention, will
continue to promote energy conservation as a cost effective means of main-
taining the lowest possible cost of the commodity they sell.
New York and New Jersey, two states in which we sell our energy,
presently have laws requiring the promotion of energy conservation. It
certainly would not be politically expedient for anyone to suggest abolish-
ing these laws. Present indications are for expansion of existing programs.
New York presently has laws pending which would require totally free resi-
dential audits and audits of multi-family residences. The utilities are
financing a study of existing residential homes in the state to deter-
mine the effect of our conservation program which was started in August
1978. The data from this study can be compared with a pre-1978 study.
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The residential market sector will receive most of our attention.
Both the commercial and industrial market sector should have enough incen-
tive to effect their own conservation program - wore profits. If increased
profits don't move this market toward more conservation, legislating laws
certainly won't move them in install the measures either. Let us remember
that audits don't save energy.
The federal government was the catalyst to start this program and
should not be involved in its implementation. Of course, the federal
government could provide technical assistance in devising the criteria to
be used in calcuating energy savings. This data would only be useful if
it were available on a regional basis, indicated savings that were realist-
ic, were compatible with computer programming, and had input from the
people who were going to use the data.
Since the real test of this program's effectiveness is how many people
installed conservation measures, it would seem reasonable to develop a
short questionnaire which could be completed by each state's lead agency
indicating the response on a statewide basis. The simpler the report, the
higher the acceptance and the greater the probability all parties will
respond. Each state should be able to indicate the measures covered, and
by comparing one reporting period to another, it would be possible to
determine how programs are being expanded.
BARBARA BROWN
Solar Times, U.K. Correspondent
P.O. Box 56
APO New York, New York 09127
Once again I want to thank the Environmental Protection Agency for
providing an avenue and encouragement for a private citizen to participate
in an energy policy review. I am adamant about the importance of private
citizen participation, taking into account the nature of the problem and
the democratic principles upon which our nation is founded. The views I
present are my own and not necessarily those of Solar Times.
The scope of the energy problem and the benefits of conservation are
still not nationally, or internationally as far as that's concerned, under-
stood. Statistics may now be widely known, but neither public policies or
expenditures, nor private lifestyles mirror the understanding of the finite
resource of fossil fuel or the political and social implications of energy
dependence, or the environmental and economic benefits of people employed
to supply safe, sufficient energy and efficient products and processes.
There are increasingly more individual examples of this understanding, but
energy conservation initiatives need to be on a national/international
scale and the rule not the exception.
Actually America's realization of the problem and program initiatives
to combat it have been notable, but this is all the more reason not to
abandon our commitment - the problem still with us. I am in agreement
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with the Administration's view that is it time for state and local govern-
ments as well as industry to take on more of the commitment, but government
program priorities must continue to support the importance of conserva-
tion. I disagree with the premise that public spending for conservation
buys us little additional security and diverts capital, workers, and ini-
tiatives form more productive uses elsewhere in the economy. I'm afraid
such thoughts disregard the benefits of conservation (efficiency) that
numerous valid studies have shown. It comes down to basic disregard for
credible studies and statistics. The thought that the private sector will
take upon itself the initiatives to operate efficiently without federal
encouragement to do so may eventually hold true, but I don't believe this
is the case at the present, nor will it happen as prudently as need be
without federal policy priority. The fact is lifestyle changes take time
regardless of the amount of directions of incentives. Transition from a
quantity to quality lifestyle has not happened yet and adequate coopera-
tion between federal, state, local authorities and the private sector must
be achieved first. The adequacy of attention to conservation must come
from everyone; no one sector can abandon their commitment.
America's consumption rate, compared to the rest of the world, and
America's influence upon world economics justify the precise energy plan-
ning we have seen with the creation of the Department of Energy and a
myriad of programs. The direction may change from federal to state and
local funding and industry and private initiatives, but the need is just
as prominent.
Energy is a world problem. Concern for German independence upon a
proposed Soviet gas pipeline to Germany, employment possibilities of con-
servation projects in countries like England where unemployment is being
blamed for current riots, hardships of the renewable energy and conserva-
tion innovators which postpone or stifle these needed developments, all
bring home the need for national as well as international energy policy
coordination.
The adequacy of attention to conservation should include assessing
the social and environmental benefits of conservation, not ignoring the
world energy and economic situation. Unemployment is a world problem and
so is energy. People worldwide are recognizing the opportunity to help
solve thse two very big problems. Conservation and renewable energy
initiatives do create jobs. (Giving everyone the benefit of the doubt of
being aware of the numerous supportive American studies, let me list to
British studies that concur with the job creation potential of conservation
and renewables:) Energy Options and Employment, by the Center for Alterna-
tive Industrial and Technological Systems, North East London Polytechnic,
1979; and Earthworks; Environmental Approaches to Employment Creation, by
Edward B. Barbier, Friends of the Earth Ltd., 1981.
Many federal officials seem to think that employment has no business
being a criterion for energy policy formulation, but I believe they are
ignoring the fact that no segment of society functions in isolation. I
agree with the Environmentalists for Full Employment belief that any plan
for economic revitalization include a major investment in energy conserva-
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tion and renewable; that such an investment would help meet much of our
energy needs, stimulate the economy and enhance productivity, and create
large numbers of jobs.
I've been an Air Force dependent wife for 14 years, a resident of
military family housing for over 8 years, and involved with conservation
and renewable pro-initiatives since 1977, including the Military Family
Housing Energy Conservation Project since 1979. I can say, with what I
believe is valid insight, that adequate attention is not being given to
energy conservation by the Department of Defense, specifically military
family housing. Energy conservation facility management practices have
been forthcoming, but few initiatives have been taken to communicate conser-
vation adequately to family housing residents. Military jobs coud be crea-
ted to present conservation as adequately as fire prevention is presented.
With the increased DOD budget, I hope to see priority given to conservation
and renewables. I think an increased awareness of the benefits of conser-
vation for the military community would perpetuate a better understanding
of the security benefits of conservation.
Let me give one final example of a security connection as well as the
importance of international cooperation in developing conservation priori-
ties. Recently a journalist for a major British newspaper warned me that
many of his anti-nuclear associates would not want to work with me on
pro-conservation and renewable projects, not because they didn't agree
with the importance of such initiatives, but because I am an American! His
associates did not want the American military in the U.K. and were even
questioning the benefits of the NATO alliance. The journalist covers
Central America.
Thank you for the opportunity to present my views. If anyone has
questions about any of my testimony, please feel free to contact me.
ART CANTRALL
Acting Administrator
Economic Opportunity Division
State of Washington
Planning and Community Affairs Agency
400 Capitol Center Building
Olympia, Washington 98504
Our agency administers the weatherization and Low Income Energy As-
sistance Program (LIEAP) so our remarks will be confined to those two
areas. Within the last year, weatherization has truly become an effective
and efficient program in the state of Washington. Up until Deceiriber 1980,
the weatherization program was continuing to increase production to a
point that over 600 dwellings per month were being completed. At the same
time technical expertise had increased to a degree where our crews were
able to do an effective job of weatherizing nearly any type of dwelling.
From an analysis of the energy savings achieved, the low income weatheriza-
tion program has become cost-effective in terms of the energy costs for the
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recipient. Fran our view, which is shared by our Governor, weatherization
is certainly a worthwhile program that is worthy of being continued.
LIEAP provides a very vital service to our low income citizens. The
program has gone quite well, specifically when compared to similar programs
in the past. local activities provide the important function of identify-
ing those individuals who quality for LIEAP but are not receiving some
other form of public assistance.
In response to your specific questions the following information is
provided:
1) Funding mechanisms and structural issues:
a. Weatherization funding needs to be specifically identified.
If weatherization is authorized but rolled into emergency
energy assistance, the immediate priorities (emergency assist-
ance) in light of limited funds will take precedence over the
long range weatherization measures. We would like to see a
specific percentage that must be dedicated to weatherization
with the flexibility to use additional funds if the individual
state so chooses.
b. We have been examining this issue in some detail. Washington
currently works through 4 local governments, 18 community
action agencies. For the most part, these agencies remain
the best suited to continue the weatherization program in
their local areas. Some modifications may be necessary such
as a careful evaluation of required administrative costs, but
the expertise, outreach capabilities etc. would be preserved.
c. Unless major policy operation changes result, transferring
the program should not be much of a problem. However, if
weatherization funds are not fence, a new agency's priorities
may reduce the program substantially.
2) Implementation issues:
a. Under Department of Energy property guidelines, the tools and
equipment revert of the grantee (state) as long as they are
used for weatherization purposes. It is our intention to
transfer equipment, tools, and in some cases, people to whom-
ever will continue low income weatherization. The procedures
to accomplish this transfer are in place and have been used
in several instances.
b. Yes. By coordinating LIEAP and weatherization efforts, the
energy cost burden is reduced for a long term.
c. We feel the current levels of funding are optimum. Some addi-
itional flexibility to allow certain additional funds for
repairs would be desirable. A lesser investment would not
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achieve the long term energy savings that the program now
accomplishes.
d. Although CETA has contributed significantly to weatherization,
the program can be maintained on a cost effective basis with-
out CETA support. If CETA support does become available, it
could be used effectively. Several programs have operated in
Washington without CETA. Our experience has been the the job
can still be done without an inordinant increase in labor
costs when you consider the number of homes weatherized during
a specified time has increased compared to homes completed by
CETA personnel during the same time frame.
If you want any other specific information or statistics, please call
me at (206) 753-4979.
CLIFFORD P. CASE, III
President
National Recycling Coalition, Inc.
45 Rockefeller Plaza
Room 2350
New York, New York 10020
My name is Clifford P. Case, III. I am President of the National
Recyclying Coalition, a nationwide grouping of organizations and individu-
als in 45 states, dedicated to the increased recyclying and conservation
of all of our resources. I am submitting this statement on behalf of the
Coalition to assist EPA in its obligation under Section 11 of the Federal
Non-Nuclear Energy Research and Development Act to analyze the adequacy
of attention to energy conservation in the United States, particularly by
the federal government.
The Coalition believes this hearing is particularly timely, since the
significance of energy conservation as an important element of governmental
policy is under increasing attack at precisely the time when spiraling
costs of both imported energy and new energy sources should be forcing all
of us to pay more, rather than less, attention to energy conservation.
Naturally, we at the National Recycling Coalition want to promote
energy conservation through greater recycling of wastes. The potential
for saving energy in this field is truly immense, and as of yet only barely
tapped. Most people are aware that use of scrap rather than virgin materi-
als in manufacturing products saves energy, but they are generally unaware
of the extent to which these energy savings can mount up. For example, if
recycling of steel increased by one-half and recycling of paper tripled,
energy equal to 500,000 barrels of oil a day would be saved. At current
world oil prices, these savings would be worth approximately $6 billion
each year! This amount of energy is also the equivalent of the output of
14 nuclear power plants.
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Naturally, this kind of major commitment to increased recyclying
could not be achieved overnight, and the capital costs would be significant,
but it seems clear to us that these inceased costs would be far outweighed
by the benefits to society which would accrue, both financial and non-
financial, in terms of enhancement of our national security through less
reliance upon imports, reduction of waste and pollution, and creation of
increased job opportunities within the recycling industry, particularly in
our depressed urban areas.
In any such major shift to recycling, a number of parties must parti-
cipate. Industrial participation is, of course, pre-eminent, since it is
the basic industries of the United States which must make the investments
necessary to permit them to use greatly increased quantities of scrap, but
government has a very significant role to play as wellby documenting the
benefits of a national recycling policy; providing incentives and tax
benefits to industry to stimulate the necessary investment in greater
recycling capacity; promoting waste disposal policies at the local level
which will assist in supplying the necessary raw materials for such a recy-
cling increase; and stimulating the market for recycled products by appro-
priate purchasing policies at all levels.
It is with great regret that we must state that the level of perform-
ance of the government in this area has been abysmal. The federal Department
of Energy has shown little or no interest in documenting through reliable
studies the extent of energy conservation possible through recycling, or
in investigating the necessary capital investment costs to achieve such an
increase. In fixing targets for the use of scrap in energy-intensive
industries, DOE completely reneged on its statutory responsibilities,
fixing goals which enshrined the status quo in the face of a variety of
economic and other trends which will of necessity make increased recycling
both economic as well as attractive from a policy standpoint. EPA has
failed in its statutory responsibility to issue guidelines for federal
procurement of recycled products, four years after the statute requiring
issuance of those guidelines, the Resource Conservation and Recovery Act,
was passed. Both DOE and EPA have fostered local waste disposal policies
which emphasize incinerating garbage, thereby making recovery of materials
difficult-in the case of metals and glassor impossiblein the case of
paper. What increases in recycling have come about have been due to local
initiatives carried out with little or no assistance, either technical or
financial, from higher levels of government.
We believe the facts speak for themselves. Total reliance on the
production of new energy and importation of energy from abroad are a per-
fect blueprint for disaster insofar as the United States is concerned.
Energy conservation through recycling represents an almost untapped resource
in this country, when the actuality of industrial recycling is compared
with its potential. We urge EPA to at once establish a program to docu-
ment the extent of the benefits possible through recycling and provide
reasonable technical and financial assistance to those parties who are
working and will continue to work to make increased recycling a reality.
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For further information: Clifford P. Case, III, President, the Na-
tional Recycling Coalition, Inc., 45 Rockefeller Plaza, Room 2350, New
York, New York 10111. Telephone (212) 765-1054.
EDITH CHASE
Energy Chair
League of Vfamen Voters of Ohio
65 South Fourth Street
Columbus, Ohio 43215
The League of Women Voters of Ohio has studied energy since 1974 and
believes that top priority must be given to energy conservation and renewable
resources. The EPA Issue Paper summarized a great deal of valuable infor-
mation. Because the Reagan administration's National Energy Plan III has
just been released and I do not have a copy, I would like to comment brief-
ly on the March 1981 DOE statements on pages 4-5 of this EPA paper.
There is no goal nor statement of purpose given. The League recommends
that not only as a responsible member of the world community but also in
the national interest, the United States must make a significant and pro-
gressive reduction in its energy growth rate. To achieve this goal, the
nation must develop and implement energy strategies thatwhile taking
account of differences in the needs and resources of states and regions
give precedence to the national good. In developing national energy stra-
tegies, the federal government should spread costs and benefits (environ-
mental, social, economic, health) as equitably as possible. In keeping
with this criterion, states and regions should take steps to maximize
conservation and to utilize their indigenous, renewable resources. There
should be assistance for low-income individuals, when changes would bear
unduly on the poor.
We certainly agree that "the government's role is to establish sound
public policies, based on economic principles, national security concerns,
and a due regard for environmental values, so that individuals and firms
in the private sector have the incentives to produce and conserve energy
efficiently, consistent with the national interest."
"The nation's energy problems will be solved primarily by the American
people themselvesby consumers, workers, managers, inventors and investors
in the private sector." Yes, but these actions will be within the frame-
work set up by the government, whatever energy policies are established.
It is also important to recognize that the government is a major consumer
of energy and, as such, must set a good example and take actions that are
being requested of all other consumers. The first step should be an inven-
tory of energy consumption and energy conservation measures being taken by
each department of the federal government and an analysis of procurement
policies. This report should be published and steps taken to conserve
energy on the basis of the findings.
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If_ "The government's role is not to select and promote favored sources
of energy," then we question the insistence on the Clinch River Breeder
Reactor projectanother $250 million requested in this budget, eventually
$3 billion or more. Yet the electricity it generates will be so expensive
that it will have to be sold at far below cost. (Wall Street Journal,
7-1781) In addition, spending for nuclear fission for FY 1981 totals
$2.1 billion, an extra $500 million over the proposed budget for the Nucle-
ar Regulatory Commission for additional inspection as a result of Three
Mile Island. In addition, annual federal government subsidies in support
of routine energy supplies totalled over $6 billion in 1977, according to
Robert H. Williams of Princeton University (see attached table). Sub-
sidies included activities such as low interest appropriations plus tax
exemptions for hydroelectric and transmission facilities, uranium enrich-
ment services, liberalized depreciation for privately-owned utilities, tax
exemption for publicly-owned utilities, and depletion allowances for oil
and gas (Energy Conservation Coalition Bulletin, June/July 1981). If
government subsidies are to be withdrawn for energy conservation programs,
then the other subsidies should also be eliminated. Unless federal subsi-
dies are removed from other sources of energy, this experiment of delegat-
ing all responsibility and funding for energy conservation to state and
local governments is obviously an experiment designed to fall.
Energy conservation includes energy efficiency or energy productivity
and refers to getting from the energy we use, not to a back-to-the-caves
reduction in amenities. It means more efficient and durable automobiles,
buildings and appliances; greater emphasis by industry on the cogeneration
of electricity and process steam, and on the development of new, more
efficent industrial processes; and a major focus on recycling and resource
recovery. The good news is that, if we take energy productivity seriously
we can have a healthy, expanding economy in the coming decades with energy
growth far below that predicted only a few years ago. The Harvard Business
School's Energy Future (1980) points out that increases in the productive
efficiency of energy possible with today's technology could allow the U.S.
economy to operate on 30 to 40 percent less energy than it now does, and
still enjoy the same or an even higher standard of living. "The cost of
conservation energy is very competitive with other energy sources," said
Harvard's Daniel Yergin. "Conservation may well be the cheapest, safest,
most productive energy alternative readily available in large amounts....
And contrary to the conventional wisdom, conservation can stimulate innova-
tion, employment, and economic growth. Since the United States uses a
third of all the oil used in the world every day, major reduction in U.S.
demand would have a major impact on the international markets."
With the cooperation of all levels of government, business, industry
and an informed public on a vigorous program of energy conservation, every-
one will benefit from the wise use of our energy resources.
GENERAL QUESTIONS
Q. How are private firms, state governments, and local agencies pre-
paring to assume their new responsibilities?
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FIGURE 1
Meanwhile, on the Supply Side
The following estimate of annual federal government subsidies in support of routine energy
supplies in 1977 was prepared by Robert H. Williams of Princeton University. It provides a
useful benchmark for measuring progress, or lack of progress, toward a free energy market. ' .
Federal Activities (million 1977 dollars)
Low interest appropriations plus tax exemptions for hydroelectric and
transmission facilities ' . 290
Uranium enrichment services . 180
Nuclear Regulatory Commission regulatory costs . 146
Privately-Owned Utilities
Liberalized depreciation for Federal tax purposes 2000
Publicly-Owned Utilities
Exemption from federal income taxes
Tennessee Valley Authority (TVA) 130
State power authorities and municipal utilities 80
Rural Electric Administration (REA) ' 294 ..
Tax-exempt bond subsidies ' 260 :
Loans and loan guarantees provided by REA . 260
Oil and Gas Industries . '-',
Percentage depletion allowance on Federal taxes
Oil 550
Gas ' 1150
Expensing of intangible exploration and development costs for Federal tax purposes
Oil -.. ' -. 740 .
Gas 460
TOTAL 6540 !
From the Energy Conservation Bulletin, June/July 1981
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A. Private firms: Private firms have, of necessity, taken many steps
to conserve energy during the last several years. Private reserch results
and expertise must be kept in-house rather than shared with other firms in
order to keep a competitive advantage. While large firms may have the
technical staff, small firms would need technical assistance, flany energy
conservation/energy efficiency measures require capital expenditures and
must compete in corporate budgets with other projects when the prime
interest rate hovers around 20%. Trade associations are a possibility; I
have no information regarding their activities.
Utilities: In some sections of the country, forward-looking utili-
ties have recognized that increasing costs of construction mean that new
power plants are more expensive than energy conservation/energy efficiency
measures as a means of meeting energy needs (e.g., New England, California).
For example, "Duke Power will put even more emphasis on its peak load
management program and less on financing power plant construction. "The
less they need to finance, the better for the company and the stockholders,'
M. Liu said." (Wall Street Journal, 2-25-81).
On the other hand, James McCarroll, manager, Health Effects Program,
Electric Power Research Institute, comments: "Conservation and energy
shortfalls can have tragic results for the very old and very young. Cutting
the thermostat back a relatively few degrees can especially in the elderly,
produce hypothermia." (Science, July 10, 1981, p. 197) EPRI, under the new
federal policies, should look far beyond turning the thermostat down if
the private sector is to assume their new responsibilities.
State governments; States are expected to play a larger role in
energy regulation and in devising energy programs for low-income and elerly
households in the next few years. Economic conditions in the state of
Ohio, however, have resulted in a budget crunch. Legislators passed a
four-month interim budget in July after they failed to agree on a budget
for the biennium. In spite of inflation, the new budget cuts existing
levels of state spending by 3 percent except for schools and welfare (Kent
Record-Courier, 7-2-81). There is no room in the budget to pick up new
programs, such as energy conservation, unless existing programs are cut or
taxes increased, both politically difficult tasks. In addition, two bills
have been introduced to eliminate the Ohio Department of Energy and scatter
the functions among various other agencies. The League objected to this
because of the increased need to coordinate efforts to deal with energy
problems and to promote the efficient utilization of energy. Whether or
not these bills are enacted, there is little leadership at the state
level to promote energy conservation.
The Ohio Department of Energy has an energy audit program, prepares
an annual energy conservation plan (but never evaluates its results), and
carries out other federally mandated programs, mostly with federal funds.
When federal support of a used oil recovery program was withdrawn, it
became a voluntary program in Ohio. The task force representing a variety
of interests recommended support but no legislation is being introduced
that requires any new funding.
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Ohio's Energy Credits Program, begun on a demonstration basis in 1977
and now permanent, provides 25 to 30 percent discounts on winter heating
bills for low-income elderly or disabled utility company customers through
vendor-lines-of-credit or onetime cash payments of $125 for retail fuel
dealer customers. Last winter some 350,000 households statewide received
benefits from the program, which is funded by state appropriation.
Such programs are an important "safety net" but are a continuing
expense. On the other hand, weatherization programs, increasingly effec-
tive, result in a significant decrease in energy consumption and increase
the ability of low-income people and the elderly to become self-reliant.
Federal funding for weatherization is being withdrawn, to be included in
block grants with less total dollars. Said Charles Royer, Mayor of Seattle,
"The real point is that we are going to get local responsibility with 25
percent less money and no practical means to replace it with local revenues."
(Wall Street Journal, 7-16-81).
Neither Congress nor the market place has yet come up with solutions
to the problem of weatherization of rental housing: why should the landlord
pay for energy conservation measures when the tenant pays for the utilities?
Local governments: flany options are available for local governments
to encourage energy conservation, such as building and zoning codes, audit
and retrofit of public buildings, public education, transit investment,
carpool matching, and demonstation projects for neighborhoods, businesses
and industry. Some of the obstacles to carrying out these programs include
lack of funds, lack of expertise, lack of public awareness, and resist-
ance to change. A phased rather than sudden withdrawal of federal support
and assistance would facilitate the turnover of responsibility to local
governments.
Q. Which activities will get priority from public and private organi-
zations and what will be the consequence?
A. If present trends continue, energy supply activities will far
overshadow energy activities, on the part of both public and private sec-
tors. The energy supply industry is well established and is populated by
many large firms capable of doing some research and development. The
energy efficiency industry is in an embryonic state of development, so
that private sector research and development capabilities are especially
limited. In the building construction industry, for example, technological
innovation is particularly difficult because the industry is fragmented
and tradition-oriented. The federal energy efficiency research and devel-
opment effort is far from adequate today. A federal program with anything
more than modest cuts at this time would have a devastating long-term impact
on U.S. economy.
The opportunities for technological innovation in energy conservation
are far greater than in the area of new supply. The problem of runaway
energy inflation can be greatly mitigated if the opportunities for cost-
effective energy conservation investments are exploited. The reason for
this is that it is possible to achieve a high level of fuel savings through
352
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energy efficiency improvements at much less cost than is required to
provide energy from new sources of energy supply. The high cost for new
energy supplies reflects the skyrocketing costs for the capital needed to
exploit lew grade energy resource alternatives to low-cost oil and gas.
Because of these rising capital costs and government subsidies for energy
supply expansion, there "has been a continuing dramatic shift of capital
resources in our economy to the energy supply sector. This ongoing shift
in capital resources contributes to the scarcity of capital for nonenergy
investments, which are needed for industrial renewal. (NRDC, Amicus
Journal, Summer 1981, p. 10-12).
Consequences: See "State and Local Conservation Activities, #2.
Q. Have any new initiatives or opportunities been created as a result
of the shift in federal energy conservation programs?
A. The opportunities have been there all along. The question of what
gets done depends in large measure on the resources devoted to the various
options. Funding, attention and other resources are rather unbalanced at
this time and becoming more so with abrupt federal rescission of FY 1981
funds and drastic reductions in FY 1982 conservation programs.
C> What is the federal government's proper role in this period of
transition?
A. To set long-term goals and policies;
to exert leadership;
to monitor and evaluate results, including costs to society and
national security;
to continue research and development on energy-efficient technolo-
gies;
to provide technical assistance to state and local governments,
business, individuals;
to monitor interstate and international impacts and recommend
actions;
to revise federal procurement policies and other measures to con-
serve energy;
to regulate and manage wastes from energy production;
to set mandatory standards for energy conservation;
to use tax incentives, tax disincentives and loan guarantees to
encourage business, industry and individual consumer to conserve energy;
to provide for and encourage citizen participation in decision
making.
Federal standards and compliance timetables that protect the environ-
ment should not be relaxed in pursuit of national energy goals.
Q. How should the federal government evaluate and monitor the effects
of its new energy policies and program changes?
A. Detailed data collection programs, with quality assurance of data,
must be continued and/or initiated on energy usage, energy supply and
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costs; import/export data; research and development by public and private
sectors; effects on environment and public health; world energy usage and
economic conditions. In addition, hold public hearings and ask for citi-
zens to corrtnent at regular intervals.
It will be important to be able to compare the effect of the changed
policies on national security and international tensions and in meeting
the needs of the country and its citizens in an equitable manner. When
does the Reagan administration plan to addres the issue of renewable
resources?
STATE AND LOCAL CONSERVATION ACTIVITIES
!_. Which of the functions formerly performed by federally funded
programs are likely to be picked up by the state energy offices? By cities
and counties? By the private sector?
A. Energy Impact Assistance; The impact of strip mining of coal is a
continuing problem in Ohio, .not a sudden new development. The state law
was superseded by the federal law for restoration and reclamation. It is
extremely important that reclamation be firmly enforced as strip mining
proceeds in order to prevent the devastation, erosion and sedimentation
and acid mine drainage of the abandoned lands in the state. Other than
that, local governments will be left to cope as best they can.
Schools and hospitals program: We support continuance of this pro-
gram, as budgeted. The emphasis in Ohio is to keep schools open. State
Senator Marcus Roberto reports that, without additional revenue, more
than 250 of Ohio's 615 school districts will likely be unable to complete
their calendar year in the black. There is only so much that can be cut
out of a school program before it becomes substandard. (Kent Record Cour-
ier, 6-27-81). Under these circumstances even important maintenance and
energy conservation projects will be deferred by schools.
Weatherization Assistance Program: In view of tight state finances,
any weatherization programs will be left to local governments to find
funds out of reduced block grants. See page 3.
State Energy Conservation Program; Although dedicated Ohio Depart-
ment of Energy (ODOE) staff members have tried to follow state and federal
laws for State Energy Conservation Programs, the lack of support and leader-
ship by top state political leaders has rendered efforts largely ineffect-
ive. Although several public hearings wee scheduled in April on the 1981
proposed state energy conservation plan, I was unable to get a copy in
order to prepare comments. The public, reflecting such attitudes, has
greeted these efforts with a large ho-hum. Coordination with other state
agencies has been limited and measures required under state and federal
laws have been neglected, such as changes in procurement policies and
evaluation of utility rate structure.
On the other hand, ODOE's request for proposals under the federally
funded energy conservation program for innovative public education, trans-
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portation, industry, local government and other projects has met with
enthusiastic response. At the public meeting in Cleveland on July 7, 43
people were present to get information on how to apply; two other meetings
were held (Cincinnati, Columbus); deadline for proposals is August 21,
1981. If federal funding is dropped, the state is not expected to continue
this program. Local governments and the private sector would focus on
their own short-term needs, as limited resources permit.
Energy Extension Service; Although personalized information and
technical assistance to individuals, small businesses and local governments
can pay big dividends in terms of energy and dollar savings, I would not
expect this program to receive state or local government funding. As an
example, I have been a member of the task force for two years for the Kent
Solar Project, funded by Argonne National Laboratory. The project's basic
goal is to develop a plan for conservation of energy and use of alternate
energy sources in Kent. The project has been completed and the task force
is continuing to meet on a voluntary basis to try to implement recommenda-
tions. One important recommendation, to establish a Kent Energy Office, a
focal point to continue efforts, may not survive, a result of the effects
of inflation and dwindling tax base on the city budget.
Emergency Energy Conservation Planning; I would expect the state
to maintain a minimum effort.
Residential Conservation Service; Under the National Energy Con-
servation Act approved by Congress in 1979, all large and some small utili-
ty companies are required to help customers decide what improvements could
help customers have energy and money. While Ohio utilities have had two
years to make plans for the startup of this program on July 1, 1981, they
have requested and received extensions for mailing notices of avail-
ability of audits. Ohio Edison Co. plans to start a pilot program in late
August. Notices to all customers should be completed by the end of the
year, according to a company spokesman. East Ohio Gas Co. also received
a 60-day extension; customers are to be sent notices about the project in
monthly cycles until all customers are served. Both plan to charge $15.
(Akron Beacon-Journal, 7-17-81).
_2. What will be the effects if a state decides to phase out its energy
office? Which activities will be discontinued?
A. Effects would include fragmentation of energy conservation efforts,
lack of coordination, lack of public education and technical assistance,
continued unemployment, increased energy expenditures by state and local
governments and the private sector, preempting capital investment and
operating funds for other, more productive, uses; reduction in economic
vitality.
I would expect that discontinued activities would include all of
these listed above except for a minimal effort on emergency planning.
^. How can local governments transfer the state experience and resour-
ces to" the development and implementation of local programs?
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A. In general, the energy audit program has been very useful. Imple-
mentation will depend on local budgets, priorities set in block grants,
and citizen initiatives, all at short notice.
^. How will the 21 states that have biennial budgets adapt to the new
federal priorities? What is the consequence of their operating on a bien-
nial budget likely to have on this ajustment?
A. Ohio has a biennial budget but was unable to agree on a budget for
this Tiscal year. Therefore the General Assembly passed an interim budget
for four months. Legislators will meet again in September. Thus, the
problem will not be the timing but revenue shortfall, because of economic
conditions.
5_. How can information, experience and resources be shared regionally
after~~the discontinuation of the DOE Regional Offices?
A. Can agreement be worked out before discontinuation for an annual
get-together of representatives from the states in each region? Otherwise,
newsletters, computer information systems, circulating libraries, circuit
riders and liaison personnel, regional or national conferences and meetings.
6_. Can alternative funding sources be found for conservation activi-
ties?"
A. The private sector presents the most opportunities. Carefully
design~ed federal and state tax incentives, disincentives, and loan guaran-
tees would encourage business, industry and individual consumers to conserve
energy and to shift toward the development and use of renewable resources.
With leadership, planning and technical assistance from the federal and
state government, the private sector, especially utilities, can make long-
range plans to meet real energy needs (not inflated demand) in the most
cost-effective way. Energy conservation has been repeatedly shown to be
the most cost-effective means to meet needs if_ life-cycle costing is consi-
dered and rf federal subsidies and other distortions (e.g., declining
block ratesfor electricity) are removed. The marketplace could then
bring economically efficient decisions.
ISSUES FOR THE 1981 SECTION 11 REVIEW
1. Funding mechanisms and structural issues
a. In light of the proposed changes, how can the nation maintain
an effective low-income weatherization program?
A. The League strongly advocates weatherization as a means
of cutting energy costs. Alternatives: funds from a very small percentage
of the Windfall Profits Tax; mandatory federal standards for energy conser-
vation; possible local mandatory requirements for energy conservation, as
part of a comprehensive energy plan; strongly encourage public utilities
to set up their own loan programs for weatherization, repaid in the custo-
mer's regular bill and in reduced capital requirements for expensive facil-
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ities that won't have to be built. Encourage formation of local weatheri-
zation coops, with members contributing labor, materials or money. Fund
the Solar and Conservation Bank as approved by Congress.
b. If weatherization is transferred into HUD Community Development
Block Grant, what agencies would be effective sponsors at the community
level?
A. Community Action Agencies, local groups.
c. How can problems involved in transferring the program from one
agency to another be minimized?
A. Provide transition funding so that personnel from the new
agency may work with the existing agency before transfer of the program;
training programs for personnel in the new agency, including hands-on
training; transfers of a few key personnel from the old to the new agency.
2. Implementation issues
a. If a state decides to phase out Community Action Agencies, how
can their resources and experience be transferred to the new weatherization
sponsor?
A. Same as I.e.
b. Should LIEAP funds be utilized for weatherization? How can the
LIEAP program coordinate its activities with the weatherization program at
the state and/or local level?
A. LIEAP funds could be used for weatherization. However, if
totals are to be cut by 25%, this will not be a significant source.
c. What is the most equitable and cost-effective weatherization
program? Should the federal government continue to provide substantial
assistance ($1000-200/unit) to a relative small number of houses? Or,
should the program be restructured to provide minimal weatherization ($200
-300) to a larger number of units?
A. Public education on energy conservation must be on an
essential element of any program. Criteria for selection of houses should
be evaluated. I believe that substantial assistance should be provided
to a relatively small number of houses, calculating pay-back. A rotary
fund should be set up; recipients of this assistance would pay what they
were able, knowing that all funds in this account would be used to help
more people. Public participation is essential; people for whom community
action programs are designed should be involved in the planning and imple-
mentation of those programs.
d. How can CETA workers be retained in the weatherization indus-
try?
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A. A strong energy conservation program is labor inten-
sive. Employment would increase, with job openings for those who have skills
in weatherization.
SUNSET PROVISIONS
1. What information is necessary to enable the federal government to
monitor and evaluate the effects of changes in energy policy and conserva-
tion programs? For example, should DOE monitor whether state and local
agencies continue important conservation activities? Whether private firms
continue conservation R&D? Whether homeowners continue to invest in
conservation improvements?
A. Yes, those items listed. Also, information should be compiled
on energy consumption by category (residential, commercial, industry,
transportation, etc.), and per capita energy consumption. Detailed infor-
mation should also be compiled on the energy consumed by the federal gov-
ernment, by category, for several years. As a major consumer of energy,
the federal government should set and meet energy conservation goals.
2. What types of regular monitoring and special studies would be most
appropriate for obtaining this information?
3. How can this information be gathered without placing a major paper-
work burden on respondent organizations?
A. Much of this information is probably already collected but may
not be in a form compatible with the system used. Quality assurance of data
and compatibility would reduce paperwork.
4. Regarding the Sunset review, what are the most important questions
in the Sunset Provisions? What would constitute adequate responses to
these questions? What types of analyses should the response contain?
What types of data should be included? What level of detail is needed?
A. All of the questions are useful. In my opinion, the most im-
portant are:
2) an identification of the objectives intended for the pro-
gram and the problem or need which the program was intended to address;
Ihe purpose must be clear.
4) an assessment of alternative methods of achieving the pur-
poses of the program;
Often a weak link, with serious omissions in identify-
ing alternatives. Nonstructural alternatives sometimes are much less
costly than structural alternatives.
6) an assessment of the degree to which the original object-
ives of the program have been achieved ...
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To measure results.
10) an assessment of the impact of the program on the nation's
health and safety;
Include social, economic, energy and environmental
effects, including secondary impacts. I would also suggest evaluating
effects on employment.
13) an analysis of the services which could be provided and
performance which could be achieved if the program were continued at a
level less than, equal to, or greater than the existing level;
Useful for the budget process.
I see this review as a broad overview and assessment, very important
on a periodic basis. It should not get bogged down in detail. The answer
to each Sunset question could be limited to two pieces of paper, with
details in appendices. I recommend adding question #15: Findings and
conclusions based on the above review.
Thank you for this opportunity to express our views.
*************
ALBERT B. CSONKA
President
Micro-Carburetor Corporation
25 Rano Street
Buffalo, New York 14207
The Micro-Carburetor Corporation is a pure research and development
organization, dealing only with fuel-saving and pollution-reducing carbure-
tors. The company owns the patent rights of the Micro-Carburetor. Upon a
small DOE contract and a still smaller N.Y. State contract, we developed
two Micro-Carburetor prototypes for two large 8-cylinder engines, as pre-
scribed by the contracts.
The Jet Propulsion Laboratory, Pasadena, CA performed a year-long
testing program with the Micro-Carburetor. According to their interim
report, prepared for the Energy Department, our caburetor saves 12 percent
fuel and increases the car's mileage by 13 percent. Their final report will
be sent to DOE in July 1981. This report will confirm the mentioned excel-
lent savings. We are convinced that with some more experiments we could
increase the fuel-saving to at least 15 percent and further reduce the
emission figures.
If Micro-Carburetors were in general use, our crude-oil imports could
be reduced by over one-million barrels daily. This means that with the
present oilprices,our trade-deficit would be reduced by 12-billion dol-
lars yearly. This savings would greatly reduce the inflation.
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During our development work, U.S. carmakers had to change to small
cars that use four-cylinder engines. It is in the country's roost urgent
interest to make these cars as fuel-efficient as possible. Properly
developed Micro-Carburetors can help do that.
In 1980, all U.S. carmakers had huge losses thus, we cannot expect
them to invest money in developing Micro-Caruretors for their small cars,
because the Micro-Carburetor was not invented by them.
For this reason, it is very important that the Government grants the
necessary amount for the development of Micro-Carburetor prototypes for
all American made cars as scon as possible.
We also have a second invention that further increases the fuel-saving
of the Micro-Carburetor by an additonal ten percent and reduces the NOx
emissions by an additional 30 percent. We were just informed by our patent
attorneys that the U.S. patent office authorized a patent for this invention,
that will be issued soon.
During the last four years we experienced very little interest from
DOE to assist the development of our fuel-saving carburetors. We expect
that the present Government will urgently remedy this fault and will
grant the necessary assistance for performing our development program
which is of vital interest to the country.
If this were denied, we would be forced to sell our inventions to
the foreign carmakers. This would represent a fatal blow, from which we
would like to spare the U.S. auto-industry.
MIKE DEKAIB
Energy Planner, Lincoln City -
Lancaster County Planning Department
555 South 10th Street
Lincoln, Nebraska 68508
In reference to the staff working paper for the third national Energy
Plan-Parts I, II and III appear to be well done.
PART IV New Views of Energy
Policy (Page 10 & 11) Deserves some comment.
- The second principle states that energy policy should be based on
"economic principles, national security concerns, and a due regard
for environmental values". This is far too narrow a base for
national energy.
- The third principle states that "government is not to select and
promote favored sources of energy". This should apply equally to
all energy sources and technology regardless of expenses. Also,
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some technologies have received substantial government subsidies
and under-writing over time - those which have not shall be
equalized for balanced economics to work.
- The fifth principle states "public spending should not be used to
subsidize domestic energy production and diverts capital..." As
noted above some subsidies only equalize previous actions built
in to some technologies. Conservation has been documented as
having the biggest impact per dollar spent in the short run.
Provisions should be made to assist conversion to more energy
efficient end uses as front-end cost and adequate public knowledge
represent substantial barriers to improved efficiency. Specific
attention should be given to non-biased information sources.
- The sixth principle states "...eliminating controls on oil which
discourages the private sector from dealing with disruptions effect-
ively..." while an accurate statement as far as it goes, what
protection remains to ensure the harvest comes in or public safety
vehicles have fuel to run?
The "New Views of Energy Policy" presents many valid points - however,
they should be expanded and tailored to present a comprehensive and more
balanced approach to national energy policy.
MARY DURHAM
County Energy Resources Coordinator
The Legislature of Rockland County
Office of the Chairman
County Office Building
New York, New York 10956
Various agencies in the Country administrator different energy -
related programs. They have been contacted to reply directly concerning
their specific projects.
The Energy Department has been mainly involved in promoting energy
efficiency in building operations. This has included participation in the
DOE program for Schools and Hospitals. The County matched federal funds
for a $200,000 technical assistance program of in-depth energy studies of
59 of its buildings. The studies pointed up ways in which the County
could save money on operations and recommended energy conservation measures
including expected savings and paybacks. $40,000 has been awarded in the
second phase to be matched with County funds to implement some of the
recommended procedures at the Community College and the Health Complex.
Signficant savings have already been realized, and implementation is
expected to show further savings or cost avoidance in energy consumption.
Monitoring of the last 3 years of energy use data shows savings of from 3%
to 33% in County buildings. Expected annual savings after implementation
are forecast to be in excess of the total cost of the program. If this
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program could be expanded to include monies for implementation of energy
conservation measures for buildings owned by local governments and public
care institutions as well as schools and hospitals, it would be even more
effective in promoting energy conservation. The Energy Department has
offered help to villages and town and public care institutions in the
County, but there is no money available for them to be able to implement
the energy conservation measures recommended in the technical assistance
studies.
The Energy Department, together with the Construction Office, is
drawing up a 3-year budget for County legislative approval. Vfork will be
done based on cost, estimated savings, and payback for each recommended
energy conservation measure. Those measures requiring little money will
be implemented year by year. Consumption data monitored and tied in with
weather data to see if savings are actually being realized. If so, energy
measures with greater than 3-year paybacks will also be considered for
capital funding.
The Energy Office and the Construction Office work closely together
to promote energy efficiency in building retrofits and in the design of
new buildings. IVfost older .County buildings were constructed with construc-
tion costs as the paramount concern. New buildings will be constructed
with an eye to operating costs as well.
The County has also participated in the New York State program regard-
ing lighting standards for public buildings. Buildings are in compliance
with the recommended standard, and part of the savings realized so far is
because of reduced lighting loads. In this lighting program, as well as
in the School's and Hospitals program, the County Energy Office has enjoyed
great cooperation with the State Energy Office.
Itockland County has an annual energy budget in excess of two million
dollars. Participation in the above-mentioned programs has helped us
lower the cost of the government to the taxpayer. The costs of the programs
are recouped in savings or cost avoidance in a relatively short time.
Conservation still remains the lowest-cost method of promoting energy
savings. It is the main thrust of the Energy Department's program.
JOHN V. FASHING
Executive Assistant
to the General Manager
Department of Water and Power
111 North Flope Street
Box 111
Los Angeles, California 90051
The Los Angeles Department of Water and Power (DWP) is the largest
municipally owned utility in the country, serving more than 1,500,000
electric and 600,000 water customers. DWP is a locally regulated utility
governed by a Board of Water and Power Conmissioners, in accordance with
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the Los Angeles City Charter. As a locally regulated utility in the state
of California, our Board exercises full authority over all DWP activities
including its conservation programs.
DWP is pleased to provide input to the Federal Energy Conservation
Program because we believe Los Angeles is an excellent example of how
nonmandatory conservation programs (tailored to local needs) combined with
appropriate pricing mechanisms have significantly reduced the use of elec-
trical energy on our system.
During the 1950s and 1960s, the annual electrical growth rate in Los
Angeles averaged 7%. Today, we are projecting an average annual growth of
1.5% through 1990.
The DWP load forecast for 1980 projected total system sales of 17,704
gigawatt hours; actual sales were 17,556. This represents an almost 2%
reduction in energy usage from 1979. During the same period, the estimated
real gross regional product increased by 4.1% and the estimated gross pri-
vate investment for the region increased by 9.2% (see attached chart).
These estimated figures are in contrast to the 1980 economic growth in Cal-
ifornia and illustrate that there has been substantial growth in the com-
mercial sector of the economy continues strong and vibrant in Southern Cal-
ifornia, energy sales are not locked to the same rate of growth. The De-
partment believes that this diversion of trends is a result of the real
price elasticity of energy and the conservation programs provided by the DWP.
As part of the realization that energy should be priced at its real
cost, the Department, in 1978, completely restructured its rate schedule
to comply with the principal of cost of service. The new rate structure
eliminated volume discounts and declining block rates, both of which, in
effect, promoted excessive use of electrical energy. The Department was
one of the nations first utilities to establish cost of service rate sche-
dules.
The residential sector comprises less than 30% of our total load and
the most productive energy conservation programs are aimed primarily at
all-electric customers. There are two types of programs in the residential
sector. The first is the RCS program mandated by the federal government
which will save approximately 51 gigawatt hours over its 5-year duration.
The cost of this program will be 13 cent per kwh saved. This is substan-
tially higher than the current cost of energy which is approximately 6
cent per kwh. The PCS program is not cost-effective for the DWP.
Other programs in the residential area are geared toward apartment
buildings which are master-metered, toward large residential electric
users, and for those people who request energy audits, the Department will
provide Class "A" home energy audits. These programs will cost the Depart-
ment approximately 1.7 cent per kwh saved, and will save 91 gigawatt hours
over the next five years. Additionally, the Department has just begun an
extended loan program which will provide financing to residential or
apartment owners who will retrofit their buildings with conservation
equipment and material.
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Table 1
Los Angeles Department of Water and Power
Indicators of Local Economic Activity & Energy Sales
Real Gross Regional
Product*
Year Billions of $s % chge
72 43.1
73 44.2 -2.6
74 44.1 - .2
V5 43.6 -1.1
76 43.4 - .5
77 44.1 1.6
78 46.0 4.3
7 'J 50.9 10.7
80 53.0 4.1
01
02
8J
84
8S
or,
07
08
09
90
Gross Private Total Electricity
Investment** Sales
Billions of $s % clige GWII
7.0 17212
7.0 0 17550
6.4 -0.6 15034
4.6 28.1 16009
4.5 -2.2 16670
5.1 13.3 16879
5.0 13.7 17515
7.6 31.0 178/7
8.3 9.2 17556
17526
17750
17855
18119
18325
18623
18942
19449
19855
20408
% chge
2
-14.4
6.1
4.
1.3
3.6
2.1
-1.8
- .2 (Est.)
1.3
.6
1.5
1.2
1.6
1.7
2.7
2.1
3.0
*This estimate is based on the same types of indicators contained in the Gross State Product.
** Includes New Construction, Durable Goods purchased and Inventory.
-------
Keal
Gross
Regional
Product
(billions)
52
'IB
'10
Annual
Electric
5ales
(GWH)
Table 2
LOG Angeleti Ucparl ".ont of Water and Power
Comparison of Knoryy Sales Growth
with Ue.il Cross Regional Product*
1972 73
74
75
7G
77
78
79
81
82
83
85
86
87
89
90
*T)ij.'j \ LJ ,in estimate based on the same types of i >id ica toi <; Contained in the Gross State Product
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EWP's cxrnmercial/industrial energy programs are partially mandated by
the state of California. The DWP has developed a program which has been
used as a model by the California Energy Commission and which was fully
planned and partially implemented prior to the CEC Conservation mandates.
Inasmuch as 70% of the Department's load is in the commercial/indus-
trial sectors, this is an extremely cost-effective program for both the
Department and its customers. Over the 5-year projected life of the com-
mercial/industrial program, the Department's customers will save over
1400 gigawatt hours of energy annually at a cost of .3 cent kwh saved.
The program is primarily made up of energy audits of commercial and indus-
trial buildings which include cost-effective analysis on conservation
practices and equipment retrofit. It also includes seminars for customers
with similar businesses in which a conservation consultant will provide 1
or 2 days of instruction to such a group. These programs have been very
well received by our customers and have been extremely successful.
The third part of our Conservation Plan is water conservation.
Although water conservation may be outside the scope of these hearings, it
is considered a separate and important segment of the DWP Conservation
Plan, and is often handled in conjunction with energy conservation audits
(saving water saves energy). The program components include audits for
business and residential customers, the recent dissemination of water
conservation kits to 1.2 million residential customers of the City, a
leak detection program which covers the Department transmission and distri-
bution main lines, and continued cooperation with other water agencies
including the California Department of Water .Resources to develop new and
innovative water conservation plans.
The fourth segment of the Conservation Plan deals with public aware-
ness. The Department has maintained a relatively low profile in the news
media as compared to other California utilities inasmuch as the service
area is more confined. The Department's public awareness emphasis has
been on direct mail to all-electric residential customers and to com-
mercial/industrial customers with minimum use of the electronic media.
This approach has been very successful in creating interest and activity
in conservation. Mditionally, the Department has used professional trade
magazines and other similar types of communication to direct information
to a particular segment of our customer base.
A major part of our public awareness program are the programs for
education. These programs are aimed at all levels of the schools including
primaryf secondary, and college, and provide student, teacher, and teacher
training materials on energy and water conservation. The Department has
licensed an education distribution company to develop "Aunt Energina"
which has been very well received by the California schools. This same
company had previously developed a "Captain Hydro" water conservation
program for primary and secondary schools. The education program also
includes the funding of an improvisatlonal theater group called "The
Twelfth Night Repertory Company", which creates and produces short plays
to be performed in front of junior and senior high student audiences.
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This program has been enthusastically received by the school districts
and has been recently broadcast on national public television.
Very briefly, these are the highlights of the Department's Conserva-
tion Plan. As you can see, there are many diverse parts of the plan which
we have developed to specifically serve the various customer sectors in
Los Angeles. The Department of Water and Power is somewhat different from
other utilities in that 70% of the load serves commercial/industrial custom-
ers. It is therefore in the best interest of conservation and DWP's cus-
tomers, to provide the primary emphasis on that sector.
It is our position that conservation goals should be set very broadly.
Each utility should then be responsible for developing the detailed pro-
grams which will reach their customers. In this way, the various publics
which must be served, can be provided with an appropriate program. By
allowing each" of the utilities to develop necessary programs which it
feels meets its system and customer requirements, each utility is then
allowed to adjust to the changing environment and provide the best and
most economical service to its customers.
Thank you for the opportunity of providing information and input on
this subject. If you have any further questions regarding our programs,
you may contact Mr. Jack Klein at (213) 481-5841.
*************
MARIAN S. FEENEY
Cooperative Extension Specialist
Energy/Resource Development
University of Rhode Island
Kingston, Rhode Island 02881
I am Marian Feeney, Associate Professor, Cooperative Extension-Special-
ist- Energy/Resource Development, University of Rhode Island. (401-792-2464).
As energy issues and concerns intensify during the 80's a period of
energy and political transition both with many unknowns, mixed messages
and uncertainty, one philosopher says uncertainty is a time to be creative.
In this written testimony, I will respond to the general questions
(p. 7) and some of the Issues for the 81 Section 11 Review (p. 12, 14 and
16). I am also submitting my testimony for the Third National Energy Plan
and the Special Edition of the Community and Rural Development Newsletter
- 1980 Community Energy for information. (This material was reviewed by
EPA but not included in the transcript due to its length).
In addressing the "adequacy of attention to conservation" and the
decentralized nature of energy conservation, we must remember that there
are many regional differences, many differences withing regions and within
areas of states. Thus, conservation policies and program developed on a
national level must be flexible for regions, states and communities to meet
their specific conservation needs.
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The Federal government should give more attention to national and
international policies and give strong leadership to initiate state and
local cooperative, coordinated and collaborative efforts in energy conserva-
tion. Such efforts must foster real interaction and communications to
reach common conservation goals among the public and private sectors.
As policies and programs are being developed and as results are moni-
tored and evaluated, more emphasis should be given to the impacts on people,
communities, and states, with each dimension being considered - the social,
economic, technical, environmental and ethical impacts, NOT just energy
impacts.
The priorities and activities selected for energy conservation will
depend upon the planning process. Because of conservations decentralizaed
nature priorities, activities and programs may continue to be fragmented
and uncoordinated. However, as resources (dollars) become limited, both
the private and public sectors including government agencies may be more
willing to share, cooperate and coordinate for greater efficient use of
resources which will make grater impact results. But if the public and
private sectors including government agencies and PEOPLE are not included
in the planning process, expected results will be difficult to achieve.
The changes in federal programs presents a tremendous opportunity for
private firms, state governments, local agencies and non-profits to network
on specific conservation issues for efficient delivery of education, infor-
mation and technical assistance to the residential, small business, indus-
trial, agricultural, government, and transporation sectors. This will
eliminate duplication of effort, provide a comprehensive approach to energy
conservation issues, and put the talent and abilities already in place to
create more effective results. The evaluation questions must be addressed
in the program planning development stage, not as an appendix.
From the issue paper, there still appears to be selecting what agency
will do what, instead of identifying the priorities, determining the audi-
ence needs, identifying informational needs and then strategizing by inven-
toring existing resources - human and material.
When doing the inventory of resources, roles, responsibilities, man-
dates,, and expertise must be clearly described. Then a creative frame-
work for a comprehensive program to meet the priorities can be developed.
This framework must include planning, implementation, delivery, monitoring,
data collection and reporting results.
Joint cooperative efforts must also be rewarded. One issue which
seems to come to the forefront in numerous public meetings is who has the
information, how to access the information and evaluate the information,
and we have the information but not the delivery system.
Such efforts demand strong leadership, a focus on priorities and
goals, and clearly defined roles and responsibilities of each participating
agency, government, and private representative with continuing communica-
tion and cooperative efforts supported so each sees hew pieces fit together
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and what the whole can produce. Each must feel a commitment to their
responsibility.
By combining the public and private sectors into a comprehensive
approach to energy conservation-existing workers, educators and the private
sector, more thought might be given to organizing cooperatives to provide
low cost service to low income, elderly and handicapped or struggling
businesses. Or an energy management service corp might be organized to
provide energy conservation services. Agencies and educational institutions
could provide management, operation and service delivery seminars and
support to both cooperatives and corps.
I feel the opportunities are there but can we put aside those barriers
or what we think are barriers to work on a creative framework to meet the
energy conservation needs of PEOPLE and communities which will have an
impact on the state, region and the nation.
Thank you for the opportunity to share my thoughts and recommendations
again this year. I will be willing to assist in implementing energy con-
servation and management actions through cooperative efforts.
KELLY FINN
Kansas City Citizen/Labor Energy Coalition
Box 5952
Kansas City, Missouri 64111
The Department of Energy under Secretary of Energy James Edwards is
narrowing energy options of the American people. Conservation and Solar
programs are being systematically dismantled, despite the fact that a
Fall 1980 Gallup poll found that solar was the most popular energy option
for Americans.
Further, the proposed elimination of 1) the Solar Energy and Energy
Conservation Bank, 2) Energy Extension Service, 3) Residential Conservation
Service, 4) State Energy Conservation Projects, 5) Home Weatherization
Programs along with elimination of CETA programs that provide much of
the labor needed for these projects, cutbacks in aid to assist in payment
of skyrocketing home energy bills, combined with the deregulation of
oil, gasolined and natural gas prices ad up to what many see as a vicious
attack on low and moderate income people. Low income people spend 35 to 50
percent of their income on energy expenses. Yet, home heating costs could
be reduced as much as 40% through proven, cost effective home weatherization
techniques. The Reagan policies mean that a growing number of Americans
will not be able to choose from expanding array of solar and energy effi-
ciency options, but because of outrageous fuel prices and lack of weatheri-
zation assistance they will be limited to a choice of fuel bills or food.
It is suggested that private firms assume new responsibilities, but
most solar/conservation firms are small with almost no money for publicity,
education, consumer information or free services.
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If our energy problem is considered a national security risk, we
should want to solve this national problem as soon as possible. The speed
at which we can solve this national problem depends largely on Federal
assistance, both to lower energy use in the houses of low income people
and in assisting, through educational efforts, the market penetration of
solar/conservation products and services.
It is also suggested that state and local governments assume new
responsibilities. However, severe limits are placed on taxing powers of
state and local government. Often these tax restrictions have been promo-
ted by local Reagan supporters, even though such policies would make it
impossible to carry out the Reagan plan for more local control. State and
local governments are facing tight and even dwindling budgets. Higher
fuel costs, resulting from deregulation, in the 39 energy importing states
means millions more dollars pupped out of these states economy, farther
weakening their ability to respond to the new challenges dropped by the
Federal government. Yet, the federal government after breaking promises
to millions of Americans, is promising now that state and local governments
will somehow be willing and able to follow through on Federal commitments.
Our private non-profit organization has been increasing its skills and
moving more in the direction of providing energy services (energy audits,
conservation installations, solar collectors) for low and moderate income
people. Much of the financing for this work has come from federal sources,
and with the Reagan cutbacks many of these services will have to be aban-
doned. The need is still there for low income energy programs, and it is
growing. KG C/LEC plans to make a continuing effort to insure that he
needs of our low and moderate income constituents are met.
In evaluating effects of Federal energy policy changes aggregate
totals of units of coal, electricity, natural gas, etc. are meaningless in
terms of citizen impact. Aggregate totals such as these tell nothing
about the amount of energy wasted or the impact on various income levels.
The more accurate way to gauge the effects of Federal policy changes
would be to compare the before and after percentages of family income
applied to energy costs. Thus success would be a lowering of the percent-
age, which would leave more family purchasing power for food, clothing,
housing and recreational expenses. The lowered percentage could be achieved
by either more efficient use of energy or lower or stablized energy prices.
The administration's energy policies, at this time of this writing, en-
courage neither of these roads to success.
The administration energy policies offered by Secretary Edwards offers
no hope, no sustainability and no vision of an energy future in which most
American would like to participate.
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MARGARET P. GARLAND
Director
State of Vermont
State Energy Office
Montpelier, Vermont 05602
The major assumption of the current federal energy policy is that the
market place will solve all problems related to energy both for this country
and the international cctmiunity as well. This assumption is predicated on
a completely free and unfettered market place where demand and supply are
in harmony. It is doubtful that such market conditions can be obtained
for any major fuel source; it is certainly not true for the petroleum
market where prices are set by a cartel headed by several OPEC nations. A
lack of recognition of this fault and withdrawal of governmental involve-
ment in energy planning will have adverse impacts on the development of
new technologies, our economy, the environment and, last but certainly
not least, the users of the several energy forms at all levels.
The government has a definite role, in our judgment, in dealing with
the imperfections in the energy marketing and distribution systems and
assuring that an equitable distribution of available resources takes place
especially during periods of shortages. If the federal government does
not act in this fashion on a continuing basis, there is a real possibility
for economic disaster for some areas of the country. New England is
particularly vulnerable to supply disruptions given its unique and continu-
ing dependence on foreign oil. A dependence that seems likely to continue
in the short term and longer.
Given the decision to continue to promote petroleum, natural gas and
nuclear as opposed to the development of new technologies, New England's
dependence on oil, and thus Vermont's, is going to be tied more closely
than ever to dependence on foreign oil, at least for the foreseeable future.
This recognizes the time needed to bring new domestic sources on line
even if they are found. A better policy would be one that promotes both
the search for more petroleum and natural gas and the search for new tech-
nologies backed up with a strong program of conservation.
In Vermont, a strong move to conserve present energy sources has
taken place since Arab oil embargo of 1973-1974. This has been particular-
ly true in the use of petroleum products. In addition, there has been a
strong trend to convert residences and businesses to the use of wood and
solar in the provision of heat and hot water. Some industrial firms pro-
vide their heat, domestic hot water and process heat and hot water from
these renewable sources. One of the state's largest banks, the Merchants,
is building all of its new branches with solar heating. The Gilman Paper
Company of Gilman, Vermont is currently heating exclusively with wood and
intends shortly to generate its own electricity from a boiler fired with
wood chips.
Much of the technology used by Vermont's residential and commercial
users was developed under public programs. Such programs, which we feel
are proper areas for governmental actions, will be lost under the proposed
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plan. Such a loss will severely set back the gains made in these areas,
further promoting our dependence on expensive and uncertain supplies
of foreign oil.
It is clear that, even with some reduction in the world price of
crude oil, our balance of trade deficit will continue at a high level due
to our importaion of large amounts of petroleum. The security of this
oil supply is constantly in question; as this is written, events are
occurring in the Middle East that could escalate into another conflict
affecting the delivery of oil to the United States.
Any National Energy Plan should recognize the need to minimize our
dependence on the international oil cartel and the possibility of supply
restrictions which even the Strategic Petroleum Reserve may not be able to
deal with. In any event, less dependence of foreign oil should improve
our balance of trade. The development of new technologies would further
reduce our need for foreign oil and make the United States preeminent
in the development of such technologies.
The policies proposed in NEP III do not sufficiently deal with the
contribution which conservation has made and can continue to make in the
energy needs of the country. Not only does conservation reduce the need
for expensive foreign energy sources, but it continues to provide employ-
ment for the unarployed, the development of new industries and the expan-
sion of old ones, and increases the amount of capital available for
investment now and in the future.
Conservation has allowed users in all of our economic sectors to
deal effectively with the ever escalating costs of all types of energy.
But, even with the effort made in Vermont and throughout the country, our
residential conservation efforts and programs for industrial and commer-
cial efficient energy usage lag far behind many other industrialized coun-
tries in the free world. A National Energy Policy must continue to recog-
nize the positive effects of conservation in dealing with our energy prob-
lems.
A substantial government-supported program of energy conservation
and efficient energy usage coupled with an aggressive program to develop
further conventional energy sources makes more sense and has more positive
economic aspects for the future than a program promoting only the latter.
A program to promote conservation should include a strong public
information segment which deals with the conservation and more efficient
use of present or conventional energy sources and the commercialization of
efficient alternative technologies and energy sources. Such a program
should support state initiatives in the areas of conservation and substitu-
tion of renewable resources for non-renewable ones.
In the latter area, Vermont has used its federal funding in the past
to develop the following:
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1. The Home Energy Audit Team which provides on-site Class A audits
and information on efficient energy usage to Vermont householders.
(Some 7000 households have received such audits at $72 per audit.
A very low cost in relation to the savings achieved by those audit-
ed).
2. Ihe Vermont Industrial Energy Conservation Advisory Program -
Under this program, energy experts frrm private sector companies
and from State Agencies combined to give advice on energy efficient
management to over 150 small Vermont companies which otherwise
would not have had the resources or time to develop their own
program. Each company surveyed will save approximately 20% on
their heating and 10% on their electrical usage.
3. Vermont's Vanpool Program is rated as the best rural Vanpool Pro-
gram in the United States. It has been instrumental in increasing
the number of vanpools in Vermont from 23, three years ago, to 109
as of this writing. Ridesharing, including both van and carpools,
has had a marked impact in Vermont where public transportation is
virtually non-existent in most areas, and people must drive to
gainful employment and to get the necessities of life.
Such programs will be severely impacted by a national policy that
reduces direct federal support of energy conservation efforts as well as
eliminating support of state efforts to promote a conservation ethic for
energy usage. Public information at all levels is extremely valuable in
the furtherance of any conservation program.
The public's hunger for information of both data-related and educa-
tional types is reflected in the number of requests the federal government
and the states receive through the mail, at public meetings or through
energy information lines such as that maintained by the Vermont State
Energy Office. Education at all levels is needed if energy consumers are
to make wise decisions in choosing the proper available energy options.
A federal-state partnership is crucial in the area of conservation
and in other areas where states have developed state-specific programs to
deal with such things as converting utilities and industrial firms to the
use of wood or coal, energy efficient management for farms, the use of
passive solar in residential, farm and commercial building designs, among
others.
"Formulation of energy policy must be sensitive to the needs of the
poor ..... holding energy prices down for rich and poor alike is an
ineffective way to help the poor." That's true, but no effective counter
proposal is discussed. An intensive program of weatherization for the
low-income and elderly, would produce immediate results by reducing the
percent of fuel wasted in dwellings and would more cost effective than a
subsidy of the energy producers through fuel aid programs. Such an
approach will be more productive in reducing the appalling waste of energy
in much of the housing used by low-income families.
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Some members of the State Energy Office technical staff have commented
that the amount of carbon dioxide placed into the atmosphere by the direct
combustion of biomass does not result in a net increase in carbon dioxide.
Biomass, through its normal decaying process, releases carbon dioxide and
water. Combustion of it will not and greater quantities of gas to the
atmosphere. Further, it seems fairly short-sighted to make the statement
that environmental impacts frcm carbon dioxide are unlikely in this century,
when this century has only twenty years to run. This seems to be glossing
over a potential problem without any attempt to address the net impact of
emphasizing technology which may contribute to a future problem.
CONCLUSION
Many of the energy problems of the United States, so forcefully
brought to light by the 1973-74 energy embargo, are still with us. We are
even more dependent on foreign energy sources than we were then as the
possibility of a severe petroleum supply disruption, the SPR to the contrary,
is still a very real possibility with the attendent devastating economic,
political and social impacts on the United States and the world.
It is our contention, if the foregoing is accepted as a given, that
the federal government can't step back a completely hands off/free market
appoach. In our judgment, the federal government has an obligation to
provide leadership to the nation in achieving economic progress by achiev-
ing energy efficiency using affordable and reliable fuels. This leadership
would involve promotion of increased domestic energy production, the fur-
therance of new energy technologies and a strong conservation program
promoting both the efficient use of present energy sources and the substi-
tution of renewable for non-renewable energy resources.
J. JOSEPH GARRAHY
Governor
State of Rhode Island
Executive Chamber
Providence, Rhode Island 02903
The State of Rhode Island welcomes the opportunity to express its
views regarding the new directions of the Federal Energy Policy and its
impact on our State and local governments.
We in Rhode Island are about 80 percent dependent on foreign oil for
our energy needs. A disruption in oil supply from abroad may occur at any
time and the ever increasing price of energy is exacerbating the unhealthy
state of our economy. Rhode Island has no significant indigenous energy
resources to turn to and it is clear that any new energy tehnologies will
not be developed in the 1980's. Rhode Island has strongly supported the
administration's efforts to expedite offshore oil and gas development, but
this too will take 7-8 years before any discovery can reach the production
stage. As a result, Rhode Island has concluded that the cleanest, least
expensive, and least vulnerable energy option today is to use less by
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being more efficient. Our efforts in the conservation of energy speak for
themselves and largely through Federal Funds we have created an awareness
that has reduced our oil consumption nearly 20 percent over the past few
years.
Ihe Administration's dramatic shift away from any meaningful role
for the Federal government in energy conservation is a giant step backwards
for both Rhode Island and the Nation. It is my firm belief that the cur-
rent Federal administration has gravely underestimated the value of energy
efficiency. Energy Conservation can be of major economic, military, envir-
onmental, and social value to the United States. Numerous studies have
shown that increased energy efficiency will provide more energy at a lower
cost and sooner than any other option over the next twenty years. There-
fore, Government has an essential role in achieving the nation's energy
conservation potential and cannot let the market place assume full respon-
sibility for what is a key factor in our economic well-being and our na-
tional security.
It is with the above concerns in mind that the enclosure addresses
those issues posed by EPA for their review of Federal energy conservation.
With warm regards.
J. Joseph Garrahy
Governor
WRITTEN TESTIMONY, STATE OF RHODE ISLAND
Many studies and numerous articles have been written regarding the
substantial barriers which exist to implementing price - responsive energy
conservation. The Journal of the Federation of American Scientists in its
April 1981 issue examined the proposed budget cuts in energy conservation
in detail and concluded they "lack economic and security rationale".
There are three points that should be emphasized regarding the theory that
market prices will achieve the energy conservation objectives that are
vital to Rhode Island's economy. They are as follows:
(1) Rhode Island businesses, schools, state and local governments and
homeowners simply cannot afford the cost of conservation measures.
Our businesses are already struggling to remain competitive be-
cause of rising energy costs combined with their older and less
efficient plants and buildings. Sufficient capital is not avail-
able in most small businesses, local governments and moderate
income families to analyze their energy problems and finance
conservation measures at current interest rates. The consumer
cannot respond to rising costs and must choose between bank-
ruptcy, food, clothing, or heat. Federal loans at lower than
market interest rates, grants, or tax credits are necessary to
enable consumers to convert high energy costs into conservation
actions. Failure to meet this need will result in more unemploy-
ment, increased need for fuel assistance and federal funds for
consumption vice conservation.
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(2) Private businesses, local governments and the average homeowner
require impartial and accurate information regarding conservation
and assistance to financing energy conservation and making the
correct response to higher energy prices. Such information has
been an important contribution of the Rhode Island Governor's
Energy Office and is essential in a period of rapid price change
and new technology. Training and education programs sponsored
by the energy office will also be curtailed resulting in a less
"energy skilled" public and work force. Furthermore, institu-
tional, legal and economic barriers which slow progress will
become greater roadblocks to conservation action because their
removal by governmental action will no longer be feasible.
(3) Rhode Island has many old raulti-family dwellings which are rented
to the poor and elderly. The owners of these buildings have
no incentives to save energy and merely pass the rising energy
costs to building tenants. As long as the availability of rental
space is limited, tenants are forced to pay the increased costs.
This is another example where institutional or market place barri-
ers prevent higher prices from working. This is an area where
mandatory efficiency standards or conservation measures should be
instituted.
Responses to the general questions posed by EPA are as follows:
(1) How are private firms, state governments, and local agencies pre-
paring to assume their new responsibilities?
Rhode Island's energy office is totally Federally funded except
for the required administrative matching grant for Title III.
If Congress does not modify the Administration's proposal for
energy conservation, funding by state appropriations will be
required to continue all energy programs except Title III. Pre-
sent austere State and local budgets will be hard pressed to come
up with substitute funding. At best Rhode Island would be forced
to reduce its energy programming and staff by 50 percent. The
extent that private, state, or local agencies will assume new
responsibilities cannot be determined and new initiatives cannot
be planned until actual funding decisions are completed.
(2) Which activities will get priority from public and private organi-
zations and what will be the consequences if some activities are
discontinued?
Long term goals will have to be sacrificed for short-term needs.
Programs which respond to the more immediate needs are those
which are most likely to receive priority. In Rhode Island these
programs are low income heating energy assistance and low income
weatherization. These programs respond to the need to help
people survive the impending heating season. The low income
heating energy assistance program pays heating bills but does
little to save energy. Programs aimed at businesses, the average
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citizen, public buildings, and improving the conservation and
renewable resource industry will be secondary even though the
energy consumed in the low income sector is miniscule in compar-
ison. Expected cuts in the energy conservation program would
eliminated on-going information programs in Rhode Island that
have greatly benefited the public in providing impartial and
accurate information about energy efficiency in equipment, build-
ings and motor vehicles.
(3) Have any new initiatives, opportunities, or efficiencies energy
conservation programs?
Current programs are already operating under severe funding con-
straints and have been designed to take advantage of any initia-
tives, opportunities or efficiencies available. For instance,
the programs have never provided direct assistance to local levels
of government, under the schools and hospitals retrofit program
(Title III, NECPA). States receive more applications than there
are funds available. Building code enforcement programs are
severely lacking in manpower and sufficient funding is available
to provide energy conservation services to only 10 percent of the
state's businesses.
Rhode Island has initiated a Community Energy Task Force to better
analyze the energy requirements at the local communities and more
effectively respond to their problems. This program will likely
be terminated unless costs are assumed by the communities.
(4) How can the federal government assist in this period of tran-
sition?
If the Reagan administration program recommendations for energy
conservation materialize then the transition in Rhode Island will
be a rapid phase out of all conservation programs except Title
III. The Federal role during this period must be to provide the
states with block grants which allow greater flexibility in deal-
ing with their priority programs and adapting to local conditions
and needs.
The most prudent way that a transition could be effected would
be to allow a phased reduction of federal assistance with an
increasing local match requirement. This will permit states that
choose to rely solely on the "market price" theory of conservation
to phase out programs while those that do not adhere to this
theory could seek state resources to meet their priority energy
conservation needs. §1166, sponsored by Senator Weicker and
Hatfield encompassed this approach and is supported by the State
of Rhode Island.
(5) How should the federal governmnt evaluate and monitor the effects
of its new energy policies and program changes?
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Evaluations should be carefully structured to include an analysis
of regional impacts, the performance of the conservation/solar
industry, and the effects of the market price theory on barriers
to conservation such as rentals and lack of capital. Complaints
to consumer agencies of government, the progress of small business,
governments and non-profit organizations, rental costs, sales of
energy materials and prices, energy conservation loan volume,
and consumer attitudes and reactions are important and should be
monitored. In addition, a continuing analysis of alternate fuel
consumption and prices will help determine program success. Tech-
nical assistance and more emphasis on information-sharing would
be helpful. Studies ought to be initiated to monitor and evaluate
the impact of the current Federal energy policy to determine if
the results warrant a continuation of the market-price principle.
MICHAEL GERMAN
Policy Evaluation & Analysis Group
American Gas Association
1515 Wilson Blvd.
Arlington, Virginia 22209
The American Gas Association (A.G.A. ) welcomes this opportunity to
provide its comments on the Environmental Protection Agency (EPA) Notice
of Public Hearings on the Federal Energy Conservation Program. 46 Fed.
Reg. 29752 (June 3, 1981). A.G.A. is a national trade association comprised
of nearly 300 natual gas transmission and distribution companies which
provide natural gas to approximately 160 million consumers in all 50
states. These A.G.A. member companies account for nearly 85% of the na-
tion's annual gas utility sales.
EPA's 1981 Section 11 review program is focusing upon the changing
federal energy conservation policy which is now tending to favor a decen-
tralized thrust for energy conservation. EPA's focus is apparently based
upon the assumption that the federal government will withdraw from its
active pursuit of comprehensive energy programs such as the Residential
Conservation Service (RCS) Program I/ at the Department of Energy. While
it is apparent that the present Administration plans a more limited role
for the federal government in energy conservation matters as has been
exhibited by the Administration's budget proposals for FY 1981 and FY 1982
A.G. A. is not convinced that the result of such budgetary changes will
be of great consequence for our member companies. Our belief is based
upon the fact that, regardless of whether monies are removed from the FY
1981 and FY 1982 budgets for such programs as the RCS Program, the statu-
tory obligations for governments and covered utilities will remain. _2/
I/ 10 C.F.R. Part 456
2/ Furthermore, substantial civil penalties for noncompliance will remain
as substantial impediments to the development of locally-tailored conserva-
tion programs. See; Section 219(d) of the National Energy Conservation
Policy Act (NECPA7~92 Stat. 3206; 42 U. S.C. Section 8201).
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Since the passage of NECPA in 1978, most utility conservation efforts
reflect the stringent requirements of the RCS Program to some extent. In
order to get an idea, then, as to what role utilities will play assuming
federal mandatory programs are abolished, we believe that EPA should
focus its attention on what was being done prior to the enactment of NECPA.
In the gas industry, an A.G.A. survey in August, 1978, canvassed 213 gas
distribution member companies. 168 of these companies responded to the
survey. Of the 168 respondents, 87 (52%) already provided home energy
audits, with 74 (44%) providing audits at no cost and 7 (4%) providing
them at some cost. Attic insulation was marketed by 47 (28%) of the re-
spondents, and 26 (15%) of the respondents sold wall insulation. Nine
(5%) of the respondents marketed storm doors and windows. Nearly all of
these programs were initiated without any direct federal, state or local
mandate.
Some specific actions taken by our member companies include a gas
utility in the Chicago-Detroit area, which marketed ceiling insulation
and offered a variety of financing options for its customers. By March,
1979, the company estimated that approximately 140,000 homes had been
insulated. Another gas utility in the Northwest also was operating an
ambitious energy conservation program at the time NECPA was enacted. In
addition to offering financing arrangements for its customers, they off-
ered ceiling insulation, side-wall insulation, night set-back thermostats,
storm windows, furnace ignition devices (eliminating pilot lights) and
new furnace and water heaters which met self-imposed stringent energy
conservation standards. One of our west coast combination companies, at
the time NECPA was enacted, had a program aimed at encouraging consumers
to add insulation to their buildings by offering zero interest loans for
the purchase of insulation. In the commercial sector, another gas utility
on the west coast had a conservation program which offered consulting
advice on energy conservation measures and practices to owners of commercial
buildings.
If the mandatory aspects of the RCS program are eliminated, EPA can
expect to see various states electing to retain the existing RCS Program
in some form. Furthermore, it is likely that many states will elect to
develop conservation programs more closely suited to the unique climatic
and economic situations in their states. Ihis conclusion is borne out by
the fact that prior to the enactment of NECPA, gas utilities in two states,
Wisconsin and Oregon, were implementing state-mandated conservation pro-
grams. These mandatory programs existed at the same time as those volun-
tary utility efforts described above. In Wisconsin, the state public
utility commission mandated a program which was similar to the RCS Program
in that utilities were required to contact and offer energy audits to
their customers. To date, experience in Wisconsin has been that, while
initial reaction to the program was satisfactory, there has been no signi-
ficant participation in the program in the last two years. The lack of
interest on the part of Wisconsin consumers at this time is particularly
surprising considering the fact that most utilities in that state have
been aggressively marketing the state program. The Oregon program, adopted
in 1977 by the state legislature, is also similar to the RCS Program in
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its provisions for home energy audits and utility arranging services for
installation and financing of conservation measures.
In terms of the energy savings which can be expected as a result of
shifting the conservation initiative from the federal level to the state and
local level, EPA should again consider the type of energy conservation sav-
ings which occurred prior to the enactment of NECPA. A. G. A. has conducted
a recent survey of the natural gas utility industry aimed at discerning
changes in energy consumption during the period from 1973 to 1979. During
this period, the RCS Program was not in effect and therefore had not yet
had any impact on energy conservation. The A.G. A. member company survey
strongly indicates that substantial conservation has already taken place
in the residential and commercial sectors without mandatory federal
programs. For example, in the residential sector, gas use declined at a
rate of 2. 7% per year, resulting in a 15% decline in per user gas consump-
tion during the survey period. Furthermore, commercial sector energy
consumption declined at an annual rate of 2. 2% per year, resulting in
12.4% less gas consumption per user during the 1973-1979 survey period.
Obviously, A.G. A. has filed extensive comment with DOE stating that there
is no necessity for a federally mandated conservation program such as
the RCS Program. Given the substantial amount of price-induced conserva-
tion which already has taken place, such a program will add an unnecessary
burden to utility.
It is our understanding that DOE is in the process of revising its
RCS rule, with the goal of making the rule reflect more strictly the re-
quirements of NECPA, thereby eliminating many of the questionable inter-
pretive aspects of the RCS Program added to the existing rule by DOE.
Since this proposed revised RCS Program rule would give EPA and the natural
gas industry a better idea as to what the federal role will be in resi-
dential energy conservation, A.G. A. hereby reserves the right to supple-
ment its comments to EPA at such time as the proposed revised RCS rule has
been issued. We believe that this rule will be relevant to the focus of
EPA's Section 11 inquiry.
SARA HMRIC
Associate Director, Energy
American Paper Institute, Inc.
260 Madison Avenue
New York, New York 10016
The American Paper Institute is pleased to submit comments to the
Environmental Protection Agency on the future of various federal energy
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conservation programs discussed in EPA's Issue Paper, "A Review of Federal
Energy Conservation Programs."
The American Paper Institute (API) is the national trade association
of the pulp, paper and paperboard manufacturers in the United States. API
consists of approximately 175 manufacturers which produce about 90% of the
nation's pulp, paper and paperboard output. In 1980, the entire paper and
allied products industry output was valued at approximately $59 billion.
This industry, which operates in all states of the union, employs more than
700,000 people.
As an energy-intensive industry, substantial efforts have been made
to voluntarily increase our energy efficiency, and reduce our use of
fossil fuel and purchased energy. The paper industry has improved its
energy efficiency since 1972 by reducing its 1980 fossil fuel and purchased
energy use per ton by 26.3%. During this time, the paper industy reduced
its total use of fuel oil in barrels by 27.5%. The industry's fuel and
energy consumption in 1980 consisted of 48.1% self-generated hydroelectric
power. By burning its non-fossil and renewable residues (spent pulping
liquors, bark and hogged wood), the industry increased its energy self-
sufficiency from 40.5% in 1972 to 48.1% in 1980.
The paper industry has consistently supported the use of free market
forces to encourage energy conservation. The industry applauds the efforts
of this Administration to move the country away from government directed
conservation efforts. The Department of Energy's initiatives to reduce
the FY 1982 budget funds for federal conservation programs, referred to in
the EPA Issue Paper, is one of these efforts which the paper industry
supports.
The wastepaper recycling segment of the paper industry would like to
take this opportunity to comment on federal, state and local conservation
activities in relation to the construction and operation of waste energy
facilities.
To the extent that governments develop programs for the burning of
urban waste to recover its energy value, the paper industry believes that
the free market should be allowed to determine the destination of recyclable
waste paper. Federal, state and local governments should not enact legis-
lation that precludes or interferes with the collection of wastepaper for
recycling. There are current laws and programs which do so. Allowing the
market to determine the most economical use of recyclable wastepaper is
consistent with the Reagan Administration's philosophy of not interfering
with free market choices.
The American Paper Institute appreciates this opportunity to express
its views to the Environmental Protection Agency on this matter.
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RALPH B. HIRSCH
National Legislative Director
League of American Wheelmen
112 South Ifith Street
Philadelphia, Pennsylvania
At least in the short run, energy conservation in several sectors is
likely to be a highly economical form of energy production. Although, as
the just-released National Energy Policy Plan (July 1^81) observes, some
conservation measures require considerable investment for long-term sav-
ings, some require little investment. The enhancement of bicycle trans-
portation is one of these low-cost measures. Already a significant and
growing part of the transportation sector in the United States, the bicy-
cle has the added advantage of being an instantly recognizable symbol of
energy conservation.
The energy conservation activities of the Department of Energy as
they bear on bicycle transportation are discussed below under four head-
ings. A brief review of current status under each headinq is followed
by recommendations for future action.
(1) Leadership and coordination of federal agencies' efforts
In July 1980, DOE was assigned the role of developing guidelines for
energy management in the federal government and evaluating the compliance
by agencies with those guidelines (see appendix 1). So-called "two-wheeled
vehicle programs", to include the encouragement of bicycle use for commut-
ing and operational purposes, are among the measures that must be consi-
dered in each agency's energy plan.
We urge specific attention by DOE to these two-wheeled vehicle pro-
grams in the evaluation of the first year's reports from the federal agen-
cies, for purposes both of creating a baseline for gauging progress in fu-
ture years and of identifying measures that may be readily transferable
to other agencies.
DOE should also take a strong position at its own facilities, such
as Fermilab and Hanford, to foster bicycle use among employees. Care
should be taken to avoid policies that tend to discourage or interfere
with bicycle use, such as a ban on bicycle use (proposed in spring 1QR1
but now apparently averted) on some roads at Hanford, and incidents last
year in which enforcement personnel at Fermilab reportedly tried to dis-
courage bicycle commuting by staff members.
(2) State and local conservation activities
State energy conservation programs in several states include a bicy-
cle transportation component, However, many state highway agencies still
are inclined to give bicycle transportation measures a low priority. An
expanded concern by state energy offices for inclusion of such measures
may serve to raise these projects to a priority level where they could suc-
cessfully compete for funding by state or local governments.
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The April 1980 Department of Transportation report "Bicycle transpor-
tation for enerqy conservation" (required by Section 682 of the National
Energy Conservation Policy Act of 1978, Public Law 95-619) recommended that
bicycle transportation be integrated in "appropriate federally required
state and local planning activities" by DOE and several other agencies.
(See appendix 2). As information is lacking to gauge how well this has been
done so far, DOE should evaluate state and local planning done under its
requirements to obtain that information.
Energy contingency plannina at the state and regional level should in-
clude the contribution that bicycle use could make in various energy emer-
gencies. Although this is being done in a few metropolitan regional plan-
ning agencies (e.g. Delaware Valley) it needs to be considered in all of
them.
(3) Grants programs
We are aware of only a few bicycle-related grants made by DOE. So
far as we know, they have been relatively small in size and high in the
quality of the projects. These include the significant and valuable sup-
port by DOE to the first national conference for bicycle professionals
(Pro-Bike 80) in Asheville, North Carolina in November 1980, and the re-
cent award of an Appropriate Technology small grant to a bicycle group in
Atlanta, Georgia, for a project to foster bicycle commuting. It would be
helpful if DOE were to prepare and collate information to publicize all
these projects, and to encourage agency officials to consider favorably any
future applications for similar projects of high quality.
(4) Public information activities
Scattered efforts of uneven quality have been undertaken by TOE in
promoting bicycling as an energy conservation measure. On the positive
side, a listing last year in the Energy Consumer of state bicycle coordi-
nators and other contact persons was helpful, and should be repeated in an
updated version.
On the other hand, some efforts are of dubious benefit. Newsweek
(6 April 1981) showed, under the slogan "Keep it up, America. Leave the
car at home once in a while" a man and a woman riding double on a single
bicycle and violating many safety rules. An important message was undercut
by being inappropriately conveyed. The opportunity that the bicycle can
provide as a potent and instantly recognizable symbol of conservation
should be capitalized upon by DOE. Advance consultation with the organized
bicycling community will enable TOE to take full advantage of this poten-
tial.
A particularly promising opportunity will be offered by the DOE's
participation in the 1982 World's Fair in Knoxville, Tennessee. The role
of energy conservation generally, and of bicycle transportation's contri-
bution specifically, should be presented to the anticipated millions of
fairgoers.
383
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Summary
Large cuts in funding for conservation-related activities in the DOE's
1982 budget suggest a general retreat from conservation as an important com-
ponent of departmental policy. Tfe think that conservation ought to have
more emphasis among DOE's objectives. However, even under a regimen of re-
duced funding the bicycle offers an outstandingly efficient vehicle for pro-
moting energy conservation. As the national organization of bicyclists we
are prepared to work with the department to get the maximum of mileage from
that vehicle.
Appendix 1
10 CFR Part 436, Federal Energy Management and Planning Programs; Guidelines
for Energy Mangement in General Operations of the Federal Government
Final rule. (45 Federal Register 44558, 1 July 1980)
436.104 Energy conservation measures and standards.
(a) Each agency shall consider for inclusion in its plan the measures iden-
tified in appendix C of this subpart.
Appendix C - General Operations Energy Conservation Measures
(a) 'Hie following individual measures or set of measures must be considered
for inclusion in each agency's 10-year energy management plan:
(10) Two-Wheeled Vehicle Programs Includes activities to encourage
the substitution of bicycles, mopeds, etc. for automobiles for commuting and
operational purposes. These may include the establishment of weather-pro-
tected secure storage facilities, shower and locker facilities, and restric-
ted routes for these vehicles on Federal property. Cooperative programs
with local civil authorities may also be included.
APPENDIX 2
Office of the Secretary, Department of Transportation, Bicycle transporta-
tion for energy conservation, April 1980 (Report of the Secretary of Trans-
portation to the President and the Congress, pursuant to Section 682 of the
National Energy Conservation Policy Act of 1978, Public Law Q5-619).
DOT bicycle program activities (page 38):
2. Implementing public information/awareness programs.
The Department will work with the Department of Energy to insure
that federally sponsored energy conservation media cmapaigns call
attention to the benefits of cycling.
DOT will request that all appropriate Federal agencies (DOI, DOE,
HUD, EPA) require full consideration of bicyclist's needs in ap-
propriate federally required state and local planning activities.
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MAKE L. HOFFMAN
313 1/2 S. 9th Avenue
Yakima, Washington 98902
I would like to join the public hearing on federal energy program
changes, but D.C. is too far from Washington (state) for me to attend.
Still I would like to add my comments to those you will receive.
I feel that this administration has really missed the boat on energy.
By putting all our eggs into the oil companies baskets, we're bound to end up
facing the last drop of oil or the last chunk of coal with few alternatives
and at the cost of ruining our environment. Fission nuclear expansion
will find us surrounded by an ever growing pile of plutonium. Both of
these should take a back seat as far as our future goals are concerned, I
feel.
I was disappointed to hear Pres. Reagan cut back most of the solar,
geothermal, tidal, wind, etc. research budgets. This is indeed a step
backwards. These "unconventional" energy forms are our only long term
hopes, except for fusion nuclear and hydro power. Fusion seems to be
safer and should be researched further.
Hydro is a whole separate can of worms. I agree that dams are neces-
sary in some areas for irrigation, city water supplies and flood control
and where a dam exists I feel a generator should too, BUT I also like wild,
free rivers for my own selfish recreational desires, for beauty, and for
wildlife. We need healthy rivers for healthy ecosystems to continue. So
hydro power should only be part of the answer, unlike what the Army Corps of
Engineers seems to think.
Conservation and simpler life-styles could also be encouraged by the
federal government. This doesn't seem to be the case with our present
administration, unfortunately.
I know the problems are very complex, but the direction in which we
seem to be heading has me very worried. The year 2000 is very close. We
have little time to correct our ways and no time for mistakes. PLEASE
HELP!!
AVIS E. HOLMES, President
Detroit Energy Corporation Consortium
State of Michigan Plaza
1200 Sixth Street
Suite 404
Detroit, Michigan 48226
RESPONSE TO ISSUES AND DISCUSSION TOPICS RAISED ON PAGES 4 & 5
Analysis of the rationale, asumptions, state and local programs budget
information, etc., clearly indicates substantial conflict between the stated
385
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national goals on "energy conservation" and the means by which to achieve
the goals, namely funding.
* Quote, "The Nation's energy problems will be solved primarily by the
American people themselves by consumers, workers, managers, inven-
tors and investors in the private sector not by the government."
Response: Prior to sweeping Wholesale changes, previously establish-
ed and planned programs should be evaluated and closely monitored
over a three (3) to five (5) year period. Over the past four (4)
years appreciable money as invested in these programs. To eliminate
these programs without properly determining their effect is extremely
wasteful.
* Quote, "The Government's role is to establish sound public policies,
based on economic principles, national security concerns, and a due
regard for environmental values, so that individuals and firms in the
private sector have the incentives to produce and conserve energy
efficiently, consistent with the national interest."
Response: The Government's role is to guide and promote "Alternative
energy sources" in order to efficiently utilize the nation's avail-
able resources.
* Quote, "The Government's role is not to select and promote favored
sources of energy. Doing so risks wasting the Nation's resources.
Response: The Government's role is to guide and promote "Alternative
energy sources" in order to efficiently utilize the Nation's avail-
able resources.
* Quote, "Formulation of energy policy must be sensitive to the
needs of the poor. But, energy policy should not be used as an
income transfer program. For example, holding energy prices down
for rich and poor alike is an ineffective way to help the poor."
Response: If energy prices/costs are targeted to the pocketbooks
of the rich some subsidy must be available to the poor. The feder-
al government must spend for energy purposes because an adequate
supply of energy is our first line of defense and is essential to
the national interest and security.
386
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* Quote, "Federal public spending for energy purposes should be
limited to those areas in which the private sector is unlikely to
invest sufficiently, such as in high cost, long lead time technolo-
gies with substantial prospects of high pay-off. Public spending
should not be used to subsidize domestic energy production and
conservation since this buys us little additional security and
diverts capital, workers and initiative from more productive uses
elsewhere in the economy."
Response; Public (federal) spending, to subsidize domestic energy
production and conservation is an "appropriate" and "necessary"
federal government expenditure, because the United States is not
energy self-sufficient. Concurrently, this nation is an excessive
consumer of non-renewable energy. Residential usage comprises
thirty three percent (33%) of energy consumption and therefore
the public must spend to reduce this high percentage. Moreover,
energy production and conservation are integral components linked
to all sectors of the economy. Since most essential industries
have been highly developed, the track to innovation and continued
progress lies in our capability to improve through energy conserva-
tion and energy production.
Government spending is a "long term investment" with an "imme-
diate result" of employment and education. Employment opportuni-
ties will in turn stimulate the economy. It is essential that
government spends its productive areas.
* Quote, "The United States government should also take steps neces-
sary to deal with potential disruptions in world oil markets.
These steps include increasing strategic petroleum stocks and
eliminating controls on oil which discourage the private sector
from dealing with disruptions effectively."
Response; The private sector is concerned with continually increa-
sing profit for its stockholders and investors. The private sector
is not in any way charged with the responsibility of meeting the
needs of the poor, nor is the private sector charged with the
responsibility of the general welfare of the public. To impose
such a responsibility on the private sector is to introduce incon-
sistency in the concept of free and private enterprise. It is the
responsibility of the federal government to ensure that the needs
of the poor are met.
* Quote, "The United States government should also take steps nec-
essary to deal with potential disruptions in world oil markets.
These steps include increasing strategic petroleum stocks and
eliminating controls on oil which discourage the private sector
from dealing with disruptions effectively."
387
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Response (Continued): A first step that the United States govern-
ment should take to deal with potential disruptions in vrorld oil
markets is is to alleviate the great dependency of the U.S. on
foreign oil. This requires that the federal government actively
participate in the promotion of energy production, energy conser-
vation, and alternative fuels.
* Quote, "The level of oil imports per se is only a rough indicator
of the Nation's progress in solving its energy problem. The wel-
fare of the American people is inextricably linked to that of
people in other countries, so the United States cannot insure its
own security by a reckless attempt to eliminate imports."
Response; The national security of this country is paramount.
Thus, domestic energy production and conservation is essential to
that security. A weak link in our security is our over-dependency
on imported energy. It is impractical to totally and dramatically
eliminate imports. However, a policy must exist to reduced our
total dependency on such imports. Availability of oil imports is
unreliable and subject to the political whims of despots and fana-
tics over which we have little, if any, control. While it is true
that our welfare is linked to that of people in other countries,
we cannot rely on other countries for our own security. The U.S.
can only secure our own security by minimizing reliance on other
countries for essential needs.
* Quote, "Energy is an international issue and so the American people
have an interest in seeing that other countries establish sound
energy policies."
Response; The United States must first establish and implement
its own sound energy policy/policies, then monitor and evaluate
those policies on a consistent basis, determine the success and
short-comings of those policies to eventually demonstrate and
share these policies with other countries. In so doing, the U.S.
must be ever mindful that other countries that we are influencing
are nations that have governments that guide, promote and imple-
ment national policies and goals imposed on their private sector.
RESPONSE TO GENERAL QUESTIONS IN EPA ISSUE PAPER, PAGE SEVEN
* How are private firms, state governments, and local agencies prepar-
ing to assume their new responsibilities?
Response; Given the new direction of federal energy policy and
the decentralized nature of energy conservation, there is no
provision for direction, support or authorization of private firms,
state governments and local agencies to assume the responsibilities
eluded to herein. The new policy does not offer a plan or the
funds for the these agencies to assume the responsibilities.
388
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* Which activities will get priority from public and private organiza-
tions and what will be consequences if some activities are discon-
tinued?
Response; It appears that public/private organizations will give
priorities to those activities which serve their own self-interest
because there will be no national priority. It further appears
that activities that attempt to meet the essential needs for the
poor will be placed in secondary or tertiary levels of concern,
if not totally discontinued. Current energy conservation and
energy assistance activities are inadequate to meet the needs of
the poor and the general public and should have been expanded.
Additional elimination and decentralization of these activities
will have an adverse ^effect on the national energy goals of the
1977 Act and will adversely impact upon the economy and the nation-
al security. Adversely upon the economy because the public will
continue to over consume and a large segment of the poor will be
unable to pay the cost of such heavy consumption. Adversely upon
the national security because consumption will be at a rapid rate
while conservation and domestic production will be curtailed.
Consequently, we will be vulnerable to international forces over
which we lack direct control.
* Have any new initiatives or opportunities been created as a result
of the shift in Federal energy conservation programs?
Response: There has been a notable decrease in initiatives because
the opportunities and incentives have effectively been removed. A
good example is the federal government's reneging on a commitment
to alcohol fuels projects. Elimination of financing in alcohol
fuels projects and other alternatives to imported fuels has killed
internal control of an extremely viable means of production which
itself could generate a series of new initiatives and opportunities
that would create vast employment opportunities and in so doing
stimulate the economy. The elimination of the initiatives and
opportunities that were created through the weatherization program
and the industry that sprang from it have been lost. Moreover,
the CETA workers who were trained out of weatherization funds will
now be out of jobs. That constitutes a waste of governmental
funds because the jobs are now unavailable. The second waste is
the loss of available "trained" manpower to the ranks of the unem-
ployed, while the public need for weatherization services escalates
with the ever-rising cost of energy.
* What is the Federal government's proper role in this period of tran-
sition?
389
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Response; The proper role of the federal government is to postpone
the hasty elimination of programs already in place until such time
as the new programs have been drafted and potential benefit deter-
mined. As previously stated the assumption that lead to the sweep-
ing eliminations of programs are untested. Thus, the proper role
of the federal government is to insure that there is no gap in
services, benefits or progress in the transition of ideologies or
approaches to a very serious matter of national concern. The
hardship that will inure to individual citizens as well as to our
conservation and security needs does not justify such an untested
course of action.
Under the Department of Energy (DOE) Act the federal govern-
ment has mandated that a study should be held to assess the govern-
ment's energy program. The federal government should properly and
fairly postpone any massive changes until such time as the mandated
study has been completed. Changes should then be made on the
basis of the findings of that study which is to be completed no
later than January 15, 1982.
* How should the Federal government evaluate and monitor the effects
of its new energy policies and program changes?
Response; In order to monitor the effects of new policies it is
first necessary to monitor, assess and evaluate existing energy
policies and programs in order to provide for an "objective stan-
dard" of reference. New policies and programs should then be
measured or compared to that reference standard and to national
needs and goals.
STATE AND LOCAL CONSERVATION ACTIVITIES, EPA ISSUE PAPER, PAGE 12
* Which of the functions formerly performed by Federally funded
programs are likely to be picked up by the state energy offices?
By cities and counties? By the private sector?
Response; The State of Michigan, as a point of reference, relies
almost exclusively on federal government funding of the State
Energy Office. These funds have been inadequate to permit any
serious planning or activities by the State Energy Administration.
The current funding priorities of the State of Michigan are prisons
and the correction systems, mental health, and. social services.
Thus, it is extremely unlikely that the State of Michigan can take
up the massive slack that will be created by the sweeping elimina-
tions in the energy area.
* Which of the functions formely performed by Federally funded pro-
grams are likely to be picked up by the state energy offices? By
cities and counties? By the private sector?
390
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No major cities or counties have established an energy office,
and the same are already short-funded and have relied heavily upon
federal funding in the past for essential services. Thus, it is
not likely that the local entities will be able to take up the
slack. The private sector involvement is limited to the utilities'
participation in the Residential Conservation Program. Their
effectiveness will also be curtailed because the federal weather-
ization and fuel assistance plans which helped low-income people
conserve energy and subsidize energy costs have now been eliminated.
* What will be the effects if a state decides to phase out its energy
office? Which activities will be discontinued?
Response; The State Energy Office is already unfunded and had
only provided scant information and limited technical advice.
Almost all of their activities were with utilities. However, they
lacked sufficient staff personnel to effectively monitor the utili-
ties' residential conservation activities. To eliminate the state
office would mean that the public would be left with no representa-
tion or means of becoming involved in the national energy effort.
Since effective energy conservation relies primarily on the human
element it would be cost effective to expand upon the foundation
that has already been established, especially if the federal gov-
ernment intends to withdraw from its role in the energy effort.
It is imperative that the State of Michigan be funded to take up
the slack.
* How can local governments transfer the state experience and resour-
ces to the development and implementation of local programs?
Response; The state experience cannot be transferred to local
government unless accomplished by federal government fundings,
support, and progressive monitoring and evaluation.
* How will the 21 states that have biennial budgets adapt to the new
Federal priorities? What is the consequence of their operation on
a biennial budget likely to have on this adjustment?
Response; Michigan has already adopted its "annual" budget, and
the budget did not adapt to the new federal priorities as there were
no funds appropriated to take up the slack. Because 21 states or
42% of the states do have biennial budgets is a further indica-
tion that the elimination of weatherization and assistance pro-
grams ought to be postponed in order to allow the entire 50 states
the opportunity to reassess their priorities so as to minimize
wholesale hardships and suffering.
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* How can information, experience and resources be shared regionally
after the discontinuation of the DOE Regional Offices?
Response; If by elimination the DOE Regional Offices the system
of regionalism itself would be destroyed the sharing of information
by regions would cease to exist. Thus, the DOE Central Office
would have the additional responsibility previously held by the
Regional Offices. Information and direction as to the goals is a
federal government function that cannot be delegated. A contact
person or unit by state in the national office plus a toll free
telephone number might be a pragmatic alternative.
* Can alternative funding source be found for conservation activities?
Response; Conservation is essential to our national security and
has been defined as a national goal. Thus, conservation activities
and the funding for such is the federal government's responsibility.
Perhaps, after ten or fifteen years following the implementation
of all of the measures essential to conservation (including alter-
native sources) have taken root then these activities themselves
will lessen the need for governmental funding. At the present
time the federal government must take the lead as it is a matter
of national security and public welfare.
WEATHERIZATION AND DOW INCOME ENERGY ASSISTANCE, EPA ISSUE PAPER, PAGES 13,
14=15 ~
* What governmental department? (Page 13)
Response; On the issue of what governmental department will admin-
ister the program is not as essential as the continuation of serv-
ices, except that the federal government should adequately fund
whichever department is designated as administrator. There should
be no break in the services.
However, the state block grant approach will not be effective
because many of the states are not sufficiently prepared to deal
with the subject of energy. Their priorities are similar to Michi-
gan's which is one of the most advanced states, i.e., trying to
deal with people who are physical menaces to society and/or unable
to accept the massiveness of the responsibility that goes with the
national goals of energy. Here again there should be a period of
adjustment and preparation before the states are given this respon-
sbility. To thrust it on the states at this point in time would
be a peril to our national security. It should be remembered that
national security is a federal and not a state responsibility.
Funding mechanisms and structural issues
* In light of the proposed changes, how can the nation maintain an
effective low income weatherization program?
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Response: The elements of a low-income weatherization program are
"labor", "materials", "management", and "training". All of which
cost dollars. Low-income weatherization by definition means serv-
ice to people who do not have money to buy such service themselves.
The elimination of the CETA program along with the reductions
from current funding levels mean that the nation will not be able
to maintain an effective low-income weatherization program.
* If weatherization is transferred into HUD Community Development
Block Grant, what agencies would be effective sponsors at the
community level?
Response; If transferred to HUD Community Development Block Grant
then HUD would have to determine the effectiveness of the respon-
sibility. They should use a criteria and an appropriate monitoring
and evaluation system that would be comparable to the standards
they use to approve, certify and monitor HUD approval comprehen-
sive housing counseling agencies.
* How can problems involved in transferring the program from one
agency to another be minimized?
Response: The problems can be minimize in transferring the program
into one agency to another by incorporating the existing operations
into the new agency for one year. During the year the successor
agency would establish its own standards as to sponsor criteria and
performance levels. Unqualified sponsors will be given a reasonable
period of time to phase out their activities.
Implementation issues
* If a state decides to phase out Community Action Agencies, how
can their resources and experience be transferred to the new
weatherization sponsor?
Response; Community Action Agencies that have the proven capabil-
ities should be allowed to continue under the new standards estab-
lished by the successor department. Where such is impossible the
Community Action Agency personnel and resources should be available
and utilized by the succesor agency.
* Should LIEAP funds be utilized for weatherization? How can the
LIEAP program coordinate its activities with the weatherization
program at the state and local level?
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Response; It would be a dilution of the purposes of LIEAP funding
to allow same to be used for wea ther izat ion. Although the same
agency might handle same, separate funding should be available
for weatherization, and under no circumstances should the level
of funding be reduced. I would grant that weatherization and
LIEAP all have to do with energy, but more importantly, they have
to do with housing and could be effectively administered by a
single entity perhaps reducing administrative costs. This would
in effect increase the amount of money available for direct ser-
vices.
Essential to the success of all of these pograms is "counsel-
ing" in order to insure that the gains are not short-termed and to
create an effective conservation effort, because conserving by
nature is a human function.
What is the most equitable and cost-effective weatherization pro-
gram? Should the Federal government continue to provide substan-
tial assistance ($l,000-$2-000/unit) to a relative small number of
houses? Or, should the program be restructured to provide minimal
weatherization ($200-$300) to a larger number of units?
Response; Based on our experience and observation the Federal
government should continue to weatherize the complete home. Com-
plete weatherization would be wasteful because there would be no
real energy savings. It would be money thrown away. The sensible
thing would be to provide sufficient funding to weatherize the
homes. If given a time-table we should adopt a plan to weatherize
all of the twelve million low-income homes with five years, a
structured approach must be followed. Hence, the bandage on the
gaping hole approach would serve no beneficial purpose, nor would
it lead to the achievement of the state goal.
How can CETA workers be retained in the weatherization industry?
Response; The program referred to in the previous question should
include CETA workers. A reduction in the cost to retain these
workers could be realized through the expansion of the weatheriza-
tion program, based on the scale and the amount of activity that
would be generated. Hence, it is obvious that only through the
infusion of dollars into the low-income weatherization program can
CETA workers be afforded the opportunity to participate in the
weatherization industry. The private sector cannot provide suffi-
cient job opportunities that would result in the assimilation of
the vast number of CETA workers. Additionally, the work experience
gained by the CETA workers will serve to make them more job ready
if jobs in the private sector to come into being. The net effect
would be to reduce the level of requisite support from the govern-
ment.
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EVALUATION, EPA ISSUE PAPER, PAGE 16
* What information is necessary to enable the Federal Government to
monitor and evaluate the effects of changes in energy policy and
conservation program? For example, should DOE monitor whether
state and local agencies continue important conservation activities?
Whether private firms continue conservaton R&D? Whether homeowners
continue to invest in conservation improvements?
Response; First, it's necessary to monitor the existing energy
policies and conservation programs. Without a knowledge and under-
standing of the successes or weaknesses in the current program
the Federal government will be able to determine the effects of
the proposed changes in such policies and programs. The question
posed as to whether DOE should continue to monitor the continuation
of various programs is less important than whether or not we have
made an acceptable level of progress toward the national goals of
conservation, service and self-sufficiency.
* What types of regular monitoring and special studies would be most
appropriate for obtaining this information?
Response; Again, since the national policies of energy are rather
new it is important to determine, assess, monitor and evaluate
what is and what has been.
* How can this information be gathered without placing a major paper-
work burden on respondent organizations?
Response; The results of monitoring and evaluation of current
programs will provide a guide as to policy needs for future pro-
grams. This is especially critical since the proposed new changes
will be based primarily on assumptions and such programs have not
been clearly defined to the point where a standard for success or
failure has been identified. We should take advantage of informa-
tion already available through past activities and use this infor-
mation to design the programs and policies that meet our national
goals. Therefore, the nature of information needed will be dicta-
ted to a large degree by identified needs.
* Regarding the Sunset review, what are the most important questions
in the Sunset Provisions? What would constitute adequate responses
to these questions? What types of analyses should the responses
contain? What types of data should be include? What level of
detail is needed?
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Response: The most important aspects of the review are those
that have to do with the objectives for which the program is being
established, specifically, (2) an identification of the objectives
intended for the program and the problem or need which the program
was intended to address; (6) an assessment of the degree to which
the original objectives of the program have been achieved, expressed
in terms of the perormance, impact, or accomplishments of the
program and of the problem or need which it was intended to address,
and employing the procedures or methods of analysis appropriate to
the type or character of the program; (7) a statement of the
performance and accomplishments of the program in each of the
previous four completed fiscal years and of the budgetary costs
incurred in the operation of the program; (8) a statement of the
number and types of beneficiaries or persons served by the program;
(9) an assessment of the effect of the program on the national
economy/ including, but not limited to, the effects on competition,
economic stability, employment, unemployment, productivity, and
price inflation, including costs to consumers and to businesses;
(10) an assessment of the impact of the program on the Nation's
health and safety; (13) an analysis of the services which could be
provided and performance which could be achieved if the program
were continued at a level less than, equal to, or greater than
the existing level; and (14) recommendations for necessary transi-
tional requirements in the event that funding for such program is
discontinued, including proposals for such executives or legislative
action as may be necessary to prevent such discontinuation from
being unduly disruptive.
I feel that all of these items are important because they
address essential criteria that is necessary to determine whether
or not an energy policy is needed and will show the success and
failures of such policy. Perhaps, most importantly, they will
advise us as to whether or not the assumptions that lead to the
proposed changes possess the validity that would warrant such
changes.
Again, I would stress that the four years of data already
compiled should be analyzed. This information must be augmented
by survey-interviews of actual consumers aivl participants both at
local and state levels. With four years of activity behind us we
will have empirical data that we can use to affect policies and
program changes that would make it unnecessary to rely upon assump-
tions and its many many variables about the energy market and the
behavior of firms and individuals within it.
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BILL HORNE
Deputy Director for Conservation
State of South Carolina
Office of the Governor
SCN Center, llth Floor, Suite 1130
1122 Lady Street
Columbia, South Carolina 29201
A federal energy policy is most important in providing direction for
both energy suppliers and consumers. We have already experienced seme of
the potential problems associated with rapid price increases in energy.
Inflationary pricing policies have affected almost all goods and services
produced. An effective energy policy which allows time for development
of U.S. energy resources is needed to help overcome and prevent future
problems such as inflation.
Expansion of our economy, unstable conditions in the Middle East,
balance of payments and controlling inflation should be addressed in energy
policy development. We must also consider long term objectives. If we
continue to have dramatic price increases in energy then control of infla-
tion and expansion of our economy will be more difficult to obtain. Stable
energy prices, however will assist in both controlling inflation and promo-
ting growth.
An energy policy ought to seek and encourage stability in price and
adequate supplies of energy.
In the immediate future conservation or efficient utilization of our
energy will help stabilize prices. As we expand our efforts to produce
more energy, efficient utilization can make otherwise wasted BTU's available
for growth. Conservation can play an important role as a source of energy
in the period ahead as we develop our sources.
How we achieve more efficient utilization in the market place is
important. Large private firms such as IBM have already demonstrated an
ability to reduce BTU consumption and expand simultaneously through more
effiicient utilizaiton of energy.
In our State the small and medium size firms without engineering
staffs do not have similar track records in conservation. Commercial
consumption of energy in South Carolina has increased much faster than
industrial or residential in the last twenty years. With substantial
industrial development occurring we have been able to produce more effi-
ciently. Industrial firms more often than not have expertise available in
house. Just recently, however, we had a request from an independent food
store owner to advise him on how to become more energy efficient.
Upon examination we simply find conservation expertise is needed in
certain areas of our economy. Also a strong conservation ethic ought to
be supported. Without that support we can expect less efficiency and an
extrapolation of past consumption trends in some areas.
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Moderating price increases can be accomplished through conservation
as presently demonstrated in gasoline. Consumption is down about 170
million gallons annually compared to 1978 in South Carolina. As we expand
energy production capabilities stable prices will assist in efforts to
expand the GNP and control inflation.
Without national direction it is difficult to determine the various
policies which may be developed by states and local agencies to impact
energy. One could expect ednergy producing states to view policy differ-
ently from consumption only states.
In summary, effective utilization of our energy resources in the next
few years should be a national goals. The benefits are tremendous and
include: assistance in controlling inflation, balance of payments are
favorable with less imported oil, wasted BTCJ's may be diverted to expansion
of the GNP, our current supplies last longer and provide valuable time
for the U.S. to develop energy resources and government should be able to
reduce its role in assisting with payments of energy.
J. A. HUNTER
Manager, Conservation Systems
San Diego Gas and Electric
P. O. Box
San Diego, California 92112
San Diego Gas and Electric would like to provide a written statement
in response to the EPA Hearing on the Federal Energy Conservation Programs.
First of all, the reduction of the Federal funds for the Energy Conser-
vation Programs, except for RCS, will place a greater financial burden on
our local community agencies and on our Company. There are three different
funding programs for the low-income and senior citizens in the San Diego
area. These funds cone frcm DOE, our utility company, and HUD (in the form
of Community Block Grant Money).
In regard to the RCS Program, the effects of the reductions would be
felt by the California Energy Commission. The CEC does receive Federal
funds for this program. These funds are used to award contracts for differ-
ent projects, some administrative costs, etc. If the funds are eliminated,
the CEC would either have to pursue alternative funding sources, or elimi-
nate the activities which are no longer funded.
The RCS funding cost would affect the local level differently. In a
general sense, our Company would be able to do an audit for less money with-
out the funding. The State Plan could then be modified according to our
community needs. Therefore, the audit could be streamlined accordingly and
the rates reduced.
SDG&E wants these comments to become part of the permanent record.
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Due to high utility rates in the San Diego area, we are always pursu-
ing ways to stabilize our rates.
WAYNE JOHNSON, Chairman
Government Relations Committee
Southern Gas Association
4320 LBJ Freeway, Suite 414
Dallas, Texas 75234
The Southern Gas Association, which represents the interests of
nealy 100 natural gas, transmission, distribution and production firms and
the South and Southwest is pleased to present these comments for considera-
tion by the Environmental Protection Agency in its continuing analysis of
Federal Energy Conservation Programs.
At its most recent meeting, the Board of Directors of the Southern
Gas Association adoptd a resolution supportive of an emerging trend in
federal energy policy to decentralize many programs which were formerly
conducted at the Washington level and return authority and responsibility
for these programs to various state and local agencies. The AGA Board
urged our member transmission and distribution companies to work closely
with officials of the various state agencies in developing effective pro-
grams and implementation plans in such areas as energy conservation, wea-
ther ization, low income fuel subsidy programs and other energy related
programs designed to help citizens use energy more wisely.
We share a conviction frequently expressed by officials of the Reagan
Administration that the price paid for energy is the largest single determ-
inant in controlling it's use. The supplementary information which accomp-
anied the notice for this EPA analysis includes the statement that current
changes in federal energy conservation programs are based on projections
that rising market prices of energy commodities will enhance conservation
efforts and we certainly agree with the determination.
Inherent in our support for this posture is the belief that state and
local agencies are in the best position to determine effective programs
and policies for the citizens of their particular states. Empirical evi-
dence exists to confirm our belief that local officials are most responsive
to needs of local taxpayers and perhaps most responsive to the wishes to
local citizens in developing programs which reflect those citizen's desire
for certain levels of state program funding and activity.
One example of the critical need for local authority and responsibili-
ty can be seen in the past winter's Low Income Energy Assistance Program
(LIEAP). Title III of the Windfall Profits Act created a Hone Energy
Assistance Program designed to provide funds to the states to be distribu-
ted to low income families to help offset the rising cost of fuel. The
stringent nature of the language in Title III plus the natue of the regu-
lations promulgated by the Secretary of Health and Human Services resulted
in program regulations which were in direct contradiction with existing
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state laws in at least seven of the states represented by the Southern Gas
Association.
As a result, natural gas utilities in those states found themselves
in a dilemma: their desire to participate in this low income subsidy pro-
gram was thwarted by existing state regulatory commission orders or by ex-
isting state laws. The single issue which brought this matter to our at-
tention was one of termination of utility service which is a responsibility
of the state utility regulatory authority. However, the federal government
in this example overrode existing state standards in favor of a national
standard on termination of service. Had the new policy of decentralized
control over federal programs been in effect, natural gas companies in
many of our states could have participated in the program thus insuring
that funds allocated for fuel subsidy payments could have gone directly to
the energy supplier. This is but one example of an instance where strict
federal regulations can work to the detriment of program goals.
Perhaps a more important reason for supporting a decentralization of
federal energy conservation activities lies in the fact that Americans
are conserving all forms of energy. Major oil companies have reminded us
that nationally our use of gasoline is declining. We have seen evidenced
from major electric utilities which suggests that the growth in electric
load is increasing at a slower rate than was experienced in the past few
decades and certainly in the first half of the 1970's.
Customers of natural gas utilities have reduced their consumption of
America's cleanest burning fossil fuel also. Residential customers, be-
tween between 1970-1980, have reduced their use of natural gas by some 15
percent. Industrial customers of natural gas utilities have reduced their
energy consumption by 11 percent. (Source: American Gas Association,
1981).
In conclusion, conservation is occurring in the marketplace in propor-
tions which are not directly related to level of federal program activity
urging energy conservation.
In this period of policy review and determination, we suggest the
federal government can best serve the American citizenry - both private
and corporate - by transferring authority and responsibility for energy
conservation programs to the state agencies and to the citizens themselves.
At most, federal participation should be advisory to the primary role of
the state agency. For example, federal programs might suggest areas for
state consideration in formulating programs for energy conservation. Fed-
eral agencies might advised private industry as to the specific cost
savings inherent in various conservation activities. Finally the federal
government might assist local governments - both state and municipal -
with advice and counseling on the best approaches to be taken by local
governments in urging energy conservation by their citizens. All of these
programs can be conducted in an advisory nature and do not require a vast
bureaucratic system of rules and program regulations which must be adhered
to by local governments and private corporations.
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Of primary consideration is the proposition described earlier that
rising costs of energy to business and to the individual honeowner is a
much more effective energy conservation promotional device than is all of
the federal, state and local programming.
Our economic system is based on the premise that when goods cost more
people use less and we congratulate and support the Environmental Protection
Agency in its expression of this overriding principal.
Thank you for the opportunity to submit these comments and we stand
ready to assist the agency in any way we can to fulfill your objectives.
SUSAN KELLER
The Community Network for
Appropriate Technologies
1321 Cleveland Avenue
Santa Rosa, California 95401
I wish to urge that action be taken to reinstate and expand energy
conservation programs. Facts prove: 1) energy costs continue to soar; 2)
present energy consumption habits make us politically vulnerable to other
nations; 3) conservation is a much wiser investment than the development
of new power supply; and 4) up to 40% of energy now consumed is wasted.
It is imperative that conservation programs receive continued Federal
support. Education and community outreach are essential if we are to
impact the community. Grants to the low-income community as a means for
getting conservation measures in place is of critical importance. Studies
prove that not only does the investment in conservation cost much less
than the energy supply offset by such action, but such action helps to
short-circuit the cash drain on the local economy to a great extent.
From 1973 - 1979 energy costs increased 171%. The next several years
will undoubtedly be much worse. Local governments and communities are
doing a great deal toward conservation, but federal assistance is needed
to insure a rapid transition toward a sustainable energy future. Such an
investment in efficiency of all support systems makes economic good sense
no matter who is talking.
The Reagan Administration Energy Policy (supply-side mentality) is
totally counter to the economic, social and political well-being of this
nation. National Security rests in our ability to conserve resources.
Please re-evaluate energy policy in the interest of the American people.
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PATRICIA KELLY
700 W 17th Street
Pueblo, Colorado 81003
The changes in the proposed 1982 Reagan budget for energy conservation
programs over recent policy are great. I can agree that there is a need
to allow petroleum-based energy sources to seek a real market level. We
would not be a nation of energy hogs and had such prices not been arti-
fically controlled. We would now have sufficient stock of energy efficient
houses and autos.
The recent price increases have caused American industry to lead the
way in our country to internally efficient operations. However, the
homeowners do not have the engineer or architect readily available to
advise them as to cost effective expenditures for conservation measures.
The lower the income of the householder the less likely that that person
has technical expertise in conservation of energy. Even more puzzling
to them is the evaluation of alternate energy sources. We just don't have
long experience in solar retrofit or wood stoves in city homes. Yet, many
actions, such as installation of solar window boxes or attached greenhouses
are ideal for the low to middle income do-it-yourselfer. That person
needs some technical assistance and some confidence that the work and expend-
itures involved are wise and effective.
There is an important consideration here for the nation, as well as
the householder: the barrel of oil thus saved for next winter will be
saved in 1983 and 84, as well as 1990. The Energy Extension Service pro-
vides the needed technical expertise. It would be a shame to phase it
out.
I work closely with our local EES office as chair of the advisory
committee. Our total budget is $21/700, $19,200 of it federal money. On
that we served 3,200 people in the past year. Like many middle sized
American towns, we have a high rate of home ownership. Many of these home
owners are do-it-your-selfers. With inflationary pressures, many more
people are becoming handimen every day.
The outreach programs of EES workshops, its technical printed material,
its onsight evaluations as invaluable these people. This individualized
service is not available elsewhere.
I am also concerned about what the program cutbacks and cancellations
will do to the truly poor. Weatherization and HEAP must continue or
frightening hardships will be experienced by them this winter. The locally
projected increase of 25% in natural gas costs this coming winter added
to the 275% increase sinced 1975 is a cruel blow to the low and fixed
income citizen. They must have somewhere to turn.
My town of Pueblo and state of Colorado seem to be fairly typical of
the rest of the country. In Pueblo this year we will receive $19,200 for
EES, $2,485,000 foi. LIEAP, $11,917,957 for Weatherization. With city and
county combined incomes of $34,000,000 in locally generated funds, there
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is little hope that they would absorb such costs and continue their custom-
ary services, particularly since they will be faced with cancellation of
other human service programs.
The state of Colorado has an Office of Energy Conservation designated
by the governor. However the legislature has never recognized it in fund-
ing. So, it has been dependent upon SECP and administers. I detected no
change in the attitude of our legislature toward this activity this year.
Energy conservation is an important national goal. It is a ready
source of energy to be used in other places. It should not be lost sight
of in the present budget slicing efforts.
WILLIAM C. KINARD, P.E.
1576 S.W. Dellwood Court
Portland, Oregon 97225
I certainly subscribe to the overall rationale for new directions in
our Federal Energy Conservation programs; however, we do not want to over-
look the merit of some Department of Energy programs, particularly programs
that have advanced research and development benefits. I particularly
subscribe to allowing market forces to induce conservation in each end use
sectornot to select and promote favored sources of energy.
Weatherization of the homes of the needy benefit society in several
waysquite effective as compared with paying portions of energy bills
year after year. Weatherization grants based upon cost-effective actions
by regions probably should be limited to insulating ceilings, caulking,
weatherstripping and floors over unconditioned spaces.
Here in the Northwest, investor-owned utilities in general are provid-
ing interest-free loans and rebates to encourage conservation as these
programs are less expensive and seem to be more acceptable to the consumer
than the development of new sources of energy that are required to assure
an adequate supply. My concern is that we may depend too much on conserva-
tion and the lead time required to receive approval and complete construc-
tion of power plants.
It appears that conservation will continue to get priority from pri-
vate and public organizations and the marketplace will continue to be
effective. Initiatives and opportunities that are created by the private
sector will continue, and public spending should be limited to research
and development, particularly in the long-term technologies. Care must
be taken not to involve political and sociological problems under a scien-
tific disguise.
Out of recommendations came the proposals under the Schools and Hospi-
tals Program to include only audit and technical assistance. This is an
example of prudent use of funds. Development of less sophisticated soft-
ware programs to audit commercial and small industrial buildings will
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increase the ability of utilities to offer audits that will encourage
operation and maintenance practices; investments and, where required,
additional engineering and economic evaluations.
Research activitiessuch as that accomplished by Lawrence Berkeley
Laboratoriesshould continue, but care should be given to not duplicating
research by private enterprises. Example: There appears to be a need for
alternatives to degradation of the indoor air quality of residences because
of weatherization-such as an effective heat exchanger. Solution: Research
available products and their impact upon the health and safety, alternative
designs and provide case histories.
The need to research the impacts of existing regulationsuch as the
Clean Air Actas it also impacts the supply and cost of energy. We need
to apply research funds to enable enterprises to fully utilize coal and
nuclear resources in our country.
It seems as though people are willing to make expenditures for conser-
vation if they know enough about alternatives, costs and savings. The
distribution of facts in case histories by the universities and utilities
will encourage conservation by all classes of users.
Local governments are capable to responding to the needs of the con-
stituents, whether it be for conservation or a new fire truck or library.
A private company initiated the zero-interest loan for conservation mea-
sure measures. I hope workers will shift from government positions to
positions in research and defense.
I believe we need to be concerned about funding sources for conserva-
tion activities. One of the major problems of commerce and industry is
funding sources at a reasonable rate. Inflation and high interest rates
are factors. Reduced federal spending should help stabilize the rates.
Any federal funding should be in the form of block grants for energy assist-
ance to the states.
New residential construction is virtually nil. Lower interest rates
will allow new ideaspassive solar and daylightingto be incorporated
into the structures. Pacific Power & Light Company plans to monitor pas-
sive solar homes in its promotion of passive solar energy saving homes.
The President's program has placed great emphasis on preserving
social welfare programs that serve the truly needy. This is a forward
step.
I appreciate the opportunity to present written testimony.
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THOMAS H. D. MAHONEY, Ph.D.
Secretary of the Massachusetts Department
of Elder Affairs
38 Chauncy Street
Boston, Massachusetts 02111
I very much appreciate the opportunity to offer testimony on the
Federal Conservation Program on behalf of nearly one million older persons
in the Commonwealth of Massachusetts. We know well that the waste of
energy is of as much concern in other states and in other parts of the
nation, and for that reason, I am pleased to report on some of the ways in
which Massachusetts has participated in conservation efforts.
Before outlining some of those programs, I believe it is important to
mention the added significance which conservation programs now hold. Our
national administration seeks to reduce inflation, increase productivity,
and enhance our image abroad. Preservation of our energy resources will,
without doubt, strengthen the ability of our entire population to meet a
meaningful standard of living, to improve our economy, and to reduce our
reliance on foreign energy sources, improving our position worldwide.
Massachusetts is a state in which winter fuel supplies are of major
concern. For our elderly and handicapped, conservation programs will
allow us to expand our fuel assistance dollars. Last winter, many elders
had to use up to one half of their annual incomes for heating their homes.
The price of a gallon of heating oil, a fuel upon which most homes depend,
rose 40 cent to $1.30 per gallon. By May 30, 1981, 41,000 elderly families
had applied for fuel assistance under the federal guidelines.
As one state which appropriated its own funds for fuel assistance, we
received 11,000 additional applications from those whose incomes were
above the national guidelines, yet who could still demonstrate a need for
assistance. In fact, the numbers of those who seek help increase yearly.
If the new philosophy of federal budgeting is adopted, the scope and
focus of conservation efforts may change. Block grants, in which the
energy conservation programs may be included, could be among the competing
interests unless the Congressional conference committee resolves the issue.
Last year, $189 million was provided for the Department of Energy Weather-
ization Program. Of that $558,000 went into energy conservation grants
with Massachusetts awarding more than $225,000 for supplementary conserva-
tion grants.
One of our programs featured an educational component with a goal of
reducing overall energy consumption by 5% through five mandatory programs:
- car pools
- thermal and lighting efficiency information
- initiating the "right turn on red"
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- publishing informational materials
- initiating governmental coordination
Our energy extension services included more than $417,000 for special
projects (and, in addition, we.provided $25,000 more with "carry over"
funds) the Massachusetts Department of Energy has given our communities
technical assistance through self-help and special "low-income unit" pro-
grams.
What is of great concern at this particular time is the added loss of
C.E.T.A. funds and the reduction of public service employment programs and
the Youth Employment Service. Our program of weatherizing one thousand
homes per month has been lost since funds were exhausted on June 30 at the
height of the summer season, an ideal time for weatherization. Block
grant funds to renew the effort would not be available until last fall,
but were we to attempt to implement the program immediately, we would still
face competing interests for a block grant award reduced in effect by 25%
from the preceeding year.
We all realize that federal cuts mean local reductions, and we have
already begun to note, with the added restrictions on state spending which
have been implemented in Massachusetts, that the private sector will, even
if it is of a mind to help, be unable to pick up but a small part of the
balance. We are dealing, for the most part, with the hard world of "market
rates", and I do not believe that the private dealers will find it in
their interest to provide for low income households at this time. This is
particularly upsetting to our Massachusetts economy since we produce a
minimum of our own energy needs, diverting expenses for oil and natural
gas to providers elsewhere.
Still, our record of promoting conservation in Massachusetts is com-
mendable. In spite of fiscal restraints, I believe we are doing all we
can. With the creation of the Executive Office of Energy Resources in
1979, Governor Edward J. King has established an Energy Bond Program to
facilitate conservation in state buildings and public housing throughout
the Commonwealth. Some elderly housing was designed with solar energy
components. However, this agency, whose reputation and credibility in
Massachusetts and New England is quite high, will see a reduction in the
federal share of its total budget from 68% to 32% by fiscal year 1982.
I believe that Governor King's six point state program to lower fuel
costs of public utilities is one worthy of mention. It involved the follow-
ing components:
- Public investigation of utility planning for conversions to coal.
- Mandated utility financing programs designed to offer zero-interest
loans to residential heating customers for home weatherization.
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- Restructured residential rate structures designed to make utility
rates more equitable and more conducive to conservation than to
consumption.
- Development of an agreement to purchase residual fuel oil directly
from a Venezuelan Government source.
- Increasing the potential for construction of new high voltage
transmission facilities through imports from Canada.
- Participation in the signing of a contract with Trans-Canada, Ltd.
to purchase 185 million cubic feet of natural gas annually to
reduce dependency upon O.P.E.C. sources by three million barrels
per year for ten years. This agreement, reached on October 14,
1981, involved nine New England utilities and five utilities from
New York and New Jersey.
I am also happy to report on steps in which our residential Energy
Consumption Program has exceed the requirements of the Department of
Energy as to minimum standards:
- all utilities are required to participate,
- audit services are coordinated among utilities,
- by January, 1982, services will be available in all residential
buildings including large apartment houses,
- auditors help customers learn to install some of their own weather-
ization materials.
We expect the "ECS" program to provide its one hundred thousandth
home audit this year, 35,000 more than predicted. For this success, we
must pay tribute to a well developed statewide outreach program.
I have established a Winter Assistance Task Force in which representa-
tives of our 23 Area Agencies on Aging meet with my staff at our Boston
office. This group, which meets monthly throughout the year, recommends a
better pairing of fuel assistance and conservation measures. If we are
to show meaningful foresight in this area, the linking of these two compon-
ents must be strengthened on a permanent basis. At the same time, we are
putting considerable emphasis on the federal income tax credits available to
those whose weatherize. I urge that the Federal Energy Conservation ini-
tiate strong national programs of public education, as we are confident
that the effort will lead to more meaningful steps on the part of public
and private sectors, businessman and private homeowner, employee and
tenant.
These hearings related to the Federal Energy Conservation Program
provide an ideal forum for an airing of ideas, interests, and common
efforts. While I speak for the elders of Massachusetts, I am sure that we
are all acting on behalf of more than 25 million older Americans who are
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sure to gain great advantage through a comprehensive and renewed conserva-
tion program.
Montana Power Company
40 East Broadway
Butte, Montana 59701
The following testimony has been prepared in response to the request
from E.P.A. to carry out its responsibilities under Section 11 of the
Federal Nonnuclear Energy Research and Development Act (Public Law 193-577).
Pursuant to that responsibility, E.P.A. is asking comments on the possible
directions of a new Federal Energy Policy based upon the concept of "free
market" economics where rising prices will enhance conservation efforts
and the private sector and the state/local government will carry out acti-
vities that were previously supported by the Federal Government.
In an attempt to address the changes in these Federal programs,
comments were requested on the following issues:
1. How are private firms, state governments and local agencies prepar-
ing to assume their new responsibilities?
The role of private firms, specifically the investor owned utili-
ties, will be enhanced under the proposed new directions of federal
energy policy. Removal of the inordinate regulatory burdens im-
posed in the past, will allow those programs that involve conser-
vation of energy in the residential sector to be more cost effect-
ive. D.O.E. 's desire in the past to be somewhat paternalistic in
treatment of customers of a utility involved in conservation pro-
grams, produced many non cost-effective burdens which were ulti-
mately paid for by the customer.
The new direction of Federal energy policy will allow the utilities
to develop and implement cost effective conservation programs.
These programs will be assisted by the proper price signals being
sent to utility customers via other deregulation programs of the
Federal government. Attempts in the past using incentive con-
servation programs in conjunction with artifically regulated low
energy prices, sent mixed signals to customers and did not generate
the amounts or kinds of conservation thought possible. Energy
prices that reflect the true cost of finding additional resources,
act as a powerful inducement for customers to adopt (when given
the proper information) conservation methods that work best.
Private utilities have in the past and will continue to lead in
energy conservation efforts. In the Northwest, the Investor Owned
Utilities have led the nation in implementing innovative, cost-
effective conservation programs that have been used as models
for government sponsored conservation programs. The customers
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of these private utilities have responded overwhelmingly to the
programs and the conservation ethic that these efforts have genera-
ted has been transferred to individual life styles.
Programs like the R.C.S. program have been in place in the service
territories of most of the Northwest Private utilities long before
it became fashionable nationwide. There is no reason to think
that such innovative, cost effecive utility programs will not
continue under the new direction of Federal energy policy.
2. Which activities will get priority from public and privated organi-
zations and what will be the consequences if seme activities are
discontinued?
The major activities that will get priority from the private sector
(Investor Owned Utility) will be the continuation of cost-effective
conservation programs and the development of new programs that
will maintain the leadership of the private sector in energy conser-
vation. Things such as the Class A energy audit for customers,
informational services geared to the needs of the customers, custo-
mer protection in conservation purchases, development of energy
resource technologies that will serve to continue the transition
from fossil fuel resources to sources of a renewable nature are
among the many programs that will receive priority.
Discontinuance of the research and development of renewable re-
source technologies may impair the realization of energy from
these sources. For example the wind program was seen as an impor-
tant tool to provide the nation with units capable of utility
sized generation capacity. Without the funds available for re-
search and development on these types of technologies and some
sharing of the risk by the governmental sector, further delays may
be caused. For this reason, adverse impacts from reduced govern-
ment expenditures may be felt in the private sector.
3. Have any new initiatives, opportunities or efficiencies been crea-
ted as a result of the shift in Federal energy conservation programs?
Possible revisions to NECPA will potentially allow the utility to
become more involved in the marketing of conservation and renewable
resource measures. This would provide an opportunity for the utili-
ty to offer the customer a "one-stop" conservation and renewable
resource service. The time to get a customer to act on conserva-
tion recommendations at the time is high and experience has indica-
ted that following departure of the auditor, interest usually
wanes and many customers do not proceed with the recommended mea-
sures.
4. How can the Federal Government assist in this period of transition?
The best help that the Federal Government can give in this period of
transition is of a technical and research nature. More work needs to
be performed on the effects on "indoor-air-quality" following imple-
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mentation of various conservation measures. Additional research
is also needed on the possible conservation benefits for the indus-
trial and commercial sectors. Rising energy prices will continue
to spur such transitions but it would be helpful to be able to plot
cost-effective conservation scenarios for these respective entities.
Preparation of literature- has also been a useful tool that the
Federal Government has provided in the past. These materials have
been well written and concise. Continuation of this function would
be justified.
5. How should the Federal government evaluate and monitor the effects
of its new energy policies and program changes?
Possibly the best way to monitor the effects of any conservation
program is to evaluate the consumption of the product in an unregu-
lated market condition. As we have found out in the gasoline situa-
tion, price elasticity is indeed greater than what was thought.
Rising prices serve to-drive the economic equation in the direction
of substitution or conservation. Given the proper information and
data from the private sector and government, the individual will
choose the proper mix of strategies to insure the protection of
lifestyle as much as is possible.
6. What will be the effects if a state decides to phase out its energy
office?
The state energy office, while at times helpful to the private
sector, has attempted to develop activities far removed from what
is generally perceived as its mission. In several cases, there
were attempts to develop load forecasting abilities, etc., which
were going to be used to justify manipulation of consumption of
those forms of energy that were perceived as of the "hard" nature
while espousing the "soft" technologies. These attempts were not
based upon any recognized cost-effective measurement but rather
upon an idea of social direction for society in general. Rather
than provide assistance to the private sector, adversarial relation-
ships existed. This was not conducive to the octnmon goal of provid-
ing the citizens of the nation with the tools necessary to formulate
their own decisions about the type and quantity of any particular
fuel to use. Advocacy of particular favored types of energy sources
by these bodies only added to the bewilderment of the general public
on the serious issue of providing adequate supplies of energy for
our nation.
In summary then, we fully support the goals of the new energy direction
of the Federal government and will continue our efforts to assist our
customers in the conservation of energy. This best can be done, however,
through the mechanism of the free market where the government's role is to
establish rational public policies which take into consideration national
security ineterests and environmental values but leaves the citizens and
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private sector with sufficient incentive to produce and conserve energy
in a cost-effective manner which is consistent with the national interest.
Section 11
Federal Nonnuclear Energy
Research and Development Act
Weatherization and Low Income Energy Assistance
The following statement responds to questions asked in the issue paper for
use in preparing testimony.
1. Funding mechanisms and structural issues
a. In light of the proposed changes, how can the nation maintain an
effective low income weatherization program?
o A key strategy for maintaining an effective low income weatheriza-
tion program includes the structuring of a diverse funding based
combining federal, state and possibly local government monies with
private funds stimulated with tax incentives perhaps special
tax incentives for energy-oriented companies.
o The proposed change of typing weatherization in with the Community
Development Block Grant funding could have serious detrimental
effects. The effects would be felt because the Community Develop-
ment Grant Program has been an ongoing program with existing pro-
jects and programs. This fund, by itself, is being cut 25%.
People will want to save the ongoing programs and possibly build
them with the added weatherization monies not sacrifice their
program for weatherization. Different people have been involved.
o In Montana, no state monies have been allocated for weatherization
programs as they have in other states. Time is needed to allow
the political process to survive cutbacks at all levels than
accept new areas to allocate state monies.
o There is an understanding of the importance of weatherization as a
long-term solution among various sectors of the population. A
Citizens Task Force comprised of former state government offi-
cials, fixed and low income representatives, a Community Action
Agency representative and the president of the Montana Power Com-
pany researched the issue of the energy problems of fixed and low
income people. They submitted a report emphasizing weatherization
as a top priority.
o But, to bring in the sectors to form a diverse base, an initial
solid funding base is needed to secure support.
b. If weatherization is transferred into the HUD Community Develop-
ment Block Grant, what agencies vould be effective sponsors
at the community level?
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o In Montana, the number of agencies capable of administering the
effective program is few. The Human Resource Development Councils
(HRDC's) or the Community Action Agencies for Montana have been
operating some type of weatherization program since 1975. Longe-
vity in development and administration of social programs such as
weatherization is a strong element for effectiveness. The HRDC's
are private nonprofit corporations that would be the best agencies
for establishing a contract arrangement for administering the pro-
gram in Montana. Other agencies, such as local county governments
are not experienced in this effort in Montana. They are experi-
enced in eligibility certification such as AFDC, but they do not
administer service programs. They mostly purchase services through
private nonprof its. Many wasted dollars would be spent in unneces-
sary start-up time. Private contractors specializing in the insu-
lation business have special interests in mind and would not pro-
mise the type of coordination and objectivity needed to administer
the program. Being a private nonprofit corporation, the HRDC's can
hire various types of labor based on funding levels and require-
ments. They could design a cost-effective labor mix of volunteers,
union or CETA's based on what is available. Community Development
Block Grant procedures allow for contracting with community agen-
cies to do the weatherization work. Administrative costs are mini-
mized.
o Without Community Action Agencies in Montana, the program might
die or fade away.
c. How can problems involved in transferring the program from one
agency to another be minimized?
o If the programs have to be transferred (which is not advisable),
impacts are minimized by:
Hiring some of the higher qualified employees of the previous agen-
cies who have experience with the program.
Allowing an adequate time for transition from one program to the
other. Allow time for employees to spend time together. Most pro-
blems occur when a desk is emptied one day and filled the next.
Time is needed to educate the public. Clients are frequently lost
in changeovers.
2. Implementation Issues
a. If a state decides to phase out Community Action Agencies, how can
their resources and experience be transferred to the new weatheri-
zition sponsor?
o Again, some of the best employees could be hired by the new agency.
They are the ones with the experience.
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At least, the Community Action Agency employees should provide
training or be contracted as a transitional team.
o The CETA trained labor could be hired by the new weatherization
sponsor. The purpose of the CETA training is to provide the base
for advancement into other jobs.
b. Should LIEAP funds be utilized for weatherization? How can the
LIEAP program coordinate its activities with the weatherization
program at the state and/or local level?
o LIEAP funds should be allowed for weatherization. States should
be able to authorize up to 30% of LIEAP funds for weatherization.
Again/ a large starting base is needed. Weatherization is the
long-term solution. Larger amounts are needed for its implement-
ation not smaller.
c. What is the most equitable and cost-effective weatherization pro-
gram? Should the Federal government continue to provide substantial
assistance ($1,000-$2,000 per unit) to a relative small number of
houses? Or, should the program be restructured to provide minimal
weatherization ($200-$300) to a larger number of units?
o To equitably service low income people, programs need to be desig-
ned for both low income homeowners and renters. In Montana, approx-
imately 50% of the low income families are renters.
o To design the most cost-effective weatherization program, more
money per unit is necessary, not less. Current limits have only
allowed a band-aid approach toward efficient retrofitting. Cur-
rent rules have allowed $500 for materials and $500 for labor.
Since many low income people live in older housing, $500 has
covered a superficial amount of storm windows, caulking and per-
haps insulation when the roof leaks and the furnace is operating
at 30% efficiency. The Citizens Task Force on Energy problems of
Fixed and Low Income Consumers, an independent group brought to-
gether by Montana Power Company, states in their final report:
"Conservation offers the most readily available long-term
solution to the energy problems of fixed and low income
people. At the present time, energy assistance funding to
provide weatherization for fixed and low income housing is
limited to $1,000 per unit, with only $500 of that amount
allowed for weatherization materials.
In order to expand weatherization to address sufficiently
the problem of housing inadequate to conserve energy, the
Citizens Task Force recommends that the Legislature appropri-
ate Coal Tax or other funds available to supplement weatheri-
zation and energy conservation programs for fixed and low
income dwellings, to be invested in retroffitting residences
with adequate and/or other energy conserving improvements..."
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More funds to support weatherization are needed, not less.
d. How can CETA workers be retained in the weatherization industry?
o Tax incentives tied with a strong information campaign selling
the skills of the CETA workers may be the key way of integrating
trained CETA workers in the private sector. The potential is
not bright given the large amount of unemployed union labor
currently available in the economy. Union labor, however, raises
the costs of the program to unnecessary heights.
o The most effective way may be to form other private nonprofit
organizations built with trained CETA labor and available to do
contract work with the local agency administering the program.
CHRIS PALMER
Director of Energy and Environment
National Audubon Society
645 Pennsylvania Avenue, SE
Washington, D.C. 20003
I very much regret that I am unable to testify at your Section 11 hear-
ings because of previous commitments but I would be very grateful if you
could enter into the record the Audubon Energy Plan, a copy of which is
attached. This study reflects our views on what the nation's energy policy
should look like. As you can see we support a major emphasis on energy
efficiency.
(Following is an extract of the Audubon Energy Plan, which was reviewed
in its entirety but is not included in the Transcript due to its length).
Energy is a major factor in determining the quality of our lives. It
furthers the production of goods and services, and its production and use
seriously impact on the quality of our environment.
The Audubon Energy Plan is a practical plan for our country to obtain
adequate energy while protecting the environment. It is based on the convic-
tion that by using energy more efficiently our economy can continue to grow
and prosper, providing an increased level of goods and services for all at
least until the year 2000 without consuming any more energy than is being
used today. The Audubon Plan envisions a steady increase in the use of
solar energy (25 percent by the year 2000) which will cause a steady decrease
in environmental pressures from traditional energy sources. The Plan is a
low-cost energy strategy and provides the most rapid route to national energy
security.
Audubon's Role in the Energy Debate
Audubon's concern is with life plant, animal, and human and the
air, water, and land so essential to life. This broad interest which has
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evolved over the past eighty years began with the successful fight by a
group of highly motivated activists to stop the slaughter of plumed birds.
Continued activity in the conservation of wildlife resulted in an awareness
of the inter-connnetedness of life ecology and led Audubon men and
women to become environmentalists dedicated to protecting the life-support
systems of our planet.
The production and use of energy have a major impact on our environment.
Pollution of the air stems primarily from the burning of fossil fuels in our
factories and powerplants, automobiles, and homes. It is the major cause of
the acid rain which falls throughout much of the world, destroying fish life
and plant life and corroding buildings. Oil spills contaminate beaches ev-
erywhere. Hydroelectric projects flood valuable wildlife habitat. The ac-
cumulation of radioactive waste threatens life for millenia. (Because of
Audubon's special concern with wildlife and the habitat on which it depends,
a detailed catalog of the impact of energy facilities on wildlife and wild-
life habitat has been prepared and will soon be released.)
On the other hand, the production and use of energy are essential to a
modern style of life. Audubon is convinced that we can have enough energy
to continue the growth of production of goods and services while at the
same time protecting the environment.
One reason will be a marked increase in the efficiency with which we
use energy; in other words, an increase in the productivity of energy.
Because the Audubon Plan requires much less coal, oil, and nuclear power
than are envisioned in the plans of the energy industries and the federal
government, it will dramatically curtail environmental environmental damage
from strip-mining, air pollution, acid rain, and the production of nuclear
wastes. Sulfur oxide air pollution and rain acidity will actually drop well
below current levels. The Audubon Plan will also ensure that environmental
safety is built into the new energy-conservation and renewable energy tech-
nologies at early stages rather than added to them half-heartedly decades
later.
Audubon's Expertise in Energy Matters
Traditionally, Audubon's expertise has been concentrated in the biolo-
gical and ecological sciences. Awareness of the serious ecological impact
of energy activities has led the Society to expand its staff to include
scientists with backgrounds in chemistry, physics, and the agricultural
sciences.
A new environmental policy research department has been formed to carry
out policy studies in a number of areas of interest to the Society, including
energy.
Preparing an Energy Plan as detailed and specific as this one requires
that difficult choices be made about nuclear power, the use of coal, and
the use of land for bioenergy, and so on. These choices have been made by
Audubon staff members, using inputs from many ccrnprehensive studies prepared
by a variety of prestigious private and governmental institutions throughout
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the world. Additionally, a draft of the report was examined by outside
reviewers. In this regard, we are particularly indebted to Alvin Aim (Har-
vard University), Paul Bente (Bioenergy Council), Lester R. Brown (World-
watch Institute), William U. Chandler (Environmental Policy Institute),
Frank von Hippel (Princeton University), Roger Sant (Carnegie-Mellon Uni-
versity), Gordon Thompson (Union of Concerned Scientists), Robert Williams
(Princeton University), and Daniel Yergin (Harvard University). Most of
the criticisms and suggestions made by these reviewers have been incorpora-
ted in the Plan. The major quantitative changes that have been made include:
1) an increase in the projection for natural gas availability in the year
2000 (from 11.5 quads per year to 15 quads per year); 2) a decrease in
the projection for industrial use of solar collectors (from 3 quads per year
to 1.7 quads per year); and 3) an incerease in the capital investments in
energy efficiency from $500 billion to $700 billion).
The Audubon Plan is not to be considered a fixed strategy. Details
will be revised periodically to take into account new developments in
both technology and governmental policy that arise.
PATRICIA B. PELKOFER
Vice-President
Group Against Smog and Pollution
P. 0. Box 5165
Pittsburgh, Pennsylvania 15206
Members of GASP's Energy Committee have reviewed the 17 page issue paper
concerning the 1981 Section 11 public hearings under the Federal Non-nuclear
Energy Research and Development Act.
We have decided that we do not have access to the necessary records and
information to adequately comment on the issues and questions presented in
this document. We sincerely hope that directors of local and state programs
for energy conservation, and those citizen's organizations that have better
access to these efforts, have submitted factual and documented testimony to
assist in your evaluation.
Our comments, for instance, on how efficient or successful the weather-
ization program has been on the local or state levels, or on what might hap-
pen to this important effort when federal funding is eliminated, would be no
more than opinion and guessing on our part without a great deal of informa-
tion we do not have.
However, we "guess": that many energy conservation efforts on the state
and local levels will be discontinued without federal funding and guidance,
as priorities for local and state tax dollars are set.
We have special concern for the poorest and the elderly among us who
can neither afford to make their homes more energy efficient, nor the funds
to pay the higher cost of fuel wated in inefficient or non-weatherized
dwellings. Many of these persons may live in rented homes where theirs is
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not the decision or option to weatherize ... and should the landlord decide
to make such improvements, the rental fee, as well, may become burdensome
to the poorer tenant.
As an incentive for energy conservation, GASP's policy supports decon-
trol of oil and natural gas pricing, so that energy used reflects actual
replacement cost. However, we believe this measure must be accompanied by
provision for those with low income through a minimum energy "life line"
basic rate or some such program as "energy stamps". The practice of pay-
ing heating bills for the disadvantaged, which may be dollars for precious
energy resources escaping through walls and windows rather than providing
heat for the elderly or poor person, is not acceptable nor in the interest
of energy conservation.
Finally, we call your attention to a recent study conducted by the
State of Pennsylvania, Office of Planning and Development, entitled "Choices
for Pennsylvanians". Nearly three dozen public meetings were held through-
out the state in an effort to identify the economic, social, health, etc. ,
priorities of Commonwealth elected officials and citizens. Several threads
became a pattern emerging at these sessions: -
1) Pennsylvania citizens desire a balanced growth approach to econo-
mic development, with about as much concern for their communities
and for the environment as for business expansion. Little will-
ingness exists to lower pollution standards as a way to keep or
attract industry, and economic growth without regard to its im-
pact on communities and resources was strongly opposed.
2) Other options ranking in the top ten concerns were conserving
energy in industry, conserving energy in homes and development of
alternative energy sources. Conservation of energy in industry
and homes were listed as more important by most citizens than ef-
forts to develop new energy sources.
Enclosed for the record is an article from the Sunday Patriot-News, Harris-
burg, PA. , July 19, 1981 by Bruce Cutler summarizes the study. We hope you
can obtain a copy of the report in its entirety for your evaluation and con-
sideration.
The right kind of approach, with a careful plan and good public educa-
tion on the part of our state and local elected officials (and the employees
who carry it out) could translate the type of public thinking expressed in
this report into positive and funded programs for energy conservation on the
state and local levels as federal dollars continue to evaporate.
Thank you for the opportunity to comment.
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GERALD ROCCAPRIORE, President
Solar Power Institute
P. 0. Box 450
46 Meriden Avenue
Meriden, Connecticut 06450
The United States is putting, its domestic economy and future existence
on the line to bring oil into this country. The Reagan Administration is
spending $160 billion on defense to protect the flow of crude oil from the
Middle East. The Middle East brings in 21 million barrels of oil a day and
uses only 2 million barrels of oil daily. Eight million of this foreign oil
is shipped into the United States daily. The United States and other non-
Communist countries produce 31 million barrels of oil daily and consume 51
million barrels of oil a day. The United States instead should put its
energy house in order and stop being at the mercy of non-renewable sources
of energy, such as the Mid-Eastern oil cartel.
The effect of such dependence not only hurts the international stabili-
ty of the world, but also jeopardizes the American economy which sends so
many dollars outside the country to pay for its addiction to foreign
non-renewable energy supplies.
The Reagan Administration need only look upward at the sun to find
the answer to its economic and defense woes. The sun, which is man's oldest
companion, can be its best teacher now in leading the way out of this econo-
mic and political shambles.
The sun provides the source of energy that can, for free, bring more
energy than all the tea in China or all the oil in the Mid-East, all the
coal in Pennsylvania, and all the uranium in Africa.
Instead of making enemies with the Mid-East and the world over non-
renewable energy supplies, let us make friends with nature and its gifts.
Let's harness the power of the natural rays of the sun to heat homes and
bring international peace to this troubled world.
The Solar Power Institute of Meriden, Connecticut is dedicated to real-
izing the dream of natural energy that can be found by looking up in the
morning instead of spending billions of dollars digging downwards for
crude oil or coal. Let's channel man's energies that have brought us the
elimination of many of mankind's ills and the creation of so many wonders,
and use it to radiate warmth to a troubled world by using the sun.
While we're looking up, let's look at the atmosphere which is so ad-
versely affected by man's use of non-renewable forms of energy that have
made some men rich but our American people so poor from inflation. Govern-
ment surveys project a drastic increase in carbon dioxide, nitrogen oxides
and ash and sludge because of coal burning and oil use. Also, we still face
incredible dangers from problems with radiation if we look to more nuclear
plants as our answer.
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6000
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15000
National income per capita (1977 US dollars)
Figure 1 Annual per capita energy consumption and gross national product, 1970 and 1978,
as compared with the potential for 2000 A.D. energy and GNP for the U.S. from the Sawhill
study. Source: Tables 1583 and 1594, U.S. Bureau of the Census, Statistical Abstract of
the United States; 1980 (101st edition), Washington, D.C., 1980.
-------
Now, the United States Department of Environmental Protection is
considering ways and means to monitor and evaluate the effects of changes
in energy policy.
That agency must consider a special study on the quality of air in
this country.
This Institute is recommending a strong commission to monitor the air
quality and solar radiation that is being defused and deflected because
of the effects of oil, coal, and nuclear powers. The air that gives us
and sustains life shouldn't be jeopardized by being suffocated by our
dependence on non-renewable sources of energy.
Already, Canada is complaining about the acid rain that falls over
our borders into its land, affecting its food growth. Must we wait until
more of this happens and hurts our food growth.
Gentlemen, the Institute heartily urges such a commission to study
our air quality. And we strongly urge that this be a blue ribbon commis-
sion with no taint of interest in this same oil and coal industry that has
already almost brought us to our knees internationally over its greediness
for foreign oil and insatiable appetite for big bucks at the expense of
domestic tranquility and international peace.
This commission should be a group of concern and honorable persons
that can honestly and truly tell us of our future air supply.
ARTHUR H. ROSENFELD
Energy Efficient Buildings Program
Lawrence Berkeley Laboratory
Berkeley, California 94720
JEFFREY P. HARRIS
Buildings Energy Data Analysis
and Demonstrations Group
Energy Efficient Buildings Program
Lawrence Berkeley Laboratory
Berkeley, California 94720
Although we were unable to attend EPA's Section 11 hearings in person
this year, we appreciate the opportunity to submit written comments re-
flecting our own personal views on several of the issues raised in your
pre-hearing announcement. These include: (1) the degree to which the
private market can be expected to move toward greater energy efficiency in
response to rising energy prices; (2) additional steps needed at the Fede-
ral level to speed the market's response and help assure its full (and
equitable) coverage; and (3) an important role for the Federal government
in monitoring the effects of both market behavior and public policies on
the rate of progress toward more efficient energy use.
420
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* Based on LBL analysis of NAHB data on 300,000 houses constructed 1976 1979
-------
Along with this letter, we are submitting for the record two documents
for inclusion with the Section 11 hearing records. They were prepared as
testimony for recent hearings by the House Subcommittee on Energy Conser-
vation and Power (5/20/81) and the House Interior Appropriations Subcom-
mittee (4/8/81) (These documents were reviewed but are not included in the
Transcript due to their length). The two papers summarize the potential
for improved energy efficiency in buildings, and offer examples of barriers
and time lags in the market's response to higher prices. These examples
draw upon several years of research on energy efficient buildings, at LBL
and elsewhere, and illustrate the need for a continued but selective Federal
role that complements and strengthens market forces. A few additional com-
ments will introduce the enclosed documents, and their relationship to the
issues raised in this year's Section 11 hearings.
Market response to higher energy prices. Historically low energy
prices have left the U.S. market with a stock of buildings and appliances
which are far less efficient than is optimal at current energy prices
let alone at the higher energy prices which can be expected in coming
years. Other advanced industrial countries, with historically higher
energy costs and heavy dependence on imported oil, have already adjusted
their economics, in part, to new energy realities, achieving levels of
energy use per capita (or per dollar of GNP) that are considerably lower
than those in the U.S. (See Figure 1. )
Evidence that we have seen suggests that the current directions of
Federal energy policy will cause the market's lag in achieving economically
optimal levels of efficiency to increase, at least in the near term, rather
than decrease. In simple terms, this is because energy economics are
continuing to change faster than the normal rate of turnover in the build-
ing stock even if one assumes very optimistic rates of adoption of
energy-saving techniques in new buildings. The major hope for reversing
this trend in market lag is to make even more rapid progress in improving
the energy efficiency of the existing stock, through physical modifications
("retrofits") and more care~fuloperating practices. Efficiency gains
in new buildings can also be accelerated, through government and utility
actions to improve the flow of technical information to industry and
consumers.
For new residential construction, one approach to measuring the market
lag is underway at LBL; some preliminary results are shown in Figures 2
and 3. These two figures, one for gas-heated and the other for electric-
heated residences, compare space conditioning energy use in homes actually
built in 1973, 1976, and 1979 with the amount of energy that would have
been used if the same new homes hctd been designed more efficiently to
minimize life-cycle energy costs.
The difference between the actual homes and the economically optimum
design is on the order of 30-40% in annual energy savings. Consumption
of actual new homes was calculated using the DOE-2 computer model, based
on a survey by the National Association of Home Builders of new home char-
422
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acteristics in each of those years. The characteristics and estimated
energy use of the "life-cycle-minimum" house for each year were based on
LBL research, again using the DOE-2 model to calculate expected energy
use.
The data show that the market, on average, is improving, but so is
the economic optimum. Even under the improbable assumption that real
energy costs remain at their current levels, and that no new energy-saving
technologies are introduced, we now estimate the market lag in new homes
at roughly 6 to 25 years. (The range depends on housing type and location. )
These market lag estimates apply only to new homes; comparable ef-
forts are needed to identify and assess trends in retrofitting existing
homes for energy efficiency. This analysis should include the rates of
retrofitting for various measures and for different parts of the country,
the actual energy savings and costs involved, and analysis of how much
these decisions have probably been influenced by rising energy prices vs.
information or incentive programs.
Initial data compiled by LBL suggest that some home retrofit programs
are achieving measured energy savings of 20-25%, at costs of under $2000
per household (or roughly $19/barrel-of-oil equivalent saved). However,
this is based on a limited sample, and results show quite a range around
the average: a few very successful retrofits have saved 40-50% or more,
while energy use in other homes was reduced by only about 10-15% (although
in some of the latter cases the retrofit investments were also very low).
These data are presented and discussed in the recent SERI/LBL report on
"Building A Sustainable Energy Future", printed by the House Committee on
Energy and Commerce (Committee Print 97-K, April, 1981; Table 2.1 and
Figure 2.12).
These preliminary results demonstrate the importance of continuing
serious efforts to track and analyze both the successes and failures of
conservation programs and market forces.
Federal actions to reinforce the market. As the enclosed papers sug-
gest, some of the most important federal roles in complementing market-
induced energy conservation are:
o Continued support for basic research in building energy science,
including researchonindoorairquality,health effects,and
other indirect consequences of some energy-saving strategies.
Private firms may benefit from much of this basic research, but
are unlikely to support it at a significant level, since many of
the results can be considered "public goods" (i.e., they represent
information that, once developed, is relatively easy for others
to obtain). Since no one organization can capture the entire
benefit of such research, none is likely to pay for the work.
o Information, feedback, and quality control. A critically import-
424
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accurate, timely, understandable information to both producers
and consumers. The Federal government can assist in providing
reliable analytical tools for measuring and communicating the
energy performance of individual products or technologies and
of whole buildings. One approach to "labelling" buildings for
their energy performance is outlined in the enclosed papers.
These analytical tools and energy labels must be in turn be based
on an ongoing research program, one that includes a full range of
performance modelling, laboratory measurements, and field monitor-
ing of real buildings.
o Participation in high-risk/high-leverage demonstrations. In any
industry, there are only a few genuine innovators, but a larger
number of firms willing to follow another company's lead, especial-
ly where the innovative project is made visible and accessible.
Government participation in innovative technology demonstrations
is all the more important in many sub-sectors related to build-
ings, where markets may be characterized by a limited number of
well-established suppliers or purchasers, where (conversely) the
firms are small and poorly capitalized, or where there are other
sources of institutional inertia or constraints. The case study
of the introduction of high-frequency electronic fluorescent bal-
lasts (4/8/81 testimony) offers an instructive example.
o Market failures from misplaced incentives. This final category
calling for a government role involves instances where normal
market incentives do not operate, or operate only within narrow
limits. One clear example is the lack of incentives for either
building owners or tenants in rental housing (or leased commercial
space) to invest in energy efficiency. Another example of an
obvious source of market failure is that wherever energy prices
to consumers are significantly lower than actual replacement
costs for energy supply (as is almost universally the case),
private decisions on energy use will be based on inappropriate
market signals.
The solutions in cases such as these are not yet clear. Nor is it
obvious that the Federal government represents the most appropri-
ate or the only appropriate level for public sector involve-
ment. But in the case of both rented/leased buildings and energy
pricing policies, the Federal government can still provide an impor-
tant source of general financial and technical support to innova-
tive new approaches developed by others, at the local government
level, in community and non-profit organizations, and by industry
itself.
Monitoring progress in conservation. We have already suggested the
need for a much more attentive monitoring of trends in energy conservation
and efficiency in buildings (and in other sectors). Looking at aggregate
trends in energy use is important, but not sufficient. Also of interest
are:
425
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o the range of conservation results achieved (including variations
in energy saved and in the costs of conservation);
o identifying reasons for this range (what factors seem to separate
successes from failures?); and
o trying to untangle the impact of market forces (energy prices)
from that of specific conservation programs, regulations, and
policies.
Gaining this more detailed level of insight into what is happening
with energy conservation, and why, will not be a simple or short-term
process. Nor is is one that the Federal government should expect to pursue
alone. But once again, DOE and other Federal agencies can help to set
directions and serve as an example to other levels of government, utilities,
and private industry by pursuing two types of activities:
o Establish a framework for technical guidance and support for
the conservation data collection and analysis done by others.
This would include periodic nationwide or regional statistical
surveys of the energy-using stock (as the Energy Information
Agency has begun doing), compilation and comparative analysis of
energy conservation data from a variety of sources, and the
dissemination of guidelines to help standardize and improve the
technical quality of these diverse data-collection activities.
o Maintaining, for the Federal government's own conservation
programs and tax incentives, the highest professional standards
in monitoring and evaluating results, and use of the findings to
improve or terminate programs.
In conclusion, we would emphasize that the Federal roles we are
recommending do represent a change in past emphases (although much of the
time Federal energy conservation policies in the past have been character-
ized more by confusion than by adherence to any clear set of goals or
strategies). The direction of this change is clearly toward a greater
reliance but not a blind dependence on the market.
The challenge for Federal policy-makers and managers will be three-
fold. First, to gain accurate insights into where market forces are and
are not leading toward economically preferred outcomes. Second, to under-
stand why this happens, and to devise and diligently pursue intervention
strategies that are no more (and no less) intrusive than needed. The
final challenge is to be as ready to address inequities in the market's
solutions as to deal with its inefficiencies.
Thank you for the opportunity to present these views.
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MR. RICHARD O. SILVA
Energy Detectives, Inc.
Executive Offices
549 Gulfview Drive
Gulfstream, Florida 33444
In January of 1980, Dr. Gautam Dutt of the Center for Environmental
Studies of Princeton University reported to Congress that 1.6 million
barrels of oil per day could be saved if every residential property in the
United States was audited for energy efficiency and retrofitted.
Intrigued by this and other information, I set out in August of 1980
on a four month tour of the country, from Philadelphia to Los Angeles and
then to Florida. I visited countless cities and towns, evaluated over one
hundred private homes, met with numerous electric company officials and
principals of energy saving enterprises. The results of this trip revealed
to me that very little was being done to implement residential energy sav-
ings throughout the country. It also became apparent that water conserva-
tion was just as important as energy conservation.
In November, 1980, I formed a company in Philadelphia, Pennsylvania
under the name of Energy Detectives, Inc., employing eight persons, two of
which were trained by Princeton University in proper residential auditing
procedures. During the first three months of operation, Energy Detectives
preformed only audits, however, many homeowners desired that it perform
the retrofit work as well. Numerous homes were also re-audited at the
homeowner's request after other firms had performed the retrofit work. We
found much of the work of the retrofitters to be shoddy and not to specifi-
cations. Today, Energy Detectives is a full service, energy conservation
enterprise.
Energy Detectives has performed 1037 audits of which 86% have been
retrofitted by us. 94% of the audits performed were to homes owned by
upper income, professional persons, even though advertising expenditures,
which exceeded $30,000.00, were directed to a middle-class audience. Based
on these results, it is apparent that middle-class homeowners are not
taking advantage of the service offered.
A recent survey of fifty homes previously audited and retrofitted by
Energy Detectives revealed an average of 27% energy savings and a feeling
by the respondents that they were conserving water due to hotter water
reaching the faucet faster, low flow shower heads and baffles in water
closets. A number of middle-class homeowners were also surveyed. The
reason for not having an audit performed were:
1. They did not believe that they could save energy without being
uncanfortable.
2. They were not aware of the need to conserve water except during
drought conditions.
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3. They believed a tax deduction of $300.00 for energy conservation
was not enough. (Most were not even aware of such a tax deduction
and when made aware, did not think it was sufficient in any event.)
4. They believed solar energy is not perfected and will not be cost
competitive in the foreseeable future.
The Residential Conservation Service Program has been in effect for two
years. Some utilities have offered this service for three years. While I
am not aware of all of the details, Princeton University, Philadelphia Elec-
tric Company and Philadelphia Gas Works have admitted that Energy Detectives
has performed more audits than any privately owned firm or utility.
I have been told that certain utilities have performed thousands of so-
called audits which are, in fact, not audits at all. What they have done
is to have a meter reader measure and record the outside dimensions of the
building, the number of windows and the number of stories. This information
is then set into a computer and the consumer is advised of the R factor of
insulation needed to make his or her home energy efficient. This system is
not only misleading but it cannot be considered to be an audit when compared
to the Princeton system.
Further, the homeowners following of mere insulation recommendations
neither makes his or her home energy efficient nor advances the cause of
energy conservation with this cursory audit method. It is also my opinion
based on numerous discussions with homeowners and the public in general
that there exists a total lack of confidence in the gas and electric
utilities. To the contrary, the American public believes that these compa-
nies are monopolies that care little about their customers and are only
interested in rate increases and surcharges. It is difficult for the
public to swallow that a company which makes its profits on the sale of
energy is seriously interested in energy conservation. It appears to me
then that energy conservation has become a mass of inefficiency; of large
utilities seeking computerized answers with minimal data input and the
continuing waste of millions of dollars spent creating complexities out of
simple on-site problems. Only when one stops and considers the thousands
of different home builders and commercial and construction firms who
have built the homes, office buildings and commercial structures in this
country, each using a different construction technique, materials, specifi-
cations, and taking short cuts, does one realize the absolute necessity
for an in-depth audit of the type developed by Princeton University and
used exclusively by Energy Detectives.
What is needed to motivate the American people including low income
persons and businessmen to act to conserve energy and water?
First, it must be recognized that the public-at-large will not incur
increased debt for what it considers to be a savings of a few dollars per
month. It must also be recognized that most people believe energy conserva-
tion means being uncomfortable. Therefore, I propose the following:
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1. Provide tax credits (not deductions) for the full amount spent by
the property owner in the year the audit and retrofit are comple-
ted. The property deed should then be noted accordingly so that
future owners and local or state governments are aware of the
building's energy efficiency.
2. There should be provided three or five year low interest loans
from state government funded by the Federal government, if neces-
sary, to pay for the cost of the retrofit. Checks should be made
payable to the property owner and to the retrofit company. A
Certificate of Compliance and Completion should be signed by the
property owner and the retrofit company and these loans should
be made quickly and without red tape, in other words, as short as
three days.
3. Any person or business entity selling a retrofitted property and
purchasing another property which has not been audited and retro-
fitted should have the opportunity to qualify for another low
interest loan which should bring the newly acquired property up
to energy efficient standards.
4. Within five years from a predetermined date, any property not
retrofitted, with certain exceptions, should not be sold until
retrofitted, thereby insuring that energy inefficiency is not
passed over or passed on.
5. At such time as is determined there exists or will exist a free
enterprise system of independent enterprises in the energy conser-
vation business, a massive advertising campaign sponsored and
funded by the Federal government should be aired on the television
and radio. This campaign should be regionalized as to its content
but the objective should be the same, to substantially increase
public awareness of what is available and what Government will do
to assist property owners in saving energy.
Needless to say, there will be both unscrupulous property owners and
retrofit companies who will attempt to take advantage of this program,
however, I am sure that retrofit guidelines and material specifications
suitably enforced can be implemented and monitored through state or local
inspection and by random analysis together with appropriate penalties for
fraud or misrepresentation.
A recent study by the Department of Energy's Oak Ridge National Labor-
atory concluded:
"Energy conservation saves energy and money, reduces the amount of
pollution, reduces oil imports and our dependence on foreign sources
and buys time during which to develop alternative sources of energy
that are environmentally benign, abundant and socially acceptable."
It is now time for the rhetoric to cease and the assault on the misuse
of energy and water to begin.
429
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For my part, Energy Detectives will begin franchising energy and
water conservation audit companies nationwide by January of 1982. These
small, efficient, privately owned and operated businesses will create jobs
and opportunities for thousands who will, by their efforts, help to audit
hundreds of thousands of homes and businesses in a relatively short time.
The practical and actual result of these audits and resultant retrofits
will be to reduce our dependence on foreign oil.
Our Government has given or proposes to give hundreds of millions of
dollars to assist utility companies in making a halfHhearted and ineffect-
ive bid at inducing their customers to conserve energy. Obviously, the
conflict of interest suspected by the general public as well as the lack
of technical excellence of these programs has netted or will net few, if
any, positive results.
The current administration has re-emphasized the need for private
enterprise and the American consumer to do for themselves what Government
has attempted to do unsuccessfully heretofore. My proposal allows everyone
to enjoy the long-term benefits of home energy and water conservation
without a giveaway to any special interest group - no matter how large or
influential - while promoting jobs in the private sector. The money alrea-
dy doled out to the utilities for ineffective programs could have made a
major contribution to the lower interest rates on loans I have proposed.
In conclusion, therefore, let me re-emphasize the tremendous need for
intelligently managed and scientifically performed energy and water conser-
vation audits in this country. The benefits to be achieved by private
industries working to provide jobs and creating real savings for Americans
all accomplished not by handouts or giveaways but by sensible and logical
credits and low interest loans so that we, as in the American tradition,
can do it ourselves.
PETER M. STERN
Vice President
Corporate and Environmental Planning
Northeast Utilities
107 Selden Street
Berlin, Connecticut
(This statement and the additional information submitted with it, was
excerpted from testimony presented by Mr. Stern in June 1981, before the
State of Connecticut, Department of Public Utility Control, Docket No.
810602 - Application of the Connecticut Light and Power Company, and Docket
No. 810604 - Application of the Hartford Electric Light Company.)
INTRODUCTION
My name is Peter M. Stern. My business address is 107 Selden Street,
Berlin, Connecticut. I am Vice President, Corporate and Environmental
Planning of Northeast Utilities. Among my responsibilities are the load
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forecast, rate research and consumer research functions. In January 1981,
I was given the additional responsibility of insuring that the Northeast
Utilities Conservation Program for the 1980s and 1990s (NU 80s/90s) is
carried out in keeping with its objectives.
OVERVIEW
NU 80s/90s is a comprehensive plan for improvement in the economics
of supplying electric power to customers of Northeast Utilities (NU). It
shows how within six years the percent reliance on oil for 47 percent of
energy used for electric generation for NU customers can be reduced to 10
percent by:
o completion of Millstone Unit 3 and retention of substantial
ownership
o conversion of 850 MW of presently oil-fired generating capacity
to coal
o limiting growth in electricity ocnsumption to 1.5 percent or
less annually (in contrast to the 2.8 percent average annual
growth experienced from 1975 to 1980)
o addition of hydro and refuse-derived energy.
The successful completion of this first six year stage of the NU
80s/90s program will benefit customers by minimizing the inflationary
effect of rising oil prices and by greatly improving security of supply.
From the measures taken between 1981 and 1986 alone (completion of Mill-
stone Unit 3, coal conversion, and the addition of other non-oil capacity)
customers will save some $6.3 billion (nominal dollars in the years the
savings occur) between 1981 and 1993 compared to what they would have paid
should reliance on oil for generation continue as at the present. This
amounts to about a $1,600 savings for the customer with a 500 kWh monthly
bill, and hundreds of thousands of dollars for our larger commercial and
industrial customers.
With the completion of Millstone Unit 3 in 1986, there will be no
need for additional base load capacity on the NU system until near the end
of the century, greatly reducing capital requirements for the construction
program. There will thus be adequate time to assess and test emerging
electric generation technologies before making a commitment. This flexi-
bility in planning for electric power generation and the reduction in the
capital construction program will be important and valuable outcomes of
the completion of the 1981-1986 phase of NU 80s/90s.
A more secure and less inflation-prone electric energy supply such as
we have planned in NU 80s/90s will also make a vital contribution to the
economic health of the region and state in the 1980s and 1990s by assuring
businesses of a reliable and economic supply of electric power, one that
can also accommodate a surge of demand as could occur if there were a
431
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major disruption of the world oil supply or price system. NU 80s/90s is
an action plan in consonance with the emphasis in the Connecticut Energy
Advisory Board's (CEAB) 1981 report on diversity of fuels in the Connecti-
cut economy, conservation of energy, and the availability of energy for
economic development.
The oil displacement as part of NU 80s/90s is substantial and has re-
gional significance. In 1987 alone coal conversion and the addition of
Millstone Unit 3 (with a 65 percent NU share) will replace 14.5 million
barrels of oil (8.5 million barrels from coal conversion and 6.0 million
barrels from Millstone Unit 3). Electric power from currently operating
nuclear plants in 1987 will displace 21.3 million barrels of oil. To
place this in perspective, the total oil replacement of 35.8 million bar-
rels in 1987 is nearly one-half the 78 million barrels of residual oil
used for electric power in New England in 1980. In addition, oil use in
the region will be reduced at the point of use because of conservation
measures taken by customers.
The economic benefits from NU 80s/90s are extensive. Let me summar-
ize them in general terms:
o Direct benefits to families and businesses equal to the value
of the energy saved through conservation.
o Benefits to the state's economy in the form of:
reduced oil dependency
retention of more dollars in the state's economy because
energy conservation expenditures involve spending within
the state. This will represent increased state income
over the alternative of not installing conservation mea-
sures and continuing to buy oil from out-of-state producers.
The savings in energy expenditure effectively increase
income and spending within the state with a multiplier
effect on the Connecticut economy.
- narrowing of inter-regional energy cost differentials
which now exist by substituting coal/nuclear for oil in
the generation of electricity, particularly as the price
of natural gas (used much more widely outside of New Eng-
land) increases with deregulation.
NU 80s/90s should have a broad impact on nearly all major categories of
oil used in the state. It will reduce the use of 12 distillate oil for
home heating, heavier oils used in apartments and businesses, and the
residual oil used by manufacturing industries and electric generating
plants. In each category the program should make an impact.
In order to maintain the targeted 1.5 percent or lower electric load
growth, we are adding substantially to the number of energy management
assistance services being offered to customers. Reinforcing the successful
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CONN SAVE home energy audit program, which NU has sponsored from the outset
(including the 1979 pilot program which enabled Connecticut to become the
first state in the nation to place the Residential Conservation Service
(RCS) program in operation), are aerial thermography and interpretative
workshops showing heat loss in buildings (available to customers in our
more densely-populated municipalities), a service to wrap water heaters
and turn down their thermostats, incentive payments for certain conservation
measures, audits for commercial/industrial customers and other programs
designed to encourage customers to use energy more efficiently.
Our objective is to reduce energy consumption of all types. Because
of the prevalence of oil used in the region for space heating and industrial
processing, and important result of NU 80s/90s will be to reduce the direct
use of oil, in addition to maintaining growth in the use of electricity at
1.5 percent or less.
The purpose of my testimony is to give a report on the current status
of the principal elements of NU 80s/90s. After describing the background
of the program I will discuss the customer assistance programs in some
detail, as considerable progress has been made, and then discuss the plan
to reduce the use of oil in our generating plants.
NU has made NU 80s/90s a central part of its institutional purpose
and future development. We feel we have been responsive to DPUC concerns
and produced a program whose elements fit well together and will result in
nore economic electricity supply being made available to customers. We
request the support of the DPUC for the program and its elements.
(Additional information on the Northeast Utilities Conservation Program was
submitted and reviewed for the record as part of Mr. Stern's testimony).
ELMER N. STUETZER
5409 Itaska Street
St. Louis, Missouri 63109
Do our nation's private electric public utilities really want "regula-
tory relief"? The July 1981 settlement of the Union Electric Company rate
case demonstrates that this Company has never had it so good as it now has
under the jurisdiction of the Missouri Public Service Commission. From
beginning to end this entire case was a farcical charade intended to fool
the public into believing that the MPSC is consumer-oriented when instead
it is really pro-utility.
On November 26, 1980 U.E. filed for a rate increase of $91 million,
much more than it knew it really needed. Such a huge sum was decided upon
so that the MPSC could later cut it down to give the appearance it was
protecting consumers. Then during the period until a public hearing was
held on May 28, 1981 the staff of the Commission made a so-called audit of
the exhibits prepared by the Company to justify its request for a rate
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increase. The hearing gave members of the public an opportunity to express
their opinions of the U.E. request, thus making them feel that they had
some part in holding down the amount granted by the MPSC.
On the very next day after the hearing the Commission staff responded
to such public opinions by announcing it could only recommend an increase
of between $22 to $26 million. However, a few days later the staff disco-
vered, with the help of the Company, that it had made a mistake and now
recommended an increase of between $38 to $42 million. On July 13, 1981
the MPSC announced that it had decided that effective July 17, 1981 Union
Electric was entitled to an increase of about $50 million to be followed
by an additional increase of about $15 million, possibly as early as August
15, 1981 after it was determined what effect the recent coal-miners' wage
increase would have on the company's fuel costs.
May I suggest a much more practical method of granting rate increases
to public utilities, i.e., THE ALL-AMERICAN WAY! I use the term ALL-AMERI-
CAN WAY to emphasize it would have to be effective in every state in the
union so that one state could not offer lower rates than another in order
to entice new business to its state at the expense of the residential
customers. Under the ALL-AMERICAN, every consumer, no matter how big or
how little would pay exactly the same price for each kWhr of electricity
used, no matter what time of day or season of the year. In addition,
instead of long, drawn-out rate cases, smaller amounts could be requested
more frequently as needed. With a governing board of the utilities peers
whose energy costs would soar you can be sure they would not allow any
utility to charge too much for its service. Had the ALL-AMERICAN method
of rates been in effect at Union Electric Company during the year of 1980
residential user's bills would have been $63 million less, commercial
users would have been $29 million less, large industrial users would have
had to pay $72 million more, $22 million, and miscellaneous would pay $3
million less.
It would have made no difference to Union Electric as it would still
have the $997 million it needed to continue to render its usual good serv-
ice. It is interesting to note that the recent decision of the MPSC
increases rates to residential by 8.5% but to large users only 8.4%. To
me, that seems to be the Un-American way!
Note: The attached schedule showing the derviation of my figures may be
of interest to you.
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KWHR Revenue in All-American Difference in
Class of Sales in Thousands of Revenue in Thousand
Customer Millions Dollars Thousand Dollars Dollars
Residential 8446 402,160 339,571 (62,589)
Commercial 6913 306,486 277,937 (28,549)
Industrial 7616 233,854 306,201 72,347
Other Electric 1435 35,619 57,694 22,075
Utilities
Miscellaneous 385 18,774 15,490 (3,284)
24,795 996,893 996,893
The above exhibit shows in the first three columns the class of cus-
tomer, kilowatt hour sales in millions, and electric operating revenues in
thousands of dollars as shown on page 36 of Union Electric Company's Annual
Report for Year 1980. The last two columns show what the operating income,
i.e., revenue, would have been and what the difference in such operating
revenue would have been had the All-American Way of Electric Utility Rates
been in effect in 1980.
The All-American Way charges all customers, from the very largest, to
the very smallest, exactly the same price per kilowatt hour, no matter how
much or how little is used, or what time of day or night, or season of
year, winter or summer. The average KWHR price used in above computations
is .040205, arrived at by dividing $996,893 by 24,795 KWHR. So residential
customers would have paid $62.5 million less, commercial customers would
have paid $28.5 million less.
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AMY TIMMER
Energy Extension Service Clearinghouse
P. 0. Box 30228
Lansing, Michigan 48909
(This statement was presented by Ms. Timroer to the National Energy Exten-
sion Service Advisory Board on May 19, 1981. The title of this presenta-
tion was Energy Information Services; Implications for U.S. Energy Policy
(A Study Based on the Michigan Energy Extension Service Clearinghouse)).
In cutting federal funding for national energy conservation pro-
grams, the Reagan Administration believes that rising energy prices and
government tax incentives will adequately encourage people to conserve.
Unfortunately, recent history suggests that this simply will not be the
case. While it is true that energy consumption has declined as prices
have risen, the decline in consumption has not kept pace with the growth
of prices. For example, since 1972, the price of natural gas used in
Michigan homes has risen 194%; the price of home heating oil, 437%; and
the price of electricity, 115%; yet per capita energy consumption in the
residential sector has declined only 5% during the same time period.
Citizens have made up the difference between their savings and their con-
sumption simply by devoting more of the household budget to energy, indivi-
duals and families are exporting billions of dollars each year to pay for
imported fuels money that could otherwise be used to purchase goods and
services within this country. Thus, the free market is working but
very slowly and at an enormous cost to both consumers and businesses.
In making their decisions about how conservation should be encouraged,
the free market theorists do not give sufficient consideration to an impor-
tant fact: rational economic decision-making relies on an unobstructed flow
of information. For the price mechanism to work, people must know how to
respond. Unfortunately, not all of our responses can be dictated by common
sense. If the price of hamburger goes up, the response is simple: eat less
or buy something else. But, if the price of home heating fuel goes up,
there are fewer obvious ways to buy less or conserve. Some of the most
effective ways to use less energy require us to know a great deal more
about our homes than most people know. In other words, people are not
managing their energy consumption because they do not know how.
A state-wide survey conducted in 1978 demonstrates this contention.
A majority of Michigan citizens polled cited turning out lights as an
important conservation action. A minority cited insulating and a very
small minority cited weatherstripping as important conservation actions.
Although all three actions will save energy, insulating and weatherstrip-
ping can save much more than turning out lights. But, because turning out
lights is the most obvious way to save energy, this conservation measure
is widely practiced, despite the fact that it will not significantly affect
utility bills. It is little wonder that American citizens claim to be
conserving, yet complain that their energy bills continue to soar. Thus,
the need for energy management information is widespread and strong. And,
the Michigan experience suggests that it is an essential complement to the
efficient operation of the free market.
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The Michigan Energy Extension Service Clearinghouse has been addres-
sing the need for energy information since April, 1978 when the Clearing-
house opened the Energy Hotline. The Hotline is a toll-free information
service established to help homeowners and other small energy users under-
stand energy use and consumption patterns, and cope with ever-rising energy
prices. The Hotline offers technical assistance over the telephone and
provides callers with written materials on a wide variety of energy topics.
Materials developed by the staff are designed to address the broader
aspects of conservation and energy management, while supplying both tech-
nical "how-to" instructions on conservation techniques, and financing
information. Based on a number of studies of public awareness of energy
concepts, and factors which best motivate citizens to conserve, more than
200 different publications have been developed and are now distributed
state-jwide. This information is used by homeowners, small businesses,
local governments, public school teachers, community groups, students,
professionals in the energy field, and other state and federal agencies.
The Clearinghouse operation in Michigan collects extensive data on
each client, which is used to continually monitor the effectiveness of
the program, and to modify the service so that it is most appropriately
addressing the needs of the public. It is important to understand that,
by definition, an information service must be responsible to public need,
since that is its inherent function. If use of such a service falls off
dramatically, it is an indication that either the service is not providing
appropriate help, or that it is no longer needed. If government is to
serve public need in the area of energy information, then, it is useful to
look at the trends that have occurred in the Michigan experience. To
date, over 65,000 Michigan citizens have made use of the Clearinghouse.
The table below shows that the demand for this service continues to in-
crease in weekly phone contacts since the service was made available in
1978.
Number of Citizens Contacting the Michigan Energy Extension
Service Information Clearinghouse
Total Number Per Week
1978 5,959 119
1979 17,019 327
1980 28,107 541
1981 (through February) 8,410 764
And the trend is expected to continue. In a random survey of over
600 Michigan households conducted in August of 1980, over 80% of the re-
spondents said they could use more information about one or more areas of
energy conservation right now. These findings are complemented by those
of a nation-wide survey conducted by the Gallup Organization (1980) where
it was found that over half of the population still does not know about
the federal income tax credit for residential solar installations (finan-
cial assistance is often viewed as one of the best incentives for under-
taking conservation projects). It is thus apparent that in order for
Americans to make wise decisions about energy use, and to be encouraged
437
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to take advantage of existing incentives, they must have access to the
necessary information.
What, then, is the best channel through which to offer such informa-
tion? The marketplace has seen the entry of a confusing variety of energy
conservation devices, including gas savers, insulation, solar panels, and
wind generators (yet another indication of consumer interest in conserva-
tion) . To sell their products, many companies must first explain energy
terminology (such as R-values, BTU's, and thermal storage capacity), and
then explain how their product will help the consumer cope with energy
costs. Thus, to make an intelligent decision, the consumer must understand:
new terms and concepts; technicalities of the product; financing in-
formation, including payback periods and resultant savings; objectivity
and reliability of information received; comparable products; and alterna-
tive options. While private interests may eventually offer all of this
information, it is the reliability and objectivity of the information that
a consumer will most often question. Approximately one-third of the
calls received by Michigan's Energy Hotline concern specific brand-name
product information, while the great majority (75%) of all calls are from
consumers who are making decisions related to personal conservation invest-
ments.
To confirm the need for an objective information service and to deter-
mine public preference for the source of that information, Michigan sur-
veyed citizens and asked the open-ended question of where people thought
they could get the most believable information about energy. The combined
"government" responses (federal, state, and local) were mentioned more
frequently than any other source. The next most frequent response was "no
one" or "don't know any." Moreover, when the Gallup Organization asked
who should "educate and inform" consumers about solar energy, the single
most often mentioned source was the federal government. Contrary to the
assumption of the new administration, it seems the public is very much in
favor of continued government involvement in certain public is very much
in favor of continued government involvement in certain public service
areas in this case, that of energy information dissemination. More
importantly, the public seems willing to support such preferences with tax
dollars. In a Michigan survey conducted from late February through early
May of this year, 79% of respondents agree that "the government should
spend a larger portion of its present budget on energy conservation." In
contrast, only 31% agree that "government should stay out of the picture
and let the free market find the best solution to our energy problem."
A criticism now being leveled against the information produced and
distributed by the U.S. DOE maintains that the department is biased in
favor of decentralized alternative energy approaches and against more
traditional central station energy sources (House Subcommittee on Energy
Research and Production report entitled, "The Department of Energy's Public
Information Programs: Major Changes Needed"). Because of this criticism,
a review of certain DOE publications is currently being conducted, and
states are unable to obtain quantitites of those materials for distribution
to the public until that review is complete. Not only has this created an
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inconvenience for state information services, but the criticisms which
led to this action are misleading. Much of the DOE public information is
distributed to consumers who are making very decentralized energy decisions.
The criticism that DOE does not adequately promote central station energy
sources ignores the fact that the public in general has little to do with
such decisions. Conservation and renewable energy options require indivi-
dual-level awareness and information in order to be implemented.
The experience in Michigan provides the kind of data upon which to
base decisions that will determine the scope of an information service.
It is consumer demand that should dictate the types of materials produced
by a government information service. Below is a table based on the first
40,000 citizens requesting information from the EES Clearinghouse between
mid-1978 and mid-1980.
Percentage of Citizen Requests
For Information by Category
Conservation 54%
Solar energy 12%
Other renwable sources 13%
(e.g. wood, wind, biomass)
All electrical generation 3%
Nuclear energy 1%
Fossil fuels 1%
Other Miscellaneous 16%
100%
As the table clearly indicates, consumer preference is overwhelmingly for
conservation and renewable technologies information. More than ten times
as many requests for solar energy information have been received than for
either nuclear or fossil fuel information. Futhermore, conservation,
solar, and other renewable energy sources, together account for over
three quarters of all energy information requested. (Note: Since August,
1980, where the table above left off, customer requests have been even
slightly more in favor of solar and conservation.) The implications for
national energy policy are obvious: the public desires, and is actively
using, information that will help them reduce energy consumption. If in-
formation services prove to be cost-effective in helping keep down energy
expenditures, they should be maintained and expanded. Thus, the costs of
such services must be explored in relation to their impact on energy con-
sumption.
The Michigan EES integrates an extensive evaluation component into
every aspect of the program. Every person who contacts the Clearinghouse
is surveyed to determine satisfaction with the service, and conservation
actions taken as a result of information received. Conservation actions
are translated into BTU savings and then into dollar savings. The table
below shows program costs and savings.
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Dollars Saved
EES Dollars Spent Client Dollars Saved per $ Spent
1978 $ 83,981 $ 283,332 $3.37
1979 155,081 866,029 5.58
1980 174,609 1,522,432 8.72
The Information Clearinghouse has in effect, more than paid for itself
with energy savings in every year of operation. In 1980 alone, almost
$9.00 were saved for every dollar spent to operate the program. This is
of special significance to the economy of Michigan, as 85% of our energy
must be imported into the state. From a national perspective, this kind
of productivity could be invaluable in helping to solve the energy problem.
A balanced energy program cannot afford to ignore such contributions.
Finally, it is interesting to note that the Michigan Clearinghouse
has promoted these savings while maintaining high ratings from clients in
a variety of service areas.
Clearinghouse Patron Feedback
74.5% of Clearinghouse materials are rated as 80-100% of what the
patron wanted.
67.1% of Clearinghouse patrons take action to conserve energy after
contact with the Clearinghouse.
79% of Clearinghouse patrons rate the service as completely informa-
tive
82.9% of Clearinghouse clients are making their first contact with
the service.
The program has consistently maintained these ratings for three years.
The national Energy Extension Service program began as an experiment in
grass roots energy conservation the intention being to use government
only as an impetus to helping consumers realize energy savings in their
personal consumption habits. Without employing any regulatioins relying
solely on the benefits of education and consumer incentives to save money
the Energy Extension Service program has done precisely that. The
service has not only helped hundreds of thousands of Americans understand
the nature of our energy crisis, but "has provided them with the kind of
information necessary to promote active conservation of scarce resources
and increased use of renewable resources. But more importantly, the exper-
ience and accumulated knowledge offers the Reagan administration an option
- to avoid government interference in the marketplace; to avoid increased
use of fuels that cannot last or are not proven safe to our environment;
to avoid sending billions of dollars out of our country each year. That
option is to educate the public, to provide a cost-effective and highly
needed information service that has proven its worth in our efforts to
combat the energy crisis.
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MARGARET WALKER
Drector, Arizona Energy Office
Office of Economic Planning and Development
1700 West Washington
Phoenix, Arizona 85007
The EPA Section 11 requirements provide a good opportunity for impar-
tial review of the U.S. Department of Energy (DOE) programs. It is impor-
tant to remember that this is not just a required exercise but a useful
tool to allow constructive comments for DOE programs and policies. The
ccmments that resulted from the 1980 Section 11 review were thoughtful
and, in our view, reflect the value of the energy conservation programs
administered by DOE. It is regrettable that the programs are being aban-
doned at a time when they are just beginning to bear fruit. In this testi-
mony, I intend to review the successes of the DOE conservation programs in
Arizona, and then respond to the altered approach of this Administration.
THE ARIZONA ENERGY STORY
The Arizona Energy Office has received federal funds since 1974 when
it was established with Federal encouragement. Since 1974, our programs
have expanded as the federal and state role in energy conservation grew.
We administer federal funds for the State Energy Conservation Program
(SECP), Energy Extension Service (EES), Emergency Energy Conservation Act
(EECA), Residential Conservation Service (RCS), Institutional Conservation
Program (ICP), and Weatherization Assistance Program. In all, direct
federal funds, excluding pass throughs, amount to $700,000 or about 60% of
our budget. The Arizona Legislature has recognized the needs in Arizona
and has supported the office with the additional 40% of our budget.
It might be useful to review the extent of the energy problem in
Arizona:
o Arizona is particularly vulnerable to oil interruptions since
we produce and refine very little petroleum.
o Arizona households spend $2.7 billion in direct energy costs
for residential and transportation uses:
$1810 per household for gasoline
$1257 per household for electricity and gas
o Transportation represents 36% of all energy used (against a
national average of 25%) despite a reduction from 1.41 billion
gallons in 1979 to 1.36 in 1980.
Arizonans have responded well to calls for conservation. They are eager
to learn how to go about saving energy in their homes, cars and businesses.
Our programs are designed to help Arizonans find reliable information and
complete effective measures. The following represents some of the activi-
ties, successes and potential of the state energy office:
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o The Governor appointed a Building Standards Advisory Comnittee
which produced a thoughtful Arizona Guidelines for Energy Conser-
vation in New Building Construction. With an estimated 43% of
Arizona's energy consumption used in buildings, a savings of just
20% is equal to the energy to be produced annually by the three
Palo Verde Nuclear units, 3750 megawatts.
o The Weatherization Assistance Program has insulated and improved
3281 homes in Arizona. If each of these averaged a 35% reduction
in space heating, which it is estimated to do, we would save
$143,000 a year in utility bills for those low income and elderly
residents. As utility costs continue to rise, that would save
millions of dollars over the lifetime of the houses.
o Driver Energy Conservation Awareness Training (DECAT) can save
20% of our gasoline consumption. In the first year of the pro-
gram, 3000 Arizonans will be trained with a savings of 1.1 million
gallons of gasoline or over one and a half million dollars for
those drivers. Particularly valuable will be training diesel
fleet drivers and high school driver education classes.
o Three hundred forty-seven schools, hospitals and local government
buildings in Arizona received $1.1 million dollars to improve the
the energy efficiency under the Institutional Conservation Program.
As an example, a hydronic economizer was installed at the Univer-
sity of Arizona which can offset 87% of the campus cooling load.
o Conservation Road Shows have been given to over 1000 Arizonans
from Williams to Willcox. At even a modest figure of 5% performing
some energy conserving measures as a result of these programs,
the savings will be equivalent to all the energy a family needs
to power its vehicles for a lifetime.
o The proposed Residential Conservation Services (RCS) would provide
on-site energy audits for Arizona homeowners. It is estimated
that a resident who takes a minimum action on the reccntnendations
of the RCS audit can reduce energy use by 22%. If just 6% request
an audit and half of them take some action, the estimated annual
energy savings is 43,000 barrels of oil equivalent. That would
represent $1.8 million in Arizona alone.
o One third of Arizona's cities and towns are participating in the
Energy Conscious Community Award program to recognize local ener-
gy activity and provide a delivery mechanism for oior energy pro-
grams. Communities can win a Governor's Award of Excellence,
Merit or Participation by demonstrating success in a number of
energy conservation and solar projects.
o As a result of the Arizona Energy Office, at least 23 trillion
Btus were saved in two years.
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This much energy in the form of gasoline would supply the
fuel for a third of a million small cars for a full year.
This much energy would supply all of the energy needs of
144,000 typical Arizona homes for a full year.
This much energy is equivalent to 3.8 million barrels of
oil or $159 million.
It is clear that we support the retention of federal funding for state
energy offices. That expenditure provides offices around the country
familiar with energy solutions and it allows states to focus on the parti-
cular needs of the citizens in that state. Arizona is an especially good
example of the need for local focus. Among other characteristics, we have
unique construction with flat roof houses and evaporative coolers, enormous
climate diversity, and we have carefully guarded local home rule. The
state and local conservation grant program that funds these 50 state energy
offices was $336 million. That is only 2% of the DOE budget and one-tenth
of the Strategic Petroleum Reserve.
EFFECTS OF NEP III
With a total reliance on the free market economics of the Third Na-
tional Energy Plan, most of the successes Arizona has forged will be re-
moved. Useful cost-effective programs will not be offered because the
funding will be removed. Although we recognize the value of a fundamental
review to examine what works and what doesn't work as a result of federal
funding, we strongly suggest we have demonstrated the value of DOE conser-
vation and renewable funding.
The rising price pressures that have resulted from the free market
economics will give Arizonans the motivation to conserve but not the means.
People need reliable, available information to understand which measures
are most cost-effective. Larger corporations with staffs of engineers can
make those calculations but the average homeowner has great difficulty in
deciding whether it is cost-effective to install R-30 or R-19 insulation
or which appliance has the most favorable life cycle cost.
These are economies of scale that can result from federally funded
appliance labelling programs, energy efficient building code reccmnenda-
tions, passive solar building technologies, and on and on. In a similar
way, it makes sense to have one state energy office to assist local govern-
ment leaders and energy users make energy decisions based on reliable
information. Economies of scale are being lost by the new approach.
RESPONSES TO SECTION 11 REVIEW QUESTIONS
1. "How are private firms, state governments and local agencies preparing
to assume their new responsibilities?"
There is little indication that these groups recognize that they must
assume new responsibilities. You make the assumption that because
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the federal government is dropping its role in conservation and
renewable programs, these groups are expected to pick them up. On
the contrary, there is a strong belief that the intended dismantling
of DOE means there is no energy problem, therefore no need to assume
new responsibilities. Leadership and authoritative sense of direction
is needed to assist us in explaining there is a critical role to be
played in conservation and renewables.
2. "Which activities will get priority from public and private organiza-
tions and what will be the consequences if some activities are discon-
tinued?"
Keep in mind that federal budgets which call for no support for state
energy offices, will mean the end of a substantial number of the suc-
cesses we enumerated earlier. Consequences will be uninformed citi-
zens who pay more than they need to in energy costs, less efficient
buildings and fleets with reduced productivity, ever increasing con-
sumption at higher prices that will fuel not only inflation in geome-
tric proportions, but bring greater declines in economic output as
fossil fuels are harder to retrieve.
3. "Have any new initiatives or opportunities been created as a result of
the shift in Federal energy conservation programs?"
Those that appear likely will end when state energy offices close.
Private sector conservation initiatives can be inconsistent, unreli-
able, unmonitored and unenthusiastic. Because profit-centered firms
need to see fast paybacks it is questionable how fundamental research
necessary for renewables will be continued.
4. "What is the Federal government's proper role in this period of tran-
sition?"
Leadership. The Federal government must explain that exponential
growth of energy consumption is impossible to sustain and recognize
that capital formation costs for expanding production facilities
is an increasing drain on the economy. It must recognize and
support conservation and renewables as appropriate answers in a
transition from fossil fuels.
- Equity. The enormous federal support for fossil fuel exploration
and production, for nuclear fuel research and disposal must be
balanced with an equal emphasis on other forms of energy produc-
tion. The subsidies for existing fossil and nuclear production
must be recognized and made part of the real cost of producing
these fuels. If similar support were given conservation and
solar during this transition, the investment would be less and
the long-term results greater.
Information. Americans need reliable information on measures to
take. As we make the transition to higher prices, people must be
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given the appropriate tools to protect themselves from these
prices.
5. "How should the Federal government evaluate and monitor the effects
of its new energy policies and program changes?"
For example, U535 would be extended to demonstrate Btu savings. A
new tool would be examining numbers of people on low income assistance
resulting from energy bills. Numbers of small businesses bankruptcies
could be calculated.
SLMMARY
Existing DOE conservation and renewable programs need a chance to achieve
their full successes. A weeding out process has produced effective pro-
grams that should be continued. True market energy economics cannot be
the sole policy since Americans need reliable energy information and assist-
ance.
MR. JETER M. WATSON
The Conservation Council of Virginia
Route 3, Box 647-A
Ashland, Virginia 23005
The Conservation Council of Virginia is a coalition of 38 membership
groups representing a broad spectrum of environmental interests, joined
together by a common commitment to the conservation of those resources
which result in maintenance and improvement of a healthy environment. As
such, the Council is extremely interested in energy use, particularly the
efficient use of energy through conservation measures, which we (in agree-
ment with the Harvard Business School Energy Project) consider to be the
most important and readily available energy source for a continuing healthy
economy.
The Administration's emphasis on increased production seems to be
based on two erroneous assumptions concerning energy conservation: First,
that conservation means a lowering of personal standards of living (implied
in the Notice of Public Hearings and Staff Working Raper, p. 10-11) and,
second, that market forces will bring about desired conservation goals
regardless of government energy policy (Id., p. 2, 6, 9, 11).
Where the first assumption is concerned, (i.e., energy conservation
means lower standards of living) the Administration seems to be fixated on
a narrow definition of conservation merely as curtailment of use (i.e.,
of "doing without"). But energy conservation is far more than that. In
the sense that we are advocating it, energy conservation means adjustment
of use (i.e., of cutting out waste by improving efficiency). Studies of
the energy/GNP relationships of the United States and a number of European
countries have indicated that, given a serious commitment to energy conser-
vation, this country could reasonably expect to achieve a 30 to 40 percent
445
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energy saving without any standard of living loss and, more probably, with
a resulting higher standard of living, when the reduction of energy-use
induced environmental dislocations is considered. In short, current waste
within the system will permit conservation to do more with less.
Where the Administration's second assumption is concerned (i.e., the
inevitability of energy conservation through pricing in the free market)
it should be pointed out that proposed federal subsidies for high cost,
high technology energy systems will inevitably erode the price induced
energy conservation we have experienced at various times since 1973 by
placing these high cost alternatives on a more favorable institutional
footing.
Were the government actually "not to select and promote favored sour-
ces of energy", as is proposed in guiding principle three (Working Paper,
p. 10), then pricing alone might, indeed, bring about the energy conserva-
tion, in the form of "not wasting the Nation's resources" (Working Paper,
p. 10), to which the Administration does not appear hostile. Unfortunate-
ly, the Working Paper immediately contradicts guiding principle three by
proposing, in guiding principle five, to subsidize high cost, high techno-
logy energy systems, subsidies which will, in a very real way, "select and
promote (the) favored sources of energy," decried in guiding principle
three.
Such high technology subsidies by the Administration will, in our
opinion, heighten the energy waste which renders our economy increasingly
non-competitive with those of other, more efficient countries. Greater
inefficiency will result from the high intermediate to end-use energy
characteristics of the favored, subsidized energy systems and from the
erosion of price-induced conservation gained so far, as these new techno-
logies use up and replace existing technologies.
Additional benefits accrue to the energy conservation approach. Ener-
gy conservation is a virtually pollution free energy source. It does not
tear up the land, nor create boom and bust economies, nor pollute or other-
wise use up waste quantities of water, nor affect air quality or climate,
and, most importantly, it does not involve the long lead times and inflexi-
bility of the high cost, high technology systems.
The Administration's Working Paper alludes to these disadvantages of
the high technology solutions,but dismisses them being results of suc-
cesses in other areas of improvement or as being too distant in time to
worry about. Far more attention should be paid to these disadvantages.
The combustion products of increased coal usage are of concern, both be-
cause of direct health effects of air contaminants and because of the more
indirect problem of acid rain. The competition for water of these high
cost, high technology energy systems with existing uses of water, espe-
cially in the more arid west, may be severely limiting both economically
and environmentally. The characterization of possible climatic effects
as too remote to warrant concern (i.e. in the next century) is inappropri-
ate on three counts. In the first place, it is irresponsible to put off
such a problem so callously on a generation unborn. In the second place,
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many of us in this room hope to live well into the next century. Finally,
there is a body of evidence stemming from the climatological research of
people such as Reid Bryson to suggest that man induced climatic effects
are already being experienced without the presence of the large scale
technologies which the Administration proposes to subsidize.
We therefore urge you to consider and support both the economic and
the environmental benefits of strong government support for energy conser-
vation initiatives which will benefit all the people, rather than the
economic benefits which will accrue to only a few, while the economic and
environmental costs are borne by many if the high cost, high technology
energy systems are subsidized at the expense of conservation and renewable
energy resource programs.
Thank you for this opportunity to present our views.
MEMBER ORGANIZATIONS OF CONSERVATION COUNCIL OF VIRGINIA
1. ASSOCIATION FOR THE PRESERVATION OF VIRGINIA ANTIQUITIES
2. AUDUBON NATURALIST SOCIETY OF THE CENTRAL AMERICAN STATES
3. CANOE CRUISERS ASSOCIATION
4. C.A.R.E. CHAPTER OF THE CHESAPEAKE BAY FOUNDATION
5. CITIZENS COMMITTEE FOR VIRGINIA STATE PARKS
6. CITIZENS ENVIRONMENTAL COUNCIL OF THE ROANOKE AREA
7. CITIZENS PROGRAM FOR THE CHESAPEAKE BAY
8. COMMITTEE TO PRESERVE ASSATEAGUE ISLAND
9. THE GARDEN CLUB OF VIRGINIA
10. HANOVER CITIZENS FOR SENSIBLE GROWTH
11. IZAAK WALTON LEAGUE OF AMERICA, VIRGINIA DIVISION
12. KING GEORGE ENVIRONMENTAL ASSOCIATION
13. LEAGUE OF WOMEN VOTERS OF VIRGINIA
14. LOWER JAMES RIVER ASSOCIATION
15. NORTHERN SHENANDOAH VALLEY CHAPTER OF THE NATIONAL AUDUBON SOCIETY
16. NORTHERN VIRGINIA CONSERVATION COUNCIL
17. OLD DOMINION CHAPTER OF THE SIERRA CLUB
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18. PIEDMONT ENVIRONMENTAL COUNCIL
19. POTOMAC APPALACHIAN TRAIL CLUB
20. RAPPAHANNOCK LEAGUE FDR ENVIRONMENTAL PROTECTION
21. RECLAIM THE JMES
22. RICHMOND CHAPTER OF THE NATIONAL AUDUBON SOCIETY
23. RICHMOND SCENIC JMES COUNCIL
24. RURAL POINT CONCERNED CITIZENS ASSOCIATION
25. SOCIETY OF AMERICAN FORESTERS, APPALACHIAN SECTION
26. TROUT UNLIMITED, VIRGINIA COUNCIL
27. VIRGINIA ANGLERS' CLUB
28. VIRGINIA B. A. S. S. FEDERATION
29. VIRGINIA BEACH CHAPTER OF THE NATIONAL AUDUBON SOCIETY
30. VIRGINIA CHAPTER OF THE AMERICAN SOCIETY OF LANDSCAPE ARCHITECTS
31. VIRGINIA CITIZENS FOR BETTER RECLAMATION
32. VIRGINIA FEDERATION OF GARDEN CLUBS
33. VIRGINIA FEDERATION OF HUMANE SOCIETIES
34. VIRGINIA REGION OF NATIONAL SPELEOLOGICAL SOCIETY
35. VIRGINIA SOCIETY OF AMERICAN INSTITUTE OF ARCHITECTS
36. VIRGINIA SOCIETY OF ORNITHOLOGY
37. VIRGINIA WILDERNESS COMMITTEE
38. YORK CHAPTER OF THE CHESAPEAKE BAY FOUNDATION
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JUNE WILLIMS
Manager, State Energy Conservation Plan
Department of Energy and Transportation
Watkins Building, 510 George Street
Jackson, Mississippi 39202
The following comments should be entered as testimony for the Environ-
mental Protection Agency Section 11 hearings.
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The Energy Division of the Mississippi Department of Energy and Trans-
portation takes the stance that conservation through high prices in the
free market alone cannot meet the energy conservation goals for Mississippi.
Conservation efforts of MDET center around the ideas of not only reducing
or at least stabilizing energy demand, but of utilizing present demand in
the most efficient manner. Peak energy efficiency is a major factor in
leveling off the costs of energy.
Large businesses and industries with heavy amounts of investment capi-
tal have the flexibility to undertake major retrofitting projects to attain
maximum energy efficiency in plant operations. These firms are also more
likely to have on staff a person whose major function it is to seek out and
take advantage of opportunities to conserve energy.
But what about those businesses and industries which are struggling
to remain in the market? Without encouragement and technical assistance
from the governmental sector, these firms will take the alternative of
continually passing on rising energy costs to consumers.
Adoption of energy efficient management practices today will most
certainly impact upon future energy needs. The MDET Energy Division will
continue to encourage energy conservation by providing energy management
technical assistance and training.
RALPH WILLMER
Somerville, Cambridge Economic
Opportunity Ccmnittee, Inc.
Somerville, Massachusetts
My name is Ralph Willmer, and I am the Project Director of the Energy
Consumer Education Program at the Somerville, Cambridge Economic Opportuni-
ty Committee, Inc. (SCEOC). SCEOC is the local Community Action Agency
which serves the cities and towns of Somerville, Cambridge, Belmont, Water-
town, Arlington and Lexington in Massachusetts near Boston. As part of
our program, we conduct workshops on low cost/no cost weatherization and
utility rights. We have also written manuals on these subjects.
The purpose of my testimony is to express my concern over the direc-
tion that federal energy conservation programs are headed. I will address
several different issues including the need for the continued federal role
in weatherization programs, the impact of the proposed federal policy in
Massachusetts, its effect on the low-income population and the problems of
shifting programs from one agency to another.
For the past several years, the federal government has sponsored
weatherization programs which target low-inccme neighborhoods. This pro-
gram has been run by several different agencies during this time period.
Programs such as these provide vital services, which should not be over-
looked. The situation in our service area is typical of many cities within
the New England region. The city of Somerville has a relatively high
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proportion of low-income people. According to a recent survey done in the
city (Initial Energy Inventory Report Citizen's Energy Advisory Conrnittee)
over 90% of the city's housing stock was built prior to 1939. Multi-family
structures comprise 90% of all city residences. There is a 2 to 1 ratio
of renters to homeowners in the city. The survey also showed that 85% of
these homes were inadequately insulated and 75% of all homes lacked any
insulation at all, Furnace efficiencies were also low - the average effi-
ciency for all housing types was only 71%. Oil is the predominant heating
source.
The scenario described by these statistics is a particularly dismal
one. Low income people who are most vulnerable to the upsurge in oil
prices are the ones who are living in homes that burn the largest volume
of fuel. Landlords have no incentive to tighten up these homes, whether
they pay the utilities or not. Since the housing stock is so old, and
poorly insulated, many of these homes are costing consumers hundreds of
dollars a year in wasted energy. Weatherization programs, sponsored by
the federal government, have begun to improve this situation. Many of
these people also receive some fuel assistance money in addition to the
weatherization kits. However, funding the fuel assistance program is
really only a band aid approach to the problem. Through continued weather-
ization, we can begin to make homes more energy efficient and therefore
decrease reliance on fuel assistance to pull people through the winter.
In general, energy conservation should be the crux of any sound ra-
tional energy policy. Throughout the issue paper written for the National
Energy Plan III hearings, the point was made that America's dependency on
foreign energy supplies leaves us in a vulnerable position. Energy conser-
vation should play a vital role in reducing our dependency on imports.
Since it is economical and the technology is already developed, there is a
very important role that the federal government should play. To ignore
this or pass the responsibility down to the states and localities is short-
sighted at best.
Massachusetts is facing an additional obstacle to maintaining and
expanding its own weatherization programs. In November 1980, the voters
approved a sweeping tax reform measure known as Proposition 2 1/2; which
essentially limits the amount of property and auto excise tax to 2 1/2% of
the value of the taxed item. In its first year of implementation it is
expected to reduce city and town revenues by anywhere from $480-$565 mil-
lion. The state, in turn, has increased its local aid package to accommo-
date approximately half of that loss. All in all, it appears that any
new revenue on either the state or local level will be used to rehire
laid off police and fire personnel and teachers, as opposed to developing
new programs. This is coupled with the anticipated cutback in various
federal funds, including the zero level budgets for weatherization and the
State Energy Corservation Program.
The Administration's proposal places more of the responsibility for
weatherization services on local agencies and organizations as well as the
private sector. I see a couple of drawbacks to this type of plan. First
of all, utility companies have thus far been reluctant to enter into the
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conservation business. The Residential Conservation Service, set up through
legislative efforts, begins to get utilities into conservation. The utili-
ties offer energy audits, appraisals, contractor referrals and financial
information. However, this program does not really benefit those who
cannot afford to insulate and weatherize their homes, nor does it help
low-income people who may not be as credit worthy as more affluent people.
Other members of the private sector also cannot fill this void. Energy
Secretary James Edwards would like to see the free market forces encourage
conservation by forcing people to conserve as prices continue to rise to
the world level. This policy can only serve to the detriment of low-
inccme people who cannot bear the brunt of these increases.
In any case, efforts should be made to continue weatherization pro-
grams that will help low-inccme people reduce their heating bills and the
resulting large utility arrearages and terminations. The most effective
structure for operating these programs have been through the Community
Action Agencies. They have been running a variety of different weatheriza-
tion projects for a number of years. They are equipped with the knowledge
of the local community's people and their needs; much more so than state
wide organizations would. Over the years they have developed the resources
and expertise to effectively manage projects and educate citizens about
weatherization. These programs have been operated in conjunction with
many other local organizations, which service a more specialized clientele
within the community. Should the CAA's be phased out by the state govern-
ment, other local agencies would probably be able to pick up the programs.
In some cases, the municipalities have also established programs of their
own. Only with close coordination between each party will a successful
transfer of responsibilities occur. However, once again, Proposition 2
1/2 will hinder the ability of the municipalities to play any major role
in weatherization, even if some block grant money filters down to them.
The optimal weatherization program would be a combination of home
improvements that would include larger investments in insulation, particu-
larly attic insulation, and low cost weatherization. This is irtportant
because in order to maximize the cost-effectiveness of the conservation
improvements, both approaches must be used. A house that has been insula-
ted but has not had its doors and windows weatherized, is still going to
leak and cost the occupant money. Conversely, a home that lacks insula-
tion will still be inefficient. Obviously, it is necessary to do at least
the minimal weatherization, but a combination of that with some insul-
ation will produce the best results. In addition, some programs have also
included tune ups of inefficient furnaces. This is important because an
inefficient furnace will cost tremendous amounts of money and waste energy
even if the home is fully insulated.
To summarize, I feel it is imperative that the federal government
continue to play a major role in energy conservation programs. Our agency
has weatherized several thousand homes and apartments over the last few
years, which has helped many low income families meet their utility obliga-
tions. A cutback in federal funds will place these programs in jeopardy
and due to the fiscal condition of Massachusetts, it is uncertain as to
whether or not the state can pick up weatherization projects. Agencies on
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the community level are best equipped to operate the program. I hope that
they will continue to have the opportunity to do so. Thank you.
HARRY WUERTENBAECHER, JR.
Vice President - Customer Service
Union Electric Company
1901 Gratiot Street
P. 0. Box 149
St. Louis, Missouri 63166
Union Electric Company is an investor owned utility which supplies
electric service to approximately 700,000 residential customers in the
State of Missouri and adjacent areas in the States of Illinois and Iowa.
We are submitting this testimony in an effort to communicate our concerns
over past actions of the federal government in the area of energy conserva-
tion. We hope that future governmental actions will rescind past programs
which sleet and promote favored sources of energy (Building Energy Perform-
ance Standards) and mandate utility provided on-site audits of customers'
premises (Residential and Commercial and Apartment Conservation Service
Programs).
GENERAL PHILOSOPHY
We support the President's Program for Economic Recovery and the
broad concepts of reducing growth in Federal spending and minimizing the
costly burden of regulation on the private sector.
The involvement of the Federal government in energy conservation was
an improper response to its previous erroneous policy of fuel price regula-
tion. The imposition of price controls on natural gas and oil, which regu-
lated the consumer costs of these fuels below their true market value,
which disrupted the oost-benefit balance between energy use and conserva-
tion. This in turn led our citizens to choose big and powerful automobiles
rather than small and efficient ones. Similarly, home buyers chose addi-
tional square footage in lieu of better insulation and storm sash in the
new home market.
The proper response to the fuel crisis which became evident in 1973-74
should have been to remove all price controls. Instead, government opted
for a gradual removal and imposed costly and ineffective regulations in
energy conservation and efficiency standards, all adding to regulatory
burdens, more federal involvement ad increased federal budgets. To
correct the situation we must change our course to that outlined by present
administrative policy.
PAST AND CURRENT NON-MANDATED CONSERVATION ACTIVITIES OF UNION ELECTRIC
COMPANY
Our efforts on behalf of energy conservation in residences began in
1954 and have not ceased in the ensuing 27 years. Our original construc-
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tion and insulation standards resulted in at least 70,000 dwelling units
being constructed with R-24 insulation in ceilings, R-15 insulation in
walls, with dual glazed windows and storm doors throughout.
In 1977, Union Electric began a program whereby we stimulated the
installation of ceiling insulation to a level of R-30 in existing resi-
dences of our customers. This was accomplished through the existing mar-
keting structure of insulation suppliers and installers with the opportu-
nity for our customers to pay for the installation on their monthly elec-
tric service bill at prevailing interest rates. Insulation contractors
participating in the program made more than 38,000 installations of this
type in homes of our customers in the period between January 24, 1977 and
June 30, 1981.
We support the National Energy Watch Program of the Edison Electric
Institute and more than 1,900 of our customers have improved the thermal
performance of their homes and as a result have become members of this
activity.
In 1976 Union Electric initiated a marketing and advertising program
educating our customers on the benefits of proper maintenance of air
conditioners and the value of purchasing new equipment with higher Energy
Efficiency Ratios. We are still actively pursuing this program.
We also are actively engaged in tests of active and passive solar
heating systems, heat pumps, solar water heaters, super insulated homes,
solar shielding of homes and electric vehicles. All these hold future
promise in the area of energy conservation.
Our past and present programs were developed on the basis of their
cost-effectiveness to our customers and represent a practical approach to
energy conservation in our area.
FUTURE CONSERVATION ACTIVITIES OF UNION ELECTRIC COMPANY WHICH EXEMPLIFY
HOW A PRIVATE FIRM IS ASSUMING ADDITIONAL RESPONSIBILITIES WHICH WILL ALLOW
FEDERAL GOVERNMENT TO WITHDRAW MANDATED UTILITY PROGRAMS
As part of our July 17, 1981 rate case settlement, the Missouri Public
Service Commission allowed Union Electric Company to remove the prevailing
market interest rate requirement from its insulation financing program.
We now will finance the installation of R-30 insulation in the attics of
our customers (and allow caulking, weather stripping, side wall insulation,
storm sash and storm doors to be included along with the ceiling insula-
tion) at an effective annual interest rate of 5%. These thermal improve-
ment items are the most cost-effective conservation measures our customers
can install in their homes. The below market interest rate is a tremen-
dous incentive to any customer who lives in a poorly insulated home and
views his rising natural gas, propane or oil heating costs as an ever
increasing financial burden.
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A SUGGESTION FOR LOW INCOME WEATHER!ZATION PROGRAMS
Subsidizing energy costs supports the continuing waste of energy. If
gasoline stations were to provide certain people with free gasoline, these
people would make no effort to drive less or to drive fuel efficient auto-
mobiles .
Admittedly, we are in an era of rapidly increasing energy costs, but
this is little different from price changes in or the availability of
other necessities such as food, clothing and shelter. People have always
adopted to these changes by using less or switching to other items or
other methods. In fact, it is important that people do this, otherwise
the supply segment of the market receives false signals and does not posi-
tion itself for the inevitable future.
Efficiency in structures and devices can only be improved to a limited
point. After that, the cost of operation must be manipulated by the user
through some form of limited use. Subsidies do not limit use but the lack
of a subsidy does.
Making structures energy efficient is a worthwhile and necessary
goal. This is especially true where the disadvantaged do not own the
structure in which they live. But improved thermal efficiency will only
delay the need to limit use ... not prevent it.
The following table gives a rough indication of annual heating costs
in St. Louis, Missouri for a poorly insulated hone (60 BTU/sq.ft.) and a
well insulated home (30 BTU/sq. ft.) for the past, present and future.
Future costs are based upon the projections of Chase Econometrics, and
Mellon Institute.
1970 1980 1990
Poor Good Poor Good Poor Good
Natural Gas $155 $ 77 $775 $386 $4,400 $2,200
Furnace
Add-On H.P. NA NA 585 293 2,200 1,100
to N.G.
Electric Heat NA NA 445 223 1,180 590
Pump
1970 1980 1990
Poor Good Poor Good Poor Good
Electric 280 140 840 418 2,200 1,100
Furnace
It is obvious frcm the above that compounded increases in energy
costs soon outpace the excellent effect of thermal improvement.
Sooner or later both the "advantaged" and "disadvantaged" will be
looking for ways to cut their energy costs, even though their structures
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have been improved in thermal efficiency. Dressing for lower inside temp-
erature settings during the winter (even lower at night) and the zoning of
the house into smaller comfort zones will be practiced by most of our
population. We may see the use of insulation in interior walls and floors
to make these comfort zones more efficient.
We suggest a new approach to low income weatherization containing
the following three linking elements:
1. Provide weatherization for the structure.
2. Deny future energy use subsidies for the weatherized structure.
3. Teach energy limiting practices to the occupants of the structure.
We recognize that a small percentage of our population is incapable
of earning enough money to cover their basic needs for food, clothing and
shelter, and will still require aid through government assistance programs.
WE URGE THE REPEAL OF ALL FEDERAL PROGRAMS WHICH PROMOTE FAVORED SOURCES
OF ENERGY MID MANDATE UTILITY ACTION
REPEAL BUILDING ENERGY PERFORMANCE STANDARDS
This program unfairly burdens an electric heating system with an
efficiency calculation unrelated to the building and related to the effi-
ciency of electrical generators. Union Electric Company generates 99% of
its electricity fron burning coal and using water power. We are construct-
ing a nuclear plant. Any law or regulation which unfairly augers against
electric heating forces the use of fuels which are either in short supply
or the availability of which is subject to the political whims of foreign
interests.
REPEAL THE RESIDENTIAL AND COMMERCIAL AND APARTMENT CONSERVATION SERVICE
PROGRAMS
These programs place Union Electric into the decision-making process
which heretofore was exclusively between our customers and their selected
contractor. It further forces us to give our customers estimates of
dollar savings due to thermal improvements they may make and forces us to
inspect those installations. Inspection of installations on the custo-
mer's side of the meter has historically been the responsibility of local
governmental inspection authorities which are generally immune from respon-
sibility arising from the inspection of a defective product.
We believe these programs are detrimental to our customer relations
and are non-cost-effective. Money spent on audits achieves nothing unless
the customer takes some conservation action. Actions taken by audited
customers do not exceed those taken by unaudited customers. To begin
these programs, and burden our rate payers with costs related to unjusti-
fied results is a tremendous mistake.
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WE URGE TOE FEDERAL GOVERNMENT TO REDUCE ITS INVOLVEMENT IN ENERGY CONSER-
VATION
Allowing the free market to work and giving our citizens correct
price signals are resulting in increased energy conservation. Citizens
will continue to respond to these signals so long as the government does
not manipulate one side of supply and demand or one segment of the energy
marketing industry.
The cost of studies, hearings and evaluations are all part of the
waste in federal spending which our country can no longer afford. We
question the need for the Department of Energy, the Federal Trade Commis-
sion and the Environmental Protection Agency to each conduct hearings
under federal laws dealing essentially with the same subject of energy
conservation.
Since none of the government's previous energy conservation programs
can be shown to have achieved any significant results, little is gained by
questioning which programs should be retained or changed.
WE URGE THE FEDERAL GOVERNMENT TO ESTABLISH A LONG-RANGE CONSISTENT ENERGY
POLICY
Private industry and private investors cannot develop energy produc-
tion and delivery systems under government policies which vacillate from
one year, or from one administration, to the next. Above all, we should
set our nation on a long-range consistent energy course. Development of
coal mines and construction of coal or nuclear power plants require five
to fifteen years from planning to production. If the government is free
to change the rules and place such energy investments in jeopardy through
changing policies, private investors cannot undertake necessary energy
projects which are so vital to our national interest.
We thank the Environmental Protection Agency for this opportunity
to express our views regarding energy conservation and energy policy in
general.
456 *U.S. GOVERNMENT PRINTING OFFICE: 1982/5S9-092/3398
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