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Rep. Claudine Schneider

March 17, 1986

Page 6

Information Administration projects substantial increases in oil

imports in the 1990s as a result of declining U.S. oil

reserves.

It is noteworthy that between 1979 and 1984 the U.S. oil industry invested $250 billion in oil exploration alone, without achieving a net increase in U.S. reserves at the end of the five Imagine what benefits we could have reaped if that $250 billion had been invested in energy efficiency measures.

years.

Because OPEC controls two-thirds of the world's cheap oil reserves, in the absence of further fuel-saving efficiency improvements we will be back to a very vulnerable situation in the 1990s with high levels of foreign imports.

Obviously the cheapest insurance against such a crisis is to encourage cost-effective efficiency investments. This includes overcoming a variety of technical and informational barriers to greater efficiency use through the continuation of a modestly funded federal energy efficiency R&D program and state and local assistance programs.

As such, Mr. Chairman, I urge you and the committee to strongly support a freeze of DOE's conservation programs at the 1986 levels. These programs have already suffered a 50% reduction over the past five years, contributing more than their fair share to balance the budget. To reduce them further is to undermine their effectiveness and jeodpardize the energy savings that can continue to strengthen national security and enhance economic productivity.

Rep. Claudine Schneider

March 17, 1986
Page 7

I would especially appreciate your support for the LeastCost Energy Planning Initiative within the conservation budget. This is a three-year, $4 million technology transfer program authorized by the House Science and Technology Committee last

year.

This modest program, which has broad-based support from the National Association of Regulatory Utility Commissioners, the American Gas Association, the American Public Power Association, the Edison Electric Institute, and the National Association of State Utility Consumer Advocates, would return the benefits of taxpayer-funded research to U.S. utilities and ratepayers.

The essence of the technology transfer program is to provide information on the full range of energy efficiency technologies

to utilities.

That concludes my testimony, thank you very much.

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Figure 2. Fuel expenses as a component of the average U.S. retail price of electricity (in constant
1985 3), 1980 to 1985. Note that in real dollars, the average electricity price per kilowatt-hour (to
all sectors) has changed little in six years, while the fuel component has declined from 35 percent
to 26 percent. Non-fuel expenses, especially capital costs of new powerplants, have offset lower
fuel costs. Oil costs have dropped even more dramatically, from 10 percent in 1980 to less than 3
percent in 1985. Even if the average cost of oil to utilities were to drop 50 percent, the average
retail price per kWh would decline by only about 1/10 of a cent. Other cost increases would
quickly offset any such decline.

Senator DOMENICI. Thank you very much. The report that you asked us to make part of the record will be incorporated in the subcommittee files. We will not ask that it be typed up but rather just be incorporated as part of the hearing record.

Senator Ford, did you have any questions?

Senator FORD. I have no question of the gentlelady.

Senator DOMENICI. Senator Evans.

Senator EVANS. Mr. Chairman, just a comment rather than a question. I think the testimony is really self-evident. It follows very closely the results we found in the Pacific Northwest Regional Power Council's activities.

Certainly the concept of least-cost planning is such common sense we wonder why we even have to emphasize it, but we have not emphasized it very much in the past years. We have not done it comprehensively enough.

I am convinced, as is Representative Schneider, that we have the capacity through greater efficiencies to radically change, even from where we are now, radically change the usage of energy and energy efficiencies will get us a big piece of the distance we have to go to avoid getting once again back in the same position we were in the 1970's when we were held hostage by the OPEC nations.

Ms. SCHNEIDER. I think we recognize the ramifications on the trade situation, as I had mentioned in my testimony, but I was rather disappointed that this morning one of the gentlemen from the Brookings Institute asked the question, he said, "Well, have we not achieved all the energy savings we possibly can since the last energy crisis?"

I think it is significant to note that there are many studies that I have pointed out that we, yes, have achieved about $150 billion per year since the energy crisis, but we still have a potential to achieve an additional $150 billion in savings through energy efficiency

moves.

Senator DOMENICI. Representative Schneider, I want to compliment you on your work in this area and assure you we will do all we can to maximize the balance that you suggest.

I really think things are changing so fast that we are not going to know the effects of what is going on for a long time. Basically the matter of price drop is going to have a very significant effect on alternate sources. There is no question about it.

I believe we have a national history of being rather shortsighted in these areas. While I am hopeful that we will not do it again, I have a sneaking, intuitive feeling that we will. Clearly, the price drop is good news overall for the economy. It will be reflected in some very good inflation reports, and it clearly will be a stimulus. I am just worried about 5, 6, 7, 10 years from now when a period of something rather dramatic will happen, and we should continue on with the research, especially in those areas where we know it will have some very major effects and can work. We will do our very best.

Thank you very much for appearing and for your patience. I apologize for the delay in starting.

Ms. SCHNEIDER. No problem. Thank you.

Senator DOMENICI. Donna Fitzpatrick, Assistant Secretary for Conservation and Renewable Energy from the Department, and

Mr. Donald Bauer, Acting Assistant Secretary for Fossil Energy for the Department of Energy.

We will have both of you appear, and Secretary Fitzpatrick, we will put your statement and that of Secretary Bauer in the record in their entirety. You may proceed to summarize them for us.

STATEMENT OF DONNA R. FITZPATRICK, ASSISTANT SECRETARY FOR CONSERVATION AND RENEWABLE ENERGY, DEPARTMENT OF ENERGY

Miss FITZPATRICK. Thank you, Mr. Chairman. I would like to summarize briefly.

Senator DOMENICI. Please.

Miss FITZPATRICK. I appreciate the opportunity to appear before this subcommittee today to discuss the fiscal year 1987 budget request for conservation and renewable energy research and development. The budget for these programs is consistent with the goals and objectives of national energy policy and is fully responsive to the administration and congressional goals of deficit reduction.

The administration's overall energy goal is to foster an adequate supply of energy at reasonable cost. Achieving this goal will require us to make full use of our Nation's vast natural resources and the daring and ingenuity of our citizens. Our approach includes supporting advances in energy conservation, as well as possible energy supply sources of the future such as renewable energy. Deficit reduction is perhaps the preeminent domestic economic imperative today, and the Department fully recognizes that fact. For this reason we are doing all we can to concentrate increasingly scarce resources on those programs and projects that directly fulfill a responsibility of the Federal Government and truly require Federal assistance.

If we are to achieve our overriding goal of a deficit reduction, we have no choice but to concentrate these resources where they show promise of bringing the greatest benefits.

I would like to briefly summarize our budget request in each of the program areas in energy conservation. The fiscal year 1987 budget request for conservation research and development totals $71.2 million. Let me give you a few examples of the types of activities which will be undertaken.

In our buildings and community systems program we will continue investigations of ways to maintain acceptable indoor air quality in energy efficient buildings. These efforts include studies of radon entry and mitigation methods. In cooperation with industry, we will continue research to advance the technology supporting thermally activated heat pumps and advanced lighting, as well as continue the utility least-cost planning initiative.

The budget request for industrial programs will be used to continue research, including thin strip casting of steel, high temperature recouperators and heat pumps advanced sensors and process controls for direct thermal-to-electrical conversion, waste conversion, and advanced separation processes.

The transportation program includes continuation of the heavy duty adiabatic diesel project. Component evaluations of developed ceramic structures in a single-cylinder test cell will be continued,

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