Statement of John A. McFarland, President and Chief Executive Officer,
and Roland S. Boreham, Jr., Chairman, Baldor Electric Company, Fort Smith, Arkansas

After years of productivity growth that has helped industrial companies become more competitive in world markets, we now find competitiveness threatened by high energy prices. Industry in the United States faces a different challenge when attempting to control energy costs than do individuals. The makeup of our electricity bill in industry is much different than that of individuals. For industrial companies, 63% of our electric bill is consumed by industrial electric motors. In some industries, such as mining, as much as 90% of the electricity bill is consumed by the use of industrial electric motors. There is a solution to this problem that is available today that allows industry to save money while saving energy - high efficiency electric motors.

With industrial electric motors consuming 25% of all of the electricity generated in the United States, it is important that we address the conservation opportunities available to us today by using more efficient electric motors. High efficiency electric motors are available from a large number of domestic and foreign sources. These products are fully developed and available today and, according to the Department of Energy, could reduce industry's electricity consumption by up to 18%.

Incentives to use high efficiency motors similar to the incentives being discussed for high efficiency automobiles could produce immediate and substantial savings in electricity. Also, since electricity is a substantial cost for industry, incentives for the use of high efficiency motors can help our industrial companies continue to become more competitive in world markets. This can be one of the most effective ways to achieve your Committees' objectives.

The following table shows the annual operating cost, the cost of a new high efficiency motor, and the electricity savings in dollars of using a high efficiency motor instead of older motors installed in industry today. As you can see in the table below, there is substantial opportunity to save electricity and electricity cost by replacing existing motors with high efficiency motors.

With one quarter of all of the electricity generated in the United States consumed by industrial electric motors, it is important that industry conserve electricity by changing out older motors to new high efficiency models available today. Using high efficiency motors will help industry become more competitive throughout the world and provide an immediate increase in electricity availability "bridging-the-gap" until additional energy production is installed.

We do not believe a major incentive is required to encourage people take actions which is in their own best interests. Market forces will work successfully over time; the issue we believe is to accelerate the workings of those market forces. A tax credit of 10-15% for the purchase of high efficiency motors and the resulting rise in awareness would have a large impact on energy conservation in our country, benefit industrial competitiveness, and make more energy available for individuals. Perhaps the best thing is there is no tradeoff. Electric motor users can save money and energy at the same time.

[The attachments are being retained in the Committee files.]