ACEEE Supports Balanced Natural Gas Policy Initiative

January 3, 2005

WASHINGTON, D.C. — The American Council for an Energy-Efficient Economy (ACEEE) joined with a diverse group of business, consumer, and environmental organizations today in supporting a new and balanced initiative for a U.S. natural gas energy policy. Said ACEEE's Executive Director Steven Nadel: "This thoughtful initiative, using energy efficiency as the leading component of a three-pronged approach, offers the nation a new pathway to efficient use and affordable supplies of natural gas. We urge the new Congress to take note, and build a natural gas bill on these principles."

In an open letter to Congress and the Administration, ACEEE and more than a dozen groups outline a set of principles for natural gas policy with three areas of focus: (1) energy efficiency and conservation; (2) fuel diversity and renewable energy supply; and (3) new natural gas supply and infrastructure development that minimizes environmental impacts. The letter can be found at In the efficiency and conservation area, the letter recommends the following policies.

  • In the utility sector:

    • Setting end-use energy efficiency performance targets for utilities

    • Expanding public benefit funds for energy efficiency

    • Reforming utility ratemaking to encourage utility efficiency investment

    • Encouraging generation dispatch based on efficiency and environmental considerations

    • Expanding use of demand response to reduce inefficient peak generation

    • Sustaining and expanding use of combined heat and power (CHP — also known as cogeneration)

  • Expanding federal funding for energy efficiency implementation and R&D

  • Accelerating federal and state appliance efficiency standards

  • Expanding energy efficiency building codes

  • Expanding performance-based incentive programs for efficient buildings

  • Recycling of materials to reduce energy required in materials manufacturing

  • Mounting a major new public awareness campaign by state and national leaders

"These policies represent the nation's best chance to reduce natural gas prices in the near term, bringing desperately needed relief to gas consumers and balance to gas markets," said ACEEE's Industrial Program Director Neal Elliott. Recent ACEEE research (available at shows that such an efficiency policy portfolio could reduce natural gas wholesale prices by as much as 26% over the next five years. Such an effort would generate over $100 billion in economic benefits, from a public investment of about $7 billion, leveraging a private investment of about $23 billion. The National Petroleum Council, in its 2003 natural gas study available at, called for similar levels of efficiency achievement to balance natural gas markets. More importantly, the National Petroleum Council agreed with ACEEE that for the next five years, energy efficiency is the nation's most accessible policy option, as most supply options will take several years to bring online.

An important finding from ACEEE's analysis is that the majority of near-term natural gas savings would occur by saving end-use electricity. That's because in most regions of the United States, natural gas is the marginal generating fuel, and since gas is converted to electricity in a simple cycle combustion turbine at an average efficiency of 30% or less, saving one unit of electricity at the end-use saves several units of natural gas at the powerplant. Hence many of the policies recommended are aimed at the electricity sector. "Our analysis shows the interconnectedness of the major energy markets," said ACEEE's Policy Director Bill Prindle. "By saving electricity, we can reduce pressure on gas prices. And by reducing gas prices, we reduce the upward pressure on electricity prices. The result is more affordable gas and electricity, less volatile prices, and a stronger economy."