Good morning. My name is Dale Landgren. I am Assistant Vice President of Business Planning for Wisconsin Electric Power Company. I appreciate the opportunity to appear before you today to express Wisconsin Electric's support for the concept of credit for early and voluntary greenhouse gas reduction actions, and to encourage Congress to enact legislation that establishes a program to provide credit to companies that undertake voluntary actions to reduce greenhouse gas emissions.
Wisconsin Electric, a subsidiary of Wisconsin Energy Corporation, is headquartered in Milwaukee. Wisconsin Electric provides electricity, natural gas and/or steam service to approximately 2.3 million people in a 12,000 square mile service area which includes southeastern Wisconsin (including the Milwaukee area), the Appleton area, the Prairie du Chien area, and in northeastern Wisconsin and Michigan's Upper Peninsula. Our electric energy mix is 67% coal, 24% nuclear, 2% renewable including hydro, 1% natural gas/oil and 6 % purchased power.
Mr. Chairman, let me commend you for your leadership on this issue, and for holding this hearing and beginning a dialogue. As I stated earlier, I am here today to express my company's support for the concept of credit for early action. We do not believe this support binds us to support the Kyoto Protocol or any other greenhouse gas action. We view a credit for early action program simply as an insurance policy in the event that a domestic or international program to reduce greenhouse gas emissions is implemented. Congress should view the credit for early action concept in the same way ... as an insurance policy where there is zero cost for the premium.
Wisconsin Electric is a strong proponent of options and flexibility based on business strategies - rather than political strategies - to address the global climate change issue in the context of modernizing the energy industry.
Clearly there are strong positions on both sides of the climate change debate. Finding common ground on the issues and reaching consensus on a policy solution will be a very difficult task, at best. Wisconsin Electric could enter the debate on whether or not the climate is changing and what should be done. But, instead of focusing on reasons why we should oppose the Kyoto Protocol or a possible climate change mandate, Wisconsin Electric is trying to find ways that we can prosper from any climate change policy. While we are not advocating such a policy, based on a number of issues including the environmental regulation trend and the public perception on the climate change issue, we do believe there will be a future mandate to reduce greenhouse gases. I don't wish to debate this point; I am simply stating my company's belief. As a result of this belief, we are acting now to position ourselves to prosper in the future. We are undertaking voluntary greenhouse gas reduction measures for the following reasons:
-- Experience - We are experimenting now to determine what works and what doesn't. Acting now gives us invaluable experience for the future.
-- Customers - We are responding to our customers' desire to be an environmentally sound company. Their interest in a clean environment and their willingness to personally get involved is evidenced by our successful green pricing program.
-- Trading - We have had a very successful experience as a trader of sulfur dioxide credits and believe we can be as successful and prosperous under a future trading regime for greenhouse gases. Profit - We are working now to determine how to be profitable in the future if greenhouse gas emissions reductions are required. Corporate Citizenship - Wisconsin Electric pledges environmental accountability and includes environmental factors as an integral part of our planning and operating decisions.
Wisconsin Electric has a long-standing commitment to the environment as part of our business strategy. Despite the scientific uncertainty surrounding the climate change issue, we believe it is appropriate to start moving toward stabilization, then reduction of greenhouse gases. At a minimum, we should explore and expand low- and no-cost strategies to reduce, avoid or sequester greenhouse gas emissions. We believe it is important to develop reasonable solutions to address the climate change issue in the context of modernizing the energy industry. Thus, we are working to develop strategies that integrate environmental, economic and energy goals, and assure that the energy industry has as many options as possible - including non-emitting nuclear power -- to meet any potential greenhouse gas reduction goals.
Currently, there is no legal framework regarding the treatment of early greenhouse gas reductions or credit for these early actions. This uncertainty is inhibiting companies from investing in greenhouse gas reduction activities and projects. Wisconsin Electric supports establishment of a program that guarantees credit that can be applied against a future requirement ... should there be one. Appropriate credit for these early actions is necessary to account for the investments that have already been made. Disallowing these credits puts the "good actors" at an economic disadvantage in attempting to meet any future potential greenhouse gas limits since the next tier of options is more costly than options available to companies that choose to wait for mandates. In addition, impending competition in the electric utility industry increases the importance of making sound strategic investment decisions now.
Wisconsin Electric is an active participant in ongoing efforts to address the climate change issue. Through our efforts, we lead by example, proactively implementing greenhouse gas reduction strategies through a variety of programs such as carbon sequestration and coal-to-gas repowering projects, a successful green pricing program and participation in the Climate Challenge program. Wisconsin Electric has undertaken and continues to pursue voluntary efforts to reduce greenhouse gas emissions. We should be given credit for these actions and not be penalized for our good deeds in any subsequent climate program.
A brief summary of our voluntary efforts to reduce greenhouse gas emissions follows.
Joint Implementation (JI) Projects
Wisconsin Electric is a partner in two projects approved by the United States Initiative on Joint Implementation (USIJI). The USIJI encourages U.S. private-sector investment and innovation in developing and disseminating technologies and procedures to reduce or sequester greenhouse gas emissions; promotes cost-effective projects that encourage technology cooperation and sustainable development projects in developing countries and emerging economies; and promotes a broad range of projects to test and evaluate methodologies for measuring, tracking and verifying costs and benefits of JI projects. The JI concept was introduced in 1992 during the negotiations leading up to the Rio Earth Summit.
Joint implementation projects involve a collaborative effort between entities from two or more countries to mitigate greenhouse gas emissions. This approach enables these entities to achieve greenhouse gas reductions at a lower cost than would otherwise be possible. JI projects can take the form of emission reduction efforts (e.g., energy efficiency or renewable energy) or can involve protection and enhancement of greenhouse gas sinks (e.g., forests, grass lands, or coral reefs).
Wisconsin Electric has supported the JI concept since its introduction. In 1994, we submitted two proposals in the first round of the USIJI solicitation. Of the thirty proposals submitted, both of our projects were among the seven approved. Our projects demonstrate the two types of greenhouse gas mitigation strategies I previously discussed:
Decin Project - The Decin Project is an energy efficiency/emission reduction project that involves the replacement of inefficient, highly polluting district heating boilers at the Bynov District Heating Plant with high efficiency, natural gas-fired internal combustion engines. An important strategy in reducing greenhouse gas emission in the face of growing demand for energy is to produce and use energy as efficiently as possible.
The Decin Project is a partnership with the City of Decin in the Czech Republic, Wisconsin Electric and two other U.S. energy companies. Development of the project was coordinated by the Center for Clean Air Policy. Each energy company partner provided to the City of Decin an interest-free loan, which enabled the City to secure the additional required financing from sources within the Czech Republic.
The project was developed in response to the local need for air quality improvement coupled with the global goal of reducing greenhouse gas emissions. Through the energy efficiency improvements and the switch to natural gas, carbon dioxide emissions are reduced by about 8,000 metric tons annually, along with reductions in nitrogen oxides, sulfur dioxide, particulates and ozone emissions, and reductions in energy consumption of over 30%.
The Decin Project is a first-of-its-kind joint implementation pilot project, which serves as a model for other efforts. The project has encouraged the Czech government to become increasingly involved in domestic and international global climate issues. And while the City of Decin was keenly interested in improving local air quality and reducing air emissions, it was only through development of this project that they learned of the opportunity to achieve these goals through focusing on greenhouse gas emissions. Bynov plant operators use state-of-the-art equipment and provide educational opportunities and experience for other communities interested in improving air quality. It also demonstrates the ability of voluntary partnerships in market-based initiatives to accomplish environmental goals cost-effectively.
Rio Bravo Project - The Rio Bravo Project is a carbon sequestration project that consists of two components: the purchase and protection of endangered tropical forests in Belize, Central America; and development and implementation of a sustainable forestry management program that will increase the total pool of sequestered carbon in a 120,000 acre area. The size of the original project has been more than doubled due to the recent acquisition of an additional parcel of contiguous land. Wisconsin Electric played a significant role in accomplishing this expansion.
The Rio Bravo Carbon Sequestration Project is a partnership with Programme for Belize (PfB), The Nature Conservancy, Wisconsin Electric, and several other energy companies. Development of the project was coordinated by Wisconsin Electric.
The forest land purchased as part of the project was threatened by imminent conversion to intensive agricultural land. By retaining the parcel in its native forest cover and combining its acreage with adjoining forested lands, an area large enough to implement a sustainable forestry program has been created. Retaining the forest cover and natural habitat it provides also satisfies the need to conserve the region's biodiversity.
The Rio Bravo project will realize carbon benefits over 40-plus years of 2.4 million tons of carbon. Through its management and preservation aspects, the project has many direct and indirect benefits to the people and natural resources of Belize.
Although some have suggested that forestry initiatives be discounted as a climate change mitigation strategy, our efforts in Rio Bravo prove that measurable and verifiable results can be demonstrated and documented.
We believe that all types of JI projects - including energy efficiency, carbon sequestration and renewable energy - should receive full credit, including credit for early actions.
While we are aware that there are new opportunities for investments and participation in joint implementation projects, the lack of certainty over credit for early action causes us some reluctance to pursue these opportunities.
"Energy for Tomorrow" Renewable Energy Program
Green pricing of electricity is a concept that allows individual consumers to vote on the environment with their purchase of electricity. With approximately 8,500 green pricing subscribers, Wisconsin Electric's "Energy for Tomorrow" renewable energy program is the largest and most successful of its kind in this country. Since its inception, the program has offset CO2 emissions by over 40,000 tons.
The program was launched in 1996 in response to increased customer interest in reducing dependence on fossil fuels like coal and natural gas and a growing public awareness of the benefits of using renewable resources to generate electricity. This voluntary program allows our customers to personally and positively impact the environment by electing to purchase electricity generated from renewable resources. Power for the Energy for Tomorrow program comes from a combination of biomass and hydroelectric facilities. This year we are building two utility scale wind turbines that will be on line by the end of June, and we are evaluating opportunities for additional sources of renewable based generation.
One aim of the Energy for Tomorrow program is to help expand the market for renewables, which will prompt more investment and technological developments that will further decrease the costs.
Climate Challenge Program
As a participant in the U.S. Department of Energy's (DOE) voluntary Climate Challenge Program, Wisconsin Electric has successfully implemented a wide range of climate change initiatives. The Climate Challenge program, established in 1994,is a joint, voluntary partnership of the electric utility industry and the DOE to reduce, avoid or sequester greenhouse gas emissions. The Climate Challenge Program is the world's most successful voluntary greenhouse gas reduction initiative.
As one of the original 30 electric utilities that signed a Climate Challenge Participation Accord with DOE in 1995, Wisconsin Electric agreed to cut annual greenhouse gas emissions by 16% from what would occur absent these actions. We will achieve a cumulative total of 10-14 million tons of voluntary reductions between 1995 and 2000.
Our commitment calls for using a broad array of approaches to reduce greenhouse gases, including innovative energy efficiency measures, beneficial ash use, carbon sequestration and alternative fuels. In addition to the initiatives I have already described, a few examples of our projects and actions include:
-- Providing demand-side management (DSM)programs to assist customers in using electrical and natural gas energy more efficiently.
-- Improving energy efficiency at all fossil fuel power plants, maintaining hydroelectric operations and improving output and net capacity at our Point Beach Nuclear Plant.
-- Developing or supporting cost-effective waste-to-energy projects through such activities as purchasing electricity generated from landfill gas. Maximizing utilization of our fly ash by actively seeking opportunities to market ash for use in other products primarily within the construction industry.
-- Providing assistance in the conversion of motor vehicles to dual fuel (Compressed Natural Gas/gasoline) capability. Reducing transmission and distribution system line losses by such actions as upgrading low voltage lines to higher voltages and improving operating equipment.
We are well-positioned to meet our Climate Challenge Participation Accord commitments, and have implemented many promising approaches for carbon dioxide reductions and mitigation that can be replicated across industry sectors and across international borders.
Credit for Early Action-- Basic Principles
Following the Rio Earth Summit in 1992, Wisconsin Electric anticipated proposals for greenhouse gas limits and began investing in voluntary greenhouse gas reduction programs.
Providing credit for these early actions is appropriate and necessary to account for the investments that have already been made. As I mentioned earlier, Wisconsin Electric supports the concept of credit for early actions in the event that a domestic or international program to reduce greenhouse gas emissions is implemented.
Wisconsin Electric believes that any program to provide credit for early action should include the following:
Credit to companies that made commitments under the voluntary Climate Challenge Program and under the United States Initiative on Joint Implementation program. A certification process that provides clear and consistent standards for determining early reduction credits; such standards should prohibit double counting of emissions reductions (crediting of the same emission reduction to multiple parties). Allowance for the use of third party verification firms, at a company's option, to certify reductions. Provisions that address displacement of emissions (a.k.a. "leakage") as a necessary component to ensure the integrity of the program.
-- A simple mechanism to account for changes of ownership, and provisions that establish baselines for new sources that want to participate in the credit for early action program. Annual accounting for credits earned to better facilitate the formation of a viable market for emission reductions.
Conclusion
As I stated earlier, Wisconsin Electric believes it is appropriate to start moving toward stabilization, then reduction of greenhouse gases. We have undertaken and continue to pursue opportunities to voluntarily reduce greenhouse gas emissions through low- and no-cost strategies. We believe this is the right thing to do. However, the lack of assurance that credit will be provided for our voluntary actions to reduce greenhouse gas emissions causes us to be reluctant to pursue additional reduction activities.
Wisconsin Electric believes that if a program to reduce greenhouse gas emissions is implemented either nationally or internationally, then we should not be penalized for the early, voluntary actions that we have undertaken. Congress should enact legislation to establish a credit for early and voluntary greenhouse gas reduction program to provide the assurance we need in the event that a greenhouse gas mitigation program is implemented.
Mr. Chairman, thank you again for the opportunity to appear before you today.