Statement of Jon Cowan
President, Third Way
May 12, 2010

Subcommittee on Conservation, Credit, Energy, and Research
House Agriculture Committee
United States House of Representatives

Good Morning, Mr. Chairman, and thank you for inviting me to testify this morning. My name is Jon Cowan, and I am President of Third Way. I previously was Chief of Staff of the Department of Housing and Urban Development. I appreciate your giving me the opportunity today to talk about a policy that has bipartisan, bicameral support, creates thousands of jobs in rural America, and is a responsible fiscal steward of Americans’ tax dollars.

Mr. Chairman, energy efficiency improvements can save homeowners a lot of money and create good local jobs. Despite the promise of lower energy bills, however, most homeowners don’t make these improvements.

With just the lightest touch from the federal government, Rural Energy Star changes the game for rural homeowners when it comes to saving energy. It makes it convenient and painless to pay for and contract improvements. It operates through long-established US Department of Agriculture and co-op processes that we know work smoothly. And it is fiscally responsible, achieving enormous benefits at limited cost.

It should be an easy decision for middle class homeowners to invest in saving energy. Improvements pay for themselves within five to ten years, and energy savings continue for the life of the home. But few families have $4,000-$5,000 lying around to pay for improvements, and they might move before the savings pay off anyway. Moreover, making substantial efficiency upgrades can be a complex and daunting endeavor.

Rural Energy Star eliminates these barriers so that anyone can take advantage of the opportunity to save money through efficiency. Affordable loans to consumers cover the entire cost of improvements, ensuring people can participate as long as they can pay their monthly utility bill. Local electric cooperatives serve as general contractor and the source of the consumer loans, creating a program for homeowners that is convenient and trustworthy. Co-ops attach the loan repayment obligation to the meter, ensuring that benefits and costs pass on if the original homeowner moves.

To take these steps to address consumers’ needs, Rural Energy Star extends two 75-year old legacies — USDA’s lending money to co-ops, and co-ops financing consumer loans and improvements. As members of this committee know well, USDA has issued direct loans to electric cooperatives since the New Deal, with the Rural Utilities Service issuing over $6 billion in loans last year alone. And the repayment history of co-ops is second to none. Rural Energy Star takes advantage of the regulations and processes already in place at USDA, so that federal loan-making is smooth and efficient.

Meanwhile, the co-ops are well situated to manage the loanmaking and contracting at the consumer level. Because they are non-profit and ratepayer-owned, the co-ops have a unique incentive to help their consumers save energy. Co-ops have the ability to finance their consumers’ efficiency improvements, the data to determine which ratepayers are good credit risks, and a reliable, property-tied repayment mechanism in the form of home utility bills. They also have on-the-ground management structures and local relationships to ensure sub-contractor accountability and confirm that improvements are installed as promised. If cost savings did not materialize, the co-ops — not the federal government — are on the hook for the losses. That’s a powerful incentive to make sure the program works.

If Congress passes the Rural Energy Star bill we are discussing today, it will be a fiscally responsible action, achieving enormous, enduring economic benefits at an affordable cost.

The $995 million this bill is projected to cost will leverage $4.9 billion in consumer loans, enabling the weatherization and retrofit of nearly 1.5 million rural homes. That means for every $1 spent by the federal government, $5 is spent in rural communities on contractors and manufactured goods. The resulting energy savings will save rural homeowners a minimum of $5 billion on their utility bills in the first ten years and even more than that in the next ten years. The extra money in people’s pockets stimulates the economy even further. Economists project Rural Energy Star will create 292,000 jobs by 2020. That’s nearly 300,000 jobs and billions upon billions of dollars in savings on consumer energy bills.

Mr. Chairman, Rural Energy Star uses proven mechanisms to leverage comparatively few federal dollars to save homeowners money and create new local jobs. This is why it has already received strong bipartisan, bicameral support, and we believe it would be an effective program if passed into law.

Thank you.