Mr. Chairman, thank you for allowing me the opportunity to testify before the Subcommittee this afternoon.

I am pleased to join with the gentleman from California (Mr. Cunningham) and a bipartisan coalition of 43 other Democrats and Republicans in sponsoring the "Energy Efficient Buildings Incentives Act."

Energy use in buildings in this country accounts for approximately 35% of polluting air emissions nationwide about twice as much as the pollution from cars. It costs the average American $1500 to heat and cool their homes every year, which amounts to an annual cost of $150 billion nationwide. Commercial buildings and schools incur $100 billion in annual utility bills. And yet, the tax code fails to provide sufficient incentives to reduce wasteful and unnecessary energy use. This is bad policy, and it must be changed. In these times of rolling blackouts in California and rising electricity prices throughout many regions of the country, we can and should be looking for ways to ensure that energy is never wasted. Instead, we should ensure that technologies that can enable us to become more efficient in our use of energy and deployed as widely as possible.

That is why the Gentleman from California (Mr. Cunningham) and I have introduced the "Energy Efficient Buildings Incentives Act." Our bill would spur use of energy efficient technologies, such as super-efficient air conditioning units, which could result in a substantial drop in peak electricity demand of at least 20,000 megawatts - the equivalent of the output of 40 large power plants. At a time when many communities are currently facing electricity supply shortages, and the local political issues involved with siting and building new power plants are difficult and contentious, our bill provides a way to reduce pressures on the nation’s electricity grid. Specifically, our bill provides tax incentives for:

This bill provides tax incentives for:

• Efficient residential buildings, including manufactured housing, that saves 30% or 50% of energy cost to the homeowner compared to national model codes, with a higher incentive for the higher savings;
• Efficient heating, cooling, and water heating equipment that reduces consumer energy costs, and, for air conditioners, reduces peak electric power demand, by about 20% (lower incentives) and 30%-50% (higher incentives) compared to national standards;
• New and existing commercial buildings, including rental housing and schools, with 50% reductions in energy costs to the owner or tenant; and,
• Solar hot water and photovoltaic systems.

The incentives are based on performance, not costs, in order to foster competition between suppliers of different technologies that can meet the proposed targets. In the case of buildings and equipment, there are one or two tiers of energy cost reduction targets that qualify the taxpayer for a fixed incentive per appliance, per home, or per square foot of non-residential building. For solar systems, the incentives are based on energy production, on a sliding scale. The incentives are provided for a 6-year period, taxable years 2002 through 2007, after which they sunset.

The incentives are provided to the taxpayer with only one exception. For non-residential buildings, the incentives are in the form of a fixed dollar amount deduction to the business entity that pays for the construction. However, if the business entity is a municipality, such as a school district (which is tax-exempt), the deduction is assignable by the owner to the architect with primary responsibility for the design. This is designed to assure that there are incentives for incorporating energy efficiency into the design of schools and other public buildings.

For residential buildings, the incentive is in the form of a tax credit that goes to the individual homeowner or the individual who purchases qualifying homes or equipment. In the case of condominiums or co-operatives, the owners get the credit on a pro-rated basis. In the case of rental housing, the incentive is a deduction to the building owner.

If only 50% of new buildings reach the energy efficiency goals of this legislation, it has been estimated that air pollution emissions in this country could be reduced by over 3% in the next decade, and decrease even more dramatically over time. In that same ten-year period, this legislation could result in direct economic savings of $40 billion to consumers and businesses. For example, a family that installs an energy efficient water heater can get $250 to $500 back from the tax code changes and an additional $50 to $200 every year in reduced utility bills. Or a family that purchases a new home that meets the standards in this bill can get as much as$2,000 returned to them by the tax incentives, in addition to the $300 or more in continuing energy savings.

I urge the Subcommittee to include this proposal in any energy tax legislation it takes up. This bill is both good tax policy and good energy policy. It will help save American consumers money, improve the air we breathe and the water we drink, increase the competitiveness of American industries, and reduce the energy consumption of our commercial and residential buildings.

Thanks again, for allowing me to testify. I look forward to working with you and other Members of the Subcommittee on this and other energy tax-related measures.