Statement of Mr. James E. Rogers
Chairman, President and Chief Executive Officer
Committee on Environment and Public Works
United States Senate
May 2, 2001
Mr. Chairman and members of the committee, my name is Jim Rogers and I am the chairman, president, and CEO of Cinergy Corp. I would like to thank you for giving me the opportunity to share my thoughts on global climate change and suggest how Congress might consider this critical issue, especially in the context of developing a comprehensive emission reduction strategy for the electricity industry.
It was my pleasure to testify before this subcommittee just two weeks short of a year ago on the need for a coordinated comprehensive emissions reduction program for coal-fired power plants.
My views have not changed since that hearing. With the growing national demand for more electric generation, energy producers more than ever need the certainty that a comprehensive longer-term program would bring.
I believe that Congress, in considering a long-term comprehensive approach to power plant emissions, must consider the uncertainties and challenges posed to my industry by the climate change issue. If indeed, the legislation is intended to build some kind of “certainty” into our planning process, climate change must be on that environmental road map.
There are those in my industries and others who believe any plan that considers climate change will doom the coal industry. I disagree and, in fact, am a firm believer that no climate change policy – one that is accepted by the public – can be successful if it ignores our most plentiful domestic natural resource.
Coal-fired power plants, which supply more than half of the nation’s electricity, face a battery of existing and proposed emission control requirements from federal and state agencies and even neighboring countries. These requirements and proposed new programs are focused primarily on the reductions of four power plant emissions: Sulfur dioxide, nitrogen oxides, mercury and carbon dioxide.
Because these regulatory initiatives are largely uncoordinated and often conflicting, the electric power industry faces enormous uncertainties as it tries to develop appropriate plans to upgrade plants and add pollution control equipment. Utility planners are even more challenged by the need to ensure their customers continue to receive reliable and affordable energy.
But, the unfortunate results of today’s regulatory soup are unnecessarily high costs for both shareholders and consumers, longer downtimes for our generating stations and continued uncertainty in an industry that is critical to the U.S. economy.
And our progress on clean air has not been what it could – or should – be.
We appreciate the interest expressed by Chairman Smith, Chairman Voinovich, Ranking Member Reid and Ranking Member Lieberman in promoting a legislative solution to this vexing regulatory problem. I am optimistic that this Congress and the new Administration will work together to reduce power plant emissions in a comprehensive manner and I look forward to working with you to make that happen.
Cinergy has a lot at stake. We are one of the nation’s leading diversified energy companies with a total capitalization of $9.0 billion and assets of $12.0 billion. Our Energy Merchant segments owns or operates nearly 21,000 megawatts of electric and combined heat plant generation in the U.S. and overseas. Approximately 14,000 of those megawatts comprise our core system of 14 baseload stations and seven peaking stations located in Ohio, Indiana and Kentucky, where we serve 1.5 million electric and 500,000 retail gas customers.
While we have made substantial investments in renewable energy, combined heat and power plants, microturbines and fuel cells and other emerging technologies, much of the electricity we produce here in the U.S. is generated by coal-fired power plants located in the Ohio River valley.
Last year, Cinergy burned 29.2 million tons of coal in our generating stations and we project our coal consumption will continue to grow in the foreseeable future. As you can see from the chart, coal is vital to the Midwestern economy, supplying 80 percent of the generation in 1999. We’re proud that the fuel we’ve purchased has provided a livelihood to thousands from West Virginia to Illinois.
But we’re equally proud of our environmental record, which tells the story of progress made in reducing the emissions from our coal-fired power plants.
Since 1990, we’ve invested more than $650 million in scrubbers, precipitators, low nitrogen oxide burners, selective non-catalytic reduction units and a clean coal technology project at our Wabash River Station in Indiana.
These technology improvements have resulted in a 47 percent decrease in our sulfur dioxide emission rate and a 25 percent drop in our emissions rate for nitrogen oxides.
The future promises even more.
Over the next five years, we plan to build up to 11 selective catalytic reduction units on our power plants, significantly reducing our nitrogen oxide emissions. We will also install sophisticated computer software to improve our plants’ coal combustion process and boiler efficiency.
We have already pioneered with success the use of selective non-catalytic reduction at one of our Ohio plants and will explore further use of this technology.
Our goal is clear: We will strive to reduce the impact the company’s coal-fired power plants have on our environment as cost-effectively as possible in order to keep electricity costs reasonable.
Congress can help put the logic back in environmental policy with a comprehensive multi-emission bill that sets the course for cleaner air, fuel diversity and reasonable goals. By passing such legislation, you can remove one of the “question marks” that hang over our industry as we struggle to meet a growing need for electric power.
A comprehensive approach must address reasonable timetables for further reductions in sulfur dioxide and nitrogen oxides and new reductions of mercury. It must fix new source review and give utilities maximum flexibility to meet the nation’s environmental goals while still keeping the lights on.
Obviously, I am not a climate scientist but I have tried to follow the scientific debate that has occurred over the years on global climate change.
Most atmospheric scientists seem to agree that human activities are affecting the climate on Earth although there is still debate over the significance, timing and impact on the planet.
While the science will certainly advance in the years to come, I am convinced that it is prudent to take action now to address what we do know.
This does not mean we must act precipitously and without careful and complete debate over the proper long-term response. We should remember that this problem has been created by two centuries of industrialization. We cannot change our way of life overnight and we will be mired in endless debate if we try.
But we need to start down the road. The U.S. electric utility industry, in fact, began that journey seven years ago, becoming one of the earliest industrial sectors to take a major step to dramatically reduce its carbon emissions.
Beginning in 1994 with the Climate Challenge, Cinergy and other utilities representing more than 70 percent of the electric generation in the United States, enrolled in a voluntary carbon emission reporting and reduction program. Under the Climate Challenge the electric utility industry reduced, avoided, or sequestered 124 million tons of C02 equivalent green house gases in 1999.
The industry believes that future voluntary programs to reduce or offset greenhouse gas emissions can be just as successful. Even though the Climate Challenge pledged carbon reductions and offsets only through the year 2000, many of the programs initiated under the Challenge will continue to deliver reductions and offsets for many years.
As an original participant in the Climate Challenge, Cinergy has been actively involved in a number of projects, both at home and abroad, to reduce or offset our carbon emissions.
Ten years ago, Cinergy’s operating companies, PSI Energy and The Cincinnati Gas & Electric Company, were more than 95 percent coal-fired. Our profile today is much different.
Through our Cinergy Solutions, Global Power and Capital and Trading affiliates, we have invested in natural gas, combined heat and power, cogeneration and renewable projects that now account for 32 percent of our total electric production.
Another Cinergy affiliate, Vestar, provides energy facility and infrastructure improvements and energy management services to large users, making them more energy efficient.
We have chosen to invest many of our R&D dollars in so-called “disruptive technologies” that are already beginning to alter the way traditional utilities do business. These technologies fall into categories such as e-commerce, information management, digital utility, retail services and distributed generation – all of which contribute either directly or indirectly to increased efficiencies and reduced carbon emissions.
Cinergy has partnered with The Nature Conservancy and other utilities in operating a 125,000-acre tropical forest preservation and management project in Belize. It is estimated that this project will sequester five million tons of carbon as well as protect the forest from being developed for agricultural purposes.
We are investing over $2 million in cooperation with The Nature Conservancy, Ducks Unlimited, the National Wild Turkey Federation, Quail Unlimited and local communities to plant three million trees and thousands of acres of native grasses here in the United States. These projects not only sequester carbon but they also enhance the local environment and can be effective land conservation tools.
All these projects and plans say one thing loud and clear: The electric utility industry has already begun successfully addressing the climate change issue and is positioned to make further progress in the years ahead.
This is not to say that we can do everything all at once without massive impacts on the reliability and cost of electricity. President Bush’s recent letter to Senator Hagel and others on climate change highlights the reality that some cures may be unacceptably disruptive, at least in my industry.
For example, Cinergy has not and cannot support the Kyoto Protocol. We have the same concerns regarding developing nation coverage that the Senate recognized in its 95-0 support for the Byrd-Hagel Resolution back in 1997.
We cannot, as the Kyoto Protocol requires, turn back the clock to 1990 in a few short years. Cinergy, like most electric power companies in this country, fed the decade’s economic boom with progressively higher demands for electricity. This robust growth led to similar growth in our carbon emissions. As a practical matter, we cannot return to those levels by the end of this year or by the end of this decade.
As I read the President’s letter, I noted his concern about global climate change and his desire to address it in a reasonable, timely matter and in a way that doesn’t disrupt our economy. He said “no” to Kyoto but he didn’t put global climate change on the shelf.
I agree with the President’s view and believe we need to move beyond the debate over the Kyoto Protocol to create a workable climate change program.
I also agree with the President’s view that carbon dioxide should not be regulated as a “pollutant” under the Clean Air Act. The tools provided in the Act to fight smog in Los Angeles or acid rain in New Hampshire are inappropriate to address the slow buildup of greenhouses gases worldwide.
There are no silver bullets out there that can “fix” the greenhouse gas problem quickly. Global climate change is the most challenging environmental issue we’ve ever faced. We have technologies that can scrub most of the sulfur dioxide, nitrogen oxides and reduce mercury and particulates out of our smokestacks
There is no such technology for carbon.
That doesn’t mean, of course, that power generators cannot go forward with a program to reduce greenhouse gases through other means, as the industry has demonstrated in the Climate Challenge program.
While global climate change is a long-term problem that demands a long-term solution, we need to take steps now to begin reducing our greenhouse gas emissions.
Congress should base any response on three truisms:
First, the national economy depends on an ample supply of energy and those of us who produce that energy can only do so if we are able to use all the fuel sources available to us. This country is facing a looming energy shortage and we simply can’t turn our backs on the abundant supply of fossil fuels that are providing most of America’s electric generation.
Second, voluntary programs, economic incentives and market approaches and flexibility are the keys to cost-effective greenhouse gas reductions.
Third, there must be a recognition that a greenhouse gas strategy for the nation and, specifically, for the electric utility industry, must consist of both a near-term program that focuses on flattening our carbon growth curve and long-term goals that focus on the technological solutions that ultimately will be needed.
Based on these considerations, a short to mid-term program should have the following attributes:
The program should not set these early goals so high as to knock current generating stations out of the box. We need these plants for the foreseeable future and companies should be allowed to recoup the capital investments they have made to supply their customers with electric power.
Congress should consider setting industry goals but should not try to impose these goals or targets on a unit-by-unit or generating station by generating station basis. Since there is no technological fix to reduce greenhouse gases on existing plants, targets aimed so narrowly would result in many of these plants being closed.
Congress should consider both economic growth and the costs involved. Goals could be based on current emission levels or established by using a future level. A growth factor based on the most efficient generation available or a cost ceiling may provide appropriate safeguards.
Industry should have full flexibility in meeting any goal. On-system reductions, efficiency gains, demand side management, renewables, co-generation, carbon sinks, sequestration, carbon internment and reductions in other greenhouse gases such as methane ---- all must be recognized and endorsed as appropriate strategies.
Private sales and allowance trading should also be included. We know that market forces can work to keep costs in check and they should be employed here to the greatest extent possible.
Congress should update Section 1605(b) of the Energy Policy Act to ensure all reductions are quantifiable, credible and independently verified. And for the purposes of any future international agreement, the U.S. government needs to stand by those demonstrated reductions.
A short-term policy ought to provide appropriate mechanisms to ensure that current technologies get into the marketplace. On the fossil fuel side, I’m thinking about the many advances that have been made in developing clean coal technologies but, for economic reasons, haven’t been deployed. And on the renewables and alternative generation side, I believe Congress should provide more economic incentives to jump start emerging wind, solar, fuel cell and microturbine technologies.
To encourage widespread participation, the policy should include proper incentives such as new source review reform and financial assistance.
In order to ensure continued development of needed generation during this period, we should consider creating a 10-20 year safe harbor for new facilities that meet “best carbon reduction practices”.
In the long run, technological solutions are the best hope for achieving a maximum level of carbon dioxide reductions. Legislation should encourage government and the private sector to work together to speed the development and deployment of new energy-efficient technologies and a mechanism to scrub greenhouse gases out of the fossil fuel energy production chain.
In fact, the real solution to global climate change lies in our ability to develop breakthrough technologies that will decouple energy production from greenhouse gases. With sufficient resources and attention, I have no doubt that we can and will achieve that goal.
If global climate change is as serious a threat as many experts say, the United States should attack this technological puzzle as single-mindedly as it did nearly 40 years when our best scientists focused on putting a man on the Moon.
In summary, Congress needs to address the climate change issue and develop an initial climate change program for the industry as part of the comprehensive multi-emission bill.
My company seeks comprehensive multi-emission power plant legislation because we want long-term clarity and certainty built into our environmental compliance planning process. I think there is general agreement on both sides of the aisle that this approach makes sense.
For me, this line of reasoning dictates the necessity of including a carbon commitment in the legislation. Without some sense of what our carbon commitment might be over the next 10, 15 or 20 years, how can I or any other utility CEO think we have a complete picture of what major requirements our plants may face?
Further, I know from personal experience that it’s impossible to build new coal baseload power plants since the economics cannot be determined without knowing what requirements the plant will face on carbon.
Congress has a unique opportunity to make a difference in our nation’s long-term air quality and to take affirmative action toward establishing a workable global climate policy. Cinergy stands ready to do what we can to help.
I thank you for the opportunity to speak to you today and I look forward to taking your questions.