The Clean Energy Group members are Consolidated Edison Company, KeySpan Energy, Niagara Mohawk Power Corporation, Northeast Utilities, PECO Energy, PG&E; Generating Company, Sempra Energy, and my company PSEG. We share a commitment to providing clean energy and adopting progressive environmental policies that are sustainable from both environmental and economic perspectives. We believe the best way to accomplish this goal is by working cooperatively with government, industry, and the environmental community.
I thank you for taking the time from what I know is a very busy legislative schedule to engage in discussions which we believe can lead to meaningful consensus on a question of vital importance to our nation – how best to foster the economic reform of the electric power industry while protecting and improving air quality and the environment.
The companies of the Clean Energy Group believe very strongly that we can and should do both.
Our industry is in the process of fundamental change. The Clean Energy Group supports and embraces the transformation of the electric power industry into a competitive marketplace. We also recognize that the generation of electricity has a significant impact on the environment. We agree with the U.S. Environmental Protection Agency and other stakeholders that this impact must be reduced if the nation is to achieve its air quality goals. And we share a common concern that the economic benefits of a fair and robust competitive energy marketplace and the social and public health benefits of improved air quality will not be achieved unless the relationship between national energy policy and environmental policy is recognized and rationalized.
While the Clean Energy Group has supported EPA's regulatory initiatives to reduce emissions of pollutants traditionally associated with the industry – nitrogen oxide and sulfur dioxide – we also share concerns that compliance delays and litigation spurred by these initiatives during a period of such unprecedented structural change in the electric power industry has contributed to a climate of business uncertainty that is becoming increasingly more difficult to manage. The strong probability that environmental policy makers will, in the near future, begin to regulate mercury emissions and that requirements to reduce carbon dioxide emissions also are on the horizon, increases concerns that a pollutant-by-pollutant regulatory strategy will result in a continued cycle of political agitation, litigation, and delay. This is a scenario in which progress toward meeting clean air goals is frustrated and uncertainty about making business decisions involving assets worth billions of dollars and the lives and livelihoods of millions of investors and employees is exacerbated.
The Clean Energy Group believes there is a common sense policy solution – an integrated air quality strategy -- to control and reduce emissions of nitrogen oxide, sulfur dioxide, mercury and carbon dioxide. We believe a coordinated, multi-pollutant approach will deliver significant and timely emissions reductions necessary to meet health-based air quality standards and provide members of our industry regulatory certainty about the amount and timetable for emissions reductions that can be factored into investment decisions and emissions control strategies.
Our proposal calls for mandatory, nationwide emissions caps for nitrogen oxide, sulfur dioxide, mercury, and carbon dioxide; established dates certain for producing the necessary emissions reductions; implementation through emissions banking and trading; credit for early reductions; and streamlining of EPA's New Source Review process to provide industry with clear and unambiguous compliance guidelines.
We are aware of recommendations to address these issues with voluntary or regional programs. We believe, however, that only a national, mandatory program implemented under authority of legislation enacted by Congress will provide the scope and compliance certainty necessary to facilitate a fair competitive market, achieve necessary emissions reductions and provide our industry with the regulatory certainty essential for sound business planning and rational investment decision-making.
The inclusion of market-based compliance methods, similar to the existing national Acid Rain program, reflects the realities of the emerging competitive energy marketplace and will provide companies the flexibility to decide how to achieve reductions at the lowest possible cost.
This approach will:
Allow and encourage companies to plan and coordinate emissions control strategies on a comprehensive, multi-pollutant basis and reduce the potential for stranded investment in pollution control technologies.
Provide a higher degree of certainty for compliance with EPA's New Source Review requirements.
Deliver timely and necessary emissions reductions that will help attain national clean air objectives.
Foster a fair competitive energy market.
And, encourage investment in new electric generation capacity that will reduce emissions and enhance electric system reliability.
I'd like to summarize the emissions caps and compliance schedules included in the Clean Energy Group proposal.
We believe the following recommendations are consistent with sound environmental policy and are achievable at reasonable and acceptable cost:
For nitrogen oxide, we are calling for a two-phase program that would cap emissions at 4.2 million tons by 2003 -- a target consistent with EPA's call for state NOx reduction implementation plans (NOx "SIP Call") for 19 eastern states – and a further 50% reduction to 2.1 million tons by 2008. This target is based on applying the SIP Call reductions on an annual basis nationwide.
We would impose a 4.5 million ton cap on sulfur dioxide emissions by 2008, which represents a 50% reduction below Phase II requirements of the Acid Rain program. This goal is consistent with meeting proposed new National Ambient Air Quality Standards for fine particulates.
We anticipate EPA is expected to call for mercury regulation later this year. We are recommending a two-phase program that would require a 50% reduction and a 26-ton emissions cap by 2008 and, if deemed necessary, a further reduction to 70% to 90% below current levels by 2012.
For carbon dioxide, we're proposing an initial control strategy that would stabilize emissions at 1990 levels, resulting in a 1.9 billion ton emissions cap also by 2008. Further reductions in the 2012 timeframe would be implemented in accord with national Climate Change policy as it evolves.
Mr. Chairman, and members of the subcommittee, the companies of the Clean Energy Group believe our industry is at an important juncture in its transition to competition. We know that we must improve our environmental performance as we make this journey. An integrated and coordinated approach will provide the direction and regulatory certainty that will facilitate business planning, make investment decisions more rational, and ultimately, deliver to our nation improvements in air quality at costs that are reasonable and fairly allocated.
Again, I an honored by the opportunity to make this statement and would be happy to respond to your questions.
Thank you.