[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]





FERC PERSPECTIVES: QUESTIONS CONCERNING EPA'S PROPOSED CLEAN POWER PLAN 
                 AND OTHER GRID RELIABILITY CHALLENGES

=======================================================================

               
                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                    
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 29, 2014

                               __________

                           Serial No. 113-168


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov
                        
                        

                                     ______

                       U.S. GOVERNMENT PUBLISHING OFFICE 

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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                 Chairman Emeritus
JOHN SHIMKUS, Illinois               FRANK PALLONE, Jr., New Jersey
JOSEPH R. PITTS, Pennsylvania        BOBBY L. RUSH, Illinois
GREG WALDEN, Oregon                  ANNA G. ESHOO, California
LEE TERRY, Nebraska                  ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan                GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
PHIL GINGREY, Georgia                JIM MATHESON, Utah
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington   DORIS O. MATSUI, California
GREGG HARPER, Mississippi            DONNA M. CHRISTENSEN, Virgin 
LEONARD LANCE, New Jersey                Islands
BILL CASSIDY, Louisiana              KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky              JOHN P. SARBANES, Maryland
PETE OLSON, Texas                    JERRY McNERNEY, California
DAVID B. McKINLEY, West Virginia     BRUCE L. BRALEY, Iowa
CORY GARDNER, Colorado               PETER WELCH, Vermont
MIKE POMPEO, Kansas                  BEN RAY LUJAN, New Mexico
ADAM KINZINGER, Illinois             PAUL TONKO, New York
H. MORGAN GRIFFITH, Virginia         JOHN A. YARMUTH, Kentucky
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
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         HENRY A. WAXMAN, California (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)

  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     1
    Prepared statement...........................................     3
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................     4
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     5
    Prepared statement...........................................     6
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7

                               Witnesses

Cheryl A. Lafleur, Acting Chairman, Federal Energy Regulatory 
  Commission.....................................................     9
    Prepared statement...........................................    11
    Answers to submitted questions...............................    86
Philip D. Moeller, Commissioner, Federal Energy Regulatory 
  Commission.....................................................    17
    Prepared statement...........................................    19
    Answers to submitted questions...............................   114
John R. Norris, Commissioner, Federal Energy Regulatory 
  Commission.....................................................    29
    Prepared statement...........................................    31
    Answers to submitted questions...............................   132
Tony Clark, Commissioner, Federal Energy Regulatory Commission...    37
    Prepared statement...........................................    39
    Answers to submitted questions...............................   145
Norman C. Bay, Commissioner, Federal Energy Regulatory Commission    46
    Prepared statement...........................................    47
    Answers to submitted questions...............................   162

                           Submitted Material

Report entitled, ``Addressing Climate Change Without 
  Legislation,'' University of California, Berkeley School of 
  Law, \1\ submitted by Mr. Waxman...............................     8
Statement of American Public Power Association, submitted by Mr. 
  Whitfield......................................................    78
Majority memorandum..............................................    82

----------
\1\ The report is available at http://docs.house.gov/meetings/IF/
  IF03/20140729/102558/HHRG-113-IF03-20140729-SD008.pdf.

 
FERC PERSPECTIVES: QUESTIONS CONCERNING EPA'S PROPOSED CLEAN POWER PLAN 
                 AND OTHER GRID RELIABILITY CHALLENGES

                              ----------                              


                         TUESDAY, JULY 29, 2014

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:01 a.m., in 
room 2123, Rayburn House Office Building, Hon. Ed Whitfield 
(chairman of the subcommittee) presiding.
    Present: Representatives Whitfield, Shimkus,Pitts, Burgess, 
Latta, Olson, Gardner, Kinzinger, Griffith, Barton, Upton (ex 
officio), Rush, McNerney, Tonko, Yarmuth, Green Capps, Doyle, 
Barrow, Matsui, and Waxman (ex officio).
    Staff Present: Nick Abraham, Legislative Clerk; Gary 
Andres, Staff Director; Charlotte Baker, Deputy Communications 
Director; Sean Bonyun, Communications Director; Matt Bravo, 
Professional Staff Member; Leighton Brown, Press Assistant; 
Allison Busbee, Policy Coordinator, Energy and Power; Annie 
Caputo, Professional Staff Member; Patrick Currier, Counsel, 
Energy and Power; Tom Hassenboehler, Chief Counsel, Energy and 
Power; Brandon Mooney, Professional Staff Member; Mary Neumayr, 
Senior Energy Counsel; Chris Sarley, Policy Coordinator, 
Environment and Economy; Jeff Baran, Staff Director for Energy 
and Environment; Phil Barnett, Staff Director; Caitlin 
Haberman, Policy Analyst; and Alexandra Teitz, Chief Counsel 
for Energy and Environment.

  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 I certainly want to thank all of the FERC commissioners 
for joining us at this morning's hearing in which we are going 
to get your perspectives on questions relating to EPA's 
proposed Clean Power Plan and its impact on reliability, as 
well as other challenges. I know that you all have a very busy 
schedule, and we do appreciate very much your being with us 
this morning to explore this very important issue.
    At this point, I would like to recognize myself for 5 
minutes for an opening statement. As I said, this is our second 
hearing on EPA's proposed Clean Power Plan, which would change 
the way electricity is generated, transmitted and consumed in 
each State.
    Our first hearing focused on the EPA itself, and I must say 
that it was obvious from that hearing that EPA does not have 
the expertise on the intricacies of electric markets and 
reliability implications of this radical transformation that 
they are proposing for the electric generation sector.
    As I noted before, we are also seriously concerned with 
this proposed rule; for one thing, EPA's unprecedented use of 
the Clean Air Act is questionable on legal grounds. Legal 
experts, and we always know there are conflicting legal 
experts, but many legal experts see nothing in the Clean Air 
Act that empowers EPA to commandeer State decisionmaking 
authority over how each State produces, delivers, and uses 
electricity.
    The EPA is also embarking on a comprehensive effort to 
Federalize electric generation, even though the Agency, as I 
said, has absolutely no energy policy setting authority or 
expertise. That is why it is important today to hear from the 
Federal body that actually does have that authority and 
expertise. Although, I might add that the top-down command and 
control efforts of EPA go far beyond even FERC's jurisdiction.
    As a preliminary matter, I would like to better understand 
FERC's level of participation in this proposed rule. Is FERC an 
equal partner with EPA, a junior partner or hardly a partner at 
all in promulgating this rule? And what would be FERC's role in 
implementing this rule? We are also interested in tapping into 
FERC's considerable expertise on electric reliability. As I 
suspect, many reliability concerns with this proposed rule that 
have not been considered by EPA.
    As it is, the Agency has already promulgated a number of 
different rules that have contributed to coal-fired power plant 
shut downs. This proposed rule would lead to more of the same. 
So we are interested in learning from FERC whether it believes 
coal-using states can abruptly and quickly move away from this 
base-load source without raising significant reliability 
concerns.
    I am also worried by many of the assumptions of EPA that 
they make as to how States can meet electricity demand while 
complying with the rule. For example, the Agency suggests that 
States can easily ramp up natural gas-fired generation to help 
meet the target goals, but we know from the experience of last 
winter that several regions of the country have natural gas 
pipeline capacity constraints.
    Similar questions about EPA's optimistic assumptions 
regarding the ability of renewables to help fill the void, 
especially given the many challenges that come with integrating 
intermittent resources into the grid. And the limitations of 
renewables will be exacerbated, if affordable and reliable 
base-load supplies, like coal and nuclear and even natural gas, 
face a constrained future as they do under the Obama 
Administration.
    Overall, we see great risk in EPA trying to overrule the 
State's choices as to the best electricity mix as well as risk 
in constraining a State's ability to change its generation 
portfolio and as you know, at a certain timeframe within this 
proposed rule, States can't change, even if they might want to. 
So EPA's proposed efforts dictating electricity use is quite 
troubling. This is an area where the reach of the Federal 
Government has been limited, and for good reason, since these 
local resource decisions are best left to States.
    So we look forward to your testimony today. I know we have 
a lot of questions for you, and certainly, as I said, you all 
have the expertise and we look forward to your opening 
statements.
    And with that, I would at this time recognize the gentleman 
from Chicago, Mr. Rush, for his 5-minute opening statement.
    [The prepared statement of Mr. Whitfield follows:]

                Prepared statement of Hon. Ed Whitfield

    This morning we will be conducting our second hearing on 
EPA's proposed Clean Power Plan targeting each state's carbon 
dioxide emissions from electricity generation and use. Our 
first hearing focused on EPA itself, and I must say that our 
discussion with Assistant Administrator Janet McCabe left us 
with more questions than answers. Today, we solicit the Federal 
Energy Regulatory Commission's expertise and perspective, and I 
welcome all five Commissioners to this subcommittee.
    As I have noted before, I find much reason for concern with 
this proposed rule. For one thing, EPA's unprecedented use of 
the Clean Air Act is on very questionable legal ground. I see 
nothing in the law that empowers EPA to commandeer state 
decision-making authority over how it produces, delivers, and 
uses electricity. But aside from the legal questions of whether 
EPA can do this to the states, there is the equally important 
question of whether the agency should do it. I have serious 
doubts whether this scheme is advisable or even workable.
    Ironically, EPA is embarking on this comprehensive effort 
to federalize energy planning even though the agency has 
absolutely no energy policy-setting authority or expertise. 
That is why it is important to hear from a federal body that 
actually does have such authority and expertise, although I 
might add that the top down, command-and-control efforts of EPA 
go far beyond even FERC's jurisdiction. As a preliminary 
matter, I would like to better understand FERC's level of 
participation in this proposed rule--is FERC an equal partner 
with EPA, a junior partner, or hardly a partner at all in 
promulgating this rule? And what would be FERC's role in 
implementing it?
    I am also interested in tapping into FERC's considerable 
expertise on electric reliability, as I anticipate many 
reliability concerns with this proposed rule that have not been 
considered by EPA. As it is, the agency has already promulgated 
a number of rules that have contributed to coal-fired power 
plant shutdowns. This proposed rule would lead to more of the 
same and indeed is seen by some as the nail in the coffin for 
coal. I am very interested in learning from FERC whether it 
believes coal-using states can abruptly move away from this 
base load source without raising significant reliability 
concerns.
    I am also worried by many of the assumptions EPA makes as 
to how states can meet electricity demand while complying with 
the rule. For example, the agency suggests that states can 
easily ramp up natural gas-fired generation to help meet their 
targets. But we know from the experience of last winter that 
several regions of the country have natural gas pipeline 
capacity constraints. I look forward to hearing the 
Commissioners' thoughts on the achievability of EPA's 
assumptions about natural gas-fired generation.
    I also have similar questions about EPA's very optimistic 
assumptions regarding the ability of renewables to help fill 
the void, especially given the many challenges that come with 
integrating intermittent resources into the grid. And the 
limitations of renewables will be exacerbated if affordable and 
reliable base load supplies like coal and nuclear face a 
constrained future as they do under the Obama administration.
    Overall, I see great risks in allowing EPA to overrule each 
state's choices as to the best electricity mix, as well as 
risks in constraining a state's ability to change its 
generation portfolio as circumstances warrant.
    I also find EPA's proposed efforts dictating electricity 
usage to be troubling. This is an area where the reach of the 
federal government has been limited, and for good reason since 
these local resource decisions are best left to states.
    Most of all, I am very concerned what this proposed rule 
would do to electricity costs for consumers and for job-
creating businesses. In my view, EPA has not been taking these 
concerns into account, which is another reason why I believe 
this hearing is important.

 OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Rush. I want to thank you, Mr. Chairman, for holding 
this important hearing on FERC perspectives, questions 
concerning EPA's proposed Clean Power Plan and other grid 
reliability challenges.
    Mr. Chairman, as the title suggests, we are here today to 
hear from the FERC commissioners on the impact that we can 
expect President Obama's Clean Power Plan to have on a variety 
of issues related to fuel diversity, the integration of 
variable energy resources, natural gas, electricity generation, 
and grid reliability, among many other topics.
    Mr. Chairman, last month, this subcommittee heard testimony 
from Acting Assistant Administrator of the Office of Air and 
Radiation, Janet McCabe, that in developing the 
Administration's Clean Power Plan, EPA consulted on 
reliability-related issues with DOE, FERC, State, public 
utility commissioners, as well as the Independent System 
Operators Regional Transmission Organization Council.
    In fact, when determining the best system of emission 
reduction, or BSER, reliability was one of the key factors that 
EPA considered and the Agency made sure to allow flexibility 
for States to design and implement their own programs in order 
to ease pressure on the system reliability.
    Additionally, Mr. Chairman, the EPA proposed to give States 
a 10-year period to achieve their final goals, which allows for 
measures to be phased in to ways that protect reliability. But 
why is it so important that we act at all? Well, Mr. Chairman, 
a series of assessment reports have come out recently, 
including the third national climate assessment, the fifth 
intergovernmental panel on climate change assessment, the EPA's 
climate change indicators in the U.S. 2014, and the bipartisan 
risky business, the economic risk of climate change in the U.S.
    Each of these reports highlights the devastating 
consequences of climate change on both public health and the 
environment, and each urging policymakers, you and I, Mr. 
Chairman, to act. And what have we learned from all of these 
telling studies, Mr. Chairman? We have learned that 7 of the 10 
top warmest years on record have occurred since 1998 and 
dangerous heat waves have become more and more frequent.
    We have learned that extreme storms threaten to flood 
coastal communities, risking lives, and that cyclone intensity 
has increased over the past 20 years, where 6 of the 10 most 
active years since the 1950s occurring during that period. We 
have learned that dangerous wildfires continue to intensify, 
reducing air quality, threatening forests, threatening 
property, and risking the lives of firefighters. We have 
learned that the area of land burned by wildfires annually has 
increased since the 1980s and that 9 of the 10 years with the 
most land burned have occurred since 2000.
    We have learned that by mid-century, farmers in the midwest 
will face crop year decline of up to 19 percent and by the end 
of the century, States like Oregon, Washington, and Idaho could 
experience as many hot days over 95 degrees Fahrenheit as 
currently expected in the State of Texas. We have learned that 
as climate warms, labor productivity in key sections including 
construction, agriculture, and utilities would likely be 
reduced and that these reductions and labor productivity may be 
the greatest in the southeast.
    So Mr. Chairman, it is for all of these reasons that 
President Obama has decided to act and fill the void left by 
this very same Congress in hopes of mitigating some of the most 
devastating effects on climate change due in large part to 
emissions from some of the Nation's oldest and dirtiest power 
plants.
    Mr. Chairman, I look forward to this hearing on the FERC 
commissioners' responses to questions and on the FERC 
commissioners to the President's plan, their response to the 
President's plan. And with that, Mr. Chairman, I want to yield 
back all the time that I might have.
    Mr. Whitfield. The gentleman's time is expired.
    Mr. Rush. Right on time.
    Mr. Whitfield. At this time, I would like to recognize the 
gentleman from Michigan, Mr. Upton, chairman of the full 
committee for a 5-minute opening statement.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Well thank you, Mr. Chairman.
    A couple weeks ago, EPA's Acting Assistant Administrator 
Janet McCabe told this subcommittee that the Agency's proposed 
rule for existing electricity generation is not an energy plan 
but rather it is a pollution control rule. Then last week, 
Administrator Gina McCarthy made the exact opposite argument 
during her testimony before the Senate that the proposal is not 
about pollution control but, in fact, it is about energy and 
spurring investments in the EPA's preferred energy choices.
    This comparison of exchanges by the two top officials at 
EPA demonstrates the Agency's current dilemma. After failing to 
push comprehensive cap-and-trade legislation through a 
Democratic Senate because of legitimate fears that it would 
hamstring our economy and make energy more expensive, the 
Administration is now pursuing a plan B approach by stretching 
the Clean Air Act to accomplish the exact same goals.
    Assistant Administrator McCabe's answer is the one that the 
agency will likely stick to when the rule gets challenged in 
court, as EPA has no explicit energy policy setting authority 
under the law. But Administrator McCarthy had the more candid 
response, as this rule clearly is an effort by EPA to assert 
control in new regulatory authorities over States' electricity 
decisionmaking.
    EPA's Clean Power Plan requires States to submit for 
approval individual or regional energy plans to achieve the 
agency's carbon dioxide emission targets. EPA is systemically 
Federalizing under the Clean Air Act what was once in the clear 
purview of the States or the markets. If the States are truly 
the labs of democracy, then why assert the Federal Government 
over their energy planning?
    FERC is the agency charged by Congress with regulating 
electricity in interstate commerce, which is why it is so 
important to gain FERC's perspective today. Even this Agency, 
with explicit authority over electricity matters, does not have 
the expansive reach envisioned by EPA's Clean Power Plan. I am 
particularly concerned about the Clean Power Plan's impact on 
energy diversity. Maintaining a diverse energy portfolio is a 
core component of this committee's vision for America's energy 
future, a vision that we call the architecture of abundance.
    Consumers and businesses are best served by an electricity 
supply that can be generated from a variety of sources: Coal, 
nuclear, natural gas, obviously, as well as renewables, and in 
the proportion that each State deems best to suit its unique 
circumstances.
    Maintaining diversity, both diversity in our electricity 
generation portfolio as well as the diversity of strategies for 
meeting a State's electricity needs is critical to affordable 
and reliable energy, but EPA's top-down Clean Power Plan will 
give us less of both kinds of diversity.
    I thank the FERC commissioners today and certainly welcome 
Mr. Bay for his first appearance before us. And I yield the 
balance of my time to Mr. Shimkus.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Several weeks ago, EPA's Acting Assistant Administrator 
Janet McCabe told this subcommittee that the agency's proposed 
rule for existing electricity generation is not an energy plan, 
but rather is a pollution control rule. Then, last week, 
Administrator Gina McCarthy made the exact opposite argument 
during testimony before the Senate--that this proposal is not 
about pollution control but is about energy and spurring 
investments in the EPA's preferred energy choices.
    This comparison of exchanges by the two top officials at 
EPA demonstrates the agency's current dilemma. After failing to 
push comprehensive cap-and-trade legislation through a 
Democratic Senate because of legitimate fears that it would 
hamstring our economy and make energy more expensive, the 
administration is now pursuing a Plan B approach by stretching 
the Clean Air Act to accomplish the exact same goals. Assistant 
Administrator McCabe's answer is the one the agency will likely 
stick to when this rule gets challenged in court, as EPA has no 
explicit energy policy-setting authority under the law, but 
Administrator McCarthy had the more candid response, as this 
rule clearly is an effort by EPA to assert control and new 
regulatory authorities over states' electricity decision-
making.
    EPA's Clean Power Plan requires states to submit for 
approval individual or regional energy plans to achieve the 
agency's carbon dioxide emissions targets. EPA is 
systematically federalizing under the Clean Air Act what was 
once in the clear purview of the states or the markets. If 
states are truly the ``laboratories of democracy,'' then why 
assert the federal government over their energy planning? FERC 
is the agency charged by Congress with regulating electricity 
in interstate commerce, which is why it is so important to gain 
FERC's perspective today. Even this agency, with explicit 
authority over electricity matters, does not have the expansive 
reach envisioned by EPA's Clean Power Plan.
    I am particularly concerned about the Clean Power Plan's 
impact on energy diversity. Maintaining a diverse energy 
portfolio is a core component of this committee's vision for 
America's energy future--a vision we call the Architecture of 
Abundance. Consumers and businesses are best served by an 
electricity supply that can be generated from a variety of 
sources--coal, nuclear, natural gas, as well as renewables--and 
in the proportion that each state deems best to suit its unique 
circumstances.
    Maintaining diversity--both diversity in our electricity 
generation portfolio as well as a diversity of strategies for 
meeting a state's electricity needs--is critical to affordable 
and reliable energy. But EPA's top-down Clean Power Plan will 
give us less of both kinds of diversity.
    I thank the FERC Commissioners for their testimony today, 
and welcome Mr. Bay for his first appearance before us. We look 
forward to a continued dialogue as we conduct oversight of the 
Clean Power Plan.

    Mr. Shimkus. Thank you, Mr. Chairman.
    Reliable low-cost energy is a critical and key asset to 
this country and for job creation. We appreciate what you do to 
help maintain that.
    In my sole region this winter, we came very close to the 
demand meeting supply, and I think that is a thing that 
hopefully you will help focus on. Base load is a key component 
of that, and as these rules drive some generating facilities 
out of the market closure, then we are going to have these 
concerns, and woe be it to the member of Congress that has 
brownouts during the hottest time of the summer or the coldest 
time in the winter.
    There is also the big debate, you guys are involved with it 
on the transmission grid. As we pick and choose winners and 
losers and electricity generation, we have to move electricity 
larger distances and that stirs up the public. I think there is 
a credible debate about localizing generation and then not 
having these transmission fights.
    As you have heard me before numerous times, I am also 
concerned about the physical security aspects. As a former Army 
officer during the Cold War, we worried about the Soviets doing 
electromagnetic pulses that would knock out transmissions and I 
know that is not the focus of this hearing, but security 
aspects of that, and maybe it is not a terrorist attack, maybe 
it is just a solar flare that really causes great concerns, and 
I am going to be watching that and involved with that in this 
year and the next couple years.
    The last thing I would like to, with this time, is just, 
Chairman LaFleur, and I will follow up with my questions, when 
you last appeared for us, you said you would keep your fellow 
commissioners in consultation with you. I think some of the 
testimony kind of questions that, based upon meetings with the 
EPA, and I hope we get clarification on that.
    Thank you, Mr. Chairman. I yield back my time.
    Mr. Whitfield. The gentleman yields back.
    At this time we will recognize the gentleman from 
California, Mr. Waxman, for a 5-minute opening statement.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you very much, Mr. Chairman. I would like 
to thank each of the commissioners for being here today, and I 
especially want to congratulate and welcome Mr. Bay, who has 
just been confirmed to the commission.
    The Federal Energy Regulatory Commission plays a key role 
in maintaining the reliability of electric grid and protecting 
electricity consumers. That is what makes your job so 
important. The Republican members of this committee deny the 
existence of climate change or pretend it doesn't exist. They 
see the EPA's Clean Power Plan for the power sector as a threat 
to grid reliability, and that is why they have called you here 
this morning. They hope you will say something that will give 
them ammunition.
    But those of us who are listening to the overwhelming 
scientific consensus see carbon emissions from power plants, 
not EPA regulations, as the real threat to the grid. The facts 
are sobering. Last year the levels of heat-trapping carbon 
pollution in the atmosphere exceeded 400 parts per million for 
the first time in millions of years. Last year was the fourth 
hottest year on record, 7 of the 10 hottest years on record 
occurred in the last decade, and all 10 occurred since 1998.
    Wildfires in the west have gotten much worse. Droughts are 
setting records and devastating harvests. Sea-level rise and 
fierce storms are threatening our coast. These, and many other 
indicators, tell us that global warming is harming us now, and 
it is going to get much worse. The power sector will feel these 
impacts. Intense storms will disrupt power delivery. Droughts 
and rising temperatures will force plant shutdowns. 
Transmission systems will lose capacity at high temperatures.
    And that is why the Clean Power Plan is so important for 
the grid and for our future. It was issued by EPA, but I am 
sure it went through an interagency review, because it is 
important to get FERC's perspective. A significant transition 
is under way in the power sector. Market forces and public 
policies are driving a shift to renewables, demand side 
efficiency and natural gas fire generation. We have doubled our 
capacity to generate renewable electricity from wind and solar 
in just 5 years.
    Wind power is already cost competitive with fossil fuel 
generation in parts of the country and the cost of solar power 
is plummeting. Natural gas costs less than coal and even coal 
boosters acknowledge that it is not cost effective to build new 
coal plants today because of the competition from natural gas, 
not because of any regulations by any government agency.
    These changes in the electricity sector are bringing 
Americans cleaner air, new jobs, lower bills, and more choices. 
The Clean Power Plan will advance these positive developments. 
FERC, too, should make its own contribution. The statutory 
standards that FERC administers, gives the agency many tools to 
help combat climate change and create the clean energy economy 
of the future.
    And I want to bring to the members' attention, the 
University of California Berkeley Center for Law, Energy, and 
the Environment report that was recently issued on this 
subject, authored by Steven Weissman and Romany Webb, which I 
ask unanimous consent to insert in the record.
    Mr. Whitfield. Without objection. \*\
---------------------------------------------------------------------------
    \*\ The information has been retained in committee files and is 
also available athttp://docs.house.gov/meetings/IF/IF03/20140729/
102558/HHRG-113-IF03-20140729-SD008.pdf
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    Mr. Waxman. I hope all the commissioners will give these 
ideas serious consideration. As this new report shows, we don't 
have to choose between protecting the environment and reliable 
electricity. FERC grid operators, State public utility 
commissions and power plants, even progressive power companies 
are already planning for the changes that are under way.
    Our nation has a proven track record of adapting to new 
environmental requirements without adverse impacts on 
reliability. We don't have to cling to the past, and we don't 
need to be afraid of the future. We can protect our 
environment, strengthen the grid, and leave our world a better 
place for our children.
    Thank you, Mr. Chairman. I yield back my time.
    Mr. Whitfield. Gentleman yields back.
    At this time, we look forward to the opening statements of 
the commissioners of the FERC. And we have with us this 
morning, the Honorable Cheryl LaFleur, who is the Acting 
Chairman; we have the Honorable Phillip Moeller, who is a 
Commissioner; we have the Honorable John Norris and Tony Clark; 
and our newest member, Mr. Norman Bay of New Mexico.
    So at this time, Chairman LaFleur, we will recognize you 
for 5 minutes for your opening statement. Make sure your 
microphone is on, and we look forward to your testimony.

  STATEMENTS OF THE HON. CHERYL A. LAFLEUR, ACTING CHAIRMAN, 
   FEDERAL ENERGY REGULATORY COMMISSION; THE HON. PHILIP D. 
 MOELLER, COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION; 
     THE HON. JOHN R. NORRIS, COMMISSIONER, FEDERAL ENERGY 
   REGULATORY COMMISSION; THE HON. TONY CLARK, COMMISSIONER, 
 FEDERAL ENERGY REGULATORY COMMISSION; AND THE HON. NORMAN C. 
    BAY, COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION

            STATEMENT OF THE HON. CHERYL A. LAFLEUR

    Ms. LaFleur. Well, thank you very much, Chairman Whitfield, 
Ranking Member Rush, and members of the subcommittee.
    I am honored to serve as the acting chairman of the Federal 
Energy Regulatory Commission, and I appreciate the opportunity 
to be with you this morning.
    As this subcommittee is well aware, the Nation's resource 
mix is changing in response to a number of factors, including 
the increased availability of domestic natural gas, growing use 
of renewable generation in response to State and Federal 
policies, and new environmental regulations. Although these 
drivers of power supply changes are themselves outside the 
commission's jurisdiction, we must be aware of and adapt to 
them to carry out our responsibilities to promote reliability 
and ensure just and reasonable rates for customers.
    Our work supports reliability in three primary ways. First, 
FERC supports the timely development of needed energy 
infrastructure. The commission has permitting authority over 
natural gas pipelines, LNG terminals, and non-Federal 
hydropower. We also support new infrastructure through our rate 
authority over those facilities and over electric transmission.
    Second, FERC oversees wholesale power markets that support 
reliability. We work to ensure that centralized capacity, 
energy, and ancillary services markets send correct signals to 
support the procurement and retention of resources needed for 
reliability.
    Finally, FERC directly oversees the reliability of the grid 
by establishing mandatory standards for the bulk power system 
under Section 215 of the Federal Power Act. It has been almost 
10 years since Congress enacted Section 215, and I believe the 
commission has established a solid track record not just on 
day-to-day reliability, but on emerging issues, like 
cybersecurity, physical security, and geomagnetic disturbances.
    As I mentioned, one of the key drivers of changes in our 
resource mix are new EPA regulations regarding air, water, and 
solid waste pollution. EPA is, of course, responsible for 
promulgating environmental regulations under the statutes it 
implements. We, in turn, are responsible for helping ensure 
that reliability is sustained as new environmental regulations 
are carried out. Our work in this area is not limited to 
interactions with EPA but includes collaborations with states, 
industry, and other stakeholders.
    One recent example is our work on the mercury and air toxic 
standards where we issued a policy statement outlining how we 
would advise EPA on when additional time might be needed to 
comply with the mercury and air toxics in order to avoid a 
reliability violation. We also established a regularly-
scheduled public forum with NARUC, co-led by my colleague, 
Commissioner Moeller and myself and our State colleagues, to 
regularly collaborate with EPA and other stakeholders on how 
the MATS rule and other rules were being implemented.
    I have closely followed the development of the Clean Power 
Plan because I believe it will have implications for the 
operation of the grid and require FERC engagement to ensure 
that reliability is sustained. FERC staff commented on the 
proposal through the OMB interagency review process from a 
reliability perspective. Among other recommendations, FERC 
staff emphasized the need for the development of natural gas 
pipeline and electric transmission infrastructure to enable 
compliance with State compliance plans. FERC staff also 
emphasize the importance of regional cooperation to promote 
efficient compliance with the Clean Power Plan.
    I appreciate that the plan gives considerable flexibility 
to the States to use the different building blocks it outlines, 
but I believe FERC will have at least three important roles: 
First, to support the development of pipelines and transmission 
that will be needed to attain the goals of the plan; second, to 
consider how market structures need to adapt to support the 
research choices that states make under the plan; and finally, 
to continue to be closely engaged with EPA and the states and 
others to identify any problems and help to make sure they are 
addressed.
    Reliability has been my top priority in my time at FERC, 
and I believe it is job one for anyone involved in electricity. 
I have seen many changes to the Nation's resource mix in the 
past 30 years, but the central importance of reliability is 
unchanged, even as new technologies and new environmental 
challenges and aspirations emerge. As FERC chairman and as a 
commissioner, I will continue to champion these issues.
    I thank the subcommittee for giving me the opportunity to 
appear, and I welcome your questions.
    Mr. Whitfield. Thank you, Ms. LaFleur.
    [The prepared statement of Ms. LaFleur follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. At this time, I recognize Mr. Moeller for 
his 5-minute opening statement.


            STATEMENT OF THE HON. PHILIP D. MOELLER

    Mr. Moeller. Thank you, Chairman Whitfield, Ranking Member 
Rush, and members of the committee.
    I am Phil Moeller. I have been on the commission since 
2006. Thank you for holding this hearing on a very important 
subject, the EPA's Clean Power Plan. As its name indicates, 
this is essentially power or electricity policy, so it is very 
relevant that we are here talking about it because we have the 
job under Section 215 of the Federal Power Act to assure the 
reliability of the Nation's bulk power grid.
    And reliability should not be, and I don't think it is, a 
partisan issue, but it has to be our job, number one, so we 
have to look skeptically at these kinds of proposals to make 
sure that we can keep the lights on, and more importantly the 
heating and the cooling on when consumers need it.
    The biggest challenge, I think, in this rule is that it 
treats states individually in terms of compliance, but 
electricity markets are fundamentally interstate in nature and 
that just creates some challenges that may not be 
insurmountable but need to be looked at very closely. In my 
written testimony, I have noted a few examples of states that 
certainly have concerns about how they will be treated.
    Idaho, for instance, consumes coal power but doesn't 
generate it, so what does that mean for its baseline now in 
going forward? We have states like Wisconsin and New Jersey 
that spend significant amount of money, billions of dollars to 
clean up their fleet, but they don't get credit under the Clean 
Power Plan. And then there are stranded assets, such as the one 
I note in Mississippi, where $1 billion of scrubbers is 
essentially not counted under the plan. So those are issues you 
will hear about as the comments come in on the rule.
    The rule is based on compliances on four building blocks. 
You have probably gone into them. I will point out one that has 
a little bit of concern to me, which is essentially getting the 
gas fleet up to 70 percent dispatch. Now, the challenge there 
is that we have traditionally gone under something called 
economic dispatch where the cheapest power plants are called in 
the merit order of dispatch. This would change it to 
environmental dispatch. You can do that with a carbon fee and 
mesh the two, but obviously the prices go up. It is a 
fundamental change, not only with how we regulate power but 
actually how the system is operated, and it needs to be 
examined very closely.
    The related issue that concerns me has to do with the 
example we have in New England. Almost everybody in the 
country, not universally, but almost everyone believes that we 
need more pipeline into New England because of the pipeline 
constraints. The challenge is financing it, because pipelines 
have traditionally been financed under long-term contracts with 
local distribution companies, but the new customer class for 
pipelines is basically power plants that may or may not be 
called on a daily basis based on the market they are in.
    So with that, the challenge is how do you get long-term 
financing with power plants that aren't going to sound 
essentially long-term contracts. Now, these are not 
insurmountable problems, but it is a real issue in New England. 
We haven't been able to solve it and I am concerned that if we 
move to a system where there is a lot more gas generation to be 
dispatched, are we going to have the pipeline capacity? Can we 
finance the pipeline capacity to meet that need? It is a real 
conundrum, one that we need to take a look at more closely.
    Essentially, what I have been calling for is a more formal 
role for our commission as we deal with EPA on these issues, 
kind of an open and transparent role, so that basically we can 
get the engineers together to discuss the challenges involved 
because it really comes down to a very granular level with 
reliability. The laws of physics will trump regulations. There 
are always unintended consequences when we shut down power 
plants because, although they may not produce a lot of power, 
they may be producing other products, ancillary services that 
maintain reliability in the grid. And the location of those 
plants is key, and sometimes you can't replicate a plant in 
that location.
    So the granular level of analysis is very important, and I 
think it should be open and transparent because, engineers can 
disagree, but we need kind of an open forum for them to do it. 
I am also not here to say that we shouldn't do anything. I 
think we can do a lot of good by essentially improving and 
modernizing the pricing of electricity. Under the leadership of 
Acting Chair LaFleur, the FERC has opened up a proceeding on 
price formation in the wholesale markets. This is overdue, it 
is a good effort. I am kind of impatient. I want this to move 
forward, because we have some inefficient pricing right now.
    Similarly, at the retail level, I urge my colleagues at the 
State level to consider more realtime and dynamic pricing at 
the retail level because that will send more accurate pricing 
to consumers, and hence, they should use their power more 
efficiently.
    Again, thank you for having us, and I look forward to any 
questions you have.
    Mr. Whitfield. Thank you, Mr. Moeller.
    [The prepared statement of Mr. Moeller follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. Mr. Norris, you are recognized for 5 
minutes.


              STATEMENT OF THE HON. JOHN R. NORRIS

    Mr. Norris. Chairman Whitfield, Ranking Member Rush, and 
members of the subcommittee, thank you for the opportunity to 
share with you my thoughts on how EPA's proposed Clean Power 
Plan will work. The fact that we are here today having this 
discussion on reducing carbon emissions, to some degree, tells 
me it is already working.
    As you may have read in my written testimony, I believe the 
EPA's proposed Rule 111(d) can work. The flexibility provided 
in the rule, along with the continuous communication and 
cooperation between EPA, FERC, NERC, the states, RTOs, industry 
and others to make appropriate adjustments along the way to 
ensure reliability lead me to the conclusion that we can reduce 
carbon emissions and keep the lights on. If the question is, is 
this the most efficient way to reduce carbon emissions in our 
electric sector? I would give you a firm no, it is not.
    I applaud the EPA for this action but recognize that this 
was the only option available to curtail harmful greenhouse gas 
emissions because Congress has failed to act. Placing a cost or 
a value on carbon consistent across the country would, I 
believe, be a far and away more efficient and fair way to 
address carbon emissions. While the EPA's proposal does provide 
more certainty on energy investment than before an industry 
struggling with uncertainty, it is nowhere near the clarity and 
direction legislation establishing a national energy policy on 
carbon would provide.
    Let me share with you an excerpt from an interview from a 
former Republican colleague of yours. He tells of a 
conversation he had with an elderly gentleman about the need 
for a carbon policy, and I quote: I was talking to him about, 
``What about your grandkids?'' And he said, ``I think they can 
get by on their own.'' I don't think that caring fellow really 
meant it quite that bluntly. I think what he meant was somebody 
will figure something out.
    And, of course, my response to him is, ``Well, 
technological innovation will sure work better if we set the 
economics right, because what we believe as conservatives and 
people who believe in free enterprise is if you get the 
economics right, somebody chasing the dollar would deliver to 
me a better product. They will make money and they will serve 
my needs. That is what makes our system go around.
    ``But if you can't get to that next step of getting the 
price on carbon, because if you attach that price, the external 
hidden cost of the product, it changes economics and all kinds 
of exciting things happening for the enterprise system.'' But 
he wants to stick at that point of saying it is not a cost, 
that CO2 is not a cost; it is not a negative. If it 
is a negative externality, it is a value of zero. If you attach 
a zero to it, there is no change in the pricing structure. So 
for him, it is very important to continue to deny the science 
because he wants to assign a zero to the cost of carbon.
    That was former Congressman Bob Inglis, who is providing a 
strong, conservative economic voice on this issue, a voice 
worth listening to. I, too, believe the best way to address 
climate change is to first recognize the overwhelming evidence 
provided by scientists throughout the world that our planet 
faces severe consequences if we do not take action. The U.S. 
can and should help lead a worldwide effort to reduce carbon 
emissions, and that our innovative and entrepreneurial spirit 
will seize the opportunities to tackle this problem.
    If we are here today to debate whether the EPA's proposal 
will work or not, I fear Congress is missing the point, again. 
A rule that is not yet finalized but empowers 50 states with 
significant flexibility to address the proposed regulations and 
then grid operators to work to incorporate those State 
decisions into their operations, it will nearly be impossible 
to be proved today that it will or will not work.
    But if the EPA and every other entity involved commits to 
making it work, I am confident it is achievable. But for the 
sake of our consumers, our utility businesses and America's 
entrepreneurs and innovators, we as a Nation could take a 
better course of action and enact a national energy policy to 
begin the transition to a low-carbon economy.
    Reliability will always be one of my highest priorities as 
a commissioner. It is my responsibility, and I will not 
hesitate to step forward and take appropriate action if grid 
security is threatened by this proposed rule or any other 
threat or action. But this rule is a very gradual transition, 
and I believe a very necessary transition, for I believe my 
responsibility as a citizen and public servant is to also speak 
up for my children, the children of America and the world. We 
are talking about action that threatens their future.
    Much talk, I think, is spent on addressing the financial 
debt we are leaving our children, and I commend all of you here 
today who are addressing that issue. But I hope you will also 
consider the atmospheric debt we are not adequately addressing. 
This is a debt I believe even more devastating but also deadly.
    Thank you. That concludes my testimony. I look forward to 
your questions.
    Mr. Whitfield. Thank you, Mr. Norris.
    [The prepared statement of Mr. Norris follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. Mr. Clark, you are recognized for 5 minutes.


                STATEMENT OF THE HON. TONY CLARK

    Mr. Clark. Thank you, Chairman Whitfield, Ranking Member 
Rush and members of the committee.
    I hope you will allow me a point of personal privilege for 
an introduction that I have today which is, in probably the 
half a dozen or so times that I have testified in front of 
Congress, I have never had my boys be able to join me. They 
have always been in school or back home in North Dakota, but 
today they are here. So Alex and Thomas.
    Mr. Whitfield. We will have some questions for Alex and 
Thomas.
    Mr. Clark. I am sure they look forward to them. They can 
now look 30 years into the future being able to look back into 
a Congressional Record and see their names are in there.
    Out of respect for your time, I won't repeat the testimony 
that I submitted, but instead will probably just extend a 
little bit upon it. It is quite clear from the questions that 
we received from all of you, the pre-hearing questions that 
preeminent in the minds of the committee are, can FERC answer 
questions related to the EPA rule and whether there will be a 
concern about either cost or reliability.
    I think, hopefully, what you gathered from my responses 
were that it is probably too early to know with specificity 
exactly what those impacts will be and the primary driver for 
that is that we simply don't know what the potential State 
implementation plans, compliance plans might look like, and we 
also don't have a sense for what a Federal implementation plan 
or a Federal compliance plan would look like.
    Typically, as the EPA has proposed rules, there would be a 
marker for what a Federal plan might look like; in this case, 
we don't have that. So it is a little tougher for us, I think, 
as a commission, to model it. But I think we can make some 
general comments about the trendline that we might at least 
wish to keep in mind, especially as a commission as we work 
through some of these issues.
    And what really got me thinking about it was an article 
that I read in the Washington Post last Friday, actually, after 
I had submitted my written testimony, which was about the 
challenges that a community in Colorado was having with regard 
to changing over their fleet in a relatively short amount of 
time, and there were some costs concerns that were taking place 
in that community. It happened to be Pueblo. And it got me 
thinking about the EPA proposed rule and what might be pathways 
to it.
    It is quite clear, although the EPA has said that they will 
offer flexibility to states, a pathway that they have offered 
up as a potential one that might be compliance, relies in some 
part on a combination of perhaps cap and trade, like a regional 
gas house initiative like they have in the northeast, some sort 
of reliance on energy efficiency and demand response resources, 
a shuttering of coal plants and, at the same time, pivoting 
towards heavier reliance on natural gas, perhaps some sort of 
renewable portfolio standard in the State.
    So you put all these things together, and it actually looks 
very much like what one of the regions has already been going 
through, which is the one that Commissioner Moeller mentioned, 
which is New England. I think one of the things that FERC and 
Congress will need to keep its eye on as we potentially move 
forward in these rules is, at least from my perspective, if 
someone were to ask me which area of the country do you have 
the most concern about both as a matter of cost and 
reliability, I would probably point to New England. Not solely 
because of some of the things that have happened already with 
regard to carbon regulation, but certainly some of those things 
do play into it.
    So should the EPA rule come to pass? I would think that 
FERC would need to ensure that as it moves forward, we would 
want to make sure that some of the concerns that we have seen 
already happen in New England with the pipeline constraints and 
the rapid conversion to gas and the very tight reliability 
system and sometimes very high cost for electricity aren't 
exported to other regions of the country, and overcoming that 
could be, indeed, a challenge.
    With that, I will end my testimony, yield back the 
remainder of our time, and look forward to your questions.
    Mr. Whitfield. Thank you very much, Mr. Clark.
    [The prepared statement of Mr. Clark follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. At this time, we will recognize the 
gentleman from New Mexico, Mr. Bay, for a 5-minute opening 
statement.


              STATEMENT OF THE HON. NORMAN C. BAY

    Mr. Bay. Chairman Whitfield, Ranking Member Rush, and 
members of the subcommittee, my name is Norman Bay, and I 
currently serve as the Director of the Office of Enforcement at 
FERC.
    On July 15, it was my honor to have been confirmed by the 
Senate to serve as a member of the commission. I anticipate 
being sworn in once all the necessary arrangements have been 
completed. Thank you for inviting me to testify at this hearing 
regarding EPA's proposed Clean Power Plan and other grid 
reliability challenges. I look forward to working with this 
committee in my tenure on the commission.
    One of FERC's critical responsibilities is the regulation 
of electric reliability. As the Director of the Office of 
Enforcement, I have been involved in investigations of 
potential reliability violations and inquiries into major 
reliability events, but I have not been involved in the EPA 
rulemaking.
    While the EPA has responsibilities under the Clean Air Act 
and other legislation, the commission has similar and no less 
important responsibility to promote the reliability of the bulk 
power system.
    One way that I believe the commission can help to ensure 
reliability is through open communication and a strong working 
relationship with the EPA; the Department of Energy; the States 
and NARUC; the North American Electric Reliability Corporation, 
or NERC; regional transmission organizations; independent 
system operators; and industry. It is my understanding that 
FERC staff, EPA, and DOE have communicated at various times 
regarding the EPA's power sector regulations. The agencies 
should continue this effort to ensure that the EPA is aware of 
any potential impacts its regulations may have on the 
reliability of the bulk power system.
    To the extent necessary and appropriate, commission staff 
should continue its communications with EPA and industry 
participants subject to FERC's regulation, including RTOs and 
ISOs and public utilities. Once I am sworn in, I look forward 
to meeting with my colleagues to discuss in greater depth these 
issues and to examine how we can work collaboratively within 
the commission's authority to promote the reliability of the 
bulk power system.
    Thank you for inviting me to testify here today. I look 
forward to remaining engaged with the committee and the EPA, 
DOE, NERC, the states and industry on these important issues.
    Mr. Whitfield. Thank you, Mr. Bay, and thank all of you for 
your testimony.
    [The prepared statement of Mr. Bay follows:]
    
    [GRAPHIC] [TIFF OMITTED] 
    
    Mr. Whitfield. At this time, we will recognize the panel 
for questions, and I will recognize myself to start off for 5 
minutes of questioning.
    It is quite clear that anyone who has examined the Clean 
Power Plan views it as a fundamental change and President Obama 
frequently talks about Congress being obstructionist, and Mr. 
Norris made the comment this is necessary because Congress has 
failed to act. And I would point out that Congress did act by 
deciding not to act. When Mr. Waxman was the chairman of this 
committee, the Cap and Trade Bill was reported out of the House 
of Representatives. It went to the Senate, and the Senate did 
not adopt it. So Congress did act in the sense that it did not 
adopt the cap and trade.
    One of the frustrating--and I am sure that President Obama 
is frustrated, and it is great that we have hearings like this 
to bring all of this out into the open, to have a discussion 
for the American people. Because one of the frustrating parts 
for the American people is when they see decisions affecting 
basic services like electricity and the impact that that has on 
our economy being made by the courts and by regulators, and 
they view that as not really being transparent.
    So we in Congress, we do not intend to just lay down and 
let the President do whatever he wants to on climate change or 
any other issue without having a public discussion about it. 
And so CO2 emissions, by the way, today are the 
lowest from energy sources that they have been in 20 years. 
Lisa Jackson even made the comment that even if we move 
vigorously forward as we are attempting to do here on 
CO2 emissions, it would make no difference unless 
other countries do the same.
    And we see in Europe today, they are mothballing natural 
gas plants because natural gas prices are so high coming out of 
Russia that they are building coal plants today. And we, under 
this plan, would not have the flexibility to build a new coal 
plant if natural gas prices go up because the technology is not 
available to be able to do it in an economic way that would 
make it possible to do it. We don't have enough money to build 
Kemper plants all over America the way they are attempting to 
do in Mississippi, and it is not being done without Federal 
dollars.
    So this kind of discussion, I think, is invaluable. Mr. 
Rush had made the comment about the drought and the impact on 
farmers, and I would tell you, the price of corn has fallen 
from $8.10 a bushel down to $4 a bushel because corn is so 
abundant right now. So there are lots of different perspectives 
on this.
    But Ms. LaFleur, everyone is concerned about reliability, 
and we have asked the EPA about this and we ask this question 
of you in our written questions: Did the EPA request a written 
document from FERC relating to reliability? Do you have a 
written report that was given to EPA on reliability issues?
    Ms. LaFleur. Thank you for that question, Congressman 
Whitfield.
    No, they did not request written comments. My 
understanding, this is the first time I have been through the 
interagency review, but there were a number of staff meetings 
and then a kind of formal debrief where we made our comments 
over at the OMB with a number of EPA people there. And we kept 
a memo, but we did not turn them in in writing because that has 
not been the practice.
    Mr. Whitfield. I personally think that is disappointing 
because reliability is such a key issue.
    Mr. Moeller, I don't have a lot of time left, but would you 
just comment briefly on this economic dispatch versus 
environmental dispatch and how that might get to a cap and 
trade system?
    Mr. Moeller. Well, that is one of the four building blocks, 
and the building block is an aspiration to get the gas fleet up 
to 70 percent dispatch, which has been very rarely done in this 
country, only in very limited circumstances. So there are some 
operational questions.
    But essentially, the only way, if you have to hit your 
target by increasing your gas fleet production, that is going 
to trump what is normally economic dispatch of the cheapest 
plant. Now, the only way you can reconcile that is then put a 
fee on the other sources, and it is talked about in the rule, 
you put a fee on the other carbon emitters so that they are 
less competitive to gas. So that is how it would be done.
    Mr. Whitfield. Well, thank you. My time is expired.
    At this time, I recognize Mr. Rush for 5 minutes of 
questions.
    Mr. Rush. Thank you, Mr. Chairman.
    Mr. Chairman, the American people are tired of the finger 
pointing, they are tired of the excuse after excuse, the blame 
that goes from one to another. They are really, really tired of 
the inaction and the inertia that seems to be the standard of 
this Congress.
    There is no question, Mr. Chairman, that we need to reduce 
our carbon pollution if we are going to avoid the worst impacts 
of climate change. No question about it and the power sector is 
the largest source of carbon pollution in the U.S. There is no 
question about this. Mr. Chairman, I believe that the EPA's 
Clean Power Plan is a reasonable approach to reducing emissions 
from power plants in light of the unending excuses, in light of 
this Congress' failure to act.
    Commissioner Norris, do you agree that a Clean Power Plan 
is a reasonable approach since this very Congress has failed to 
act?
    Mr. Norris. I think the EPA plan is, as I mentioned, the 
most feasible, reasonable one that they can do out of their 
authority, that it is workable. It would be more efficient if 
we would remove the uncertainty around carbon and enact a 
policy that would provide more certainty and more efficiency in 
this transition.
    Mr. Rush. Again, commissioner, how will EPA's proposed rule 
affect investment in renewable energy and energy efficiency 
resources?
    Mr. Norris. It is a much-needed signal to both renewable 
energy and other technologies that can provide demand side 
management energy efficiency and new technologies for 
generation, that, I think, there is a great hunger, an appetite 
for investing in new clean air energy technologies. This will 
help spur more investment which will create more technology 
opportunities for us to make this an efficient transition.
    Mr. Rush. What about nuclear power? With the low price of 
natural gas, some nuclear power plants are struggling 
financially. How could the proposed rule help keep those 
nuclear plants running?
    Mr. Norris. Well, again, I think it provides a much-needed 
signal to the value of nuclear plants because they are 
noncarbon emitting. It has been a real concern of mine that we 
maintain our nuclear fleet because it is noncarbon emitting and 
a solid base load source of generation. So I think the EPA rule 
will assist in providing a better market, if you will, for 
nuclear resources.
    Mr. Rush. Yes. Again, commissioner, what do you think about 
whether industry and regulators can rise to the challenge and 
achieve the carbon reduction set out in the Clean Power Plan 
without sacrificing electric reliability?
    Mr. Norris. I am sorry?
    Mr. Rush. Without sacrificing electric reliability.
    Mr. Norris. Without jeopardizing electric reliability?
    Mr. Rush. Sacrificing.
    Mr. Norris. Yes, I think, as I said, you are not going to 
prove it is or isn't going to work because it is still in 
development. The key thing going forward is the communication 
and cooperation between the EPA, FERC, NERC and all the other 
entities that we--everyone wants to keep the lights on, 
including the EPA. And so what it is going to take is just a 
continuous effort going foward to make sure reliability needs 
are addressed if and when they occur.
    Mr. Rush. Chairman LaFleur, do you agree?
    Ms. LaFleur. I certainly agree that it is going to take a 
ongoing effort of communication to identify issues that 
specific states or regions might be having. As with all, I 
believe, and I testified on MATS before this committee, I said 
the two things you need for change are flexibility and 
coordination and that is even more true in this rule. We need 
coordination to make sure the State plans work and protect 
reliability.
    Mr. Rush. Commissioner Bay, what are your thoughts? Do you 
agree?
    Mr. Bay. I think that there could be challenges.
    Mr. Rush. Turn your mike on, please.
    Mr. Bay. I am sorry.
    I think that there could be challenges, but I think that 
the challenges are manageable. I would note, for example, that 
with the 2005 baseline that the EPA used, there has already 
been a 15 percent reduction in carbon emissions from generators 
so that an additional 15 percent needs to be achieved over the 
next 16 years.
    And even under the EPA proposal, it estimates that in 2030, 
gas-fired generation will constitute more than 30 percent of 
generation and coal will be more than 30 percent, as well. And 
with the regulatory certainty provided by the rule, I agree 
with Commissioner Norris that it will incent innovation. And 
industry is amazing when they know that there is something to 
be improved upon and that can result in better or more profits.
    Mr. Rush. Thank you, Mr. Chairman.
    Mr. Whitfield. At this time, we recognize the gentleman 
from Texas, Mr. Barton for 5 minutes.
    Mr. Barton. Well, thank you, Mr. Chairman.
    And I want to thank the commission for being here. We 
rarely have all the commissioners, so it is an honor to have 
each of you. I was really going to rip Mr. Clark today, but 
since his two boys are in the audience, I am going to have to 
give him a pass on that. But no, not really.
    I have a general question that I would like each of the 
commissioners to have the opportunity to answer. You don't all 
have to, if you don't wish to. With this new EPA carbon rule, 
would seem to me to be at variance with the FERC's stated 
responsibility to provide electricity at a reasonable cost. I 
don't buy the argument that you can close all these power 
plants and you are going to miraculously replace them with 
either natural gas, nuclear power or this clean coal technology 
which really only exists in the laboratory. It hasn't been 
proven in a commercial scaled-up facility yet.
    So, my general question is, can the FERC have any impact to 
guarantee that we continue to provide electricity at a 
reasonable cost to the consumer if this rule goes forward?
    Ms. LaFleur. Well, thank you, Mr. Congressman.
    I do not think the rule itself is inconsistent with FERC's 
responsibilities. As I see it, the EPA makes environmental 
rules and those become the baseline within which the system is 
planned, and we have to make certain that within those rules 
the rates are done in a just and reasonable way and that we 
will be paying attention to that as well as paying attention to 
reliability.
    I think all transitions cost money and so the transition to 
a new resource mix, whether it is because of the environment or 
because of anything else, to build pipelines, to build 
transmission is going to cost money. The long run costs are 
really unknown. They depend on the relative cost of the fuel, 
and we also don't know the long run cost of leaving climate 
change unattended to, which is not free. So, but we will be 
working to make sure that the transition costs of the 
pipelines, the transmission, the things we regulate are done in 
a reasonable way.
    Mr. Moeller. Congressman Barton, I agree with Acting Chair 
LaFleur about we have to react to an environmental rule. I 
suppose there is a possibility that EPA could put some kind of 
a safety valve in from an economics perspective. That is not in 
the rule right now, but that is a potential. Even they admit 
that this is going to cost consumers money and raise rates.
    The question is how do we transition? And my concern is do 
we have the right market signals to actually allow for these 
types of investments, particularly in pipelines, if we are 
going to expand the gas fleet so much.
    Mr. Norris. Thank you, Congressman. First of all I agree 
with you, there are no miracles here, but we are talking about 
accounting for all the costs including the external costs. I do 
have great faith in America's technology innovation. The costs 
for renewable energy are coming down dramatically in this 
country. Technologies for a demand site management and energy 
efficiency are going up dramatically in terms of their 
capability.
    And finally, the fuel costs for renewable energy is zero. 
We know that is a constant going forward. That gives me great 
hope that we can make this transition in a very manageable way 
for the economy. In fact, a very positive way for the economy 
because of the world wide market that is out there for clean 
energy technologies.
    Mr. Clark. Congressman, as I indicated in my testimony, 
FERC has allowed costs that are legally incurred by a business 
to be bid into the markets themselves. So to the degree that it 
is just bidding in costs that are otherwise legally incurred, 
that may not directly implicate FERC markets from a 
jurisdiction standpoint.
    There is potentially though one, what I referred to as a 
potential jurisdictional train wreck between EPA and FERC, and 
it would be this; if EPA through the Clean Air Act required 
utilities to go down the path of environmental dispatches, 
we've talked about, and depart from economic dispatch, that 
could potentially be challenging for FERC in this way.
    Our authority comes not through the Clean Air Act, but 
through the Federal Power Act, which requires just and 
reasonable rates and non-discriminatory rates. We have always 
judged that by economic dispatch. So to depart from economic 
dispatch and move to something else could potentially be 
challenging for the Commission, I think.
    Mr. Bay. Congressman Barton, I think you raised an 
important issue, and certainly FERC under the Federal Power Act 
has to do its best to help ensure that rates remain just and 
reasonable. I think the commission has taken some actions to 
examine price formation in the energy markets as well as in the 
capacity markets that could be very helpful in addressing the 
issue that you raise.
    Mr. Barton. My time is expired, Mr. Chairman.
    I want to just make a statement real quickly. In 2005 the 
then chairman of the FERC, Chairman Keliher, complained to me 
that FERC didn't have the authority to enforce some of its 
rules, and we gave the FERC some additional authority. We 
changed the penalty structure.
    That authority has been used in a way that many people 
think has not been normal due process, so I hope to work with 
the subcommittee in the next Congress to put in a reform 
package to provide more transparency and more of a balanced 
playing field on some of the things that, some of these 
investigations that FERC has been engaged in, in the last 4 or 
5 years.
    With that I yield back.
    Mr. Whitfield. At this time I recognize the gentleman from 
California, Mr. Waxman, for 5 minutes.
    Mr. Waxman. Thank you, Mr. Chairman.
    The world's leading scientists have repeatedly confirmed 
that climate change is already happening. It is caused by human 
carbon pollution and will get much worse if we do not act. So, 
this is a question for all the commissioners. Do any of you 
believe that there is no need to act on climate change? If any 
of you believe there is no need to act on climate changes, 
raise your hand, and I will call on you. Otherwise, I have 
other questions.
    So seeing no one jumping to that bait, it sounds like all 
of you believe that there is some need to deal with climate 
change. Just this morning the President's Council of Economic 
Advisors released a new report on the cost of inaction on 
climate change. They estimate that just one degree celsius 
additional warming could cost the U.S. economy $150 billion per 
year. It is getting harder and harder to deny the imperative of 
action, and we cannot make meaningful progress on climate 
change without controlling carbon pollution from our largest 
source, power plants. Several of you discuss in your written 
testimony the ongoing transition in the power sector as natural 
gas, renewables and energy efficiency are playing larger roles 
in meeting our power needs.
    Chairman LaFleur, what is driving this shift?
    Ms. LaFleur. Thank you for the question, Congressman 
Waxman. I actually think the biggest driver of change is the 
abundance of domestic natural gas. Up in New England where we 
have heard about the challenges of pipelines, there are coal 
plants that have been under attack by the environmental 
community for 20 years.
    Mr. Waxman. Natural gas is a driving force.
    Ms. LaFleur. And second is, as has been mentioned, the new 
renewable technologies and the technological improvements and 
policy support.
    Mr. Waxman. The new renewable portfolio standards, and how 
about improvements in renewable technologies?
    Ms. LaFleur. Yes.
    Mr. Waxman. And new environmental regulations?
    Ms. LaFleur. Yes, that is the third.
    Mr. Waxman. So environmental standards play a role, but we 
would be facing a shift in the power sector even without these 
regulations that EPA is proposing.
    Commissioner Norris, how do FERC and other involved 
entities such as regional transmission organizations and State 
public utilities commissions work to ensure reliability in our 
power system? Do you try to ensure that generation and 
transmission infrastructure remain frozen in time, or do you 
work to ensure that as inevitable changes occur, the impacts on 
reliability are addressed?
    Mr. Norris. The states and RTOs are empowered with that 
responsibility now and no reason why they would not continue to 
be empowered with that responsibility, to choose their means, 
set the reserve margin and choose their means for meeting the 
adequate resources in the way that best fits their State and 
their economy. I see no reason that it change.
    Mr. Waxman. Chairman LaFleur and Commissioner Bay, do you 
agree that the goal for FERC is not to stop change, but to 
ensure that the system responds appropriately as changes occur?
    Ms. LaFleur. Yes, I think we have to adapt the part of the 
system that we regulate as new environmental regulations occur.
    Mr. Waxman. Mr. Bay?
    Mr. Bay. I agree with that as well.
    Mr. Waxman. Now opponents of the Clean Power Plan claim 
that it is a complete departure from how the power sector has 
regulated and will threaten grid reliability.
    Commissioner Norris, is this proposal a sea change from 
everything that has come before, or does the plan build on 
regulatory structures already in place and trends that are 
already occurring?
    Mr. Norris. Referring to the proposed EPA plan as the 
change?
    Mr. Waxman. Yes, EPA plan.
    Mr. Norris. No. Like I said, it is a gradual transition 
that is already occurring. We are already not building coal 
plants because the science is not changing. We are already 
having, as Commissioner LaFleur said, the advent of gas coming 
that is impacting the system, that is as a result of 
technology, the fracking technology, so science and technology 
is driving this change, not EPA.
    Mr. Waxman. State PUCs, RTOs, and ISOs already regulate 
electricity markets and, along with FERC and NERC, work to 
assure reliability. The power sector has dealt with many 
environmental regulations in the past, most recently the 
Mercury and Air Toxic Standards, and has maintained 
reliability. The shift to cleaner electricity is already 
underway. The Clean Power Plan will accelerate these changes 
and may pose greater challenges, but they are challenges that 
we already must and will address. I would assume you agree with 
that, Mr. Norris?
    Mr. Norris. Do I agree that we can maintain reliability 
through this transition?
    Mr. Waxman. Yes.
    Mr. Norris. Yes----
    Mr. Waxman. Chairman LaFleur, and Commissioner Bay, what do 
you think? EPA's Clean Power Plan is eminently, in my opinion, 
reasonable and quite modest proposal. It provides tremendous 
flexibility and ample time to the states and industry to reduce 
carbon pollution in the least burdensome way possible.
    Do you, as Commissioner Norris stated, the question is not 
whether we reduce carbon pollution, but how, and EPA has an 
answer embodied in the Clean Power Plan, and that is what they 
are proposing as a start. So rather than ask that as a 
question, I want to make that comment.
    And, Mr. Chairman, one last thing. The EPA is acting under 
the Clean Air Act which was adopted by the Congress. They are 
acting under decisions by the U.S. Supreme Court. There have 
been five to four decisions that I have not liked, and there 
have been five to four decisions that you haven't liked, but 
Supreme Court decisions are the law of the land.
    I yield back.
    Mr. Whitfield. At this time I recognize the gentleman from 
Ohio, Mr. Latta, for 5 minutes.
    Mr. Latta. Well, thank you, Mr. Chairman, for today's 
hearing, and also to the commissioners for being with us today. 
It is great to have you all here before us.
    And if I could, I would like to start with Commissioner 
Clark if I may. And what are the implications of the State 
energy laws and regulations if they are included as part of an 
EPA-approved State implementation plan to comply with the Clean 
Power Plan?
    And I just wondered if that could tie into your testimony, 
where you had mentioned that when you are looking at some of 
the, when this relationship is occurring, that States might get 
into a mother-may-I relationship with the EPA that never 
existed before. Would that tie into that?
    Mr. Clark. Congressman, it does. The concern that I raised 
is I do think there is a risk that this is a rather dramatic 
change jurisdictionally, and States will at least need to 
consider it as they decide whether they are going to go down 
the path of a State compliance plan. The reason I say that is 
in the past, EPA might just be regulating emission sources 
either by source or a fleet, but not the entire regulatory 
regime in an integrated resource plan standpoint that a State 
might have.
    So to the degree that a State goes down the path of 
creating effectively a carbon integrated resource plan, they 
will be putting into that things that have traditionally been 
set by State legislatures, renewable portfolio standards, 
building codes, energy efficiency standards, in addition to 
traditional sort of power plant decisions.
    To the degree that then becomes blessed by EPA and 
submitted and approved by EPA, it is a much different 
jurisdictional relationship than has existed before because if 
a State goes back and decides maybe the RPS should be 25 
percent instead of 30 percent, or maybe our State building 
codes should be adjusted because something isn't working, in 
many ways it will have lost that opportunity because it will 
have become a part of a Federally-approved plan and would then 
need to seek approval from the EPA, depending on how it is 
structured to----
    Mr. Latta. Let me follow up. What would that do to costs in 
those States, especially when you are dealing with a district 
like mine that has 60,000 manufacturing jobs, and is that going 
to drive costs up? Is there going to be less flexibility that a 
State could do in the future? What would happen out there?
    Mr. Clark. Congressman, again, I think it is a bit too 
early to tell specifically because we don't know what the 
compliance plans would look like or what a Federal compliance 
plan would look like. I would just point to the trend lines 
which is in those States that have moved more aggressively and 
have been first movers on some of these issues, the trend line 
has been toward an increasing electric rate environment.
    Mr. Latta. Thank you.
    Chairman LaFleur, if I could turn to you, recently I have 
been hearing that in a number of States in competitive markets, 
electricity generators and electric distribution companies are 
seeking State public utility commission approval for the 
purchase power agreements or the PPAs, as a means to guarantee 
a contract between the power provider and the regulated utility 
company.
    States are considering these because they are concerned 
about the impacts to their retail customers if those plants 
were to shut down. So the question is, if capacity markets were 
ensuring reliability and preserving essential base load 
capacity, then it seems that these PPAs would not be necessary. 
Are these actions by the State an indication of the market 
inadequacies out there?
    Ms. LaFleur. Well, right now the capacity markets are under 
a lot of pressure because of all the changes in resource mix, 
and something that we are looking at very hard is how we make 
sure the capacity markets properly compensate all the 
increments that are needed for reliability, and I think that 
will continue to be important, but there will still be a role 
for the States which regulate generation within their own 
authority.
    Mr. Latta. Let me ask you, when you say that they might be 
under pressure out there, what is causing the pressure out 
there in the capacity markets?
    Ms. LaFleur. I think some of the factors I already said. 
The first is the gas price being very low has really driven 
down the marginal revenues, so it is hard for some of the coal 
and nuclear units to recover their costs in the market and 
other resource changes as well.
    Mr. Latta. Thank you very much.
    Mr. Moeller, if I could turn to you, in your testimony you 
were talking about what could be happening out there is we 
could have higher costs involved out there. When you look at 
those higher costs again when you look at the States out there 
like the State of Ohio that is 70 percent generated by coal 
right now, if you look in that crystal ball down the road, what 
would happen to States like Ohio for costs when you look at 
what is happening with the EPA right now?
    Mr. Moeller. I wouldn't want to predict how much rates 
would go up, but, again, even EPA admits that rates will be 
going up based on this rule. It would depend a lot on how they 
chose to come up with their State implementation plan. They 
could go the energy efficiency route, but that gets more and 
more expensive as you get more efficiency out of the system.
    Transition to gas would probably be expensive because a lot 
of those coal units are relatively low cost. There are other 
ways to perhaps get there, but, again, this will result in 
higher rates, which I don't think is denied by anybody.
    Mr. Latta. Thank you very much.
    Mr. Chairman. I see my time is expired and I yield back.
    Mr. Whitfield. At this time I recognize the gentleman from 
California, Mr. McNerney, for 5 minutes.
    Mr. McNerney. Well I thank the chairman for holding the 
hearing and the commissioners for your testimony. I 
congratulate Mr. Bay on your confirmation.
    Mr. Moeller, you had an interesting discussion of the 
pipeline challenge in New England because I assume it is from 
return on investment concerns of investors, the pipelines 
wouldn't be fully utilized. What would improve that financial 
barrier situation?
    Mr. Moeller. Well, traditionally the pipelines have been 
paid for by the local distribution companies with 20 and 30 
year contracts. They are the ones selling gas at retail. The 
new customer base is power plants, and in that market power 
plants don't know on a daily basis whether they are going to be 
called or not. They bid in. Sometimes they are taken. Sometimes 
they are not.
    The pipes are basically full in New England. Almost 
everybody agrees that we need more pipe in New England, but how 
do you finance it under a new model? There are three proposals 
out there, one from the governors, one from the investor-owned 
utilities, and a recent one from a municipal group and we are 
hoping that part of this discussion can lead to a solution, but 
it is a concern we don't want replicated in other markets.
    Mr. McNerney. OK. Another question. You mentioned your 
concern about EPA not having the capability to do the granular 
analysis needed. I would assume the EPA does have that 
capability, so basically would you reiterate that you don't 
think they have that capability?
    Mr. Moeller. Well in my opinion, I don't expect them to 
know electric markets like we do, just like we wouldn't know 
the details of Clean Air Act either. That is not really their 
job, but that is why I think we need a more formal relationship 
because we have the expertise. NERC has the expertise. The 
people that run the markets do and it is really drilling down 
into some very detailed engineering analysis, and it can be 
done.
    Mr. McNerney. Well, you and other of the commissioners 
mentioned that you think one of the requirements for success of 
the rule, and I think it is cute that it is called the rule, is 
that you need open and transparent relationship between 
yourselves and the EPA and also the DOE. How can we achieve 
that, Chairwoman LaFleur? How can we achieve that transparency?
    Ms. LaFleur. Well, I agree that we need an open and ongoing 
relationship with the EPA. I think the model that we adopted on 
the Mercury and Air Toxics Rule where we have regular monthly 
staff calls with the EPA, as well as meetings at the 
Commissioner level, is one we should follow here. I think we 
will know much more where the challenges are and what we need 
to do once the State implementation plans are done.
    Mr. McNerney. Do you need a higher authority to make that 
transparency happen?
    Ms. LaFleur. Well, I always love more authority, but I 
think we have the ability to be transparent within our existing 
jurisdiction.
    Mr. McNerney. Mr. Waxman established that each of you feel 
there is a need for reduce carbon emissions. What do each of 
you feel, briefly if you would, would be the most efficient way 
to achieve that, the rule or some other method?
    Ms. LaFleur. Well, I agree with Commissioner Norris that 
from the standpoint of reducing a pollutant most effectively, a 
nationwide cap and trade or some sort of nationwide system 
would probably be the most efficient. Given the structure of 
the Clean Air Act that we have, I think the EPA did a good job 
building in flexibility to use the authority they have.
    Mr. McNerney. Mr. Moeller?
    Mr. Moeller. Well, because carbon is ubiquitous in its 
concentration throughout the world, we have got to solve this 
on a worldwide basis, and I really think we should do it 
through market forces. As I mentioned in my testimony, getting 
prices more accurate at the wholesale and retail level 
throughout the world. Energy is subsidized I think a trillion 
dollars a year. Those are the kind of things that if we send 
the right pricing signals, people will use their energy more 
efficiently.
    Mr. McNerney. OK. Thank you.
    Mr. Norris. Thanks. I partially agree with Mr. Moeller. 
Sending the right price signal is right, but you have got to 
get the external cost in that price. I think the most efficient 
way to do that personally is a carbon tax. I am not opposed to 
a cap and trade, but it takes a lot more pages for you all to 
write, and a carbon tax would be a lot simpler.
    Mr. McNerney. Thank you.
    Mr. Clark?
    Mr. Clark. Congressman, from my standpoint, research and 
development is really the key in future energy technologies, 
and I am a supporter of government-supported research and 
development into those new technologies, the idea being that if 
new sources of energy can be developed in a way that no Nation 
or no developer would want to do anything but because it is 
both the cleanest and the most cost effective, then that solves 
both answers for you, and you don't have to worry about as much 
government intervention into the markets themselves because on 
its own----
    Mr. McNerney. So that would take Federal or some higher 
source of funding for that research?
    Mr. Clark. There can be all sorts of ways of developing 
those research dollars, yes.
    Mr. McNerney. Mr. Bay?
    Mr. Bay. At this point 14 seconds or less, I would say 
innovation. I would say research and development. And I would 
say markets.
    Mr. Whitfield. We are always willing to talk about those 
issues.
    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. 
A special welcome to you, Dr. Bay, as our next chairman. 
Welcome.
    As you all know, our grid faces many challenges. You have 
to coordinate gas with electric power, and sometimes that can 
be difficult. Wind is plentiful but not at times when we need 
it, at times we don't need it. Subsidies distort the market and 
help shutter nuclear power plants, reliable nuclear power 
plants, And, as we have heard today, EPA adds to those 
challenges.
    My first question is for the entire panel. In the Mercury 
Rule, the EPA included a way to pause the rule if reliability 
is threatened. It is called, as you all know, a relief valve. 
As you all know, too, most of America's grid is run by 
impartial groups called ISOs. Now, the ISOs are asking EPA to 
include a reliability relief valve in the carbon rule. Yes or 
no, do you all agree that this could be a valuable part of the 
final rule?
    Commissioner LaFleur.
    Ms. LaFleur. I don't think it could be designed by the 
reliability safety valve in MATS, but I think there should be a 
way to consider reliability as a last resort if there is an 
issue.
    Mr. Moeller. I think some kind of a safety value would be 
very helpful.
    Mr. Olson. Commissioner Norris?
    Mr. Norris. I apologize. I was not very clear on capturing 
the question, but if it is a safety valve, I am for safety 
valves.
    Mr. Olson. Yes. Safety valves, there is one for 
reliability. And so they want something for a reliability rule 
in the Carbon rule, some sort of safety valve. It is out there 
for the ISOs. ISOs want to make sure they have that thing. It 
is part of the Mercury rule. It has been done with mercury. 
They just want to make sure that, hey, that is a good idea. Can 
we have that as well, just a safety valve for reliability as 
opposed to mercury.
    Mr. Norris. Reliability is paramount, and we should do 
whatever we can to maintain reliability but not use a safety 
valve to empower people to push back what they are trying to 
achieve.
    Mr. Olson. Commissioner Clark?
    Mr. Clark. Congressman, yes, and I think it needs to be one 
that is done by an independent third party so that they can 
have greater visibility into the entire grid itself so as the 
State and regional plans are stitched together, someone 
independently is able to look at how they all work together and 
whether it will impact reliability.
    Mr. Olson. Mr. Bay?
    Mr. Bay. Congressman Olson, I certainly think it is an idea 
worth considering.
    Mr. Olson. OK, thank you.
    My second question is for you, Commissioner Moeller. When 
power plants close we focus on the number of megawatts lost, 
but large power plants like coal and natural gas just don't 
provide bulk power. They also protect the grid with what is 
called ancillary services.
    Unlike wind and solar, they can ramp up or ramp down 
immediately if needed. They can keep their power balanced at 60 
hertz, right there 60 hertz, not 59.99 or 60.001. It is more 
important than reliability having that power, it is having the 
right power. And so my question is, are these EPA rules closing 
down the most important kinds of power on the grid, ones driven 
by coal and natural gas?
    Mr. Moeller. Well, it is very location-specific, 
Congressman. I can think of a big power plant in Montana that 
provides voltage support, a lot of power. If you were to take 
that out of the grid, it would have big impacts on the rest of 
the northwest system, and I am sure that that is the case in 
low pockets throughout the country.
    And that is why I think drilling down into the granular 
nature of the reliability of closing plants is necessary, and 
we can take EPA's chart. They have projected which plants are 
going to be shut down, so the reliability study shouldn't be 
that difficult.
    Mr. Olson. Yes, so one further question. As EPA's second 
pillar of the carbon rules calls for a massive increase in 
power from natural gas, but they don't seem to realize that 
coordinating natural gas and electric power is a very delicate 
balance, and even worse now, the environmental groups are 
attacking FERC Using Greenhouse Gas Rule to try to turn around 
and stop FERC from approving natural gas pipelines. You can't 
have natural gas without the pipelines.
    And so my question is, do you think EPA understands how 
difficult some of these assumptions are? Are they realistic?
    That is for you, Mr. Moeller.
    Mr. Moeller. I don't think they fully appreciate the 
challenges we have with getting more pipeline infrastructure. 
At least I haven't sensed that they do, because as I noted in 
my testimony, this set of new consumers of pipelines as power 
plants, not the traditional ones, local distribution companies 
that have provided the financing through long-term contracts, 
and we have got to address that and solve that issue or else 
the assumptions on pipeline expansion, I think, will be faulty.
    Mr. Olson. My time I yield back. Thank you.
    Mr. Whitfield. At this time I recognize the gentleman from 
Texas, Mr. Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    I want to thank our commissioners, both new and old, for 
testifying today.
    Reliability of transmission electricity is the backbone of 
our economy. Our industrial, commercial, and residential 
customers never need to question whether the power they need 
will be delivered when they need it. It is FERC's 
responsibility to maintain the reliability of the grid and FERC 
has quite a few other responsibilities, including pipelines, 
LNG facilities, and oil pipeline rates, to name a few.
    Chair LaFleur, in your testimony you gave EPA's Mercury and 
Air Toxic Standards, or MATS, you state that EPA sought the 
advice of FERC upon the issuance. You stated that FERC issued a 
policy statement on potential violations MATS may induce based 
on FERC's reliability standard. Did the EPA respond to that, to 
FERC, and what you submitted?
    Ms. LaFleur. Yes, Congressman Green. The EPA, in fact, we 
based our policy statement on a policy guidance memo they put 
out that indicated that power plants could seek a fifth year to 
comply with the advice of FERC and other reliability experts. 
Thus far we are just in the fourth year, so we haven't had any 
fifth year applications, but we anticipate a few.
    Mr. Green. Well, Congressman Olson and I actually have 
passed a bill through the House that doesn't deal with FERC but 
deals with EPA and the Department of Energy, H.R. 271, that 
deals with the conflict that exists between EPA and the 
Department of Energy. That bill passed the House, and it may 
emerge sometime in a different form over in the Senate, but it 
also puts reliability as the most important.
    Because again, I am from Texas, and Houston right now where 
it was 99 degrees when I left last week, and so reliability is 
important for our air conditioning to run in the summer just 
like it is for heating in the north in the winter.
    Given the increasing complexity of EPA's regulations, does 
FERC anticipate additional conflicts with reliability?
    Ms. LaFleur. I believe it is our responsibility to make 
sure that reliability is sustained. I think we will know much 
more when we see the different State plans, but there will 
undoubtedly be issues to work through as we work through the 
transformation, that is what we will do.
    Mr. Green. You also discussed EPA's proposal and gas 
pipeline adequacy in your testimony, stating FERC emphasized 
capacity factors and existing constraints. Do you believe EPA 
adequately incorporated FERC's input?
    Ms. LaFleur. I think EPA referenced in the rule the 
considerable need for new pipeline capacity to facilitate the 
Clean Power Plan, but it is going to be up to us to help get 
that pipeline capacity in the ground.
    Mr. Green. OK. Do you anticipate FERC's handling increased 
permitting requests for natural gas pipelines if States choose 
the EPA's regional policy option, which since FERC is a 
national agency.
    Ms. LaFleur. I think our pipeline work will continue to 
grow for a number of reasons, yes.
    Mr. Green. OK.
    Director Bay, until you are at least sworn in, as Director 
of Enforcement in your office and responsible for violations 
and inquiries in market manipulation, however unlike other 
Federal agencies, FERC does not have an office of compliance or 
any other resource or regulated community to address questions 
and concerns. Mr. Bay, do you believe that the office of 
compliance would benefit the regulating community, someone to 
just call and say we are looking at this option before it ends 
up in enforcement action?
    Mr. Bay. We actually tried to do that, Congressman Green. 
There is a no action letter process whereby an entity can 
submit its question to FERC for consideration by staff on 
whether or not there would be a violation if the entity engages 
in a certain form of conduct.
    In addition, we have a help line that is staffed to answer 
questions from the regulated community. And certainly we are 
often speakers at conferences in which we----
    Mr. Green. OK. I only have about 40 seconds left, but I am 
concerned that maybe we could use some more transparency on the 
enforcement and maybe an additional office of compliance.
    Let me get to my last question. Mr. Clark, EPA's rule seems 
to assume transmission grade will not require much, if any, 
changes as a result of retirements, decreased margins, or 
renewable sources whether they be large or small. In different 
regions of the country, what entities are responsible for 
building and maintaining new and existing transmission, and 
what challenges are they going to face under this new EPA 
model?
    Mr. Clark. Congressman, there can be different entities in 
different parts of the country, either incumbent utilities or 
competitive utilities that are attempting to get into the 
transition business. Who plans that and makes the calls differs 
substantially in different parts of the country, and in more 
regulated, less restructured regions of the country, like the 
southeast and most of the west, it tends to be still 
traditional monopoly and vertically integrated utility 
companies regulated by States. In more market regions of the 
country, it tends to be probably an ISO or an RTO.
    Mr. Green. OK.
    Thank you, Mr. Chairman. I know I have run out of time.
    Mr. Whitfield. At this time the chair recognizes the 
gentleman from Virginia, Mr. Griffith, for 5 minutes.
    Mr. Griffith. Thank you, Mr. Chair.
    Ms. LaFleur, if I understood your testimony earlier, and I 
wrote down part of it but I don't want to put words in your 
mouth, given the structure of the Clean Air Act that we have, 
the EPA I think you said did a good job or something similar to 
that. I got it to that point and then I couldn't write fast 
enough. Is that an accurate statement of your opinion?
    Ms. LaFleur. That is basically what I said. The question 
was what's the most efficient way to regulate carbon, and given 
the authority they have----
    Mr. Griffith. Yes, ma'am. That wasn't my question. My 
question is, is that a statement of your opinion that the 
structure of the Clean Air Act that we have, under the 
structure that we currently have, the EPA did a good job in 
coming up with these regulations?
    Ms. LaFleur. Yes.
    Mr. Griffith. And so then I would ask you to reconcile for 
me when you take a look at Section 111 of the Clean Air Act 
where in Section D it says, the Administration shall prescribe 
regulations which shall establish a procedure under which each 
State shall submit to the administrator a plan which 
establishes standards of performance for the existing source 
for any air pollution for which air quality criteria have not 
been issued or which is not included on a list published under 
Section 108 A, and the critical part, or emitted from a source 
category which is regulated under Section 112 or 112 B.
    And how do you reconcile that with the fact that electric 
generation units are currently regulated under 112, and 
therefore the EPA does not appear to have authority under the 
Clean Air Act to propose the regulations which they have 
enacted, and what they are relying on is a scrivener's error 
that took place in the redraft in, I believe, 1990, but in a 
case which I would cite for you all to go back and look at with 
your lawyers, in a case New Jersey v. EPA 517 F.3d 574, 2008, 
it appears that the EPA acknowledged that they didn't have this 
authority.
    And the court ruled accordingly in view of the plain text 
in structure of Section 112, we grant the petitions and vacate 
the delisting rule, which was a previous lawsuit. This requires 
vacation of camera regulations of both new and existing EGUs, 
electric generation units. EPA promulgated the camera 
regulations for existing EGUs under Section 111(d), but under 
EPA's own interpretation of the Section, it cannot be used to 
regulate sources listed under Section 112.
    So it is not just my reading, but apparently the EPA in a 
court case made that same reading, and the EPA thus concedes 
that if EGUs remained listed under Section 112, as we hold they 
do, then camera regulations for existing sources must fail. So 
it would appear that the EPA is reaching way out, and under the 
existing law I would submit they don't have the authority and 
that they are asking for litigation.
    Doesn't that make your job harder in trying to figure out 
where you are going to go when the EPA is stretching the law so 
far that they disagree currently with the decision of the court 
that they conceded was the correct reading of the law as late 
as 2008? Yes or no.
    Ms. LaFleur. The legality will be decided by the courts, 
but we are going to do our job to try to keep the lights on in 
the meantime.
    Mr. Griffith. And I appreciate that you all are going to 
try to keep the lights on, and that brings us to this whole 
pipeline issue and I worry about the EPA and folks filing 
lawsuits on trying to lay down new pipeline to get it to the 
power sources, and all of a sudden we have EPA regulations 
coming in and saying to us, wait a minute, wait a minute, you 
can't put the pipeline there, or we have lawsuits that last 
longer.
    And, Mr. Norris, you said earlier you were confident in the 
American innovations and so forth, and I am too. The problem is 
the EPA apparently is so confident they believe that we can get 
it done in 2 years. We know from the Department of Energy, and 
I sometimes wish that all of you all would sit down and talk on 
a regular basis. The Department of Energy has told us the new 
clean coal technology will not be available for approximately 
10 years even if what we are working on now works, and I think 
there are some really exciting things. I love chemical looping, 
but we are looking at 10 years. I think with some money we 
might be able to shorten it to 7 years.
    But under these proposed regulations, assuming that they go 
into effect, the States have to come up with their plan. Even 
though they have 10 years to hit their target, their plan has 
to be completed with one year. That doesn't seem very 
reasonable to me. Do you believe that States really can come up 
with a plan not knowing where the pipelines are going to be, 
not knowing what technology is going to be available that can 
hit all of these very rigorous standards, come up with the plan 
now for 10 years later? Yes or no. Thank you.
    Mr. Moeller. I do.
    Mr. Griffith. Thank you. You do.
    Well, we only have 5 minutes, so I got to hurry to get it 
all in. I got more than I can handle here.
    Somebody said earlier it is not the EPA regulations that 
are putting the coal power plants out of business; it is the 
price of natural gas. The problem is that coal and natural gas 
compete about even at $4 a unit, and for most of this year, it 
is true in the last week or so it has dropped back down under 
$4, but for most of 2014, the natural gas price has been over 
$4.
    And so if it is not the price, I would submit to you all it 
must be EPA regulations which are in fact killing jobs across 
this country, and we are doing it at a time when this country 
can't afford it. The people in my district can't afford it. The 
consumers are the families of middle class America. We are the 
ones being hurt. It is great to have all these lofty ideas, but 
I don't see it working, and I fear that we are going to have 
rolling brownouts in the future, and I fear that you all are 
going to have a really tough job because of these EPA 
regulations.
    And with that, Mr. Chairman, I see my time is up, and I 
yield back.
    Mr. Whitfield. At this time I recognize the gentlelady from 
California, Ms. Capps, for 5 minutes.
    Mrs. Capps. Thank you, Mr. Chairman, and to all of the 
commissioners, thank you for your testimony today.
    Despite what some have argued, it is clear to me that EPA 
engaged in unprecedented outreach in developing its Clean Power 
Plan. EPA met with public utility commissioners, grid 
operators, and utilities of all types among many others.
    Chairwoman LaFleur, to emphasize it for the record, I would 
like to ask you about EPA's outreach to you and to FERC staff. 
In your written response to questions posed by the majority, 
you indicated that FERC staff met with EPA staff on several 
occasions while the proposal was being developed. Is that 
correct?
    Ms. LaFleur. Yes, it is, Congresswoman Capps.
    Mrs. Capps. And during these conversations, did FERC have 
an opportunity to flag issues that you all believed that EPA 
should be considering while developing their proposal?
    Ms. LaFleur. Yes.
    Mrs. Capps. Thank you.
    As far as you know, did anyone at FERC tell EPA that the 
proposal would significantly undermine reliability?
    Ms. LaFleur. That was not the sum of our advice. As I said 
in my testimony, our staff really emphasized that the pipeline 
and transmissions would need to be there to facilitate the 
plan, that that was a key driver as well as a need for regional 
cooperation.
    Mrs. Capps. Thank you.
    Another topic. One of the written questions from the 
majority asked whether FERC prepared the resource adequacy and 
reliability analysis that EPA released with the proposed rule. 
Would FERC normally prepare the supporting documents for 
another agency's rulemaking?
    Ms. LaFleur. Not to my knowledge. I think that was prepared 
at EPA.
    Mrs. Capps. So there is nothing unusual about EPA 
conducting its own supporting technical analysis for a proposed 
rule?
    Ms. LaFleur. I honestly don't know what their normal 
practice is, but they did not come to us for that.
    Mrs. Capps. Thank you.
    And again moving on, we have heard arguments that FERC 
should immediately complete an independent reliability 
assessment of EPA's proposal. Chairwoman, in your testimony you 
indicated you don't think it makes sense for FERC to prepare 
such an analysis at this time. Why is that?
    Ms. LaFleur. First of all, the rule is just in draft, but 
even if the rule were final, the way it is structured, there is 
49 different States, have to come up with plans using four 
different building blocks, and some of them will do it on a 
State level, some regional, so there would be so many 
combinations and permutations we would need to go through, I 
think it would be more productive for us to focus on doing our 
jobs of getting the infrastructure built and then zero in if 
there are issues in a State.
    Mrs. Capps. Thank you.
    Again moving on, our power sector is already transitioning 
towards energy efficiency and renewable energy, and EPA's Clean 
Power Plan will accelerate that transition. That is my summary 
of it. If regulators in industry do the necessary planning and 
maintain focus on implementing the Rules targets, is this 
transition manageable, and can you elaborate on that a bit?
    Ms. LaFleur. I think on balance it should be manageable. As 
I said, I think there is a lot of infrastructure we need to get 
built, and we need to have a process if there are specific 
issues. But from what I hear, many of the States are already 
well situated.
    Mrs. Capps. Thank you.
    You know, Mr. Chairman, I think it is clear that EPA sought 
and received FERC's input on the development of the Clean Power 
Plan, and that EPA will certainly continue to seek FERC's input 
as it finalizes the rule as it moves from the draft into the 
final rule stage. EPA's Clean Power Plan is a critical step to 
reducing carbon emissions and combatting climate change, and I 
hope we can all work together in the various agencies and 
Congress to ensure that these rules are as strong and as 
effective as possible.
    And I know I have a minute left, but I am prepared to yield 
back.
    Mr. Whitfield. Gentlelady yields back.
    At this time I recognize the gentleman from Illinois, Mr. 
Shimkus, for 5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Again, welcome. We are actually glad to have you here, and 
I missed some of the impassioned questions, but the reality is 
there are people in coal countries of this nation that since 
this Administration was elected there has been a war on coal.
    And I always refer people to President Obama's then meeting 
with the editorial board of the San Francisco Chronicle in 2008 
when he said, I am just going to make it so costly to use coal, 
that they will move out of the market and I think we are living 
in that world. Your job is living in that world, how do we keep 
the lights on.
    And I also would hope that your job would be trying to make 
sure there is enough base load and that we have competitive 
prices because if prices go up, then the whole economy is 
challenged by that. But the passion is sincere for those people 
who live in coal country and have the majority of their 
generation from coal-fired power plants.
    Now I am from Illinois, so we have a big nuclear portfolio, 
too. We are fortunate in that, but I would say nuclear power is 
challenged today also.
    So, Chairwoman LaFleur, I filed this question, and in your 
statement you talked about the FERC staff working on the 
operational grid, pipeline, transmission, regional cooperation, 
and I understand the work that commission staff has done, but I 
was intrigued by Commissioner Moeller's statement when he 
talked about requesting a more formal role.
    Commissioner Moeller, can you explain to me what that 
means, and maybe that might address some of these questions 
about how much time, who is reviewing, who is making decisions. 
And what do you mean by a more formal role?
    Mr. Moeller. Well Congressman, as Acting Chair LaFleur 
mentioned there were meeting between FERC staff and EPA, but it 
is kind of up to whoever heads the agency as to whether that 
information is going to be disseminated.
    Now, to her credit, she did. But I like these issues. They 
may not be very glamorous, but they are very important in terms 
of the reliability implications of transitioning this fleet in 
a very short amount of time.
    And so I don't want to endorse staff meetings and paperless 
meetings. I would prefer a more formal open, transparent 
process, where frankly we can get engineering expertise which 
will often probably disagree among themselves as to the 
reliability implications, and I don't think it is that hard 
because EPA even gave us the list of power plants that they 
project to shut down. So the information is out there, courtesy 
of EPA.
    Mr. Shimkus. So in that statement, and not trying to sow 
discord, but it is your opinion that there hasn't been an open, 
transparent system?
    Mr. Moeller. I was never invited by EPA to either review 
the proposal or comment on it. It was done strictly----
    Mr. Shimkus. Let me ask to all the commissioners here and 
the acting Commissioner, was anybody else invited to any of 
these meetings with the EPA? Obviously the commission, the 
staff is yours, but----
    Ms. LaFleur. There are two different things going on. In 
the interagency review process, we were under strict 
confidentiality requirements about Xeroxing and releasing 
information, although I did offer the excerpts to all of my 
commissioner colleagues. Now that the rule is out, we can have 
all the open meetings we want.
    Mr. Shimkus. And I only have a minute left. So I know 
Commissioner Moeller, you weren't. Commissioner Norris, were 
you involved in any of this prior?
    Mr. Norris. Well, I was involved----
    Mr. Shimkus. Or Commissioner Clark?
    Mr. Clark. No.
    Mr. Shimkus. Commissioner--you weren't around yet. So 
welcome, I guess I should say.
    And I will just end on this, again we appreciate it. You 
all know where we stand. I talk to a lot of people in the 
generating sector, and I was involved with public policy that 
moved us to competitive generating facilities instead of a, in 
regulated markets. I think there is now a question under this 
new regime of is it better for reliability, do you go back to 
regulated markets? How are merchant facilities going to 
survive?
    Commissioner Clark, you are shaking your head. Do you want 
to comment real quick, and then I will end on that, Mr. 
Chairman. Thank you.
    Mr. Clark. Congressman, you raise an intriguing point, and 
one that I have thought of from time to time, which is there is 
the potential in some restructured markets to have, to the 
degree that you are requiring a State-led basically integrated 
resource plan to be put on top of the market construct, that it 
is a form of almost soft re-regulation in some of those markets 
that had traditionally been trending in a much different way in 
a restructured environment.
    Mr. Whitfield. At this time, I recognize the gentleman from 
Pennsylvania, Mr. Doyle, for 5 minutes.
    Mr. Doyle. I thank my friend.
    Commissioners, thank you and welcome. You have provided a 
great deal of insight and thought, and your responses to the 
majority's written questions were certainly exhaustive.
    We are embarking on a fundamental shift in our energy 
sector, and I share the goal of reducing emissions of 
greenhouse gasses that are contributing to climate change, but 
we have to do it in a way that is prudent. Traditional energy 
sources, nuclear, coal, they are still going to play a critical 
role in ensuring reliability, and as we move forward toward 
supporting cleaner types of energy, we have to make sure we 
have the capability and the infrastructure to support them. The 
most recent proposed rule from the EPA on existing power plants 
is going to force a sectorship with a fairly expedited time 
frame, and the impact is real, particularly in my home State of 
Pennsylvania. So I appreciate your time today as we continue 
this critical conversation.
    Chairwoman LaFleur, let me ask you, as you know, the 111(d) 
proposed rule includes both binding interim goals beginning in 
2020 and final compliance goal in 2030. Now, if there is no 
hiccups or delays or extensions, many States will have their 
completed plans in place by hopefully 2017.
    By 2020, my State, Pennsylvania, will have to reduce its 
carbon emissions from the 2012 baseline by 28 percent. That is 
just 3 years to make a 28 percent reduction. This will require 
swift action from utility planners, rather than long-term 
planning that could ease reliability concerns.
    My question is by keeping the 2030 compliance goal in place 
but allowing States to determine the appropriate interim glide 
path, could EPA achieve the same carbon reduction goals while 
providing utility planners the necessary timeline to avoid 
reliability impacts and unnecessary stranded assets, and is 
this an approach that FERC would support?
    Ms. LaFleur. I would want to think more about that, 
Congressman, and perhaps take it as a question for the record. 
It is not something that we discussed with EPA during the 
process. I do think that your State is well served--
Pennsylvania has the advantage of being well served with gas 
pipelines and also being close to a region that--being in a 
regional transmission organization where there might be 
regional solutions that would both afford more time and more 
options to the State; but, of course, it is not up to me to 
make their plan.
    Mr. Doyle. Let me ask all of the commissioners. A recent 
Brattle study noted that looking at forward market prices and 
recent 5-year cost trends, about half of merchant nuclear 
plants are not profitable. This is not a future problem. This 
is a problem that is staring at us right now today.
    What happens to reliability if nuclear plants retire, 
especially when you factor in the number of coal plants 
shutting down because of EPA's MATS rule and the fact that the 
remaining base load coal fleet is under the same market 
pressures as nuclear? It seems to me that this is a real 
problem today long before the rule could impact the grid. What 
are the RTOs doing, particularly PJM in my area, to address 
this problem today?
    Ms. LaFleur. Well I think it would be a problem if we lost 
our nuclear fleet. It is a very important part of our fleet. 
PJM, as well as FERC, are looking at both the capacity markets 
to make sure they properly compensate the reliability 
contribution of base load plant, as well as Commissioner 
Moeller referred to we are looking at price formation in the 
energy markets to make sure that those plants are getting fair 
market prices to support them.
    Mr. Doyle. Would any other of the commissioners like to 
make a comment on that?
    Mr. Moeller. Congressman, your specific question about what 
happens if we lose the fleet, the entire fleet would be 
devastating because it is so important to our grid. Individual 
plants, it really depends on the load pocket involved, and I 
know that New England is struggling with the closure of Vermont 
Yankee, and there are lots of ramifications of that.
    But as Acting Chair LaFleur noted, both the RTOs and as a 
commission, we are looking at ways to better compensate the 
reliability implications of on-site fuel and trying to get the 
prices right in the price formation effort, which will better 
compensate those units.
    Mr. Doyle. I am trying to understand when EPA says that the 
rule will preserve at-risk nuclear plants, how exactly does 
that work? I mean how will they preserve at-risk nuclear 
plants, and how soon does that happen?
    Mr. Clark. Congressman, I share your concern. I think the 
answer is easier in certain regions of the country than others. 
If you come from a region that still happens to be a State-
regulated monopoly, vertically integrated utility environment, 
it is probably less of a concern in that those public utility 
commissions can build in some of the those base costs into base 
rates.
    In market regions of the country though, you are exactly 
right. We are struggling with that issue where there doesn't 
seem to be enough revenue from the market to support some of 
these, what I think most people acknowledge are very important 
nuclear plants.
    Mr. Doyle. Thank you.
    I see my time is up. Thank you, Mr. Chairman.
    Mr. Whitfield. Thank you.
    At this time I recognize the gentleman from Texas, Mr. 
Burgess, for 5 minutes.
    Mr. Burgess. Thank you, Mr. Chairman. Welcome to our 
commissioners. We are really so grateful you spent the time 
with us.
    Mr. Moeller, let me ask you a question because you caught 
my attention in your opening statement and of course you were 
talking about the commission has a responsibility to promote 
the reliability of the Nation's bulk power system, and then you 
specifically referenced heating and cooling. We talk a lot in 
this committee about public health concerns, about things. I 
mean, that is a major one, isn't it? We forget about, I mean, 
everyone understands that there can be cold-related deaths, but 
heat-related deaths actually can be more significant, at least 
in my experience.
    Mr. Moeller. Absolutely. We talk about the lights staying 
on, which is great, but it is really heating and cooling that 
keeps people alive during extreme weather events, and 
particularly in your State, it gets mighty hot.
    Mr. Burgess. Well, and even in States where it is not. I 
mean, we saw in France in 2003, when I forget the number, but I 
think it was in excess of 10,000 deaths during a heat wave that 
they had in France that they were unprepared to deal with, so 
it can be substantial. The effects on public health can be 
substantial.
    You know, I think you point out in your testimony that the 
Federal Power Act restricts the duties of the commission, the 
authority to regulate interstate electricity transmission, 
wholesale electricity prices, and leaves the questions of 
electricity generation and intrastate distribution to the 
States, but with the proposed Clean Power Plan, this separation 
seems to be changed and puts the EPA in control of intrastate 
electricity matters.
    Is that concerning to you as commissioner of the FERC that 
the EPA is claiming authority through really the regulatory 
process that Congress did not grant to you as a commission 
through statute?
    Mr. Moeller. I think Commissioner Clark may want to 
elaborate more specifically to that point. But, I try to point 
out the fact that these are interstate markets, and if you 
impose a State-by-State enforcement solution, that is very 
challenging, particularly when you have States that, for 
instance, Idaho, that consumes a lot of coal-generated power 
but doesn't actually produce any within their State. The 
baseline how it works now going forward, very challenging.
    Mr. Burgess. Commissioner Clark?
    Mr. Clark. Sure. I would just reiterate what appeared in my 
presubmitted testimony, which is, just that this is a big 
change potentially as States enter into these compliance plans 
wherein they may be putting into the compliance plans all sorts 
of integrated resource planning type mechanisms like renewable 
portfolio standards and efficiency codes, as well as decisions 
that their State public utility commission is making and then 
seeking approval of those from the EPA.
    To the degree that they later try to change that, depending 
on how inflexibly that is written in their particular 
compliance plan, it could cause issues where they later need to 
go and seek approval from the EPA, or if they depart from that, 
subject some entity in their State, either a generator, the 
State itself, to either an EPA complaint in enforceability, or 
even private citizens lawsuits against the plan that they have 
locked themselves into. So it is a jurisdictional issue that I 
think States will need to think about as they work through this 
process if the rule is upheld.
    Mr. Burgess. They need to think about it, but it also 
strikes me that they may not have, I don't know. Are they going 
to have the protections that they need in order to do their 
job.
    I just have to say as a father and a grandfather, I admire 
the forbearance of your sons to hang with you through this. I 
don't know what you promised them, but I suspect it must be 
substantial.
    Mr. Clark. Thank you. I have a 7-year-old that is at home 
that we didn't risk this with.
    Mr. Burgess. So noted.
    Let me just ask you a question on, the reductions in actual 
capacity, the EPA seems to assume a reduction based on 
efficiency measures.
    The EPA really cannot force citizens, though, on their 
purchase of electricity or power, so how can the EPA rely upon 
reductions in usage based upon efficiency without the ability 
to mandate how much power is consumed or not consumed?
    Mr. Clark. Congressman, I think what is envisioned by the 
EPA's plan is that that is the sort of thing that would go into 
a State compliance plan. It does raise the question about, in 
my mind, who would be the entity that EPA would then enforce 
that standard against?
    An energy efficiency measure is not like a power plant that 
EPA can go in and specifically tell to ramp down or up. If 
there is something that is not being met in the State energy 
efficiency goal, who would be the compliance entity that is 
targeted? Would it be the State itself, the installers of the 
energy efficiency? I just struggle a little bit to understand 
in the context of the Clean Air Act exactly how that would be 
enforced, but I appreciate the question.
    Mr. Burgess. And I appreciate the very provocative answer 
in the form of a question.
    Thank you, Mr. Chairman. I will yield back.
    Mr. Whitfield. At this time the chair recognizes the 
gentleman from Georgia, Mr. Barrow, for 5 minutes.
    Mr. Barrow. Thank you, Mr. Chairman. I want to talk about 
something we haven't talked about much today. To fully develop 
and deploy renewable energy in some remote areas is going to 
require infrastructure upgrades to get that energy from where 
it can be generated to where it is going to be needed.
    And I know until 2011, the rule was pretty set. 
Infrastructure upgrades had to be paid for by those who were 
going to benefit from them. There was a direct benefit test. 
Back in 2011, you all released a regulation, it is called Order 
1000, that basically proposes to broaden, to reallocate the 
cost of infrastructure upgrades to allow for the greater 
development of renewables in remote locations by spreading it 
across a broader base, including folks who won't benefit from 
it, won't consume the energy that is being produced.
    Now, personally I am all for them paying the cost who get 
benefits, myself. But I want to ask each of you all, and direct 
this question to each of you in turn, what do you say to folks 
who are skeptical about spreading the cost of infrastructure 
upgrades beyond the base of those who are going to benefit 
directly from it?
    Ms. LaFleur. Well, Order 1000 preserved the principle that 
those who benefit are the ones who should pay for transmission. 
But it suggested a new type of benefit beyond reliability, 
which is well understood and why you build transmission. 
Economic benefits of reducing congestion, getting a cheaper 
power by building transmission.
    And the third was enabling States to comply with State laws 
such as buying renewables, so the premise of the rule is that 
if a State passes a law requiring extra set renewables, then 
the transmission to facilitate compliance with that law does 
benefit that State. So it is a different type of benefit but 
still one that we believe the people who receive the benefit 
should pay.
    Mr. Barrow. Commissioner LaFleur, am I correct in 
understanding, then, that a State like Georgia, which does not 
mandate the purchase of renewables in a certain quantity would 
not in any way be required to subsidize or contribute to the 
cost of upgrades elsewhere in order to provide for the----
    Ms. LaFleur. That is correct. Georgia would be part of a 
region, there is a southeastern regional planning and only 
Federal, State and local enacted laws and regulations would be 
public policy requirements around which transmission had to be 
built. So if Georgia had no renewable requirement, they 
wouldn't have to build for renewable requirement.
    Mr. Barrow. How about you, Commissioner Moeller, do you 
agree?
    Ms. LaFleur. Excuse me?
    Mr. Barrow. How about you, Commissioner Moeller, do you 
agree?
    Mr. Moeller. There are parts of Order 1,000 I supported, 
parts that I wasn't supportive of--it is in the courts now. But 
generally speaking, the concept of beneficiary pays is one that 
we try to embrace. The challenge with these assets is that they 
are often 30-, 40- or 50-year assets and the power flows change 
and so who is paying for them now, other entities can benefit. 
So there is some art and there is some science in cost 
allocation. It is difficult, but most importantly, we want to 
get it built.
    Mr. Barrow. Commissioner Norris, do you think those who pay 
bills----
    Mr. Norris. Yes, the board supports the principle 
beneficiary pays, and I agree with both the previous 
commissioners. This is not an exact science. But you get 
reliability benefits, you get economic benefits, and you get 
the access to renewable energy where it shows and by that plan. 
I would just add to what Commissioner LaFleur said is that the 
public policy only requires that that be considered in the 
regional plan. It does not require that that be a part of the 
plan. It only enables public policy considerations to be a part 
of the process but does not require them to be in the plan.
    Mr. Barrow. And what does that mean for folks who are 
served by companies that don't----
    Mr. Norris. That means the regional planning process has to 
have in their planning process, a mechanism in which public 
policy laws or requirements get on the table for consideration. 
It doesn't require that they be adopted in the plan, only that 
there is a process by which they get considered.
    Mr. Barrow. Commissioner Clark?
    Mr. Clark. I would agree that the concept of beneficiary 
pays is a sound one. There have been a number of cases, Order 
1,000, which I, too, have agreed with parts and disagreed with 
parts, but also specific cost allocation cases that have been 
taken to court, some of which I have agreed with, some of which 
I have not.
    I think the courts are beginning to hem in the Commission 
in terms of what is considered within bounds and what is 
considered without, outside of the lines. In a recent MISO 
case, it determined that the Commission had made a sound 
judgment in terms of beneficiary pays and I thought the court 
was right. In the case of a recent PJM case; the Commission had 
decided it was outside of the bounds and had not tied down that 
beneficiary pays analysis enough, and I agreed with the court 
in that case, as well.
    Mr. Barrow. Commissioner Bay, last word.
    Mr. Bay. The only thing I would add is that the 7th Circuit 
has said that the cost must be roughly commensurate with the 
benefits, and the commission has adopted that principle, as 
well in Order 1,000, and also has said that if you don't 
benefit, you don't pay.
    Mr. Barrow. Thank you.
    My time is up.
    Mr. Whitfield. Time has expired.
    At this time, recognize the gentleman from Pennsylvania, 
Mr. Pitts, for 5 minutes.
    Mr. Pitts. Thank you, Mr. Chairman.
    The Administration's Clean Power Plan that we are reviewing 
here today provides four emission reduction strategies, fuel 
switching from coal to natural gas is a potential component of 
two of these strategies.
    One advises the coal firing of coal plants with natural gas 
or outright conversion to natural gas firing; the other 
involves increasing the dispatch rate for natural gas combined 
cycle power generation units. Pipeline companies are expanding 
their infrastructure to meet demands for clean burning natural 
gas, and in Lancaster County, which I represent, there is a 
proposal for a new line that would run through most or some of 
the most pristine farmland in the Nation.
    Chairman LaFleur, I have two questions relating to this. 
Since many other communities will see similar projects in the 
coming years, what procedures do you have in place to make sure 
environmental concerns and the rights of property owners are 
given full consideration when reviewing these proposed roots 
for pipelines? And secondly, do you believe the Clean Power 
Plan would lead to a proliferation of new pipelines across the 
country?
    Ms. LaFleur. Well, thank you for the question, Mr. 
Congressman.
    The way our pipeline approval process works, we do a 
complete review of the environmental safety and community 
aspects, which includes scoping meetings, opportunities for 
public comment, open houses in communities around the 
pipelines. We are often asked why the process takes so long, 
and it is because of all the opportunity for comment that are 
fed into the process. I do believe we will have more pipelines 
as a result of the greater utilization of gas, but they have to 
be built with sensitivity to the concerns of the people whose 
communities we are crossing.
    Mr. Pitts. Commissioner Moeller, right now, some States 
average a natural gas utilization rate in the single digits. 
Given that the EPA assumes that an average 70 percent 
utilization rate for natural gas is feasible, do you think that 
many States may fall short in this goal and that many consumers 
will simply be left with a larger electricity bill?
    Mr. Moeller. Well, I think it would be extremely 
challenging, Congressman, to reach those 70 percent levels, 
generally. I will be looking forward to the comments on the 
rule that talk about particularly the operational aspects of 
that aspiration, and we will need to get the pipeline in place.
    And the question is, does the timing of a new pipeline sync 
up with the enforcement timeline?
    Mr. Pitts. Commissioner LaFleur, my understanding is that 
the proposed rule factors in new nuclear plants but only 
factors in 6 percent of the existing nuclear plants; in other 
words, if an existing nuclear plant shuts down, the impact on a 
State's ability to comply is limited to 6 percent of the energy 
that comes out of that plant, which doesn't seem like much of 
an incentive to take actions that will value the carbon-free 
energy that nuclear plants provide all day, every day.
    Don't you think customers benefit from having plants that 
have 18 to 24 months of fuel on site, particularly when those 
plants can run at 97 percent of their capacity even during 
conditions like the polar vortex or the hottest day of the 
summer?
    Ms. LaFleur. I think nuclear plants bring a lot of benefit 
to customers, including reliability benefits, the fuel security 
you mention. I don't believe that the EPA mandated what 
percentage any State could or could not rely on nuclear. That 
was a building block that was put out that a State could put 
together. If a State wanted to rely more on nuclear, less on 
something else, my understanding of the plan, it would be 
allowed.
    Mr. Pitts. Mr. Moeller, would you like to comment?
    Mr. Moeller. Well, I have talked to a few nuclear companies 
about it, and I think they are still analyzing it, but there is 
one train of thought that despite EPA's intention, that the 6 
percent could actually be counterproductive to nuclear. It has 
to do with the calculations and replacing it with gas to meet 
your baseline better. But it is certainly worthy of further 
discussion. I admire EPA's attempt to try and booster the 
nuclear units, but there is a train of thought that actually 
could be counterproductive the way they proposed it.
    Mr. Pitts. I yield back.
    Mr. Whitfield. Gentleman yields back.
    At this time, I recognize the gentleman from Kentucky, Mr. 
Yarmuth for 5 minutes.
    Mr. Yarmuth. Thank you, Mr. Chairman.
    And thanks to all the commissioners for this discussion. I 
think it has been a very thoughtful and interesting one.
    I want to thank the chairman, my fellow Kentuckian, for 
returning us to the days of yesteryear with the discussion of 
Waxman-Markey, which, by the way, did not become law because a 
Republican minority in the Senate wouldn't let it become law, 
because it did have a majority of votes in the Senate after 
passing the House. But when I was considering whether to vote 
for that bill or not in the House, my primary concern was how 
it would affect the cost to my consumers, both business and 
residential.
    And I talked to a lot of the businesses, all the big users 
of power; they were all kind of either for it or neutral on the 
bill. And then I talked to our utility company and asked them 
how it would affect residential rates, and they said that they 
projected that over 10 years the average residential user would 
experience a rate increase of 15 percent if they did nothing 
else, and so they didn't engage in any conservation practices.
    And I think, understandably, this hearing is focused on the 
supply side of the energy equation, but the demand side of the 
energy equation is also critical to our ongoing consideration 
of our energy future.
    And Mr. Norris, you talked about innovation primarily on 
the supply side, but there is an incredible amount of 
innovation going on on the demand side, which is going to 
affect supply and whether or not we have adequate energy in the 
future. So when we talk about rates, rates don't necessarily 
mean billing amounts, is that correct? And there are huge 
amounts of the things going on out in the world of innovation 
right now which could dramatically affect what the bills are 
regardless of what the rates are. Is that not true and would 
you elaborate on that?
    Mr. Norris. Very true. When I was the chairman of our State 
commission, we had a utility, MidAmerican, who hadn't raised 
rates over 10 years, but I got complaints all the time about 
people's utility bills going up, and it is very simple: You are 
plugging more stuff in and turning more stuff on. So the demand 
side is a very important part of this equation.
    As I said in my written testimony, the deployment of smart 
grid and smart meters are already taking place, and that 
continues to be a technological innovative area where we can do 
a lot more to make our consumption of electricity much more 
efficient, and we should.
    Mr. Yarmuth. And, I mean, I am not aware of any decent-
sized business that is not very much focused on reducing their 
energy costs and doing the types of things, whether it is 
turning their computers off at night or whether it is putting 
solar panels on their roofs or doing any number of things to 
reduce those costs.
    Have you seen examples of can you gauge what the 
opportunity in terms of utilization reduction on the demand 
side would be because of technology, just current technology 
right now? How much can an average business save by 
implementing--or an average homeowner save by implementing some 
of the techniques that already exist?
    Do you have an estimate on that?
    Mr. Norris. How much is the potential, you say, for demand 
side reduction? Well, no, I don't have a number. I know that 
there is still a great opportunity for putting price 
responsiveness and demand response in both our retail and 
wholesale system. For consumers to get the right price signal, 
putting elasticity in our demand curve, I think there is a 
great potential, but I don't have an exact number for you.
    Mr. Yarmuth. Right. And we know that, for instance, rates 
on solar panels have come down approximately 75 percent just in 
a matter of 5 years or so. So it is reasonable to expect that 
those kinds of technologies will make it much easier for 
consumers and for businesses to keep their cost in line, their 
energy costs in line, even if rates happen to rise at some 
significant rate.
    Is that not true, Ms. LaFleur?
    Ms. LaFleur. Yes, that is definitely true. And much earlier 
in my career, I used to run conservation programs for an 
electric company and there are a lot of things that businesses 
and residences can do, first of all, when they build in the 
first place to build inefficiency, but also retrofitting, 
lighting, motors, and so forth.
    Mr. Yarmuth. OK. And we are actually seeing that in the 
automobile segment of the energy industry, too. Innovation has 
now vastly increased the amount of mileage, and unfortunately, 
that is having repercussions in the Highway Trust Fund because 
people are not buying as much gas and paying as much tax.
    But anyway, I appreciate the discussion, and your work. 
Thank you very much.
    Mr. Chairman, I yield back.
    Mr. Whitfield. Thank you very much. The gentleman yields 
back, and that concludes today's hearing.
    Mr. Rush. Mr. Chairman, I have a unanimous consent request.
    Mr. Whitfield. OK. What is it?
    Mr. Rush. Mr. Chairman, I would ask that the record reflect 
that Commissioner Clark's two sons have been the most attentive 
and intense listeners we have had before this committee in 
years and years and years.
    Mr. Whitfield. Without objection, so ordered.
    Mr. Clark. Mr. Chairman, and ranking member, I appreciate 
the compliment, but you realize when you make it it is going to 
cost me a lot more money somewhere down the line paying them 
back. So thank you.
    Mr. Whitfield. Well, I am sure that their classmates are 
going to be excited for them to tell about this hearing that we 
had on FERC and the clean plan, and they will be the most 
popular students in school.
    And I am also going to ask unanimous consent that we enter 
into the record a statement from the American Public Power 
Association on this hearing.
    [The information appears at the conclusion of the hearing.]
    Mr. Whitfield. And that will conclude the hearing.
    I want to thank all of you for being here. We also thank 
you for your responsibility in what you do for our country. We 
look forward to working with you because we don't really have 
any easy answers here. There are many challenges facing all of 
us, and I know that even though we have philosophical 
differences, we do have the same goal and that is to have a 
strong economy and reliable abundant electricity.
    So thank you all again. The record will remain open for 10 
days.
    And for the Clark children, I hope you will come back and 
see us again soon. Thank you very much.

    [Whereupon, at 12:16 p.m., the subcommittee was adjourned.]
    
    [Material submitted for inclusion in the record follows:]
    
    [GRAPHIC] [TIFF OMITTED] 

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