Energy Efficiency:

Alliance to Save Energy president explains the consumer response to energy prices

President Bush recently urged consumers to reduce their use of gasoline, in an attempt to lessen demand for gasoline after hurricanes Katrina and Rita damaged Gulf Coast oil facilities. Does Bush's call for conservation suggest a new approach on energy at the White House? Or will Bush and Republican leaders in Congress focus solely on building new oil refineries and opening up new areas to energy exploration? Kateri Callahan, president of the Alliance to Save Energy, talks about energy legislation moving through the House and Senate and the potential for a fuel economy increase. Plus, she explains what consumers are doing to lessen their energy use and the role for the Department of Energy.

Transcript

Brian Stempeck: Hello and welcome to OnPoint. I'm Brian Stempeck. Joining me today is Kateri Callahan, president of the Alliance to Save Energy. Kateri thanks a lot for being here today.

Kateri Callahan: You're welcome Brian. It's a pleasure.

Brian Stempeck: Earlier this week we heard President Bush, really pretty much for the first time in his presidency, say it's time for Americans to kind of cut back on the amount of energy they use. What was your take on what the president had to say?

Kateri Callahan: Well I think it's tremendous. Using his bully pulpit to educate Americans about the connect between demand and price is really very important, and I think it's having an impact. That plus price is definitely having an impact. Gasoline sales in the United States actually were lower and are expected to be lower in August and September than they were a year ago. That's bucking a trend of significant growth over the last several years.

Brian Stempeck: Now some people would just say this is just more rhetoric from the president. At the same time that he's talking about cutting back on gasoline he's also saying that we need more refineries, more offshore exploration, things of that nature. Do you think there's actually substance behind what he saying?

Kateri Callahan: I think so. I think there's a recognition that we can't dig and drill our way out of the situation that we have now. It's going to take supply measures plus demand side measures. We actually are in a partnership with the Department of Energy that's going to launch this Monday. So your viewers are getting a bit of a scoop, but Secretary Bodman is going to be, has produced PSA's, public service ads, that will be broadcast coast to coast teaching consumers low cost and no cost ways that they can save dollars at the pump and on their home energy bills this winter.

Brian Stempeck: Give us an example of some of the things that you're talking about. This is something that your group does all the time, trying to educate consumers.

Kateri Callahan: Sure, well in terms of the home, insulating. We say proper insulation in a home is a way to insulate against high energy bills this winter. Caulking, weather stripping, buying energy star label products, putting in programmable thermostats, all those things can significantly lower energy costs in the home. At the gas pump we talk about proper inflation of the tires, keeping the car in good working order, driving slower. Actually, when you increase speed over 60 miles an hour you significantly impact the fuel economy of the car, so those kinds of tips, ways that consumers can manage their energy bills. We're expecting this winter the highest energy bills on record, so it's very important that people understand how they can work right now to lower those costs, because supply will take a long time to come on.

Brian Stempeck: Now as you work on the consumer side lawmakers on Capitol Hill are still working on more energy legislation. And as we tape this interview there's a markup going on in the House talking about potentially opening up ANWR, opening up offshore areas. As House lawmakers look at those bills is there any room in there for more energy conservation? Is that something you're working on?

Kateri Callahan: It is. It is. I think that particularly with the energy bill that was just passed there was a wealth of good energy efficiency provisions in it, actually energy efficiency with Title I. I think trying to emphasize the importance of that in meeting our energy requirements, but there was a big missing piece and that really was transportation. And that's the sector that eats up two thirds of the oil that we use in the United States. And it was left largely untouched, so we think that it's time for the Congress to come back and really tackle that problem and improve the fuel economy of our cars and light duty trucks.

Brian Stempeck: Now that's something we've heard before, Congressman Boehlert is a member in the House and him and Congressman Markey both introduced a bill to raise fuel economy standards. At the same time though we've seen that kind of bill introduced many times during the past few years, a lot of failed attempts to get that into the energy bill. Is there anything different this time around that you think we'll get this through Congress?

Kateri Callahan: I think that the big difference is that consumers are just so burdened and being crippled by the prices at the pumps that they need help and they need support. And there's a recognition of that in the Congress. You have Senator Domenici saying that we need to look at CAFE again. That doesn't mean necessarily that it will pass in the Senate or in the House, but it means at least they're open to discussion. The fuel economy of our vehicles has been going down since 1988. We hit a peak of fuel economies in 1988 and since that time the average fuel economy has actually declined. Cars and trucks on the roads right now get an average of about 20 miles to a gallon. The CAFE standard is set at 27.5 miles to the gallon, so there's a lot of room for improvement.

Brian Stempeck: Now the big opponent to this in the House is Joe Barton, the head of the Energy and Commerce Committee. He said he doesn't think that he wants to work on CAFE. Is that something you're working on to try to talk with him? You know Senator Domenici in the Senate, it seems like some of this might be possible. With the House it seems like there's a lot more resistance.

Kateri Callahan: I think that that's true. I think there'll be resistance on both sides, but again, I think that the invitation for a conversation is open, which is very different than in it's been before. And it's not necessarily that we have to just look at moving or increasing the CAFE standard. There's a lot of work that can be done in fixing the program that's there now. If we simply improve the testing of the vehicles to bring those up to date, the testing procedures are based on 1975, when we didn't have air conditioning, when people drove slower, cars weren't as powerful. They don't reflect real world driving. So closing that loophole, treating mini vans and SUVs as what they truly are, passenger vehicles can give us big gains in terms of increasing the overall fuel economy of vehicles. And putting in place CAFE standards for vehicles over 8500 pounds. Right now they get a free pass. There is no standard that has to be met with those heavier vehicles. So there's a lot of work that can be done within the system to fix it and to close loopholes. The other thing, I believe that there's some interest in the Congress in looking at different approaches. We advocate a program that's known as a feebate program, that would be a market-based approach that could replace CAFE. And what it is is you would set a fee on gas guzzling vehicles that would generate a rebate on gas sipping vehicles. So you would encourage, through the purchase price of the vehicles, a transition over towards the more fuel efficient.

Brian Stempeck: At the same time a lot of people would say the market is already responding. Yeah, Bill Ford came out recently and said they're going to increase the number of hybrids they build at Ford by about ten fold. There's dozens are of models of hybrids that are going to be on the market relatively soon and at the same time SUV sales are starting to decline and giving more rebates on those.

Kateri Callahan: Right.

Brian Stempeck: Isn't the market responding on its own? I mean why the need for a feebate program or CAFE at all?

Kateri Callahan: I think the market is responding, but let's not forget that hybrids represent less than 1 percent of the vehicles that are on the roads today. And while it's very encouraging and that will grow over time, the question is how fast and how wide do we want the transition of our vehicles to be? So I think everything we do to encourage hybrids is important. The tax incentives that were made available in the new energy law for hybrid and for lean burn diesel vehicles, very, very critical to transitioning our fleet. We believe though that those incentives need to be paired with standards that establish a floor. We have to say this is the minimum that's acceptable and then keep driving to the goal of the most efficient vehicles.

Brian Stempeck: Now as automakers develop more hybrids, there's a big story in the New York Times Sunday Magazine this week, talking about basically a number of hybrids now that automakers aren't really stressing the fuel economy like they did with the Toyota Prius. They're instead saying, well, look at this electric motor. You're getting performance of 300, 400 horsepower and saying this is basically a performance vehicle, not enough fuel economy. How do you take that trend? Is that worrying to you that they're not focusing on fuel economy?

Kateri Callahan: Well I think that at this infant stage we need to encourage the development of the hybrid technology itself. But I will say that the trend of the last 20 years or so has been, we've made significant, 20 percent improvement in the efficiency of our vehicles on the road, but that improvement has gone to making the vehicles heavier and to making them more high performance vehicles or muscle cars if you will. So we don't want to see that trend continue into hybrids. We would like to see the hybridization go to fuel economy. You talked about the marketplace and people are interested in hybrids right now because of the fuel economy, so we're hoping that the market will drive those hybrids toward using the hybridization for fuel economy versus for power and for weight.

Brian Stempeck: All right, let's talk about another thing that your group is working on which is the appliance standards, with energy efficiency there. That's something that a lot of people say the energy department has really been lagging behind on. A number of states recently just took the department to court over that.

Kateri Callahan: Right.

Brian Stempeck: How do you see, what's the path forward in the appliance standards? And what can you do to get the Department of Energy to move more quickly on that?

Kateri Callahan: Well a couple of things, the new energy bill, to reference that again, calls for 16 new appliance standards and these are very important to decreasing energy use in this country and they've proven to be quite effective. One of the things that the Congress did, I think that's very smart, is they actually legislated the standard. So that should make the promulgation of the standards by DOE much less time consuming and much less difficult because those legislated standards represent agreements between the advocates and the stakeholders and the manufacturers. So we ought to be able to get a move on on these new standards that have been put in place in the federal law. To go back to all those ones are languishing at DOE, the new law calls for a report and a plan from DOE on how they get back on track on those standards. As you mentioned yourself, a number of states are suing DOE because they have missed the statutory deadlines for the standards, so there's pressure there. And within DOE itself they're working and they're working on a plan, I know this, right now, to try to get back on track. So we'll keep the pressure up. The Congress is going to keep the pressure on and I think that outside advocates in other states that recognize that these standards are so important to controlling demand are going to keep pushing as well.

Brian Stempeck: On the consumer side of things, what else can consumers do? I mean when President Bush comes out and says that he wants people to cut back on gasoline, that's one option. And your group is working on these public service announcements, but what else, as Congress is working on more long term solutions, what else can happen in the short term?

Kateri Callahan: Well again, I would say we're approaching the winter heating season, so let's talk about that because EIA projections for fuel costs this winter are at record highs. They're talking about natural gas prices being 71 percent higher than they were last year, which was already a significant increase. So people need to look at their homes right now. They need to look at protecting themselves against these high bills. So again, insulation, if a home is 20 years or more old, it's probably pretty certain that the insulation is insufficient. So we say start in the attic, because heat rises and it escapes there first, but also come down the walls, insulate crawl spaces, insulate the basement. Again, look for air leaks in the house, so caulking and sealing up those air leaks. If you do those two things, the insulation and caulking and sealing air leaks, your monthly bills can be reduced by as much as 20 to 30 percent. So it's significant. Little things can add up to big savings. And those are the kinds of tips and things that we're talking to consumers about. The president obviously is asking people not to drive, nonessential driving if you will, and to use less gasoline. And I think Americans are getting it. And to the extent that we can continue to educate people that their demand is what's driving price in large measure, then we can, I believe and I hope, affect their behavior and reduce demand. And because they'll use less energy they're going to use it more wisely.

Brian Stempeck: What do you make of approaches like in Georgia? I mean the governor of Georgia, who basically, recently this week, took a little bit of fire for the fact that he canceled school for a few days to try and reduce demand and have a lot less people on the road using gasoline. Do you think that's going too far?

Kateri Callahan: I won't make a comment on that particular action, but up to you something that we apply this happening in Georgia. From, I think, October 6 to October 9 there's a sales tax holiday for purchase of energy efficient appliances and products for the home, up to $1500. So the state is actually saying we want you to take these actions. We want you to use energy more wisely and we're going to help you with the initial purchase price, which is going to give you long term savings on your energy bills. So that's tremendous. Georgia also opens up its HOV lanes to hybrid vehicles, single occupant drivers. So they're encouraging the purchase of those vehicles. So that's very important. And states, we're just mentioning Georgia, but states across the nation are trying innovative approaches in leadership to advancing energy efficiency that we think is just tremendous.

Brian Stempeck: All right. We're out of time Kateri. Thanks a lot for coming on the show today.

Kateri Callahan: Thank you.

Brian Stempeck: I'd like to thank our guest today. That was Kateri Callahan of the Alliance to Save Energy. I'm Brian Stempeck. This is OnPoint. Thanks for watching.

[End of Audio]