Opening Statement of Senator Bob Smith

Full Committee Legislative Hearing on S. 556,

The Clean Power Act of 2001

Thursday, November 15, 2001

Good Morning. I would like to thank Chairman Jeffords for holding this second in a series of hearings on legislation to reduce emissions from our nation=s electric utilities. Thanks also to the witnesses for appearing before us here today.

I offered most of my comments on this issue in my opening statement two weeks ago at the first legislative hearing on S. 556. I won=t take up our time by repeating myself this morning. I would, however, like to emphasize that we now have two sets of analyses B one from EIA and one from EPA B that underscore the value of a multi-emissions approach. These analyses show that we can make significant reductions in NOx, SO₂, and mercury for less than the expected cost for partial reductions in just SO₂.

In the Clean Air Act Amendments of 1990, we committed to reducing sulfur dioxide emissions by nearly 7 million tons at an EEI-estimated annual cost of $7 billion. And I=d like to point out that actual annual costs have been right around $1 billion B nowhere near as expensive as the original estimates. The EIA and EPA analyses show that we can achieve additional substantial reductions in SO₂ in combination with significant reductions in nitrogen oxides and mercury for less than $7 billion B the original estimates for the Acid Rain Program alone.

We need to remember, however, that it is not merely the existence of a market-based multi-pollutant system that will provide efficiency benefits B appropriate levels and timing are critical to the success of any such program. The Chairman=s bill, for instance, likely would not achieve the economic efficiencies available from a market-based multi-pollutant approach due to insufficient time to meet the aggressive target levels.

A comparison of the EIA analysis requested last year by Representative McIntosh B which is the closest to an analysis of S. 556 we have to date B with the analysis I requested earlier this year emphasizes the importance of setting appropriate emission levels and time frames. For instance, average electricity prices in 2020 under the McIntosh scenario would be 25 percent higher than 1999 prices while 2020 average prices would be either lower or no more than 6 percent higher than 1999 prices under the most stringent scenario I had analyzed. Incremental resource costs also are significantly higher under the McIntosh scenario B $132 billion compared to only $89 billion.

These analyses show that if we set up a market-based multi-pollutant system correctly, we can achieve desired emission reductions in a cost-effective manner. If we don=t do it correctly, however, we will impose unnecessary costs on industry and consumers alike.