Mr. Chairman, members of the Joint Subcommittee, my name is Trip Pollard, and I am a senior attorney with the Southern Environmental Law Center. I thank you for the opportunity to present these remarks on the key environmental and consumer issues electric utility restructuring raises.

The Southern Environmental Law Center is headquartered in Charlottesville, and works throughout the South to protect our natural resources and public health. We support increased competition in the electric industry, because we believe it can lead to economic, health, and environmental benefits. However, unless done properly, restructuring will harm our environment, our health, and our pocketbooks.

A primary environmental concern with restructuring is its impact on air pollution. Electric utilities are the largest source of air pollution nationally and regionally. Power plants are a primary contributor to acid rain, ground-level ozone, global climate change, and other critical 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.

These impacts are being felt here in Virginia. Air quality in Shenandoah National Park is among the worst in the country, with summertime visibility less than one-quarter the natural range, health warnings have been issued to visitors because of bad air quality, streams are poisoned by acid rain, and trees are damaged by ozone pollution. Air pollution is also contributing to the decline of the Chesapeake Bay. There have been scores of violations of federal health standards for ozone smog across the state this year. And hundreds of thousands of Virginians -- particularly children and the elderly -- are exposed to unnecessary health risks due to high air pollution levels.

These impacts bring a heavy price tag, increasing health costs for consumers and employers, damaging farms, forests, and fisheries, hurting tourism, and hindering the ability to attract new business to areas with poor air quality.

Restructuring will influence the type of power plants built and operated, and thus it is likely to 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 two to ten times the level of key pollutants as similar new plants. If restructuring favors older plants, air pollution will increase dramatically.

Another major environmental concern with restructuring is that it will reduce investment in energy efficiency and renewable energy as utilities adopt a narrow, shorter-term focus in a more competitive environment. This is a serious problem because increasing energy efficiency is the best tool consumers have for controlling their electric bills. I'm not talking about freezing in the dark; I'm talking about the fact that technological advancements have resulted in new products that provide the same services -- such as cooling -- using far less electricity. 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. Reducing efficiency investments will make matters worse, by hindering the ability of consumers to cut their power bills. In addition, energy efficiency and renewable energy are among the best, most cost effective ways to address air pollution from power plants, by reducing the need for more plants and by providing cleaner sources of power.

Despite these critical public benefits, investments in energy efficiency are in jeopardy as competition increases in the electric industry. Utilities have begun to focus exclusively on short-term prices, slashing energy efficiency and renewable energy investments and focusing on promoting increased electric use. A prime example of this trend is Virginia Power, which has reduced its planned energy savings by more than 90%.

This is unacceptable.

The General Assembly has recognized that restructuring must be undertaken "with due regard to the protection of the environment." Virginia needs to go one step further, and undertake restructuring only if it will improve our environment and our health.

Restructuring must contain three primary elements to provide adequate consumer and environmental protection.

First, there must be open competition among electric power suppliers on a level playing field. Any system biased in favor of existing generation, whether it is due to the operation of the transmission and distribution wires, as a result of market power, or through the preservation of more lenient environmental standards for existing generation, thwarts true competition and promotes environmental degradation. The market must not be skewed in favor of dirtier power plants.

Second, all consumers must be given real choices among competing power suppliers. Among other things, to enable consumers to make informed choices, all suppliers should be required to provide information to customers on how their power is generated and the resulting pollution.

Third, a restructured electric power system must include policies which increase investments in energy efficiency and renewable technology development and commercialization.

These elements raise dozens of issues, and issues that will impact the environment are before each of the task forces the Joint Subcommittee has established.

For example, the Structure and Transition Task Force is examining market power issues which could have tremendous environmental impacts. The potential benefits of restructuring will not be realized if market power prevents true competition among suppliers on a level playing field.

In addition, the Stranded Cost Task Force is examining the critical issues of the definition, level, and method of recovering stranded costs. These are all environmental issues, since, for example, stranded cost recovery needs to be limited to minimize the competitive advantage it gives to existing plants, and stranded cost recovery must not be used as a mechanism to subsidize the ongoing operation of uneconomic plants.

Other key environmental issues restructuring raises need to be addressed by the Consumer, Environment, and Education Task Force. There are at least five significant environmental issues that Task Force should address.

First, the need for comparable environmental standards for all generation, to reduce the advantage older, dirtier plants will have in a restructured environment;

Second, the need to require power providers to disclose the type of fuel used to produce their power, and the amount of pollution they generate, to help consumers make informed choices about their power supplier;

Third, the need to provide funding for efficiency and renewable energy, particularly programs to help ensure that electricity remains affordable to the most vulnerable customers. These programs can be financed through a public benefits charge imposed on all users of the distribution system;

Fourth, the need for a renewable portfolio standard in order to reduce the environmental impact of power production and to stimulate the development and commercialization of renewable energy. This standard requires a certain percentage of the power offered for sale by each retail electric supplier to be generated from renewable resources. To harness market forces, a supplier could satisfy this standard by owning or purchasing renewable resources or by purchasing renewable credits from other suppliers; and

Finally, the need for environmental performance incentives and system planning requirements for the portions of the electric industry which remain regulated after restructuring, such as transmission and distribution.

Promoting environmental protection and maintaining or improving environmental quality should be ensured in any form of restructuring in Virginia. We look forward to continuing to work with this Joint Subcommittee and the task forces it has created to address the serious environmental issues restructuring raises.

I thank you for the opportunity to present these remarks.