Will higher energy bills force consumers to conserve energy? During today's OnPoint, Kateri Callahan, president of the Alliance to Save Energy, explains the impact of a nationwide cap-and-trade program, and the higher energy prices that may come as a result, on consumers' energy usage. She discusses the energy efficiency provisions in the Waxman-Markey bill and explains the changes that may be made to the legislation as it makes its way through the Senate.

Transcript

Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Kateri Callahan, president of the Alliance to Save Energy. Kateri, nice to have you here again.

Kateri Callahan: Nice to see you again Monica.

Monica Trauzzi: Kateri, the environmental impacts of the Waxman-Markey bill have come under scrutiny since its passage at the end of June. On energy efficiency, where is it strongest, where does it need work?

Kateri Callahan: Well, the most important thing that the Waxman-Markey bill does is it prices the externality of carbon, the cost of carbon, and that really is where it's going to drive energy efficiency. But in addition to that, it also recognizes that there are market distortions that need to be corrected if we're really going to deploy energy efficiency at scale. So it has building code provisions. It provides a significant share of the value of the allowances to energy efficiency activities and it puts in place some appliance standards and labeling programs for buildings. So it's got a wide variety of mechanisms for driving energy efficiency. And the result of that, according to EPA, is that we will essentially, between now and 2050, keep demand for energy in this country flat. If we don't do the Waxman-Markey bill or something like it and use efficiency and use all of the other mechanisms that are there we're going to grow at about 17 percent. So it's very significant in terms of shaving the demand for energy in this country and keeping it flat.

Monica Trauzzi: So, as energy and climate start being taken up in the Senate this summer what changes do you want to see from the House bill in the Senate version?

Kateri Callahan: Well, actually, and with respect to the complementary policies that are there for energy efficiency, when you stack those up to the ACES bill or the Bingaman-Murkowski bill they're actually, in many respects, stronger provisions in the House. So we really like those provisions and we think that the cap-and-trade program is really pretty good. I mean there are some improvements we would like to see as everyone, but we actually supported passage of Waxman-Markey. I think our concern in the Senate side is that it may be weakened. We have two big areas that we're going to be watching Monica. One is the offsets because we want to make sure that those are real and verifiable and they don't undermine the cap. And then the second piece is not to mute the price signal so that actually the consumer gets and businesses get the price signal that energy costs are higher and the way to mitigate that is by investment in energy efficiency. We want to make sure that there's no muting of the price signal because we'll lose the benefits and, in fact, we think it will make it more expensive to demonstrate compliance than not.

Monica Trauzzi: So, does the bill essentially force consumers to use less energy because energy prices will be higher?

Kateri Callahan: Well, I don't know that it forces them. I mean they can pay a price, but the hope is that there will be investments that will be made in energy efficiency that while the kilowatt hour price for electricity for example may go up, there will be mechanisms in place that will allow consumers to reduce their energy use so that their monthly bills remain essentially flat. And that's what actually the EPA analysis is showing, is that with the cost control mechanisms that energy efficiency and other means in the bill will add, that the price is not going to be significantly more for consumers, for families if you will.

Monica Trauzzi: So, overall, would you characterize this as an environmentally strong bill?

Kateri Callahan: Yes, I would. You know, it gets us to 83 percent reduction in greenhouse gas emissions by 2050. It covers 85 percent of the economy. It's a very strong measure and, again, we're hopeful that there could be some improvements and tweaks, but that the Senate can put something through that is as strong as the House and that's going to be a tough lift.

Monica Trauzzi: Tough lift, 60 votes needed in the Senate. Should the Senate start dividing the bill up if it looks like 60 is going to be impossible in order to let some of these programs like energy efficiency programs get through and start being filtered in to our economy?

Kateri Callahan: Well, first of all, we're going to work as hard as we can to get a good cap-and trade bill through with strong complementary efficiency policies, because as I said, in terms of driving energy efficiency nothing is as effective as putting a price on carbon. So we're going to work that. If it doesn't go, I believe, personally, and I think that our organization would be very supportive of trying to put through the complementary policies on their own. They benefit the country in terms of reduced energy demand, reduced emissions helps with energy security. We believe it's an economic benefit as well and I do not want to see energy efficiency measures held hostage to a climate bill if we can't get that through this year or next. We had the experience with the Energy Policy Act of 2005 of waiting for more than a dozen years to get the energy efficiency provisions that were in that bill because they were married to very controversial supply-side measures like opening up ANWR that had to be resolved. There's no reason not to take the steps now on energy efficiency if we can't decide the bigger issues and problems on climate. And there's every good reason to go forward, because that starts to take us down a path of controlling CO2 and also of enhancing our current energy security.

Monica Trauzzi: Underlying this debate on climate is the economic downturn. What impact has the crash of the housing market had on the use of the efficiency in the construction of new homes?

Kateri Callahan: Well, first of all, new homes aren't being constructed like they were before and we only have anecdotal information at this period and juncture in time, but we actually brought in two owners of a home building company, a small one in Michigan, one of the hardest hit states and they're actually in one of the hardest hit areas, a husband-and-wife team. They opened their business in 2003 and they have had progressive and steady growth and even with the economic downturn they are increasing their housing starts every year. They maintain that the reason they're able to do that and all of the rest of even the very large construction firms in Michigan are not having housing starts and are laying people off, it's because they're building very efficient homes that people want and that they know they can afford. One of the things that they said in a briefing was, "We've never had anyone say, 'Make my house more leaky. Oh, please, don't insulate my house. Oh, please, make my energy bills rise.'" So they're building homes actually that are 50 percent and more energy efficient than current energy building codes. So one of the things, to get back to the bills, both in the House and Senate, that we've been advocating is that we step up significantly the energy efficiency building codes in this country, that we establish national model codes that put us on a path to net zero energy homes and commercial buildings and that we provide resources and requirements for the states both to adopt and enforce the codes.

Monica Trauzzi: Final question here, the Smart Grid, a major part of the stimulus, also a big component in the overall energy efficiency picture. A lot of people are concerned that the money from the stimulus just isn't getting out there quickly enough. What's your assessment of the state of the Smart Grid development?

Kateri Callahan: Well, let's back it up for a second and talk about the money not getting out there quickly enough. I do think that the administration is making a concerted effort to move the money quickly, but to move it well and to do it in a transparent fashion. So, for our purposes, we want to see the money well spent on energy efficiency. There's a lot of money, somewhere between 26 billion and 75 billion, depending on choices that are made by those that are controlling the funding. We'd hate to see the missed opportunity, so we're hoping that will be spent wisely and well and expeditiously, but wisely and well and drive us toward that clean energy economy. With respect to the Smart Grid, I think that fits under that same rubric and umbrella. We need to look at making investments that will continue to feed into the economy, putting in smart meters for example is something that we're very much in favor of because that will allow us to deploy new and more efficient technologies to provide information directly to consumers on their energy use, so to empower them to not waste as much if you will or to save, depending on how you want to express it. So we're hopeful that those funds -- and we're helping to work with the administration to see that those funds are actually flowing through into the economy to do two things, one, to stimulate the economy, put a shot in the arm because that's the purpose. But second, to leave lasting benefits by making our economy more energy-efficient and by developing a skilled workforce that we're going to need for our clean energy future.

Monica Trauzzi: OK, we're going to end it right there. Thank you for coming on the show again.

Kateri Callahan: Thank you Monica.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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