December 30, 1996

To Our Utility Partners and Other Stakeholders,

In his 1993 Earth Day address, President Clinton expressed his policy on greenhouse gas (GHG) emissions: "We must take the lead in addressing the challenge of global warming . . . I am instructing my Administration to produce a cost-effective plan . . . that can continue the trend of reduced emissions. This must be a clarion call, not for more bureaucracy or regulation or unnecessary costs, but instead for American ingenuity and creativity to produce the best and most cost-efficient technology." The Climate Challenge Initiative is part of that policy. In voluntary partnership with the Department of Energy (DOE), Climate Challenge utilities are reducing their GHG emissions using a wide range of control options and innovative approaches. As Secretary of Energy O'Leary has stated repeatedly, this is a different way of doing business, for the Federal government and for the electric utilities.

The central concept behind Climate Challenge's voluntary and collaborative approach is that flexibility delivers better, faster, and less costly benefits. The widespread and vigorous participation in Climate Challenge more than 600 utilities are members represents a new era of cooperation between the Federal government and the electric utility industry. It also exemplifies the change in the corporate culture of the industry, a change that recognizes the importance of GHG emission consequences in utility business decisions.

The Climate Challenge program is a successful and growing program. Over 60 percent of the electric utility industry is participating in Climate Challenge, and these utilities have pledged greenhouse gas reductions of 44 million metric tons of carbon equivalent in the year 2000. By working in a collaborative, non-adversarial relationship, the Department and the utilities have greatly enhanced communication and the exchange of ideas, and developed "custom-tailored" approaches that meet the interests of all stakeholders.

We recognize that commitments and pledges are, in essence, promises of future actions, and that what is done will ultimately count for more than what is promised. So far, there is every indication that the extensive commitments made by the electric utility industry are being met. We have met with a number of utilities for midterm reviews of their Participation Accords, and most utilities are on, or ahead of, schedule for meeting their commitments. Many utilities have even begun taking on additional commitments beyond those described in their Accords. In addition, the industry associations are spearheading new and exciting industry-wide initiatives and additional utilities are joining the program.

What makes these actions even more impressive is that they are being made in the face of increasing competitive pressures. As restructuring and cost-competitiveness reshape the industry, utilities face pressure to focus on short-term savings rather than the long-term benefits of a voluntary program such as Climate Challenge. Yet electric utility participation in Climate Challenge continues to grow as utilities recognize the value of devising innovative solutions to environmental concerns. As noted by Mark DeMichele, President and CEO of Arizona Public Service Company in the March/April, 1994 issue of Electric Perspectives: "In the global-warming debate, proactive management, willingness to negotiate, and leadership through voluntary initiatives are our strongest trump cards. Through a series of positive actions, we can become participants in positive progress instead of victims of negative rule."

By being proactive, utilities are demonstrating and accelerating the introduction of new ideas and increased environmental stewardship. As explained by E. Linn Draper, Chairman of American Electric Power Company in the same issue of Electric Perspectives: "To put it simply, in the absence of industry commitment, others in government, the environmental movement, and the international community are ready, willing, and able to fill the leadership gap on global climate change and greenhouse gases. Together, we share a commitment to environmental stewardship. . . . The voluntary nature of the Utility Climate Challenge allows the electric-power industry to balance these concerns effectively while taking cost-effective action on greenhouse gases."

Climate Challenge is still in its infancy. Its longer-term "success", as measured by participation levels, activities pledged, reductions achieved, and stakeholder perceptions, will contribute to meeting the real long-term challenges for this country maintaining our environmental, economic, technological, and policy leadership in the international community. We welcome the advice and comments of any stakeholder on how we can best assure the long-term success of the program.

TABLE OF CONTENTS

SECTION I: CLIMATE CHALLENGE PROGRAM OVERVIEW

Please send comments to:
Lawrence.Mansueti@hq.doe.gov