ZCOb MAR 2Li P U: I 9 INFORMAL COMMENTS OF THE ARKANSAS ENERGY OFFICE IN

RESPONSE TO NOTICE OF INQUIRY - DOCKET 06;Q@-@E I'J i]

The Arkansas Energy Office (AEO), a Division of the Arkansas Department of Economic

Development (ADED), offers the following comments in response to Order #1 of Docket

06-004-R. These comments are written and submitted on behalf of the AEO by Chris

Benson, Director of Energy Programs, ADED.

Background

In order to provide some context for these comments, it is worth noting that the AEO has

the following mission:

To create, advocate, and support energy efJiciency and sustainable development

opportunities that promote economic and environmental well-being for all citizens of

Arkansas.

Furthermore, through its enabling legislation, the AEO has the following responsibilities:

Demonstrate new energy technologies

Administer state & federal grant funds

Develop and manage energy programs

Administer Energy Code and emergency petroleum allocation regulations

Support policy development

Disseminate energy information to the public and government

Advocate for energy efficiency through education and promotion

All of these responsibilities have been, and continue to be, supported by our activities,

programs, and resources. However, the bulk of the AEO's work involves advocacy and

support for energy efficiency in Arkansas. We view energy efficiency as an important

and essential part of a comprehensive, coordinated and balanced state energy policy

framework. [We will come back to this idea of a state policy later in the comments.]. For

the purposes of these comments, we will define energy efficiency as the reduction of

energy consumption through conservation and/or application of technologies, standards

and programs while maintaining output of services.

The Commission’s Workshop on Energy Efficiency did a good job laying out the reasons

that justify consideration of energy efficiency in this docket. The “take home” from the

conference was that energy efficiency is a resource for Arkansas, just as oil, natural gas,

biomass, wind and solar are. Developed properly, energy efficiency is an opportunity for

our State to reap benefits that are near-term, economic and persistent.

Energy efficiency potential

While it is true that Arkansas’ utilities have made virtually no investments in energy

efficiency, since the late 1970’s the AEO has operated modest information and education

based energy efficiency programs with 80/20 DOE/State funding. Over the years of our

existence, the AEO has leveraged over 40 million dollars of federal and state funds for

energy efficiency and market transformation projects. However, one of the lessons we

have learned is that without a well conceived State framework of policies, with buy-in

from stakeholders, funds are inevitably expended inefficiently and programs are not as

effective as they should be.

Our experience also suggests to us that there is substantial energy efficiency potential in

the State that is available “as low hanging fruit”. The data that we compile periodically

in the Energy Data Profile indicates as much. For instance, per capita energy

consumption in Arkansas has been rising rapidly (relative to the U. S.) since the late

1980’s to the point where it is now about 24% higher than the national average (2001).

In 2000, Arkansas ranked 1 3th in the U. S. in energy consumption per capita. In other

words only 12 states consumed more energy per person.

Energy Consumption per capita, 1970-2001

Similarly, it takes 16,130 Btu to produces one dollar of Gross State Product (measure of

the total market value of all goods and services produced) in Arkansas, and about 9,570

Btu/$ (adjusted for inflation) on average in the U. S. In other words it takes

approximately 70% more energy to produce our economic activity than the U. S. as a

whole. Arkansas ranked gth in the U. S. in energy consumption per dollar of gross state

product output in the year 2000.

Energy Consumption per Dollar of Product, 1970-2001

Put another way, Arkansas expended 5 billion dollars in 2001 for its primary energy

needs. This represents approximately 7.3% of Arkansas' gross state product. By

comparison, the U. S. expended approximately 5% of its GNP on energy, suggesting that

the Arkansas economy has considerable room for improvement relative to the U. S. The

Arkansas economy could save over 1.3 billion dollars per year if it could reduce its

percentage of energy expenditures/GSP to that of the U. S. average.

By another measure, approximately 65% or 3.3 billion dollars annually (1999) is

expended by Arkansans on energy that is imported &om outside of the State. This huge

amount of money (slightly less than Arkansas state government annual gross revenues) is

therefore not available to circulate in the local communities to be spent on goods and

services, produce sales revenues and create employment. To make matters worse, the

gap between what we produce and what we import is growing since Arkansas natural gas

and oil production have been declining in recent years.

While Arkansas as a whole appears to be prime for energy efficiency opportunities, some

sectors have more potential for efficiency improvements than others, i.e. transportation

(which will not be discussed in these comments), public, residential and small industrial

(time constraints will not permit extensive comments at this time).

Public Sector Facilities

State and Local Buildings

In 2004, Arkansas State government paid nearly 60 million dollars in electric and gas

utility bills to operate their buildings. Since 1985, State government expenditures have

risen by nearly 12% per year.

I

60

50

6 40

O 30

P 20

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0 I 1985 1990 1994 1999 2000 2002 2003 2004

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W Gas W Electricity 0 Total

With approximately 32 million square feet of floor space, little or no energy efficiency

investments or policies and a sizable utility bill, State buildings represent an energy

efficiency opportunity. In 1999, the AEO performed a lighting assessment on nearly all

State buildings to see if replacing old T12 lamps and magnetic ballasts with T8 lamps and

electronic ballasts would make economic sense for State government. The study took a

year, and when the results were compiled, they showed that net present value of savings

were over 73 million dollars and that rate of return was 67%. Total cost to achieve these

savings was calculated to be 22.3 million dollars.

AEO Lighting Study Material

$$$

Initial Capital Costs Annual Savings Lighting Net Post-Tax Energy Present IRR

Value Labor Total Energy Costs Demand Consumption Reduction

$$$ $$$ $$$ kW kWh % %

The State Office of Purchasing has since placed new lighting technologies on their

procurement lists, but the AEO’s experience with a lighting retrofit within its own

building suggests that these technologies are not being widely used; and when they are,

the operation and maintenance policies are often counterproductive to the goals of the

installation.

A number of states have initiated public buildings programs to reduce energy costs in

state buildings. Of the programs reviewed, one of the most notable has been the North

Carolina Utility Savings Initiative. The Utility Savings Initiative (USI) is a

comprehensive, multi-programmed approach to reduce utility expenditures and resource

use in state buildings. The purpose of the program was to identify utility cost savings and

to implement low-cost/ no-cost measures. The goals of US1 are to ensure that:

1. All agencies and universities are billed on the most economical utility rate

schedule;

2. No- and low-cost operation and maintenance conservation measures are

implemented;

3. An agency strategic energy plan is developed;

4. Agency personnel receive appropriate training and resources;

5. Investment in energy projects will be encouraged, funded by repair and

renovation and other hnds as available; and

6. Performance contracts, or guaranteed energy savings contracts, will be promoted

to fund comprehensive energy projects.

K-12 school buildings also represent energy efficient opportunities, Arkansas has approximately 80 million square feet of school buildings. Estimates of energy

expenditures range from $100- 120 million (the Dept of Education does not track these

numbers). In 2003, the AEO began a project to baseline energy usage in a sample of

large, medium and small school districts across Arkansas to quantify how much potential

utility savings is available. A copy of the second phase report conducted by Dr. Darrin

Nutter at the University of Arkansas is available from the Energy Office.

While the study is not yet complete, some of the findings were:

1. Refined utility data for 84 elementary, middle, intermediate, junior-high, and

high school campuses were used to compute numerous benchmarking

parameters to compare within school districts and statewide. Table 3.1

contains average benchmarking values for each utility and school type.

Numerous figures contain actual benchmarking data from the study.

2. By benchmark comparisons, it appears that 10-20% of the schools have the

potential for significant utility cost reductions; however, a more detailed

evaluation of each situation would be required.

3. Over 30% of the district superintendents responded to the e-mail survey. In

general, all school districts: 1) use buildings for community activities, 2) find

it difficult to track costs between academic and non-academic facilities, and 3)

feel tracking utilities would be beneficial.

4. There appeared a stark difference in the responses of smaller versus larger

districts. In general, larger districts: 1) receive utility tracking reports, 2 ) feel

they would rank well as compared to other districts, and 3) do not need

personnel or specialized assistance to help them conserve and reduce

operating costs. In simificant contrast to the larger districts, smaller districts

generally: 1) do not utilize automated building controls, 2) do not receive as

many useful reports that track operating costs, 3) do not know if they would

rank well in terms of enerav usage per student as compared to other districts,

4) need more personnel and assistance to track utilities, 5 ) need additional

training for their staff to better operate buildings. 6) could use specialized

evaluation assistance to conserve and reduce operating costs, and 7)

emphasize first cost minimization over future operating costs when planning

new buildings and upgrades.

The report concludes with:

I . Make a strong effort through education and assistance to help the smaller

school districts that do not have: a) the personnel and/or expertise in

utility cost reduction techniques and optimal building operation, b)

automated building controls, and e) struggle to minimize life-cycle costs.

2. Use the determined benchmarking parameters as a guide for other school

districts across the state.

3. Provide school districts a simpler mechanism for tracking utilities. In many

cases, the districts need the information, but do not have the time,

personnel, or expertise to track their utilities. Available data in electronic

form from local utilities would be helpful.

Public lighting

Traffic and street lighting present an untapped energy efficiency resource. The AEO

funded two pilot projects in Little Rock and Fayetteville to verify the feasibility of

installing LED traffic signals. The project was successful and helped to lead to the

replacement of all signals in both cities. A number of people involved with these efforts

have indicated dissatisfaction with current utility rate tariffs for traffic signals because the

full benefits of energy reduction are not realized in utility savings. The current tariffs are

a disincentive to adoption of the newer, more cost effective and energy efficient

technology. With revised tariffs in place, we believe most larger cities will find it in their

economic interest to make the switch.

Subsequent to the Little Rock experience, the AEO discussed additional traffic signal

incentives with the Arkansas Department of Highways and Transportation to see if other

communities might benefit. We discovered that ADHT requires LED traffic signals in all

new installations under their purview. However, smaller communities have few options

since they don’t have the resources or personnel to upgrade their signals. In order to

address the needs of small communities the AEO has entered into a grant agreement with

the AHTD to install new LED signals in 22 of the smallest communities under one

installation contract.

Conclusions:

Based on what other states are doing and our experiences with public facilities, we offer

the following conclusions:

0 Long term success starts with state legislation that serves as a basis for public

policy. Legislation typically identifies target reduction goals and timelines, life-

cycle costing principles and points of responsibility.

Training state agency, local government and school personnel to become facility

energy managers provides lasting benefits and places responsibility for planning

and success at the point of energy consumption.

Utilities are essential partners in the rate and billing evaluations, and subsequent

measurement of performance.

Energy service contracting companies (ESCOS) offer audit and financing services

that are tested and beneficial. Smaller facilities might benefit from aggregating

their needs with other small facilities and negotiating a joint performance

contract.

0

Residential sector

Energy efficiency potential in the residential sector is significant, but presents unique

challenges depending on whether the buildings are newly built or existing. From an

energy efficiency standpoint, most of the gross potential is in existing homes because

they’re older with high infiltration rates, have inefficient appliances, are built to lax or no standards and there are many more of them. However, the high cost to retrofit energy

improvements into these buildings frequently makes the savings more difficult to justify.

The weatherization system for low income citizens has made a science out of evaluating

and prioritizing energy improvements in order to get the most bang for the buck in

existing homes. There is a great deal to learn from their experiences. No doubt

stakeholders (principally utilities) in these proceedings will recognize the value in

leveraging these experiences along with federal dollars to improve the potential

efficiency gains for low income households. Even though most homes in Arkansas are

not candidates for weatherization, it can still make economic sense to apply many of

these same techniques to the 1.2 million or so households in Arkansas, i.e. use of a

blower door test and evaluation software.

Existing homes - In the early ~ O ’ S , the AEO funded a study of 24 existing homes to

determine if there was noticeable leakage in home air distribution systems and what

impact sealing these leaks would have on energy consumption. The results showed that

there was substantial leakage in the duct systems on the order of 22% of total air volume

for the house. When the leaks were sealed, energy consumption was reduced on average

for heat pump systems by 28.3% and for natural gas systems by 19.1%. One might

expect that improved building practices and materials have mitigated these losses in

newly built homes since the study was done, however, our observations of the building

industry and newer housing stock suggest otherwise. National studies have shown duct

leaks typically raise a home’s heating and cooling costs by 20-30%.

One of the major sources of energy inefficiency in existing homes is the over sized

HVAC system; principally the air conditioning system. A/C systems are typically

oversized by 20-50%. Not only does this lead to larger up front costs for cooling

capacity that is not needed, but it makes the unit operate inefficiently, the home is

uncomfortable and it adds to the utility’s summer peak load requirements. Although

some progress has been made in this area, builders and HVAC contractors need to be

trained and required to use appropriate load calculation software when installing new or retrofit systems.

There has been a great deal of study and research done on how to operate and maintain a

home to reduce energy costs. These are typically identified as low-costho-cost

measures. The degree to which they are successful varies with the effort required in the

measure, current energy prices and complexity, and the frequency and quality of the

marketing message. As a general rule, if implemented together, these types of measures

can save from 20-30% on utility bills. The AEO has undertaken a concerted effort to

“market” the message through radio and TV spots in recent years, but we are uncertain of

the impact other than to say that our website activity spikes considerably after each

airing.

Appliance standards

Federal appliance standards appear to have a significant impact on residential and

commercial energy consumption in Arkansas, particularly heating and cooling

equipment.

End- Use Energy Consumption for Typical Household, 2001 ~~

Appliances 28% 1

Refrigerator / a,C ~

7 Ya - / \ Air I 1

Water Heating 18%

\Conditioning 15% j

Wide recognition of the Energy Star label on appliances likewise, seems to have been a

market transformation success story. It has been difficult to measure the impact of

increased appliance efficiency since penetration rates and sales data is difficult to obtain.

Even EPA’s Energy Star program is unable to determine the numbers of Energy Star

appliances are sold in Arkansas. However, there have been several studies done

nationally that indicate that federal appliance standards work. What’s more administrative costs for such standards are relatively low and, as with energy codes,

savings are persistent. In an examination of DSM efficiency policies, a Resources for the

Future report says:

Appliance standards do appear to yield positive net benefits to

consumers on average. The average price of energy for all non-

transportation uses in 2000 was $6.08 billion (in 2002 dollars)

per quad, while the cost of the appliance standards was just

under $2.8 billion per quad. Even if unaccounted for costs of

appliance standards are so large as to be equal to those included

in the study, or ifactual energy savings are halfof what is

estimated, the package of appliance standards would still yield

positive net benefits on average. Adding in the positive

environmental benefits of reduced electricity consumption would

strengthen the argument that appliance standards can be worth

the cost.

New homes - In 2004, there were approximately 12,000 single family homes built in

Arkansas. All of these homes are subject to the Arkansas Energy Code standards for new

home construction. The AEO has had the responsibility to administer these standards

since the late 1970’s. Before that time, energy codes did not exist in Arkansas. Even

early codes were so weak as to be non-existent. Based upon our experience, most homes

built before 1992 have inadequate insulation, inefficient equipment, poorly installed

distribution systems and lower quality materials.

In recent years, Arkansas has upgraded its Code two times to the current standards that

exceed U. S. DOE requirements ( 2003 International Energy Conservation Code). [The

Energy Code includes, by reference, a commercial standard known as the ASHRAE 90.1 -

2001 .] The AEO currently and will continue communication outreach with builders on

code compliance, simplified approaches and technical assistance. The AEO maintains

communication and training through newsletters, CDs, presentations and web-site. Future

projects include an updated compliance survey.

In preparation for the latest Code update, the AEO performed an evaluation of 100 homes

in Arkansas (mainly in the Central and Northwest areas) to determine the degree of

compliance with the Code. These homes were followed from foundation to completion

and the energy efficiency details of their construction (often hidden from view after

completion) were documented. When completed, a blower door was used to evaluate the

home’s air leakage and, by subtraction (taping off the supply and returns), the leakage of

the ductwork. The air leakage rate of these new but unoccupied homes indicated that

builders were paying more attention to caulking and weather-stripping. The leakage of

the ductwork (5% is considered tight and the average was 12% with 29 out of 100 above

15%) indicated that this area needed improvement-also 98% of the ductwork was

“sealed” with low-quality “duct tape.”

An industry-approved HVAC sizing program indicated that the overwhelming majority

of homes had oversized cooling systems (average cooling over sizing was 49% with

seven out of 100 systems 100% oversized) and heating systems (average heating over

sizing was 94%).

A little less than half of the 100 homes complied with the minimum levels of the Energy

Code. Forty-four out of 100 homes came within plus or minus 5% of passing; however

there were 27 out of 100 that failed the code by greater than 5% and 14 out of 100 that

failed by greater than 10%. The majority of failures were due to inefficient window

selection (aluminum frame with no thermal-break) and excessive window areas (one

home had 28% of its wall area in windows). There were also several instances where

insulation was not thoroughly installed (overall thickness or thickness in specific areas

was less than required).

Successfully installed slab insulation was found in only two out of the eighty-one of the

homes built on a slab. Many homes in the northwest part of the state (where more severe

winters are experienced) attempted slab insulation; however the techniques did little to

reduce the heat loss from the most important area-the vertical edge of the slab. [The

complete study can be found on the AEO’s web site: “Energy Performance Evaluation of

New Homes in Arkansas”.

The study results indicated to us that 1) there was significant non-compliance with the

Energy Code standards; 2) the performance of these homes, even when meeting

standards, suggested that design, specifications and building practice were sub-par; 3) the

potential for energy savings in the residential sector just in terms of compliance with

current standards, is considerable, especially since these newly built homes will be part of

the building stock for many years to come. The main reasons for these results are:

0 The Energy Code has virtually no enforcement provisions. The only real

enforcement is at the local level where local jurisdictions can adopt the Code and

enforce it through their building permit process. Only about half of the cities in

Arkansas and no counties have a building permit requirement. To date, few

communities have adopted the code by ordinance. The State of Arkansas has had

little appetite for using penalties as an enforcement mechanism. Nor have they

been interested in funding an enforcement system, which can have a significant

cost (as California and Massachusetts can testify to).

Education and training of the building community is inadequate. There have been

efforts to educate and train the building community from our Office, and through

the administration of the Arkansas Mechanical Code and the Arkansas

Contractors Licensing Board, but these have been uncoordinated and under

funded.

There have been several US DOE supported studies on state code-compliance programs

that have been conducted throughout the nation. Successful programs utilized a multi-

facetted approach combining updated but simplified energy codes, education of the

building industry, education of consumers and code officials, and utility sponsored

residential construction programs that include incentives.

A 1996 ACEEE Summer Study: “Residential Building Code Compliance: Implications

for Evaluating the Performance of Utility Residential New Construction [RNC] Progranis” (LBL-3 83 82) indicated that, “In three studies, compliance with state building

codes was shown to be higher for participants in utility RNC programs than for non-

participants. In PG&E’s study, “builders/contractors who agreed to participate in the

PG&E program achieved 100% compliance.” These programs resulted in improved

housing stock and reduced peak demand.

A strategy for improving Code compliance effectiveness in Arkansas might involve three

pieces:

0 Stakeholders in the building community have indicated a need for simplified

codes and code compliance processes. The AEO has made progress in this area

but more needs to be done to make the Code understandable and easier to comply

with.

0 Amend the 2004 Arkansas Energy Code, to require adoption and enforcement of

the prevailing Energy Code at the local level where building permits are required.

Local enforcement is always preferred to a distant governmental entity.

0 Institute a Code compliance certification seal that must be affixed to the exterior

utility panel. The seal would contain the requisite Code compliance information

for that particular home. The utilities could provide considerable effectiveness if

the seal were required before they provided utility service.

New home performance - Some states have established programs that encourage energy

efficiency to a higher level of performance than the minimum code. Earth Craft, Energy

Star and LEED are a couple of examples. These “market transformation” programs have

been very popular with builders and consumers across the country. They make some

sense in Arkansas, particularly in areas of high growth and with some of the larger

builders. The fact that the Energy Policy Act of 2005 provides a tax credit to home

builders for Energy Star level homes would also be an incentive.

Conclusions:

1. Existing homes represent an important energy efficiency potential that can be

captured through programs that involve measurement, evaluation and incentives.

Some of the experiences of the State Weatherization Program would be useful in

this regard.

2. Federal appliance standards appear to be having an impact on energy savings in

the residential sector, however, whether State standards in Arkansas makes sense

is uncertain until we have more data available.

3. The construction of new homes is an ideal opportunity to intervene since they

have the lowest cost of saved energy. Even though Arkansas has promulgated the

most current standards, it is important that Code compliance be improved and that

utility involvement and training, and education be part of the strategy.

4. Branded homes makes sense from a market perspective, but from a public policy

perspective, encouraging their construction is a poor substitute for meeting

minimum standards.

Program Development and Delivery

The AEO advocates that a third party organization administer funds contributed by utility

participants to develop and deliver agreed upon programs. Such an organization would

be fuel neutral and accountable to a State government authority. An example of such an

organization was the Arkansas Energy Efficiency Partnership (AEEP). In 1996, the AEO

along with ARKLA Gas (currently Centerpoint Energy), Arkansas Electric Cooperatives

Corporation, Entergy, and S WEPCO (currently American Electric Power) entered into a

partnership agreement under the umbrella of the AEEP. The goal of AEEP was to inform

buyers and builders of new homes in Arkansas about the state’s new energy-efficiency

standards adopted in the Arkansas Energy Code for New Home Construction.

Each of the participating partners in AEEP contributed funds to a multi-media campaign

managed by the AEO and approved by each of the partners. The funds were

administered by AEO. The percentage of the financial commitment by each partner was

determined using a formula based on the number of that partner’s residential meters, i.e.,

partners with more customers contributed a higher percentage of costs than partners with

fewer customers. The campaign eventually ran out of funds, but the outcomes of the

campaign were largely positive. Both consumer and builder responses were above initial

expectations; however, the prevailing low energy prices appeared to undermine the

energy efficiency message as the campaign progressed.

The AEO attempted to re-form the AEEP in 2005 in preparation for the expected rise in

winter heating bills. Unfortunately, we could not muster enough interest from a couple of

the utilities, (perhaps because our efforts came on the heals of the Katrina and Rita

disasters) and the initiative went nowhere.

2006 AEEP

In view of the current circumstances, the AEO believes it is appropriate and timely to

propose another AEEP partnership composed of all electric and gas utilities in the State.

The purpose of the partnership would be to administer and coordinate DSM activities on

behalf of State interests and the utilities’ rate-paying customers.

The goals ofthe AEEP would be:

Develop energy efficiency programs and projects that are consistent with a DSM

framework established by the PSC.

Market and promote a common and fuel neutral energy efficiency message.

Administer funds contributed by the utilities

Monitor, measure, verify and report on energy efficiency activities

Coordinate organization activities with other State, federal and local programs,

Le. low-income weatherization program, EPACT 2005 incentives, State Energy

Office, etc.

Work with private sector interests to procure energy services.

We believe such an organization can effectively bring expertise to bear on complex

issues across all economic sectors, rate classes and utilities.

Other Issues

Environmental Costs

Unarguably, there are environmental risks and costs associated with our over reliance on

fossil fuels. Historically, those costs were not included when calculating the costs of

producing and consuming our energy (externalities). There has been a great deal of

activity at the federal, regional and state level with regard to policies that deal with COz

emissions and global warming issues. Several significant pieces of legislation have been

introduced in Congress and regionally, states have taken action to create cap and trade

protocols for their own policy and economic purposes. Many large industries have also

voluntarily decided to take early action in anticipation of mandatory federal legislation.

The Pew Center’s Business Environmental Leadership Council provides a forum for

many of these industries. A number of the member companies have interests in

Arkansas, i.e. Alcoa, AEP, Baxter International, Boeing, CH2M Hill, Entergy, GE,

Georgia-Pacific, Lockheed Martin, United Technologies, Weyerhaeuser, and Whirlpool.

A recent white paper by Senators Bingaman and Domenici discusses possible

“mandatory market-based systems” as a means to reducing and reversing the destructive

potential of greenhouse gases. The National Commission on Energy Policy has

recommended that “a mandatory, economy-wide tradable permits system be designed”. . . to slow the growth of greenhouse gas emissions.

It appears inevitable to us that federal global warming policies will be the law of the land

in the not to distant future. Clearly, Arkansas is not well positioned to exploit the

opportunities or mitigate the risks associated with such policies. Arkansas is one of a

handful of states that lacks an action plan or emissions targets. The recent economic

development experience in Little Rock and West Memphis with regard to non-attainment

standards is a good example of how vulnerable our State is to environmental concerns.

Energy efficiency measures have significant potential for reduction of greenhouse gases and as a corporate strategy for reducing compliance costs in anticipation of a regulatory

mandate. We are hopeful that one of the outcomes from this initiative will be a

recognition that environmental externalities should be factored into the costs and savings

of our energy efficiency programs.

Secuvi[v

Our nation and State have become so dependent upon fossil fuel that it opens us up to

painful and costly dislocation at, what seems like, the drop of a hat. Harsh winter

weather, spikes in prices, geopolitics, speculative demands, terrorism, hurricanes, are just

a few of the eventualities that have shaped our experiences with fossil fuels. For instance,

despite high natural gas prices, our State dodged a bullet this year with a mild winter. The

spin-off effects of the Katrina and Rita disasters should have taught us that we are

vulnerable to energy supply and infrastructure disruptions as well. [Experts are

predicting dire consequences when the New Madrid earthquake becomes active again]

Energy efficiency won’t prevent these problems in the short term, but it could help to

soften the blow and should be part of an energy emergency response strategy.

State Public Policy

The ways in which we acquire and use energy has enormous consequences for our State’s

economy, state and local development, security and environment. The competitive

position of Arkansas in the national and global economy is greatly influenced by the

future availability and cost of delivered energy within the state. Energy is also vital for

an expanding economy that expects to provide new competitive opportunities and

increasing prosperity for its citizens. With energy prices unstable and rising rapidly, and

environmental problems that are small but a growing concern for economic development,

it appears that we are in need of a comprehensive, coordinated and balanced energy

framework that addresses issues across the state and all economic sectors. Arkansas is

one of 16 states that are dues paying members of the Southern States Energy Board. Of

these states, Arkansas, Maryland, Mississippi, Alabama and Louisiana do not have an

energy plan. Anecdotally, Our Office has seen dramatic increases in inquiries from concerned and interested citizens over the last year that need help and information

concerning a myriad of energy issues. Our guess is that the same has been true for the

PSC, utilities and the media. In our opinion, Arkansas needs, and apparently wants, an

energy policy that will provide a roadmap for meeting current and future energy

challenges in the public interest. The Arkansas economy and its people will only be more

vulnerable without it.