[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
BENEFITS OF AND CHALLENGES TO ENERGY ACCESS IN THE 21ST CENTURY:
ELECTRICITY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND POWER
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 27, 2014
__________
Serial No. 113-121
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
_____
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............................... 4
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 5
Witnesses
Edward S. Finley, Jr., Chairman, North Carolina Utilities
Commission..................................................... 7
Prepared statement........................................... 9
Bruce E. Biewald, Chief Executive Officer, Synapse Energy
Economics...................................................... 66
Prepared statement........................................... 69
Supplement to prepared statement \1\
Mel Coleman, Chief Executive Officer, Northern Arkanses Electric
Cooperative.................................................... 77
Prepared statement........................................... 79
Paul O'Brien, Vice President for Policy and Campaigns, Oxfam
America........................................................ 86
Prepared statement........................................... 89
Todd J. Moss, Chief Operating Officer and Senior Fellow, Center
for Global Development......................................... 98
Prepared statement........................................... 101
Submitted Material
Report, undated, ``Climate Change Evidence & Causes: An overview
from the Royal Society and the U.S. National Academy of
Sciences,'' submitted by Mr. Waxman \2\
Statement of February 24, 2014, ``What the Cold Snap Tells Us
About EPA Carbon Rules,'' Electric Reliability Coordinating
Council, submitted by Mr. Whitfield............................ 140
Letter of January 24, 2014, from Christopher M. Crane, President
and Chief Executive Officer, Exelon Corp., et al., to Regina A.
McCarthy, Administrator, Environmental Protection Agency,
submitted by Mr. Whitfield..................................... 143
Article, posted February 20, 2014, ``Energy Access and the True
Cost of Fossil Fuel Projects in Africa,'' The Huffington Post,
submitted by Mr. Whitfield..................................... 149
----------
\1\ Internet link to the report ``2013 Carbon Dioxide Price
Forecast'' is on page 77.
\2\ Internet link to the report is on page 124.
BENEFITS OF AND CHALLENGES TO ENERGY ACCESS IN THE 21ST CENTURY:
ELECTRICITY
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THURSDAY, FEBRUARY 27, 2014
House of Representatives,
Subcommittee on Energy and Power,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:16 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Ed
Whitfield (chairman of the subcommittee) presiding.
Members present: Representatives Whitfield, Shimkus, Terry,
Latta, Olson, McKinley, Pompeo, Kinzinger, Griffith, Barton,
McNerney, Tonko, Green, Barrow, Matsui, Christensen, Castor,
and Waxman (ex officio).
Staff present: Nick Abraham, Legislative Clerk; Charlotte
Baker, Press Secretary; Sean Bonyun, Communications Director;
Allison Busbee, Policy Coordinator, Energy and Power; Tom
Hassenboehler, Chief Counsel, Energy and Power; Brandon Mooney,
Professional Staff Member; Mary Neumayr, Senior Energy Counsel;
Peter Spencer, Professional Staff Member, Oversight; Caitlin
Haberman, Democratic Policy Analyst; Bruce Ho, Democratic
Counsel; Alexandra Teitz, Democratic Senior Counsel,
Environment and Energy; and Kate Istoll, Democratic Fellow.
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 and certainly want to thank the witnesses for
being with us today.
This morning, we do begin a new hearing series entitled
``Benefits of and Challenges to Energy Access in the 21st
Century.'' And today's hearing will focus on electricity
access, and the next hearing will deal with fuel supply and
infrastructure issues.
Now, when we talk about access to electricity, in America
we are fortunate that we have a well-developed system, but many
of us are genuinely concerned that the Obama administration is
pushing us so quickly, so fast into a renewable mode, and the
President says that he supports an all-of-the-above energy
policy, which all of us do support. But his actions indicate
that certainly on coal he does not see that coal really has a
future in America, despite what he might say.
And most people recognize, I think, that Europe at least
has the reputation of being the green sector of the world, and
22 percent of their electricity comes from renewables. But we
also know that they are having great difficulty. They have an
unemployment rate of 12 percent, gas prices are so high that
they mothballed 30 gigawatts of natural gas-powered plants to
produce electricity, and last year, they imported into their
area about 50 percent of our coal export market. And they are
using more coal because natural gas prices are too high.
And I think realistically in America we don't think anyone
is going to build a new coal-powered power plant with natural
gas prices as low as they are, but most of us genuinely believe
that we should have the option to build a coal-powered plant in
the future. And with the greenhouse gas regulations that will
become final supposedly this summer, it will be impossible to
build a new coal-powered plants because the technology is not
available to meet the emissions standards set by EPA. And we
feel very strongly and have written letters to EPA asking for
an explanation, that their emissions standard was set illegally
because the plants that they rely on is an explicit violation
of the 2005 Energy Policy Act.
And I think that this recent cold spell should also cause
concern for all of us. The CEO of AEP announced that 89 percent
of their plants in operation to meet this cold spell demand are
scheduled to be retired in 2015. Southern Company, 75 percent
of their coal plants, operating at capacity for this recent
cold spell, plan to be retired. Luminant brought two coal-fired
plants back into operation in Texas for this cold spell. TVA
set an electricity demand record during this cold spell and
they are planning to close 20 coal-fired plants. The nuclear
companies have written us letters saying that the pending
cooling tower regulation coming out of EPA threatens the
premature shutdown of a significant number of nuclear power
plants.
So, on the one hand, you talk to people and they say, well,
climate change is the number one issue and that has got to be
addressed. On the other hand, if people's reliability is
threatened and if we can't compete in a global marketplace
because we are eliminating one source of fuel that we might be
able to use in the future, then we are threatening jobs and the
economy.
But one of the most disturbing things from my perspective
is that the Obama administration is being so aggressive in
making sure that the World Bank and even they attempted--the
Ex-Im Bank and the Asian Development Bank and other financial
institutions will not provide funding for a coal plant to be
built anywhere in the world. We have people from Bangladesh
coming to talk to us, people from Africa. I was reading in
Nigeria half the people there don't even have electricity.
So this administration, not only are their regulations
affecting us domestically, but they are affirmatively,
aggressively trying to prevent the building of a new coal-
powered plant even with the best technology anywhere in the
world even though in those areas what they are burning now is
fuel oil using generators that is much dirtier than emissions
from a supercritical coal plant, for example.
So these are issues that we are struggling with and they
have got to be answered. We can't just run off, as John Kerry
said recently in Indonesia, that climate change is the mass
destruction weapon facing mankind. I think that kind of extreme
view is not good or healthy.
My time is expired, and I was just getting started.
[The prepared statement of Mr. Whitfield follows:]
Prepared statement of Hon. Ed Whitfield
Today's hearing will focus on electricity access, and the
next hearing will deal with fuel supply and infrastructure
issues. The unusually cold weather we have recently experienced
across the Nation underscores the importance of affordable and
reliable electricity.
Nonetheless, under the Obama administration electricity
access is being jeopardized by a number of already finalized or
pending measures raising its cost. This includes pending global
warming-related regulations from the Environmental Protection
Agency.
Regardless of intention, I believe any policy that
increases the price of energy runs a serious risk of doing more
harm than good. And the first victims of misguided measures are
the least fortunate in society, both here in the U.S. and
around the world.
EPA's rules threaten electric reliability as well as
affordability. EPA's rules are contributing to an unprecedented
number of coal plant shutdowns that will occur in the next few
years as environmental regulations take effect. Taking coal out
of the equation means that America's most abundant source of
baseload electricity will have a diminishing role. The North
American Electric Reliability Corporation's most recent Long-
Term Reliability Assessment and other studies have raised
serious concerns about electric reliability in the near future.
Among the EPA rules contributing to reliability problems are
the Mercury and Air Toxics, or ``Utility MACT,'' rule, that is
accelerating the pace of coal-fired power plant retirements,
and the proposed greenhouse gas New Source Performance
Standards for power plants that would effectively ban any new
coal from coming online. To address the latter, we need to
enact H.R. 3826, the Electricity Security and Affordability
Act, in order to keep new coal in our energy future.
America's growing natural gas abundance is clearly a
blessing, but the recent cold spells demonstrate that there are
limits to the ability of natural gas to replace coal. In fact,
it was necessary to increase the use of coal-fired generation
to get us through the periods of high demand brought on by the
very cold temperatures. This included many coal facilities
scheduled to shut down in the next 2 years. We should look at
this winter as an early warning that reliability is at risk.
Now I might add that it is not even necessary to be a
global warming skeptic to be a skeptic of these policies. Even
EPA administrator Gina McCarthy admitted to this committee that
none of her agency's costly global warming rules would make a
measurable difference. In other words, the Obama energy agenda
is all economic pain for no environmental gain.
And the pain will fall disproportionately on the poor, who
are least able to handle higher electric bills. The unemployed
are also hurt, as higher electricity costs slow the pace of job
creation, and the war on coal is eliminating job opportunities
in many communities.
The damage around the world from the administration's
climate policies could be even worse. 1.2 billion people still
don't have access to electricity. The last thing they need
imposed on them is a costly climate agenda that puts the dream
of electrification even further out of reach.
For this reason, I am particularly disappointed by the
administration's opposition to financing for new state-of-the-
art new coal-fired power plants in developing countries, and
I'm perplexed by the President's insistence that he supports
the goal of increased electricity access while also pursuing an
uncompromising global warming agenda that effectively deprives
people of such access.
Unfortunately, those seeking to advance a global warming
agenda lose sight of the things that really matter. Today, we
will refocus on what really matters--ensuring affordable and
reliable energy for as many people as possible.
Mr. Whitfield. At this time, I recognize the gentleman from
California, Mr. McNerney, for an opening statement.
OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. McNerney. Well, I thank the chairman. I want to thank
the witnesses for coming out here today despite the weather and
whatever other obstacles you may have had. I just want to say a
little rebuttal to the chairman, who I have a great respect
for.
Coal does have a future in this country but we need to
implement carbon capture and sequestration technology and
develop that technology, which would be a benefit to the coal
industry. That being said, electricity and energy production
and our environment are interconnected and it is essential that
we continue efforts to produce energy in a responsible way. We
know, as has been confirmed by the world's leading scientists,
that climate change is happening and that human activities,
including burning fossil fuels, are driving this change.
We have also seen that climate change threatens our
electricity system itself and our economy through impacts like
droughts like the one we are now having in California, where
water accounts for about 15 percent of our total power supply.
This drought has disrupted hydroelectric dams and forced
utility companies to purchase electricity from other sources
that is up to three times more expensive than hydro.
Severe weather events, disasters, polar vortices, and large
wildfires also pose additional strains to our electricity
system. As a result, when considering electricity access in the
coming years, we must consider climate change. Energy
efficiency demand response, grid resiliency, reliability
measures and modernization could all help to mitigate and
prepare for the climate impacts that scientists tell us are
coming. Addressing electric enhancements and vulnerabilities
that providers are more capable of preparing for and responding
to our energy needs during extreme weather events and also
boost our economy by creating manufacturing jobs and
encouraging innovation.
Our Nation generates electricity from a variety of sources;
39 percent comes from coal, 29 percent from natural gas, 19
percent from nuclear, and 13 percent from renewable sources.
Renewable energy capacity alone has surpassed 90 gigawatts and
is becoming more competitive with fossil fuels every year. In
this committee, we have talked about American efforts to curb
carbon pollution and greenhouse gas emissions and how that
parallels the energy policies of other nations.
The U.S. should lead by example. We can show other
countries that we are more environmentally responsible to meet
our energy needs. Coal will remain a component of our Nation's
energy infrastructure but we can show that there are ways to
make it cleaner. For example, there will be plants online this
year both in the United States and Canada where CCS technology
will significantly reduce coal's carbon pollution. We are also
seeing the potential benefits of microgrids where consumers may
be better able to handle energy needs. When wildfires take down
a power line, the microgrid system can provide additional power
back to the utility.
The International Energy Agency estimates that by 2020,
developing countries will double their electricity power
output. There will be regions where new centralized power
plants make sense economically and that it is appropriate for
existing infrastructure. However, microgrids could and should
be essential to bringing power to many developing regions. That
is because connecting a remote community to a conventional
power grid with its large, centralized power plants is
expensive and could take more than a decade.
Building and combining power from multiple local sources
can be cheaper, more secure, and faster than extending the grid
to remote areas. This type of distributed generation also
typically relies less on carbon-intensive energy sources.
With that, I look forward to hearing the witnesses'
testimony and I yield back.
Mr. Whitfield. Thank you very much, Mr. McNerney.
And at this time, Mr. Upton was going to make a 5-minute
opening statement and we will submit it for the record, but he
is not here today.
So is there anyone on our side of the aisle that would like
to make a statement?
I know that Members of Congress always like to speak. I saw
Mr. Waxman coming in so I was trying to stress that someone
talk on our side, but at this time I recognize 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, on behalf of
the opening statement-makers.
I want to say we are having a hearing on electricity
access. Access to affordable, reliable electricity is
fundamental to our economy. It is a subject we should be
working together to address, especially since much of our
current electricity infrastructure is decades old and will need
to be replaced or upgraded in the coming years.
According to the Edison Foundation, these investments will
cost over $1 trillion over the next two decades. But we can't
have an honest discussion about the future of the electricity
system unless we talk about climate change. Until we have an
energy policy that acknowledges the reality of climate change,
the utility industry will operate in a perpetual state of
uncertainty.
Outside of Congress, there is a broad agreement that
climate change is the most significant issue facing our energy
system and infrastructure needs. On Monday, the CEO of the
Nation's largest railroad, Matthew Rose, called for an energy
policy that recognizes the reality of climate change. On
Tuesday, David Crane, the CEO of the Nation's second-largest
power generator, said that climate change is the most serious
threat to the future of the world.
These CEOs operate in the real world, so unlike this
committee, they know the value of listening to scientists. And
scientists know that climate change is occurring in that human
activities such as burning fossil fuels are largely
responsible. The most recent report from the Intergovernmental
Panel on Climate Change, which assessed nearly 10,000 peer-
reviewed studies, concludes that ``warming in the climate
system is unequivocal,'' and ``human influence on the climate
system is clear.''
And yes, yesterday, the Royal Society in the United Kingdom
and our own National Academy of Sciences jointly briefed this
committee to reiterate that it is now more certain than ever
that humans are changing Earth's climate and that these changes
will have serious impacts on humans, society, and the natural
world.
Energy, economic disparity, and the climate are
intertwined. The rest of the world knows this. UN Secretary
General Ban Ki-Moon calls climate change an existential threat.
And World Bank President Jim Yong Kim said that unless we
address the climate change, ``we could witness the rolling back
of decades of development gains and force tens of millions more
to live in poverty.'' And President Kim said point-blankly,
``if we don't confront climate change, we won't end poverty.''
We need to face this reality if we are going to design an
energy policy that protects our environment, grows our economy,
and gives companies the certainty they need.
Electricity system investments cost hundreds of millions
and often billions of dollars and are expected to last for
decades. It makes no sense to build this infrastructure without
considering its effects on the climate and the effect of
climate change on our energy systems. Much of American industry
knows this. Even ExxonMobil screens investments using a price
on carbon of $60 per ton. Most other major oil companies assume
carbon prices as well. Wal-Mart, Wells Fargo, Delta, GE,
Google, DuPont all are using a price on carbon to guide their
decisions.
As we will hear from one of our witnesses today, Synapse,
even utility companies are assuming carbon prices in their
planning. According to a recent survey, ``carbon pricing has
been standard operating practice in business planning.'' But it
is still an anathema even to discuss the idea in this
committee. We need to stop denying science and start listening
to the scientists and enlightened business leaders if we are
going to succeed in crafting a sustainable energy policy for
the future.
For the information of our witnesses and our guests at this
hearing today, despite repeated requests to have a hearing with
scientists, we haven't even gotten a response to that request,
let alone a hearing, so we have a woeful ignorance in this
committee of the reality of what is happening in the world
today as we look at energy policy.
Thank you, Mr. Chairman. I yield back my time.
Mr. Whitfield. Thank you, Mr. Waxman.
And that concludes our opening statements, and so once
again, I want to welcome the witnesses and thank you for being
with us today. We have a distinguished group of panelists that
will provide great insights into this issue that we are talking
about, energy access and the benefits and challenges of that.
Our first witness this morning--and I will introduce all of
you and then we will go back--but we are delighted to have Mr.
Edward Finley, who is the chairman of the North Carolina
Utilities Commission. Mr. Finley, thank you for being with us.
We have Mr. Bruce Biewald, who is the Chief Executive Officer
of Synapse Energy Economics. We have Mr. Mel Coleman, who is
the chief executive officer of the Northern Arkansas Electric
Cooperative. We have Mr. Paul O'Brien, who is the Vice
President for Policy and Campaigns at Oxfam America. And then
we have Dr. Todd Moss, who is the chief operating officer and
senior fellow at the Center for Global Development.
So thank all of you for being with us, and each of you will
be given 5 minutes for an opening statement and then we will
open it up for questions.
So, Mr. Finley, you are recognized for 5 minutes.
STATEMENTS OF EDWARD S. FINLEY, JR., CHAIRMAN, NORTH CAROLINA
UTILITIES COMMISSION; BRUCE E. BIEWALD, CHIEF EXECUTIVE
OFFICER, SYNAPSE ENERGY ECONOMICS; MEL COLEMAN, CHIEF EXECUTIVE
OFFICER, NORTHERN ARKANSAS ELECTRIC COOPERATIVE; PAUL O'BRIEN,
VICE PRESIDENT FOR POLICY AND CAMPAIGNS, OXFAM AMERICA; AND
TODD J. MOSS, CHIEF OPERATING OFFICER AND SENIOR FELLOW, CENTER
FOR GLOBAL DEVELOPMENT
STATEMENT OF EDWARD S. FINLEY, JR.
Mr. Finley. Thank you, Chairman. Chairman Whitfield and
Ranking Member McNerney and members of the subcommittee, thank
you for the opportunity to share with you my thoughts on the
important of affordable and reliable electricity in North
Carolina.
By far the most difficult aspect of my job is to conduct
public hearings at which consumers appear and implore us
commissioners to reject utility requests to raise rates. The
testimony is often poignant and heartrending. If you approve
this request, I will be unable to pay both the power bill and
to pay for medicine that I need. We listen to testimony for
hours at a time in hearings from one end of our State to the
other. In the end, we nevertheless grant at least a percentage
of the requested increases because the utilities must maintain
their financial health to provide reasonably priced electricity
over the long-term and maintain reliable and safe service.
Electric utility rate increases in recent years have been
driven primarily by plant construction expenses, a new
supercritical coal plant to replace older, less efficient ones,
new gas plants constructed for the same reason. More stringent
environmental regulations have been a major catalyst.
Our State, its legislature, the electric and gas utilities,
and its regulators have acted responsibly in efforts to improve
the environment while minimizing financial hardship on the
State's citizens that have been hit hard by the recession.
Since 2002, we have spent billions on environmental control
facilities, coal-to-gas conversion, incentives for renewables,
demand response, and energy efficiency measures.
By 2015, our electric utilities will have retired all of
their uncontrolled coal plants. However, rules requiring
removal of carbon from the remaining smokestacks will prove a
challenge for us. We have no place for the repositories.
In 2007, the legislature enacted the first renewable energy
portfolio standard in the southeast. It calls for 12.5 percent
of electric sales to be from renewables and energy efficiency
by 2021. For Duke Energy, demand-side management and energy
efficiency is projected to meet one-third of the projected
demand growth over the next 15 years, and for Progress Energy,
20 percent.
We have followed an all-of-the-above policy thinking that
is best. We have been able to balance the requirements to keep
energy prices affordable while anticipating assisting to
formulate and to comply with the rules to protect and improve
the environment. We believe this approach is best. It is
usually done in an adversarial context where we hear strong
arguments from both sides. That seems to be how our energy
policy is addressed these days.
Thank you very much.
[The prepared statement of Mr. Finley follows:]
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Mr. Whitfield. Thank you, Mr. Finley.
And, Mr. Biewald, you are recognized for 5 minutes.
STATEMENT OF BRUCE E. BIEWALD
Mr. Biewald. Thank you very much. Good morning, Chairman
Whitfield, members of the U.S. Subcommittee on Energy and
Power.
My name is Bruce Biewald. I am President and CEO of Synapse
Energy Economics. We are a research and consulting firm
specializing in electricity, energy, economic, environmental
topics. We do work largely in the States before commissions
such as North Carolina related to utility planning.
So I believe that climate change and carbon emissions from
the electric sector can be addressed in the U.S. without
threatening reliability, without large electricity price bill
increases to customers, and in a way that creates net jobs in
our economy.
I am here today to focus in particular on the planning
practices in the States. Many utilities are placing dollar
values on CO2. Carbon dioxide emissions are priced
in utility planning processes in the States. It has become
increasingly commonplace. So that is what I am focused on.
I did a report in November 2013, which is online. I think
it is actually attached to my comments here. And it reviews
Federal and State policies related to CO2 and then
summarizes utility forecast of CO2 prices. So
electric utilities, they are making very important resource
decisions, very capital-intensive, long-lived resource
decisions, and as part of that, they present the basis for
those decisions before regulatory commissions in the States.
They forecast CO2 prices, they forecast fossil fuel
prices, they forecast capital costs for their resource
alternatives.
So I have a slide here today. Unfortunately, it is
difficult to see at this scale, but it summarizes 30-some
forecasts of CO2 prices by utilities.
[The information follows:]
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Mr. Biewald. So we have got, for example, Duke Energy in
the Carolinas as a forecast I think in the middle of the pack.
There we have got Entergy in Arkansas. In their planning they
use four CO2 price forecasts--well, they use zero
for certain cases. They also look at a price of $25 per ton in
2017 in one of the sets of scenarios that they look at. So
Entergy has a carbon price in their forecasts. In Arkansas, the
Electric Cooperative Corporation has a CO2 price.
They look at $0, $10, and $20 for purposes of the latest plan.
So, you know, utilities around the country, including what
are represented here through their regulators or executives,
are forecasting CO2 prices and planning on that
basis. They are able to do this and the average of the prices
shown there for 2025 is $16 per short ton of CO2. So
that is kind of a summary of a lot of complicated information.
The links to all the IRPs are provided in the appendix to
my written submission here.
So I want to say that there are carbon prices I think
coming in the future in the United States that affect power
plants. Utilities are recognizing that. They are able to
recognize that and plan to serve their customers reliably at
reasonable cost and, you know, to the benefit of the local and
U.S. total economies.
Energy efficiency is available. Utilities that are
investing in energy efficiency are seeing prices of 2 to 4
cents per kilowatt hour. It is extremely attractive. In much of
the country, particularly the middle from the Dakotas down to
Texas, wind energy last year was coming in at prices of 2 to 4
cents per kilowatt hour.
In contrast, natural gas generation, you know, all in is,
you know, 6 to 8 cents per kilowatt hour and the coal-fired
power plants that we have been discussing, whether they are new
coal-fired--well, existing coal-fired power plants with the
upgrades that are required are at prices significantly above
that typically. It varies by region; it varies by plant. It is
important for utilities and regulators and others to roll up
their sleeves, look at the details, and make sound long-term
planning decisions.
Thank you very much.
[The prepared statement of Mr. Biewald follows:]
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The report ``2013 Carbon Dioxide Price Forecast'' is
available at http://www.synadpse-energy.com/Downloads/
SynapseReport.2013-11.0.2013-Carbon-Forecast.13-098.pf.
Mr. Whitfield. Thank you very much.
Mr. Coleman, you are recognized for 5 minutes.
STATEMENT OF MEL COLEMAN
Mr. Coleman. Thank you, Mr. Chairman.
Members of the Energy and Power Subcommittee, thank you for
inviting me to testify today on the benefits and challenges to
electric energy access in the 21st century. I am Mel Coleman. I
am here only as CEO of North Arkansas Electric Cooperative and
my main concern are my 35,000 accounts that I have.
We strive each and every day to improve the quality of
life. That is the business we are in. We have 28,000 members,
35,000 connects. We purchase our power from Arkansas Electric
Cooperative Corporation, which is our cooperatively owned
wholesale power supplier.
We have an obligation, Mr. Chairman, to provide a reliable
supply of electricity, plain and simply, providing that to our
member consumers at the lowest possible price. This job is not
easy today based on the new and ongoing challenges that we
face. One such challenge is the heavy infrastructure investment
that is associated with serving rural service territories. Co-
ops serve very diverse communities with sharp economic and
geographical differences with service territories that are
sparsely populated. I have a density, sir, of 7.4 meters per
mile where the average across the United States is 33.3. So our
costs are a lot more than most co-ops and most utilities will
see. The legacy of rural electrification and the obligation to
serve the last mile results in higher maintenance costs as
compared to our industry counterparts.
On top of our infrastructure challenge, we serve some of
the neediest Arkansans. As with most rural areas, North
Arkansas is economically depressed with limited economic
opportunities for our members. All six counties that my co-op
serves has an average poverty rate of 19.15 percent, well above
the national average, and a median household income of $32,000,
well below the national average. Rural consumers are more
dependent upon electricity to meet their household energy needs
than those living in urban and suburban households.
Contributing factors are higher electric usage in rural areas
and the prevalence of single-family detached unit homes, as
well as energy inefficient manufactured housing. So it stands
to reason that increased electricity costs have a
disproportionate impact on rural consumers.
Recently, consumers have been hit with the double whammy of
increased costs and higher rates due to the recent cold snap.
Not even a southern State like Arkansas was immune. Our
electric co-ops set new peaks for winter power consumption with
this being the coldest winter the State has experienced in 20
years. High demand for electricity and natural gas, along with
localized gas supply disruptions, force the grid to rely
heavily on coal generation to meet the power needs this winter.
I hope we can all take a lesson from these events and
appreciate the stability of coal pricing as a hedge against
natural gas-priced volatility. Our coal-based generation
resources protected Arkansas' electric cooperative member
consumers from the full effect of the recent spike in natural
gas prices. This winter proves that such a move to shut down
coal plants and EPA's goal of shutting down coal plants would
jeopardize reliable and affordable electricity for my members.
Unfortunately, EPA's proposed standard to limit carbon
dioxide emissions from new coal units will require carbon
dioxide capture technology that is costly and is not viable on
a commercial scale, effectively removing new coal generation as
a hedge against future natural gas price spikes. EPA's climate
regulations may well be the greatest threat facing our
industry. We are extremely concerned that EPA will propose a
standard to existing coal plants this summer that will threaten
the viability of our existing coal fleet, resulting in
increased cost to our members and undermine the reliability of
the Nation's power grid.
My cooperative, members of the committee, is not in the
electric business. We are in the life improvement business. Our
partnership with NRECA's international program has only
confirmed my sentiments about our commitment to quality of
life. To see what rural America was like before rural
electrification, all you need to do is visit a Third World
country.
I hear old-timers talk about the day the lights came on but
I didn't experience that day. I was fortunate to be part of an
electrification project in the remote areas of northwest
Guatemala. Last year, I saw the lights come on for the first
time for people. As the electrons flowed for the first time, so
did the tears of all who witnessed. That was the beginning of
the quality of life for those villagers, and in their face, I
saw our grandparents and felt what they experienced in our
country 75 years ago. That is what we have to protect.
Electricity is the foundation of our quality of life, and we
must never forget that. Thank you.
[The prepared statement of Mr. Coleman follows:]
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Mr. Whitfield. Thanks, Mr. Coleman.
And, Mr. O'Brien, you are recognized for 5 minutes.
STATEMENT OF PAUL O'BRIEN
Mr. O'Brien. Thank you, Mr. Chairman, and thanks, Ranking
Member McNerney, for your comments and for inviting us here.
Oxfam America is part of a collaboration of 17 affiliates,
and we work in 90 countries around the world, kind of in the
same business as Mr. Coleman, trying to improve lives. And
those were touching reflections and we have experienced those
ourselves. We see energy poverty and what it means to people on
the ground all over the world where we work. I lived in
Afghanistan for 5 years and I saw the same thing. I saw micro
hydro dams turn on electricity for girls who were able to do
schoolwork for the first time. In Sudan, I saw pumps that
electricity was allowing water to come out. Women no longer had
to walk through insecure areas. It literally changed their
lives, may have saved them. East Africa in more remote areas I
saw what refrigerated electricity can do for the medicines that
rural communities and remote places can have and health clinics
work all day long.
But we have seen something else happening in the last few
years that we are also trying to work on on the ground, and
that is the devastating impacts of climate change for poor
communities. We feel that they are the ones who face it first
and worst. They are 20 times more likely to face a climate
disaster in their lifetimes than the non-poor.
So what has that meant for us? Well, it means two big
things. One, it means that we as Oxfam have to spend a lot more
time trying to help people to be food secure in an increasingly
insecure environment. We work in places like Mali, Ethiopia,
Nigeria, Senegal to help farmers develop resilience practices
so that they can cope with unpredictable weather. We have
watched in the last few years food price spikes. And of course
these are far worse for poor people because they are spending
70 percent of their income on food. So corn may not be at all-
time high now but it was just a couple of years ago, and our
estimates and our research tells us that corn is going to
double in cost in real terms over the next 20 years due to
climate change.
The other big thing we see besides food insecurity is
climate-related disasters. We have worked with victims of
flooding in places like Pakistan and Bangladesh. We have helped
communities recover from coastal incursions by extreme weather
in the Gulf Coast of the United States, in Haiti, and very
recently, in the Philippines.
In the next 40 years, we estimate that somewhere between
150 million and 1 billion people are going to be displaced by
climate change. The U.S. is already one of the most generous
and effective responders to disasters around the world, but are
we going to be able to cope? Already, today, we are dealing
with south Sudan, Syria, the Philippines, the Central African
Republic. What are we going to do when climate exacerbates the
breadth and depth of the disasters that we face? And this isn't
just about the people on the ground that Oxfam America and
others like us care about. It is also about all of the security
and political unrest that comes when you face those kinds of
disasters. What are we going to do?
Something different must be done to deal with these two
challenges of energy poverty which is real on the one hand, as
we have spoken about, but also of climate-related poverty. And
just to be clear, Oxfam America does not oppose fossil fuel
extraction. We worked for 10 years to make sure that the monies
from oil, minerals, and gas that developing countries are
getting, and they are getting it--goes towards poverty
reduction.
I just want to put this in numerical context. Globally,
there is about $130 billion spent every year on AIDS to help
people living in poverty mostly in developing countries. At the
same time, there is $2 trillion of private investment going
into developing countries. And there is $6 trillion of
government investment being spent in developing countries. The
question that is before us is not whether we should decide the
fate of fossil fuel industries in Africa and other places. That
is going to happen anyway. The question is whether we should be
taking precious U.S. payer tax dollars and using it to invest
in fossil fuels. And we believe that that is not the way
forward if the interests of the poor in those countries is the
center of the equation.
So today, the Electrify Africa Act is being marked up by
the House Foreign Affairs Committee and we, Oxfam, and many
organizations like us are advocating that the Act adhere to
three core principles around access. First, it should be
prioritizing access and not just production. Secondly, let's
remember that at the end of the day whether communities and
countries have viable access to electricity is going to be the
responsibility of their governments, and everything we do
should weaken, not undermine, those governments. Whether we
like it or not, they are going to be responsible for
maintenance and for ensuring that revenues are connected to
sustain their energy economies.
And finally, we believe that the Act should be prioritizing
renewable energy development. And just a couple quick comments
on why. First, we believe that fossil fuels do not internalize
the actual cost of their production, their cost to communities,
their cost to countries, their cost to the planet. If they did,
we believe that they are actually far more expensive than
renewable energies. Secondly, we know where the poor are
living, and although some will say that the numbers around
urban poor are high, maybe as high as 200 million, we don't
think it is that high. Even in a place like Africa, most
people, 400 million, are living in rural areas where you cannot
access them with centralized grid planning. You need mini-
grids. You need off-grid plans.
I watched in Afghanistan in the early----
Mr. Whitfield. Mr. O'Brien, excuse me a minute. I have let
you go over a minute and 15 seconds----
Mr. O'Brien. OK.
Mr. Whitfield [continuing]. So if you could just summarize.
Mr. O'Brien. I will close with one sentence. Renewable
energy costs, we believe they are going down and we would like
more creativity and innovation by the United States.
But thank you, Mr. Chairman----
Mr. Whitfield. Thank you.
Mr. O'Brien [continuing]. For allowing me the time, and I
look forward to your questions.
[The prepared statement of Mr. O'Brien follows:]
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Mr. Whitfield. Thank you.
Dr. Moss, you are recognized for 5 minutes.
STATEMENT OF TODD J. MOSS
Mr. Moss. Thank you, Chairman Whitfield, and other members
of the subcommittee.
Energy access is increasingly relevant to American business
and U.S. foreign policy interests, especially in the fast-
growing emerging markets. As a development policy scholar at
the nonpartisan Center for Global Development and a former
State Department official, I am going to focus this morning on
the international dimensions and what the U.S. really can and
should be doing about it.
I have three points this morning. One, the energy gaps are
huge and very harmful; second, the U.S. can and should be a
leader in expanding energy access abroad; and three, to
succeed, we have to be honest about how our policy choices may
have the practical effect of denying power to the world's
poorest.
First, more than 1 billion people today live without
electricity. Turning on a light, heating our homes, using a
computer or a fridge are things that we in the United States
view as simple conveniences of modern life. In Africa, as we
have heard, some 600 million people, almost twice the
population of the United States, live with no electricity at
all. Even those with access to power use an absolute fraction
of the power that we do.
I was recently shopping for a new refrigerator with my son,
who is here with me today, and I was reading those little
yellow ENERGY STAR tags, and my new fridge uses five times
power per year than the average person in Tanzania or Liberia.
This lack of electricity is devastating to both lives and
livelihoods. Without electricity, people are forced to cook
with wood and charcoal. This creates indoor air pollution,
which then leads to premature death. The best global estimate
we have is that there are 3 \1/2\ million premature deaths
every year from indoor air pollution, so energy poverty kills
more people than AIDS and malaria combined. The effect on jobs
and economic growth is stifling. World Bank data show that the
lack of affordable and reliable electricity is the top
constraint to business expansion in Africa.
Second point, the U.S. Government has a very vital role to
play in closing this energy gap. African governments are
prioritizing electricity estimates. European countries, China,
and other nations are increasing their commitment to energy
access and it is time for the U.S. to play its part, too. In
our own history, our government has been fundamental in the
expansion of electricity to underserved areas and ensuring that
American industry has sufficient and affordable energy to be
competitive. This policy had both a human face and was pro-
growth.
Last June, President Obama launched Power Africa. This very
promising initiative supports a doubling of energy access in
the continent. Ordinarily, the agency best positioned to lead
this effort, the Overseas Private Investment Corporation, or
OPIC, is hamstrung by outdated policies and legislation. This
little-known but high-performing agency supports the American
private sector through insurance and project finance, not aid.
This is commercial finance. And what OPIC needs is not more
money but they need more authorities and flexibility to fulfill
their mission.
Fortunately, the Electrify Africa Act introduced last year
by House Committee on Foreign Affairs Chairman Royce and
Ranking Member Engel is being marked up today. Congressional
action is important because it will power OPIC and provide a
foundation so these efforts outlive the current administration.
Momentum in Congress is encouraging, yet just as the U.S.
is pushing expanded access, other policies are adding
restrictions on financing for natural gas and even hydropower.
This comes unfortunately at just the moment when many African
countries are discovering natural gas and understandably they
want to use some of those resources to produce electricity at
home. Indeed, all six of the Power Africa focus countries are
either producing or exploring for oil and gas today.
Ghana, a close U.S. ally, is a good example. Ghana wants to
use its newly discovered natural gas to expand access and grow
its industry. If the U.S. is limited in our ability to assist,
and many advocacy groups concerned about greenhouse gas
emissions are pushing to prevent any gas-fired power plants in
Ghana, as we consider our position, it is worth noting in the
United States we have over 3,400 fossil fuel plants. Ghana has
two.
My final point is that we cannot wish away these tradeoffs
of our energy policy choices. An emphasis on clean technology
is a very good idea where it is feasible and it deserves active
U.S. support, but the scale of the problem is so great that
those approaches will simply not be enough. People living
without power are not all in isolated villages. As we have
heard from Mr. O'Brien, some 200 million Africans living
without electricity are in cities and towns. Connecting these
fast-growing urban areas will require more large-scale
generation and expanding the grid.
Even in rural areas in Africa, people are not as spread out
as some people imagine. In Kenya, only 20 percent of the
population has access to power, but a careful study by the
University of California Berkeley shows that 75 percent of the
population lives within a mile of an existing transmission
line.
Solar lamps, also very popular, it is a fine invention, but
consumer demand is going to be much greater than having a
single light bulb and a cell phone charger. No country would
rationally accept solar lamps in lieu of a modern energy system
that can generate jobs and growth.
A final common mistake is assuming that universal energy
access can be achieved entirely through renewables. Instead,
there is a clear tradeoff between strictly focusing on
renewables and expanding access. My colleague Ben Leo and I
estimate that allowing OPIC to invest in natural gas power
projects could provide, for the exact same money, access for 60
million more people over a renewables-only strategy. At the
very least, we should make an exception to any public financing
restrictions for the poorest countries with the least
emissions.
To conclude, no one would openly argue that we should fight
climate change on the back of the world's poor, but we must be
very careful not to burden the poorest nations with romantic
notions of an energy future that does not yet exist. If an all-
of-the-above approach is good enough for the United States, how
can we in good conscience stand in the way of the world's
poorest countries using locally available energy sources to
provide electricity for their own people?
Thank you.
[The prepared statement of Mr. Moss follows:]
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Mr. Whitfield. Well, thank you very much, Dr. Moss, and
thank all of you for your testimony.
You know, your testimony raised some great issues because
while we do have many problems in America as we make this
transition--and I still maintain we are transitioning too
quickly to renewables--but basically, you have America and
Europeans and wealthy nations dictating to developing nations
on exactly what kind of energy they are going to have.
And, of course, Mr. O'Brien, in your testimony, I mean
Oxfam has a great reputation. In your testimony you talked a
lot about climate change, and obviously, whenever you talk
about this issue, you have got to talk about climate change.
And I want to read an article that I read just recently about
the most recent AR5 assessment report of the Intergovernmental
Panel on Climate Change, which says it acknowledged that the
lack of warming since 1998--there has been a lack of warming
since 1998--and there are growing discrepancies between
observations in reality and the climate model projections.
There is evidence of decreased climate sensitivity to increases
in atmospheric CO2 concentration, evidence that the
sea level rise during 1920 to 1950 was the same as 1998 to
2012, and that the Antarctic ice mass is increasing, also, that
types of weather extremes were worse in the '30s and even in
the '50s than they are today.
And there are a large group of scientists who are saying
because so much of CO2 emissions are natural, that
is having a much greater impact certainly than manmade. So none
of us question the concern about greenhouse gas-enhanced
climate change, but we should not be such alarmists, and the
international news media I think is contributing to this
because we need to start acknowledging that there are some real
discrepancies in these model projections and the reality, as is
pointed out in this AR5 assessment report that was issued in
the fall by the IPCC.
So here we are talking about we have got these financial
institutions under pressure from the Obama administration
dictating on what the electricity is going to be produced from
in these developing countries. And I mean that is a concern
that you expressed also, Dr. Moss.
But anyway, one of the questions I wanted to ask you, Mr.
Coleman, I mentioned in my opening statement about how, with
this cold spell that we had, and we had Southern Company, we
had AEP, we had Luminant, we had even the nuclear plants
talking about the impact of these regulations, and 89 percent
of the AEP coal fleet is going to go down, Southern Company, 75
percent that was operating at capacity is going to go down, all
because of these regulations.
And many of us are concerned about when you have spells
like this, the renewables, I mean how can you just meet your
requirements with reliability without these plants? Would you
just comment on that for me?
Mr. Coleman. Well, Mr. Chairman, I think the short answer
is we can't. Baseload generation are our fossil fuel plants.
And I will give you a disclaimer; I am in the distribution
business. I am not a generation and transmission expert. But
the power that we purchase, you know, we have to have the
baseload generation there.
Renewables are great. We are all for renewables. We have
got renewables in our portfolio. And as you said, in Arkansas
we have got a campaign called The Mix Matters, and it says you
have got to have a mix of all-of-the-above energy strategy, not
all-but-one energy strategy.
So renewables play a part, certainly, the wind renewables
that we have, but it is not baseload generation. Fortunately in
Arkansas we are part owners of the newest coal plant in the
country, an ultra-supercritical coal plant, the Turk plant, and
we could not build another one today under today's EPA rules.
So, yes, we have got to have the basic generation or my people
are out of power.
Mr. Whitfield. You know, these are such real issues with
such dramatic impacts on people, and I really think the Obama
administration is not being truthful with the American people
when they set the emission standards on these new plants based
on plants that will not be built without a lot of government
support. And none of these plants are in full operation yet.
That is the thing that is so disturbing to me and many other
people.
My time is expired so I would like to recognize the
gentleman from California for 5 minutes.
Mr. McNerney. Well, thank you, Mr. Chairman.
What I am hearing this morning is a conflict between the
legitimate desire to provide electric power to people in the
world to make their lives better so that they can live in a
modern world on the one hand, and on the other hand, providing
electric power requires fossil fuels to be burned, which
increases the problems associated with climate change. So the
risk in my opinion of the climate change is the bigger risk.
But we can't overlook the need to provide power. So that is the
fine line that we need to develop and to walk. And to say that
one side or the other is totally right or wrong is missing the
point in my opinion.
Mr. Biewald, you had an interesting comment I believe in
your opening statement that you thought that it was possible to
provide responsible power and create jobs without increasing
the price of electricity. Would you expand a little bit on
that, please, in a minute or so?
Mr. Biewald. Absolutely. In the States that we have looked
at, it is perfectly plausible with a little bit of planning to
retire some plants and replace them with alternatives that
really don't cost any more, in fact, in many cases cost less.
And so it helps the consumers.
In Kentucky, for example, we did a study where adding
efficiency and renewables, displacing some fossil fuels, added
20,000 net jobs by the year 2020. So it is helping the economy,
it is keeping the reserves at a level that is required for
liability and at reasonable cost to the customers.
Mr. McNerney. Would that increase their price of
electricity for the customers?
Mr. Biewald. It need not. What happens is the efficiency
opportunities are so inexpensive and such low-hanging fruit and
so attractive that those are available and decrease the prices
a lot. The renewable prices are a mix. Some renewables are less
than the conventional supply and some renewables are more. In
terms of intermittent renewables coming on the grid, say wind,
as Mr. Coleman points out, we need to sort of baseload demand
for electricity, but that baseload can be served by some mix of
resources, including, say wind, with natural gas backing it up.
So that provides in combination baseload power that serves that
baseload demand reliably.
Mr. McNerney. Thank you. Mr. O'Brien, I would like you to
sort of expand that discussion to the international situation.
Mr. O'Brien. Well----
Mr. McNerney. How could we provide power to international
customers that don't have power now----
Mr. O'Brien. Right.
Mr. McNerney [continuing]. Using responsible low-carbon
emission methods?
Mr. O'Brien. What has changed radically for us as a
development organization is where wealth that is driving
economic growth is coming from. Let's take countries we have
been in in the last several decades, Kenya, Tanzania, Uganda,
Mozambique. In the last 3 years, those four countries have
discovered 130 trillion cubic feet of gas. They have discovered
2 billion barrels of oil. They don't need our help to burn more
fossil fuels. In the same environment, they have populations
facing extreme weather events all the time. They have got
coastal regions where fishing communities are being wiped out;
they have got farmers who are losing their livestock and their
crops.
What we are asking is that the United States plays a
leadership role in helping the global economy move off an
overreliance. We want to be the ones associated with the
hospital in Haiti that is able to run through solar power an
entire hospital to cater for 6,000 patients. We want to be
associated with that.
Mr. McNerney. So another thing that scares me about climate
change is the potential to drive political and military
conflicts. Would you expand on that a little bit, please?
Mr. O'Brien. Today, there are 2 billion people under water
stress. Many of them live in insecure regions where their
governments don't have confident control of their territories
and they are not frankly anything close to the kind of strong
democracies that we would like to see. Climate is only going to
exacerbate local tensions based on lack of access to important
resources like water and so on. If we don't tackle the
consequences of climate change, we are going to be dealing with
the stresses on governance and on security in much of the
Sahel, in much of central Asia where I spent a lot of time, and
in many other areas which are really facing water stress is
perhaps the easiest way to understand it.
Mr. McNerney. Well, thank you, Mr. Chairman.
Mr. Whitfield. At this time I recognize the gentleman from
Texas, Mr. Barton, for 5 minutes.
Mr. Barton. Thank you, Mr. Chairman. You may have done this
before I arrived but we have former Congresswoman Jo Ann
Emerson in the audience, and if she wasn't introduced, we
welcome you back to the committee and we are glad to have you
in your new position today.
Mr. Whitfield. Yes, thank you for doing that. We hugged and
kissed before but we didn't do it publicly.
Mr. Barton. Well, I missed out on that unfortunately,
dadgummit.
We have been throwing around a lot of terms here today, Mr.
Chairman, and just for the record I want to try to clarify some
of these before I ask some policy questions.
My first question--and I don't know who to ask this to, I
guess the utilities commissioner from North Carolina, Mr.
Finley--is the cost of CO2 the same as the cost of
carbon?
Mr. Finley. Well, there is a lot of ways to measure the
cost of carbon. Of course, carbon involves more than
CO2. It involves methane and other types of--I am no
expert on the cost of carbon so that is about the best answer I
can give you.
Mr. Barton. OK. Well, let me try it another way. When we
talk about the cost of CO2, are we talking about the
actual cost of obtaining CO2 for a productive
purpose such as oilfield injection or something of that sort or
are we talking about the cost of complying with various
CO2 remediation and reduction regulation?
Mr. Finley. In my opinion, it is the latter as opposed to
the former. There is a lot of cost involved in taking the
CO2 out of the smokestack and making the plants
compliant with whatever regulations that we do come up with and
retrofitting plants to be able to accomplish that.
Mr. Barton. So we are really talking about the cost of
regulatory compliance?
Mr. Finley. I think that is a large cost, yes.
Mr. Barton. Does anybody disagree with that, anybody on the
panel? I don't see----
Mr. Biewald. Well, some people do talk about the cost of
buying CO2 as an industrial product. No one here
today----
Mr. Barton. But that is not what your chart was?
Mr. Biewald. No, no, and my chart has to do with the price
of carbon or carbon dioxide for purposes of planning. So we are
certainly talking about that. Some of us are also talking about
the societal cost of the carbon emissions, so the cost of the
damages associated with the carbon emissions. So there is both
sides to it.
Mr. Barton. Which is a very subjective thing, very
speculative. This pencil lead is carbon. I know what that
costs. I know what this pencil cost. Your chart and all this,
it is in the eye of the beholder what you want to apply to
that. At least in my opinion it is.
Do these compliance costs result in any increased
efficiency in the generation of electricity or any lowering of
electricity cost? And I will ask the gentleman from the
electric co-op in northern Arkansas that question.
Mr. Coleman. Again, Congressman, I am a distribution guy; I
am not a generation guy. Would you restate the question for me
one more time?
Mr. Barton. Well, I was trying to get you to say no----
Mr. Coleman. No.
Mr. Barton [continuing]. It just raises the cost.
Mr. Coleman. That is what I heard, no.
Mr. Barton. OK. That is the answer I wanted. I only have a
minute left. The vice president of Oxfam, I was really
impressed by your testimony. I mean you seem to be in the real
world and not some starry-eyed idealist, which I am an
industrial engineer by training so I really did appreciate what
you said. So my question to you, and I don't think this is a
loaded question and I think the answer is going to be yes, but
does your organization believe that democratically elected
governments that use free market capitalism principles provide
the greatest opportunity for their people to have a better life
in their country?
Mr. O'Brien. Yes.
Mr. Barton. OK. Good. Good.
Mr. O'Brien. We have a way to go to get there, but yes.
Mr. Barton. OK. Now, I wish I had another 10 minutes or 5
minutes because I would really like to get into--I actually
support a lot of what you said about in these developing
nations a baseline power grid system like we have in the United
States is not the most efficient means of providing power in
these developing countries where they are so spread out and
they don't have the infrastructure, and I do believe that
alternative energy sources like wind power and in some cases
small hydro is the way to go.
But I also believe that there are cases where a baseload
coal-fired power plant, if there is coal locally in the region,
can provide an economy of scale and an efficiency that these
alternative energy sources can't provide so that in my view, if
you are using free market capitalism, you would have a mix in
these developing countries. Would you agree? That is a pretty
complicated statement.
Mr. O'Brien. I will tell you what I saw.
Mr. Barton. And then I will yield back to the----
Mr. O'Brien. And very briefly, in my 5 years in Afghanistan
I saw major infrastructure projects around energy start and
flounder because the government was weak, like you say, or
didn't have the capacity to get things going or it got stolen
or there wasn't security on the grounds to actually move the
thing forward fast enough.
But at the same time, I went to some of the most remote
bases and saw small micro hydros literally change the options
for women and children.
Mr. Barton. Right.
Mr. O'Brien. And I see what is going on in Pakistan today,
and even if we get those lines across Afghanistan to provide
power, I don't believe that government has what it takes to
collect the revenues needed to sustain a big energy economy.
That is why I think in many respects if we want to meet real
needs, we have got to go smaller and meet people where they are
at.
Mr. Barton. I agree with that. Mr. Chairman, I yield back.
Mr. Whitfield. The gentleman's time expired a long time
ago, but at this time I would like to recognize the gentleman
from California, Mr. Waxman, for 5 minutes.
Mr. Waxman. Thank you, Mr. Chairman. I will try to do my
questions within the 5 minutes, but I see that you are being
liberal and allowing people to go over, but I will try to stay
within the 5 minutes.
Coal-fired power plants are responsible for one-third of
the Nation's carbon dioxide pollution. A new coal-fired power
plant can cost billions of dollars and might be expected to
operate for 40 years or even longer. Given what we know about
climate change, it doesn't make sense to invest in a new coal
plant without considering the long-term liability of its
pollution.
Mr. Biewald testified that many electric utilities are
looking for ways to minimize their carbon pollution such as by
including costs of carbon in their integrated resource plans or
IRPs. In 2013, the Arkansas Electric Cooperative, which
supplies Mr. Coleman's co-op with its power, filed an IRP with
the Arkansas Public Service Commission that included carbon
price scenarios starting at $10 per ton in 2022 and escalating
to as high as $78 per ton by 2050. Last year, Duke Energy
Carolinas also included a carbon price in the IRP it filed with
Chairman Finley's commission. Duke looked at a carbon price of
$17 per ton beginning in 2020 and escalating over time.
Mr. Coleman and Chairman Finley, are there laws that impose
these carbon prices in Arkansas or in North Carolina?
Mr. Coleman. No.
Mr. Waxman. Mr. Finley?
Mr. Finley. Not in North Carolina.
Mr. Waxman. OK. Jim Rogers, Duke Energy's former CEO,
recently said, ``every decision we make today we make with the
knowledge that there will someday be carbon regulation in this
country. There will be a price on carbon, and since we make
decisions for 30 to 40 to 60 years, we need to take that into
account.'' Mr. Biewald, do you agree with Mr. Rogers that
rational utilities should include a price on carbon in planning
and investment decisions even if there are no current laws that
impose such a price?
Mr. Biewald. Absolutely, yes, because such prices are
likely to be in place, policies and prices, during the life of
these assets. So prudent, responsible planning really requires
the companies making these decisions----
Mr. Waxman. Um-hum.
Mr. Biewald [continuing]. To anticipate that.
Mr. Waxman. Utilities around the country are prudently
considering the cost of carbon in their business decisions.
Unfortunately, there is only so much they can do on their own.
In 2009, American Electric Power proposed to build a
commercial-scale coal-fired power plant with carbon capture and
sequestration in West Virginia, but AEP had to cancel that
project when State regulators wouldn't approve the cost because
no existing laws required AEP to reduce its carbon pollution.
Mr. Biewald, are other utilities likely to be able to finance
technologies such as carbon capture and sequestration if there
are no legal requirements to control carbon?
Mr. Biewald. I would say in general, no. It would be
difficult for commissions to approve those kind of expenditures
and put them on the backs of the customers. Even a new coal
plant without carbon capture and sequestration is sort of
economically unviable, so in that regard, it is not about the
carbon policy or the price of carbon. It is just the market
economics of producing kilowatt hours.
Mr. Waxman. Well, EPA's forthcoming power plant rules would
provide the regulatory certainty utilities need to build
cleaner coal plants in this country, yet House Republicans
recently passed the Whitfield bill out of this committee which
would block EPA's rules. House Republicans might not believe
climate change is real, but virtually no one in the scientific
community holds this position and responsible businesses don't
either. This committee needs to stop ignoring reality and start
finding solutions to climate change.
In his questions a minute or so ago, Chairman Whitfield
read some out-of-context quotes to suggest that climate change
has paused and that there is less reason for concern. He could
not be more wrong. Yesterday, the Royal Society of Great
Britain and our own National Academy of Sciences published a
new paper entitled, ``Climate Change Evidence and Causes'' that
specifically addresses these and similar denialist arguments.
And let me read you a key section. ``Does the recent slowdown
of warming mean that climate change is no longer happening? No.
... Despite the slower rate of warming, the 2000s were warmer
than the 1990s. A short-term slowdown in the warming of Earth's
surface does not invalidate our understanding of long-term
changes in global temperature arising from human-induced
changes in greenhouse gases.''
So since there is still such misunderstanding about such
basic facts on this committee, I would ask unanimous consent to
introduce this report for the record.
Mr. Whitfield. Without objection.
[The information is available at http://dels.nas.edu/
resources/static-assets/exec-office-other/climate-change-
full.pdf.]
Mr. Waxman. Thank you, Mr. Chairman. I see that my time has
expired.
Mr. Whitfield. Thank you.
And at this time, I would like to recognize the gentleman
from Ohio, Mr. Latta, for 5 minutes.
Mr. Latta. Well, thank you, Mr. Chairman, and thank you
very much for the hearing today and thanks to our witnesses for
being with us today. I really appreciate your testimony. You
know, we have been experiencing a really cold winter in the
United States. Across my district, tonight it is going to be 10
below again, so it has been cold.
But if I could get right to it, just a little bit about my
district. I probably represent the largest number of co-ops in
the State of Ohio. I probably represent the largest number of
farmers in the State of Ohio. I also represent about 60,000
manufacturing jobs in the State of Ohio. And as I believe Mr.
Coleman had said a little bit earlier that you need baseload
capacity to turn these machines on and what you need to do to
power up, and that is what we have to have in my area to make
sure that people are back at their jobs in the morning working.
And if I could, Mr. Finley, I noticed with interest on page
4 of your testimony, you are describing, you know, some of the
declines in your furniture businesses and things like that and
then on page 5 that, you know, you are all competing for
business across the country and businesses are also looking at
price and reliability. How important is it to you to have that
power out there to make sure that you can even bring these
businesses into your State?
Mr. Finley. It is fundamentally important. It is one of the
most important aspects of our jobs and the power companies'
jobs that we regulate.
Mr. Latta. And, Mr. Coleman, as you talk about Arkansas co-
op and, you know, I also saw that in your testimony, you know,
you talked about that if you are going to raise the standard of
living and tackle poverty, you have got to have that power. And
to be able to do that, especially tackling poverty and to have
that power, doesn't that equate to jobs that you have to have
to make sure that you have it?
Mr. Coleman. Absolutely.
Mr. Latta. And again in looking at your testimony, I also
found it interesting, I think it was on page 2 of your
testimony where you went into one of your plants is required to
do $614 million in total upgrades to a plant that cost $1.17
billion. So you are almost at half the cost of your plant for
upgrades. Who is paying for those costs?
Mr. Coleman. Congressman, my members are and all of the
480,000 members of the State of Arkansas are paying for those
in the electric bills every day.
Mr. Latta. OK. And when you look at that, what are your
folks out there that are using the power in your companies
saying when they are getting these increases in their costs?
Are they saying that they can stay in Arkansas or do they have
to sometimes look somewhere else?
Mr. Coleman. Well, I can give you an example. We have got a
10 megawatt load on our lines, and we meet with them on a
quarterly basis. They are based out of Chicago, and they are
the largest user of power that we have. Power is also the
largest expense that they have as a business. And, you know, I
meet with them across the table once a year and I hear from
them that, you know, when is this going to end? And if you
listen to some of the testimony today, it is not when is it
going to end; it is almost like it is just beginning. So when
we talk to, whether it is the industrial customer or whether I
talk across the table to a residential member, and I have got
some stories about how they can't pay their bills, that is the
problem, the affordability of the bill and the fact that the
power has got to be there when they need it.
Mr. Latta. Thank you. Mr. Finley, if I could ask a question
to you now. You also testified that the electricity rate
increases are up in North Carolina are being driven largely by
recent construction of power plants required in large number by
need to comply with more stringent environmental regulations.
When you refer to more stringent environmental regulations,
what are you referring to?
Mr. Finley. Those have to do with the atmospheric
regulations both within our State and from the national
government. There are any number of them that have been driving
the cost of plants in North Carolina since approximately 2002.
Mr. Latta. Thank you. And, Mr. Moss, also when you are
looking at the developing countries out there and to really get
their economies moving and get the standard of living up there,
you have to have jobs. And to have those jobs, you have to have
that energy and especially electricity. When you are looking at
that crystal ball into the future, what kind of power do these
countries have to have to be able to have that baseload
capacity to create those jobs to increase that standard of
living?
Mr. Moss. Many multiples of what they have now, many, many
multiples.
Mr. Latta. OK. And when you say multiples, how would you
describe the multiples?
Mr. Moss. The average person in Nigeria uses about 130
kilowatt hours per year. In the United States, the average
person uses about 13,000, so we have got 100-fold. You know,
for a Nigerian that wants to live an American-style lifestyle,
they need a 100-fold increase in power. There is an aluminum
smelter previously owned by an American company in Ghana. That
has been running at only 20 percent capacity for the sole
reason that they do not have enough power.
Mr. Latta. Thank you.
Mr. Chairman, I see my time is expired and I yield back.
Mr. Whitfield. The gentleman's time is expired.
At this time, I recognize the gentleman from New York, Mr.
Tonko, for 5 minutes.
Mr. Tonko. Thank you, Mr. Chair, and thank you to our
panelists for some interesting discussion.
Mr. O'Brien, in your testimony you refer to the
International Energy Agency's scenario for universal energy
access, which has 65 percent of the energy coming from
renewable sources. The model for the electricity sector in the
developed world, large-scale central generation with power
delivered to customers over a network of transmission and
electrical lines, is about a century old. OPIC and the Ex-Im
Bank have been operating for years without any energy cap, and
these countries have had access to the technologies that make
up this traditional generation and delivery system for years.
This model hasn't delivered for these people, so this doesn't
seem to be a realistic model for energy access by the poor,
especially in rural areas. Would you agree with that statement?
Mr. O'Brien. Yes.
Mr. Tonko. And the finance model for our electricity sector
where central generation and delivery costs are paid by the
ratepayers also doesn't seem realistic for people who operate
in a cash or barter economy and spend about 75 percent of their
incomes on food. Would you agree with that?
Mr. O'Brien. Yes.
Mr. Tonko. It seems to me this is analogous to the
situation with landline-based telecommunications versus
cellular communications, that the improvements in renewable
energy technologies and the drop in the price to acquire them
seems to have been done far more to improve energy access for
poor people in developing countries than our decades-long
attempt to help them duplicate our model of energy access. Is
that----
Mr. O'Brien. Yes. I had the privilege of being in both
Africa and Afghanistan to watch the technology leap in the
telecom sector, and it was transformative and it wasn't done by
starting from all technologies. I couldn't agree with you more.
Mr. Tonko. Thank you. And your testimony provides examples
of climate impacts that poor communities in the developing
nations are experiencing now. Are these communities or their
national governments able to respond to natural disasters,
increased water scarcity, or other climate-related problems
that they are experiencing?
Mr. O'Brien. The short answer is they have to be because
there is no other viable way to meet the long-term solutions.
If we want those free market economies with proper oversight,
you have got to have effective governments doing that.
When we went to Haiti to help them after the earthquake,
only 1 percent of all the money we provided to Haiti went
through public institutions and basically left them just as
weak afterwards as they were beforehand. You know that Haiti is
going to see another climate-related disaster in the next few
years, and their government is no more ready today than it was
before the last crisis. We have got to find a way both to meet
the needs of people on the ground and to do it in a way that
makes local institutions stronger at being responsible
themselves.
Mr. Tonko. Thank you. And what do these continued or
accelerated climate impacts mean for the people affected?
Mr. O'Brien. Well, it means everything. It means jobs, too,
for fishermen, for farmers, for healthcare workers. We are
witnessing threats to livelihood in that all of these contexts
because of extreme weather events, and not is why we are so
seized with the fact that we have to address both the climate
challenges economically and the energy challenges.
Mr. Tonko. Thank you, Mr. O'Brien. Mr. Chair, I yield back.
Mr. Whitfield. Thank you.
At this time I recognize the gentleman from West Virginia,
Mr. McKinley, for 5 minutes.
Mr. McKinley. Thank you, Mr. Chairman.
Mr. O'Brien, in your testimony you use quite a few
statistics and some facts there but you didn't provide the
sources of those so that we could verify that. I think it is on
page 3 you talk about--you use a 20 time multiplier. You talked
about the 3 percent with the poorest people--could you----
Mr. O'Brien. Yes.
Mr. McKinley [continuing]. Go back through your testimony
and provide us the references of those if you would, please?
Mr. O'Brien. We will be happy to do that.
Mr. McKinley. But that leads me to another because what I
heard in your comments, you raise, quite frankly, a moral
question. I think everyone on the panel and others would agree
that the African nation needs affordable and dependable energy
for them to emerge from poverty. And there is a consensus among
economists that the best way to do that is using their fossil
fuels that either they have or they can develop with that. But
by virtue of some of your testimony, it came across that these
Africans and other people in Third World nations--it comes
across as they shouldn't be entitled to use them. Now, America
can, but they can't.
And so there was a quote that was given. It was, you know,
forcing a Third World person to stay behind by forcing him to
use more expensive electricity just so some First World person
will feel better about themselves. This comes across as immoral
and I am troubled with that, and I hope that we can work
together somehow to get across to maybe change the minds of
some individuals with that.
But the time that I have remaining I would like to hear a
little bit of Mr. Moss because you were also providing some
very interesting testimony. I started talking about Africa a
year ago, the problems that they have with a lack of power and
how we can be exporting coal into Africa to develop so that
they can emerge from poverty. Then I used the model of a 60
watt light bulb and I said that is the total power that they
have there is a 60 watt light bulb for 3 hours a day per
person. That is it.
So I want you to amplify a little bit more on that and also
to reflect back on some of Mr. O'Brien's testimony if you
would, please.
Mr. Moss. Sure. I mean I think that it is absolutely right
that the poorest people in the world are going to be hit the
hardest by climate change, but it is perverse to actually make
the world's poor pay twice by compounding their poverty by
taking measures that effectively deny them access to power.
There is no plausible scenario that I have ever seen where
African carbon emissions are going to affect global emissions,
so if it is a global problem, the problem is in the current
emitting countries; it is not--you know, us denying Ghana two
or three natural gas power plants is going to have absolutely
zero affect globally. So it doesn't make sense to try to
connect Ghanaian farmers who are having trouble with climate
change and saying, well, let's not let Ghanaian farmers get
electricity from Ghana's natural gas. That is just a logical
leap that I think is quite frankly quite immoral.
Just one other point I want to make, the IEA figures, the
International Energy Agency, when they define energy access, it
is for an urban household of five people, 500 kilowatt hours
per year. That is 100 kilowatt hours per person. That is what
an American will use in 3 days.
So when you see these scenarios that we can provide
universal energy access through, you know, nice solar panels,
yes, some clinics will run on solar panels, yes, micro-hydro
and other technologies are changing every day, but if your
target is 3 days' worth of electricity per year for somebody,
of course you can do it through these other technologies. And
you are not going to be able to build industry, you are not
going to be able to have households that run refrigerators and
washing machines and all of the things that all consumers want
without being able to provide a modern energy system which,
given current economics, frankly is going to have to be a mix,
including a lot of fossil fuels in many places.
And it is true that the price of renewable technology is
coming down. If it turns out that renewables are cheaper in
Ghana or Kenya or Mozambique, then the regulations on something
like OPIC are totally irrelevant because OPIC is going to
decide project by project on what is commercially viable. That
is how they do it.
Mr. McKinley. Thank you. I yield back.
Mr. Whitfield. The gentleman's time is expired.
At this time I recognize the gentlelady from Florida, Ms.
Castor.
Ms. Castor. Well, thank you, Mr. Chairman, and thank you
very much to the panel. I think this is a very interesting
topic and we have many challenges ahead.
Affordable, reliable electricity is very important to our
neighbors back home and to the overall economy, and one way
that States and utilities help ensure that electricity costs
are affordable is by a going through planning processes
routinely where they look at the economics of generation and
conservation over the long-term and then compare different
options. And I know you all agree that if utilities do not
adequately prepare for the future, this can impose substantial
cost on the electricity system and its customers.
But it seems now that these planning processes now do not
meet the challenges that we face due to the changing climate.
They seem divorced from the context of rising costs, from
extreme event. I know one of my colleagues said that those
costs are often subjective, but they are real and local
governments have to adapt, have to address rising sea level
rise, but in our local property tax dollars to repair, replace
infrastructure systems at home. And look at what the Congress
has to do when it comes to disaster funding, responding to
natural disasters. It has been a very high price tag that is
very well documented.
It seems that part of this is because the whole business
model of electricity sales is outdated. There need to be new
incentives for the utilities to promote conservation and energy
efficiency. And some States are doing that and some are way
behind. My State of Florida is kind of a problem child and
needs to do more when it comes to efficiency and conservation.
Mr. Biewald, you know, your group has done a lot of the
analysis on these planning processes. Most State electric
utility planning processes really don't take into account the
wider range of cost. One Florida utility Commissioner recently
said to me in a conversation, gosh, our hands are tied. The
State law was written some time ago. We can't consider any of
these cost factors outside of just that narrow ratepayer or
rate increase decision. What needs to happen today in the
planning processes at the State level for States to begin to
build in consideration of the huge costs that we are going to
face in the future due to the changing climate?
Mr. Biewald. So I would start out by pointing out Florida
is one of the more vulnerable States in terms of those damages,
right, the storms and the impacts of climate change. We tallied
up the damages for scenarios with sea level rise in Florida,
and they are, I will say, astronomical in terms of the
regulation of utilities in Florida.
I think that the regulators in many States--you have to
look State by State--but in many States they have more leeway
they may take advantage of. In other words, regulators should
certainly be requiring test practices in integrated resource
planning, and those practices include carbon price or carbon
constraint on the planning of the utilities as they are picking
their resources and looking at a full range of resource
options, really looking at energy efficiency, really looking at
renewables.
Some States now have laws that require the procurement of
all cost-effective energy efficiency, and that is a terrific
thing. It is basically in the interest of the customers and the
businesses in that State. It has environmental benefits but
also economic benefits locally. So where we see things like
that happening, it helps the commissions and the utilities.
Ms. Castor. Do you agree this whole business model on the
amount of energy you sell really is not going to service well
in the future? Think about the cost that ratepayers and
consumers could realize if utilities are aggressive about
conservation and energy efficiency. And there is one huge
example out of Florida--I know you all are aware of it--where
we have put in an advanced recovery fee that kind of encourages
the building of large power plants. Unfortunately, the plants
did not come online but ratepayers were still on the hook to
the tune of $3 billion without realizing one kilowatt hour of
energy. Certainly, if a more enlightened business decision had
been made, that $3 billion could go to more energy-efficient
initiatives. What do you think?
Mr. Biewald. Absolutely. I think there is a lot of
improvement that could be made within the current legal and
regulatory structures and then also the utility business model
and the regulated monopoly. The regulation, the way it is done,
is very stressed and needs to be changed. And I think that will
be changed going forward on a kind of State-by-State basis as
States experiment and learn----
Ms. Castor. What can we do at the Federal level to
encourage it?
Mr. Biewald. Well, at the Federal level I think the main
thing is clarity of the coming regulations. So, in other words,
utilities in these planning processes in the States, some of
them do a good job at anticipating the future fossil fuel
prices, future environmental regulations of various types.
Other utilities take a very myopic view. They look at the next
regulation and ignore the further regulations that are going to
come 4 years----
Ms. Castor. Yes.
Mr. Biewald [continuing]. Six years from now. So as
regulations are firmed up so there is some certainty of what is
actually coming in terms of carbon and cooling water and air
regulations, that helps the utilities and the regulators be
able to plan in a rational way and actually pick the lower-cost
alternatives. What no one wants is this piecemealing of
complying with just the next regulation, then the next
regulation, then the next regulation one at a time, which leads
to horrendous resource decisions, very expensive investments as
you pointed out, that hurt the residential customers, hurts the
industrial customers, hurts the local economy.
Mr. Whitfield. The gentlelady's time is expired.
At this time I recognize the gentleman from Kansas, Mr.
Pompeo, for 5 minutes.
Mr. Pompeo. Great. Thank you, Mr. Chairman.
You know, we heard from some folks on the other side today
the Republicans aren't interested in solutions. You know, what
we are really interested in is the EPA has proposed solutions
that simply don't work. I asked Ms. McCarthy a few weeks back
now about the 26 indicators she has got on the EPA Web site
about climate change, and I asked what the greenhouse gas
regulations would do to each of those 26 indicators. And she
said, well, you are thinking about it wrong. This is about
global leadership. This isn't about actually impacting climate
change. This is about feeling good about ourselves.
You know, Republicans don't care about science? Science is
about testable propositions, right? You satisfy the regulations
and this is the impact we would expect this would have on
climate change, and then you test against that. And yet the
very test that is being proposed by the EPA, the administrator
herself admits doesn't work.
And so I think this is all about science. I think it is
about finding real good solutions, solutions that work. And,
Mr. Coleman, that is why I wanted to ask you a question. So you
talked about we have got a greenhouse gas set of rules that are
proposed for future coal power plants to be built and you
expressed some concern that they may begin to regulate current
coal-fired power plant generation as well. How long before the
impact of just the rules on new power plants will begin to be
felt in the cost structure?
Mr. Coleman. Well, I think you are feeling them right now.
I was fortunate enough to be able to speak to the EPA back in
the summer about this. You know, we are seeing and we are
projecting rates that are going to be again somewhere around 40
percent, 20 to 40 percent range for our members when we see
some of these come into effect now. You know, that is up to
$480 a year, and that is not a lot to us, but to the ladies,
the grandmothers that I have got on fixed incomes, when you
talk about these coal-fired plants, whether it is the existing
fleet or whether it is the new fleet, it is going to have a
tremendous negative impact on my members.
And, you know, I can give you one example. I had a
grandmother call me a few years back when we had--we have a
fuel cost line adder on our bill and this fuel cost rise that
is passed along to the member because that is the only person
that can pay these fuel costs. But I had a grandmother from
Horseshoe Bend, Arkansas, called me. Typically, this would be a
phone call where she was not happy and I might get chewed on
just a little bit, but she told me, she said I what you to know
that I have figured out--I got this phone call, by the way,
this is not someone handing me a note. She said I want you to
know that I have figured out how to pay my electric bill; I am
going to take my medication every other day. This was several
years back. That was when that lady's electric bill was lower
than it is today, and what really scares me is all this stuff
we are talking about, how is she going to afford it?
I got a text last night from a member who cannot pay her
electric bill, and she is a young person and she is worried
about not being able to afford air-conditioning in the summer
because of what her winter bills have been because of the
extreme winter. This is what I face every day.
Mr. Pompeo. Yes, I appreciate that, real health effects of
these regulations impacting folks adversely as opposed to what
the proponents of these rules would say they are going to
improve the health of citizens in Arkansas and places like
south-central Kansas.
Mr. Coleman. Exactly. Exactly.
Mr. Pompeo. Thank you.
Mr. Biewald, you said in your testimony that in a strip
South Dakota and south--that would be Kansas, straight south of
South Dakota if I got my geography right--you said wind is
cheaper than other forms of energy today. Is that your
testimony?
Mr. Biewald. In many parts of the country, yes.
Mr. Pompeo. So if it is cheaper today, no need for the wind
production tax credit any longer? That is a vestige of days
gone by, an anachronism because we now have affordable wind
energy at least in this strip? We will have it in other places
but the production tax credit for producers in those places, we
should just eliminate immediately? That would make sense,
right? Just let the market sort it out because they are cheaper
today?
Mr. Biewald. I think we should look at energy subsidies
kind of comprehensively.
Mr. Pompeo. I agree with you but I am just asking the
question. One of the justifications for the wind production tax
credit you have to subsidize it while the technology improves
so the costs could come down, and I just heard you say we are
there.
Mr. Biewald. I think there are parts of the country where
that is the case for wind. There are other----
Mr. Pompeo. And I thank you for supporting me in that
effort to get rid of all of those energy tax credits, for the
oil and gas guys, too. I think we should get rid of them all.
But it sounds like wind is at the competitive point from your
perspective in at least certain places.
I was also interested--I have just got 20 seconds left--you
talked about companies pricing carbon today in anticipation of
regulations down the road.
Mr. Biewald. I did.
Mr. Pompeo. So just the mere threat of regulation is
driving up costs for consumers today, is that right?
Mr. Biewald. Not at all. It is providing a signal where the
smart utilities that are looking forward doing long-term
planning are able to make better resource decisions. I would
say it is lowering costs again in many parts of the country.
Mr. Pompeo. Wow. So it is lowering costs for them to
anticipate some future cost increase on their business? Having
been a small businessman for a long time, that is fascinating
economic estimation.
Mr. Biewald. I also am a small businessman.
Mr. Pompeo. Yes.
Mr. Biewald. We try to do good planning.
Mr. Pompeo. Fascinating. I will yield back.
Mr. Whitfield. At this time I recognize the gentleman from
Texas, Mr. Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman, and thank you for
holding the hearing.
Today's hearing we are discussing the topic of electricity
production and climate change. We have heard from our witnesses
that discussed domestic international opportunities and
challenges associated with energy access, but underlying all
these opportunities and challenge is the economic cost.
You know, the cost associated with natural resources,
regulation, production, carbon has created vast amounts of
uncertainty for consumers, investors, industry, and the
environment, and it is this uncertainty that Congress should
address. We must create a workable structure that deals with
uncertainty and the framework must remove these unknown
variables and address environmental concerns and promote
economic development.
Saying all that, I have some questions. Mr. Biewald, your
organization produced a document, 2013 carbon dioxide price
forecast, that discusses a number of different ways to price
carbon. Under the social cost of carbon, the price of carbon is
$23-$37, industry internally priced carbon at $6-$60, which is
a great spread, and regional cap-and-trade prices range from
$2-$11. First, what accounts for these wide disparities? Are
they all using different formulas?
Mr. Biewald. Well, they are to some extent different
things. And one of the questions I answered earlier had to do
with the price of carbon in terms of compliance versus the
social cost of carbon.
Mr. Green. Um-hum.
Mr. Biewald. So the social cost, those higher numbers are
associated with the damages imposed on people outside of the
system from the emissions. The median numbers I believe that
you referred to have to do typically with the cost of
compliance. So the marginal price if you had a cap-and-trade
system comprehensive for the country, this is where the price
might be, the kind of prices that I showed where utilities are
anticipating the cost. And in the lower numbers are for some of
the cap-and-trade systems in place today.
Mr. Green. OK. I represent a very industrial district in
Houston--refineries, chemical plants--and I know the issue with
EPA now is looking at new power generation plants. We know that
carbon emitted from a coal plant--in Texas we use everything,
coal, natural gas. I don't think we use fuel oil but in a lot
of our rural areas we use propane.
But on the cost of fuel switching is a good example, and I
want to ask from our co-op in Arkansas, because your base fuel
is coal, and I know Arkansas traditionally has produced natural
gas and we are seeing some very low prices except for the last
month when we have had such--although my producers obviously
like the $5 or $6 but we don't think it will stay there. What
would be the carbon cost, for example, if you used your
baseload in Arkansas, you used natural gas instead of coal?
What would it cost? Is coal that much cheaper than a pipeline
from, say, South Texas to be able to fuel switch to natural
gas?
Mr. Coleman. Yes, sir. Coal is our least-cost resource. The
existing coal fleet that we have, when you exclude the Turk
plant that you are well aware of, is about 2.3, 2.4 cents. You
get up in the gas range, you are going to be up in that 4 cents
a kilowatt hour on a wholesale basis. Now, again, my disclaimer
here is I am a distribution guy, but obviously I keep up with
our generation resources.
Mr. Green. Um-hum.
Mr. Coleman. But, yes, natural gas is more expensive. And
what worries me is what happens when the next debate moves on
to natural gas because of its carbon emissions?
Mr. Green. Well, and that is the issue, but unless
scientists are changing their opinions, we know carbon would be
about half----
Mr. Coleman. Right.
Mr. Green [continuing]. What it would be for coal.
But that is where I get back to the cost. You know, the
ratepayers are going to end up paying for that cost.
Mr. Coleman. Yes, sir.
Mr. Green. If we see, you know, people really do want to
deal with carbon, then we need to make sure that the ratepayers
understand there is a cost of doing that. And although I have
to admit that in Texas we also produce more wind power than
everywhere else in the country. And it is cheap.
And, in fact, ERCOT in our recent problem with reliability
said if we hadn't had that 10,000 megawatts of wind power, we
would have probably had rolling blackouts through Texas. And if
in Texas we are lacking energy electricity production, no
telling what the rest of the country is because we use, like I
said, everything except for hydropower. We just don't have
enough rivers that have any fall to be able to deal with
hydropower.
Mr. Chairman, I know I am out of my time but I appreciate
our--because that is the issue, the cost and how much both our
customers, your grandmother but also your industry in Arkansas,
can afford to be there. And with natural gas we are seeing
expansion of a lot of plant capacities as it is cheaper. Thank
you.
Mr. Whitfield. Thank you. And at this time I recognize the
gentleman from Illinois, Mr. Kinzinger, for 5 minutes.
Mr. Kinzinger. Thank you, Mr. Chairman. I was in microphone
no man's land, so I will move here.
I appreciate you bringing this hearing together in order to
focus on the benefits of having access to affordable and
reliable electricity. Not only do individual households reap
the benefit of our country's vast energy resources on a daily
basis but so does our economy. The industrial sector in the
United States accounts for about one-third of all in-use energy
consumption while filling about 14 percent of our GDP. What
this means is that access to our country's affordable and
reliable energy puts domestic production and employment in the
manufacturing industry at a competitive advantage as compared
to others around the world.
In fact, I had an interesting meeting recently in Germany
in which many of the German CEOs informed me of that very fact
and the much better competitive environment here in the United
States than even in Europe. Low-input prices tend to lead to
higher output that can in turn lower prices for consumers.
Lower prices lead to less demand for imported products and help
create jobs domestically, which are all good things.
In Illinois, over 90 percent of our electricity generation
comes from nuclear and coal-powered plants, which seem to both
be under constant regulatory threats to their existence. In my
district alone, I have four nuclear power plants providing grid
and price stability to consumers throughout our region. I
believe I have the most of any Congressman out there. Without
the availability of this baseload power, there is no doubt that
energy prices would skyrocket and the stability of the energy
grid would plummet. Not only would this be bad for households,
but it also creates an environment in which manufacturers will
have to deal with yet another hurdle in order to compete in a
global market.
Unfortunately, as is often the case, government regulations
have set up roadblocks to this sector of the energy industry.
In just the past 5 years, five nuclear power plants have either
retired or announced their plans to retire in the near future.
And that is baseload power that is critical to the reliability
of the system that, unlike some other forms of power
generation, we can't just flip a switch to turn back on.
In addition to this, a large portion of nuclear industry is
getting to the end of their current licensing lifespans. As it
currently stands, existing operating licenses for over 7,500
megawatts of capacity are scheduled to expire before 2023. Two
of those reactors are in my district in Illinois. This threat
of closure due to relicensing requirements is real and is
something that I believe we should all take very seriously.
The Foreign Affairs Committee, which I also sit on, just
held a markup on the Electrify Africa Act, and I believe Dr.
Moss mentioned that in his opening statement. It is bipartisan
legislation that states it is U.S. policy to encourage access
to electricity through the development of a multi-year strategy
to assist countries throughout that region.
I actually recently visited Liberia and I saw the stark
contrast between those in Liberia and how they live and those
in the United States. And because it was a country that chewed
itself up with civil war, you have basically a lost generation,
a lost decade. And in many cases, though, I think there is hope
for Liberia in the future. It is sometimes hard to find because
of what happens.
So, Dr. Moss, my first question is for you. What is a level
of electricity that we would consider meaningful access for the
poor in Africa and other nations, and is it enough to power a
few light bulbs for each person through the year or to provide
such necessary for people to have refrigeration, sanitation,
efficient water delivery, things like that?
Mr. Moss. Yes. I think, you know, the international
standard of 100 kilowatt hours per year or, in rural areas, 50
kilowatt hours per year is way too low. It is kind of the
equivalent of the international standard for poverty of $1 a
day. If you got everybody up to $1.50 a day, you wouldn't call
them rich and they certainly wouldn't be satisfied with that
income.
The exact level, probably something closer to 4,000, 5,000
kilowatt hours per year would be a better international
standard that would, you know, provide a dignified life that
people could use the appliances that in Europe, the United
States, and other developed parts of the world that we take for
granted.
Mr. Kinzinger. Well, thanks. And I think it is interesting,
too, if you actually look at the advances that Africa has made,
I mean, you know, back in the '80s and '90s we were constantly
seeing videos of people on the edge of starvation. And that
number of people on the edge of starvation has reduced but we
still have a huge poverty problem obviously in Africa. And when
you deny people energy, you deny them opportunity to be
entrepreneurs, to build businesses, and to grow themselves out
of that situation.
How far do we have to go to get to a point where the
poorest of Africa have access on the order of, say, Great
Britain or China? Obviously very far.
Mr. Moss. I don't want to look into a crystal ball on that.
I would say that, you know, there is decades of investment have
to come and it is both at the consumer level for individuals.
And I should add that the analogy to cell phones and being
able to leapfrog cell phones, until we can project electricity
through the air, the actual lesson from cell phones is that the
commerce can be based on mobile phone payment systems. I was
not that long ago in Namibia and they have a pay-as-you-go
scratch card for electricity, and being able to do that allows
for people to pay for their electricity, which is necessary for
commercial sustainability. And we have seen from cell phones
that even poor people are willing to pay for services if they
work. So I think there is a lot potential there.
Mr. Kinzinger. Thank you. And as I wrap up, I will just
say, you know, I think developing an electrical grid in Africa
is important to help them withstand weather disasters, to
reduce the need for U.S. and foreign aid, and obviously help us
to live in a much better, peaceful world.
Mr. Chairman, thank you.
Mr. Whitfield. At this time I recognize the gentleman from
Texas, Mr. Olson, for 5 minutes.
Mr. Olson. I thank the chair, and welcome to our witnesses.
On January 10, 1901, the Spindletop well near Beaumont,
Texas, started gushing oil. My home State, Texas, rightfully
became the face of oil in America. About a century later, that
face has changed. We are still the face of oil, we are the face
of coal, the face of natural gas, the face of nuclear power,
the face of solar power, the face of wind power. As my
colleague Gene Green mentioned, we are the number one wind
producer in America right now. We have a true diversified
energy portfolio which has allowed my State to become the
fastest-growing State in the country. Three million people
moved to Texas between 2000 and 2010.
But that growth is being threatened. The administration is
conducting a war on coal. Nuclear power here in America is on
hold, and tax credits for wind have put our baseload power
under pressure. Our grid's reliability is uncertain in the
future in many ways.
My first question is for you, Mr. Coleman. And I know that
Arkansas is different from Texas, but can you please go into
more detail on why wind is an important source but not one that
we can build a grid around?
Mr. Coleman. And you said wind, sir?
Mr. Olson. Wind, sir, yes, sir. Again, we are number one
but we can't build a grid around that.
Mr. Coleman. Well, we can't build a grid around anything in
my opinion except baseload generation. You know, we do have
wind assets, and when the wind blows, we have those assets, the
peaking power that they provide. But I am unable to meet the
obligation that I have to serve my members if Arkansas Electric
Cooperative has to base their portfolio around wind. We have to
have the baseload generation. If I have learned anything in the
last few months, Lord hope I have learned something because we
have had a tough winter in Arkansas. I don't know how Texas has
been but Arkansas has had a tough winter. We have got more to
come. But our baseload coal generation is our hedge against the
volatilities that we see of natural gas, of the ineffectiveness
of wind and solar.
But we cannot, as you said, base our portfolio around wind
technology. We will utilize it. It will be part of the mix. The
mix does matter and it is an all-of-the-above strategy, just as
you mentioned Texas has.
Mr. Olson. Yes, sir. Thank you.
The next question is to you, Dr. Moss. And first of all,
having a 13-year-old son who will be 14 in April, your boy is
amazing, but I know he is getting very hungry right now so my
questions will be very brief.
I want to talk about India. As you know, over 1 billion
people call India home. Over 400 million live in poverty, no
electricity. That is more than the entire population of
America. And I saw this firsthand. I went on a trip before
Christmas. Wealth and poverty, opulence next to staggering
poverty, right side by side.
You said that allowing OPIC to invest in gas plants would
bring electricity to 60 million more people focusing on
renewables alone. I want to get this straight. You said that
allowing OPIC to invest in gas plants would bring electricity
to 60 million more people than focusing on renewables alone.
And while Chairman Emeritus Dingell is leaving us, his
examples persist. I will ask you some yes-or-no questions and
get your son to have his lunch here. Are those 60 million
people more likely to face illness and see higher child
mortality, more deaths, those 60 million people, without
getting that power? Yes or no?
Mr. Moss. Without getting power, yes.
Mr. Olson. Yes, OK. Yes or no, are they more likely to
remain on crude sources of heat and power than dirtier
inefficient sources?
Mr. Moss. Yes.
Mr. Olson. Yes. Are they more likely to stay in severe
poverty?
Mr. Moss. Yes.
Mr. Olson. Regarding India, is there any downside to
exporting LNG, liquified natural gas, to India in your opinion?
Mr. Moss. Downside for the United States?
Mr. Olson. Downside for the United States, India, anybody
in the world, big picture.
Mr. Moss. I don't think.
Mr. Olson. No downside. One final question: Do you believe
that current American policies on power in the developing world
would leave people in the dark who would otherwise see
electrification? And you can elaborate on that one.
Mr. Moss. Yes, it will. I mean, it depends a lot on what
happens with a lot of the regulations or changing the fiscal
year 2014 Appropriations Bill. So it will depend a lot on what
happens next year.
Mr. Olson. OK. That is all my questions. It is time for
lunch.
Mr. Whitfield. Enjoy your lunch, Mr. Olson.
At this time, I would like to recognize the gentleman from
Virginia, Mr. Griffith, for 5 minutes.
Mr. Griffith. He thought he was last. He forgot about me.
Thank you all for being here. This is important. I will
tell you that several years ago, then-Administrator of the EPA
Lisa Jackson was in. We were debating the authority to regulate
greenhouse gases. Obviously, the case of Massachusetts v. EPA
set up the principle that they could. It didn't say that they
had to. It just said they could if they found that it was
harmful from a health standpoint. I asked her at that point, I
said, ``OK''--I was last then, also--``Your testimony here
today has all been about global warming and how hotter
temperatures cause people to have more heart attacks and
strokes, but what happens when somebody like people in my
district cannot afford to pay their bill, cannot afford to buy
their fuel? The cost has gone up too high for their
electricity, and they cannot heat their home in the wintertime.
Did you all study that?'' I asked her that question. Her
response to me at that time was--and I may be paraphrasing but
pretty darn close--was, ``We have programs to take care of
those people.''
Mr. Coleman and Chairman Finley, I ask you, when you hear
these stories of people who are not taking their medications or
you hear stories of people who can't pay their bill, are there
always programs to take care of those people or does the money
run out like it sometimes does in my district in a hard winter
by the time you get to the end of February?
Mr. Coleman. The money runs out.
Mr. Griffith. Chairman Finley?
Mr. Finley. We do the best we can to have support for
people who can't pay, but for many there is not enough money
there.
Mr. Griffith. And so, you know, I have to question the
underlying finding by the EPA that they have the authority to
regulate these greenhouse gases because they studied half of
the problem, the rising temperature, but they never looked at
what happens when you make those costs go up for the poor
people in our country, for the working folks, for the middle
class.
I think your testimony--and I apologize I wasn't here; I
was at another hearing--but one of you, I think, testified that
your constituents or the people that you serve--I guess it was
you, Mr. Coleman, have an average household income of about
$32,000. My district might be a couple thousand dollars
different than yours, but I am in the same boat with the people
that I represent, and they can't always afford to pay these
things. We didn't look at that. We didn't look at, apparently,
what happens when people can't afford to pay for their
medication and to heat their homes. And so as a result of that,
I think that the policies the EPA is putting forward are
actually harming the health of a lot of American citizens, and
it is unfortunate they didn't take the whole picture into
account.
And the testimony today here, hearing you all testify and
knowing that your testimony is heart-wrenching, I understand
that because my constituents tell me the same thing.
Let's talk about, Mr. Coleman, you said the volatility of
natural gas, this winter there have been a lot of places. Did
you all have any difficulty getting a hold of the natural gas
necessary to power whatever plants you have using natural gas?
Mr. Coleman. We didn't have any difficulty but at one time
some of the prices that we saw--you know, we were in the $3-$4
range. We saw prices $17, $18 that spiked. Prices on average
were $4 or $5.
Mr. Griffith. Yes. And I saw reports in the Northeast where
they were having trouble getting supply that prices actually
crested over $100----
Mr. Coleman. Yes.
Mr. Griffith [continuing]. During that really bad cold
snap. That doesn't happen obviously with coal. You have got it
piled up out back. You can just pull it in there.
We do have some infrastructure issues with turning it all
over to natural gas. Now, in my area, I heard one of the other
witnesses or one of the other Congressmen say that they didn't
use a lot of fuel oil in their area, but in my area a lot of
people use fuel oil and we do at my house. And one of the
reasons we use fuel oil is because we would kind of like to
switch to natural gas but there is no pipe that comes to our
house. I live just on the other side of the interstate, and it
is just too costly to bring that pipe across the Interstate 81
to my neighborhood so I don't have the ability to get natural
gas. I might be able to get propane. Do you find that to be a
problem for some of the folks in North Carolina, Chairman
Finley?
Mr. Finley. Yes, sir, it is a problem. We have done a good
job, I think, in expanding the pipeline facility. Twelve years
ago I was in your situation in the middle of Raleigh. My old
40-year-old oil furnace went out on the coldest day of the
winter and the pipeline was about 20 yards up the street, and
they couldn't get it there for 3 weeks and I couldn't wait for
3 weeks so I had to put an oil furnace back in.
Mr. Griffith. Yes. And so this is a problem that real
people, not ivory tower folks at the EPA or even in the halls
of Congress, are facing. It is that, you know, natural gas may
be the wave of the future, but if you can't get it there, if
you don't have the supplies to provide the electricity, to
provide the heat for people, they are going to need it. And
also the fact that we are raising the costs by creating
regulations that are closing down plants and raising the cost
of electricity for the average American citizen is harmful to
the health of the working people in this country.
Mr. Chairman, I appreciate the opportunity to have this
hearing and I yield back.
Mr. Finley. I would say, if I might, that from my friends
at PSNC that they have run the line down to my house and I do
have natural gas now.
Mr. Whitfield. You are the chairman, so you have got
influence, right?
Well, Mr. Griffith, thank you. And I want to thank you all
for coming this morning to testify. We appreciate the insights
that all of you provided on a rather vexing issue.
And that will conclude the hearing. I would like to ask
unanimous consent to enter into the record the Electric
Reliability Coordinating Council's document entitled ``What the
Cold Snap Tells Us about EPA Carbon Rules,'' as well as a
letter to the EPA we received from the CEOs of five nuclear
power plants relating to EPA's pending cooling tower rules and
the fact that may cause the premature retirement of a
significant portion of the nuclear fleet.
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Mr. Whitfield. And I want to clarify the fact, when I was
talking about Southern Company, I want to make sure that I said
75 percent of Southern Company's coal-fired generating plants
scheduled to be retired were operated during the cold spell.
And that is like 3,300 megawatts. So those that were scheduled
to be retired were operating, and certainly when they are
retired, that will be the end of it.
And also ask unanimous consent that we enter into the
record ``Energy Access and the True Cost of Fossil Fuel
Projects in Africa.''
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Mr. Whitfield. So with that, the record will remain open
for 10 days.
And we look forward to working with all of you as we move
forward, and thank you again for your time. And that will
conclude today's hearing.
[Whereupon, at 12:13 p.m., the subcommittee was adjourned.]