Electric utility restructuring presents both an opportunity and a threat to environmental quality, public health, and consumers. The current system has resulted in a costly, heavily polluting industry. The Southern Environmental Law Center supports increasing competition and allowing customers to choose their electricity supplier because we believe this can lead to economic, health, and environmental benefits. However, unless done properly, restructuring will harm our environment, our health, and our pocketbooks.

Although each of the SJR 91 Joint Subcommittee's task forces is examining issues with significant environmental and consumer impacts, this Task Force has the broadest responsibility to develop environmental and consumer protection recommendations.

These are not uncharted waters. Every state that has moved to restructure its electric industry has adopted environmental and consumer protection provisions. Organizations such as the National Association of Regulatory Utility Commissioners have endorsed specific measures to promote restructuring in the public interest. Further, SELC has joined a number of groups to endorse the Virginia Consumer Bill of Rights, which establishes essential consumer and environmental goals which should be part of any restructuring plan. We also have been working with Virginia Power and others to try to develop consensus on at least some portions of a framework of consumer and environmental protection in restructuring. We hope to provide the results of this effort to the Task Force before its next meeting.

I'd like to focus on the environmental and energy efficiency issues identified in the Task Force overview of today's meeting.

The environmental impacts of electric power production are immense. Of particular significance, electric utilities are the largest source of air pollution nationally and regionally. The Environmental Protection Agency has found that power plants release approximately two-thirds of the sulfur dioxide (SO₂), and one-third of the nitrogen oxides (NO_x), carbon dioxide (CO₂), and mercury emitted in the country. This pollution is a primary contributor to acid rain, ground-level ozone, global climate change, and other serious problems. Pollutants from power plants harm the air we breathe, the water we drink, our forests, wildlife, and quality of life. They drive up health care costs, and harm our economy.

In Virginia, the air pollution from power plants is taking a heavy toll. For example, air quality in Shenandoah National Park is among the worst in the country. Summertime visibility there is less than one-quarter the natural range, streams have been poisoned by acid rain and trees damaged by ozone pollution, and there have been health warnings due to high pollution levels. In addition, nitrogen pollution from the air is contributing to the decline of the Chesapeake Bay.

Air pollution from power plants also poses a public health threat. There have been scores of violations of federal health standards for ozone smog across the state this year. Hundreds of thousands of Virginians -- particularly children and the elderly -- are exposed to unnecessary health risks due to high air pollution levels.

Restructuring will influence the type of power plants built and operated, and thus will have a major impact on air emissions. A major concern is that restructuring will not offer a level playing field among power providers, but will be biased in favor of existing, dirtier generation. Exemptions in the Clean Air Act for older plants allow plants built prior to 1977 to emit several times the level of key pollutants as similar new plants. In fact, the Southern Environmental Law Center and the Izaak Walton League recently released a report -- which I have attached to my remarks -- which finds that bringing these older plants up to date would eliminate 82 percent of the sulfur dioxide and 70 percent of the nitrogen oxide from the electric utility sector in Virginia.

These older, dirtier power plants are likely to enjoy cost advantages in a competitive market since they are subject to laxer environmental standards and many of these plants have been substantially depreciated. If restructuring favors older plants, air pollution will increase dramatically.

The most effective solution to this problem would be to apply the same environmental standards to all generation sources. Although some states have attempted to tackle this issue, we believe that it is best addressed at the federal level. The General Assembly should, however, adopt the approach taken by Pennsylvania, and endorse changes to federal clean air laws to apply equal standards to all electricity generators.

In addition, the Task Force should recommend that the General Assembly provide for consumer information disclosure. Public opinion surveys consistently show that, given the choice, consumers want to purchase power from cleaner, "green" resources. If restructuring truly provides for meaningful competition among suppliers, the advantage the competitive market is likely to bestow upon dirtier plants could be lessened. Consumer choice is meaningless, though, without adequate information. Recognizing this, many states that have moved toward electric utility restructuring have adopted consumer right-to-know or information disclosure provisions.

Among other things, information disclosure provisions require power suppliers to provide understandable information regarding both how their power is generated (i.e., the mix of the types of fuel used in power plants) and the resulting pollution. This information is necessary to enable consumers to make informed choices among competing suppliers. To be useful to consumers, this information needs to be provided in a uniform, easily-understandable format, such as the food label on a box of cereal or a bag of chips. And this information should be provided in all marketing materials and on customer bills to enable consumers to comparison shop among competing suppliers.

I've attached to my remarks a copy of an article which discusses the findings of recent research on issues involving the design of consumer information disclosure provisions.

Consumer desires to choose cleaner generation resources can also be thwarted, however, unless the General Assembly authorizes the State Corporation Commission or some other state entity to monitor and verify suppliers' claims to provide "green" power. The early track record in other states has demonstrated a significant potential for fraudulent and misleading claims to provide cleaner power, and strong steps are required up front to prevent such practices.

In addition to these steps, the Task Force should recognize and weigh in on the issues before other task forces which may skew the generation market in favor of dirtier power plants. Any system biased in favor of existing generation, whether due to the operation of the transmission and distribution wires or as a result of market power, will thwart competition and promote environmental degradation.

A further environmental concern with restructuring is that it will reduce investment in energy efficiency and renewable energy.

Energy efficiency offers one of the best and cheapest ways to address the adverse impacts of power plant pollution. New technologies offer the same level of comfort and services -- such as heating, cooling and lighting -- as conventional measures, but use far less energy. For example, high efficiency industrial motors use 50% of the energy of standard equipment.

Experience and studies show that one-quarter to one-third of our energy use can be eliminated by installing cost-effective, high-efficiency technologies. Eliminating such a substantial portion of our demand would have a tremendous impact on our pollution problems in Virginia.

Energy efficiency offers another significant public benefit: it is the best tools consumers have for controlling their electric bills. Residential consumers -- particularly low income, elderly, and rural consumers -- are vulnerable to electricity price hikes and are the least likely to see lower rates after restructuring. Energy efficiency measures enable customers to reduce their electric bills by installing equipment that provides essential services -- such as lighting and cooling -- while using far less electricity. For example, weatherization programs have been very successful in increasing the comfort and decreasing the power bills of low income customers.

In addition to using electricity more wisely, we must develop and acquire renewable sources of energy to effectively address our air pollution problems. Renewable energy resources have decreased in cost to the point where they can begin to affordably meet a significant share of our energy demand. Virginia must aggressively pursue renewable energy development and commercialization to address the environmental problems linked to power production.

Investments in programs promoting energy efficiency and renewable energy offer a host of other important public benefits, such as economic development, fuel diversity, and system reliability. The State Corporation Commission has long recognized the value of energy efficiency and encouraged utility investment in conservation and load management (or CLM).

The creation of a competitive electric power market will undoubtedly open new opportunities for marketers of energy efficient products. However, these marketers have always been free to compete for customers. Pervasive market barriers -- such as lack of information and the higher up-front cost of many efficient technologies -- have depressed investment in cost-effective energy efficiency improvements. As a joint study by two national laboratories concluded, "sizeable economic benefits" have resulted from utility programs promoting energy efficiency, and without these programs "these benefits would go uncaptured in the marketplace." M. Levine, E. Hirst, et al., Energy Efficiency, Market Failures and Government Policy at 33-34 (March 1994). Introducing greater competition, in itself, will do nothing to address the market barriers that have thwarted the commercialization of energy efficient products to date.

In fact, restructuring is more likely to reduce investment in programs promoting energy efficiency, as the State Corporation Commission staff's working model for restructuring recognized. The public benefits offered by wiser, more efficient use of electricity are in jeopardy as competition increases.

The same is true for renewable energy. Although restructuring will create new opportunities for marketers, incentives for utilities to invest in renewable technology research and development will disappear with competition.

This is already happening. Utilities have begun to focus exclusively on short-term prices, slashing energy efficiency and renewable energy investments and focusing on promoting increased electric use. Virginia Power exemplifies this trend; it has reduced its planned energy savings by more than 90% in the past few years. For example, the amount of summer peak reductions they project from demand side programs by the year 2010 has dropped from 1477 megawatts to 151 megawatts.

Energy efficiency and renewable energy investments must not be lost during restructuring. A restructured electric power system should include policies which increase investments in energy efficiency which will not otherwise occur in a competitive market, particularly programs to help ensure that electricity remains affordable to the most vulnerable customers. In addition, restructuring should increase investments in the development and commercialization of renewable energy technologies.

The most promising approach to securing these public benefits, we believe, is to establish a public benefits fund to support programs promoting greater energy efficiency and renewable technology development. This public benefits fund should be generated by a nonbypassable, competitively neutral charge on all users of the retail electric system. It should be administered by an independent non-profit entity to help ensure that there is no conflict between the purpose of the public benefits fund and the interest of the organization administering the fund. For example, a utility owning unregulated generation whose profits are tied to electricity sales will have little interest in investing in energy efficiency. Further, to harness market forces, investments from the public benefits fund should be made using mechanisms such as competitive bidding to the greatest extent practicable.

Although details differ, most states that have moved to restructure their electric utility industry, and most federal restructuring proposals, adopt this approach to ensure that the significant public benefits provided by investment in energy efficiency and renewable energy are not lost as a result of restructuring. This task force should recommend a similar approach for Virginia.

Environmental and consumer protection must be a cornerstone of restructuring Virginia's electric utility industry. I urge this Task Force to adopt strong recommendations to provide such protection. There is a wealth of information on the measures SELC is endorsing, and we are ready and willing to work with the Task Force to develop measures to ensure that restructuring benefits, rather than harms, the environment and consumers.