September 23, 2003

Washington, D.C. -- As Congress begins conference discussions on the first major energy bill since 1992, the disturbing trend in higher natural gas prices and the latest power blackout call for bolder federal action to address these serious problems. The American Council for an Energy-Efficient Economy (ACEEE) urges Congress and the President to take stronger steps, in and beyond the energy bill now in conference, to use energy efficiency as a "first responder" in meeting these challenges.

"Energy efficiency is the fastest way to reduce natural gas prices and keep the lights on," said ACEEE Executive Director Steven Nadel. "While new energy supplies and infrastructure investments may be necessary, they will take many years to bring on and will be expensive. Efficiency offers relief sooner and often at lower cost."

ACEEE's recent report, Impacts of Energy Efficiency and Renewable Energy on Natural Gas Markets, shows that as little as a 2 percent reduction in natural gas demand can cut wholesale prices by as much as 20 percent. Other recent ACEEE research documents the reduction in peak electricity demand that energy efficiency programs provide. Since a key factor in power blackouts is peak demand from customer loads such as air conditioning and lighting, well-targeted efficiency programs provide inexpensive insurance against future blackouts. And since peak-period electricity generation is a major consumer of natural gas, saving electricity also helps solve the natural gas problem. Energy efficiency is thus a unique "double-acting" strategy that can address both of these pressing energy problems.

Actions for Congress

Strengthen Gas and Electricity Savings in the Energy Bill

• Increase Appliance and Equipment Efficiency Standards. We recommend that the conferees use the standards section reported out of the Senate Energy Committee, as this included several new consensus standards that were negotiated by manufacturers and efficiency supporters after House passage of the 2003 energy bill. We also recommend that the conferees accept the most recent consensus language on commercial refrigerators. These standards will create major savings for a range of gas- and electricity-using products within this decade.

• Energy-Efficiency Tax Incentives. We recommend that the conferees use S. 1149 as the starting point for negotiations, including several bipartisan amendments by Senators Grassley, Baucus, and Bingaman. Key gas and electricity savings can be created through credits for residential water heaters and furnaces, combined heat and power (CHP) systems, efficient new homes, commercial buildings, and home appliances.

• Electricity Performance Standards. Congress should explicitly include energy efficiency, demand response, and distributed generation in the reliability standards provisions of the bill. Targets should be set for reducing energy and peak demand by pre-set amounts within a specific time period, as was required in Texas' electricity deregulation legislation. Congress should also do more to ensure that efficient distributed generation technologies, such as CHP, are able to gain access to power grids without anticompetitive barriers and at reasonable cost.

• Support Efficient Transmission Planning. The energy bill is expected to prohibit the Federal Energy Regulatory Commission from pursuing national transmission planning policies for several years. This leaves states and regions that want to move forward on these issues without guidance or support. However, the Senate Energy and Water Appropriations bills contains language ordering the U.S. Department of Energy (DOE) to fund state and regional groups to help prevent future blackouts through more coordinated transmission planning. The bills require grantees to consider all available resources in transmission planning, including energy efficiency and distributed generation. The conference bill should include this language.

Ramp Up Federal Efficiency Programs

• The Senate should increase fiscal year 2004 spending for the U.S. Environmental Protection Agency and DOE's efficiency deployment programs, including ENERGY STAR®. The House-Senate conference should recede to the Senate on these increases as urgently needed to respond to our energy challenges.

• Congress should double energy efficiency research, development, and deployment (RD&D) funding over the next five years, as recommended by the President's Council of Advisors on Science and Technology (PCAST).

• Step Up Voluntary Efficiency Campaign. DOE's Smart Energy campaign is a good first step, but it needs significant and sustained funding, both at the federal and state levels. The department should pass some funds through to states to help ramp up their efficiency campaigns.

• Speed Up Appliance Standards Rules. The current rulemaking processes for residential heating and commercial air conditioning should be accelerated so that the rules are issued and take effect sooner. In setting efficiency levels, DOE should also take into account higher energy prices based on recent trends.

• Increase Efficiency RD&D Funding. In keeping with PCAST recommendations, plan for and request a doubling of energy efficiency funding over the next five fiscal years. For the fiscal year 2005 request, seek a 20 percent increase, with emphasis on deployment programs that can make a short-term impact on gas and electricity usage.

About ACEEE: The American Council for an Energy-Efficient Economy is an independent, nonprofit organization founded in 1980 and dedicated to advancing energy efficiency as a means of promoting both economic prosperity and environmental protection. For information about ACEEE, its programs, and its publications, contact ACEEE, 1001 Connecticut Avenue, N.W., Suite 801, Washington, DC 20036-5525 or visit http://www.aceee.org.