[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
EVALUATING THE ROLE OF FERC IN A CHANGING ENERGY LANDSCAPE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND POWER
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
DECEMBER 5, 2013
__________
Serial No. 113-106
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky FRANK PALLONE, Jr., New Jersey
JOHN SHIMKUS, Illinois BOBBY L. RUSH, Illinois
JOSEPH R. PITTS, Pennsylvania ANNA G. ESHOO, California
GREG WALDEN, Oregon ELIOT L. ENGEL, New York
LEE TERRY, Nebraska GENE GREEN, Texas
MIKE ROGERS, Michigan DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania LOIS CAPPS, California
MICHAEL C. BURGESS, Texas MICHAEL F. DOYLE, Pennsylvania
MARSHA BLACKBURN, Tennessee JANICE D. SCHAKOWSKY, Illinois
Vice Chairman JIM MATHESON, Utah
PHIL GINGREY, Georgia G.K. BUTTERFIELD, North Carolina
STEVE SCALISE, Louisiana JOHN BARROW, Georgia
ROBERT E. LATTA, Ohio DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington DONNA M. CHRISTENSEN, Virgin
GREGG HARPER, Mississippi Islands
LEONARD LANCE, New Jersey KATHY CASTOR, Florida
BILL CASSIDY, Louisiana JOHN P. SARBANES, Maryland
BRETT GUTHRIE, Kentucky JERRY McNERNEY, California
PETE OLSON, Texas BRUCE L. BRALEY, Iowa
DAVID B. McKINLEY, West Virginia PETER WELCH, Vermont
CORY GARDNER, Colorado BEN RAY LUJAN, New Mexico
MIKE POMPEO, Kansas PAUL TONKO, New York
ADAM KINZINGER, Illinois JOHN A. YARMUTH, Kentucky
H. MORGAN GRIFFITH, Virginia
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Ohio
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
7_____
Subcommittee on Energy and Power
ED WHITFIELD, Kentucky
Chairman
STEVE SCALISE, Louisiana BOBBY L. RUSH, Illinois
Vice Chairman Ranking Member
RALPH M. HALL, Texas JERRY McNERNEY, California
JOHN SHIMKUS, Illinois PAUL TONKO, New York
JOSEPH R. PITTS, Pennsylvania JOHN A. YARMUTH, Kentucky
LEE TERRY, Nebraska ELIOT L. ENGEL, New York
MICHAEL C. BURGESS, Texas GENE GREEN, Texas
ROBERT E. LATTA, Ohio LOIS CAPPS, California
BILL CASSIDY, Louisiana MICHAEL F. DOYLE, Pennsylvania
PETE OLSON, Texas JOHN BARROW, Georgia
DAVID B. McKINLEY, West Virginia DORIS O. MATSUI, California
CORY GARDNER, Colorado DONNA M. CHRISTENSEN, Virgin
MIKE POMPEO, Kansas Islands
ADAM KINZINGER, Illinois KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia JOHN D. DINGELL, Michigan (ex
JOE BARTON, Texas officio)
FRED UPTON, Michigan (ex officio) HENRY A. WAXMAN, California (ex
officio)
(ii)
C O N T E N T S
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Page
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 1
Prepared statement........................................... 3
Hon. Jerry McNerney, a Representative in Congress from the State
of California, opening statement............................... 3
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 4
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 5
Prepared statement........................................... 6
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 7
Witnesses
Cheryl A. LaFleur, Acting Chairman, Federal Energy Regulatory
Commission..................................................... 8
Prepared statement........................................... 10
Answers to submitted questions............................... 78
Philip D. Moeller, Commissioner, Federal Energy Regulatory
Commission..................................................... 15
Prepared statement........................................... 17
Answers to submitted questions............................... 114
John R. Norris, Commissioner, Federal Energy Regulatory
Commission..................................................... 22
Prepared statement........................................... 24
Answers to submitted questions............................... 125
Tony Clark, Commissioner, Federal Energy Regulatory Commission... 34
Prepared statement........................................... 36
Answers to submitted questions............................... 134
Submitted Material
Statement, dated December 4, 2013, of the American Public Power
Association, submitted by Mr. Whitfield........................ 74
EVALUATING THE ROLE OF FERC IN A CHANGING ENERGY LANDSCAPE
----------
THURSDAY, DECEMBER 5, 2013
House of Representatives,
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:34 a.m., in
room 2123, Rayburn House Office Building, Hon. Ed Whitfield
(chairman of the subcommittee) presiding.
Members present: Representatives Whitfield, Hall, Shimkus,
Pitts, Terry, Burgess, Latta, Olson, McKinley, Gardner,
Kinzinger, Griffith, Barton, Upton (ex officio), McNerney,
Tonko, Engel, Green, Barrow, Matsui, Christensen, Castor, and
Waxman (ex officio).
Staff present: Nick Abraham, Legislative Clerk; Charlotte
Baker, Press Secretary; Ray Baum, Senior Policy Advisor/
Director of Coalitions; Sean Bonyun, Communications Director;
Allison Busbee, Policy Coordinator, Energy and Power; Patrick
Currier, Counsel, Energy and Power; Tom Hassenboehler, Chief
Counsel, Energy and Power; Jason Knox, Counsel, Energy and
Power; Ben Lieberman, Counsel, Energy and Power; Brandon
Mooney, Professional Staff Member; Chris Sarley, Policy
Coordinator, Environment and the Economy; Tom Wilbur, Digital
Media Advisor; Jeff Baran, Democratic Senior Counsel; Greg
Dotson, Democratic Staff Director, Energy and the Environment;
Caitlin Haberman, Democratic Policy Analyst; Elizabeth Letter,
Democratic Press Secretary.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY
Mr. Whitfield. I would like to call the hearing to order
this morning. We are going to be evaluating the role of FERC in
a changing energy landscape. And I am delighted that the
Commissioners of FERC are with us today. We appreciate very
much your being here. I certainly initially would like to
congratulate Cheryl LaFleur, who has been appointed the Acting
Chair of FERC.
And I enjoyed our meeting yesterday, Ms. LaFleur, and we
look forward to working with you on the many issues facing our
country as we adjust to this changing landscape that we all are
very much involved in.
I would say that I think the transcending issue that sort
of encompasses everything that we are talking about today does
relate to the changing landscape of energy in America. With
this low-priced natural gas we see a transformation from coal
to natural gas. Many States, and this administration
particularly, are being very aggressive in trying to increase
the amount of electricity produced from renewables as they try
to address climate change.
And I would say that as we move forward, and I think you
all particularly have to be sensitive to this, is that
frequently many people in the administration and other groups
point to Europe as a model for America. And yet in Europe 22
percent of electricity is now being produced from renewables.
They have an overcapacity of electricity in Europe. And as a
result they have very low wholesale prices, which is good, but
their residential rates and their manufacturing rates are the
highest in the world because of renewable surcharges.
And so what is happening over there is they are trying to
make this transition too quickly, in my view, and that is what
people are trying to do in America as well. But what is
happening over there is that the utilities, the baseload
utilities have lost, like, $800 million in market valuation
over the last 15 months or so. And so as you go to renewables
and you have to place more emphasis on distribution at the
local levels, there is not enough capital in the utility
industry there to meet those needs. And so they have a real
conflict in Europe right now.
And interestingly enough, they have mothballed 30 gigawatts
of plants producing electricity from natural gas in Europe
because of the high cost of natural gas coming out of Russia,
and we had our largest export market of coal last year in
recent memory and the Europeans took 45 percent of that,
because when Germany closed down their nuclear power plants,
they realized--and other countries over there realized--they
have to use some coal.
And so this administration, who talks all the time about
all-of-the-above policy, is in effect in their greenhouse gas
rules going to prohibit even the option of building a new coal-
powered plant in the future. So if we are going to talk about
an all-of-the-above policy and say that is our policy, then
that should be the policy.
And so we have introduced legislation. We don't expect
anybody to build a new coal-powered plant right now with
natural gas prices this low, but in the future, like in Europe
what they are discovering, it should be an option. And so I
look forward to the testimony of the Commissioners today to get
some of their views on the many challenges facing us.
And I look forward to your comments, Mr. Norris. I know you
made a comment recently in a smart grid conference in November
about your personal view is we don't really maybe need anymore
infrastructure for natural gas and fossil fuels. I may be
wrong, but I think you made that comment. And many of us would
disagree with that, particularly with the additional fields
that we have. And the Northeast talks to us all the time about
not having the infrastructure to get the gas to where it needs
to be.
But we all recognize that we have a lot of challenges, and
we can't meet those challenges unless we work together to meet
them. And we are going to continue to provide an alternative
view to this administration, particularly in the area of
energy, where we think that there are serious disagreements and
with dire consequences that are possible.
[The prepared statement of Mr. Whitfield follows:]
Prepared statement of Hon. Ed Whitfield
Today's hearing is entitled, ``Evaluating the Role of FERC
in a Changing Energy Landscape.'' Let me begin by first
expressing my congratulations to the Honorable Cheryl LaFleur,
who was recently named Acting FERC Chairman. Welcome Chairman
LaFleur, and welcome to the other Commissioners.
Today provides us the opportunity to consider the legal and
regulatory authorities of the Federal Energy Regulatory
Commission (FERC) and evaluate the manner in which FERC carries
out its statutory duties under the Federal Power Act, the
Natural Gas Act, and other authorities. FERC is tasked with
regulating the interstate transmission of natural gas, oil, and
electricity. FERC also is responsible for evaluating proposals
to build LNG terminals and interstate natural gas pipelines, as
well as the licensing of nonfederal hydropower projects. FERC
also oversees the reliability of the electric grid.
The reliability of the grid is of particular interest to me
given the dramatic shift we are experiencing in the electric
generation portfolio. Much of this shift has been driven by the
vast amounts of natural gas that are being developed. But this
shift also is being driven in large part by the EPA's new and
proposed regulations aimed at prohibiting the use of coal to
produce electricity. So I have serious concerns regarding how
the president's policies directly aimed at trying to bankrupt
the coal industry will impact grid reliability, fuel diversity,
and electricity prices for families and businesses. Given
FERC's role in overseeing the reliability of the grid, I am
very interested in understanding what impacts FERC believes
will result from the elimination of a significant portion of
affordable and reliable baseload generation.
I am also concerned with FERC's implementation of Order No.
1000--FERC's rule on Federaltransmission planning and cost
allocation. Some of FERC's initial compliance orders conflict
with FERC's statements before this subcommittee that it would
be flexible and respect regional differences while implementing
Order 1000. And I continue to have concerns that Order 1000
will, to the detriment of ratepayers, allow for the broad
socialization of costs to pay for transmission lines that will
carry expensive wind energy to load centers, even when the
economic or reliability benefits will be minimal.
Finally, with respect to organized wholesale electricity
markets, the committee stands ready to work with FERC as it
continues to examine ways to improve the functioning of such
markets to ensure consumers will continue to receive reliable
electricity at affordable rates.
The sectors and industries regulated by FERC comprise a
substantial portion of the U.S. economy and infrastructure, so
it is critical that FERC carry out its statutory duties
independently and effectively, and do so in a manner that will
help facilitate our new era of energy abundance.
Mr. Whitfield. So with that, at this time I would like to
recognize the gentleman from California, Mr. McNerney, for his
5-minute opening statement.
OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. McNerney. I certainly thank the chairman for calling
this hearing today, and it is an real opportunity for us to
have all the Commissioners in front of us. So I want to thank
you for coming out here today. This is an area that I have a
lot of passion for and a good background in.
As we know, FERC has broad jurisdiction over the
electricity and natural gas markets, such as setting
electricity and transmission rates, overseeing regional
transition organizations, such as the one we have in
California. It is now time to make some important decisions
about our Nation's energy infrastructure and FERC will be an
essential component of that decision-making process.
Efforts to increase renewable energy production, growth of
natural gas, and the need to ensure a secure grid will all be
critical issues. In fact, there is no shortage of issues to
discuss, including what defines the public interest with
natural gas exports, licensing LNG export facilities, licensing
natural gas pipelines, smart grid innovation, renewable energy,
to name only a few.
States such as California are implementing aggressive
renewable portfolio standards, and there is a need to ensure
grid stability. It is becoming increasingly important that we
have an energy infrastructure that is capable of meeting these
demands.
Our energy infrastructure needs cyber and physical
protections. Threats to our grid are real, and transitioning to
smart grids presents both an opportunity and a threat to grid
security. The Energy Policy Act of 2005 made significant
progress, providing FERC with the authority to oversee power
grid and to establish critical infrastructure protections.
However, more needs to be done to protect the grid. The Energy
Policy Act focused on bulk power systems, which can exclude
some transmission local distribution and other grid facilities.
I think it is worth exploring FERC's role in the grid, an
area of increasing innovation and technical developments. These
are areas which we can improve upon, such as response during
emergency situations and addressing potential improvements to
critical grid infrastructure protection initiatives.
FERC's coordination with the North American Electric
Reliability Corporation--a little bit of an mouthful there--or
NERC, regarding standards and reliability, such as those
related to cybersecurity, remain a high priority for me.
Lastly, we must analyze these challenges in the context of
climate change, a serious threat to our Nation on several
levels that has been acknowledged by scientists as well as
leaders at the Pentagon. Combined, these issues will dictate
how we are able to manage and respond to rapidly changing
energy technology, as well as managing supply and demand in the
markets.
At this point, I would like to yield to my colleague from
Texas, Mr. Green.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you Mr. Chairman, and thank my ranking
member for yielding to me and allowing me to speak.
Today, our witnesses will discuss issues that face our
country now and in the future, including grid security, gas-
electric coordination, electricity transmission and
infrastructure permitting.
It is important to note that Texas is the face of the
changing energy landscape. In Texas we have demand for energy
that is growing exponentially. We have grid issues that
threaten our economic growth, we have infrastructure needs for
market delivery and power generation. We must coordinate and
balance all these challenges with the resources necessary to
overcome them. Wind power and natural gas offer Texas a way to
clear all these obstacles.
Additionally, our domestic supplies allow us to meet not
only our challenges, but those of our neighbors. But this, too,
must be addressed correctly.
Last month, we held a hearing on H.R. 3301, the North
American Energy Infrastructure Act. At the hearing, FERC was
concerned about H.R. 3301 with the effect of their ability to
comply with section 3 and section 7 of the Natural Gas Act. I
think after initial misreadings, we want to emphasize that
FERC's section 3 and section 7 authority remain in place. In
fact, H.R. 3301 provides FERC additional authority by
eliminating the Presidential permit process, creating a
regulatory structure within the Commission, and gives FERC the
ability to approve the import or export of natural gas across
national boundaries.
I think many members of this subcommittee have confidence
in FERC's pipeline permitting ability, and H.R. 3301 is an
example of that. And I look forward to discussing all these
issues today at the hearing, and thank our witnesses for being
here, and again thank my ranking member for yielding to me. I
yield back my time.
Mr. Whitfield. The gentleman yields back.
At this time I recognize the chairman of the full
committee, Mr. Upton of Michigan, for 5 minutes.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Well, thank you Mr. Chairman.
America's energy picture is rapidly changing and America's
energy regulators have got to keep pace. Long held beliefs in
American energy scarcity have given way to a new era of energy
abundance, especially in regards to oil and natural gas, but
many policies and attitudes are still rooted in the outdated
assumptions of shortages and rising imports, with the potential
to obstruct the opportunities before us, and FERC is in the
middle of many of those debates.
For example, America's new abundance of oil and natural gas
requires new infrastructure to meet demands and keep prices
affordable. And we have got to build this architecture of
abundance quickly, given that America's oil and gas output has
been rising every year and is straining the existing
infrastructure.
But nearly every new project is met with stiff resistance
at every step of the process. Opponents are enabled by an
archaic Federal regulatory process that can be manipulated to
cause years of delays for pipelines, power lines, LNG export
projects, and in some cases can block them outright. And while
the process at FERC generally works well, there is always room
for improvement.
Canada, Australia, and most EU nations have deadlines for
their environmental regulatory agencies to act. Why shouldn't
the U.S. hold our agencies to a similar standard?
Congress has been active to keep pace with the new energy
landscape. The House recently passed H.R. 1900, a bipartisan
bill that creates more accountability for the natural gas
pipeline approval process. We will soon be considering other
infrastructure projects as well, including a bill that I have
coauthored with my friend Gene Green to bring more certainty to
energy projects that cross our border with Canada or Mexico to
help create a more robust and self-sufficient North American
energy market.
American energy holds tremendous potential for millions of
jobs and for affordable energy prices for everyone from
homeowners to small businesses, certainly to manufacturers,
too. And the U.S. is always the proud global leader in the safe
and responsible development of our resources. The prospect of
LNG exports not only means jobs in the U.S., but also means
improved relations with our allies and trading partners and
enhanced standing around the globe. But none of these benefits
can be achieved if America's energy is choked off by red tape,
which is precisely why we are examining the uncertain FERC
policies today.
I look forward to working with the Acting Chair and all of
the Commissioners before the committee. I look forward to a
constructive and productive dialogue and process as we move
into next year and the years beyond.
And I would yield time--anyone to our side needing time? If
not, I yield back the balance of my time.
[The prepared statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
America's energy picture is rapidly changing, and America's
energy regulators must keep pace. Long-held beliefs in American
energy scarcity have given way to a new era of energy
abundance, especially in regards to oil and natural gas. But
many policies and attitudes are still rooted in the outdated
assumptions of shortages and rising imports, with the potential
to obstruct the opportunities before us. And FERC is in the
middle of many of these debates.
For example, America's new abundance of oil and natural gas
requires new infrastructure to meet demands and keep prices
affordable. And we must build this architecture of abundance
quickly, given that America's oil and gas output has been
rising each year and is straining the existing infrastructure.
But nearly every new project is met with stiff resistance
at every step of the process. Opponents are enabled by an
archaic Federal regulatory process that can be manipulated to
cause years of delays for pipeline, power line, and LNG export
projects, and in some cases can block them outright. While the
process at FERC generally works well, there is room for
improvement. Canada, Australia, and most European Union nations
have deadlines for their environmental regulatory agencies to
act; why shouldn't the U.S. hold our agencies to a similar
standard?
Congress has been active to keep pace with the new energy
landscape. The House recently passed H.R. 1900, a bipartisan
bill that creates more accountability for the natural gas
pipeline approval process. We will soon be considering other
infrastructure measures as well, including a bill I have co-
authored with Gene Green to bring more certainty to energy
projects that cross our border with Canada or Mexico to help
create a more robust and self-sufficient North American energy
market.
American energy holds tremendous potential--for millions of
jobs and for affordable energy prices for everyone from
homeowners to small businesses to manufacturers. The U.S. is
also the proud global leader in the safe and responsible
development of our resources. The prospect of LNG exports not
only means jobs in the U.S., but it also means improved
relations with our allies and trading partners and enhanced
standing around the world.
But none of these benefits can be achieved if America's
energy is choked off by red tape, which is precisely why we are
examining certain FERC policies today.
I look forward to working with the commission and welcome
Acting Chairwoman LaFleur and all of the Commissioners before
the committee. I look forward to a constructive dialogue and
process as we move into 2014 and the years ahead.
Mr. Whitfield. The chairman yields back the balance of his
time.
At this time, I recognize the gentleman from California,
Mr. Waxman, for 5 minutes.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you very much, Mr. Chairman.
I would like to thank each of the Commissioners for being
here today, and I want to congratulate Ms. LaFleur on her new
role as Acting Chairman.
The Federal Energy Regulatory Commission has a broad range
of important issues before it, from renewable energy
integration and electric transmission modernization to
hydropower licensing and enforcement actions to prevent energy
market manipulation. But I want to focus on an issue that has
not gotten enough attention during this Congress, and that is
grid security.
The Nation's critical infrastructure and defense
installations simply cannot function without electricity. Yet,
it is clear that the electric grid is not adequately protected
from physical or cyber attacks. And these are not theoretical
concerns. Just this April, there was an actual attack on our
electricity infrastructure. This was an unprecedented and
sophisticated attack on an electric grid substation using
military-style weapons for the attack. Communications were
disrupted. The attack inflicted substantial damage. It took
weeks to replace damaged parts.
Under slightly different conditions, there could have been
a serious power outage or worse, and the FBI and others are
investigating this attack. So as not to harm any ongoing
investigation, I won't disclose details of the incident, but I
have been in touch with the FBI, and they are willing to
provide the members of this committee with a briefing on the
very real threat that attacks like this pose to our critical
infrastructure. And I hope the chairman will work with me to
get that briefing scheduled quickly so that members can get the
facts.
The April attack is hardly the only threat facing the grid.
A few months ago in Arkansas there were multiple attacks on
power lines and grid infrastructure that led to millions of
dollars in damage and brief power outages. Independent
engineers also recently discovered a new cyber vulnerability in
the software used by many electric grid control systems.
We rely on an industry organization to develop reliability
standards for the electric grid through a protracted,
consensus-based process. FERC lacks authority to directly
address these threats and vulnerabilities. And that is
incredible. FERC lacks the authority to address these threats.
Congress needs to fix this gap in regulatory authority.
In 2010, the bipartisan GRID Act would have provided FERC
with the necessary authority. There was a bipartisan consensus
that national security required us to act. That bill was
reported out of the Energy and Commerce Committee by a vote of
47-0, and then it passed the full House by voice vote. However,
the Senate did not act on this legislation.
Mr. Chairman, we have worked on this issue in a bipartisan
way in the past and we should be able to do so again. We need
to give FERC important new authorities like the authority to
take action to protect the grid in emergencies. This is a
national security issue that deserves our attention. We should
act now while there is still time to protect against successful
attacks.
Thank you, Mr. Chairman, for this chance to make the
opening statement. I look forward to the testimony of the
members of the Regulatory Commission and to an opportunity to
engage them in questions. Yield back my time. Any other member
on our side wishes me to yield a minute? No. Yield back.
Mr. Whitfield. The gentleman yields back. So that concludes
the opening statements. So at this time I would be recognizing
each one of you for your 5-minute opening statement. And all of
you are skilled witnesses and you know that our little lights,
red, yellow, and green, what they mean. So the only reason I
mention that is that we are expecting some votes on the floor
sometime this morning, and I am hoping that we will have an
opportunity to go way down the road before that happens.
So, Ms. LaFleur, you are recognized for 5 minutes for an
opening statement. Thank you.
STATEMENTS OF CHERYL A. LAFLEUR, ACTING CHAIRMAN, FEDERAL
ENERGY REGULATORY COMMISSION; PHILIP D. MOELLER, COMMISSIONER,
FEDERAL ENERGY REGULATORY COMMISSION; JOHN R. NORRIS,
COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION; AND TONY
CLARK, COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION
STATEMENT OF CHERYL A. LAFLEUR
Ms. LaFleur. Well, thank you very much, Chairman Whitfield,
Ranking Member McNerney, and members of the subcommittee. My
name is Cheryl LaFleur. For 3-1/2 years I have had the
privilege of serving as a Commissioner on the Federal Energy
Regulatory Commission, and I have appeared before this
subcommittee previously in that capacity.
Today, I appear before you as the Commission's Acting
Chairman, an appointment I received just 10 days ago. Thank you
for your good wishes, and I look forward to working with my
colleagues and the wonderful employees at FERC in my new role.
Thank you for holding this hearing today. My colleagues and
I appreciate the attention you give to your oversight duties
and the opportunity to share our work with you. I am honored to
lead the Commission at a time when our Nation is making
substantial changes in its power supply and its associated
infrastructure to meet environmental challenges and improve
reliability and security.
In particular, as you noted, we are seeing significant
growth in the use of natural gas for electric generation due to
the increased availability and affordability of domestic
natural gas, and to the relative environmental advantages and
flexible operating characteristics of gasgeneration. And that
is, I think, a significant advantage we have over Europe with
the abundance of domestic natural gas to balance our renewable
resources.
The second driver of change is the tremendous growth of
renewable and demand side resources, which is being fostered by
developments in technology and by policy initiatives in 39
States and at the Federal level. Finally, new environmental
regulations are also contributing to changes in power supply.
Although the drivers of power supply changes are largely
outside the Commission's jurisdiction, we must be aware of and
adapt to these developments to carry out our responsibilities
to ensure just and reasonable rates, a reliable power grid, and
fair and efficient electric and gas markets. My colleagues will
discuss several of the ways we are responding. We divided up
these topics, and I want to focus the balance of my testimony
on another critical aspect of our work, reliability and grid
security.
Ensuring reliability means that the Commission and NERC,
our electric reliability organization, really take care of two
things. One is the day-to-day, nuts-and-bolts activities, like
trimming tress and setting relays to keep the lights on,
emergency response. And the second is emerging issues, like
cybersecurity. I believe we are making progress on both fronts.
In the past 3 years, we voted out numerous orders on the day-
to-day type standards of tree trimming, frequency response,
planning criteria, and so forth, and we hear from NERC that
they are seeing a reduction in transmission-related outages in
the grid as opposed to previous years. Going forward, we very
much have to build on that progress.
The emerging issues are somewhat different because we have
to try to set standards in an environment of incomplete
information. We don't have the benefit of decades of
experience, and we know the challenges are evolving. But it is
still incumbent on us to try to develop meaningful, cost-
effective regulation that we can enforce in an environment of
imperfect knowledge.
Two weeks ago, the Commission approved Version 5 of the
Critical Infrastructure Protection Standards that cover the
bulk electric grid against cybersecurity incidents. They are
not perfect. We did ask some questions as we approved them,
things that we wanted modified, but they represent a
substantial step forward from the protections that were in
place before.
We have also started a rulemaking to require standards to
protect against geomagnetic disturbances that can be caused by
solar storms and human actions, a real example of high-impact,
low-frequency threats to reliability that we need to get ready
for before they happen.
Finally, I want to touch on the subject that Congressman
Waxman raised, the physical security of the assets that make up
the grid, protecting them from tampering, vandalism, and
sabotage. In general, our approach in this area has been based
on cooperative efforts with industry and with other government
agencies--DHS, FBI, DOE, and so forth--to try to develop best
practices and communicate with industry to make sure they are
implementing those best practices.
Thank you very much for the opportunity to be here today,
and I look forward to your questions on any aspects of the
Commission's work. Thank you.
[The prepared statement of Ms. LaFleur follows:]
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Mr. Whitfield. Thank you, Ms. LaFleur.
And, Mr. Moeller, you are recognized for 5 minutes.
STATEMENT OF PHILIP D. MOELLER
Mr. Moeller. Well, thank you, Chairman Whitfield, Ranking
Member McNerney, members of the committee. Thank you for having
us back for this valuable oversight role that you undertake for
the Federal Energy Regulatory Commission.
I am Phil Moeller. I am a sitting Commissioner. And your
staff asked us to focus on three areas in our testimony today
and add additional items that we thought were relevant. So I
will talk about the three items--Order 1000, pipeline siting,
hydroelectric siting--and add a couple of more--gas-electric
coordination and some reliability concerns on the electric
grid.
Related to Order 1000, I was generally supportive of Order
1000 because I felt like it would add to the certainty to build
needed additional electric transmission in this country. And
for the most part, I think it has helped particularly with the
transmission planning process. It has forced a more open and
arguably more accountable process.
There were a couple of areas that I disagreed with the
majority on. The first was how we deal with the right-of-first-
refusal projects. This is specific to reliability projects, not
those economic projects that reduce congestion costs or the
public policy projects that try and promote generally
renewables through transmission, but rather when a utility is
required because of NERC standards to build a project to
enhance reliability. I would have preferred that we give a very
limited time of right of first refusal to the incumbent
utilities because I didn't think the litigation risk was worth
it. And we are seeing the litigation now on that issue.
Hopefully that will be resolved soon.
The second area had to do with the cost allocation methods
in the rule and the concern that, because of the regional cost-
sharing element of it, it would force utilities or give them
the incentive to, instead of building more regional projects,
just go to local projects. And I think particularly in the
Midwest we have seen that happen.
But for the most part, we have several more years of Order
1000 compliance ahead of us, we have further iterations of the
intraregional filing, and we haven't even tackled the
interregional filings yet and those are going to be very
complex with some major policy issues. So Order 1000 will be
with us for a while.
Related to hydro siting and pipeline siting, we have a lot
of similar issues, and I know members of the committee have
been concerned about the length of time that that has taken.
But simply put, we are dependent on State and Federal resource
agencies in the process to deliver their part of the analysis.
And if they delay that, it will delay our ability to act. And I
know there has been legislation to consider moving this up.
There are more extensive legislative concepts out there in
terms of actually giving FERC the ability to decide whether
some of these conditions are in the public interest. That would
take a major legislative change. But if you are interested we
can talk about that further.
Related to gas-electric coordination, Acting Chair LaFleur
referenced this, we have been working on this now for about 22
months at the Commission. We have had a series of seven
technical conferences. The first five were regional in nature.
Then we dug down to a series of issues, the first set on
communication, whether people are comfortable talking to each
other in this, when there is typically a weather-related supply
squeeze. Then we talked about the timing mismatch of the gas
trading day and the electric trading day.
I am happy to report that as a commission we issued a final
rule on the communication protocols just last month. And I want
to thank OMB. I don't know who it was, but they made an effort
to make sure that we could have a 30-day turnaround on that
rule so that it would be effective December 23rd, before we go
into the really tight heating season this year. So they deserve
some thanks for that.
On electric reliability, we do have an impending issue
related to the effectiveness of the MATS rule, and I just want
the committee to be aware of the fact that we are looking at
potentially some pretty tight situations in the Midwest, the
footprint of the Mid-Continent Independent System Operator,
perhaps as early as the summer of 2015, but certainly as soon
as the summer of 2016. It is something that I really think
deserves your attention. I know that the MISO is working
heavily with the States to try and come up with a solution. We
are happy to let them try and solve it.
But the time is extremely tight. They can tell you more the
numbers, but we are looking at some pretty small reserve
margins for the footprint. And recall that under the MISO
agreement, they all share the surplus, but they also share the
deficits. So if there is a regional deficit, the pain will be
shared in terms of, frankly, rolling blackouts if it comes to
that. We can hope for a cool summer in the summer of 2016, but
that is not necessarily a prudent approach.
So with that, I am happy to answer any questions at the
appropriate time.
[The prepared statement of Mr. Moeller follows:]
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Mr. Whitfield. Thank you Mr. Moeller.
And our next witness is Mr. John Norris.
And you are recognized for 5 minutes, Mr. Norris.
STATEMENT OF JOHN R. NORRIS
Mr. Norris. Good morning, Chairman Whitfield, Ranking
Member McNerney, and members of the subcommittee. Thank you for
holding this hearing and the opportunity to testify.
As I acknowledge in my written testimony, there is
significant change occurring on our energy landscape. The
operation of our energy system in America has experienced, in
my view, only modest, incremental change over the last many
decades. Yet in recent years, the rapid development of new
technologies is bringing much more rapid change to the system.
That change can be disruptive. But I think embracing these
changes will allow for a much more efficient utilization of our
energy resources.
The challenge before us, I believe, is to enable our system
to be more efficient through the utilization of new
technologies and foster the development of a diverse set of
competitive energy resources, while at the same time ensure we
have a reliable supply of power at just and reasonable rates
for consumers.
As a result of the development of fracking technology, we
are experiencing an abundant supply of natural gas and
resulting gas prices at their lowest since 2002. This new
supply of gas is changing the economics of electric generation,
resulting in the retirement of older and less efficient coal
units and most recently some nuclear plants.
The new generation being built to replace these units is
primarily combined cycle gas plants, wind, and solar
generation. This recent trend appears likely to continue. This
change in our generation mix has been driven by a significant
degree by the economics around low-priced gas and the
development of more efficient and productive wind turbines and
solar panels. The other drivers are little to no load growth,
public policies such as renewable portfolio standards,
compliance with EPA rules implementing clean air standards, and
the development of demand side management technologies, like
energy efficiency and demand response.
At the same time change is occurring in our electric
generation we are also experiencing significant developments in
technology around grid operations. A large percentage of our
existing transmission and distribution grid is quite old and
only modest technology enhancements have been made in nearly a
century of operations. That system is being replaced by a grid,
most commonly referred to as the smart grid, that is opening up
multiple opportunities for more efficient utilization of our
energy resources and expanding the marketplace for electricity
to a vast new supply of diverse energy resources.
One of FERC's recent focuses has been the adjustment of
market rules and regulations to ensure that all resources,
including new technologies, are able to compete in our energy
market and our energy system. The continued investment in new
technology and jobs in energy production and management of our
energy consumption is critical for maintaining a competitive
energy economy and efficient utilization of our resources. As
our energy system changes, providing stability, market access,
and fair regulatory treatment is critical to maintaining
continued investment in our energy infrastructure.
My written testimony covers several recent actions that
FERC has taken that reflect our efforts to make adjustments
around these new technologies and resources. I will be happy to
answer any questions you may have about these FERC actions,
other FERC actions, and to help you in your oversight
responsibilities of our agency.
Thank you very much.
[The prepared statement of Mr. Norris follows:]
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Mr. Whitfield. Thank you, Mr. Norris.
And our next witness, of course, is Mr. Clark.
And, Mr. Clark, you are now recognized for 5 minutes.
STATEMENT OF TONY CLARK
Mr. Clark. Thank you, Mr. Chairman, Mr. Ranking Member, and
members of the committee. My name is Tony Clark. I am the
newest member of FERC. I have had the opportunity to speak
before you in a previous job, but this is my first opportunity
as a member of the FERC. So thank you for the invitation to be
here with you here today.
In my opinion, and, Mr. Chairman, this is something you
referenced, the biggest story in energy today is the revolution
that is taking place in shale gas and shale oil, probably the
biggest story in decades. And this flood of domestic gas has
really upended utility planning models and market fundamentals.
Gas at the sustained prices that we are seeing now today is
dramatically impacting where utilities are putting their money
in the build-out of the grid.
As an example, in 1990 coal was responsible for about 53
percent of the electricity that was produced, with natural gas
producing just 13 percent. EIA is projecting that by 2040, 35
percent of electricity will come from coal and 30 percent from
natural gas. But I would note, however, that predicting these
sorts of things is highly speculative. We know that there is
some pending rulemakings by the EPA, and depending on how those
come out it could have a dramatic impact on how these futures
play out.
Such nationwide projections also tend to gloss over the
very highly regional nature of our energy and electricity grid.
Some regions of the country, such as the central Appalachia,
the South, are much more heavily dependent on coal than others,
such as New England and the Northwest, and so the implications
of fuel switch has a much different impact depending on where
you live.
The Commission is heavily engaged in the work of assessing
these fuel mix changes and responding to the regional
implications of it. For example, FERC has undergone significant
efforts with regard to the implications of gas-electricity
interdependency that Commissioner Moeller mentioned as more
electricity generators simultaneously turn towards natural gas
as a fuel source. This effort is important nationwide, but it
is particularly crucial for a region like New England where a
number of factors, including geography and State-level policy
choices, have created an electricity delivery network that is
very dependent on a constrained supply of natural gas.
The analysis takes on a different shade in other regions of
the country. For example, in my home region of the Midwest coal
has traditionally been the primary source of electricity, but
today a combination of affordable shale gas and impending EPA
regulations is creating a situation where there are increasing
concerns about reserve margins and supply adequacy, as
Commissioner Moeller noted, especially as we get into that
2015, 2016 timeframe, and it is something we are paying close
attention to and I know the committee is as well. Nonetheless,
under any scenario, it is clear that gas will play a much
bigger role in the future than it has in the past.
As you might expect, the shale revolution, in both liquids
and natural gas production, is having a tremendous impact on
the work of FERC itself. As the committee is aware, the FERC
has broad oversight of both economic and siting regulation of
the natural gas pipeline industry. In recent years, the
Commission has seen a shift in this type of work as industry
responds to the burgeoning shale plays. Shale gas basins have
seen significant pipeline investment. Shale basin pipeline
projects that are either in service or in some part of the
permitting process at FERC total now over 3,400 miles of pipe,
delivering over 31,000 MMcf per day of capacity with a total
investment of over $18 billion.
This large amount of natural gas in the U.S. is also
creating an impetus for something that was nearly unimaginable
10 or 15 years ago, which is LNG export applications as opposed
to import terminals, and this is the area of significant
increase for the Commission's workload. Presently, the FERC has
13 proposed LNG export terminals and 3 LNG import terminals in
some phase of the permitting process. And as you would expect,
these are major investments and the reviews are quite
extensive.
Given the influx of natural gas siting work, I believe the
FERC must continually assess our staffing levels and priorities
to ensure that we task enough resources to process these
projects in a timely and thorough manner. In addition, while
the FERC has no control over other Federal agencies that inform
our siting process, I would encourage them to help us by also
doing what they can to be timely in their assessment work.
Mr. Chairman, with that, I will conclude my testimony. And
I touched on a few things, but of course I would be happy to
answer any questions that you or the committee members may
have.
[The prepared statement of Mr. Clark follows:]
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Mr. Whitfield. Thank you Mr. Clark.
And thank all of you for your opening statements. And at
this time, we would like the opportunity to ask you some
questions, and I would like to recognize myself for 5 minutes
to get started.
Mr. Clark, you mentioned the difficulty in trying to
forecast the future. And I might add that last year EPA
projected that less than 10 gigawatts of the Nation's coal-
fired generation would retire by 2015 as a result of utility
MACT. It is not quite 2014, and already announcements have been
made to close 50 gigawatts of coal-fired plants because of
these EPA regulations and low natural gas prices.
One of your missions is reliability, and there has been a
lot of discussion about EPA, whether or not they take that into
consideration and the communication and dialogue between FERC
and EPA on reliability issues. Do any of you have any concerns?
These plants have been announced they are closing, 50
gigawatts, that is a lot, but they are not going to be closed
for, you know, maybe another year or so. We will start with
you, Mr. Clark, to address that issue briefly, and then I would
like to just go down the line.
Mr. Clark. Sure. Mr. Chairman, the greatest concern, as we
have indicated a couple of times already this morning, is
probably in the Midwest, the Mid-Continent ISO, MISO, where
they are projecting that by the 2016 timeframe they are likely
to have a shortfall of somewhere in the neighborhood of 7.5
gigawatts of where they would like to be in terms of reserve
capacity. That is a projected number. They are almost certain
that there is going to be a shortage of at least a little over
2 gigawatts. So that is the concern in that region. There are
concerns in other regions, but probably most acute in the
Midwest.
From my perspective, where I would like to see the FERC go
is to maintain its independence as an independent regulatory
agency, provide what information that we can through the
resources that we have through our own modeling efforts to
provide information to all of you, as well as the rest of the
Federal Government, so they can understand the implications of
different policy choices that may be made.
Mr. Whitfield. Thank you.
Mr. Norris, do you have a comment on that.
Mr. Norris. Certainly, yes. I think Commissioner Clark, I
share his concerns, the concerns that Mr. Moeller shared you
with about MISO, particularly in the Midwest region. And it
could be up to 7 gigawatts, it could be 8.5. They could be in
2016 looking at an 8.5 percent reserve margin. So absolutely I
am concerned about that.
Mr. Whitfield. Thank you.
Mr. Moeller.
Mr. Moeller. Well, I remain concerned. I testified before
this committee on the same subject. Remember that MATS takes
effect April 16, 2015. We will talk a lot about the fourth
year, but the fourth year is only for those plants that are
going to retrofit. So if you have got a marginal plant that
can't afford to retrofit, it is going to be shut down in
roughly about 15 months. And so extremely concerned, mostly the
Midwest, but we even had some issues in September in PJM. It
was shoulder season. We are going to have to be watching this
very closely. And I think we are hoping that the EPA will be
watching it with our help, as well.
Mr. Whitfield. And Ms. LaFleur.
Ms. LaFleur. Well, thank you. As you can tell, this is an
issue we have been very engaged in. For the past 2 years
Commissioner Moeller and I have cochaired a forum with the
State regulators at NARUC on this very issue, and the EPA has
come to every single one of our meetings and discussed some of
the issues--how compliance is going, how supply chain issues
are going and so forth.
I would say over most of the country I think MATS
compliance is well underway. A tremendous amount of
construction work is going on right now. There is no question
the most significant issues are in the Midwest due to a variety
of factors. And in addition to relying on the Mid-Continent ISO
and the States, we need to stay closely involved.
Mr. Whitfield. Do you feel like EPA is actually listening
to you on these reliability issues?
Ms. LaFleur. I do because in 2011 when they put out their
rule, they included a consultative role for FERC if somebody
needs a fifth year. And I believe that includes not just a
fifth year for the retrofit, and not just for retrofits, but
also if they need a fifth year to bring transmission in before
a plant can retire. And we voted out a policy statement of how
we would handle those. We haven't gotten them yet because it is
not far enough along in the process.
Mr. Whitfield. Well, they tell us they are listening to us
a lot and sometimes we don't think they are. But our views may
be different.
Ms. LaFleur. Well, I have been very grateful that they come
to all the NARUC meetings and I have a commitment from them
that they will continue. But it is something that needs close
vigilance.
Mr. Whitfield. All right. I was going to ask you about your
priorities. I felt like Mr. Wellinghoff's agenda at FERC was
basically coinciding with the administration's energy policy,
but maybe we will have an opportunity to talk later about that.
At this time, my time has expired, I would like to
recognize the gentleman from California for 5 minutes, Mr.
McNerney.
Mr. McNerney. Thank you, Mr. Chairman.
One of the things I mentioned in my opening statement was
cybersecurity, and I know that that is also an issue that is
very important to Mr. Waxman. The thing is that smart grid
gives us a tremendous opportunity to gather information so that
we can become more reliable, so that we can predict grid
behavior, and gives us an opportunity to deliver renewable
energy reliably and so on. But it gives the utility companies a
tremendous amount of information about individual users, it
opens up grids, utility companies for cyberattacks, and so on.
Ms. LaFleur, you said that just 2 weeks ago the Commission
passed, I think you said cybersecurity standards?
Ms. LaFleur. Yes.
Mr. McNerney. Could you talk about that a little bit? Are
those mandatory standards? Are they voluntary? Let's hear a
little bit about that.
Ms. LaFleur. Well, thank you very much, Mr. Congressman.
Yes, they are mandatory standards. All of the bulk power
system, along with the nuclear plants, are really the only part
of our critical infrastructure right now that have mandatory
standards. And what is new about the critical infrastructure
standards we adopted 2 weeks ago, or we proposed to approve--
well, we did in a final rule approve 2 weeks ago, I am sorry--
is that for the first time they cover not just the super-
critical assets, but all elements of the bulk power system
receive some level of protection because, as you indicated,
with the increasing digitization of the grid, even smaller
assets can potentially be a problem.
Mr. McNerney. So when do those standards take effect?
Ms. LaFleur. They take effect in general in 2 years,
because of the process of getting ready, but there are
standards in place now. The earlier generation and the new
generation becomes mandatory on top of those standards. But
there are mandatory standards already in effect.
Mr. McNerney. Mr. Norris, you mentioned that the old grid
technology was being replaced by smart grid. How do you feel
that process is progressing of changing the old with the new,
more secure grid technology?
Mr. Norris. Well, I think it is progressing at the pace of
great new technology being developed, and then the Smart Grid
Interoperability Panel working to make sure that the platform
is usable for all those new technologies. That is the critical
piece right now I think, is to make sure that the investment in
this new technology is useful, it provides great opportunity
for efficiency, and the addition of the cybersecurity standards
will, I think, enable that to be a secure system.
Mr. McNerney. Mr. Moeller, you mentioned that the FERC is
dependent upon local entities to deliver information on some of
the pipeline siting permits. How would Federal legislation that
establishes firm timelines, how would that affect the process?
Would the States be more responsive or would it just handcuff
FERC even further?
Mr. Moeller. Well, it is largely Federal agencies as well.
It depends on the project of course, resource agencies, whether
it is Federal, State, sometimes even local. I think the key is
you can put in statute perhaps timelines, you could also change
the statute in terms of our responsibilities. A lot of the
times it comes down to management and whether, particularly the
local office head, makes it a priority to deal with these type
of projects that we need the input on. And we have seen a wide
range of responsiveness and a lack of responsiveness throughout
at least the Federal agencies related to this.
Mr. McNerney. So you don't think the legislation would
change that?
Mr. Moeller. Well, the legislation in terms of timelines I
think has some positive accountability aspects. But you also
have to be careful, as I testified before this committee
earlier, that you don't force a timeline that results in a no,
because they will say they don't have enough time to analyze.
So the timelines and how they are administered would matter.
Mr. McNerney. Thank you.
You know, in the wake of the Enron's fraud and California
energy crisis in the early 2000s, Congress passed the
antimarket regulation authority in 2005. Recently FERC had an
enforcement action against JPMorgan for market manipulations in
California and the Midwest. Would you comment on how that
turned out, Chairwoman.
Ms. LaFleur. Well, thank you. That is a very important part
of our work. You gave us additional authority in 2005, and FERC
has geared up a very, I think, capable enforcement unit headed
by a former U.S. Attorney.
Recently, we have voted out a number of cases either
ordering somebody to show cause why they didn't manipulate the
market or actually a settlement with them in which they
acknowledged a manipulation, and JPMorgan is the most
prominent. Most of them relate to people taking positions in
the energy market to benefit something in the financial market
that can cause harm to other people in the energy market. And I
think we have to continue to make sure that we are very
vigilant that the markets are fair.
Mr. McNerney. Thank you.
My time has expired.
Mr. Whitfield. The gentleman's time has expired.
At this time I recognize the gentleman from Texas, Mr.
Barton, for 5 minutes.
Mr. Barton. Thank you, Mr. Chairman.
And welcome to our newest FERC Chairman. It is good to have
you here, ma'am, and the other three Commissioners.
I listened with interest to all four of the opening
statements, and I was struck at the breadth of regulatory
authority that the FERC has. It is an agency that almost no one
hears about, yet its impact on the U.S. economy, and to some
extent the world economy, is extraordinary. So it is a very
important position that you four people hold.
I am going to focus my questions on LNG siting. Of all the
stuff that you folks have responsibility over, there is
probably no more important mission that you hold today in terms
of the strategic interests of the United States than siting
these LNG facilities. The Congress gave you the authority to
make the final decision, or at least on the permits, back in
the Energy Policy Act of 2005. At the time we did it, we felt
you were going to be using that for LNG imports more than LNG
exports. But the fact is that between you and the Department of
Energy, you have the ability to affect strategic interests all
over the world.
I met last evening with some officials from the Russian
energy sector, and they are very, very aware of the impact LNG
exports from the United States will have in markets that right
now the Russians dominate, just as an example. I have also met
recently with Turkey, you know, Kazakhstan, some of these
countries, Qatar. It is just stunning how our ability to
produce natural gas with hydraulic fracturing and horizontal
drilling at the prices we can do it that are competitive
impacts our ability to affect strategic interests.
So my first question is, under law FERC and DOE have joint
authority. It is not real clear how that authority, if at all,
is coordinated. Madam Chairwoman, is there any ad hoc protocol
with the Department of Energy on how you review the permit
process and how DOE interviews the--just the fact that it is in
the national interest to do the exports?
Ms. LaFleur. Well, thank you for the question. It is a very
important part of our work. And as Commissioner Clark said, we
have 13 substantial applications pending.
We primarily work in our own lane, which is to review the
environment and safety issues of the facilities, and DOE
reviews the actual national interests, national security issues
with the export of the commodity. And so I think our staffs
communicate so we understand what our mutual statuses are, but
we don't actually, to my knowledge, actually collaborate on the
cases. We do our work and they do their work, to my knowledge.
Mr. Barton. Is there any interest at the Commission's level
with some congressional legislative guidance on how that
process should be coordinated, if at all?
Ms. LaFleur. Well, I guess at this moment I am not aware of
any undue delays in our process, although we would always
welcome Congressional guidance if we can do it better. I know
that there is Representative Upton's bill that would change
the--I guess that is really for other natural gas--that would
change some of the import/export, and I guess I hesitate to
comment on anything that is directed at the DOE process because
I really feel the DOE folks----
Mr. Barton. My time is about to expire. I am not trying to
be rude at all, I promise you that. But there is a recent
decision that the Department of Energy rejected, at least
partially, an application by Freeport on exporting from their
terminal, and it was a partial acceptance, partial denial. But
they stated that since the permit request at FERC was for one
amount of volume of natural gas per day that was less than what
they were asking at DOE, that they only approved the volume
that was in the application pending for the permit at your
agency. And since these volumes, depending on the level of the
volume, impacts the ability to finance the project, it seemed
pretty troubling. And according to at least my staff's reading,
the Department of Energy doesn't have any statutory authority
to even consider a FERC proceeding under the Natural Gas Act.
Can you comment on that? That is why I am asking about what
the coordination protocol, if any, is, because it is obvious
that DOE based their decision in terms of volume approval,
partially on what your agency was doing.
Ms. LaFleur. I think we dealt with or are dealing with the
application that is before us in the dimensions of what we were
asked to approve, and without reference to the fact that the
DOE application was apparently for a different amount. I would
be happy to take it back and dig into it more. I guess the
question is why the company put in two different amounts in the
two different applications.
Mr. Barton. My time has expired. I am not casting
aspersions. Strategically this permitting process is something
that we need to get right.
Mr. Whitfield. The gentleman's time has expired.
At this time I recognize the gentleman from California, Mr.
Waxman, for 5 minutes.
Mr. Waxman. Thank you, Mr. Chairman.
Chairman LaFleur, I know you have focused on electric
reliability and grid security during your tenure on the
Commission and I think you are right to make that a priority.
In my opening statement I talked about an April attack on an
electric grid substation in California, and my understanding is
that this was a sophisticated attack using military-style
weapons. And real damage was done, and the consequences could
have been far worse. You and I discussed this incident when we
met yesterday.
Chairman LaFleur, do you agree this was a serious,
sophisticated attack on the electric grid?
Ms. LaFleur. Absolutely.
Mr. Waxman. Do you share FBI's concern about publicly
discussing details of the attack?
Ms. LaFleur. Yes, because of the potential for copycat
attacks if too much is disclosed.
Mr. Waxman. Well, without getting into details, has
anything like this physical attack on the electric grid ever
happened in the United States before?
Ms. LaFleur. I am not aware of an incident with the same
sophistication in all of the elements. There have certainly
been sabotage-type incidents. You referred to the Arkansas one
and people cutting down towers and things. I have heard of
that. But this one seemed a little unique to me.
Mr. Waxman. Before he stepped down as Chairman, Mr.
Wellinghoff was personally briefing officials about this
attack. The FBI has agreed to brief members of the committee.
Would you be willing to have FERC staff brief committee members
as well?
Ms. LaFleur. Yes.
Mr. Waxman. Chairman LaFleur, does FERC have authority to
directly issue standards to protect the grid from physical and
cyber attacks?
Ms. LaFleur. I believe to an extent under the 215 because
there are physical standards for data centers and some that are
part of the cyber standards. So we have some authority.
Mr. Waxman. Do you have authority to directly issue
standards?
Ms. LaFleur. Well, it would have to go through the same
process you referred to. We can direct the development of a
standard, then industry develops it and files it.
Mr. Waxman. Well, does FERC even have the authority to
issue orders to a utility in a grid security emergency?
Ms. LaFleur. No. That is one of the things that I think a
lot of the legislation that has been pending has given either
FERC or DOE: emergency authority. It is lacking now in the
legislation.
Mr. Waxman. So you would think that it would be appropriate
for Congress to address this gap in authority?
Ms. LaFleur. Yes.
Mr. Waxman. Let me ask the other Commissioners as well. Do
each of you agree that Congress needs to address this gap in
authority? Mr. Moeller?
Mr. Moeller. Yes, my thinking has evolved. I think because
of the emergent nature of some of these threats it is worth a
good discussion in Congress.
Mr. Waxman. Thank you.
Mr. Norris.
Mr. Norris. Yes, I agree. Someone has got to be in charge
of making a decision if we are under threat.
Mr. Waxman. Mr. Clark.
Mr. Clark. I concur.
Mr. Waxman. I thank you. This committee should be working
in a bipartisan basis to ensure that FERC has the authority it
needs to protect the grid from physical and cyber attacks. And
I hope, Mr. Chairman, we can rebuild the bipartisan consensus
we had in 2010 on the need for legislative action.
And I yield back the balance of my time.
Mr. Whitfield. The gentleman from California yields back.
At this time I recognize the gentleman from Illinois, Mr.
Shimkus, for 5 minutes.
Mr. Shimkus. Thank you, Mr. Chairman.
Thank you all for coming. A lot of issues. I am going to
make a couple of statements, then I have got a line of
questioning that is parochial to southern Illinois.
But, you know, the first one is, and this is based upon
your testimony and some of my colleagues, shame on us if we
have rolling blackouts in the Midwest in 2016. I mean shame on
us, because it turns us back to a Third World country based
upon not balancing our portfolio properly.
And the point being is, we are always going to need big
baseload generation. And I deal in the nuclear side. I think
there is attack on nuclear power. We know there is attack on
coal. We have got renewables coming in, but they are not at the
levels we need to maintain adequate supply. And that is why the
discussions that the chairman did on the EPA and this
discussion about reliability, we really need your help on this
because we cannot go down that route.
In fact, I think there has got to be a way, we have to
start talking about incentivizing major baseload, 800-megawatt
to 1,600-megawatt facilities to make sure that they are still
here because of the pressure that is being placed on them
because of natural gas and EPA rules and regs. I mean, it is
just a reality and we all know that. That is my little
statement.
Also I am chair of the Board of Visitors at West Point and
I want to follow up with MISO on a transmission grid issue. And
I was trying to get some information, didn't get that done in
time.
But for the sake of clarity of my constituents in southern
Illinois, and I am just going to make this a general question
and whoever is most apt to be able to answer that, that would
be fine. There is a huge transmission line project that goes
from the Missouri border to the Indiana border, it comes right
across the State of Illinois. It is called the Illinois Rivers
project.
One of the major fights has been on the route, as you can
imagine. And just for the record, it is my understanding that
route approval is something done with the State, specifically
the Illinois Commerce Committee, and not a FERC matter. Is that
correct? Everyone is shaking their head saying correct. Thank
you.
It is going to get a lot of my constituents off my back.
That is why I am asking these questions.
A second major concern has been over the return on equity
provisions, rate and Amron will receive for the project. Some
are questioning the 12.38 percent and want to know why they
receive that percentage regardless of how the project is
conducted. Am I correct that the return on equity is from the
MISO transmission owners agreement that was approved by FERC in
2003? And I am seeing the----
Ms. LaFleur. Yes. We have jurisdiction over the return on
equity.
Mr. Shimkus. Thank you. And that the return of equity would
be applicable to all transmission owners in the region and
their projects, not unique to Illinois Rivers Project. Is that
correct?
Ms. LaFleur. Yes. MISO has a region-wide return on equity.
Mr. Shimkus. Great. Thank you. Lastly, there was a
proceeding pending before FERC to re-evaluate the return on
equity where interested parties were able to submit comments on
the 12.38 percent return on equity rate at FERC. Can you tell
me where that stands and what the process is at FERC for
reviewing and making a determination on that complaint?
Ms. LaFleur. I am hesitant to comment on pending open
dockets before us, but I think you have my commitment and I
suspect those of my colleagues to give the ROE cases that are
pending before us a very high priority, because we know they
are important and in--there are several ROE transmission cases
pending before us that, as you have referenced, are very
important to the companies and the transmission grid.
Mr. Shimkus. And the interesting thing about this
transmission grid, it really--the citizens of southern Illinois
are getting no benefit from this line. It is just a pass-
through. So the personal disruption--and it is a pass-through
because of renewable portfolio standards and States is trying
to wield in green power. So that really needs to be part of the
consideration to understand that as these fights go on in
siting, there is no benefit to the folks in southern Illinois.
Let me end on the--I wanted to also end on this issue of
LNG exports, because I deal also--an additional duty I do is
democracy in eastern Europe, and these LNG exports are critical
to our NATO allies, Poland, Lithuania, who want to stop the
extortion by Russia and using energy as leverage and power. So
I agree with Chairman Emeritus Barton. This is not just a
critical issue for us; this is a critical issue for peace,
democracy, freedom, rule of all, and our allies in NATO, and I
hope you can keep that in consideration.
Yield back my time.
Mr. Whitfield. The gentleman's time has expired. At this
time I recognize the gentleman from Texas, Mr. Green, for 5
minutes.
Mr. Green. Thank you, Mr. Chairman.
And first of all, if you don't tell by my accent, I am from
Texas and I have a district in Houston, so--and I tell people I
was born there, but I have never not lived near a pipeline
easement in the Houston area, so, you know, crude oil, natural
gas, liquids, you name it. So I don't have the big concern
about it, because it is just part of the way of our life. And
our committee has jurisdiction every few years to do pipeline
safety. And we passed a good pipeline safety bill last
Congress, and I can tell you in a few years we are going to
find technology's improved and how we can deal with it, and
hopefully we will pass another reauthorization with additional
standards that will make them even safer.
Commissioner Clark, in your testimony, you state that
approximately 75 percent of our daily consumption's covered by
North American resources. You also state that we are more
secure than we have been in decades. Would a viable North
America energy market further our security interests in?
Mr. Clark. Congressman, infrastructure generally helps
forward our energy security future. With regard to the 75
percent figure, that was in reference to liquid products, crude
oil. We have about 75 percent covered from North American
resources. On the natural gas side, it is off the charts. It is
way over 90 percent.
Mr. Green. Yes. OK. In a recent cross-border decision, FERC
stated that an export of natural gas would promote national
economic policy and stimulate the flow of goods and services.
What experience or authority would allow FERC to make such a
declaration?
Mr. Clark. Again, the bill you are referencing, is it the
3300?
Mr. Green. No. This is just--FERC stated the export of
natural gas would promote national economic policy and
stimulate the flow of goods and services. I was just asking you
what authority or experience does FERC have to show that----
Mr. Clark. Sure. Yes. Absolutely.
Mr. Green [continuing]. To make that statement?
Mr. Clark. I mean, FERC's ability to----
Mr. Green. I will get to 3301 in a minute.
Mr. Clark. Yes. FERC's ability to cite infrastructure is
clearly critical to the Nation's energy security future and to
our national interests.
Mr. Green. Would you agree that the statement that the
promotion of strong national economic policy is within FERC's
decision-making purview?
Mr. Clark. To the degree it is authorized by statute, yes.
Mr. Green. OK. To provide additional authority, do you
believe that FERC has the necessary expertise to coordinate and
make sound and reliable decisions relating to U.S. interests?
Mr. Clark. Generally speaking, I believe, yes.
Mr. Green. Thank you. Well, in a side note, a number of us
went to Mexico for an inter-parliamentary the Friday before
Thanksgiving, and one of the things that was the highlight of
our discussion with the Members of Congreso was the recent
decision on the pipeline from Texas, natural gas pipeline to
northern Mexico, because they don't--obviously have a lot of
resources but not enough production. And my concern is that--
and that was no problem at all. We may be selling or providing
natural gas to Mexico, but 20 or 30 years from now we may need
to be importing it from Mexico just because of our
infrastructure that we are building up because our reasonable
priced natural gas downstream, chemical, you name it,
manufacturing. But that was a big win when we were--you know,
with our neighbors in Mexico. So I appreciate that on those
cross-border pipelines, which brings me up to the H.R. 3301.
The North American Energy Infrastructure Act, FERC staff
raised concerns regarding confusion over whether the
legislation would prohibit FERC from fully complying with
Section 3 and Section 7 of the Natural Gas Act. If we were to
amend the legislation to specifically state that nothing in
H.R. 3301 would affect the need to fully comply with the
Natural Gas Act, do you believe FERC would no longer have
concerns with the legislation? And I guess I will ask Dr.
LaFleur.
Ms. LaFleur. I think you have identified the important
concern with the legislation. I think with an amendment, which
I have seen in the discussion draft, I think we would be
comfortable, I would be comfortable operating under the new law
with respect to natural gas imports and exports.
The other parts of the Act, electricity and oil, are beyond
us.
Mr. Green. And other agencies are in that Act will be able
to deal with those.
Ms. LaFleur. Yes.
Mr. Green. So I appreciate it.
Commissioner Moeller, in your testimony, you state that
FERC efficiency would be improved and that many delays are
caused by a lack of timeliness from other State or Federal
agencies. Could you provide a little more explanation on that?
Obviously State agencies, we don't have a whole lot of
oversight on, but other Federal agencies, is that delaying FERC
providing the typically 12 months turnaround time?
Mr. Moeller. Yes. We can give you specific examples later
if you want them----
Mr. Green. OK.
Mr. Moeller [continuing]. But it kind of depends. It goes
back to the point I made earlier. There is a lot of regional
differences. If the management regionally makes it a priority,
it happens; if they don't, they can drag their feet.
Mr. Green. OK. Before I lose all the time, Chairwoman
LaFleur, there is some concern in Texas about our reliability
issues, and a number of us on this subcommittee have made
attempts to resolve an issue, because Department of Energy says
you can do something with a power plant, but EPA says no, and
we are trying to correct that. I know our committee's passed
that H.R. 271, Revolving Environmental and Grid Reliability
Conflicts Act. I would hope we would deal with that, because
that would help us, at least in Texas, with some of our
liability issues and I think it would help nationally. So thank
you for your courtesy.
Mr. Whitfield. The gentleman's time has expired. The
gentlemen from Pennsylvania, Mr. Pitts, is recognized for 5
minutes.
Mr. Pitts. Thank you, Mr. Chairman.
The concept of beneficiary pace is at the heart of the way
our transmission system operates and assigns costs, and I am
concerned that under Order 1000, FERC is defining benefits so
broadly and spreading costs so widely that this simple axiom
has no meaning anymore.
Chairwoman LaFleur, please explain your idea of beneficiary
pace, what that should mean. And keep in mind, I don't want my
constituents paying for subsidized midwest wind into my market
with no voice in the process. And I know you can't address the
merits of individual compliance filings under FERC's Order
1000, but there is a legal point I would like to raise with
you, I think stands on its own, to which I hope you will be
able to respond.
Ms. LaFleur. Well, thank you very much, Congressman Pitts.
The Order 1000 required regions to plan cooperatively across
the region, as the region encompassing Pennsylvania already
does, and take into account three kinds of benefits:
reliability benefits, which can be very hard to quantify but
are very real; the meeting public policy requirements to
connect resources that States require them to connect, which
are normally identified by the States, such as Pennsylvania,
which has a renewable portfolio standard; and thirdly,
congestion benefits to reduce the cost of power by building
more transmission.
And the order required the regions to take those benefits
into account in assigning the costs, and I think the region
that Pennsylvania is a part of is a good example of coming up
with a hybrid proposal that used different types of cost
allocation together for different types of benefits that I
think is a--that we have approved preliminarily in the first
case.
Mr. Pitts. Do you think FERC has authority under the
Federal Power Act to allocate costs for new transmission to
entities that don't have a customer or contractual relationship
to the builder of the line and don't need the capacity provided
by the line?
Ms. LaFleur. I think that under the court decisions and our
orders, there has to be a proportionality between benefits and
costs, but not necessarily line-by-line. There can be a
portfolio of projects that a region agrees to that some benefit
one area, some benefit another. And if a region agrees to it,
we assume they have negotiated, that they all get something.
Mr. Pitts. Can you show me what section of the Federal
Power Act gives FERC this authority to allocate costs in the
absence of a contractual relationship?
Ms. LaFleur. Yes. We are relying on the sections of the Act
that require just and reasonable and non-discriminatory rates,
thinking that a process where the States involved and the
companies involved negotiate the costs will help ensure just
and reasonable transition rates.
Mr. Pitts. Commissioner Clark, in specific, FERC Order 1000
compliance filing orders, you have raised some serious concerns
about potential downsides of the Commission's implementation of
Order 1000. Can you elaborate on these concerns and
particularly the implications for consumers?
Mr. Clark. Sure. To the degree that Order 1000,
Congressman, deals with the need for perhaps greater regional
planning, I am on board with that. I think it is just prudent
for utilities to do so. To the degree that it is about trying
to come to more accommodation with regard to cause or cost,
payer cost payer allocation issues, I think that is helpful.
Where I have disagreed with the majority of the Commission
from time to time is with regard to how FERC has been
understanding and allowing the ISO's and RTO's and utilities to
take into consideration those State and local laws that they
still have to comply with because we have this Federal system
where they still have substantial State and local compliance
laws. And I have tended to argue that we need to give more
latitude for those utilities that we regulate to continue to
understand, to comply with and give them the flexibility to
take into consideration those existing State and local laws,
and not use Order 1000 as an attempt to sort of shake up the
jurisdictional box, which I think just leads to greater
litigation.
Mr. Pitts. Under Order 1000, it is predicated on the--it is
predicated on the idea, not the evidentiary record, that
insufficient transmission is being built. How does the order
solve this problem and how will we know when the proper amount
of transmission is being built? Will the marketplace tell us?
Will local utilities tell us? Will FERC tell us? What? Mr.
Clark.
Mr. Clark. Mr. Chairman and Congressman, the way I
understand it, it'll be an iterative process, so it will take a
little bit different shape in different regions. As I
indicated, the grid is highly regional by nature. In some
regions, like the midwest, you have renewables in parts of the
region, you have renewal portfolio standards in other parts of
the region, you have regional utilities and States coming
together and talking about some of those issues.
In other regions of the country, like the southeast, you
have a much, much different situation. You have don't have
access to renewables, and you have a different regulatory
structure in those States.
I just believe that FERC has to be open to understanding
each of those regional differences and accommodating those.
Mr. Pitts. OK.
Mr. Whitfield. The gentleman's time has expired. At this
time I recognize the gentleman from New York, Mr. Tonko, for 5
minutes.
Mr. Tonko. Thank you, Mr. Chair.
Commissioner LaFleur, in your testimony, you noted
improvement between the years 2011 and 2012 in the number of
nonweather-related bulk power system transmission related
outages. As you know, we have several other related issues that
can contribute to reliability problems, older transmission
lines and grid equipment that needs to be upgraded or replaced
and an increase in severe weather events that I have seen in my
district and throughout New York that can cause outages.
In addition, we have much more reliance on IT in general
for everything from financial transactions, to research and
manufacturing, things that require exceptionally reliable power
delivery.
How are these changes in the nature of the demand for
power, the aging parts of the grid and the increased frequency
and intensity of storm-related disruptions being considered in
FERC's reliability efforts?
Ms. LaFleur. Well, thank you. That is a big question. I
guess there are at least two different parts of it: one is the
actual reliability standards to make sure that the transmission
asset owners have the accountability for the refurbishment of
their lines so that the lines operate properly in order to meet
the standards, but secondly, is in--we were talking about Order
1000 transmission planning, a reference was made to
transmission rates, that is all a part of making sure that the
structures are in place so that the companies can invest the
money they need to replace aging infrastructure. And as you
know, I am familiar with some of the aged resources in your
region. They were--it was an early part of the country to
electrify.
Mr. Tonko. Thank you. Thank you very much. And FERC's
changes to the capacity market rules in both the PJM area and
ISO New England threaten to continue the ability of load-
serving entities to self-supply their own capacity resources to
serve their own loads. This problem is particularly acute for
publicly-owned and cooperatively-owned electric utilities,
because it endangers their ability to finance new generation
units needed to serve their customer base using their
traditional business model, which relies on long-term contracts
and lower cost debt.
Do you anticipate that public power or cooperatively-owned
utilities in these RTO's would be able to successfully exercise
buyer side market power and RTO capacity markets?
Ms. LaFleur. Well, this is a question that is directly
being looked at in our ongoing capacity marketing inquiry that
is open right now with a very heavy participation of public
power, but basically the capacity markets that are forward
price of what reliability is worth that is used to assign what
the generators, the existing fossil generators as well as new
generators, will get paid for being there. And if people are
allowed to bid in with a subsidized rate that doesn't refer to
the market, it can pull down the market rate and it could
affect everyone's reliability, but munis always have the right
to prove that their costs are lower and show the ISO that they
can self-supply because they can do it more cheaply.
Mr. Tonko. Thank you. Thank you. Mr. Norris, your testimony
describes the many changes that are simultaneously occurring
throughout the country in the power production use and delivery
landscape. I am particularly interested in the challenge that
our successes with energy efficiency, demand management and
renewables are presenting to the traditional economic models
for utilities. The success of energy efficiency and demand
management is a good story, but companies do not increase
profits by figuring out how to sell less of their major
product.
So how are we going to provide continued incentives to seek
more efficiencies and better management of demand if these
goals further erode utilities' ability to earn profits?
Mr. Norris. Well, Congressman, a lot of those
determinations are made at the State level, at the retail rate
regulation. What we have been doing at FERC is trying to make
sure that there is access to the markets for different new
technologies that enable demand response in energy efficiency.
Certainly you see it in the PJM market and the huge increase in
demand response capability and that ability for that to bid
into the marketplace, and PJM has fostered development of
demand response in that region.
Different regions of the country are also looking at ways
to develop better demand response resources or more demand
response resources. I presume it will be part of the package of
solutions in MISO as they look at meeting their potential
capacity shortfall in 2016 and beyond.
So what we are doing is to make sure that there is--that
demand response gets treated fairly in the marketplace, so as a
reward for investors in that technology.
Mr. Tonko. Do you see, like, a major restructuring of the
power sector over time?
Mr. Norris. Major restructuring of the?
Mr. Tonko. Of the power sector over time.
Mr. Norris. Yes. I think it is happening right now. I mean,
I think you have got a lot more people engaged. Historically it
has been central station power owned by the utility and
delivered to the homes and businesses. Now you have got--
consumers want to be involved and engaged in their own energy
production and more engaged in their energy usage. The
development of the technologies on the smart grid are enabling
those consumers to do that. The traditional utility and power
sectors having to respond to that change in customer demand,
much like what happened in the telecom sector, but it is
bringing great efficiencies to our utilization of energy.
Mr. Tonko. Mr. Chair, I yield back.
Mr. Whitfield. The gentleman's time has expired. At this
time I recognize the gentleman from Ohio, Mr. Latta, for 5
minutes.
Mr. Latta. Thank you, Mr. Chair.
And I thank the Commissioners for being with us today. I
appreciate your testimony. If I could start with Chairman
LaFleur, just a series of questions, if I could. Under Former
Chairman Wellinghoff, FERC's top initiatives included the smart
grid, demand response, integration of renewables, and Order
1000 transmission planning cost allocation. Do you see that you
would be continuing on with the former chairman's goals, or do
you have other goals? Do you agree with those, disagree, or
where do you see you directing the Commission?
Ms. LaFleur. Well, it is a timely question, because I am
just in the process of talking to each of my colleagues, since
it has been about a week that I have been in the job, to really
set consensus objectives going forward, but I see that
reliability and security will continue to be a top priority,
and that includes resource adequacy, because you need the
resources to be reliable, which we have talked about a lot this
morning. We have a lot more work to do on transmission, so
Order 1000, as I believe Commissioner Moeller said, is going to
be a big part of our work for a while, as well as transmission
rates that was brought up. And I think making sure the markets
are fair and that they work to attract the investment the
country needs, and that the infrastructure is there, are
clearly four priorities, but I think to be refined as we
continue forward, but those are things that are ongoing.
Mr. Latta. Well, if I could, just a couple of areas, then.
Where would you see that--like, natural gas pipeline
permitting, where would that be on your priority list?
Ms. LaFleur. Well, I think I referred to that in general in
the term ``infrastructure,'' but I think that in general, I
think our projects group does a good job handling the pipeline
applications in a timely fashion. We are seeing a lot of them,
especially spurs and compressor stations in the Marcellas, and
we have to continue to handle them. We do about 92 percent in a
year, and I think that we should continue to do so.
Mr. Latta. Well, you know, especially on the pipeline
permitting is very important across the midwest, especially, as
you just said, on the Marcellas and Ohio, we have the Utica.
And, you know, one of the great things we have is we have all
the natural gas, but one of the problems we are having is we
don't have the ability to get that natural gas where it needs
to be. The potential in Ohio where the chemical industry at the
same time being able to have that gas cracked and then to be
able to utilize it, again, all depends on that pipeline
permitting, so that is very, very important.
Also, what about on organized wholesale electricity
markets? Where do you see you on that?
Ms. LaFleur. I see that as the--all the things we have been
talking about today, the power supply changing, we have seen a
lot of changes in the markets to adapt to new resources and
make sure the resources are there when the customers need them.
Right now we are focusing in on the capacity markets, and I
don't think that that is going to change in terms of the level
of cases or the amount of things we need to look at.
Mr. Latta. OK. Just one last question, if I could, with
you, Madam Chair. What are the best measures to determine
whether the restructured wholesale electricity markets operated
by regional transmission organizations are benefiting
consumers?
Ms. LaFleur. Well, that is a big question. I think
certainly reliability is a key one, but also looking at the
costs over time. It is very difficult to compare the costs of
the restructured markets with the places that didn't
restructure, because the places that restructured were the high
cost places to begin with. That is why they restructured. But I
think looking at the costs and reliability are two big ones.
Mr. Latta. OK. And Commissioner Moeller, does FERC plan to
exert jurisdiction over the generation or transmission
activities of the non-jurisdictional entities?
Mr. Moeller. Not that I am aware of.
Mr. Latta. OK. I want to make sure about that.
And also, if I--my remaining 40 seconds, Commissioner
Clark, in Title 7 of Dodd-Frank, Congress required the FERC and
the CFTC to enter into a memorandum of understanding to
establish procedures for resolving your jurisdictional
conflicts over energy derivatives.
What needs to be done in order to resolve the
jurisdictional conflict between the agencies and provide
industry the certainty it needs?
Mr. Clark. FERC's position, Congressman, is that both
agencies should be able to fully share in the information that
we each have so that we can do what we believe Congress has
intended us to do. For whatever reason, for reasons that
predate my term on the Commission, that hasn't happened. We
have had now leadership changes in both commissions, and I am
hopeful that there can be a way that FERC and CFTC can have a
meeting of the minds and strike that MOU.
Mr. Latta. Thank you.
Mr. Chair, my time's expired and I yield back.
Mr. Whitfield. The gentleman's time has expired. At this
time, I recognize the gentlelady from Florida, Ms. Castor, for
5 minutes.
Ms. Castor. Thank you, Mr. Chairman.
And good morning. I think you all are serving on the
Federal Energy Regulatory Commission at a very exciting time. I
mean, this has been a remarkable time with the natural gas
revolution that comes at an important time when we have got
to--when we are seeing natural gas supplant coal at a--when we
know that it is vital to reduce carbon pollution, and then add
on top of that all of the innovation in the smart grid, demand
management and renewables. So while all that change is
occurring, your responsibilities remain very important to
ensure that consumers are protected, that you are charged with
enforcing laws that protect consumers and ensure fair
competition in the electric and natural gas markets, you have
got to maintain your important relationships with State and
regional partners to ensure that necessary energy
infrastructure gets constructed, but what Mr. Tonko was--
Representative Tonko was talking about, it is almost outdated
now, the old utility model of selling as many kilowatt hours as
possible.
Instead, with what we know about smart grids and energy
efficiency, we have got to be able to do some things, and some
States are doing it, to incentivize greater conservation while
at the same time keeping an eye on our infrastructure and
reliability. So I think what you all have been doing to ensure
that renewables compete on a level playing field is very
important, also that energy efficiency and demand side
management are also treated fairly as they compete with
traditional power generation.
Now, FERC itself has said that they recognize demand
response can help reduce electric price volatility, mitigate
generation, market power and enhance reliability. You have
issued a recent staff report, I know Mr. Norris was able to
comment on it. Madam Chair, could you comment on that recent
staff report, the findings, and what else FERC is going to be
doing to channel this great innovation across the country?
Ms. LaFleur. Well, thank you. Yes. The staff report is
something that we do under the Energy Policy Act, and it looked
at the level of demand response around the country. Our primary
focus is on the wholesale markets. I think we have--under--2
years ago did a--had a significant case on how you compensate
demand response in the energy markets. Right now there are a
lot of issues pending with respect to how you compensate demand
response in the capacity markets, and I think we will continue
to confront those as a part of our capacity market inquiry.
I do think, though, that a lot of the effort to unbundle
rates and incentivize efficiency is at the State level. And I
know your Commissioner is going to be the president of NARUC
soon, and I think that is where a lot of the innovation is
still coming in the retail markets.
Ms. Castor. It just seems like some States are so far
behind. I would say my State, we can do a much better job, and
people are really waking up to the fact. Young people now, they
expect to be able to use their smartphone to turn down their
thermostat.
And while, Commissioner Norris, you mentioned in your
testimony that you have had conversations with a number of
utility CEO's about their electricity generation plans for the
future, you said virtually all CEO's you talked to said they
were focused on increasing natural gas and renewable energy
generation. Is that right?
Mr. Norris. [No verbal response.]
Ms. Castor. And what do you--why do you think they are
recognizing, waking up to the fact that it is natural gas and
renewables that are their future?
Mr. Norris. A combination of low-priced natural gas and
apparent abundant supply, incentives for renewables and meeting
State renewable portfolio standards. But one of the biggest
factors we haven't talked about today is just the uncertainty,
the uncertainty of an investment in coal-fired generation,
because as I said in my written testimony, those CEO's and
people I have talked to in this industry, it is not just
whether--it is not just when--it is either when legislation
will occur or the likelihood it will occur at some point is
really precluding financing of new coal generation in this
country.
Ms. Castor. And it is the science and the economics as
well, the science that tells us we have got to reduce carbon
pollution and the economics are telling us the exact same
thing. Think about the State of Florida where now taxpayers are
going to have to invest and they are already investing huge
sums of money to begin to adapt to a changing climate. Think
about the huge bills, the bills that come due every time we
have an extreme weather event, whether it is drought or super
storms. And I would think that the utility industry also sees
the writing on the wall. They are looking for that certainty.
And the more aggressive we are on moving away from carbon
intensive energy generation, the better. Thank you very much.
Mr. Whitfield. The gentlelady's time has expired. At this
time, I recognize the gentleman from West Virginia, Mr.
McKinley, for 5 minutes.
Mr. McKinley. Thank you, Mr. Chairman.
Chairman LaFleur, perhaps you can give me some direction
here a little bit on this. We have a growing problem in West
Virginia with stranded gas and the production of the various
constituents with NGO that we can't use necessarily in the
local market, it has to be shipped. Currently a lot of it is
being flared or just wasted, which is a shame, and it doesn't
benefit the consumer and doesn't help the environment any.
So my question is, what I am hearing or sensing is there
is--and I think it is not unique just to West Virginia with
this exploration of the Utica and the Marcellas in a number of
States, there seems to be a potential jurisdictional problem
starting to flare up a little bit, and one of them is--so my
question to you is should we be treating NGO's as natural gas
and thereby allowing the Federal Government, your group, to
take care of that, or should we continue having the NGO's
handled at the State level and manage it that way? Do you have
a position on that?
Ms. LaFleur. I hadn't thought of the jurisdictional
question. It is a good thing for the committee to be looking
at. There is a lot of stranded gas capacity as well as gas that
is being flared because there is not sufficient take-away
capacity for the liquids. We only do the pricing for the
liquids pipelines under Interstate Commerce Act, but we don't
do the siting. I suspect some of the States that think they do
the siting very well would not welcome Federal siting. I think
we could do it well, because we do it well with gas pipelines,
but it might not be as popular with some of the States
involved, but I think----
Mr. McKinley. I think that is a fair statement.
Ms. LaFleur [continuing]. We've done a good job with that.
Mr. McKinley. I'm just trying--whether or not you want--are
you going to take a more passive and let the States continue to
do--or are you going to try to assert a role that otherwise is
not expected?
Ms. LaFleur. I didn't have a plan to redefine natural gas
under the Natural Gas Act, but I think it is something to think
about.
Mr. McKinley. OK. Could you provide us in writing, because
with the time frame, we don't--and especially since you said
you weren't prepared to discuss that necessarily, can you
provide us some rationale for the Federal Government to be
involved in this as compared to the States?
Ms. LaFleur. Yes. We will certainly take that and think
about it. Thanks for the opportunity to think more.
Mr. McKinley. OK. Thank you. Now, and the last is maybe
more generic, but probably for over 10 years as an engineer in
private practice prior, we were concerned about electromagnetic
pulse, and it has been mentioned here again. I have been
hearing about it for well over a decade, but certainly in the
last 5 or 6 years. People have been talking even more here the
last 3 years that I have been in Congress. Where are we with
this? Or are we just waiting for some catastrophic event to
happen, because there is just an awful lot of talk, but no
action?
Ms. LaFleur. Well, I think I mentioned in my written
testimony and briefly in my verbal testimony that last year,
the Commission voted out a rule requiring utilities to have
operational plans and response plans for----
Mr. McKinley. I guess more what I am saying, what is your
expectation, not just your plan?
Ms. LaFleur. I think that the geomagnetic disturbance
standards that we will get, and we have one pending, will help
somewhat with the electromagnetic pulse. Although there--I
think there's also voluntary efforts going on in the North
American Transmission Forum to talk about other aspects of the
EMP, but I think the GMD standards are probably the most
tangible action that has going on in this area for a long time.
Mr. McKinley. Is there progress being made in Europe or
elsewhere with EMP's, but it is not unique to western--to the
United States?
Ms. LaFleur. I am sorry. I didn't----
Mr. McKinley. Is there progress being made with other
countries in dealing with EMP's?
Ms. LaFleur. It is variable. A lot of progress is being
made in Scandinavia, South Africa and the United Kingdom. A lot
of other countries are taking a wait-and-see approach and
looking--Israel. Israel is also doing a lot. Other countries
are taking more of a wait-and-see approach.
Mr. McKinley. Thank you. We will have further conversation,
but thank very much.
Ms. LaFleur. Thank you.
Mr. Whitfield. The gentleman yields back the balance of his
time. At this time, I recognize the gentleman from Colorado,
Mr. Gardner, for 5 minutes.
Mr. Gardner. Thank you, Mr. Chairman.
And thank you to the members of the Commission for being
here today, and congratulations to the acting chairman. I just
wanted to follow up on a question, a brief conversation to Mr.
Moeller that we touched on earlier, and it was an intriguing, I
think, question raised. In Colorado, I think in--just a couple
years ago, we had the Hyde Park fire, which became the State's
most devastating forest fire, followed a week later by the
Waldo Canyon fire, which became the State's most devastating
natural disaster. This past year we have experienced the Black
Forest fire.
Do you believe that forest health threatens grid
reliability?
Mr. Moeller. Well, I recall being involved in that issue,
because I think we wrote the Forest Service--or I wrote the
Forest Service after talking to Colorado officials, including,
I think, a Democratic State senator who works for the Keystone
Foundation, just very concerned about the amount of dead forest
and its threat from a fire perspective on transmission lines.
That was the Nexus defer. So, yes, forest health--I come from
the State of Washington. Forest health is a big issue up there,
and particularly with the pine beetle issue. Should we hope for
2 more weeks of really cold weather to kill those beetles? I
guess that is a mixed question, but it would be nice--it would
be nice if that threat to reliability can be removed.
Mr. Gardner. We would love to follow up with you a little
bit more on that.
And to Acting Chairman LaFleur or Commissioner Moeller,
earlier this year we unanimously passed the Hydropower
Regulatory Efficiency Act. This Act revised how FERC regulates
small conduit hydro projects, required the Commission to
investigate a 2-year licensing process for non powered dams,
and closed-loop pump storage projects, and also conduct pilot
projects.
Could you give us an update on the Commission's activities
to date to implement these and what provisions of the law
outline--you know, the other provisions of the law, and outline
what steps the Commission will take in 2014 to implement the
law?
Ms. LaFleur. Yes, certainly. We have already received a
large number of exemption applications for conduits, I believe
18, and they are all in some stage of the process. A couple of
them have already been approved and others are close to
approval. So that took effect immediately, and----
Mr. Gardner. Would you mind giving us maybe an idea of
those 18 and which ones have been approved and where they are
at?
Ms. LaFleur. Certainly. We will take that as a written
question and where they are in the process.
Also, on, I believe it was October 22nd, we held a tech
conference, a technical conference on what we can do to help
speed up the process in the 2-year licensing requirement. I
believe comments are outstanding right now, and the folks in
the hydro section are working on that; they had a lot of the
other agencies involved that contribute to the timing as well.
We have received fewer applications for some of the other
parts of the law as of yet, you know, the 40-megawatt exemption
and so forth.
Mr. Gardner. Do you believe that FERC will be able to
implement the pilot projects in 2014?
Ms. LaFleur. Yes.
Mr. Gardner. OK. You talked a little about the workshops,
you talked about what you learned. Do you believe that we will
be able to get through the intent of the legislation in the
next 2 years, implement the intent of the legislation?
Ms. LaFleur. You mean satisfy the intent of the
legislation?
Mr. Gardner. Yes. Correct.
Ms. LaFleur. I certainly think that is our job.
Mr. Gardner. OK. And the process for excluding small
conduit hydro projects from FERC licensing, how is that
working?
Ms. LaFleur. I--we--it is working actually very well with
your State, because of our Memorandum of Understanding, and we
recently entered into one with California, I believe, just a
couple weeks ago. It is variable in different regions, because
some of the States don't have the resources on hydro to have
the same level of cooperation, but it is something we have put
a lot of effort into. The hydro team has simplified the Web
site, simplified the processes to try to process them as
quickly as we can.
Mr. Gardner. And do you have a number on the determinations
that have been sought?
Ms. LaFleur. No, but I can get that and take it as a
question for the record.
Mr. Gardner. That would be fantastic. If we could find out
those granted and those denied, that would be great. And if you
could provide some statistics on the length of time these
proceedings have taken as well, that would be great.
Ms. LaFleur. Yes.
Mr. Gardner. To Mr. Moeller, Commissioner Moeller,
Commissioner Clark, a question for you, and I am running out of
time here, should behind-the-meter generation be treated as a
demand response resource or generation resource?
Mr. Moeller. Very timely. I have issues with behind-the-
meter generation, because it is not dispatchable like other
forms, and I will point you to a dissent that I wrote earlier
this week on a particular order.
Mr. Gardner. And Commissioner Clark, quickly, then I am
going to have to follow up on the record with some of these
other questions and some FERC 1000 Order questions.
Mr. Clark. Sure. Congressman, to a great degree, I think it
depends on the record in each of those individual cases. I
would have a concern in some areas, and others, if measurement
and verification can be proven, I believe they may be able to
participate. There is a separate question with regard to
compensation that should be given to those resources, and from
time to time, I have disagreed with parts of the Commission's
orders on that issue.
Mr. Gardner. Thank you. Mr. Chairman, I will follow up with
additional questions.
Mr. Whitfield. The gentleman's time has expired. At this
time I recognize the gentleman from Virginia, Mr. Griffith, for
5 minutes.
Mr. Griffith. Thank you, Mr. Chairman. Appreciate that.
Mr. Norris, earlier you were speaking with Ms. Castor, and
you started talking about that people were worried about
building coal-fired power plants because of legislation. Could
you expand on that for me?
Mr. Norris. I think there is a general concern that there
will be at some point in time, a cost put on carbon. Because of
the uncertainty of when that will happen and what that will be,
combined with the other factors in place right now that I have
talked about in my testimony, natural gas prices, EPA rules,
State requirements, that it is just too risky for investment
into coal-fired generation. And, frankly, nuclear is suffering
some of the same problems strictly on the cost aspect.
Mr. Griffith. So while natural gas is a concern because the
prices are lower right now, looking forward, natural gas and
coal have competed over the decades and that would probably
continue, but with already existing newly proposed EPA
regulations and the fear that either legislation or additional
EPA regulations are major causes as to why no one's really
looking at building a new coal-fired power plant. Is that
correct? Is that a fair statement of generally what you said?
Mr. Norris. Yes. I think some of the existing facilities
are being retired because new--massive----
Mr. Griffith. The new--right.
Mr. Norris. But the primary concern that was expressed to
me is that--the anticipation at some point, there will be a
cost on carbon, and that makes the economics difficult to
finance coal plants.
Mr. Griffith. All right. And then let me ask about, to
anyone who wishes to answer, all of you, PJM and the other
markets, have you all done any studies to determine whether or
not those markets have actually lowered the costs of
electricity coming to the consumer?
Ms. LaFleur. Yes. We get regular reports from the markets
and their market monitors and a--the years are running
together, but within the recent past, we compiled a major set
of metrics from the different RTO's that included cost metrics
over time, and there were, I know, within PJM and the other
eastern markets cost reductions. Now, they are, in part, driven
by the cost reductions in gas being used to generate the
electricity, but we also looked at the transmission congestion
and how that was coming down. So we could provide an update on
that in written form as well.
Mr. Griffith. All right. That would be great, and I
appreciate that.
Have any of you had contact with the White House regarding
the President's climate action plan?
Ms. LaFleur. Not me.
Mr. Moeller. No.
Mr. Norris. I don't believe so.
Mr. Clark. No.
Mr. Griffith. Well, isn't that interesting. So they didn't
talk to you all about that? I guess, if they didn't talk to you
about it, they just--nothing else you can say about it, I
suppose.
Ms. LaFleur. I mean, in my view, we function as an
independent agency. They don't give us policy guidance, at
least never in my experience. They did call to make me acting
chairman, which I very much appreciate, but didn't say anything
about how to vote on anything.
Mr. Griffith. Well, and I wasn't really asking, you know,
whether or not they had called you about how to vote on things,
but I am just curious that they came out with this major plan
and didn't discuss with you, and what I am talking about, get
advice or seek input or anything like that. So you didn't have
those conversations either? So maybe I wasn't clear when I
asked it the first time around.
Ms. LaFleur. I do coordinate with the Department of Energy
on the electricity advisory committee, but their efforts are
more around transmission, storage, some other areas. I think
the climate plan came from other parts of the administration.
Mr. Griffith. OK. So then I guess it would be fair to say
that they didn't seek any information from you-all on how this
might affect electric prices for the average American family?
Ms. LaFleur. The White House didn't seek any information
from me.
Mr. Moeller. Nor I.
Mr. Norris. I am going to assume they didn't contact me
because we are an independent agency, not because they didn't
know we existed.
Mr. Clark. No, I wasn't contacted.
Mr. Griffith. All right. Well, I don't have any additional
questions. Thank you very much for being here today. And, Mr.
Chairman, with that, I yield back.
Mr. Whitfield. The gentleman yields back. At this time I
recognize the gentleman from Illinois, Mr. Kinzinger, for 5
minutes.
Mr. Kinzinger. Thank you, Mr. Chairman.
And thank you all for being here. Competitive markets tend
to be the most efficient when a light regulatory approach
towards rules and regulations are in place. Given that the
process as put in place by FERC impacts tens of millions of
consumers, it is my hope that your Commission will work with
all parties to ensure that all aspects of industry are taken
into account in order to ensure that current and future energy
demands are able to be met.
It is my understanding that FERC is in the process of
evaluating market mechanisms in a holistic fashion in a subset
of the capacity markets in which it regulates. I appreciate the
Commission taking on this effort, but I have a few concerns
that I would like to discuss in order to determine where this
effort may lead and whether or not it may be unnecessarily
limited.
Chairman LaFleur, what does the Commission intend to do
with the information it is currently gathering in this
proceeding?
Ms. LaFleur. I think on the capacity markets, that is very
much a work in progress that is going on right now, but I think
potentially, an illustrative example is what we have done on
gas electric where we have looked at a large number of comments
from around the country and said, here is a large set of them
that have to be handled regionally, and we will continue to
deal with it with each region of the country, but here are a
couple of cut-across issues we may look at across more than one
region, and that may well be the future capacity markets, but I
think I want to read the comments and talk to my colleagues.
Mr. Kinzinger. Have you discussed the possibility of
expanding this effort to include other wholesale capacity
markets that the Commission regulates, and is there a specific
reason for limiting the inquiry if, in fact, you have the
capacity markets alone?
Ms. LaFleur. There was a reason to limit the technical
conference to the three markets: because they operate in
largely parallel fashion, they are more mature. The Midwest ISO
voluntary capacity market is considerably newer, and we thought
it might be difficult to do them all in one day, but there is
certainly no reason we won't in the future be looking at other
places as well if the need arises.
Mr. Kinzinger. OK. Baseload electric generating assets have
a life span of 40 to 60 years. The forward capacity markets and
organized electricity markets typically operate 3 years ahead.
Ms. LaFleur and Mr. Norris, let me ask you these questions. Do
you agree that there is a fundamental mismatch between the
investment recovery profile of electric generating assets and
the way merchant markets are structured, and do you believe
FERC has a role to play in addressing this problem? Mr. Norris
first.
Mr. Norris. By markets, you mean capacity markets?
Mr. Kinzinger. Yes.
Mr. Norris. Yes. There is a disconnect. The capacity
markets are really designed to make sure there are adequate
resources and the reserve margin will be met for the long-term
future. I think some of our current capacity constructs were
largely put in place to provide a revenue stream for generators
that were spun off in a lot of the restructuring areas, and
there has been a cushion of time there for that to play out. We
are reaching into that cushion now. We have got to look at
these capacity markets and play a role in structuring them so
long-term supply is available for adequacy.
Mr. Kinzinger. And, Chairman LaFleur, do you have any
anything to add on that?
Ms. LaFleur. Well, I think the reason we are looking at
capacity markets is largely to see if they attract the
investment we need, and that includes, you know, baseload,
peaking, intermediate, demand response, all the things you need
to run a grid, and that is what we will be looking at.
Mr. Kinzinger. Does your Commission have plans to review
and improve market rules so that wholesale markets are given
the proper signals to allow for investment decisions to be made
in the power sector?
Ms. LaFleur. Well, that is the purpose of the wholesale
market rules in part--to attract the investment for
reliability--so I think that is very much within our
responsibility.
Mr. Kinzinger. And then finally, Mr. Clark, do you think
the Federal Power Act authorizes FERC to subsidize long-
distance transmission of remote wind power over potentially
cheaper local renewables?
Mr. Clark. I don't think it authorizes, Congressman, the
Commission to subsidize such lines. I think it charges the
Commission with trying to make a reasonable attempt at
allocating costs on a commensurate basis on a cost-causation
beneficiary principle. I think the Seventh Circuit through the
course of a couple of major cases has basically given us the
goalposts in terms of what our responsibilities are in terms of
assigning those costs.
Mr. Kinzinger. OK. Thank you all for your time.
Mr. Chairman, I will yield back 36 seconds.
Mr. Whitfield. Thank you very much. At this time I will
recognize the gentleman from Texas, Mr. Hall, for 5 minutes.
Mr. Hall. Mr. Chairman, thank you.
And Commissioners, I thank you for appearing here today. If
I ask questions that have been touched on earlier, I have been
another committee. We are all trying to pass everything we can
before getting to go home for Christmas.
I have been hearing about a new technology that is coming
onto the market, and I am from Texas and, of course, have great
interest in energy. Probably other than ``prayer,'' it is the
most important word in the dictionary for young people. And
they have no jobs today, and if we go on the way we are going
now, there will be no employers in about a year, so you have a
very important job.
That new one, manufacture the solution out of gas liquids
to make it easy to transport to a customer, who then treats it
and then uses it as a fuel or feed stock or electric
generation, whatever they want, and I am told that it is a new
technology that can be used relatively small, simple equipment
that is often modular and can be moved from site to site in an
oil field, which is important to them, to capture stranded gas
that Mr. McKinley had an interest in, or they can be installed
within existing port facilities.
I hope FERC can ensure new beneficial technologies like
this are not subjected to the same time-consuming and expensive
review process as the major projects, say, such as LNG. Some of
these new technologies don't always fit the rules that you
have, they are all forced to fit into a category, but just
because you are supposed to regulate and you feel that you have
to regulate them, the new businesses are going to be stifled or
it will never get off the ground. I hope you won't feel that
you have that conjure up ways to regulate something if you
haven't been told to regulate it by an act of Congress. And
that is kind of a question that is not meant to be insulting in
any way, because I admire you.
And do you have any short statement you want to make to
what I have said so far?
Ms. LaFleur. Well, I believe we have to stay in our
jurisdiction. As has been observed several times today, we have
been given quite a lot of it. We are not short of things to do.
And that is what we try to do, is follow the law.
Mr. Hall. And I expect you to do that.
Mr. Clark. Yes. Congressman, I would just add, I agree with
Chairman LaFleur. Coming from North Dakota as I do, where we
have a significant concern with flared gas, and I understand--
--
Mr. Hall. You have a role to play there.
Mr. Clark. Yes. I understand the technology that you are
talking about, and I am intrigued by it, but I would share your
concern that anything that we can do to advance technologies
that allow us to capture and utilize valuable resources is
something we should do.
Mr. Hall. Well, we go back some 20, 25 years that some of
us have been up here. And if you remember, we passed Clean Air
Acts and Clean Water Acts, and took several sessions to do
them. And we breathed life into the EPA in those. I remember
that. Even though I was a Texan and believed in energy, and
energy paid 55 or 60 percent of the taxes that were paid in
Texas, we felt that it was very important. And we breathed life
into the EPA by giving them a role in that act.
I am kind of sorry now that we did, because they acted well
then and we were pleased with what they did, and we thought,
even though we were energy oriented, that the energy people
needed some supervision, but they also needed some help that
the Federal Government can give. So they now hurt us by
overregulation, and that is what I was asking you about, I
guess.
And, Acting Chairwoman, a key goal in FERC's strategic plan
2009 to 2014 calls for safe, reliable and efficient
infrastructure development to integrate these resources. Are
you supportive of FERC's--have you been there 3 weeks, you say?
Ms. LaFleur. No. I----
Mr. Hall. Golly, you----
Ms. LaFleur. I have been 3-1/2 years, so I----
Mr. Hall. I would hate to cross-examine you----
Ms. LaFleur. I have only been in this job 2 weeks.
Mr. Hall. All right. Well, you are doing very well, and I
thank you for that, because you have given--are you supportive
of FERC's goal for infrastructure development included in this
plan?
Ms. LaFleur. Yes, I am. I think it is an important part of
what we do.
Mr. Hall. And what kind of enhancements or changes would
you consider on this goal?
Ms. LaFleur. Excuse me?
Mr. Hall. Do you have any changes you'd make? Maybe you
haven't had time. Maybe the other gentlemen might.
Ms. LaFleur. When I looked most recently at the strategic
plan, it is written at a very high level, and I think most of
it is things like just and reasonable rates and a robust
infrastructure, which I do not think there would be any need to
change.
I think, as I said, as we look at the current situation of
where the country is, I want to meet with my colleagues and
figure out are there things that we need to give more priority
to. And I think I will be very accountable for that, but I want
to do a little bit of work before I answer, if possible.
Mr. Hall. Commissioner Moeller, Mr. Clark, if the
administration continues down this part of taking fuel-of-
choice decisions away from the electric industry, as I am told
that they do, and reducing fuel diversity, what negative
consequences would you expect?
Mr. Moeller. Well, we just have to watch reliability very,
very closely. A number of us have made references to the
midwest, but it is just not the midwest. In the next few years
and the next few summers, very concerned about making sure that
we have resource adequacy.
Mr. Hall. And to the acting--my time up?
Mr. Whitfield. I am sorry, Mr. Hall.
Mr. Hall. Well, I guess I will yield back, then.
Mr. Whitfield. We were all so mesmerized by your comments
that I forgot the time, too.
But at this time I would like to recognize the gentleman
from Nebraska, Mr. Terry, for 5 minutes
Mr. Terry. Thank you, Mr. Chairman. And I am your favorite
witness, the last.
So, Mr. Norris, I want to follow up with you because part
of the discussion today has been about a carbon price being
built in that the carbon price is based on the uncertainty of
what is going to happen regarding carbon. That intrigues me,
what you were talking about, because yesterday I was hit up by
a reporter that asked me a similar question about energy
companies already starting to build in a carbon price. And of
course the question then from the reporter is, what are you
guys doing in Congress about a carbon price? And I said,
nothing, we aren't trying to artificially inflate, at least
legislatively, energy prices, nor overtly through a tax.
So it begs the question, since there is a lot of discussion
about now building in a carbon price, is there discussions in
FERC that you have been involved with or know about as an overt
attempt to either raise prices based on carbon or any other
thing that would, in essence, increase cost based on carbon?
Mr. Norris. In short, no. The reason for my comments in my
testimony here today is to make you aware I think that is a
major factor in some of the change happening in our energy
landscape right now, is the uncertainty about when or if there
will be a price on carbon.
Mr. Terry. Well, and I think there is some merit to the
``if,'' because there are a lot of people that are pushing
that. There is no legislative attempt. But it also begs the
next level of question, with natural gas in particular, and you
just had some discussions about flaring in North Dakota. I have
pictures on my iPhone of that when our subcommittee took a
little trip up there.
So we are burning it off, we have got an ample supply. But
I think there is some uncertainty in that area as well based on
some environmental groups and even some people on this
committee that would like us to stop using the technology of
hydrofracturing.
Have any of you had discussions in there about any policy
impacts on hydrofracturing, how that could impact the
reliability and affordability of electrical generation in the
United States? And let's start with the Acting Chairwoman.
And congratulations. That is a good call from the White
House. I am just looking for any call from the White House on
any of the issues I have asked them to talk to me about. But
that is a issue for a different day.
Ms. LaFleur. We don't regulate hydraulic fracturing. We
have been asked in some of our gas pipeline cases to evaluate
the environmental impacts upstream and downstream, and we have
taken a pretty strong line under the National Environmental
Policy Act to just look at the impact of the project we are
certificating.
I think as part of the discussion of fuel diversity and
gas-electric there has been general discussion of should the
rules change at any time on natural gas, you know, we have to
be alert to that because that could affect reliability, but no
direct impact on it.
Mr. Terry. Well, let's take that, because one of the
discussions we have had with FERC in the past has been the
coordination with FERC, particularly on natural gas with the
other entities, EPA for example, reliability. How is that work
going of everyone trying to get on the same page in regard to
natural gas?
Chairwoman.
Ms. LaFleur. Most of the discussions I have been present
with on the EPA have been about specific suites of regulations
that we have discussed, MATS and so forth. I stay alert to
discussion of regulation of natural gas, but I have not been
part of the discussion of fracking.
Mr. Terry. Well, no, this is just on natural gas in
general, and reliability, because there is going to be an
issue, as some of these plants are unable to use coal because
of the new standards that are being produced, and there will be
a time when they either shut down or move to natural gas. That
is going to affect reliability. And I assume those discussions
are occurring with the EPA and other agencies so that you that
you know that this is going to happen and how you are going to
deal with it.
Ms. LaFleur. Well, should there be a time when I have any
reason to believe the natural gas supply is going to be
interrupted, I would certainly take part in those discussions.
Everything we are seeing----
Mr. Terry. Well, this will be more about the down time of
plants, to either shut down or the shutdown to retrofit.
Because you can't gut a coal-fired plant and have it still
running while you are putting in a whole new system.
Ms. LaFleur. Well, on that we have had discussions, and I
think that is one of the reasons that the EPA gave us, among
others, a consultative role if a plant needs more time to
retrofit under the MATS standard.
Mr. Terry. Well, even if you give them more time to
retrofit it is going to be down time during the retrofit. So we
are going to have issues of electrical generation not existing
in certain areas.
Mr. Whitfield. The gentleman's time has expired. I am very
sorry to say you are not going to be the last person to ask
questions, Lee.
Mr. Hall. Mr. Chairman, can I make an inquiry of you? I
didn't get to ask everything I wanted to, but I didn't know
what had already been asked. Would you ask to leave the record
open for a couple of weeks if we mail a direct question to
them----
Mr. Whitfield. Absolutely.
Mr. Hall. We have had problems about the natural gas sector
and the electricity sector. Thank you, Mr. Chairman.
Mr. Whitfield. Yes. We will have it open for 10 days and
work with you to get the questions to the Commissioners.
So at this time I recognize the gentleman from New York,
Mr. Engel, for 5 minutes.
Mr. Engel. Thank you, Mr. Chairman. And I won't take 5
minutes. I was here before and I had to run out.
I just really have one question. I would like to focus on
the Champlain Hudson Power Express. I am sure you are aware
that I and others have spent many years speaking out in favor
of closing the Indian Point nuclear power plant in New York. I
am not opposed to nuclear power, and I never spoke a word about
closing the plant until after September 11th, when I learned
that one of the planes that hit the towers flew right over this
power plant, which is probably about 10 miles out of my
district.
I believe, and so does our governor and all the elected
officials in the surrounding area, Members of Congress who
represent the area in Westchester County, we think it presents
one of the most serious safety and environmental threats facing
the New York metropolitan region.
But New Yorkers no longer really need to face this threat
because the Champlain Hudson Power Express would deliver 1,000
megawatts of power to the New York metropolitan region. And
with the implementation of the Champlain Hudson Power Express,
security of New York's electric grid would be increased and New
Yorkers would no longer have to live with the dangers of Indian
Point in their own backyard.
It is obviously a benefit to New York, and the safety of
New Yorkers is obviously all of our concerns. And given the
great benefits of the project, I really believe that it is
important that it is implemented in a timely manner.
So my only question is really in our effort to plan for a
post-Indian Point New York, I am sure that we have to make sure
that we have sufficiently reliable, safe energy to replace the
nuclear facility because when some of us said that it should be
closed, people came back with, well, what are you going to do
to replace it? So I believe the Champlain Hudson line provides
a portion of that energy. And I would like to hear from any of
you regarding the status of the project.
Madam Chair.
Ms. LaFleur. Thank you, Mr. Congressman. I believe about a
year ago, within the past year, FERC issued an order approving
market-based rates for the Champlain Hudson line. No one sought
rehearing of that order, so it is final, so we did the rate
making. I believe the siting of the line is being done in New
York State, and so I don't think we have any anything open on
the line right now. But we got out the order that they needed
for their rates.
Mr. Engel. Thank you.
Anybody else have anything to add.
Mr. Moeller. Congressman, I think it points to the fact
that transmission is such a good technology because it can
solve a multitude of challenges going forward. And so I again
want to stay positive on the need for more transmission
investment. This is a local example that has regional benefits.
We can duplicate that in many areas of the country.
Mr. Norris. Thank for the question. Yes, I echo my
colleagues' comments, we have dealt with that line, given it
negotiated rate authority as a merchant transmission line. I
think it is a great example of the wealth or abundance of
hydroelectric facilities, of possibilities coming down from
Canada that could meet a lot of our long-term needs with low
emissions, or no emissions, but also transmission will be key
to making it happen.
The second point would be, as you talk about your nuclear
facility, I am very sensitive to the decisions of New Yorkers
about that plant. We are also facing a close down of the San
Onofre plant in California. Just a heads-up: Replacing those
large facilities in huge urban centers is going to require some
other infrastructure to replace it. So we are going to need
support, and developers are going to need support for building
that infrastructure to replace those generation facilities.
That is not easy to do in today's environment.
Mr. Clark. I would concur with my colleagues and don't have
anything to add.
Mr. Engel. OK. Thank you all very much. I appreciate the
answers.
Thank you, Mr. Chairman.
Mr. Whitfield. I will make one just comment on this. You
referred to the closing of the nuclear plant down in southern
California, and California has the 33 percent renewable
mandate. And I was talking to one of the CEOs of one of the
majority utilities out there. And as they build new
transmission lines to bring in renewable power to where they
need it, they are getting in some instances specific
instructions relating to going underground on the transmission
lines, which raises a lot of technical issues. And this CEO
informed me that the mileage that they are going underground is
costing his utility $100 million a mile. So we are talking
about some costly situations in some cases.
At this time, I recognize the gentleman from Texas, Mr.
Olson, for 5 minutes.
Mr. Olson. I thank the chair. And I thank you, sir, for
your patience. I can assure you that I will take only a maximum
of 4 minutes and 59 seconds of my time.
Welcome to the witnesses. Chairwoman LaFleur, Commissioner
Moeller, Commissioner Norris, Commissioner Clark, welcome.
Happy holidays.
I have one question, and it is about the production tax
credit. I will start with you, Commissioner Moeller.
As you know, for the next 10 years some wind turbine owners
will get tax credits for every hour they run. This tax credit
was designed to kick start renewables. And yet it lives on
despite wind being a major part of the grid, at least 12
percent in my home State of Texas capacity coming from wind.
But some markets have seen, quote/unquote, prices as low as
negative $41 per megawatt hour as operators get the credit and
run whether the power is needed or not.
Now granted, that is an extreme example, but they can
suffer a loss and taxpayers make them whole. That moves
markets. Back home, our lack of new power construction in
Texas, our public utility commissioner Chairwoman Nelson has
said, and this is a quote, the market distortions caused by
renewable energy incentives are one of the primary causes. This
distortion makes it difficult for other generation types to
recovery their costs and discourages investment in new
generation. And while the PTC isn't the only driver of market
distortions, it is a significant force.
So starting with you, Commissioner Moeller, do you agree
that incentives for renewables distort energy markets?
Mr. Moeller. Congressman, I think all subsidies distort
markets.
Mr. Olson. Chairwoman LaFleur, any comment, ma'am?
Ms. LaFleur. In a pure market there would be no tax
subsidies, but many of the resources that fit into the market
have tax subsidies of one sort or another that are not taken
into account in the market price.
Mr. Olson. Commissioner Norris, you are up, sir.
Mr. Norris. I echo my colleagues' comments. I agree any tax
implication is going to affect an open marketplace. Having said
that, I am concerned that some of the nuclear facilities that
have been closing or looking at retiring because of negative
nighttime pricing is a concern for me because I think of the
long-term stability of those as baseload fuel, and baseload
plants in our system is important.
Mr. Olson. Yes, we need those. Yes, sir.
And, Commissioner Clark, you are our last hitter, sir.
Clark.
Mr. Clark. I would agree and for the reasons that you have
identified. Obviously it is a decision for Congress to make
whether there will be a PTC or not, it is not FERC's, but
clearly it does has a market-distorting impact, especially in
very wind-rich parts of the country and at certain times of day
and at certain times of the year.
Mr. Olson. And one final question, it is a yes-or-no
answer, and following up on my colleague Mr. Green's questions
about our grid liability bill we passed here in Congress. Yes
or no, does everyone out there still agree that it is bad
policy to trap companies between two different regulators with
different goals during power crisis?
Chairwoman LaFleur.
Ms. LaFleur. Yes. I think it is bad policy and I
supported--you are talking the Hobson's choice bill?
Mr. Olson. Yes, ma'am, our grid bill.
Ms. LaFleur. I supported the basic principle that if the
DOE orders you to run, you should not face sanctions for that
in that limited instance.
Mr. Moeller. I strongly, strongly support the concept,
especially with what we are hearing about in the Midwest and to
some extent Texas.
Mr. Olson. Yes, sir.
Commissioner Norris.
Mr. Norris. I think it puts people in an unfair position.
Mr. Clark. I would concur, and I have been supportive in
the past of the bill that you and Congressman Doyle have
sponsored.
Mr. Olson. Thank you. I yield back the balance of my time.
I am 41 seconds early, sir.
Mr. Whitfield. Yes. Thank you very much. We appreciate
that.
Well, that concludes today's hearing. I would like to ask
Ms. LaFleur one additional question.
Recently it was brought to my attention that FERC has
jurisdiction over a number of lakes around the country in which
hydropower is being produced, and a decision affecting the Lake
of Ozarks and about tearing down some houses and whatever and
then went out at the Grand Lake in Oklahoma. Would you be able
to identify for the committee the name of an individual at FERC
that would have up-to-date information on the authority and
jurisdiction that you all have over these lakes in which
hydropower is being produced? Not right now, but later.
Ms. LaFleur. Yes. Absolutely.
Mr. Whitfield. OK. Thank you.
And without objection, and hopefully you all have seen
this, we have a letter from the American Public Power
Association, a statement that they would like to insert into
the record. Without objection. So that is entered.
[The information follows:]
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Mr. Whitfield. And we will keep the record open for 10 days
because, as Mr. Hall and others said, there are a few
additional questions we would like to submit to you all.
But I want to thank you for coming up today and visiting
with us and for the exchange that we had. And thank all of you
for what you are doing and continue to do in addressing these
important issues.
And with that, that will conclude today's hearing. Thank
you.
[Whereupon, at 11:48 a.m., the subcommittee was adjourned.]
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