297 

 Mr. DeFazio. Thank you. Mr. Alderson. 



STATEMENT OF GERALD R ALDERSON 



Mr. Alderson. Mr. Chairman, thank you for the opportunity to 

 appear here today. I am Gerry Alderson, the President and Chief 

 Executive Officer of KENETECH Corporation, and, KENETECH, 

 as a private company, is not necessarily a household name. How- 

 ever, it is a firm or an organization which is involved in all aspects 

 of the areas that you have heard testified to here today. 



We engineer, develop, build, construct, operate and maintain fos- 

 sil fuel facilities, cogeneration facilities, as well as we have a sig- 

 nificant subsidiary which is in the energy conservation business, 

 and we are the largest renewable developer in the world through 

 our subsidiary, U.S. Windpower. 



In the interest of conserving the energy of everyone in this room, 

 I will limit my remarks today to highlight a couple of areas that 

 are in our written testimony and rely on that written testimony to 

 cover most of what I would otherwise comment upon. 



I'll also generally restrict my comments here to be those from the 

 vantage point of U.S. Windpower in terms of its development of re- 

 newables in the northwest. 



The two specific areas that I would like to comment on begin, 

 first, with the complexities of pricing and the challenges associated 

 with comparing the cost of energy — ^the real levelized cost, if you 

 would like to use that term — associated with the renewable re- 

 source as compared to other generation options. 



In the all resource bid that BPA had a couple of years ago, the 

 project, a relatively large project that we bid in this particular 

 area, was roughly three mills higher than the project which was 

 eventually selected. And without going through the issues associ- 

 ated with externalities, let me point out that at that level of pricing 

 differential, more traditional considerations, such as exposure to 

 fuel escalation risks, the imposition of taxes, which I'm sure we'll 

 agree is more likely to occur on fossil fuel generated electricity as 

 opposed to that fi-om renewables, makes it virtually impossible, in 

 our judgment, to look at those on a case-by-case basis. 



For instance, had the project that I had referred to earlier as 

 being three mills different in pricing from the fossil fuel plant that 

 had been selected been chosen, that facility would today, at least 

 for the first ten years of its operating life, be some 1.2 mills less 

 expensive than the electricity generated by that project by virtue 

 of the National Energy Policy Act and the inclusion therein of a 1.5 

 cent production tax credit associated with wind-generated elec- 

 tricity, effectively, between the time of that bid and today, lowering 

 the price by 1.5 cents or 15 mills as contrasted to the original three 

 mill differential. 



And I think perhaps impUcit in that particular example is the 

 concern that I would express and offer to you in terms of something 

 that I've not heard mentioned here today, but the search for ways 

 in the process for BPA to look iteratively at things going on in its 

 marketplace. 



So that at the point in time that you have a bid, if, two months 

 later, there's been a substantial change in the relative pricing of 



