NASEO News
State Leaders Report to
Congress on Stimulus Jobs Created,
Innovation Under Way
Four State Energy Office
directors who also serve as NASEO Board
members recently briefed a Congressional
audience on the economic impacts of
Recovery Act funding on the U.S. State
Energy Program. Hosted by the
Environmental and Energy Study
Institute, the panel addressed more than
110 people crowded into a briefing room
in Washington, D.C.
Carol Werner, Executive
Director of EESI, described the topic as
one that has captured a lot of attention
and interest on Capitol Hill.
“This is an opportunity to hear
from states across the country in terms
of how they have tackled the challenges
of how to deal with [ARRA] in a quick
way and to insure they can have a
sustained impact,” Werner said when
introducing the panelists to the
audience.
The panel included Phil
Giudice, Commissioner, Massachusetts
Department of Energy Resources and NASEO
Chair; Louise Moore, Chief of the Energy
and Pollution Prevention Bureau, Montana
Department of Environmental Quality;
Frank Murray, President and CEO, New
York State Energy Research and
Development Authority; and Theodore
Peck, Energy Administrator, Strategic
Industries Division, Hawaii Department
of Business, Economic Development and
Tourism.
The panelists, as board members
of NASEO, represent the 56 state and
territory energy offices that administer
the U.S. State Energy Program (SEP)
funds on the state level.
SEP received $3.1 billion in
stimulus funds that were allocated to
states and territories on a formula
basis. The states leveraged these funds
with state-based funds from their
program partners and the private sector
funding for a total impact of $4.7
billion.
“Each state was entrusted with
figuring out the best way to put that
(stimulus) money to work in their
specific situation, their circumstances
and to make a lasting difference,” said
Commissioner Giudice, who is also Chair
of NASEO. “And it is working well across
the country.”
Giudice pointed to the current
status of the program to illustrate his
point. “The states have responded by
obligating either through contractors
and vendors for $2.5 billion of those
funds. Almost 60, 70 percent of that
money is now making jobs happen and
every one of the states and territories
are putting this money to work.”
Giudice noted that there have
been many challenges and that the states
and the Department of Energy are working
together very productively and
collaboratively to solve them and make a
difference on these matters.
Challenges have included
legislative barriers as well as
processes that the federal government
and the states needed to work through to
put that money to work. “And this is not
just about the federal stimulus money,”
Giudice added. “We are leveraging $1.50
from the private sector and other
sources (for every $1 of stimulus) to
match the $3.1 billion. More than $4.7
billion is being put to work in these
various programs from federal and
private sector.”
In his presentation Giudice and
the other panelists said the
applications that states submitted to
the Department of Energy in May 2009, as
defined by the ARRA legislation, were to
be three-year plans.
“One of the challenges, and it
is not the fault of anybody, is that
things have changed,” Giudice said in
wrapping up his comments. “The initial
funding was provided under the context
of this is going to be a three-year
program and now there is so much effort
and concern to spend all of the money
now, 12 months after the president has
signed [the legislation], and if you
don't something is wrong.”
“And it is not necessarily that
something is wrong,” he concluded, “but
folks are feeling a different set of
pressures now than they might have felt
before.”
“Dollars Spent” Is a Lagging
Metric
Each member of the panel spoke
to those pressures and the enormous
amount of interest in the actual spend
rate. Describing the “dollars spent”
metric as a lagging indicator of what is
actually happening at the local level in
terms of creating jobs and getting work
done, NYSERDA President and CEO Frank
Murray said the check-writing will
happen after the work is complete.
NYSERDA is no stranger to
managing large amounts of funding. The
organization has an annual budget of
$650 million not counting the stimulus.
Murray noted that in the 30 or 40 years
that NYSERDA has been around there has
never been a hint of scandal with the
way the state agency has dealt with its
funds. “That is because we have the
controls in place that make sure you do
not get paid until you actually do the
work,” he said. “And that is what all
the states across the country are doing
with the ARRA funds. So fixating
on what is spent is the wrong metric.”
“I think what we need to focus
upon is not the spending number -- we
should be focusing on the front-end of
that process in what we call obligation.
Once you obligate the money, once you
sign the contract, that is when the jobs
start being created.”
Murray urged the audience to
focus on the obligated numbers and use
the same common-sense approach they do
as homeowners. “Think in terms of your
own personal experience,” he said. “For
those of you that own a home -- you
bring in a painter to do some interior
decorating, you hire a landscaper, or
you replace the roof on your home.
And I ask you -- when you hire that
person do you go out there and give them
all of the money upfront? I don't. I
often make a deposit but I make sure
they do the work -- the money in that
case under federal parlance is
obligated. So when you hear that it is
not spent -- of course it is not spent.
We are not going to spend the money
until the people have actually done the
work that you have hired them for.”
Murray said it is the same
thing with the states.
“These are public funds and we
have a special responsibility to make
sure that these funds are spent
efficiently and effectively,” he said.
“We have to make sure that we avoid
fraud and abuse and the only way you do
that in my experience is that you don't
pay people until the work is done.”
“So fixating on what is spent
is the wrong metric,” he added. “So if
you hear these numbers that the states
are not spending these monies -- it is
baloney. The states are [spending] and
when we have obligated these funds we
have started putting people to work from
the engineering phase all the way to the
worker installing the insulation in your
house or the solar panel on your roof.
That is what economic stimulus is all
about -- putting people back to work and
we at the states I think are doing a
pretty darn good job about it.”
Questions and Answers
The following is an abbreviated
transcript of Question and Answer phase
of the briefing.
Q.
What mechanism is in place to adapt
projects when new standards come out in
regards to new energy efficiency
standards?
Louise Moore:
I will give you a specific example in
Montana. We have state legislation that
says that any state building needs to be
ASHRAE 20.1 and that will move as any
new standard comes into being. We are
used to changes and can adapt as codes
and standards change.
Q. What kind
of checks are in place to insure that
energy efficiencies that are intended
will be realized. How can the federal
government insure that it is getting its
bang for its buck?
Phil Giudice:
The State Energy Program was first
funded in 1978, so federal money has
been going through these channels for
30-plus years now. And states have been
reporting back and making sure that we
get good bang for the buck on those
funds.
The most recent comprehensive
study of the program was conducted by
Oak Ridge a few years back and shows a
$7 return for every dollar invested in
the state energy programs.
This [ARRA] is obviously a lot
more money than is traditionally
allocated to the state energy programs,
but the infrastructure is in place.
Massachusetts as well as others have
other energy efficiency programs, and
measurement and verification are core
elements of those programs.
Louise Moore:
On the M&V portion we had actually
started a process to go out and measure
the energy use on every particular
project and we are accountable. We will
be looking at that and we will be
reporting that every two years in
reports to the governor and you are very
welcome to see those.
Frank Murray:
In respect to the grants we make to
schools, hospitals and local governments
as part of the competitive bidding
process there are technical requirements
built into the bidding process that
become part of the evaluation process,
and if you don't meet those you don't
get a grant.
In terms of our regular program
in both the commercial and residential
stock, again this is the lesson that
should be learned and it is relevant to
ARRA -- we don't give the money out
upfront. You get an energy audit done,
you identify the potential for savings,
and then we set up a payment schedule
that is linked to a performance
schedule. Then we go back in an audit
for quality assurance to ensure that we
achieve exactly what you talk about.
We have a high degree of confidence in
the savings that we are accomplishing.
Theodore Peck:
I will tell you my experience in getting
the bang for the buck -- the level of
transparency associated with ARRA is
such that some people are really not
even wanting to touch it because of the
amount of accountability that is there.
So, anyone that is playing with ARRA
funds is well aware that there is a very
high level of verification. I am not
concerned, we will verify of course, but
it is definitely getting spent very
well.
Q. From your
experiences with ARRA, what are the
programs that have had the biggest bang
for the buck in GHG reductions, jobs and
to what extent has NASEO been able to
communicate these lessons learned to the
Hill?
Phil Giudice:
I think we are at the beginning stages
of the communication challenge and it is
going to be a long-term challenge. I
think we are going to need all sorts of
help from other organizations and others
in how best to get the message across.
What works for Massachusetts is
very different than what would work for
a neighbor like New York much less
Arizona, Montana and Hawaii because they
have different climates, building
stocks, industrial base and so you
really need a solution that is tailored
to the circumstances. States, cities and
towns are all out there making this
happen at the local level and are an
incredible resource to figuring out what
works and how to think about these
programs and how to figure out what
happens next after stimulus and to keep
moving on the momentum that was built
here.
Frank Murray:
If you are looking at benefit cost
analysis the better investment is energy
efficiency instead of renewable. But
that certainly is not the case in
Hawaii. Ted is talking about solar hot
water heaters and potential is quite
different in Hawaii than it is in New
York state.
I think one of the nice things
Congress did do is that did leave it up
to the states to pick the programs. So,
I don't think there is a simple answer
to your question nor do I think from the
way Congress put this thing together
they are looking for that. I think they
are looking to the states and letting
them do what they can do in the classic
laboratory of democracy type of
approach. One size does not fit all.
Theodore Peck:
First of all, there are different needs
for different states. But, even for the
metrics you talked about, one particular
program may be very good for greenhouse
gas emissions but may not be for jobs.
So, really it is a very complex problem
set.
Q. Concerning
the NEPA process and the NEPA
requirements, did each of your projects
need to go through each of the hoops
that directly federally funded projects
need to go through in NEPA or was it a
little bit easier?
Phil Giudice:
There were certain projects that got
categorically excluded but they needed
to be confirmed that they fit those
categories. So there was a review step
for every project that was funded --
some were not particularly burdensome
and others were more burdensome. And all
of it took time even for those that got
categorical exclusions. In Massachusetts
I don't think we got that confirmed
until something like September or
October of last year. So, that is just
the nature of the process.
Q. What could
have been done better with ARRA funding
and the State Energy Programs?
Phil Giudice:
I think there is something to be said
for setting expectations upfront and
being clear on what the priorities are
going to be. One of the challenges, and
it is not the fault of anybody, is that
things have changed a little bit. The
initial funding was provided under the
context of this is going to be a
three-year program and now there is so
much effort and concern to spend all of
the money now, 12 months after the
president has signed [the legislation],
and if you don't something is wrong. And
it is not necessarily that something is
wrong, but folks are feeling a different
set of pressures now than they might
have felt before. So, I think that more
clarity in thinking this through and
setting objectives to some of this might
have been helpful upfront.
Then there is an enormous
amount of issues around reporting and
how things are being counted even now --
there are methodologies that OMB have
adopted that essentially give you no
credit for creating jobs if all you are
doing is buying capital equipment
because there isn't a timesheet that can
be identified with that capital
equipment. So you may be using all of
your stimulus money to buy new HVAC
systems and adding much more efficient
HVAC systems, but all of your stimulus
money is going just for the equipment
and even though jobs are being created
to actually install that and to make
that equipment if it is Buy American --
so it is all domestic jobs that are
being created -- and it will count as
zero jobs from an OMB standpoint.
And it is like really? That is
the right way to do that? But,
nevertheless that is where we are at
now.
Frank Murray:
This has been a painful process for both
DOE and state and local governments.
What has happened over the last year or
so is we have begun to build the
infrastructure that is in place now. To
walk away from this infrastructure in a
year or two from now will be a really
big mistake. We have been down this
pathway before and I would hate to see
us go down it again.
Theodore Peck:
ARRA has created tremendous innovation
that no one has been able to figure out
how to tie metrics to yet and I think
that is a story that is yet to be told.
Q. Is that
any effort being made to create a demand
for these energy efficient retrofits?
Frank Murray:
Efforts are underway to develop more
aggressive approaches to residential
retrofitting. We are already
encountering some sort of curveballs so
to speak. Government is never going to
have the fiscal resources available to
do the scale of investment that needs to
be made in terms of residential
retrofitting. What we need to do is take
the public funds that are available and
leverage that into a more substantial
investment by the private sector. One of
the mechanisms that we were particularly
excited about was PACE financing.
Despite the efforts of DOE and the White
House who were not able to persuade
Fannie Mae over the weekend that this is
an approach that we should be looking
at. But we haven't given up that battle
but we are beginning to look at other
ways to finance these retrofits -- to
capitalize upon private sector
resources. That's the only way we are
going to be able to make the kind of
penetration on the large scale that is
going to be necessary to accomplish what
we are talking about.
Q. When we
talk about the success of the ARRA we
talk about the number of jobs that are
created. Is there any way to quantify
the amount of dollars that are saved by
reducing the amount of fossil fuel that
is used and getting rid of some of the
external costs that come from the use of
fossil fuels?
Phil Giudice:
There is. I think it was part of every
state application to figure the
greenhouse gas emissions with every
project and we will be reporting that on
a regular basis. Right now the focus is
all about jobs and so that is what is in
the headlines.
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