Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
Naseo national energy issues 1998 to 1999
ee ed)tallestekAoeos *bape J,on Sa AyiaafTEAge, pies *eas8 Poni" a ss.a ve betas ee oe re guys'inggthe@States"a aeang art;"ari«, bsA4 aycgTae: £ce La iad a i:' " ome ..rents of State Energy Officials 's a2: aT"A. Lim ceeateoeeeo2 8oeNDeas aneees Nitewenabeviet screeci Ae git!he£ eee LS f SAG angkDiyle FbReadreyt4 "* oe}BEES,G. 24 Chairman Chester B.Smith Mississippi Immediate Past Chairman Larry Bean Towa Vice Chairman Richard P.Sedano Vermont Treasurer John Nunley III Wyoming Secretary William J.Keese California Regional Representatives Kim Christianson North Dakota Cheryl DeVol-Glowinski Indiana K.C.Golden Washington Tobin K.Harvey Texas Brian M.Henderson New York Jeff Herholdt West Virginia Frederick H.Hoover Jr. Maryland Patrick E.Meier Wisconsin Daniel Pagan Rosa Puerto Rico DeeAnn Parsons Nevada Samuel S,Reid Rhode Island Jim Tait Florida Affiliates'Chairman Thomas K.Dreessen NASEO STAFF Executive Director Frank Bishop General Counsel Jeffrey C.Genzer Managing Director David S.Terry Conference Director Melanie Minesinger Program Manager William M.Walker Jr. The National Association of State Energy Officials (NASEO),founded in 1986,is a nonprofit organization whose membership includes energy officials from the State.and Territory Energy Offices and affiliates from the private and public sectors.NASEO is the state and territory energy officials'Washington Voice on national energy issues-informing Congress,the administration,and regional and national organizations about the specific energy priorities and concerns of the states and territories. The strategy and.programs must.be characterized by their efficient use of taxpayer funds and attention to both the nation's economic growth and the environment.The primary aim of NASEO is to advocate initiatives that together foster a balanced approach to energy opportunities and challenges. Energy-Fundamental to Americans'Lives and the La nes nee ee woe ee Nation's Economy Every day our lives ave affected in some way by energy-oil,gas, coal,electricity,and alternative fuels.No other resource or industry touches so many of us in so many ways.A rational approach to the management,production,and consumption of energy is fundamental to the way Americans live and work.The role energy plays in our lives is so pervasive and basic that we often take it for granted. America consumes billions of dollars in energy each year.The electric utility industry alone represents a market of over $200 billion and is in the midst of a major restructuring,certain to dramatically affect how businesses and consumers purchase power.Indeed,the impact of energy prices and policies ripples through the entire national economy-affecting transportation,industrial production,services, households,electricity generation,and agriculture. Given energy's significant role in the nation's economy and environ- ment,it is essential to achieve a balanced national energy policy or strategy that allows states and territories to prioritize,develop,and implement programs that are targeted to their citizens while wisely using their indigenous energy resources.State and territory energy The National Association of State Energy Officials (NASEO), founded in 1986,is a nonprofit organization whose membership includes energy officials from the State and Territory Energy Offices and affiliates from the private and public sectors.NASEO is the state and territory energy officials'Washington Voice on national energy issues-informing Congress,the administration,and regional and national organizations about the specific energy priorities and concerns eyof the states and territories.seemereneThe National Association of !State Energy Officials foe MR ne pr eer en rere mee FE 22] Be ee evn --r Ss .v In Conclusion Our nation deserves to reap from our energy resources and technologies the potential rewards of a vital,healthy national economy and environment.The federal government must promote fair and rational energy policies to ensure that we reach this long-term goal.And,since energy is fundamental to the American economy,effective energy policies and programs are important to everyone. Recognizing that public policies and programs affect energy producers and consumers in all of the states and territories, NASEO'%s primary aim is to advocate initiatives that together foster a strategic approach to energy opportunities and challenges. To the extent that current federal energy programs impede the achievement of these goals,NASEO believes that these programs should be reexamined,modified,and removed or that new ones : should be crafted and put into place. policies and programs are vital to ensuring economic growth, increased energy efficiency,and a greater reliance on cost-effective clean energy and renewable energy sources.Increasingly,America's business community is making national and state decision makers aware of the need for states'continued leadership in implementing home-grown,economically efficient,and environmentally sustainable energy programs,policies,and incentives. A network of State and Territory Energy Offices delivers state-driven energy programs to their communities.The State Energy Offices were formed in response to the energy crisis of the early 1970s.These offices have evolved to become important agents of change-deploying emerging energy technologies and spurring energy-related economic development while minimizing the environmental impact ofgrowth,crafting energy solutions that fit their citizens'needs,and increasing our national energy security. The work of the State Energy Offices is supported primarily by taxpayers.This support comes in the form of state funding for programs and activities under the direction of the governors or legisla- tures,as well as federal appropriations for the State Energy Program (SEP),which focuses on promoting cost-effective energy solutions. The activities of State and Territory Energy Offices vary widely, depending upon states'indigenous resources and needs.However, most State Energy Offices: @ Advise governors and legislators on energy issues,such as electric utility industry restructuring; G Ensure that the needs and issues of industry,business,and residential energy consumers are considered during energy policy development; E Help businesses to use energy effectively-modernizing industry 'and retaining and creating jobs; EI Bring together divergent public interests and work to build consen- sus to implement energy and resource efficiency projects,energy development projects,and renewable energy projects and programs that benefit the economy and the environment; I Assist energy providers and consumers during energy emergencies and natural disasters to mitigate supply disruptions and coordinate state,local,and regional responses; B Support residential and other small energy consumers in meeting their energy needs through the most cost-effective and energy efficient solutions possible; &Demonstrate the application of cost-effective,advanced energy efficiency and clean energy technologies in real-world situations; I Work to deploy cutting-edge energy technologies that reduce energy costs at publicly supported facilities; 1 Manage certain federal energy research and demonstration programs more effectively and at lower costs than many traditional federal program management mechanisms; Z Work with state agencies to deploy cost-effective,state-of-the-art technologies to reduce energy consumption;and =Communicate to the public the importance of energy to economic development and the environment,emphasizing the value of cost-effective energy efficiency measures. The National Association of State Energy Officials (NASEO) believes that a bipartisan national energy strategy,coupled with sound energy programs delivered directly by the states and territories, is necessary to ensure a stable,market-driven climate in which energy resources can be produced and consumed efficiently over the long term.The strategy and programs must be characterized by their efficient use of taxpayer funds and attention to both the nation's economic growth and the environment.The primary aim of NASEO is to advocate initiatives that togetherfoster a balanced approach to energy opportunities and challenges.To achieve the orga- nization's education and advocacy goals,NASEO will work with providers,and others in order to meet these requirements.Steps should be taken to ensure that flexible fuel vehicles use alternative fuels to the maximum degree possible,rather than simply relying on traditional fuel sources.And legislative and policy incentives designed to stimulate the market and improve the cost effectiveness of alternative fuels vehicles should also be pursued. In addition,attention must be brought to increasing transportation efficiency through the following: |.Delivery of programs that reduce miles traveled;to.Use of highly efficient automobiles;and 3.Introduction of cutting-edge automotive technologies to the marketplace. Moreover,delivery of more fuel efficient and new transportation options is a business opportunity for America's largest auto manufac- turers and does not require huge federal government investments. Rather,government should employ cost-effective public policy tools such as targeted consumer incentives and enhanced education measures. Actions:Inform the Congress and others about the importance of relying on alternative fuels and efficiency programs to decrease America's dependence on foreign oil.Advocate continued private and federal support for programs that encourage the further development of an infrastructure to service and fuel alternative _fuels vehicle fleets.Promote incentives to reduce financial barriers to the broad use of alternative fuels vehicles,Advance programs that increase consumer awareness of the benefits offuel efficiency and encourage auto manufacturers to continue their investment in new transportation technologies as a part of their regular business plans. 21 6 Encourage the Implementation of Alternative 20 Fuels Legislation and Transportation Efficiency Programs (tenet OR serena Sosrnn e America's dependency on foreign oil and the need to continue to address air quality issues related to transportation are among the toughest challenges facing the United States.Over the years, Congress,states,business,the environmental community,petroleum interests,the auto industry,and others have all worked,from various perspectives,to address transportation fuels and transportation efficiency issues.The use of alternative fuels vehicles and adoption of transportation efficiency programs are a means to address these challenges. As a result of years of hard work,important legislation,regulations, and programs have been passed or developed at both the federal and state levels to encourage energy efficiency and the use of alternative fuels vehicles.Most notable among the legislative actions is the requirement under the Energy Policy Act of 1992 that states must acquire alternative fuels vehicles as a specific percentage of their new light-duty vehicle acquisitions.However,with some notable exceptions such as California,many state,local,and federal organizations have not made progress in moving toward the goals enacted by Congress,and insufficient resources have been provided to meet these goals. Efforts must be increased to motivate both public and private fleet operators to increase the number of alternative fuels vehicles in .service,as well as toEffortsmustbeincreasedto improve the delivery motivate both public and infrastructure for some private fleet operators to alternative fuels. Federal and state increase the number of ..authorities should alternative fuels vehicles in focus on implementing .;existing legislationservice,as well as to improve through programs that the delivery infrastructure allow states to partner for some alternative with private fleets,fuel fuels. Congress and the administration to: &Correct the disproportionate budget reductions that the State Energy Program (administered by the U.S.Department of Energy)has experienced as compared to energy programs designed and implemented directly by the federal government. &Empower the states and the marketplace-proven agents of change-to lead the way in the deployment of cost-effective energy efficient technologies and practices,renewable energy,and other sustainable energy technologies and practices. i Implement the provisions of the Energy Policy Act. E Identify our nation's top energy priorities and create a true national energy strategy.This should be used as a vehicle to expedite a review of the energy-related programs of various federal departments and to eliminate duplication of effort. 8 Ensure that federal electric utility industry restructuring actions are responsive to state and regional needs and avoid actions that would diminish progress already achieved by states in moving toward competition in the electricity market.And ensure that cost-effective energy efficient measures and public programs con- ducted by State Energy Offices are maintained or enhanced- fostering economic growth and energy security. a Maintain the assets of the Strategic Petroleam Reserve and strengthen federal support for mitigation of,response to,and recovery from emergency energy supply disruptions. @ Encourage the implementation of existing alternative fuels legislation and the development of new legislation that supports programs and incentives that allow states and the private sector to promote alternative fuels use and infrastructure development. The above actions are crucial to both empowering the states and the marketplace and ensuring America's energy future.In the coming months,NASEO will focus on educating the energy community, Congress,federal officials,business,and others about the importance of these issues.Specifically,NASEO will work to achieve the following: r ee ee mee beep en ee ree a wore ee mur-- 1 Allow States and Territories to Determine Their Citizens'Energy Priorities and Needs Within a National Context a With relatively limited funding from certain federal departments, such as the U.S.Department of Energy and U.S.Environmental Protection Agency,state and territory energy programs deliver huge economic benefits,environmental improvements,and energy savings for businesses and citizens.NASEO is determined to secure greater federal recognition of and support for the value and importance of The federally funded State Energy Program is just two- tenths of one percent (0.02 percent)of the total U.S, Department of Energy budget,and only 3.5 percent of the total budget for the state energy initiatives and the State Energy Program as the essential tools for determining energy priorities outside thedepartment's confines of Washington,DC.State and territory energy officials Office of provide important short-and long-term energy solutions Energy efficiently and in ways that are most responsive to Americans' needs while addressing certain national priorities,such as Efficiency energy security,sustainable development,and job creation. and Renewable Nevertheless,the federally funded State Energy Program is Energy,which just two-tenths of one percent (0.02 percent)of the total U.S. Department of Energy budget,and only 3.5 percent of theadministerstotalbudgetforthedepartment's Office of Energy Efficiency the states'and Renewable Energy,which administers the states'funds. funds And,the State Energy Program is the only U.S.Department of Energy program that provides funding directly to the states and territories to meet the needs of their constituencies and to help mitigate the budgetary effects of federal energy mandates. Following are results of some of the states'efforts: £State Energy Program funding allows states to strategically assist industries in enhancing their economic competitiveness while cost-effectively mitigating pollution.For example,Ohio's Energy Office worked with a major metals manufacturer to develop an electric induction heating process for superheating reservoirs of molten alloys in a furnace,replacing conventional fuel oil or gas heating methods. This process increased energy efficiency by 98 percent and reduced pollution and maintenance costs. Congress and the adminis- to strengthen this vital appropriate use of the reserve. a number of different private-and public-sector organizations,such as tration must take action insurance companies,utilities, emergency planning authorities,and energy offices.Congress should direct national resource and the Federal Clarify and revise the rules regarding Emergency Management Agency and the USS.Department of Energy to work with state officials and the energy industry to develop plans to mitigate the impacts of supply disruptions.Preparing for and averting,to the degree possible,energy supply disruptions can dramatically decrease the cost of such disruptions to the economy. Most important,no matter how limited supply disruptions may be geographically,they pose serious safety and health consequences to citizens. Actions:Communicate to Congress and the administration the significance of the Strategic Petroleam Reserve as insurance against serious disruptions in oil imports.Encourage Congress and the administration to (a)clarify the circumstances under which it is appropriate to access the reserve;(b)develop innovative alternatives forfunding the Strategic Petroleum Reserve;and (c)extend the benefits of the reserve to the states and U.S.territories outside the continental United States.Alert businesses and citizens to the importance of maintaining the reserve and the negative impacts of selling reserve oil to meet short-term budget goals.America can not afford the continued liquidation of the reserve when prices are low,a time when reserve oil supplies should be increased as prudent protection from the high cost offuture disruptions. Raise the visibility of the essential energy emergency planning and response measures provided by State and Territory Energy Offices in mitigating the effects of energy supply disruptions,including those associated with natural disasters,and in mitigating the effects of extreme fuel price fluctuations.Provide support to State Energy Offices so that they can better assist state and local disaster coordinators and enhance delivery of energy services during hazard mitigation and planning,as well as during disaster response and recovery.Encourage the administration to lead the way by directing the Federal Emergency Management Agency,the U.S.Department of Energy,and other federal agencies to work with State and Territory Energy Offices to improve energy emergency training, coordination,mitigation,preparedness,response,and recovery. 19 120 90 60 30 118 and analysis efforts in past winters have assisted suppliers and consumers by providing important information that helped to mitigate sharp fuel price swings and dangerously low inventory levels.States and the U.S.Department of Energy have also developed an emergency communication procedure to ensure rapid information sharing on the nature and scope of emergency events and the actions taken in response. Fortunately,many states and territories have at least a minimum level of resources dedicated to energy emergency preparedness.For example,25 states in the Northeast,Midwest,and Mid-Atlantic regions have staff with responsibilities that include,among other activities, the collection and analysis of heating fuel supply and price information during the heating season.However,state energy officials'resources are limited and in serious need of additional support,particularly in the area of preparing for the energy implications of natural disasters such as hurricanes and ice storms that do not limit their destruction to geo-political boundaries. In this regard,the Federal Emergency Management Agency has a great deal of authority over emergency issues and provides significant training.The federal government'efforts,however,do not adequately address energy disruption preparedness,mitigation,response,and recovery.This is particularly important in light of increasing competition and restructuring in the energy industry. Both federal and state governments should also consider sustainable principles in their emergency management planning and recovery. Examples of sustainable development activities for disaster recovery include employing Days of Import Protection photovoltaics forInventory(year-end) U.S.Net Petroleum Imports/Day (yearly average)emergency power generation, recycling debris for use as a biomass 93 fuel source,and ]rebuilding to the P81 82 FS model energy code through the use of 67 energy efficient =mortgages. i The effect of supply disruptions can also be minimized through proper training and coordination among 87 88 89 90 91 92 93 94 95 96 97 Y E A R Source:1997 Annual Report For The Strategic Petroleum Reserve. U.S,Department Of Energy,Dec.199718)PaiceSRRERSSrreBE#Adequate energy supplies and stable competitive energy markets are vital to the health and safety of our citizens and states'economies.A hallmark of State Energy Programs is mitigating,preparing for,and responding to emergency energy supply disruptions caused by natural disasters and other events.For example,a January 1998 ice storm devastated the Northeast and resulted in federal and state declarations of disaster.In response,State Energy Offices worked with state,federal, and local emergency officials and private-sector vendors to ensure the timely resupply of gasoline,heating oil,and propane to tens of thousands of farmers,residents,and businesses as they coped with the aftermath of the ice storm. E The Interstate Clean Transportation Corridor is the nation's only public-private partnership dedicated to accelerating the market penetration of alternative fuels vehicles in interstate goods movement between nonattainment areas and Clean Cities in California and in other western states.With the help of State Energy Program funds, California has initiated a plan to deploy up to 178 liquefied natural gas tractors,build natural gas fueling stations,displace 2.9 million gallons of diesel fuel annually,and leverage nearly $28 million in public and private capital.California also leveraged funds for adjacent states' implementation of the corridor plan. §Some states have greatly enhanced the education and technical skills of their work force with State Energy Program funds.The Louisiana Energy Office and the University of Southwestern Louisiana,for example,provide energy curriculum guides as part of the state's Energy Conservation Enhancement Project.This program provides for the enhancement of energy education curriculum materials that were developed for selected courses in the state's vocational-technical schools.This material increases the knowledge of energy efficiency techniques for students who are in building trades and enhances the students'opportunities for employment. §State Energy Programs fund energy efficiency improvements in schools,allowing millions of dollars in annual energy savings to be used directly for educating our children.The lowa Building Energy Management Program,for example,installs cost-effective energy efficiency measures in Iowa's public facilities.To date,$5 million in federal and state funds have been combined with private financing to implement $150 million of improvements,producing annual savings of more than $25 million-exceeding projected energy savings.Iowa has 80% 70% 60% 50% 40% 30% 20% 10% 0% worked with an advisory committee that includes the lowa Hospital Association,the Iowa School Board Association,the Iowa Higher Education Loan Authority,the League of lowa Municipalities,the Iowa State Association of Counties,and others to implement this program. I State Energy Programs assist residential and other small energy consumers,businesses,and local governments in reducing the negative impacts of energy production and consumption on the environment. For example,in Nebraska,residents use the state's Dollar and Energy Saving Loan Program to finance cost-effective energy efficiency improvements in the residential,commercial,and government sectors. Local lending institutions in conjunction with the State Energy Office have financed more than $77.7 million in energy improvements. B The Arizona Energy Office offers a unique partnership,combining energy and water conservation with a social service information and referral program for senior homeowners.All disabled homeowners regardless of age are included in this free service.Senior volunteers are trained by the energy program administrator toWhoDirectsSpendingof Energy Conservation Funding? 65.01% direct the conservation education programs and install donated materials.Energy Office staff 72.42%provide the technical expertise and administrative oversight to ensure cost-effective conservation of energy and water and a safe and healthy environment for eligible senior homeowners. These measures reduce a senior's utility bill by 34.99%$120 to $240 per year,and over 20,000 homes 27.58% ;have been serviced since 1985. Ef Because of state energy officials'unique knowledge of their states'resources,businesses, FY'95 FY'98 and opportunities,their energy-related economic development initiatives attract greater private-sector commitments than do similar federal initiatives.And,state energy initiatives often help industry to modernize and operate more efficiently,creating and retaining jobs.For example,in Mississippi,the State Energy Office was the catalyst for a huge private investment in a 21st century industrial complex and lignite and biomass-fueled electrical generating facility called the Red Hills EcoPlex.The initial private investment in the EcoPlex is estimated at $450 million,and it will employ a permanent work force of 250.Industries compatible with the Congress should direct the Federal Emergency Management Agency and the state officials and the energy industry to develop plans to of supply disruptions. disruptions.Federal budgetary constraints have made it difficult to fill the reserve to the authorized level of 750 million barrels.However, the current level of 563 million barrels provides insurance against real threats of supply disruptions,caused by events such as the Gulf War, which can rapidly threaten consumer health and safety and cripple the nation's economy. Federal budget actions in recent years have resulted in the sale of over $700 million worth of oil from the Strategic Petroleum Reserve to finance reserve maintenance activities and to achieve one-time budget deficit reductions.These actions are contrary to the reserve's purpose.Moreover,the sale of the nation's reserve oil results in a considerable financial loss to taxpayers since a great deal of the oil was purchased at prices much higher than today's markets can bear. U.S.Department of Energy to work with NASEO strongly supports maintaining the Strategic Petroleum Reserve and believes that Congress and the administration must take action to strengthen this vital national resource mitigate the impacts and clarify and revise the rules regarding appropriate use of the reserve.Congress should also continue to explore alternative means of financing the purchase of reserve oil to further mitigate serious fuel supply disruptions. Moreover,the benefits of the reserve should be extended to the states and USS.territories outside the continental United States.If the nation is to be prepared for energy supply emergencies,then government must live up to its promise to the taxpayer and maintain America's energy security and economic vitality. In addition to strengthening the Strategic Petroleum Reserve,energy emergency preparedness efforts are in serious need of regional coordination,review,and updating.State and territory energy officials develop programs and implement actions to mitigate energy supply disruptions and restore energy operations and services as rapidly as possible.In the face of emergencies and natural disasters, such as the electricity disruption in the West in 1996,hurricanes,the ice storm in the Northeast in 1998,and recent El Nifio-related storms,the need to shore up funding for these efforts is clearly evident. Additionally,energy offices work with businesses,residential consumers,and fuel oil and propane suppliers to examine and mitigate extreme fuel price fluctuations due to severe weather and unusual market conditions.State Energy Offices'data collection 5 Maintain America's Energy security andStrengthenFederalSupportforPreparedness for,Mitigation of,Response to,and Recovery From Emergency Energy Supply Disruptions Me a ee The Strategic Petroleum Reserve was established for use in emergencies or natural disasters to provide a buffer against the potentially severe human and economic consequences of oil supply disruptions.The petroleum reserve is stored in huge underground salt caverns along the coast of the Gulf of Mexico.Oil from the reserve can be moved quickly and efficiently to the nation's refineries if .commercial supplies of crude oil are disrupted.The reserve 7s ;.;With 563 million barrels in storage,the reserve is the nation's the nation's first line of defense against an inter- first line of ruption in oil imports and the largest strategic ;stockpile of crude oil in the world-a nationaldefenseagainst..insurance policy. ]Ton .an interrupt to Today the Strategic Petroleum Reserve can in oi]imports withdraw oil at a maximum sustained rate of 3.7 million barrels per day for a 90-day period.As theandthelargestPeyyP caverns are emptied,the draw-down rate decreases strategic in a stair-step fashion.At its current inventory,a stockpile of full-scale draw down would last for nine months. With world oil demand running at a rate of aboutcrudeoi]in 72 million barrels a day,bringing the reserve the world-a4 supply onto the market would represent a 5 per- .cent increase in world oil supplies.This amount,national ;;;nearly half of current Saudi Arabian production, insurance would have a major impact on world oil markets. policy.In 1996,the United States imported 46 percent ofits total petroleum needs,and imports are expected to increase to 66 percent by the year 2020.The growing dependence on foreign oil makes America increasingly vulnerable to major oil supply disruptions,emphasizing the importance of the Strategic Petroleum Reserve.In 1996,the reserve provided 67 days of import protection.However,by 2010,that number will likely fall to only 44 days of import protection as demand grows and import requirements increase. Current and past administrations,the Congress,governors,state legislators,and industry have all supported the need for the Strategic Petroleum Reserve as protection against serious energy supply "16|Recteereby-products of the project's electric generation (steam,waste heat, cooling water,and gypsum)will be the primary tenants of the complex. Total private investment will likely exceed $1 billion. f Another example of State Energy Offices'ability to gain greater private-sector commitments than most federal programs is New York's FlexTech program.For every $1 New York spends in State Energy Program funds to deliver its FlexTech technical assistance service,$17 is leveraged in energy efficient capital improvements,and $5 in energy costs is saved by participating customers each year. ¥California's Transportation Technologies Advancement Program is another example of state energy-related economic development that attracts private-sector commitments.The program provides a maximum of 50 percent co-funding for near-term research and development and demonstration of advanced transportation and fuel technologies that reduce petroleum fuel consumption,cost,or emissions.A total of $300,000 in state funds was matched by $546,000 in private funds for the conversion and demonstration of six gasoline-powered U.S.Postal Service delivery trucks to electric power.The results may affect the Postal Service's decision to convert more fleet vehicles and would create nearly 300 new jobs in California. Given the importance of these activities to the citizens of their respective states and the entire nation,Congress should correct the disproportionate budget reductions that the State Energy Program has experienced as compared to energy programs designed and implemented directly by the federal government and the US. Department ofEnergy. Actions:Work with Congress to increase funding for the State Energy Program,correcting the disproportionate reductions already experienced by states and territories.Raise the visibility of the states'work under the program and demonstrate its effectiveness relative to energy programs operated directly by the federal government.Work with the U.S. Department of Energy to streamline the process it uses to administer the states'funds.Communicate to Congress and the administration the importance of empowering the states and the marketplace-proven agents of change-to lead the way in the deployment of cost-effective energy efficiency technologies and practices.It is only through deployment of these technologies in the marketplace that increased energy efficiency, cost-effective emissions reductions,and improved economic competitiveness can be achieved. Meee ee ?Implement the Provisions of thee7,emergency preparedness,and low-income assistance-is key tocsad ="5 ass =ae bowFae.making a successful transition to a competitive electric utility market.Energy Policy Act As the hub of energy program activity and expertise in most states,nnn ne EO energy offices are the most innovative and efficient administrators of public purpose programs.The reason for their effectiveness isTheUnitedStatesdoesnothaveaclearstrategytoensureourP ;in ;simple.Like the majority of essential government programs,enerenergyfuture.The most comprehensive legislative debate on this key sony 6 PIs SyrogramsaremosteffectivelyimplementedbystateandlocalissueoccurredduringthedevelopmentandpassageoftheEnergypmsyumeeeeOYEEENO Policy Act of 1992 (EPACT).Hailed as the most important energy ' legislation in nearly 20 years,the act was signed into law with governments,because they are close to the customers and better understand their needs. overwhelming bipartisan support.The energy community believed 'In addition,states will likely be the best vehicle to administer cost- in earnest that the act,while imperfect,would achieve vital national effective public programs that benefit all consumers-both commercial energy goals through its implementation.Electric Power Industry Restructuring Activities,Showing Current State Average Electricity Rates (cents per kilowatt-hour)Nevertheless,the hard-fought battles to address key energy challenges and increase energy efficiency through this legislation have been overshadowed and in some cases constrained by a succession of new initiatives.The consequence of these new initiatives has been .Sen aneaee Hy €wy NH 11.7 devastating cuts to successful EPACT-related programs and to highly EP .PMA 10.2 -,a ¢ge RI 10.5effectiveprogramsoperatedbythestates.The present federal i é 'A LE cr 10.5 approach to energy seems to be to direct limited funding to an increasing number of energy programs,which results in several failed approaches rather than a single successful one. For example,the development of new federal initiatives to address greenhouse gas emissions may be prudent.Real,cost-effective coerreductionsinemissions,however,do not require elaborate new ee Nt federal programs;they do require:Restructuring Legislation Enacted E%Comprehensive Regulatory Order Issued1.Reliance on measures that have broad bipartisan support;Legislation/Orders Pending 20 "22 Commission or Legislative Investigation Ongoing 12 ...saps sve Source:U.S.Energy Information AdministrationNoOtherSignificantActivit:32.Deployment and implementation of energy efficiency and other y =Hote:Information current as of Apr#?1998. sustainable measures-the practical application of research and devel ;and residential-once competitive electric utility markets are established.evelopment;National,regional,and state actions on electric utility industry .funding;and ....3.Adequate funding restructuring must recognize the vital ongoing role of State Energy 4.Leverage of private-sector resources.Offices in America's electricity system. The first two elements above are in place;EPACT has strong Actions:Inform and educate Congress and the administration of the bipartisan support,and the states are the recognized leaders in the progress already achieved by many states in moving toward competition intofcost-effective energy efficiency and sustainable ener re ..4:deployment o sy y BY the electric utility market and emphasize the importance of avoidingmeasures.Given modest resources,the states can meet virtually any ;;;pre-emption through federal laws and regulations.Ensure that environmentalreasonableenergygoalsdecideduponbyCongressandtheo oo ;:concerns continue to be addressed during and after the transition to a moreadministrationthroughtheimplementationofstate-related EPACT . .;;.competitive structure.Seek federal support to (a)assist states in accessingprovisions.States are already attempting to implement cost-effective information on all aspects of electric utility 1 | measures,such as:afc pects of 'y industry restructuring to be certain that the concerns of all consumers,producers,and other marketflEducationregardingandenforcementofenergyefficientbuildingcodes;f »P , participants are considered;(b)work with states to clarify terminology andIAlternativefuelsvehiclepromotionandpurchaseanddevelopmentof....Speshareinformationandoptionsforappropriatestateelectricutilityindustry infrastructure;."tous ...necessary infrast ;restructuring legislation;and (c)enable states to increase dissemination of I Energy improvements in state and local buildings and schools that pay information to all consumers and policy makers to ensure that states' for themselves while saving taxpayers money every year;and commitments to promoting clean energy technologies and energy efficiency are not lost in the move to competitive markets. 10] 14 A Ensure That Electric Utility Industry Restructuring Is Responsive to State and Regional Needs .- a ae| Congress and federal regulators should design national electricity policies,legislation,and regulations in ways that allow states and territories to determine the most prudent course for electric utility industry restructuring in their state,territory,or region.Federal support and guidance should focus on providing states with the resources to access appropriate information and to provide informa- tion to policy makers and consumers on all aspects of restructuring so that decisions regarding stranded benefits and costs and other issues can be fully considered at the state level.In addition,federal support should encourage reliance on market forces and a move toward a more competitive retail market,to the extent that such support is consistent with state policies. Most important,Congress and the administration should carefully and cautiously consider any expansion or modification of federal authority over the electric utility industry so that the progress already achieved by states in moving toward competition in this market is not diminished.Consideration should be given to options that address market barriers that may remain during and after the transition to a competitive electric utility market.And caution should be exercised to be certain that actions regarding restructuring maintain or enhance environmental quality. Finally,over a dozen states have already enacted legislation or are actively pursuing administrative rulemaking to implement retail competition in electric utility markets.These states'experiences are key to formulating any federal actions regarding restructuring. For example,the electric utility industries in states such as New York, New Hampshire,and California are undergoing dramatic changes as they move toward more competitive electric utility markets.During this period of change,it is important to ensure that electric service continues to be safe,clean,and reliable.Thus,public purpose funding is being required to preserve or expand vital public programs that are beyond what competitive markets will deliver.In most cases,these public purpose programs are being supported through non-bypassable wires charges or systems benefits charges.Many of these programs will be administered directly by the State Energy Offices,which have an established infrastructure of expertise and mechanisms to oversee and deliver these important public programs to all citizens. The role of State Energy Offices in delivering and administering public purpose programs-energy efficiency,renewable energy,pub- lic buildings energy improvements,technology research and deployment, ee renee re " The present federal approach to energy seems to be to direct lim- ited funding to an increasing number of energy programs, which results in several failed approaches rather than a single successful one. E Industrial programs that work with industry and small business to identify energy efficiency measures and incorporate new technologies and processes,resulting in lower costs,improved productivity,and more globally competitive businesses. However,inadequate federal resources directed to a myriad of new beltway-based initiatives restrict efforts to meet the important federal mandates of EPACT and make it difficult for some states to fully meet their citizens'energy priorities.This situation is further complicated by ever-changing direction from the federal government.From year to year it becomes less clear whether Congress and the administration believe that the EPACT mandates constitute our present approach to meeting our energy goals,or whether some new initiative,decided upon with limited discussion and briefly in the spotlight,is the favored approach. By coupling EPACT implementation with grants to the states, for example,national energy goals could be accomplished in ways that allow states to custom-tailor solutions to fit their citizens' unique needs.This state-led approach results in home-grown solutions,rather than less effective,one-size-fits-all national programs operated directly by the federal government in Washington. Cost-effective emissions reductions are but one goal that could be achieved through implementation of EPACT.The real benefits of the law are reaching a set of reasonable national energy goals- energy security,economic growth,enhanced competitiveness, increased use of clean energy technologies,and increased environ- mental quality.Attaining the goals of EPACT is simply dependent upon congressional and administration leadership acknowledging EPACT and empowering the states to implement its provisions. While NASEO strongly supports the development of a national energy strategy,achieving this goal will take significant time and considerable and important debate.Until a bipartisan national energy strategy is developed by Congress,the administration, states,and others,NASEO believes that the energy goals set forth in EPACT should be the primary guidance for Congress,the U.S. Department of Energy,and other agencies in directing the use of taxpayer funds. Actions:Encourage Congress and the administration to focus on meeting the energy goals set forth in EPACT and direct resources toward implementation of key EPACT provisions.Communicate to Congress, the administration,and others that federal resources for energy programs are such that only one set of priorities can be adequately funded and implemented.Until a bipartisan national energy strategy is developed, fundingfor and implementation ofEPACT should be the principal means of meeting our nation's energy goals. 11 3 Develop a National Energy Strategy and Operate Federal Energy Programs as Efficiently as Possible rei ce mera ana sana As one of the most important elements of an economically competitive and safe America,a clear vision is needed to secure America's energy future.Congressional and administration leaders recognized this in the development of EPACT and began to address energy's importance through a number of far-reaching EPACT provisions that targeted such areas as alternative fuels,energy technology deployment,and building codes. A lack of direction and changing priorities have left behind myriad federal programs,sometimes duplicative and often under-funded and unfunded,that result in multiple failed approaches to achieving our nation's energy goals.Congress should begin to identify America's energy priorities by holding a series of hearings and debates on our nation's energy challenges and opportunities.Input should be sought from the states,industry,and other stakeholders to develop a set of actions that address both our near-and long-term goals to ensure America's energy future.While the U.S.Department of Energy has developed a national energy strategy,it did not receive the serious level of national attention needed to devise a bipartisan and reasonably comprehensive approach to meeting our energy challenges. Equally important in developing a meaningful national energy strategy is assessing current federally funded energy programs.Congress should expedite a review of the energy-related programs in all federal agencies,in particular,those of the U.S.Department of Energy,the U.S.Environmental Protection Agency,and the U.S.Department of Agriculture,to determine whether taxpayer dollars are being used as effectively as possible.In short,Congress should become more engaged in the direction and management of resources targeted toward our nation's most important energy challenges. Moreover,federal agencies should be encouraged to establish more meaningful collaboratives with stakeholders and partnerships with states,including joint planning.The U.S.Department of Energy,for example,should institute greater competitive selection and performance-based funding of initiatives that are traditionally operated by federal private-sector contractors and laboratories.Using this approach,the most innovative ideas from all sectors-small businesses,universities,and state organizations-would be available to solve the nation's energy problems.wfeeeaeyreer_In considering our nation's federal appropriations for energy programs,Congress,the administration,and states and territories should discuss some fundamental questions,including: §What are the nation's energy program priorities? B Which energy programs have the best track record or potential and are most effective in meeting the needs of American citizens? §Which programs are responsive to the mandated provisions of EPACT? &Which of these programs are vital to America's long-term economic growth,stability,and environmental health? f How can Congress and the administration encourage federal agencies to work cooperatively and respect unique state and territory needs when deploying programs and funding? I How can federally funded energy programs be most efficiently and effectively delivered? Answering these questions will enable decision makers to reasonably consider which programs match the nation's priorities in energy research and development and deployment,energy efficiency, renewable energy,fossil energy,alternative fuels,energy security,envi- ronmental quality,economic development,health,and so forth. Oi1 Savings of Comparable Programs Program FY 1996 Funds Cin thousands) Barrels per Year Saved by 2000 (in millions) State-Focused Programs State-directed funds(SEP)26,500 5.9 Building codes and standards 8,901 0.4 IACs 8,679.0.1 NICE-3 6,000 2.1 Commercialization ventures 3,000 3.0 Building Equipment and Materials (R&D) Materials and structures 3,260 1.6 Space conditioning 15,257 1.0 Windows and glazing 6,106 0 Lighting and appliance 4,360 0.2 Industries of the Future Forest and paper products vision 11,553 0 Glass vision 1,414 0.2 Aluminum vision 1,449 0.1 Chemicals vision 13,840 1.0 Steel vision 6,780 0 Metals casing vision 1,992 0 Partnership for a New Generation of Vehicles (R&D) Electric vehicle 17,692 4.0 Fuel cell 22,250 0 Hybrid vehicle 57,690 0 Lightweight vehicle materials 13,360 0 Propulsion system materials (ceramics)22,125 0 Other Transportation Alternative fuels vehicle R&D 29,303 12.1 Source:U.S,General Accounting Office Actions:NASEO strongly encourages Congress and the administration to create a national energy strategy.Support efforts to develop an energy strategy and work with the states,territories,and industry to identify the nation's most pressing national energy priorities. Communicate to Congress and the administration the importance of engaging the states in the development of a national energy strategy. epshees Chee:TeneeSbShe&aaea3ch al fe etre ag at LiemPeeotebetas ohgee alema ES PaOeaygePagewaun, Ae es |NationalAssociation of State Energy Officials ENERGY'S WASHINGTON VOICE TE teh 3 eeaheeLeyas*eaePrteeeaberi3 :eh eos ere ;eet}rothbiaBhsEtret 24 Chairman Chester B.Smith Frederick H.Hoover Jr. Mississippi Maryland Immediate Past Chairman PatrickE.Meier Larry Bean Wisconsin Towa Daniel Pagan Rosa f Vice Chairman Puerto Rico Richard P.Sedano . .DeeAnn ParsonsVermont Nevada Treasurer John Nunley III Samuel S.Reid .Rhode IslandWyoming Secretary Jim Tait William J.Keese Florida California Affiliates'Chairman Regional Representatives ThomasK.Dreessen Kim Christianson North Dakota NASEO STAFF Cheryl DeVol-Glowinski Executive Director Indiana Frank Bishop K.C.Golden General Counsel Washington Jeffrey C.Genzer Tobin K.Harvey Managing Director Texas David S.Terry Brian M.Henderson Conference Director New York Melanie Minesinger Jeff Herholdt Program Manager West Virginia William M.Walker Jr. The National Association of State Energy Officials (NASEO),founded in 1986,is a nonprofit organization whose membership includes energy officials from the State and Territory Energy Offices and affiliates from the private and public sectors.NASEO is the state and territory energy officials'Washington Voice on national energy issues-informing Congress,the administration,and regional and national organizations about the specific energy priorities and concerns of the states and territories. ion The strategy and programs must be characterized by their efficient use of taxpayer funds and attention to both the nation's economic growth and the environment.The primary aim of NASEO is to advocate initiatives that together foster a balanced approach to energy opportunities and challenges. Loe Energy-Fundamental to Americans'Lives and the Nation's Economy Every day our lives are affected in some way by energy-oil,gas, coal,electricity,and alternative fuels.No other resource or industry touches so many of us in so many ways.A rational approach to the management,production,and consumption of energy is fundamental to the way Americans live and work.The role energy plays in our lives is so pervasive and basic that we often take it for granted. America consumes billions of dollars in energy each year.The electric utility industry alone represents a market of over $200 billion and is in the midst of a major restructuring,certain to dramatically affect how businesses and consumers purchase power.Indeed,the impact of energy prices and policies ripples through the entire national economy-affecting transportation,industrial production,services, households,electricity generation,and agriculture. Given energy's significant role in the nation's economy and environ- ment,it is essential to achieve a balanced national energy policy or strategy that allows states and territories to prioritize,develop,and implement programs that are targeted to their citizens while wisely using their indigenous energy resources.State and territory energy The National Association of State Energy Officials (NASEO), founded in 1986,is a nonprofit organization whose membership includes energy officials from the State and Territory Energy Offices and affiliates from the private and public sectors.NASEO is the state and territory energy officials'Washington Voice on national energy issues-informing Congress,the administration,and regional and national organizations about the specific energy priorities and concerns of the states and territories. {The National Association of State Energy Officials rrttnveag ta ree en 23 22| In Conclusion. Our nation deserves to reap from our energy resources and technologies the potential rewards of a vital,healthy national economy and environment.The federal government must promote fair and rational energy policies to ensure that we reach this long-term goal.And,since energy is fundamental to the American economy,effective energy policies and programs are important to everyone. Recognizing that public policies and programs affect energy producers and consumers in all of the states and territories, NASEO's primary aim is to advocate initiatives that together foster a strategic approach to energy opportunities and challenges. To the extent that current federal energy programs impede the achievement of these goals,NASEO believes that these programs should be reexamined,modified,and removed or that new ones should be crafted and put into place. policies and programs are vital to ensuring economic growth, increased energy efficiency,and a greater reliance on cost-effective clean energy and renewable energy sources.Increasingly,America's business community is making national and state decision makers aware of the need for states'continued leadership in implementing home-grown,economically efficient,and environmentally sustainable energy programs,policies,and incentives. A network of State and Territory Energy Offices delivers state-driven energy programs to their communities.The State Energy Offices were formed in response to the energy crisis of the early 1970s.These offices have evolved to become important agents of change-deploying emerging energy technologies and spurring energy-related economic development while minimizing the environmental impact ofgrowth,crafting energy solutions that fit their citizens'needs,and increasing our national energy security. The work of the State Energy Offices is supported primarily by taxpayers.This support comes in the form of state funding for programs and activities under the direction of the governors or legisla- tures,as well as federal appropriations for the State Energy Program (SEP),which focuses on promoting cost-effective energy solutions. The activities of State and Territory Energy Offices vary widely, depending upon states'indigenous resources and needs.However, most State Energy Offices: 2 Advise governors and legislators on energy issues,such as electric utility industry restructuring; 2 Ensure that the needs and issues of industry,business,and residential energy consumers are considered during energy policy development; 2 Help businesses to use energy effectivelyp-modernizing industry and retaining and creating jobs; I Bring together divergent public interests and work to build consen- sus to implement energy and resource efficiency projects,energy development projects,and renewable energy projects and programs that benefit the economy and the environment; E Assist energy providers and consumers during energy emergencies and natural disasters to mitigate supply disruptions and coordinate state,local,and regional responses; Support residential and other small energy consumers in meeting their energy needs through the most cost-effective and energy efficient solutions possible; 2 Demonstrate the application of cost-effective,advanced energy efficiency and clean energy technologies in real-world situations; 2 Work to deploy cutting-edge energy technologies that reduce energy costs at publicly supported facilities; 3 Manage certain federal energy research and demonstration programs more effectively and at lower costs than many traditional federal program management mechanisms; i Work with state agencies to deploy cost-effective,state-of-the-art technologies to reduce energy consumption;and 2 Communicate to the public the importance of energy to economic development and the environment,emphasizing the value of cost-effective energy efficiency measures. The National Association of State Energy Officials (NASEO) believes that a bipartisan national energy strategy,coupled with sound energy programs delivered directly by the states and territories, is necessary to ensure a stable,market-driven climate in which energy resources can be produced and consumed efficiently over the long term.The strategy and programs must be characterized by their efficient use of taxpayerfunds and attention to both the nation's economic growth and the environment.The primary aim of NASEO is to advocate initiatives that togetherfoster a balanced approach to energy opportunities and challenges.To achieve the orga- nization's education and advocacy goals,NASEO will work with providers,and others in order to meet these requirements.Steps should be taken to ensure that flexible fuel vehicles use alternative fuels to the maximum degree possible,rather than simply relying on traditional fuel sources.And legislative and policy incentives designed to stimulate the market and improve the cost effectiveness of alternative fuels vehicles should also be pursued. In addition,attention must be brought to increasing transportation efficiency through the following: 1.Delivery of programs that reduce miles traveled;tJ.Use of highly efficient automobiles;and 3.Introduction of cutting-edge automotive technologies to the marketplace. Moreover,delivery of more fuel efficient and new transportation options is a business opportunity for America's largest auto manufac- turers and does not require huge federal government investments. Rather,government should employ cost-effective public policy tools such as targeted consumer incentives and enhanced education measures. Actions:Inform the Congress and others about the importance of relying on alternative fuels and efficiency programs to decrease America's dependence on foreign oil.Advocate continued private and federal support for programs that encourage the further development of an infrastructure to service and fuel alternative fuels vehicle fleets.Promote incentives to reduce financial barriers to the broad use of alternative fuels vehicles.Advance programs that increase consumer awareness of the benefits offuel efficiency and encourage auto manufacturers to continue their investment in new transportation technologies as a part of their regular business plans. 21 Proscar ere 6 Encourage the Implementation of AlternativeFuelsLegislationandTransportation Efficiency Programs eee wd aed 20) America's dependency on foreign oil and the need to continue to address air quality issues related to transportation are among the toughest challenges facing the United States.Over the years, Congress,states,business,the environmental community,petroleum interests,the auto industry,and others have all worked,from various perspectives,to address transportation fuels and transportation efficiency issues.The use of alternative fuels vehicles and adoption of transportation efficiency programs are a means to address these challenges. As a result of years of hard work,important legislation,regulations, and programs have been passed or developed at both the federal and state levels to encourage energy efficiency and the use of alternative fuels vehicles.Most notable among the legislative actions is the requirement under the Energy Policy Act of 1992 that states must acquire alternative fuels vehicles as a specific percentage of their new light-duty vehicle acquisitions.However,with some notable exceptions such as California,many state,local,and federal organizations have not made progress in moving toward the goals enacted by Congress,and insufficient resources have been provided to meet these goals. Efforts must be increased to motivate both public and private fleet operators to increase the number of alternative fuels vehicles in service,as well as toEffortsmustbeincreasedto improve the delivery motivate both public and infrastructure for some private fleet operators to alternative fuels. Federal and state increase the number of .authorities should alternative fuels vehicles in focus on implementing ..existing legislationservice,as well as to improve through programs that the delivery infrastructure allow states to partner for some alternative with private fleets,fuel fuels. ha er Rey wowCongress and the administration to: B Correct the disproportionate budget reductions that the State Energy Program (administered by the U.S.Department of Energy)has experienced as compared to energy programs designed and implemented directly by the federal government. §Empower the states and the marketplace-proven agents of change-to lead the way in the deployment of cost-effective energy efficient technologies and practices,renewable energy,and other sustainable energy technologies and practices. I Implement the provisions of the Energy Policy Act. B Identify our nation's top energy priorities and create a true national energy strategy.This should be used as a vehicle to expedite a review of the energy-related programs of various federal departments and to eliminate duplication of effort. a Ensure that federal electric utility industry restructuring actions are responsive to state and regional needs and avoid actions that would diminish progress already achieved by states in moving toward competition in the electricity market.And ensure that cost-effective energy efficient measures and public programs con- ducted by State Energy Offices are maintained or enhanced- fostering economic growth and energy security. 3 Maintain the assets of the Strategic Petroleam Reserve and strengthen federal support for mitigation of,response to,and recovery from emergency energy supply disruptions. 2 Encourage the implementation of existing alternative fuels legislation and the development of new legislation that supports programs and incentives that allow states and the private sector to promote alternative fuels use and infrastructure development. The above actions are crucial to both empowering the states and the marketplace and ensuring America's energy future.In the coming months,NASEO will focus on educating the energy community, Congress,federal officials,business,and others about the importance of these issues.Specifically,NASEO will work to achieve the following: 1 Allow States and Territories to Determine Their Citizens'Energy Priorities and Needs Within a National Context With relatively limited funding from certain federal departments, such as the U.S.Department of Energy and U.S.Environmental Protection Agency,state and territory energy programs deliver huge economic benefits,environmental improvements,and energy savings for businesses and citizens.NASEO is determined to secure greater federal recognition of and support for the value and importance of The federally funded State Energy Program is just two- tenths of one percent (0.02 percent)of the total U.S. Department of Energy budget,and only 3.5 percent of the total budget for the state energy initiatives and the State Energy Program as the essential tools for determining energy priorities outside thedepartment's confines of Washington,DC.State and territory energy officials Office of provide important short-and long-term energy solutions Energy efficiently and in ways that are most responsive to Americans' _needs while addressing certain national priorities,such as Efficiency energy security,sustainable development,and job creation. and Renewable Nevertheless,the federally funded State Energy Program is Energy,which just two-tenths of one percent (0.02 percent)of the total US. Department of Energy budget,and only 3.5 percent of theadministerstotalbudgetforthedepartment's Office of Energy Efficiency the states'and Renewable Energy,which administers the states'funds. funds And,the State Energy Program is the only U.S.Departmentnds. of Energy program that provides funding directly to the states and territories to meet the needs of their constituencies and to help mitigate the budgetary effects of federal energy mandates. Following are results of some of the states'efforts: t State Energy Program funding allows states to strategically assist industries in enhancing their economic competitiveness while cost-effectively mitigating pollution.For example,Ohio's Energy Office worked with a major metals manufacturer to develop an electric induction heating process for superheating reservoirs of molten alloys in a furnace,replacing conventional fuel oil or gas heating methods. This process increased energy efficiency by 98 percent and reduced pollution and maintenance costs. Congress and the adminis- to strengthen this vital national resource and appropriate use of the reserve. a number of different private-and public-sector organizations,such as tration must take action insurance companies,utilities, emergency planning authorities,and energy offices.Congress should direct the Federal clarify and revise the rules regarding Emergency Management Agency and the US.Department of Energy to work with state officials and the energy industry to develop plans to mitigate the impacts of supply disruptions.Preparing for and averting,to the degree possible,energy supply disruptions can dramatically decrease the cost of such disruptions to the economy. Most important,no matter how limited supply disruptions may be geographically,they pose serious safety and health consequences to citizens. Actions:Communicate to Congress and the administration the significance of the Strategic Petroleum Reserve as insurance against serious disruptions in oil imports.Encourage Congress and the administration to (a)clarify the circumstances under which it is appropriate to access the reserve;(b)develop innovative alternatives forfunding the Strategic Petroleum Reserve;and (c)extend the benefits of the reserve to the states and U.S.territories outside the continental United States.Alert businesses and citizens to the importance of maintaining the reserve and the negative impacts of selling reserve oil to meet short-term budget goals.America can not afford the continued liquidation of the reserve when prices are low,a time when reserve oil supplies should be increased as prudent protection from the high cost offuture disruptions. Raise the visibility of the essential energy emergency planning and response measures provided by State and Territory Energy Offices in mitigating the effects of energy supply disruptions,including those associated with natural disasters,and in mitigating the effects of extreme fuel price fluctuations,Provide support to State Energy Offices so that they can better assist state and local disaster coordinators and enhance delivery of energy services during hazard mitigation and planning,as well as during disaster response and recovery.Encourage the administration to lead the way by directing the Federal Emergency Management Agency,the US.Department of Energy,and otherfederal agencies to work with State and Territory Energy Offices to improve energy emergency training, coordination,mitigation,preparedness,response,and recovery. is 120 118 90 60 30 and analysis efforts in past winters have assisted suppliers and consumers by providing important information that helped to mitigate sharp fuel price swings and dangerously low inventory levels.States and the U.S.Department of Energy have also developed an emergency communication procedure to ensure rapid information sharing on the nature and scope of emergency events and the actions taken in response. Fortunately,many states and territories have at least a minimum level . of resources dedicated to energy emergency preparedness.For example,25 states in the Northeast,Midwest,and Mid-Atlantic regions have staff with responsibilities that include,among other activities, the collection and analysis of heating fuel supply and price information during the heating season.However,state energy officials'resources are limited and in serious need of additional support,particularly in the area of preparing for the energy implications of natural disasters such as hurricanes and ice storms that do not limit their destruction to geo-political boundaries. In this regard,the Federal Emergency Management Agency has a great deal of authority over emergency issues and provides significant training.The federal government's efforts,however,do not adequately address energy disruption preparedness,mitigation,response,and recovery.This is particularly important in light of increasing competition and restructuring in the energy industry. Both federal and state governments should also consider sustainable principles in their emergency management planning and recovery. Examples of sustainable development activities for disaster recovery include employing Days of Import Protection photovoltaics for Inventory (year-end) U.S.Net Petroleum Imports/Day (yearly average)emergency power generation, recycling debris for use as a biomass p93 fuel source,and rebuilding to the rei 82 FL 8 model energy code through the use of energy efficient : J mortgages. The effect of supply . disruptions can also be minimized through proper training and coordination among 86 87 88 89 90 91 92 93 94 95 96 97 Y E A R : Source:1997 Annual Report For The Strategic Petroleum Reserve,5 U.S.Department Of Energy,Dec.1997Te) B Adequate energy supplies and stable competitive energy markets are vital to the health and safety of our citizens and states'economies.A hallmark of State Energy Programs is mitigating,preparing for,and responding to emergency energy supply disruptions caused by natural disasters and other events.For example,a January 1998 ice storm devastated the Northeast and resulted in federal and state declarations of disaster.In response,State Energy Offices worked with state,federal, and local emergency officials and private-sector vendors to ensure the timely resupply of gasoline,heating oil,and propane to tens of thousands of farmers,residents,and businesses as they coped with the aftermath of the ice storm. I The Interstate Clean Transportation Corridor is the nation's only public-private partnership dedicated to accelerating the market penetration of alternative fuels vehicles in interstate goods movement between nonattainment areas and Clean Cities in California and in other western states.With the help of State Energy Program funds, California has initiated a plan to deploy up to 178 liquefied natural gas tractors,build natural gas fueling stations,displace 2.9 million gallons of diesel fuel annually,and leverage nearly $28 million in public and private capital.California also leveraged funds for adjacent states' implementation of the corridor plan. I Some states have greatly enhanced the education and technical skills of their work force with State Energy Program funds.The Louisiana Energy Office and the University of Southwestern Louisiana,for example,provide energy curriculum guides as part of the state's Energy Conservation Enhancement Project.This program provides for the enhancement of energy education curriculum materials that were developed for selected courses in the state's vocational-technical schools.This material increases the knowledge of energy efficiency techniques for students who are in building trades and enhances the students'opportunities for employment. I State Energy Programs fund energy efficiency improvements in schools,allowing millions of dollars in annual energy savings to be used directly for educating our children.The Iowa Building Energy Management Program,for example,installs cost-effective energy efficiency measures in Iowa's public facilities.To date,$5 million in federal and state funds have been combined with private financing to implement $150 million of improvements,producing annual savings of more than $25 million-exceeding projected energy savings.lowa has 80% 70% 60% worked with an advisory committee that includes the Iowa Hospital Association,the Iowa School Board Association,the lowa Higher Education Loan Authority,the League of lowa Municipalities,the Iowa State Association of Counties,and others to implement this program. B State Energy Programs assist residential and other small energy consumers,businesses,and local governments in reducing the negative impacts of energy production and consumption on the environment. For example,in Nebraska,residents use the state's Dollar and Energy Saving Loan Program to finance cost-effective energy efficiency improvements in the residential,commercial,and government sectors. Local lending institutions in conjunction with the State Energy Office have financed more than $77.7 million in energy improvements. E The Arizona Energy Office offers a unique partnership,combining energy and water conservation with a social service information and referral program for senior homeowners.All disabled homeowners regardless of age are included in this free service.Senior volunteers are trained by the energy program administrator toWhoDirectsSpendingof Energy Conservation Funding? 65.01% direct the conservation education programs and install donated materials.Energy Office staff 72.40%provide the technical expertise and administrative oversight to ensure cost-effective conservation of energy and water anda safe and healthy environment for eligible senior homeowners. These measures reduce a senior's utility bill by 34.99% $120 to $240 per year,and over 20,000 homes 27.58%|.;have been serviced since 1985. }I Because of state energy officials'unique knowledge of their states'resources,businesses, FY'95 FY'98 and opportunities,their energy-related economic development initiatives attract greater private-sector commitments than do similar federal initiatives.And,state energy initiatives often help industry to modernize and operate more efficiently,creating and retaining jobs.For example,in Mississippi,the State Energy Office was the catalyst for a huge private investment in a 21st century industrial complex and lignite and biomass-fueled electrical generating facility called the Red Hills EcoPlex.The initial private investment in the EcoPlex is estimated at $450 million,and it will employ a permanent work force of 250.Industries compatible with the Congress should direct the Federal Emergency Management Agency and the state officials and the energy industry to develop plans to of supply disruptions. disruptions.Federal budgetary constraints have made it difficult to fill the reserve to the authorized level of 750 million barrels.However, the current level of 563 million barrels provides insurance against real threats of supply disruptions,caused by events such as the Gulf War, which can rapidly threaten consumer health and safety and cripple the nation's economy. Federal budget actions in recent years have resulted in the sale of over $700 million worth of oil from the Strategic Petroleum Reserve to finance reserve maintenance activities and to achieve one-time budget deficit reductions.These actions are contrary to the reserve's purpose.Moreover,the sale of the nation's reserve oil results in a considerable financial loss to taxpayers since a great deal of the oil was purchased at prices much higher than today's markets can bear. U.S.Department of Energy to work with NASEO strongly supports maintaining the Strategic Petroleum Reserve and believes that Congress and the administration must take action to strengthen this vital national resource mitigate the impacts and clarify and revise the rules regarding appropriate use of the reserve.Congress should also continue to explore alternative means of financing the purchase of reserve oil to further mitigate serious fuel supply disruptions. Moreover,the benefits of the reserve should be extended to the states and USS.territories outside the continental United States.If the nation is to be prepared for energy supply emergencies,then government must live up to its promise to the taxpayer and maintain America's energy security and economic vitality. In addition to strengthening the Strategic Petroleum Reserve,energy emergency preparedness efforts are in serious need of regional coordination,review,and updating.State and territory energy officials develop programs and implement actions to mitigate energy supply disruptions and restore energy operations and services as rapidly as possible.In the face of emergencies and natural disasters, such as the electricity disruption in the West in 1996,hurricanes,the ice storm in the Northeast in 1998,and recent El Nifio-related storms,the need to shore up funding for these efforts is clearly evident. Additionally,energy offices work with businesses,residential consumers,and fuel oil and propane suppliers to examine and mitigate extreme fuel price fluctuations due to severe weather and unusual market conditions.State Energy Offices'data collection 7 16) 5 Maintain America's Energy Security andStrengthenFederalSupportforPreparedness for,Mitigation of,Response to,and Recovery From Emergency Energy Supply Disruptions bow...eee aes ee = The Strategic Petroleum Reserve was established for use in emergencies or natural disasters to provide a buffer against the potentially severe human and economic consequences of oil supply disruptions.The petroleum reserve is stored in huge underground salt caverns along the coast of the Gulf of Mexico.Oil from the reserve can be moved quickly and efficiently to the nation's refineries if The reserve 7s the nation's first line of defense against an interruption in of]imports and the largest strategic stockpile of crude oi?in the world-a national Insurance policy. commercial supplies of crude oil are disrupted. With 563 million barrels in storage,the reserve is the nation's first line of defense against an inter- ruption in oil imports and the largest strategic stockpile of crude oil in the world-a national insurance policy. Today the Strategic Petroleum Reserve can withdraw oil at a maximum sustained rate of 3.7 million barrels per day for a 90-day period.As the caverns are emptied,the draw-down rate decreases in a stair-step fashion.At its current inventory,a full-scale draw down would last for nine months. With world oil demand running at a rate of about 72 million barrels a day,bringing the reserve supply onto the market would represent a 5 per- cent increase in world oil supplies.This amount, nearly half of current Saudi Arabian production, would have a major impact on world oil markets. In 1996,the United States imported 46 percent of its total petroleum needs,and imports are expected to increase to 66 percent by the year 2020.The growing dependence on foreign oil makes America increasingly vulnerable to major oil supply disruptions,emphasizing the importance of the Strategic Petroleum Reserve.In 1996,the reserve provided 67 days of import protection.However,by 2010,that number will likely fall to only 44 days of import protection as demand grows and import requirements increase. Current and past administrations,the Congress,governors,state legislators,and industry have all supported the need for the Strategic Petroleum Reserve as protection against serious energy supply by-products of the project's electric generation (steam,waste heat, cooling water,and gypsum)will be the primary tenants of the complex. Total private investment will likely exceed $1 billion. #Another example of State Energy Offices'ability to gain greater private-sector commitments than most federal programs is New York's FlexTech program.For every $1 New York spends in State Energy Program funds to deliver its FlexTech technical assistance service,$17 is leveraged in energy efficient capital improvements,and $5 in energy costs is saved by participating customers each year. §California's Transportation Technologies Advancement Program is another example of state energy-related economic development that attracts private-sector commitments.The program provides a maximum of 50 percent co-funding for near-term research and development and demonstration of advanced transportation and fuel technologies that reduce petroleum fuel consumption,cost,or emissions.A total of $300,000 in state funds was matched by $546,000 in private funds for the conversion and demonstration of six gasoline-powered U.S.Postal Service delivery trucks to electric power.The results may affect the Postal Service's decision to convert more fleet vehicles and would create nearly 300 new jobs in California. Given the importance of these activities to the citizens of their respective states and the entire nation,Congress should correct the disproportionate budget reductions that the State Energy Program has experienced as compared to energy programs designed and implemented directly by the federal government and the USS. Department of Energy. Actions:Work with Congress to increase funding for the State Energy Program,correcting the disproportionate reductions already experienced by states and territories,Raise the visibility of the states'work under the program and demonstrate its effectiveness relative to energy programs operated directly by the federal government.Work with the U.S. Department of Energy to streamline the process it uses to administer the states'funds.Communicate to Congress and the administration the importance of empowering the states and the marketplace-proven agents of change-to lead the way in the deployment of cost-effective energy efficiency technologies and practices.It is only through deployment of these technologies in the marketplace that increased energy efficiency, cost-effective emissions reductions,and improved economic competitiveness can be achieved. habaae ; * cA | +i?Implement the Provisions of the ' ,,, e Te .emergency preparedness,and low-income assistance-is key to .eT EDOona EES i making a successful transition to a competitive electric utility market.Energy Policy Act ; ee ed As the hub of energy program activity and expertise in most states, energy offices are the most innovative and efficient administrators of public purpose programs.The reason for their effectiveness isTheUnitedStatesdoesnothaveaclearstrategytoensureour ;ae ;simple.Like the majority of essential government programs,ener.energy future.The most comprehensive legislative debate on this key ty 8 prog BY rograms are most effectively implemented by state and localissueoccurredduringthedevelopmentandpassageoftheEnergyPIesyamY .overnments,because th ]to th t dbPolicyActof1992(EPACT).Hailed as the most important energy 6 "SS I NES ENE poe ...understand their needs.legislation in nearly 20 years,the act was signed into law with overwhelming bipartisan support.The energy community believed In addition,states will likely be the best vehicle to administer cost- in earnest that the act,while imperfect,would achieve vital national effective public programs that benefit all consumers-both commercial ener:oals through its implementation.8Y 5 8 P Electric Power Industry Restructuring Activities,Showing Current State Average Electricity Rates (cents per kilowatt-hour) PY 4.2 Nevertheless,the hard-fought battles to address key energy challenges and increase energy efficiency through this legislation have been overshadowed and in some cases constrained by a succession of new initiatives.The consequence of these new initiatives has been devastating cuts to successful EPACT-related programs and to highly effective programs operated by the states.The present federal approach to energy seems to be to direct limited funding to an increasing number of energy programs,which results in several failed approaches rather than a single successful one. For example,the development of new federal initiatives to address greenhouse gas emissions may be prudent.Real,cost-effective reductions in emissions,however,do not require elaborate new federal programs,they do require:Restructuring Legislation Enacted 1 ES Comprehensive Regulatory Order Issued 6 Le.Reliance on measures that have broad bipartisan support;Legislation/Orders Pending 20 &2%Commission or Legislative Investigation Ongoing 12 No Other Significant Activity Source:U.S,Energy Information Administration 10) 2.Deployment and implementation of energy efficiency and other sustainable measures-the practical application of research and development; 3.Adequate funding;and 4.Leverage of private-sector resources. The first two elements above are in place;EPACT has strong bipartisan support,and the states are the recognized leaders in the deployment of cost-effective energy efficiency and sustainable energy measures.Given modest resources,the states can meet virtually any ' reasonable energy goals decided upon by Congress and the administration through the implementation of state-related EPACT provisions.States are already attempting to implement cost-effective measures,such as: 8 Education regarding and enforcement of energy efficient building codes; EB Alternative fuels vehicle promotion and purchase and development of necessary infrastructure; i Energy improvements in state and local buildings and schools that pay for themselves while saving taxpayers money every year;and Note:Information current as of April 1998. and residentiak-once competitive electric utility markets are established. National,regional,and state actions on electric utility industry restructuring must recognize the vital ongoing role of State Energy Offices in America's electricity system. Actions:Inform and educate Congress and the administration of the progress already achieved by many states in moving toward competition in the electric utility market and emphasize the importance of avoiding pre-emption through federal laws and regulations.Ensure that environmental concerns continue to be addressed during and after the transition to a more competitive structure.Seek federal support to (a)assist states in accessing information on all aspects of electric utility industry restructuring to be certain that the concerns of all consumers,producers,and other market participants are considered;(b)work with states to clarify terminology and share information and options for appropriate state electric utility industry restructuring legislation;and (c)enable states to increase dissemination of information to all consumers and policy makers to ensure that states' commitments to promoting clean energy technologies and energy efficiency are not lost in the move to competitive markets. ayA Ensure That Electric Utility Industry Restructuring Is Responsive to State and Regional Needs om i ey | Congress and federal regulators should design national electricity policies,legislation,and regulations in ways that allow states and territories to determine the most prudent course for electric utility industry restructuring in their state,territory,or region.Federal support and guidance should focus on providing states with the resources to access appropriate information and to provide informa- tion to policy makers and consumers on all aspects of restructuring so that decisions regarding stranded benefits and costs and other issues can be fully considered at the state level.In addition,federal support should encourage reliance on market forces and a move toward a more competitive retail market,to the extent that such support is consistent with state policies. Most important,Congress and the administration should carefully and cautiously consider any expansion or modification of federal authority over the electric utility industry so that the progress already achieved by states in moving toward competition in this market is not diminished.Consideration should be given to options that address market barriers that may remain during and after the transition to a competitive electric utility market.And caution should be exercised to be certain that actions regarding restructuring maintain or enhance environmental quality. Finally,over a dozen states have already enacted legislation or are actively pursuing administrative rulemaking to implement retail competition in electric utility markets.These states'experiences are key to formulating any federal actions regarding restructuring. For example,the electric utility industries in states such as New York, New Hampshire,and California are undergoing dramatic changes as they move toward more competitive electric utility markets.During this period of change,it is important to ensure that electric service continues to be safe,clean,and reliable.Thus,public purpose funding is being required to preserve or expand vital public programs that are beyond what competitive markets will deliver.In most cases,these public purpose programs are being supported through non-bypassable wires charges or systems benefits charges.Many of these programs will be administered directly by the State Energy Offices,which have an established infrastructure of expertise and mechanisms to oversee and deliver these important public programs to all citizens. The role of State Energy Offices in delivering and administering public purpose programs-energy efficiency,renewable energy,pub- lic buildings energy improvements,technology research and deployment, The present federal approach to energy seems to be to direct lim- ited funding to an increasing number of energy programs, which results in several failed approaches rather than a single successful one. #Industrial programs that work with industry and small business to identify energy efficiency measures and incorporate new technologies and processes,resulting in lower costs,improved productivity,and more globally competitive businesses. However,inadequate federal resources directed to a myriad of new beltway-based initiatives restrict efforts to meet the important federal mandates of EPACT and make it difficult for some states to fully meet their citizens'energy priorities.This situation is further complicated by ever-changing direction from the federal government.From year to year it becomes less clear whether Congress and the administration believe that the EPACT mandates constitute our present approach to meeting our energy goals,or whether some new initiative,decided upon with limited discussion and briefly in the spotlight,is the favored approach. By coupling EPACT implementation with grants to the states, for example,national energy goals could be accomplished in ways that allow states to custom-tailor solutions to fit their citizens' unique needs.This state-led approach results in home-grown solutions,rather than less effective,one-size-fits-all national programs operated directly by the federal government in Washington. Cost-effective emissions reductions are but one goal that could be achieved through implementation of EPACT.The real benefits of the law are reaching a set of reasonable national energy goals- energy security,economic growth,enhanced competitiveness, increased use of clean energy technologies,and increased environ- mental quality.Attaining the goals of EPACT is simply dependent upon congressional and administration leadership acknowledging EPACT and empowering the states to implement its provisions. While NASEO strongly supports the development of a national energy strategy,achieving this goal will take significant time and considerable and important debate.Until a bipartisan national energy strategy is developed by Congress,the administration, states,and others,NASEO believes that the energy goals set forth in EPACT should be the primary guidance for Congress,the U.S. Department of Energy,and other agencies in directing the use of taxpayer funds. Actions:Encourage Congress and the administration to focus on meeting the energy goals set forth in EPACT and direct resources toward implementation of key EPACT provisions.Communicate to Congress, the administration,and others that federal resources for energy programs are such that only one set of priorities can be adequately funded and implemented.Until a bipartisan national energy strategy is developed, fundingfor and implementation ofEPACT should be the principal means of meeting our nation's energy goals. Jia 3 Develop a National Energy Strategy and ,Operate Federal Energy Programs as Efficiently as Possible _raerr|a ee ee ee ee pens As one of the most important elements of an economically competitive and safe America,a clear vision is needed to secure ' America's energy future.Congressional and administration leaders recognized this in the development of EPACT and began to address energy's importance through a number of far-reaching EPACT provisions that targeted such areas as alternative fuels,energy technology deployment,and building codes. A lack of direction and changing priorities have left behind myriad federal programs,sometimes duplicative and often under-funded and unfunded,that result in multiple failed approaches to achieving our nation's energy goals.Congress should begin to identify America's energy priorities by holding a series of hearings and debates on our nation's energy challenges and opportunities.Input should be sought from the states,industry,and other stakeholders to develop a set of actions that address both our near-and long-term goals to ensure America's energy future.While the U.S.Department of Energy has developed a national energy strategy,it did not receive the serious level of national attention needed to devise a bipartisan and reasonably comprehensive approach to meeting our energy challenges. Equally important in developing a meaningful national energy strategy is assessing current federally funded energy programs.Congress should expedite a review of the energy-related programs in all federal agencies,in particular,those of the U.S.Department of Energy,the US.Environmental Protection Agency,and the U.S.Department of Agriculture,to determine whether taxpayer dollars are being used as effectively as possible.In short,Congress should become more engaged in the direction and management of resources targeted toward our nation's most important energy challenges. Moreover,federal agencies should be encouraged to establish more meaningful collaboratives with stakeholders and partnerships with . states,including joint planning.The U.S.Department ofEnergy,for example,should institute greater competitive selection and performance-based funding of initiatives that are traditionally operated by federal private-sector contractors and laboratories.Using this approach,the most innovative ideas from all sectors-small businesses,universities,and state organizations-would be available to solve the nation's energy problems. Oil Savings of Program In considering our nation's federal appropriations for energy programs,Congress,the administration,and states and territories should discuss some fundamental questions,including: §What are the nation's energy program priorities? §Which energy programs have the best track record or potential and are most effective in meeting the needs of American citizens? I Which programs are responsive to the mandated provisions of EPACT? I Which of these programs are vital to America's long-term economic growth,stability,and environmental health? §How can Congress and the administration encourage federal agencies to work cooperatively and respect unique state and territory needs when deploying programs and funding? If How can federally funded energy programs be most efficiently and effectively delivered? Answering these questions will enable decision makers to reasonably consider which programs match the nation's priorities in energy research and development and deployment,energy efficiency, renewable energy,fossil energy,alternative fuels,energy security,envi- ronmental quality,economic development,health,and so forth. Comparable Programs FY 1996 Funds Cin thousands) Barrels per Year Saved by 2000 Cin millions) State-Focused Programs State-directed funds(SEP)26,500 5.9 Building codes and standards 8,901 0.4 IACs 8,679 0.1 NICE-3 6,000 2.1 Commercialization ventures 3,000 3.0 Building Equipment and Materials (R&D) Materials and structures 3,260 1.6 Space conditioning 15,257 1.0 Windows and glazing 6,106 0 Lighting and appliance 4,360 0.2 Industries of the Future Forest and paper products vision 11,553 0 Glass vision 1,414 0.2 Aluminum vision 1,449 0.1 Chemicals vision 13,840 1.0 Steel vision 6,780 0 Metals casing vision 1,992 0 Partnership for a New Generation of Vehicles (R&D) Electric vehicle 17,692 4.0 Fuel cell 22,250 0 Hybrid vehicle 57,690 0 Lightweight vehicle materials 13,360 0 Propulsion system materials (ceramics)22,125 0 Other Transportation Alternative fuels vehicle R&D 29,303 12.1 Source:U.S.General Accounting Office Actions:NASEO strongly encourages Congress and the administration to create a national energy strategy.Support efforts to develop an energy strategy and work with the states,territories,and industry to identify the nation's most pressing national energy priorities. Communicate to Congress and the administration the importance of engaging the states in the development of a national energy strategy. Association:NASEO cmsofStateEnergy:Officialsse-+: Fananay's wasHiNerOW VoIC®:| RECEIVED AB UW.19h DIVISION GF ENERGYDecember28,1998 VISION ©G Percy Frisby Director Division of Energy333West4"Avenue Suite 220 Anchorage,Alaska 99501-2341 Dear Percy: The Operational Review Task Force's final report and recommendations were presented at NASEO's recent Board of Directors Meeting in Alexandria,Virginia.At the meeting,David Terry presented the report on my behalf.He provided the board with background information concerning how we arrived at our recommendations and briefly explained each recommendation. At the meeting,the board strongly supported the task force's findings and recommendations,and it passed two motions based upon our recommendations, including: 1)Directing the chairman of the board to appoint a Revenue Task Force;and 2)Completing a review and update of the strategic plan in the coming year.C I want to personally thank each of you for your contribution in this successful effort. Your time in participating in conference calls and providing input throughout the process will strengthen NASEO.As the executive director implements these recommendations in the coming months,I'm confident the result will be an organization better prepared to seize new opportunities and meet the challenges ahead. Best wishes for the New Year, hy,MuaSEOOperationalReview Task Force cc:Frank Bishop Jeff Genzer David Terry Ce. Enc.PeriChard 1414 Prince Street Suite 200 Alexandria,Virginia 22314 Telephone:703.299.8800 Facsimile:703.299.6208 Home page:www.naseo.org BOARD OF DIRECTORS Chairman CHESTER B.SMITH Mississippi Immediate Past Chairman LARRY BEAN lowa Vice Chairwoman CHER STUEWE-PORTNOFF Missouri Treasurer JOHN F.NUNLEY III Wyoming :Secretary RICHARD P.SEDANO Vermont Regional Representatives KIM CHRISTIANSON North Dakota CHERYL DEVOL-GLOWINSKI Indiana K.C.GOLDEN Washington TOBIN K.HARVEY Texas BRIAN M.HENDERSON New York JEFF HERHOLDT West Virginia FREDERICK H.HOOVER JR. Marvland RAFAEL LUIS LLOMPART Puerto Rico PATRICK E.MEIER Wisconsin DEEANN PARSONS Nevada SAMUEL S.REID Rhode [stand JIM TAIT Florida Affiliates'Chairman THOMAS K.DREESSEN Executive Director FRANK BISHOP General Counsel 'JEFFREY C.GENZER Communications Director DAVID S.TERRY Conference Director MELANIE MINESINGER att £ Le-vld - /CG/OIPSWelCover dowble Seal, fy NASEO's OPERATIONAL REVIEW TASK FORCE REPORT TO THE CHAIRMAN AND EXECUTIVE DIRECTOR DECEMBER 1998 1.Introduction and Process The National Association of State Energy Officials (NASEO)Operational Review Task Force was established by the chairman of NASEO to examine the organization's operation and answer the following questions:"What type of organization should NASEO be,and how can it best serve its members?"The task force considered issues related to budget priorities,staff responsibilities, and advocacy communications. The task force reviewed various types of organizational structures that are common to many national associations.The task force members wanted to know how NASEO's operations compared to those of similar successful national organizations,in a context of understanding NASEO's primary goals. In conducting its work,the task force examined NASEO's budget priorities and the sources of funding for those priorities.This included a review of the recent adjustments in NASEO's advocacy budget and an examination of lobbying rules that affect the organization.The task force also attempted to clarify the roles and responsibilities of NASEO's executive director and counsel.In addition,the task force examined the advocacy interests of the organization and ways to enhance its effectiveness. It is important to note that the chairman's sole purpose for establishing the Operational Review Task Force was to identify and recommend opportunities to improve the organization.The task force was not established to solve perceived problems or difficulties.Rather,the task force was responding to a recognition by the Board of Directors and others that NASEO has matured as an organization, particularly over the past several years,and that an examination of the organization's operations was prudent. NASEO Chairman Chester B.Smith appointed Larry Bean (Iowa)as Chair of the Operational Review Task Force.The task force's members are: Larry Bean,Chair,lowa Brian Henderson,New York Cheryl DeVol-Glowinski,Indiana Sam Reid,Rhode Island Kriste Growdon,Washington John Nunley ITI,Wyoming David Lockard,Alaska Rich Sedano,Vermont Brenda Williams,Oklahoma William Keese,California Jim Tait,Florida Jeff Burks,Utah Chuck Clinton,District of Columbia Bob Harris,Nebraska The task force includes both charter members and members of NASEO who are relatively new to the organization.The task force also encompasses members with varied experiences in state government and,of particular note,members with experiences at other organizations with member expectations similar to those of NASEO members. Early in the task force's activities it became clear that we needed to accurately reflect NASEO members'interests regarding the operations of the organization.Thus,we conducted a member survey to assess members'interests and priorities.The survey questionnaire and a summary of the results are included in Appendices 1 and 2,respectively,and the survey results are discussed later in this report. The task force provided written questions for the chairmen and counsel prior to the task force meetings in order to facilitate in-depth discussions.These questions and a written response from counsel are included in Appendices 3,4,and 5. A quorum of the Operational Review Task Force members met via several telephone conference calls.On July 31 the task force held its first discussion and debated what kind of organization NASEO should be.The group also discussed budget and advocacy issues relating to the organization.On August 14 the task force invited Chester Smith,NASEO Chairman,to join its discussion.Mr.Smith commented on staffing issues and suggested the creation of a separate service entity.On August 21 the task force was joined by Charles Guinn,the founding Chairman of NASEO. Mr.Guinn shared his observations about the organization and reported on the states'perceptions of NASEO.On August 27 the task force invited Jeff Genzer,NASEO Counsel,to participate,and the group discussed the role and responsibilities of the counsel position.On September 10 the task force reviewed the responses to its membership surveys and discussed some of its final recommendations. On November 17 the task force discussed and reviewed its final report. 2.Background As our association has evolved,NASEO's board members and staff have taken actions related to the operation of NASEO that have considered the growth and maturation of our organization.This process has manifested itself in a number of ways,such as the development and adoption of our strategic plan and our mission.This operational review of our association focuses on how we can better meet our goals,provide increased attention to state energy issues,increase funding resources (federal and other)for State Energy Offices,and develop greater capabilities within State Energy Offices. In examining NASEO's operation,it is important to note that over the past several years there have been:1)improvements in internal financial controls;2)improvements in our accounting system;3) confirmation that labor practices continue to be in compliance with federal regulations;and 4)new revenue sources that pay for essential member services.Staff accomplished these changes and improved the services delivered to members.Some additional significant changes that have occurred since NASEO's founding in 1986 include the following: e NASEO Strategic Plan-developed in 1994,the strategic plan helps NASEO members communicate the organization's purpose and mission.From the strategic plan flows a greater sense of what NASEO is about and what the priorities of its members are. e NASEO Communications Plan-the development and implementation of the communications plan and accompanying Jssues Agenda were logical extensions of the strategic plan.The communications plan has begun to bring NASEO's communications,the principle product of a national association,in step with other groups in our nation's capital.An association's advocacy activities must be fully integrated with its communications activities (they are essentially one and the same)in order to be successful in Washington. Types of Organizations In general,Washington-based associations fall into three broad categories including: 1.Full Service Organizations.These organizations usually represent large groups,provide a broad range of products,and emphasize serving their members'needs while growing revenue.These associations conduct extensive advocacy operations at the national,state,and local levels of government.They hold frequent fee-based,profit-motivated national and regional meetings; promote members activities through advertising and media events;provide certification and education training programs;deliver fee-based consulting services for members;and act as spokespersons for their members.These large associations are in the business of serving their members,growing their membership roster,and growing their revenues. 2.Boutique Advocacy Organizations.These associations usually focus on advocacy as their primary purpose.While they may represent very large industries or groups,their focus is relatively narrow-informing and educating Congress and the administration and serving as a forum for the exchange of ideas.Services for their members,such as training programs and consulting,are secondary or non-existent.< 3.Limited-Service Organizations.These organizations are not involved in advocacy and usually exist to provide their members with educational opportunities and a forum to exchange ideas.They may also operate programs such as job training,marketing,professional certification,or data collection. There are countless variations of the types of organizations listed above,but in general most national groups in Washington fit into the first two categories. Today,NASEO fits into the Boutique category.To maintain our focus on state concerns,we will only ever have 56 or so core members.Even if we decide to expand our core membership to include energy officials in other areas of energy (e.g.,coal,oil,regulators,or other non-SEP offices),our membership and top priorities will likely remain narrowly focused. NASEO's operations can be improved.Following are some perceptions of NASEO's current structure: e Asa group,NASEO (members and staff)often seems to lack focus even as we face stiffer and stiffer competition for federal resources. e We seem at once interested in independence from the U.S.Department of Energy (DOE)while looking principally to DOE to resolve our need for resources. e We seek greater appropriations from Congress,but are more engaged with DOE than with Congress. e We are aware that we are competing for federal funds with DOE while actively supporting DOE programs that often benefit other national organizations or the special interests that they represent,resulting in diminished energy and conservation funds available to Congress to appropriate to the states. The following are among the points considered by this task force; 1.Examine the perceived diminished influence of State Energy Offices.Restructuring, reorganization,and change are a continuing dynamic of State Energy Offices.However,recent changes in a few energy offices have led some to perceive that the offices have been downgraded in their influence and visibility and that this will lead to diminished federal,state,and local support for their energy initiatives. 2.Clarify performance expectations for staff and counsel.The task force can,and should,clarify the roles of the executive director and counsel. Reevaluate the work of counsel.NASEO's growth and maturation suggest that there are varied needs for legal and other services.These include:(a)legal services for NASEO corporate activities;(b)advocacy services with Congress and federal agencies;and (c)consultant services for grant activities. 4.Develop more effective Washington advocacy strategies.The executive director,staff,and counsel need better coordination and clearer definitions of how to effectively communicate with our Washington,DC,interests (i.e.,administration,congressional delegations,and federal agencies).In addition,the membership needs a structure that assures effective written communication and effective personal meetings in Washington,DC.2 5.Establish protocol for who communicates and when,on behalf of the organization.This should include written correspondence,telephone calls,testimony,and so forth for staff,counsel,and members. 3.Findings and Recommendations Early in the work of the Operational Review Task Force,staff conducted a membership survey to assess what all of NASEO's members thought was the most important work that the association could do for them.The survey questionnaire is included in Appendix 1,and a summary of the survey results is in Appendix 2.It was clear that the membership considers advocating for continued or increased appropriations as the most important activity of the association.In addition,the members highly valued advocating for legislation,creating targeted communications,and providing a network for information sharing among members.These ideals are consistent with the organization's current structure. Change and Influence of State and Territory Energy Offices Reorganization,restructuring,and change within the state bureaucracy are continuing characteristics of State Energy Offices.Recent changes in a few energy offices have led some to perceive that these offices have generally been downgraded in their influence and visibility.Furthermore it is a concern that this perceived diminished influence would lead to diminished federal,state,local support for State Energy Offices'energy initiatives. The task force believes that while a State Energy Offices may experience changes in function that seem traumatic and that may appear to diminish their influence during an adjustment to those changes,it is a mistake to conclude that State Energy Offices are being eliminated.The changes that occur within state government organizations have been continual and dynamic since the first energy office was established-this is true of many government entities.This dynamic is the normal result of individual states that are planning their bureaucracy.All states continue to have,and are expected to continue to have,an office designated by their governor as the vehicle for the development and implementation of state and federal energy programs. Recommendation A:The executive director,counsel,staff,and members should refrain from portraying any State Energy Office as diminished in its influence.Either within its home state or nationally,such characterization only serves those with questionable motives regarding the role of State Energy Offices in the deployment of energy initiatives. Some have also characterized State Energy Offices as having more influence than they deserve. Most often,this perception resides within Washington,DC.It is true that in a number of cases,State Energy Offices are more vocal,more active,and more productive with the federal agencies and Congress than they are with their own legislatures.However,NASEO's close ties with the National Governors'Association (NGA)and the energy offices'ties to the executive branch within their states and,in particular,the energy offices'entry with their congressional delegations suggest that the influence prescribed to the State Energy Office is well deserved.In fact,the State Energy Offices have the potential to be even more effective and influential in our Washington,DC,advocacy work. Performance Expectations for the Executive Director and Staff The members of NASEO and the task force expect that an annual performance plan for the executive director will be developed by the chairman and the executive director and that this performance plan will form the basis of an annual review that will be completed before any annual salary adjustments are considered.The primary purpose of the performance plan and annual review is to enhance the professional development of the executive director and to assure responsiveness on the part of the association's interests. The executive director is expected to develop annual performance plans for NASEO staff and direct an annual performance evaluation based on the annual plan.In addition,the executive director will assure that staff has in place a professional development plan (as distinguished from the annual performance plan).As discussed later in this report,the chairman,executive director,and counsel will develop an annual performance plan for counsel. Recommendation B:The task force believes that NASEO should institutionalize the actions of the June 1998 Board of Directors meeting regarding personnel matters.The board acted to empower the executive director to discharge all staff personnel responsibilities,including annual reviews,salary adjustments,discipline,and so forth. In addition to personnel management responsibilities,the executive director has budgetary management responsibility and is expected to manage staff compensation packages within the association's budgetary constraints. The executive director's performance plan will serve as the annual performance evaluation to be conducted by the chairman.The chairman will review,with the executive committee,the executive director's annual evaluation,and recommended salary adjustments.With specific support of the executive committee,the director's salary adjustment will be taken to the full board for action.It is expected that the board will deal directly only with the executive director's compensation package and that the executive director,in turn,will manage staff and counsel compensation.This should not preclude staff or counsel from coming to the chairman,the executive committee,or the board with unresolved personnel issues. Roles of the Executive Director and Counsel With regard to the roles of the executive director and counsel (counsel serves as both NASEO's lobbyist and legal advisor,as well as NASEO's consultant on grant-related projects),the task force observes that the relationships among counsel,the executive director,and the association members are productive and healthy.The task force does feel that the roles of the lobbyist (counsel)and the client (NASEO)need to be articulated so that they are understood in a way that justifies the members'confidence. The lobbyist-client relationship generally becomes more productive with time.Consequently it is particularly important for associations to regularly review this relationship because the rotation of the association's members and officers makes it difficult to have an "institutional memory"about this relationship. A good way to view the lobbyist is as the negotiator between client and government,in the effort to achieve good public policy.Clients have positions and should be free to express those positions strongly,whether through staff or volunteers.The lobbyist must be able to express how strongly the client feels about the issues and why.However,the lobbyist needs to have both the ability to inform the client how strongly the other side feels and the flexibility to find common ground.Thus the lobbyist must be perceived as flexible,even if the client isn't.Only in this way can the lobbyist convince the other side to bend. This lobbyist-client relationship is dynamic and often leads to the question,"Whose side are you on?"The answer is that both the association and the lobbyist must be on the same side,but approaching from different angles.After all,the lobbyist is the negotiator on behalf of the association. This dynamic tension has a side benefit.It allows the association members to send a clear message about their feelings on issues,rather than having to guess at what a politically acceptable position is in advance of the issue being joined.This is why it is so important to have staff or volunteers make formal presentations.It's not that the lobbyist is unable to make such presentations.Rather, members can directly present positions that strengthen the lobbyist's ability to negotiate without being bound by everything that is said. Recommendation C:NASEO's chairman,executive director,and counsel should develop an annual performance plan for counsel as soon as possible that articulates clear expectations with regard to the association's lobbying activities.These should include,but not be limited to the following: 1.Work with the board,executive director,and staff to develop and implement a strategy for preserving the expanding appropriations for the State Energy Program and the State Energy Program's special projects accounts. 2.Advocate on the state's behalf before Congress,federal agencies,the administration,and other and enhance the views of State Energy Offices in Washington,DC. 3.Build and expand coalitions with sympathetic interest groups (e.g.,oil,gas,state,local), as well as with energy efficiency,renewable energy,and environmental groups. It should be noted that the task force recommendations suggest the inclusion of specific measurable items as part of the performance plan.It is further recommended that the utility of the performance plan,specifically,and the lobbyist-client relationship be reviewed in one year.Subsequently,there should be an annual performance review of the lobbyist's activities and an annual review of our lobbyist-client relationship. Counsel's Role and Communication The Operational Review Task Force embraces the idea of counsel serving as the organization's lobbyist.The roles of the lobbyist and the executive director have been discussed earlier in this report.The task force believes that it is important to amplify that its comfort with this working relationship presupposes an atmosphere of absolute coordination and communication between the two positions.While it appears to the task force that there is good communication between the executive director and counsel,there is also an expressed need by the membership for an institutionalized communication protocol.The protocol must assure the members that information is shared on a regular and timely basis between the lobbyist and the executive director of our association. Recommendation D:The executive director and counsel should establish and sustain regular and timely communication,with regard to counsel's role as both a legal advisor to the association and as the association's lobbyist.This recommendation includes the presumption that NASEO's staff members will be part of this communication activity. The growth and maturation of NASEO has resulted in the evolution of varied needs for professional legal and other services.NASEO's professional services needs and the services currently provided by counsel include: e Legal services for NASEO's corporate activities; e Advocacy services with Congress and federal agencies; e Consultant-representative services for DOE and other federal agency matters. The delineation of these service categories implies that they could be procured independent of each other.This is the case in some organizations.It is the opinion of the task force,however,that NASEO not procure these services independent of each other.The current procurement regime appears to serve NASEO satisfactorily for our corporate and consultant needs,as well as for our advocacy activities.Consultant services provided by counsel in the near term are likely to be in the areas of electricity restructuring and the EPA-SIP Call Task Force. Recommendation E:NASEO should retain a single counsel for its legal and advocacy services,as well as for agreed upon consultant services.These needs are to be identified in an annual performance plan for counsel,as discussed earlier in this report.An annual review of this performance plan with the chairman,executive director,and counsel will determine whether this procurement continues to satisfactorily meet NASEO's needs. NASEO's Advocacy Approach NASEO is perceived by energy organizations as effective and influential in our Washington,DC, advocacy.The task force believes that this is largely due to the activities of our executive director, staff,and counsel. However,NASEO must become more effective in communicating specific state issues to Congress and federal agencies in order to reach our goals.This can be accomplished by creating an environment that encourages greater involvement (directly or indirectly)by NASEO members in the organization's advocacy work. NASEO members and the Board of Directors have generally relied on NASEO staff and counsel to conduct advocacy efforts on their behalf.Each year at key points in the appropriations process,a small group of NASEO members have contacted their congressional delegations,whenaskedbyNASEOstaffandcounsel.This approach is one that members are a part of for only brief periods as directed by NASEO. The task force believes that the level and quality of the involvement of NASEO members in the advocacy process can be greatly increased by finding means to directly vest members in NASEO's advocacy planning and implementation.This is a more team-oriented approach than training members to react to NASEO's periodic calls for action. Vest the Board of Directors in the Appropriations Advocacy Process. As a first step to implementing this approach and vesting members in the process,the Board of Directors should be given a calendar of key budget and appropriations dates,as well as an overview of the appropriations process.This briefing should occur at the December board meeting,and written materials on the briefing should be sent to board members in advance of the meeting. Ideally (and perhaps in future years),this process should involve all interested NASEO members. However,in order to achieve some level of success this year,it may be best to first begin working with the full Board of Directors.The effort could be expanded to a larger group of members next year by working through the regional representatives and committees. Identify NASEO's Annual Budget Recommendation for the State Energy Program (SEP). The second step in this new approach should be to define NASEO's appropriations advocacy goal-a SEP federal budget recommendation. During one of the Operational Review Task Force discussions,NASEO's executive director recommended that NASEO formulate its own,independent federal budget request for SEP.This approach is in keeping with NASEO's position as a nonpartisan organization.Thus,the task force recommends that NASEO's Board of Directors develop a SEP federal budget recommendation,as well as budget recommendations for other federal budget categories that are directly related to State Energy Office activities. For some time,NASEO has stated in its written materials,such as the Issues Agenda,that we support a restoration of 90 percent of fiscal year 1995 funding,or $47.5 million,for the State Energy Program.In practice,as an official position,we have supported the administration's budget request for the past several years,which has been considerably below $47.5 million. At the December board meeting,the Board of Directors should discuss this issue and should formulate a NASEO budget recommendation to Congress.As always,NASEO must be prepared to back up and market its request with documentation and testimonials as to the importance of the State Energy Program.NASEO's declaration of its own budget number sets a tone of independence from both the administration and Congress. Discuss an Approach to Attaining NASEO's Annual Appropriations Advocacy Goal. The third step in the process is to discuss,generally,a strategy to meet our advocacy goal.With some understanding of key appropriations dates,committees,and challenges,the Board of Directors,NASEO staff,and counsel should discuss how to achieve our appropriations goal. 10 Following is a list of potential discussion items: «Identify key congressional members; ¢Develop press conference materials; +Develop tentative schedules for educational events or meetings with Congress (i-e.,during NASEO's February meeting); »Create communications materials that target key congressional offices and others; -Establish new nontraditional advocacy partners (e.g.,oil,gas,environmental);and +Create opportunities for interested NASEO members to meet with their congressional delegation. The above list is a good starting point for staff.However,the executive director and chairman should be careful to guide the board's December discussion away from a laundry list of items to be prepared by staff and toward a more strategic discussion of how the organization will achieve its appropriations goal. It is critical to gain the active participation of NASEO members in this process so that advocacy, our highest priority as an association,is not an isolated activity pursued primarily by staff.Ata minimum,NASEO must ensure the participation of the full Board of Directors in advocacy planning and implementation. Educate NASEO Members About the Appropriations Process,Goal,and Plan. Expanding NASEO member involvement is limited by both members'interest and their ability to contact congressional offices on behalf of their states.However,whether or not a member can directly participate in the advocacy process,increasing their knowledge about the organization's activities and the budget process in Washington can only strengthen their relationship with and support of NASEO. Written briefing materials on the appropriations process prepared for the December Board of Directors meeting should be provided to all NASEO members.And an invitation to participate in working toward NASEO's appropriations advocacy goal should be forwarded to all NASEO members. Recommendation F:The task force determined that NASEO needs to develop a specific advocacy approach,or strategy.The task force recommends that NASEO's Board of Directors develop a SEP federal budget recommendation and supporting documentation,as well as budget recommendations on other federal budget categories,that is directly related to State Energy Office activities.Most important,NASEO's board should have an in-depth discussion regarding an advocacy strategy for the coming year. The task force also recommends that NASEO's staff and members develop a toolbox of items and actions to be utilized by the association as need dictates.These tools should be a part of the overall advocacy strategy and should include,but not be limited to,the following items: 17 Osean.2A2Ba.424fhHt10. 11. NASEO has developed an excellent directory of states'congressional representation in Washington,DC.This directory should be refined and distributed to the membership at appropriate times.This refinement should also identify states that have important congressional leadership positions,as well as,states that have opinion leaders within the various congressional committees and subcommittees.In addition,states should be made aware of committee memberships,by state,that are important to the interests of the association. NASEO should develop,in as long a time horizon as possible,a calendar of significant congressional state energy-related activities. NASEO staff and counsel should cultivate relationships with NASEO members who have congressional representation important to the organization.This suggests communication of the importance of each state member's role in the success of the organization. NASEO should be prepared to ask members to testify before Congress as appropriate. This testimony should be provided by members only,and not NASEO staff or counsel. A balanced panel of NASEO members representing exemplary projects that will resonate with congressional interest should be assembled to make an annual presentation to congressional staff.In the past,these successful panels have been assembled and orchestrated by NASEO with the assistance of the Energy and Environmental Study Institute. NASEO should acquire,cultivate,and maintain an up-to-date inventory of the best energy efficiency and renewable energy projects implemented by states.There should be diversity in the projects,as well as in the states that have developed the projects. In concert with the NASEO members,NASEO staff should develop a relationship with the Washington,DC,offices of the respective states.While there is variability in the way that these offices are designed and utilized by the respective states,these offices represent a resource that can enhance communications with the appropriate congressional offices. At the Energy Outlook Conference in late winter each year,NASEO should provide a training session for state members on effective communication with Congress.This training should range from elemental communication skills for relating to Congress and congressional staff to an overview of specific issues to be addressed with Congress in the coming year. NASEO should consider establishing a base of operation in the nation's capitol building for one day of targeted contacts with each state's congressional representatives.This base would serve to orient the member,provide materials to the member for sharing with their congressional representative or staff person,and provide the assistance of NASEO staff and counsel directly as needed. NASEO staff can facilitate congressional contacts by state members,making the appointments or staff contact,if it is acceptable to the individual state.Such assistance should include the development of materials packets for delivery by the member to the congressional representative.The packets should include generic materials already assembled by NASEO,such as our Issues Agenda,as well as specific information,such as bullets or talking points for the state members to use when communicating with their respective congressional offices. Solicitations for contacting Congress by state members should be targeted to specific states or regions.It is presumed that such requests from NASEO going to the states will 72 not be a surprise if the previously described tools are adequately utilized.Blanket communications to all of NASEO's membership requesting congressional contacts should no longer be sent.In the past,these communications have been ineffective and,in some cases,have alienated our membership. Budget Trends and Recent Changes In considering both NASEO's operations and the organization's ability to meet its members' expectations,it is critical to understand our budget.Tremendous progress has been made over the past several years in improving NASEO's cash flow and income. For example,establishing up-to-date accounting and overhead methods and increasing affiliate member dues has virtually eliminated the association's deficit.In fact,NASEO's financial picture has shifted from recurring annual net losses to a net income for the fiscal year ending June 30,1998. Among the most important changes to the budget are the costs allocated to general funds.(Please note that general funds comprise dues and meeting fees and not federal grants.)In previous years, general funds were used to pay for rent,the legal and advocacy activities of counsel,meeting-related receptions,and other expenses not related to grant activities.These expenses consumed all of the general fund. Beginning July 1,1998,NASEO revised its budget to ensure that all appropriate costs were charged to grants and other accounts and that the remaining costs would be charged against the general fund. Expenses charged to the general fund now include only those required under federal!contracting rules or those which are ineligible federal expenses.Appropriate expenses formally charged to the general fund are now charged against other accounts. Thus,the NASEO general fund (dues and meeting fees)now pays for a small portion of certain staff members'salary;appropriate indirect expenses;advocacy expenses associated with counsel;and meeting reception expenses.Particular attention is given to the source of funds for advocacy work due to federal and some states'limitations on the use of these funds for such purposes.Only private sector funds and other allowable funds are used to reimburse advocacy related activities.Counsel's advocacy work continues to be paid for in a manner which meets all legal requirements. NASEO is full compliance with the Byrd Amendment as it applies to lobbying expenses and with House and Senate rules concerning disclosure of lobbying activities.Furthermore,NASEO continues to report its annual advocacy expenses to the Internal Revenue Service. Budget Constraints The task force also believes that it is important for the Board of Directors and the membership to fully understand the use of their dues,as well as the limitations of NASEO's budget.Understanding the organization's budgetary challenges may help to both set realistic expectations and foster creative suggestions for improving our financial condition and flexibility.Some of the major factors and constraints in NASEO's budget follow: 13 -.5No federal funds can be used for advocacy. Overhead (this includes rent,utilities,accounting and audit expenses,legal costs,etc.)must be derived proportionally from all revenue sources.NASEO's overhead rate is 41.5 percent.This percentage must be taken from all revenue sources (dues,contracts,grants)equally. Although NASEO's revenues appear relatively high -more than $1 million in fiscal year 1997, for example -a large proportion of this revenue is passed through directly to states or to NASEO- affiliated contractors who provide services to states. Grants do not produce profit.They simply reimburse the organization for actual costs.It is a zero sum activity of salary,direct,and indirect expenses in,and reimbursement out. NASEO receives approximately $160,000 per year in state and affiliate dues (16 percent of total revenues).Of this amount,41.5 percent is dedicated to overhead costs (e.g.,rent,accounting, legal).Overhead costs are evenly distributed-as mentioned in Item 2 above-across grant, dues,and other revenue sources as required by federal law.Additional direct costs,such as travel not covered by grants,are paid for from the dues account.These other direct expenses also require indirect charges of 41.5 percent.Thus,a small amount of dues funds remain beyond these basic expenses,with only a tiny fraction of those funds directed toward staff salaries. Staff salaries are derived almost exclusively from grants and other contracts,not member dues. It would be impossible to support even one senior staff position-within the current structure- without grants and contracts. There are expenses beyond advocacy that cannot be billed to federal grants,totaling at least $20,000 per year,that must come from affiliate member dues (not state)or meeting sponsors. Meeting fees do not cover the full cost of either the Annual Meeting or Energy Outlook Conference.Although meeting fees,particularly for nonmembers,have risen,even the relatively low-cost Annual Meeting would produce a loss without aggressive fundraising and deferment of appropriate labor costs to grants and contracts. NASEO has no operating reserve. It would be prudent to have at least a six-month operating reserve of approximately $500,000. .Monthly cash flow is extremely tight due to the organization's dependence on reimbursable grants.Generally,funds can only be requested from the granting agency after they have been expended.This requires that staff constantly monitor not only current expenses,but also anticipated expenses that could rapidly cause a negative cash flow-an unacceptable situation, given that lack of an operating reserve. The task force believes that an ongoing concern that must be addressed is the need for greater nonfederal income.This funding is needed to ensure that staff has greater flexibility in meeting members'needs.Currently,staff salaries are paid almost entirely from grant and contract sources, not member dues. While the executive director has done a great deal to ensure that grant and contract activities mesh with members'priorities,this situation is nevertheless a concern over the long term.Ideally,staff's work would be directly linked to members'dues and less dependent on outside sources.That does not appear to be a possibility in the foreseeable future,however.Thus,other,nonfederal income sources are needed. 14 Recommendation G:As discussed above,the need for increased non dues,nonfederal resources is clear.The task force believes that this is too large an issue to deal with during its tenure.Thus,the task force recommends that the executive director and Board of Directors establish a new Revenue Task Force to examine this situation,discuss potential means to increase revenue,and work with staff to attract new revenue sources.This activity will likely need to be addressed on a continuing basis by a task force or perhaps a standing committee comprising both NASEO staff and members. Recommendation H:The task force recommends that NASEO consider the merits of establishing a NASEO Service Delivery Entity.This activity relates to the development of new revenue sources.It has been suggested by a number of NASEO members that a separate service delivery entity should be established.This entity would be somewhat independent from NASEO and designed to both provide states with necessary services (fee and non fee via grants)and generate revenue for the organization.The task force believes that the executive director and board should direct the Revenue Task Force (mentioned above)to examine this option and deliver its recommendations to the Board of Directors during 1999. Although the above budget constraints highlight the need to improve the organization's nonfederal revenues and create an operating reserve,the task force stresses its belief that the executive director and staff have made great progress in NASEO's finances and operation.Their actions have positioned the organization to make continued improvements.The task force believes that it is important for NASEO members to understand our current financial status as it considers the type of services it expects from the organization. NASEO Member Participation on Committees Historically,one of the most prevalent criticisms heard at NASEO meetings concern positions taken on issues or statements made by NASEO on behalf of the membership.In general,these positions and statements should be the result of recommendations made by NASEO's committees. NASEO's committees include individuals who have interests in particular topics,as well as a desire to serve.All states and territories are urged to actively participate.In most cases,it is up to the chair of the committee to solicit or assign members to the various committees.While some individuals are privately vocal in their concerns about particular issues,their public participation on NASEO's committees-the best means to air concerns and discuss issues-is extremely low. If members are unwilling to actively and constructively participate in committees and task forces, then it is unfair to expect the organization to be responsive to those members'concerns.Members must take the lead on issues within committees by putting their concerns about particular energy and organizational challenges out for discussion.NASEO staff can support this effort,but it is not reasonable to expect staff to force discussions of issues or operate the organization in the absence of any discussions. NASEO is not unique in its use of committees to accomplish tasks and develop positions.The National Association of Regulatory Utility Commissioners (NARUC),for example,is somewhat similar in structure to NASEO.NARUC has seven standing committees;communications, 15 electricity,energy resources and environment,finance and technology,gas,water,and international relations. The president of NARUC selects committee members within 60 days of the organization's annual elections.Regional balance,as well as desire and availability to participate,is considered.The membership term is one year.The president solicits the desires of members to serve on any given committee prior to making his selections.Members will automatically be assigned to committees of the president's choice if they do not indicate a choice of their own.The president selects the chairs of all of the committees,and the members are given an opportunity to accept or deny the appointment by majority vote. Recommendation I:The task force recommends that NASEO implement a committee and task force assignment mechanism.All state and territory members will be asked to indicate the committee on which they are interested in serving.Committee chairs or the chairman of NASEO will consider individual desires to participate on a particular committee,as well as geographic and other criteria.If a member does not indicate an interest in a particular committee,then the member will be assigned to a committee.Participation in committee meetings,however,will be open to any interested parties. The task force agrees with the current practice of the chairman selecting the chair of each committee.The chairman,vice chairman,and committee chair should work with staff to assign members to the committees if necessary.The size of a committee should be no less than six,with one representative from each NASEO region,and no more than one-half the number of NASEO's state members. International Activities Many states and territories are increasingly becoming involved in projects and activities with other foreign governments.While NASEO will always focus primarily on US domestic policy,it is necessary to include and expand international activities so that the organization can maintain its responsiveness to the membership. NASEO's International Task Force guides the organization's export promotion work generally. Through the International Task Force,NASEO has operated an International Energy Efficiency Peer Exchange Program to help national and provincial government officials from other countries to establish energy programs and policies that emphasize energy efficiency and clean energy products and services. Election of Officers and Board Members The executive officers of NASEO include the immediate past chairman,the chairman,the vice chairman,the treasurer,and the secretary.Board members include two representatives from each of the six NASEO regions.NASEO has attempted to pursue a policy of inclusion for its officers and board members. The association recognizes the merit of institutional memory that is carried by some of the longer term members,but highly values the perspective and input of newer energy officials.Additional 16 parameters that are considered in the election of officers and board members include geography,the party of the governor,and diversity of gender and race.All of these factors should be considered in order to ensure balanced representation and diversity of input. Traditionally,the executive officers and board members have served two consecutive one-year terms.This presumes an interest on the part of the officer or board member to continue in their elected role and satisfactory discharge of the responsibilities accorded to their elected position.The executive officers for NASEO are nominated by a nominating committee,representative of the membership at large and chaired by the immediate past chairman.The slate of executive officers is presented and voted on at the Annual Meeting. The board members who serve as regional representatives are elected annually,within individual regions and by regional members.The results of the regional elections are announced at the Annual Meeting. The board members who serve as regional representatives appear to the task force as an underutilized resource for NASEO.More effective use can be made of the regional representatives in terms of communications and the delineation of specific regional perspectives.The regional representative board members can effectively have their "finger on the pulse”of the issues in their states and the states they represent.The intelligence value of the regional representative board members cannot be overlooked by the organization in the context of our work with federal agencies and the U.S. Congress.More effective utilization of the regional representative board members should be incorporated into NASEO's legislative communication. Recommendation J:NASEO should elect its officers and regional representative board members in the manner in which it has in the past.NASEO staff and counsel should examine ways to effectively delegate responsibility to the regional representative board members.However,the executive director should coordinate the delegation of this responsibility. Strategic Planning As the task force considered its work,it became clear that a number of important items would need the attention of the Board of Directors and future task forces,such as the need for additional sources of revenue discussed above.In addition,the task force determined that NASEO's strategic plan should be updated. Recommendation K:The task force's analysis of the strategic plan,particularly in light of the member survey conducted by staff,indicates that some of the plan's elements have been completed,some need amending,and others should be reviewed by the members.The task force recommends that the executive director and Board of Directors move to complete a new strategic plan during 1999. 17 = Appendices: 1.Survey Questionnaire 2.Survey Result Summary 3.The Questions of Counsel 4.The Questions for the Chairmen 5.Budget Graphs 78 1.NASEO State and Territory Member Survey Your response to this survey will help the NASEO Operations Review Task Force with its mission-to answer the questions,"What type of organization should NASEO be,and how can it best serve its members?" Please rank each of the function below base on how important you believe it is to NASEO's success,with 1 being the most important and 10 being the least important.Use each number only once.Thank you for your cooperation.. NASEO is a successful national organization,in your eves,if if: provides network and information exchange services among the State and Territory Energy Offices. collects energy data (e.g.,energy price/supply,trends,regulations,legislation,program information)and disseminates these data to NASEO members and others. develops (or has developed)and delivers (or facilitates delivery of)training programs to improve the capabilities of State and Territory Energy Office staff. facilitates the development of energy projects by assisting states in attracting financing from the private sector. creates communications that deliver information to a broad audience about the value, work,and successes,as well as the issues and interests,of the State and Territory Energy Offices. creates communications that deliver information to a targeted audience (e.g..Congress. the administration.executive branch agencies,the media)about the value,work,and successes,as well as the issues and interests,of the State and Territory Energy Offices. advocates adoption or modification of energy-related legislation and regulations that directly impact states (consistent with NASEO's Issues Agenda and the interests of its members). advocates sustained /increased (circle one)appropriations of federal resources to support state energy activities and programs. other (please describe) other (please describe) Attachment 2:Results of August 1,1998 Member Survey provides network collects energy data develops training facilitates projects broad communication targeted communication advocates legislation advocates appropriation other comments: #of first &|47 Total Responses | second Mean Median scores FL VI PR GA SC AL MS TN NC KY WV MD DE DC 9 4.0 4 3 1 6 3 3 6 5 4 *3 5 5 1 3 2 6.3 7 8 6 5 6 7 5 4 10 *10 7 8 4 7 2 5.9 6 4 3 7 7 5 7 6 10 *5 6 6 3 6 3 6.6 7 7 4 8 8 4 8 5 10 .9 8 7 6 8 2 5.5 5 5 5 3 5 8 4 1 5 .4 4 4 7 5 21 3.0 3 1 7 1 4 6 3 1 1 *2 3 3 8 1 21 3.1 3 2 8 2 2 2 2 1 2 il 6 2 2 5 4 30 2.6 2 6 2 4 1 1 1 1 3 *1 1 1 2 2 (WA)Works well with ASERRTI and leverage with ASERRTI to help both organizations. (ND)Keeps members informed of developments in Washington DC that could effect them. (NY)Provides an indirect method for the states to influence national energy policy. (NY)Develops model energy programs and policies that could be implemented by the states. (KY)Keep states informed about energy issues. (KY)Provide timely analysis available on current issues. (VI)Advocate/extend communication to other regions such as the Caribbean In order to promote EE/RE. (NE)Facilitates fundraising for NASEO operations and specific projects and assists states with identifying and helping raise funds from non-profit charitable foundations and government for state projects. (NH)Advocate with DOE to continue to improve working relationship with state &territory energy offices (KA)Peer Exchange Programs Explanation: The first column counts the number of first and second place rankings that category received.Thus,the higher the score the greater the importance placed on that cetegory by respondants.The second column is the average ofall the rankings given to that category. Thus,the lower the number,the greater (he importance placed on that category by respondants. Analysis: The category receiving the greatest importance by both scoring mechanisms,concerns advocating on appropriations.In a close tie for second place are the categories on advocating on legislation and creating targeted communications.In fourth place is the category on providing a network for the membership. 2 3 1 2 2 1 3 4 2 1 1 3 5 5 6 5 6 2 3 3 3 5 2 3 3 2 2 1 4 3 7 7 1 1 2 1 1 6 1 1 5 3 6 2 3 1 8 8 (NC)National interagency and corporate contacts,including White House,NGA,etc.More work on technology development, deployment,market penetration,etc.More work on environment related efforts. (OH)Facilitates task groups to problem solve specific areas of interest to SEO's.Creates linkages with groups and national organizations with simular goals and objectives. (SD)Hosts seminars &conferences concerning energy for states.Maintain focus on state energy issuesandnotapoliticalagenda. (AZ)Be our eyes and ears in Washington.Provide information to Arizona that may directly effect our state. (CO)Liaison with DOE and with labs. (GU)A quarterly newsletter.Material labs to facilitate technical assistance. UT MT ID AZ NM NV CA OR__WA ___GU Hl 5 2 7 6 5 4 4 5 5 5 7 8 3 3 5 7 5 8 6 6 3 5 6 7 7 7 8 7 6 7 7 4 6 7 8 6 9 6 8 7 3 8 7 4 4 6 8 8 4 6 5 8 4 8 6 3 5 10 4 2 1 3 2 3 1 1 2 1 10 3 1 3 1 4 2 2 3 1 4 10 1 3 2 2 1 1 6 2 provides network collects energy data develops training facilitates projects broad communication targeted communication advocates legislation advocates appropriation other comments: 2.Questions for NASEO Counsel The Operations Review Task Force is meeting via conference calls to look at the internal organization of NASEO in order to answer the questions "What type of organization should NASEO be,and how can it best serve its members?"The task force is considering issues related to budget priorities,staff responsibilities,and communications. We would like your input during one of the task force's upcoming conference calls.As soon as dates are agreed upon for our next several meetings,we can work with you to determine which date is best for your participation.In preparation for our discussion with you,we would appreciate your thoughts on the organization,in general,and would like you to comment on the following: l.We have discussed the need to be explicit about the performance expectations of NASEO staff,counsel,and contractors.What are your thoughts on how these expectations could be put in place for NASEO counsel? Among the issues the task force is considering is the re-evaluation of NASEO's legal needs.The organization's growth and maturation suggest that we may need (a)legal counsel for NASEO corporate activities,(b)advocacy with Congress and federal agencies,and (c)consultant-representative services for DOE and other federal agency matters.How do we best meet these needs on behalf of our members?How should they be procured? What are your thoughts on the organization's communications effectiveness in Washington,DC? a.Communications by NASEO staff and/or counsel on behalf of the organization with Congress,as well as with federal agencies? b.Communications by NASEO members to their delegations,particularly when this information is critical toa NASEO pnority?Are you comfortable with what NASEO members have said are their priorities? c.Communications by NASEO members via congressional testimony?Do you think there should be protocols for who represents NASEO to our Washington audiences? If so,what are they?Should there be a protocol for written correspondence, telephone calls,etc.by staff,counsel,and NASEO members?What should such a protocol contain? A significant portion of NASEO's budget is derived from federal grants that are used to pay the majority of NASEO staff and contract labor.Are the activities under these grants reasonably consistent with the priorities of NASEO members?Does NASEO need to establish a formal mechanism (e.g.,board involvement)to ensure that grant-related activities and deliverables are aligned with state members'needs and issues?Are vou comfortable that vour work includes significantly more grant-related activity than in previous years,and are you comfortable with the sources of grant funding that support your work? 1997-1998 NASEO Receipts Meeting Fees 11% Membership Dues 18% Contracts and Grants 71% ©Contracts and Grants £1 Membership Dues Meeting Fees 1997-1998 Budget Analysis -Dues Expenses Salaries 0% Conf.&Trav 0% Indirect 49% Outreach 51% Memb.Serv. 0% Contract Labor 0% lM 1 Salaries §Conf.&Trav ©Outreach O Contract Labor Memb.Serv. E}Indirect 1997-1998 Budget Analysis -Grant Expenses Indirect 10%Memb.Serv. 0% Contract Labor 23%Salaries 47% Outreach 0% Conf.&Trav 20% ©Salaries Conf.&Trav O Outreach O Contract Labor li Memb.Serv. ©Indirect 1997-1998 Budget Analysis -Meeting Expenses Memb.Serv._ 0% IndirectContractLabor Salaries 0%: :24% Outreach 0% Conf.&Trav 56% O Salaries Ea Conf.&Trav O Outreach O Contract Labor Ei Memb.Serv. ©Indirect NASEO Receipts 1998-1999 C1 State Dues 16% 3 Affiliate Dues 3% O Meeting Fees 9% O Grants 72% State Dues &Affiliate Dues O Meeting Fees O Grants Wis.w+4.3 ee ee -- NASEO 1998-1999 Budget Analysis -Dues Expenses Indirect Salaries pee nee 42%C Salaries Ei Conf.&Trav. O Outreach O Cont.Labor Memb.Serv. fi Indirect Memb.Serv.; 10% Cont.Labor /.Outreach Conf.&Trav. 0%14%5% NASEO 1998-1999 Budget Analysis -Meeting Fee Expenses Indirect (1 Salaries Conf.&Trav. O Outreach O Cont.Labor Memb.Serv. Indirect Memb.Serv. 0% Conf.&Trav.Cont.Labor 0%71% Outreach i 0% NASEO 1998-1999 Budget Analysis -Grant Expenses 44 ka Memb.Serv. Indirect Ci Salaries f Conf.&Trav. O Outreach O Cont.Labor 2NSGtow” Indirect Memb.Serv. 0% Cont.Labor 0%Conf.&Trav. Outreach17%