Johnson Controls is a global market leader in facility services and control systems. Since the 1880s when Warren Johnson invented the thermostat, Johnson Controls has been working with government facilities, schools, hospitals and commercial buildings to help create comfortable, productive and safe building environments that are energy efficient. 

We do this through the design, manufacture, installation and service of energy monitoring and control systems, HVAC systems, as well as utility, lighting, security and fire management systems for non-residential buildings. Included in our service offering is energy savings performance contracting which I will discuss in more detail later. 

In March, EPA recognized Johnson Controls with the 2001 Energy Star Award for Service Providers for its vast array of special endeavors relating to energy efficiency, from the operations of our own facilities, to our leadership in community outreach and customer education efforts. 

One of those outreach efforts took place just last week.  We co-sponsored the 12^th Annual Energy Efficiency Forum along with the United States Energy Association at the National Press Club. Our goal for the Forum is to promote an energy efficiency ethic through the presentation of national and worldwide views on energy efficiency, environmental impacts and economic growth.  

Congressman Markey was one of our featured speakers, and he provided an interesting analysis of the nation's energy situation to over 400 business leaders and government policy makers and others who were present.  

We were pleased to have a number of other notable speakers, including Vice President Cheney, FERC Chairman Curt Hébert and Senate Energy Committee Chairman Jeff Bingaman, who opened the program by stating that, "Energy efficiency is a bi-partisan issue. the entire country will benefit." 

This was our 12^th consecutive Energy Efficiency Forum.  In the beginning, the event was called the Energy Conservation Forum. Several years ago, we recognized the negative associations with the word "conservation."  It brings to mind cardigan sweaters, turning down thermostats in the winter and turning them up in the summer, shutting down escalators and other uncomfortable or burdensome measures.

It is important to appreciate the difference between conservation and efficiency.  Conservation means shutting off the lights and saving energy the day you do it; efficiency means replacing the light and fixture with energy efficient bulbs and lighting controls such as motion sensors that automatically turn lights off when not needed - which saves energy tomorrow and well into the future.  Conservation means adjusting the thermostat up or down depending upon the season and being uncomfortable.  Efficiency means automatically controlling temperatures, heating and cooling rooms and buildings only when they are occupied.  Conservation can save energy in the short term, energy efficiency means sustainability for the future. 

As energy needs continue to rise in the typical office environment, we need to expand deployment of current off-the shelf technology to achieve energy efficiency in a high tech world.  For example, Johnson Controls is currently working to install an energy monitoring and controls system as part of the renovation of the Pentagon. When the Pentagon was built over 50 years ago, there was one telephone for every three desks and manual typewriters were used. Today, every desk has a phone, computers,task lighting and other equipment, supported by a wide array of printers and copiers, all which put out heat. As the "plug load" expands the demand for electricity in aging buildings, energy efficiency measures become vital. 

According to the U.S. Department of Energy, there are some 4.5 million existing commercial buildings involving 55 billion square feet of space. These buildings consume 30-40% of all energy and use 60% of all electricity.  It's estimated these facilities use 20-40% more energy than necessary.  They can capture those savings and benefit from the reductions - not by fiddling with the thermostat, but by retrofitting with energy efficient equipment. 

At our recent Forum, Vice President Cheney said, thanks to new energy efficiency technologies it can mean doing things "better, smarter, cheaper."  Congressman Markey stated that, "we need to take command of our destiny."  And other speakers noted that the technology, which has been developed over the past 20 years, has made conserving energy irrelevant.   We are now in the energy efficiency business. 

Many of these energy efficiency improvements for commercial buildings, schools, hospitals and government facilities are accomplished through Energy Savings Performance Contracts (ESPC).  This is a type of contracting in which an energy services company like Johnson Controls privately finances the investment of installing energy efficient equipment with no up-front costs to the customer. The investment includes identifying building energy requirements and acquiring, installing, operating, and maintaining the energy-efficient equipment.  The building owner pays for these retrofits and new equipment over time with dollars saved on energy and maintenance bills.  The energy services company guarantees the savings, so the customer won't pay more than they are currently paying for utility costs.  After the investment is paid off, the building owner gets all the subsequent savings. It's a win-win situation. 

 We've determined that Johnson Controls performance contracting customers alone will see $18 billion in total energy savings by 2010.  That's a 3400 megawatt reduction in electrical demand, the equivalent of taking offline more than three large generating plants or seventy 50 megawatt peaking plants.  It also eliminates 350 million tons of emissions - just like removing the pollution from four million automobiles or planting 29 million acres of trees. But we need to go further.  Many organizations benefit from energy effectiveness: using technology and knowledge that make better buildings for a livable future.   

It's all about collaborative design, engineering, and operations.  The U.S. Green Building Council's Leadership in Energy and Environmental Design (LEED) rating provides a comprehensive, sustainable plan for new construction.  Existing buildings become more effective through efforts such as Energy Star's promotion of efficient lighting, heating and ventilating technology - and the controls to measure, monitor and manage their performance. 

Many businesses and organizations see extraordinary results by installing energy efficient technology and evaluating operations and maintenance.  For example, we have done projects for:

·        Central City Cyberschool, Milwaukee, Wisconsin

·        St. Mary's County Public Schools, Leonardtown, Maryland

·        St. John Medical Center, Tulsa, Oklahoma

·        North Carolina Baptist Hospital/Bowman Gray School of Medicine, Winston -Salem North Carolina

·        St. Charles Medical Center, Bend, Oregon

·        Kansas City Convention Center, Kansas City, Missouri 

Also notable is the work being done at some Federal facilities.  As the largest single consumer of energy in the United States, the federal government spends over $3.5 billion a year to light, heat, and operate its 500,000 buildings. According to the Department of Energy, the Federal Government has three billion square feet of floor space, located in all climates. High-rise offices, research laboratories, aircraft hangars, libraries, hospitals, tourist areas, parks, and prisons must all be considered. In total they consume almost 54 billion kilowatt-hours of electricity each year, costing taxpayers more than $3.1 billion annually. 

We applaud the President's recent directive for federal facilities to reduce energy.  Some facilities are already working hard at saving energy. For example, Johnson Controls, entered into an Energy Savings Performance Contract with the Denver Federal Center. It will save $450,000 per year in energy and operational costs for the next 11 years while reducing more than 6.6 million pounds of carbon dioxide emissions.  It also involves recommissioning an existing solar domestic hot water heating system and improving an irrigation system, which will save nearly 11 million gallons of water per year. All was done with existing technologies. 

These are the kinds of projects that work.  Unfortunately, the question is - why aren't we doing more?  Why aren't more federal sites reaping the benefits of energy efficiency and saving energy plus taxpayer dollars?  There are two answers. 

First, while there are great success stories at some federal sites like the Denver Federal Center and others, at many other sites there is reluctance to enter into ESPCs.  Congress passed the authority for agencies to enter into ESPCs back in 1992.  But some sites and agencies are still reluctant to develop projects because it can be a complicated process or they may be concerned over the long-term nature of some projects. 

Energy savings must be made a part of the federal culture.  Instead of asking, "where can we do an ESPC?" we need to ask why isn't everybody doing them?  From a Department's headquarters in Washington, to regional offices, to site directors and base commanders, all the way down to the boiler room, there must be a consistent effort to use ESPCs. 

The second problem is one of micro-management and delay of projects inside the beltway. The current ESPC contracting mechanisms were designed with streamlining in mind.  But some agencies exercise an unnecessary and burdensome review and approval process adding months or more to effort.  This delay in projects defers taxpayer savings and ties up contractor resources, which could be used to develop more projects.  The federal government does an excellent job providing technical resources and training government employees in the field on how to do ESPCs.  It's time for headquarters to trust that they will make good decisions and allow projects to be approved quicker.   

Yes, it's important to be sure that the project is a good deal for the government. But the questions and issues that headquarters need to be review can be answered at the preliminary proposal stage, before a contractor makes a significant investment.   Unfortunately, the micro-management and drawn-out questioning is often done at the final proposal stage, delaying projects and tying up capital for months.  Everyone looses - the site, the contractor and ultimately the taxpayer too. 

Johnson Controls is a large company.  We're in this for the long haul.  But other contractors, especially small and disadvantaged subcontractors, may not have the financial wherewithal to wait for months to hear that a project is going forward.

And even in our case, we have a responsibility to our stockholders to maintain a degree of profit.  We are forced to financially consider whether we should even develop other federal proposals because we know we may lose money waiting for approval. 

The good news is that neither of these problems are insurmountable barriers. 

Federal leadership for energy efficiency should start by example.  The federal government needs to utilize ESPCs more at federal facilities.  Make the federal building stock truly energy efficient.  Cut energy consumption and save the taxpayer money.  Leading by that example, showing that it can and should be done is as powerful a tool as any statutory or regulatory measure you could pass. 

As far as any new statutory or regulatory measures are concerned, the Subcommittee may wish to consider the advantages of public benefit funds.  The days of utility rebates seem to be in the past but the results of those programs continue to save energy. Public benefit funds can spur energy efficiency, particularly where an ESPC type mechanism may not be practical, because the project is too small or the payback too long.  Or they could be used to help buy down the project cost of an ESPC to help make it affordable. 

Energy efficiency is not just in our nation's best interest, it is a vital part of maintaining a strong and secure economy.  We encourage this committee to continue its efforts to spur more efficiency in the future. We look forward to reaping the many benefits of energy efficiency - a strong, secure economy, lower taxes, a cleaner environment, and a federal government that leads our nation. 

Thank you again for the opportunity to testify.