PSEG is a diversified energy company with over $25 billion in assets and over $8 billion in annual revenues. The PSEG family of companies includes Public Service Electric and Gas Company, New Jersey’s oldest and largest electric and gas delivery company, PSEG Global, which owns and operates energy production and distribution facilities overseas, and PSEG Power, one of the largest independent electric generating companies in the United States, with 13,000 megawatts of electric generating capacity operating or under construction in New Jersey, New York, Connecticut, Pennsylvania, Ohio, and Indiana.

The Clean Energy Group (CEG) is a coalition of companies with more than 100,000 Mw of generation capacity nationwide, including coal, gas, oil, nuclear, and renewables. The members of CEG - Consolidated Edison, Inc., Entergy, Exelon Corporation, KeySpan, Northeast Utilities, PG&E National Energy Group, Sempra Energy, and PSEG – are committed to promoting progressive environmental policies that are economically sound and sustainable.

PSEG, which celebrates its 100th anniversary this week, has long believed that environmental performance is one indicator of overall business performance. Experience has taught us that proactive steps to improve environmental performance can often lead to better bottom line results. That said we never take our eye off of bottom line results. In our view, environment and economics are inseparable, and, as with many things in life, the secret to success is finding the right balance.

If you remember only one thing from what I say here today, please remember that one word: balance. For PSEG and the CEG member companies, the single greatest value to be derived from federal multi-pollutant legislation – aside from the public health and environmental benefits themselves - is certainty. And the best way we know to achieve certainty is through a public policy outcome that strikes the right balance between environmental and energy policy objectives.

I am aware that this is the third hearing you have held on the many questions surrounding multi-pollutant legislation. And I am also aware that various stakeholders have come before you to argue that the current proposals on the table go too far, or do not go far enough. I suppose such a tug of war is common in politics, but in business, we often worry when any one extreme carrys the day, for experience shows that a strong pull to any one extreme only invites an equal and opposite backlash at some point down the road. From day one, our goal in this debate has been to seek and encourage consensus for we believe that it is only through consensus that we can achieve the kind of regulatory stability essential to the health of our industry.

You have heard from others here today about the importance of certainty, and I echo that concern. This is a very capital intensive industry, where large investments are made in assets that last 30 years or more. Making large bets on the future is an inherently risky proposition, and no amount of legislative activity on your part can offer us 100 percent certainty. But to the extent that the trajectory of future environmental requirements looms large in the planning of any major player in our industry, you can make a significant difference by crafting legislation that clearly articulates expectations over the next 15 years, at least.

The past two and a half years have been tumultuous for our industry. We do not need any more excitement. But where some people might argue that now is the wrong time to set new environmental requirements, we would argue that to take this “do nothing” advice would be to kill us with kindness.

Whether you believe that the current oversupply of generation and capital crunch will last two years or five years, the fact of the matter is that current market conditions in our industry are part of a cycle. At some point, hopefully soon, companies like ours will begin to make new investments in our nation’s energy infrastructure, and when we do, it is critical that we have a clear understanding of the environmental requirements we will have to meet. Otherwise, I fear, we will be making bad investments.

Nowhere is this more true than the issue of carbon dioxide regulation. First off, let me state for the record, as we have said many times in the past, PSEG believes that President Bush was right to reject the Kyoto Protocol. The reductions contemplated under that agreement demanded too much, too fast for our industry and our economy to handle.

At the same time, we think the issue of climate change is real, and we believe a domestic regulatory response is both necessary and inevitable. Given that our industry is singularly responsible for over a third of the nation’s greenhouse gas emissions and ten percent of total manmade greenhouse gas emissions worldwide, we cannot, and should not dodge this issue.

With this perspective in mind, we believe that we are better off as a company, and as an industry, if we develop and implement a moderate response now rather than wait 10 years, only to find that the political problem is now worse or that the environmental problem requires a more drastic response, and the investment decisions made in the interim were dead wrong. This is one of the reasons why we think the bill introduced by Senators Carper, Chafee, Gregg make such an important contribution to this debate, and why we have been such strong supporters of their efforts.

We are encouraged by the leadership that the Bush Administration has shown on the issue of multi-pollutant legislation, and we deeply appreciate the leadership that Senator Inhofe and, you, Senator Voinovich, have shown in tackling this very difficult issue. We encourage you in your efforts to find that balance that I talked about earlier, and I pledge the full support of PSEG and the CEG companies in your efforts.

Once again, thank you for the opportunity to testify before this committee. I will be happy to answer any questions you may have.