MEMORANDUM

TO:	U.S. Department of Agriculture
	Rural Business Cooperative Service

FROM:	Alecia Ward, Executive Director
	Midwest Energy Efficiency Alliance (MEEA)

RE:	Comments on 2002 Farm Bill, Energy Title
	Section 9006 Implementation Recommendations

DATE:	December 5, 2002


The Midwest Energy Efficiency Alliance (MEEA) submits these comments to USDA 
in response to the December 3, 2002 "Expanding Rural Renewable Fuels Systems"
stakeholder meeting to discuss Section 9006 (Renewable Energy and Energy 
Efficiency Improvements) implementation of the 2002 Energy Title of the Farm Bill.

Although we were unable to attend the meeting in person, we appreciate the 
invitation to comment.  MEEA believes that the comments of our colleagues in the industry 
- the Environmental Law and Policy Center (ELPC), the American Council for an 
Energy Efficient Economy (ACEEE) and others - do an excellent job of detailing the 
legislative intent of section 9006, identifying the program objectives and priorities, 
and recommending program guidelines/criteria for participant eligibility.

We encourage the USDA to move forward with a rulemaking or NOFA immediately 
to expedite the distribution of FY03 funds made available in Section 9006 and 
to use established distribution mechanisms for delivery of those funds to eligible 
applicants. While USDA has little experience with energy efficiency and renewable energy
programs, your colleagues in other federal agencies, including DOE and EPA 
have extensive experience and the infrastructure already in place to deliver 
these funds. We would like to see USDA distribute FY03 funds through existing 
infrastructures, which maintain well-established guidelines, criteria, and case studies for successful energy efficiency and renewable energy project funding as well as operate the very successful ENERGY STAR program.

ENERGY EFFICIENCY - A PRIORITY:

Our primary purpose in submitting comments is to encourage the USDA to fund 
energy efficiency programs as aggressively as renewable energy programs from the 
9006 funds. Energy efficient technologies, products, and best practices are the first, 
best, and most cost effective strategy to: 1) avoid building more generating power plants, 2) reduce the potential for transmission gridlock, and 3) deliver energy savings and environmental benefits as well as process improvements to farmers, ranchers and rural 
small businesses.

Furthermore, energy efficiency and renewable energy go hand-in-hand. Energy 
efficiency should be considered a prerequisite to and foundation of renewable energy 
projects because it extends the supply of energy needed to make a small-scale 
renewable energy project feasible.  Energy efficiency makes renewable energy projects viable. Energy efficiency and renewable energy are not in competition with each other but 
embrace the same principles and, as such, our programs are not only compatible but 
complementary.

Rural communities have struggled with this issue of energy for many years - 
how to generate it in rural areas, how to transmit it to and from those areas, and 
how to make both of those endeavors more cost effective for the rate payers in those 
areas.  Rural Electric Cooperatives provide services and power to rural residents, farms, 
ranches and small businesses, but have until very recently failed to embrace energy 
efficiency and renewable energy programs.  Investor Owned Utilities have had extensive 
experience with demand side management (DSM) programs, but have had limited funding for 
rural DSM projects except on a large industrial farm scale or in California, the 
Northwest and New York.  At long last, the Energy Title of the 2002 Farm Bill makes 
dollars available to that previously neglected community of farmers, ranchers and rural small businesses to engage in basic conservation techniques.

ENERGY EFFICIENCY - Rural Residential Applications:

While USDA will be funding wind energy, biomass, photovoltaics and other 
renewable energy projects through 9006 funds - and while MEEA fully supports its doing 
so - it is clear that energy efficient products and the availability of funding for 
those products is needed in rural retrofit of farm homes and ranch homes has the potential to be overlooked.  Energy efficient window and lighting retrofits, HVAC systems 
replacements and improvements, furnaces, chillers, and refrigeration systems as well as 
building envelope improvements for rural residences should be eligible for funding 
through the application process.

MEEA recommends that a small percentage of funding (perhaps 2%) be dedicated 
to basic improvements in these rural farm homes and ranch homes.  Whereas 
energy efficiency and DSM programs have been in the marketplace in urban areas for 
many years, the Energy Title of the 2002 Farm Bill makes available for the first 
time significant funding for similar programs for rural customers.  Of course USDA will not want to administer applications for 1 refrigerator or a 6-pack of compact 
fluorescent light bulbs (CFLs), so a minimum retrofit budget for rural residences should be set.  

MEEA recommends applications for a minimum of $10,000 project total of which 25% 
would be eligible for 9006 grants, or up to 50% would be eligible for grants, loans, 
and loan guarantees combined.

ENERGY EFFICIENCY - Agricultural Applications:

Farmers, ranchers and rural small businesses have varied products and 
services that provide opportunities for energy efficient upgrades.  For crop farmers there are a variety of system improvements that can be made in the drying & refrigeration 
process.  For the animal agriculture segment, technologies like improved lighting systems 
(including natural day lighting) can have dramatic impacts on energy bills as well as 
improvements in the output of production by the animals.  In both agricultural industries 
(crop production and animal production) more efficient refrigeration is a huge 
opportunity for energy savings.


PRIORITY FUNDING RECOMMENDATIONS:

Eligible projects (for both residential farm/ranch applications and 
agricultural businesses) for energy efficiency funding from 9006 would include, but not be limited to:

- Refrigeration equipment
- Dairy machinery
- Lighting retrofits and day lighting
- Motor and pump systems
- Envelope improvements including: windows and insulation
- System improvements including: HVAC systems, furnaces, and chillers

Given the diversity of needs of the rural farmer, rancher and small 
business, MEEA recommends USDA focus, but not limit, FY03 funding to these proven 
technologies with documented energy savings potential. These technologies are readily 
available in the marketplace.  MEEA also recommends that where an ENERGY STAR standard 
exists, USDA use that specification as a minimum criterion for eligible efficiency
improvements.  Where there is not an ENERGY STAR specification, MEEA recommends that USDA work closely with the American Council for an Energy Efficient Economy (ACEEE) and the Consortium for Energy Efficiency (CEE) as well as DOE and EPA to establish criteria.

Any grant, loan or loan guarantee provided for installation of an energy-efficiency
improvement should include energy-efficiency audits as a permissible expenditure of
those funds.

PROVEN vs. NEW TECHNOLOGIES:

MEEA is interested in market transformation.  When there is an energy 
efficient product available, we want consumers to choose the energy efficient product over its less efficient counterpart for their application.   Much of transforming markets rests on continuity. Manufacturers of energy efficient products need to be sure that a market for their product will not just exist for one year, but rather will continue for several years.  This is, of course, how they recover the cost of investing in the research essential to bring newer and more energy efficient products to market and make them cost effective for consumers to choose.  MEEA strongly encourages USDA to begin using 9006 funds for well established and proven technologies like the ones listed above for at least the first 3 years of the program, then expanding into newer technologies that have less experience in the marketplace.

There is low-hanging fruit that USDA should take the opportunity to capture 
the energy savings from before moving on to more costly and less well established 
technologies. With that said, in the later years of the program - after USDA has had a 
chance to smooth out the application process, deal with the issues of distributing funds, and begin to collect measurement and verification data from the projects funded to date - new technologies should be eligible for consideration.

GEOGRAPHY:

The Midwest has more farmers and ranchers than any other region of the 
country. There are also a significant number of manufacturers of energy efficient products located in the Midwest, including Whirlpool, Maytag, Pella, Andersen, Carrier, and Trane.  The Midwest is where the greatest potential for renewable energy (in the form of wind and biomass) resides. As such, USDA should expect a large portion of applications for 9006 funding to come from the Midwest and should not set an arbitrary restriction 
for percentages of applications from a certain region of the country.

MATCHING FUNDS:

Farmers, ranchers and rural small business that have been approved to 
receive or that have received funds from state programs for energy efficiency should be 
encouraged to apply for grants, loans and loan guarantees that will match, up to the 
statutory limit, that state funding in order to further finance energy-efficiency improvements through such state programs.

The Midwest has excellent potential for matching funds for rural projects 
via three public benefit funds in: Wisconsin, Illinois, and Ohio; as well as aggressive 
efficiency program funding through regulated conservation programs in Minnesota and Iowa.  MEEA recommends that USDA accept applications with matching funds from:

- State Energy Offices or other 3rd party entities that operate "Public 
Benefit Funds"
or "Systems Benefit Charges"
- Investor Owned and Municipal Utilities as well as Rural Electric 
Cooperatives
- Private Entities like manufacturers, wholesalers and retailers of products
- Private Foundations
- Individuals

In the first few years, USDA should be prepared to receive more applications 
seeking grants and loans than loan guarantees in the initial years of the program.

CONCLUSION:

Thank you for the opportunity to comment on Section 9006 of the Energy Title 
of the Farm Bill.  MEEA is very interested in the process that USDA will establish 
in the NOFA guidelines and is fully prepared to provide additional information if 
USDA should need it.  We would like to reiterate how important coordination and 
cooperation with your federal colleagues and state and local interests is to the success of this program.  We look forward to seeing the results of this hard work early next year.


Sincerely,
Alecia Ward