[House Hearing, 115 Congress] [From the U.S. Government Publishing Office] OVERSIGHT OF THE FEDERAL ENERGY REGULATORY COMMISSION AND THE FY 2019 BUDGET ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON ENERGY OF THE COMMITTEE ON ENERGY AND COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED FIFTEENTH CONGRESS SECOND SESSION __________ APRIL 17, 2018 __________ Serial No. 115-119 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Printed for the use of the Committee on Energy and Commerce energycommerce.house.gov ________ U.S. GOVERNMENT PUBLISHING OFFICE 31-421 WASHINGTON : 2018 COMMITTEE ON ENERGY AND COMMERCE GREG WALDEN, Oregon Chairman JOE BARTON, Texas FRANK PALLONE, Jr., New Jersey Vice Chairman Ranking Member FRED UPTON, Michigan BOBBY L. RUSH, Illinois JOHN SHIMKUS, Illinois ANNA G. ESHOO, California MICHAEL C. BURGESS, Texas ELIOT L. ENGEL, New York MARSHA BLACKBURN, Tennessee GENE GREEN, Texas STEVE SCALISE, Louisiana DIANA DeGETTE, Colorado ROBERT E. LATTA, Ohio MICHAEL F. DOYLE, Pennsylvania CATHY McMORRIS RODGERS, Washington JANICE D. SCHAKOWSKY, Illinois GREGG HARPER, Mississippi G.K. BUTTERFIELD, North Carolina LEONARD LANCE, New Jersey DORIS O. MATSUI, California BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida PETE OLSON, Texas JOHN P. SARBANES, Maryland DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California ADAM KINZINGER, Illinois PETER WELCH, Vermont H. MORGAN GRIFFITH, Virginia BEN RAY LUJAN, New Mexico GUS M. BILIRAKIS, Florida PAUL TONKO, New York BILL JOHNSON, Ohio YVETTE D. CLARKE, New York BILLY LONG, Missouri DAVID LOEBSACK, Iowa LARRY BUCSHON, Indiana KURT SCHRADER, Oregon BILL FLORES, Texas JOSEPH P. KENNEDY, III, SUSAN W. BROOKS, Indiana Massachusetts MARKWAYNE MULLIN, Oklahoma TONY CARDENAS, California RICHARD HUDSON, North Carolina RAUL RUIZ, California CHRIS COLLINS, New York SCOTT H. PETERS, California KEVIN CRAMER, North Dakota DEBBIE DINGELL, Michigan TIM WALBERG, Michigan MIMI WALTERS, California RYAN A. COSTELLO, Pennsylvania EARL L. ``BUDDY'' CARTER, Georgia JEFF DUNCAN, South Carolina Subcommittee on Energy FRED UPTON, Michigan Chairman PETE OLSON, Texas BOBBY L. RUSH, Illinois Vice Chairman Ranking Member JOE BARTON, Texas JERRY McNERNEY, California JOHN SHIMKUS, Illinois SCOTT H. PETERS, California ROBERT E. LATTA, Ohio GENE GREEN, Texas GREGG HARPER, Mississippi MICHAEL F. DOYLE, Pennsylvania DAVID B. McKINLEY, West Virginia KATHY CASTOR, Florida ADAM KINZINGER, Illinois JOHN P. SARBANES, Maryland H. MORGAN GRIFFITH, Virginia PETER WELCH, Vermont BILL JOHNSON, Ohio PAUL TONKO, New York BILLY LONG, Missouri DAVID LOEBSACK, Iowa LARRY BUCSHON, Indiana KURT SCHRADER, Oregon BILL FLORES, Texas JOSEPH P. KENNEDY, III, MARKWAYNE MULLIN, Oklahoma Massachusetts RICHARD HUDSON, North Carolina G.K. BUTTERFIELD, North Carolina KEVIN CRAMER, North Dakota FRANK PALLONE, Jr., New Jersey (ex TIM WALBERG, Michigan officio) JEFF DUNCAN, South Carolina GREG WALDEN, Oregon (ex officio) C O N T E N T S ---------- Page Hon. Fred Upton, a Representative in Congress from the State of Michigan, opening statement.................................... 1 Prepared statement........................................... 3 Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois, opening statement................................. 4 Hon. Greg Walden, a Representative in Congress from the State of Oregon, opening statement...................................... 5 Prepared statement........................................... 6 Hon. Frank Pallone, Jr., a Representative in Congress from the State of New Jersey, opening statement......................... 7 Witnesses Kevin J. McIntyre, Chairman, Federal Energy Regulatory Commission 8 Prepared statement........................................... 10 Answers to submitted questions............................... 107 Cheryl A. LaFleur, Commissioner, Federal Energy Regulatory Commission..................................................... 18 Prepared statement........................................... 20 Answers to submitted questions............................... 137 Neil Chatterjee, Commissioner, Federal Energy Regulatory Commissione Departent of Natural Resources and Environmental Control........................................................ 30 Prepared statement........................................... 32 Answers to submitted questions............................... 148 Robert F. Powelson, Commissioner, Federal Energy Regulatory Commission..................................................... 42 Prepared statement........................................... 44 Answers to submitted questions............................... 157 Richard Glick, Commissioner, Federal Energy Regulatory Commission 54 Prepared statement........................................... 56 Answers to submitted questions............................... 165 Submitted Material Statement of the Utilities Technology Council, submitted by Mr. Upton.......................................................... 103 Statement of the American Public Power Association and the National Rural Electric Cooperative Association................ 105 OVERSIGHT OF THE FEDERAL ENERGY REGULATORY COMMISSION AND THE FY 2019 BUDGET ---------- TUESDAY, APRIL 17, 2018 House of Representatives, Subcommittee on Energy, Committee on Energy and Commerce, Washington, DC. The subcommittee met, pursuant to call, at 10:00 a.m., in room 2123 Rayburn House Office Building, Hon. Fred Upton (chairman of the subcommittee) presiding. Members present: Representatives Upton, Olson, Barton, Shimkus, Latta, Harper, McKinley, Kinzinger, Griffith, Johnson, Long, Bucshon, Flores, Mullin, Hudson, Walberg, Duncan, Walden (ex officio), Rush, McNerney, Peters, Green, Doyle, Castor, Welch, Tonko, Schrader, Kennedy, Butterfield, and Pallone (ex officio). Staff present: Samantha Bopp, Staff Assistant; Daniel Butler, Staff Assistant; Karen Christian, General Counsel; Kelly Collins, Legislative Clerk, Energy/Environment; Wyatt Ellertson, Professional Staff, Energy/Environment; Margaret Tucker Fogarty, Staff Assistant; Adam Fromm, Director of Outreach and Coalitions; Jordan Haverly, Policy Coordinator, Environment; Zach Hunter, Director of Communications; Mary Martin, Chief Counsel, Energy/Environment; Drew McDowell, Executive Assistant; Brandon Mooney, Deputy Chief Counsel, Energy; Mark Ratner, Policy Coordinator; Annelise Rickert, Counsel, Energy; Dan Schneider, Press Secretary; Peter Spencer, Professional Staff Member, Energy; Jason Stanek, Senior Counsel, Energy; Austin Stonebraker, Press Assistant; Hamlin Wade, Special Advisor, External Affairs; Everett Winnick, Director of Information Technology; Priscilla Barbour, Minority Energy Fellow; Jeff Carroll, Minority Staff Director; Jean Fruci, Minority Energy and Environment Policy Advisor; Rick Kessler, Minority Senior Advisor and Staff Director, Energy and Environment; John Marshall, Minority Policy Coordinator; Alexander Ratner, Minority Policy Analyst; Tim Robinson, Minority Chief Counsel; Andrew Souvall, Minority Director of Communications, Outreach and Member Services; Tuley Wright, Minority Energy and Environment Policy Advisor; and C.J. Young, Minority Press Secretary. OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN Mr. Upton. Good morning, everybody. Oh, man. Becoming a theme. That's good. So we are lucky to have all five members of the Federal Energy Regulatory Commission at our hearing today to discuss the priorities of this independent agency and the challenges of regulating industries that are undergoing significant transformation. Since our last oversight hearing in 2015, FERC itself has also experienced a number of changes with addition of four new members, so I welcome all of you here today and look forward to hearing your individual perspectives on some very complicated and technical issues ranging from grid resilience to battery storage to cybersecurity. The past year has been challenging for the commission, having struggled without a functional quorum for more than 6 months, and during that period utility filings became backlogged and decisions were delayed on matters ranging from utility rate applications to million-dollar interstate natural gas pipeline proposals. Fortunately, I understand that FERC operations have returned to near normal, having cleared much of that backlog, allowing the commission to turn its attention towards a host of issues ranging from controversial changes to the RTO capacity markets to how new energy infrastructure projects should be evaluated under FERC's certificate policy. As we recently heard at your hearing on energy infrastructure, building new pipelines and electric transmission towers is not a easy or simple task. Affected landowners know their rights and they have organized campaigns to oppose new energy projects, sometimes protesting at FERC's doorstep. I understand that Chairman McIntyre announced that the commission is now taking a fresh look at its 1999 policy to evaluate the need for new natural gas pipelines. Obviously, a lot of changes have occurred over the last 20 years in the way infrastructure is developed. So I would be interested to hear what may come from that review. Another topic that has consumed much attention in the industry and at FERC recently involves the question of the bulk power system's ability to anticipate, withstand, and recover from disruptive events. This topic of grid resilience became a source of much heated debate we heard from Secretary Perry just last week that the national security of this country is jeopardized--those are his words--if we don't take steps to protect the grid. I understand that FERC is flagged as a top priority and has directed each of the RTOs and ISOs to provide detailed information regarding the state of grid resilience. The committee is reviewing the RTO's submissions to FERC and will seek and track the anticipated responsive comments through early next month. FERC's jurisdictional electricity markets have also been a topic of frequent discussion during our Powering America hearing series. We have heard concerns from market participants that range from the need for updated PURPA regs to changes to FERC's transmission planning rules under Order 1000. Additionally, recent pricing proposals developed by the RTOs and ISOs aimed at accommodating state policies represent a fundamental shift in how resources set prices in the wholesale markets. Commissioner LaFleur deserves credit for focusing on that issue last May when she was chairman. But, as these Federal-state jurisdictional issues play out in filings at FERC and in litigation at the various courts of appeals, we should consider the differences between an impact of the wholesale and retail electricity markets. So these are tough issues and I recognize that you've got a lot on your agenda right now. However, despite the tough work and challenging issues FERC faces, I'd like to point out that the commission is consistently ranked among the best places to work in the Federal Government, based on employee surveys and your success in maintaining such high marks by your 1,500 staff members is noted. With that, I want to thank the commissioners again for appearing today. I look forward to your testimony and the questions and interactions that we have between us. [The prepared statement of Mr. Upton follows:] Prepared statement of Hon. Fred Upton We are lucky to have all five members of the Federal Energy Regulatory Commission at our hearing today to discuss the priorities of this independent agency and the challenges of regulating industries that are undergoing significant transformation. Since our last oversight hearing in 2015, FERC itself has also experienced some changes with the addition of four new members, so I welcome you here today and look forward to hearing your individual perspectives on some very complicated and technical issues ranging from grid resilience to battery storage to cybersecurity. The past year has been challenging for the Commission, having struggled without a functioning quorum for more than six months. During that period, utility filings became backlogged and decisions were delayed on matters ranging from utility rate applications to million---dollar interstate natural gas pipeline proposals. Fortunately, I understand that FERC operations have returned to near---normal, having cleared much of this backlog, allowing the Commission to turn its attention towards a host of issues ranging from controversial changes to the RTO capacity markets to how new energy infrastructure projects should be evaluated under FERC's certificate policy. As we recently heard at our hearing on energy infrastructure, building new pipelines and electric transmission towers is not an easy or simple task. Affected landowners know their rights and have organized campaigns to oppose new energy projects, sometimes protesting at FERC's doorstep. I understand that Chairman McIntyre announced that the Commission is now taking a fresh look at its 1999 policy to evaluate the need for new natural gas pipelines. Obviously, a lot of changes have occurred over the past 20 years in the way infrastructure is developed, so I would be interested to hear what may come from this review. Another topic that has consumed much attention in the industry and at FERC recently involves the question of the bulk power system's ability to anticipate, withstand, and recover from disruptive events. This topic of ``grid resilience'' became a source of much heated debate and we heard from Secretary Perry just last week that ``the national security of this country is jeopardized'' if we don't take steps to protect the grid. I understand that FERC has flagged as a top priority and has directed each of the RTOs and ISOs to provide detailed information regarding the state of grid resilience. The Committee is reviewing the RTO submissions to FERC and will track the anticipated responsive comments, due early next month. FERC's jurisdictional electricity markets have also been a topic of frequent discussion during our Powering America hearing series. We've heard concerns from market participants that range from the need for updated PURPA regulations, to changes to FERC's transmission planning rules under Order 1000. Additionally, recent pricing proposals developed by the RTOs and ISOs aimed at accommodating state policies represent a fundamental shift in how resources set prices in the wholesale markets. Commissioner LaFleur deserves credit for focusing on this issue last May when she was Chairman, but as these Federal-state jurisdictional issues play out in filings at FERC and in litigation at the various Courts of Appeals, we should consider the differences between and impacts of the wholesale and retail electricity markets. These are tough issues and I recognize that you have a lot on your agenda right now. However, despite the tough work and challenging issues FERC faces, I'd like to point out that the Commission is consistently ranked among the best places to work in the Federal Government based on employee surveys--and your success in maintaining such high marks by your 1,500 staff members is noted. With that, I'd like to thank the commissioners for appearing today and I look forward to your testimony. Mr. Upton. With that, I recognize the ranking member of Energy Subcommittee, Mr. Rush, my friend from Illinois. OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS Mr. Rush. I certainly want to thank you, Mr. Chairman, for holding this very timely hearing today. I look forward to hearing from the FERC commissioners on some of the more pressing issues regarding the reliability and the resiliency of the Nation's electric grid. Mr. Chairman, just last week this subcommittee heard from Secretary Perry on what he considers a very real concern regarding grid reliability, specifically, Mr. Chairman, the topic of DOE intentionally using its emergency authority under Section 202(c) of the Federal Power Act to grant the request made by First Energy to issue an emergency must-run order for 85 coal and nuclear plants within the PJM interconnected came up more than once. In fact, Secretary Perry, Mr. Chairman, seemed to be sounding the alarm that we are quickly heading toward a point of no return when the imminent retirement of several coal and nuclear plants would leave our nation in a situation where we would be unable to meet our energy demands if we do not act soon. Mr. Chairman, I look forward to hearing the commissioner's views on these critical issues. Another topic of great debate during last week's DOE hearing focused on the March 2018 study by the National Energy Technology Laboratory, or NETL. That report highlighted the use of coal during the prolonged cold snap that the Nation experienced between December 2017 and January 2018. The NETL study concluded that within the PJM region, coal provided the most resilient form of generation during this cold blitz and went on to say that without the available capacity from coal facilities then PJM would have experienced power shortfalls and widespread blackouts. However, Mr. Chairman, just this past Friday, PJM issued its own response to the NETL study refuting those conclusions and stating that PJM indeed had adequate amounts of resources to supply power and then not need to invoke emergency procedures. PJM also noted that, while coal and nuclear played an important role during this period, that was more due to economic factors and it really never faced any reliability threats. Mr. Chairman, and the agency responsible for ensuring the reliability of the Nation's electrical grid, I look forward to hearing directly from the FERC commission on this and other important issues. Specifically, I would like to commend the agency for its recent unanimous vote finalizing the rulemaking allowing for distributive energy resources to compete in wholesale markets. This vote marks an important step in the right direction by allowing advanced technologies such as demand response, energy storage, electric automobiles, and photovoltaics potentially in the wholesale market. Unfortunately, Mr. Chairman, I also have some concerns regarding the recent policy change determining how impacting stakeholders may intervene in pipeline review. I'd like to hear from the commission on its justification for a less lenient in allowing interveners to join proceedings that are, quote, ``out of time'' and how these new changes might impact public input and participating in the pipeline review process. That said, Mr. Chairman, I look forward to engaging the commissioners today and I will yield back the balance of my time. Mr. Upton. The gentleman yields back. The chair would recognize the chair of the full committee, the gentleman from the good state of Oregon, Mr. Walden. OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON Mr. Walden. Thank you, Mr. Chairman. Good morning. Welcome to our FERC commissioners. We are delighted that you're here. I think the last time we had all the commissioners before the committee was in 2015, and so we are delighted that you're here. But this is the first time under the chairmanship of Commissioner McIntyre. So we look forward to the discussion that will take place. FERC oversees, as you all know, many critical aspects of our nation's energy infrastructure and industry, and through the authorities provided by Congress, namely, the Federal Power Act and the Natural Gas Act, the commission regulates the interstate transmission of electricity, natural gas, and oil and reviews proposals to build LNG terminals, interstate natural gas pipelines, and oversees the licensing of hydro power projects, all of which are very, very important to our country and to my state. Our nation's energy industry is at the forefront of an unprecedented period of change driven in part by changes in fuel mixes, technological innovation, and market competition. Declining natural gas prices, stable demands, zero cost generation resources, greater efficiency--they've all led to a generation mix differentiated not solely by cost but through operational characteristics such as dispatchability flexibility and ramping. So a well-functioning energy system is dependent on competitive markets. However, in some wholesale electricity markets, certain generation resources such as coal and nuclear are struggling to recover costs and remain competitive. In some cases, under wholesale market rules, inflexible generation units are not permitted to set price. This presents real challenges for cost recovery, which could, ultimately, have an impact on the reliability and resiliency of our electricity grid. So I am hopeful that FERC will take this matter seriously as it conducts its review of comments regarding resiliency in the organized electricity markets. At the same time, advances in digital information technologies are driving real change, creating new opportunities for more intelligent and dynamic energy systems. Many of these advanced energy technologies have applications on the distribution side and behind the meter beyond the regulatory reach of FERC. However, given the interconnected nature of our grid, we are beginning to see their impacts on the bulk power system and wholesale electricity markets. Of course, as our generation mix shifts toward natural gas, we are going to need more pipelines to transport gas from producing wells and user consumers. New England is especially feeling that crunch, as we have heard, as we saw when they had to import LNG from Russia on two occasions this year to meet market demands. So I am hopeful that Chairman McIntyre's review of FERC's procedures for evaluating applications for new gas pipelines will result in more efficient and timely decisions. I understand that FERC will be taking formal action on this review at its open meeting on Thursday. With our abundant shale resources, we can be entirely self- sufficient on natural gas. But we must construct new pipelines to do that. While cross border trade with our neighbors in Canada and Mexico may be a win-win, we should never have to be reliant on the Russians for imports again. Since taking the gavel as chairman of this committee, I've made it my promise to always put the consumer first in everything that we do. The modern consumer expects greater control, convenience, and choice when it comes to their energy consumption. I am excited about the changes taking place and the opportunities that it presents to our nation's economy and energy security. With that, I'd like to thank all of you for willingness to participate in this public service and in this hearing and I look forward to your testimony. As you all well know, we also have another subcommittee meeting at the same time on telecommunications issues so you will have members, including myself, coming and going. We really value your testimony and your long public service and we look forward to a partnership together for America's future. With that, Mr. Chairman, I would yield back the balance of my time. [The prepared statement of Mr. Walden follows:] Prepared statement of Hon. Greg Walden Good morning and welcome to our FERC commissioners. The last time the Energy and Commerce Committee heard testimony from all five commissioners was in 2015, as Commissioner LaFleur may remember. However, this is a first under the Chairmanship of Commissioner McIntyre, so we're grateful for the opportunity and looking forward to today's hearing. The Federal Energy Regulatory Commission--known as FERC-- oversees many critical aspects of our nation's energy infrastructure and industry. Through authorities provided by Congress, namely the Federal Power Act and the Natural Gas Act, the commission regulates the interstate transmission of electricity, natural gas, and oil; reviews proposals to build LNG terminals and interstate natural gas pipelines; and, oversees the licensing of hydropower projects. Our nation's energy industry is at the forefront of an unprecedented period of change--driven in part by changes in fuel mixes, technological innovation, and market competition. Declining natural gas prices, stable demand, zero cost generation resources, and greater efficiency have led to a generation mix differentiated not solely by cost but through operational characteristics such as dispatchability, flexibility, and ramping. A well-functioning energy system is dependent on competitive markets. However, in some wholesale electricity markets, certain generation resources such as coal and nuclear are struggling to recover costs and remain competitive. In some cases, under wholesale market rules, inflexible generation units are not permitted to set price. This presents real challenges for cost-recovery, which could ultimately have an impact on the reliability and resiliency of our grid. I am hopeful that FERC will take this matter seriously as it conducts its review of comments regarding resiliency in the organized electricity markets. At the same time, advances in digital and information technologies are driving change, creating new opportunities for a more intelligent and dynamic energy system. Many of these advanced energy technologies have applications on the distribution side and behind the meter, beyond the regulatory reach of FERC. However, given the interconnected nature of our grid, we're beginning to see their impacts on the bulk power system and wholesale electricity markets. Of course, as our generation mix shifts toward natural gas, we're going to need more pipelines to transport gas from producing wells to end-use consumers. New England is especially feeling the crunch, as we saw when they had to import LNG from Russia on two occasions this year to meet the market demand. I am hopeful that Chairman McIntyre's review of FERC's procedures for evaluating applications for new gas pipelines will result in more efficient and timely decisions. I understand that FERC will be taking formal action on this review at its open meeting on Thursday. With our abundant shale resources, we can be entirely self- sufficient on natural gas--but we must construct new pipelines. While cross-border trade with our neighbors Canada and Mexico may be a win-win, we should never have to be reliant on Russian imports again. Since taking the gavel as chairman for this committee I have made it my promise to always put the consumer first in everything we do. The modern consumer expects greater control, convenience, and choice when it comes to their energy consumption. I am excited about the changes taking place and the opportunities that it presents for our nation's economy and energy security. With that, I'd like to thank the Commissioners for appearing before us today, and I look forward to their testimony. Mr. Upton. The gentleman yields back. The chair would recognize the ranking member of the full committee, Mr. Pallone, from New Jersey. OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY Mr. Pallone. Thank you, Mr. Chairman. I am pleased that there is finally a full slate of five commissioners at FERC. Last year, I voiced my concern that a lot of important work was put on hold for an extended period of time because the commission lacked a quorum, and it's a pleasure to have all five of you here with us today. First, I'd like to thank the commission for its decision to reject Secretary Perry's notice of proposed rulemaking to provide cost recovery for certain coal and nuclear facilities that are no longer economical. This proposed rule is a threat to competitive electricity markets and would have led to higher energy prices for consumers. With Secretary Perry's proposed rulemaking now behind us, we must turn our attention to the feedback that the commission receives from the regional transmission organization as it relates to current resiliency risk. I would also like to touch briefly on FERC's authority to review applications for the construction of interstate natural gas pipelines. For years I've expressed concern with the process FERC uses to review pipeline applications and its tendency to green light the construction of potentially unnecessary pipeline projects. Overbuilding our natural gas pipeline system has many negative impacts on the public. Ratepayers ultimately foot the bill for the construction of these pipelines whether they are necessary or not. Homeowners in the path of a pipeline also have little recourse to stop pipeline companies from seizing their land through eminent domain. It's time for a new approach. I believe a more regional review of these projects should be implemented rather than the current process where every pipeline appears to be reviewed individually without any consideration of other pipelines in the area. And I was encouraged by Chairman McIntyre's announcement in December that FERC will review its 1999 pipeline policy statement. I hope this review leads to a new pipeline policy that provides greater protections to property owners and more holistic review process that looks at all pipelines in a given region. I've also heard from many property owners and advocacy groups that FERC is not nearly responsive enough to the public. More needs to be done at the commission to provide a greater role for the general public and the FERC process. My colleague, Representative Schakowsky, had introduced a common sense bill that would create an office of public participation in consumer advocacy at FERC and such an office would provide an important resource for everyday citizens who typically lack the ability to navigate the complex FERC process. And finally, I'd like to address FERC's grid storage order number 841, which was issued in February. I've long advocated for finding ways to introduce more distributed energy and energy storage into our electric grid and removing the many barriers preventing storage benefits from reaching consumers. And so I am fully aware that there are some technical changes that grid operators and utilities will have to overcome, it can be done and I am pleased that FERC has directed the RTOs to evaluate how storage can add value to our electricity markets. So, again, let me conclude by welcoming everyone here today. Thank you, and I yield back, Mr. Chairman. Mr. Upton. Gentleman's time has expired. We are now prepared to hear testimony from each of the commissioners. We welcome you. Thank you for submitting your testimony in advance. It'll be made part of the record. We will let you spend 5 minutes each summarizing your statements and at that point we will go to questions on both sides. So Mr. McIntyre, welcome. Good to see you. STATEMENTS OF THE HONORABLE KEVIN J. MCINTYRE, CHAIRMAN, FEDERAL ENERGY REGULATORY COMMISSION; THE HONORABLE CHERYL A. LAFLEUR, COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION; THE HONORABLE NEIL CHATTERJEE, COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION; THE HONORABLE ROBERT F. POWELSON, COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION; THE HONORABLE RICHARD GLICK, COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION STATEMENT OF KEVIN MCINTYRE Mr. McIntyre. Thank you, Chairman Upton. Likewise. Thank you. Good morning, Chairman Upton and Ranking Member Rush, and distinguished members of this subcommittee. My name is Kevin McIntyre, and since December I have had the privilege of serving as the chairman of the Federal Energy Regulatory Commission, FERC. FERC is an independent Federal agency that regulates important aspects of our nation's electric, natural gas, hydro power, and oil pipeline industries. As chairman, I am particularly pleased to be serving alongside my esteemed fellow commissioners who are also appearing before you today. I could not have hoped for a more engaged, better informed, and more public spirited group of colleagues than these. My goals as chairman include the fostering of continued excellence at FERC, which was recently recognized as you, Chairman Upton, recognized in a prominent national ranking of the best places to work in the Federal Government as the number one mid-sized agency. My goals also include making FERC's actions as open, transparent, fair, and efficient as possible. A top substantive priority of mine is to protect and promote the resilience of our bulk power system, as has been mentioned here this morning. On January 8, we initiated a proceeding to evaluate the state of that grid resilience. We are still receiving the incoming public comments in response to our issuance in that proceeding, and as we are informed by those comments and deliberate on them, we will make determinations as to whether additional action by FERC is warranted in this critical area. I also am pleased that FERC is beginning a review of our 1999 policy statement on the certification, our term for the approval process for interstate natural gas pipeline facilities. As a matter of good governance, I believe that it is appropriate for us, as with any other governmental body, to review our policies and processes from time to time to explore whether any improvements can be made. Our review of gas pipeline certification processes is timely in light of the many changes that the natural gas industry has witnessed in the past 20 years. In addition to these specific goals and priorities, as chairman, FERC is continuing to consider many other important issues. My fellow commissioners will address some of those in their testimony before you here this morning. With that, I thank you for this opportunity tto appear before you. [The prepared statement of Mr. McIntyre follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Upton. Thank you. Ms. LaFleur, welcome. STATEMENT OF CHERYL LAFLEUR Ms. LaFleur. Thank you, Chairman Upton, Ranking Member Rush, and members of the subcommittee. My name is Cheryl LaFleur. I've been a commissioner at FERC for nearly 8 years and have appeared before this committee several times. Got a little lonely last year so I am extremely happy to be here this morning with the full commission. What I am going to discuss today is FERC's regulation of our wholesale electricity markets and I will also touch briefly on our oversight of interstate transmission planning. Both areas are covered more fully in my written testimony. The organized markets that provide electricity to more than two-thirds of Americans are, roughly, 20 years old now and I believe they've done a very good job for the Nation's electric customers, promoting efficiency and innovation and protecting reliability at least cost by deploying resources over a broader regional footprint. As the Committee knows, there are different market structures in different regions of the country, reflecting varied State and regional regulatory choices. Perhaps the most prominent difference is that the eastern markets--PJM, New York ISO, and ISO New England--use mandatory capacity markets to ensure resource adequacy because all or most of the States in those regions chose to deregulate generation in the 1990s. By contrast, the Midwestern and Western markets--MISO SPP and CISO--rely primarily on state resource planning for resource adequacy. The markets have grown dramatically since I've joined FERC in 2010. In 2013, the Energy companies and others in the mid- south became part of MISO, nearly doubling its size. Two years later in 2015, the integrated systems and part of the Western Area Power Administration in the upper Midwest joined SPP, marking the first time a Federal power marketing administration chose to join the market. The big story in 2018 is the expansion of markets in the west. The western energy imbalance market operated by the California ISO has expanded in recent years to include utilities in five Western states including several public power entities and now represents the load of 55 percent of the western interconnection. Several more entities are scheduled to join in the next 2 years when two-thirds of the electricity in the West will be shared and balanced by that market. In addition to the group of companies primarily in Colorado and Wyoming, and are known as the Mountain West Transmission Group, have indicated their intent to join the Southwest Power Pool. I think it's really important that these market expansions are being driven at the state and regional and company level, not driven by FERC. In fact, I strongly believe that's the only reason they're happening is that the choices are being made in the regions. They reflect the increasing and increasingly broad recognition that sharing resources over a large footprint can sustain reliability and save money for customers, especially at a time of substantial resource change. FERC has worked hard to make sure the markets do what they're supposed to do. We've taken a number of steps to make sure that markets are fair for all resources including emerging technologies. We've also worked to ensure grid resilience by overseeing capacity market changes to increase compensation to the resources including baseload that keep the lights on at times of system stress. In the energy markets, we've taken a number of steps on market mechanics to improve price formation. The most challenging issue currently confronting the wholesale markets is their interplay with state policy initiatives, which my colleague, Mr. Powelson, will discuss and which I touch on in my testimony. Finally, I will comment briefly on our work on interstate transmission. It's been nearly 7 years since FERC issued Order No. 1000 to require regional transmission planning and cost allocation and require competitive transmission selection over some projects. All regions of the Nation are in some stage of implementing Order 1000 at this point. Five of them have had competitive transmission processes and have proven that it saves customers money. They've also proven that it's hard to do and that we have a lot more work to do on this, and it's something the commission is going to continue to monitor and work on. And with that, I will thank you again for the opportunity and look forward to your questions. Thank you. [The prepared statement of Ms. LaFleur follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Upton. Thank you. Mr. Chatterjee, welcome. Good to see you. STATEMENT OF NEIL CHATTERJEE Mr. Chatterjee. Thank you. Great to see you, Chairman Upton, Ranking Member Rush, distinguished members of the subcommittee. Thank you for the opportunity to appear before you today to discuss the important work FERC is doing to ensure that the American people have access to reliable and affordable energy. As a former congressional staffer, it's always a pleasure to be back on Capitol Hill, and I would like to note that while I came to the commission from the Senate, I began my career here in the people's house and never allowed myself to become a Senate snob. I can't say the same for all of my former colleagues. I appreciate the subcommittee's attention to the major energy issues facing our nation as well as its interest in the role the commission plays in addressing them. I would like to focus my remarks today on our efforts regarding reliability and the Public Utility Regulatory Policies Act of 1978, or PURPA, and to touch briefly on a few of my other priorities. I will begin with a look in the area of energy policy affecting families and businesses across the Nation on a daily basis--reliability. Congress delegated the FERC the responsibility to approve and enforce mandatory reliability standards for the grid, and with our partners at the North American Electric Reliability Corporation we remain committed to that endeavor. Our reliability standards have progressed considerably since they first became mandatory and enforceable just over a decade ago, and today they form an effective baseline for addressing day- to-day grid reliability issues like tree trimming, relay setting, communications, system planning, and emergency operations. Another way the commission works to maintain reliability is through our oversight of jurisdictional wholesale energy capacity and ancillary services markets. For example, the commission has recently taken a number of actions to ensure all new generators provide essential reliability services such as voltage and frequency control. Those efforts are a good start but more work remains. Because of historically low natural gas prices and technological innovation, our country is experiencing rapid unprecedented changes in its generation resource mix. These trends promise tremendous benefits to consumers through lower prices and greater choice. But they also highlight a need for vigilance as we ensure that reliability is not adversely impacted. I've been pleased to see the important work that ISO New England has done in this regard through its assessment of fuel supply vulnerabilities in its footprint. Its analysis is an excellent example of how RTOs and ISOs should proactively evaluate the specific regional risks. I expect that the implications of fuel security for grid reliability and resilience will continue to be areas of interest for the commission. Finally, the commission is also taking action to address other emerging threats such as physical security, geomagnetic disturbances, and electromagnetic pulses. FERC and NERC have made important strides on these issues and the commission remains actively engaged with our government partners and other stakeholders to improve our knowledge of these threats and evaluate creative ways to address associated risks proactively. Now, turning to the second topic I would like to address, which is PURPA, today's energy environment is fundamentally different from that of 1978, when PURPA was enacted. Because of this, many stakeholders are rightly asking whether changes to PURPA are needed to better align it with our modern energy landscape. While significant changes will require congressional action, I believe the commission should review our existing regulations to ensure they fulfil PURPA's mandate of fostering the development of renewable and co-generation resources while protecting customers and competition. Before I close, I would like to take a moment to talk to you on a couple of additional issues that I view as priorities. First, the commission's current review of the 1999 certificate policy statement. As FERC considers how we evaluate natural gas pipeline applications, I am committed to ensuring that we have an efficient and transparent process that encourages landowner participation. From my perspective, our review should build upon our process improvement efforts under the recently signed MOU implementing Executive Order 13807, one Federal decision policy. Second, I would like to emphasize my continued commitment to securing our grid against cyberattacks. While the administration has taken laudable steps already, I believe these challenges will continue to grow. I strongly support the commission's approach to addressing cyber threats which consists of mandatory standards as well as voluntary best practices and information sharing. Still, more work remains and I look forward to continued cooperation with my colleagues at the commission and our partners across the government. I want to take my final seconds to commend this committee in particular for the work that you guys have done to really look into these significant issues, not just by holding this hearing but, Chairman Upton, under your leadership the past couple of years this committee has done tremendous work to bring focus to these enormously complex issue areas. As an alumnus of Congress, I believe firmly in the legislative branch's co-equal role in our government. And now having the good fortune to serve the American public at the commission, I have come to realize that in dealing with these enormous challenges we are constrained by the statutes that govern us. But you all can take a leadership role in addressing some of these complex issues and I look forward to working with you and your colleagues to do that in the future. [The prepared statement of Mr. Chatterjee follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Upton. Well, thanks for your kinds words. I know that those are shared on both sides of the aisle so appreciate that. Mr. Powelson, welcome. STATEMENT OF ROBERT POWELSON Mr. Powelson. Good morning, Chairman Upton, Ranking Member Rush, and members of the subcommittee. I also want to echo what my colleagues have said earlier in thanking you for inviting us here this morning. My name is Robert Powelson. I am honored to serve as the commissioner on the Federal Energy Regulatory Commission. In fact, I was honored to go through the process with my colleague, Commissioner Chatterjee, and let me just say it's an honor to serve in this capacity. Before joining the commission in August, I spent 9 years as a member of the Pennsylvania Public Utility Commission. I spent 4 1A\1/2\ years as chairman and I also had the honor in 2017 of serving as president of the National Association of Regulatory Commissioners. So when I look to my right and my left, the people I serve with here, it's a collegial body and the people that represent this agency are world class, as demonstrated in recent rankings as a Federal agency. My experience, Mr. Chairman, as a State regulator and my interaction with colleagues at the State commission level across the country, have informed in my appreciation and understanding of the FERC's role in interfacing with the States. Since joining the commission, I've approached each of my decisions with an understanding of how the determinations impact, as was mentioned earlier, families and businesses nationwide. I've also prioritized my engagement with stakeholders from all backgrounds and geographic regions to ensure that I hear a variety of viewpoints and my decisions are fully informed. For purposes of my testimony here this morning, I am focusing on two areas. First, I will discuss the evolving grid, in particular, how the Nation's generation resource mix has changed in just the last decade. The second issue is one of just a huge priority for all of us, and that's the proactive cybersecurity work that the FERC is doing. Now, when we talk about the changing electric grid, or some would call it the evolving grid, what's interesting is I look at my experience in Pennsylvania where, in 2008, most likely 50 percent of our dispatch was from coal. And now, with the evolution of shale plays like Marcellus, Utica, and the plays in Louisiana and Texas and Arkansas, there has been a drastic shift in our power mix and it's having a profound impact on wholesale power prices in a good way. It's actually, in my home State, has brought a $5 billion investment in ethylene cracker to Beaver County, Pennsylvania. It's also changed at the local--we'll call burner tip--where customers with gas purchase costs in LDCs across Pennsylvania--seven LDCs--have dropped over 70 percent, a direct pass-through savings to customers in the State of Pennsylvania. When we talk about the evolving grid, though, it's also important to mention the impact that new resources are having. As mentioned earlier by Chairman Walden, the evolution of battery storage, renewable energy, and the impact it's also having on the grid is critically important. Last year in our bulk power system, 10 percent of our dispatch power came from renewable energy resources. A number of states over the last decade have adopted very successful renewable portfolio standards. I should note for my good friends from the State of Texas is the number-one wind producer in the country--shout out to Chairman Barton and Ranking Member Olson as well--and it speaks to the ovulation, again, of our modern-day grid. Now, another tectonic shift is also taking place in our grid and, unfortunately, it has to deal with the flat demand for electricity. As I like to say, the way we generate, transmit, and distribute power in this country is ever changing. The fact of the matter is the grid is getting more efficient, it's getting more resilient, and it's clearly getting cleaner. But we are also offering tools to customers. Those tools include things like energy efficiency, real-time pricing--as mentioned earlier, in certain states like Texas and Pennsylvania and New Jersey, the ability to go out and shop for retail energy supply. And I note that because a lot of customers are out in the market--residential and industrial customers. The last item I want to touch on in cybersecurity, and I think cyber is really one that keeps us all up at night, and I am just very proud of the work that this commission has done, going back to our former chairman, Commissioner LaFleur, and really working with the States, Mr. Chairman, to develop protocols and cyber capacities within the State public utility commissions, and I will talk about that later on here in the hearing. There's been a number of changing threat vectors in the bulk power system. There are a number of bad actors out there that want to infiltrate industrial control systems and wreak havoc on our bulk power system. But I am proud to report, again, to the work of the Federal Energy Regulatory Commission, working with the Department of Homeland Security. More recently, the leadership demonstrated by Secretary Perry with the launch of the Office of Cybersecurity within DOE is another great step forward in addressing overall cybersecurity in this country. So, Mr. Chairman, I look forward to today's conversation and appreciate the opportunity to be with you and your colleagues. [The prepared statement of Mr. Powelson follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Upton. Thank you. Commissioner Glick. STATEMENT OF RICHARD GLICK Mr. Glick. Thank you, Mr. Chairman, and thank you, Ranking Member Rush, and members of the subcommittee. Thank you for the opportunity to testify this morning. As a former minority general counsel to the Senate Energy and Natural Resources Committee--and maybe I am a snob, according to Commissioner Chatterjee--but as a former counsel to the Committee, it's nice to be back on Capitol Hill and it's good to see some familiar faces from the Joint House and Senate Energy Bill Conference that took place during the last conference. I've been a member of the Federal Energy Regulatory Commission for almost 5 months. During this short period of time, the commission has been called upon to consider a number of challenging matters. Although FERC is not typically an agency that receives a substantial amount of public attention, the commission's actions have a significant impact on the lives of everyday Americans. I witnessed this first-hand while at the Department of Energy at the end of the Clinton administration. The commission's inability to come together on a unified response during the height of the Western energy crisis in 2000 caused consumers to pay significantly more for electricity and natural gas than they should have. It is imperative that the five of us safeguard--work together to safeguard to public's interest. As everyone here knows, we are in the midst of a dramatic transformation in the ways Americans produce and consume energy. This revolution has the potential to substantially improve our energy efficiency, reduce emissions, grow the economy, and create millions of new jobs. FERC can help facilitate this transition by removing the barriers to participation and competition that exist in the wholesale markets. For instance, the commission can examine market rules to ensure that they are not unduly discriminating against new technologies. In February, FERC voted 5-0 to approve a final rule requiring RTOs and ISOs to facilitate energy storage participation in wholesale electric markets. Storage technologies such as batteries and pumped hydro have the potential to play a leading role in the transition to the electricity system in the future. As the cost of energy storage continues to decline, these resources are poised to become a bigger part of the generation mix, leading to the development of a more robust grid that can, among other things, help to accommodate the ever increasing demand for clean renewable resources from States, corporations, and residential customers. In addition, these storage resources will enhance the reliability and resilience of the grid by also reducing electric rates. Today, the cost of using lithium ion battery is less than one-quarter of what it was at the start of the decade. Partly as a result of those declining costs, industry forecasts project that the Nation's installed energy storage capacity will increase by 750 percent in just 5 years. The commission's action to reduce barriers to help reduce barriers to energy storage resource participation in wholesale markets will help to further this remarkable trajectory, all the while reducing consumer energy bills. I believe FERC, pursuant to the Federal Power Act, should also identify and eliminate other barriers to participation of new energy technologies and wholesale markets. For example, the commission last week held a technical conference to examine the potential participation of aggregated distributed energy resources in wholesale markets and the benefits these resources could provide. Chairman Upton and Ranking Member Rush, thank you again for the opportunity to appear before the committee today. I look forward to answering your questions and the questions of your colleagues. [The prepared statement of Mr. Glick follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Mr. Upton. Well, thank you all. Appreciate you being here, and the first thing that I want to raise--I don't know if you saw today's Washington Post. This is a copy of it. I should have made copies for you. But the headline is ``U.S., British Governments Warn Businesses Worldwide of Russian Campaign to Hack Routers,'' and it quotes the Homeland Security assistant secretary for Cybersecurity, and she says, ``Once you own the router you own the traffic that's traversing the router.'' And it's pretty clear in this story--it starts off the U.S. and British governments on Monday accused Russia of conducting a massive campaign to compromise computer routers and firewalls around the world from home offices to internet providers for espionage and possible sabotage purposes. And as you may know, we are planning to markup tomorrow a bill that's going to help coordinate things with the Department of Energy that I believe at least at this point looks to have pretty widespread bipartisan support by virtually all of the members of this subcommittee is what I am told in advance, but, got to wait until you get there. So, Chairman McIntyre, my question is it's my understanding that DOE has offered an open invitation for FERC commissioners to receive intelligence briefings on cyber-related threats and I am curious to know how many of those you might have taken up with you and your fellow commissioners in terms of the briefings that have been offered? Mr. McIntyre. Thank you, Mr. Chairman. I don't know the exact number. Mr. Upton. Obviously, this is an open setting so I caution everyone in terms of what they might say. Mr. McIntyre. Yes, sir. But let me just note up front that the issue that you have raised here we would be hard pressed to identify one of greater concern to us as an energy industry, as regulators of that industry, and, indeed, as a nation in terms of national security in this threat of cyberattacks from bad actors, in many cases, state actors such as you have identified. We are increasingly working with DOE and other components of the Federal Government on a daily basis, mostly at the staff level, Mr. Chairman, to ensure that we stay on top of these issues and take all appropriate measures that are available to us, and I know that the staff of each and every one of my colleagues here has been very much engaged in that process. You are correct that we have been offered personal briefings that we are I think in the process of scheduling and taking. Very, very helpful. DOE has been very helpful in this regard--DHS, TSA--and our level of engagement on this I think will only continue to increase. Mr. Upton. Do you believe that there's any additional statutory authority that FERC may need, as you look to the future? Mr. McIntyre. That's a good question. In 2005, we were given the role of ensuring that reliability is intended to-- through our oversight of the electric reliability organization of the Nation and the reliability standards promulgated by it. And I believe that we are making good use of that authority. I don't have a specific area right now that I can identify as something where we would need broader statutory authority. I am very pleased with this level of increased Federal engagement that I described. My colleagues may wish to add their own---- Mr. Upton. Yes, and maybe also can you shed any light on the degree and frequency of cyberattacks on the energy infrastructure? Mr. McIntyre. Attacks are constant, but the degree of severity and from the perspective of the perpetrators, success, that is what varies. But every day, not just governmental entities but, indeed, the companies that we regulate are subject to attacks and attempted attacks. Mr. Upton. I would appreciate hearing from the other commissioners as well. Mr. Chatterjee. Thank you, Mr. Chairman. I think in terms of the interactions that we've had with DOE and other agencies, I have the good fortune to represent the commission at an ESCC--Electric Sector Coordinating Council--meeting with a number of stakeholders across the government and industry looking at these serious issues. I also got to participate in a delegation that included DOE, DHS, and FERC to travel to Israel to learn about best practices and ways to stay ahead of these ever-evolving threats. It's something that I think my colleagues and I all take very seriously. It is the new reality that we must contend with. As we benefit and gain from the technological innovation that's taking place in this space we have to be cognizant that it comes with that downside risk of increased cyber vulnerability and my colleagues and I will all remain vigilant on this. Mr. Upton. Commissioner LaFleur. Ms. LaFleur. Thank you, Chairman. I've received a number of classified briefings at the Department of Energy over the years. I actually have one scheduled tomorrow, and I appreciate Secretary Perry continuing to make them available. In answer to your other question, hacks on the grid are constant. The National Center for Cybersecurity and Communications Integration--whatever NCCIC stands for--every year electric grid attacks are either a slight majority or slightly below 50 percent in the public numbers they put out every year. Fortunately, in part because of the strong standards that I believe we put in place for the high voltage electric grid on perimeter security and password security and other things, they're very infrequently successful with the electric grid. In terms of what this committee has done, I think this committee had done an excellent job on the electric grid side. I used to participate, when I was chairman in some kind of committee that was across government of heads of the different agencies, and I think where there's more we can do that's across the different infrastructure sectors, among electricity, water, gas, finance, and others, that's where there's real, I think, weaknesses in sharing information and learning from each other because they're looked at individually on the Hill and in government. But we all have a lot in common. Mr. Powelson. Mr. Chairman, let me also pick up on that. The outreach that the FERC has done through our Office of Energy Infrastructure and Security, outreaching the State public utility commissions and helping State PUCs build their internal capacity to address cyber, I am very proud of the work of our Office of Energy Infrastructure and Security along with our Office of Electric Reliability. State public utility commissions have used us as a resource to go through trainings and we've developed this checklist that PUCs can use with their regulating utilities to help in a management audit. It's been a great collaborative. I will tell you it's very difficult. When you asked about resources, we could certainly use more boots on the ground. I am not here to get ahead of my chairman on that but I will make the request. The work getting out to 50 States and doing that kind of training requires a lot of boots on the ground. The good news is we are doing it in a collaborative approach with NARUC. Commissioners have come into Washington for read-ins. These are all good things that are evolving. But to the earlier points, these threat vectors are changing every day and trying to break down the silo mentalities between the different Federal agencies I think we've come a long way in the last 8 years as a Nation to address these emerging threats. Mr. Upton. Thank you. I know my time has expired so I will yield to Mr. Rush. Mr. Rush. Mr. Chairman, Chairman McIntyre, back in January the commission voted unanimously to reject Secretary Perry's notice of proposed rulemaking that sought to prop up coal and nuclear facilities. Instead, the commission wanted grid operators to submit additional information regarding their ability to judge and I quote you, ``naturally occurring and man-made threats,'' to their system within 60 days. Where does the agency currently stand on this issue? Does the commission believe that we are truly heading past the point of no return when the retirement of coal and nuclear facilities will leave us in a situation where we will soon be unable to meet our energy demands if we do not act quickly? Does the agency support action by States and RTOs, the markets, or Congress? Or does the commission have the means and the authority to act on this issue if and when it becomes a problem? Mr. McIntyre. Well, thank you for the question, Ranking Member Rush, and also thank you for acknowledging the steps that we as a commission have taken thus far. As you note, our January order did raise the issue of the grid resilience and, specifically in terms of steps forward, we directed our nation's operators of our regional grids--the regional transmission organizations and independent system operators--to take the first step in helping us to build our record on which we would base our decision making by submitting to us their own perspectives on resilience within their respective footprints. And that initial round of comment has come in from the original transmission organizations and independent system operators. Now we are in the subsequent commenting phase. The questions you raised are among the very important issues that we will have to grapple with. Are there categories of resources or, indeed, even perhaps specific important resources that if they were to retire on a permanent basis simply go away and exit the scene of resources that are available to contribute to the energy that serves our nation's energy needs? Would that be something that would be harmful to American interests? A very important issue and a tricky one. So that is very much within the scope of the matters that we will be looking at as we make our decisions, going forward. Mr. Rush. I would like to ask any of the other commissioners would you care to comment on my question? Ms. LaFleur. Well, I think, broadly, the commission has two major sets of our responsibilities that really are directed to the resilience of the electric grid. The first is the market rules to make sure that there's enough resources in the market, that there's enough of the type of resources that are needed to keep the lights on at any given time and that they're properly paid and the markets are stable so they'll continue to attract investment and resources. Secondly, the commission has put in place a number of broad standards, both the reliability standards we oversee as well as some of the rules that Commissioner Chatterjee referred to, for example, on frequency response or voltage to make sure that if there is an essential reliability of services that's in demand because of all the changes on the grid, we have it for customers. I think that Chairman McIntyre really covered very well the ongoing resilience proceeding. In terms of specific resources that are needed, all of the market operators have in place reliability must-run tariffs so if a resource wants to retire a test is done to make sure that its retirement will not put customer reliability at risk. If there are changes needed in those tariffs we'll look at them. But I think that's a good place to start. Mr. Rush. Mr. Chatterjee. Mr. Chatterjee. Thank you, Mr. Ranking Member. I initially was sympathetic when Secretary Perry proposed the notice of proposed rulemaking to the commission. Being from Kentucky, having worked for Leader McConnell, I saw first-hand the devastating impact that coal plant shutdowns had on coal communities throughout Appalachia. I also believe in climate change and man's role in it and believe that we need to mitigate emissions and I believe nuclear power will plan an essential role in that. And also am cognizant of the security concerns that Secretary Perry himself laid out before this committee last week. That said, none of those issues were relevant to the docket that was before us, and I agree with all of my colleagues in voting to reject it because the record simply did not support compensating plants based on the availability of 90-day supply of fuel. That doesn't mean that Secretary Perry didn't ask the right question and I do believe the question of resilience that we are examining in this current docket is an essential one and I think over the course of time Secretary Perry will be proven right. We are going to ultimately have resilience challenges in this country and we need to be prepared for that, and I think that this docket will allow for that. Finally, I will say, to build on the point that Commissioner LaFleur made about existing tariffs for reliability must-runs, we've got to evaluate whether they work or not. While Secretary Perry asked the right question, perhaps the NOPR was not the right solution. There may be other necessary solutions and we may in the coming days, weeks, months be confronted with situations where the existing tariffs do not allow for some of the accommodations that may be necessary. I had pushed for a show-cause order that I included in my concurrence to the NOPR that I think, as we look back in time, may have been the right thing to do. Mr. Rush. Thank you, Mr. Chairman. I yield back. Mr. Upton. Thank you. Mr. Barton. Mr. Barton. Thank you, Mr. Chairman. I am going to ask my questions directly to the chairman. But if any of the commissioners wish to add their comments they're very welcome to. The first question, Mr. Chairman, is can you give the subcommittee a general idea of what the variances in retail cost of electricity in this country is by region from, say, the lowest region to the highest region? Mr. McIntyre. Thank you for the question, Congressman. No. I am afraid I don't actually have that information at hand. It does vary very much by region and that, in turn, is often a function of the fuel type that is generally consumed within that region. Mr. Barton. Does anybody on the--yes, sir, Mr. Powelson. Mr. Powelson. This is not real time, Mr. Chairman, but---- Mr. Barton. I don't need down to the exact---- Mr. Powelson. OK. So let's start with probably the highest distribution rate in the country is at about 43 cents a kilowatt hour on the island of Hawaii. When we go more inland to the lowest cost of energy, I think the Republic of Texas, through retail competition, customers are paying less for power today than they were prior to electric restructuring. So Texas has low rates. The State of Florida, from my last anecdotal meeting with officials from their utility, a nine- cent kilowatt--per kilowatt hour all in price. That's transmission, distribution, and generation. So you from Hawaii, we know, at 43 cents to your state, maybe Florida, at a low distribution of nine cents. Mr. Barton. Well, let's exclude Hawaii, since they're 3,000 miles from the mainland. Is it fair to say in the lower 48 the price difference at retail--the highest would be three times the lowest? Is that a fair generalization? I know I am close. The right answer would be to say yes, but if you disagree with me---- [Laughter.] Mr. Powelson. I don't want to get ahead of my chairman so-- -- Mr. Barton. It's at least two to one and I think if you look at California and compare California to Oregon, it's going to be close to three to one. Or if you compare Texas to New York, it's going to be close to three to one. Would you all agree with that? Now, the reason I ask that question is because ultimately what the committee and the Congress and the president are responsible for is, for lack of a better term, retail electricity prices that the average citizen can pay. We also want it to be reliable, and we've developed a mix of energy sources in this country. Some states have regulated markets. Some states have deregulated markets. Some states pretty much rely on coal. Some states have a--like Texas, we've got a mix of coal, natural gas, wind, and some nuclear power and a little solar power. But our nuclear plants and our coal plants are in distress. And my second question is the distress primarily caused by market forces, natural gas prices being very low, or is it caused by regulatory constraints on the nuclear industry and the coal industry? Mr. McIntyre. Congressman, I will begin. Thank you for the question. Certainly, the low prices of natural gas today that we experience in this country due in large measure to the revolution in natural gas production methods make for significant head winds for coal and nuclear because it's very, very difficult for them to compete in our open and competitive wholesale markets against that cheap natural gas resource. As to the regulatory role, hard to say. Certainly, nuclear compliance and everything associated with the prospect of building a new nuclear generating facility today makes for enormous costs that probably has an all but prohibitive effect at short-term competition with natural gas prices. Mr. Barton. My time is about to expire. I asked the first question to bring to the attention of the commission and the committee that retail prices vary greatly in this country. The cost of generation of electricity varies, depending on the fuel source, and the regulatory burden, obviously, on nuclear is very high and you can argue that it's also very high on coal plants. If we look for solutions to keep our distressed nuclear plants and coal plants in service, we should first look at regulatory relief and only then look at market relief. When you start, in my opinion, to mess with the market, which some of these proposals do, in the long run it hurts the consumer because you either have to subsidize that price, which drives the retail price up, and eventually you can't sustain it. So I respect my good friend at the Department of Energy, Governor Perry. But I don't think his proposed solution--while it's well meaning, I personally don't think it would work in the long run. I would encourage the commission, to the extent you can, to look on the regulatory relief side, before we begin to look at the market solutions. And with that, Mr. Chairman, I yield back. Mr. Upton. Gentleman yields back. Mr. Pallone. Mr. Pallone. Thank you, Mr. Chairman. In my opening statement, I noted that I've long advocated for finding ways to introduce more distributed energy and energy storage into our electricity grid, and one of the reasons for that is that I see too many transmission projects needlessly rubber stamped in the name of reliability. There are certainly other ways to address reliability than just gold-plating the transmission system. But perhaps when you're a hammer everything looks like a nail. So today, newer and bigger transmission lines aren't always the answer to the question of reliability. Distributed energy resources, renewable and otherwise, along with efficiency and demand response should be equally large tools in the box and technology has dramatically transformed the possibilities for cost-effective generating and efficiently delivering electricity to homes, businesses, and manufacturing facilities from a variety of sources. So I want to commend the commission for recognizing this with its recent order regarding storage. With storage and distributed generation, both fossil and renewable base, along with improving storage options, smart meters, micro grids, and other technologies have altered the possibilities for effectively and economically ensuring reliability, and these technologies have also called into the question the most basic tenets of rate making and have challenged the longstanding financial model for utilities. Now, I want to talk about a local issue, 2 years ago, First Energy JCP&L determined that its Monmouth County--where I live--that its Monmouth County reliability project is necessary to retain reliability for the entire regional transmission grid and specifically for New Jersey, and they proposed a 10-mile transmission line that would run through the district I represent along New Jersey Transit's north Jersey coastline. Ever since JCP&L proposed this project, I've articulated concerns about whether constructing this Monmouth County reliability project is necessary to accomplish JCP&L's stated reliability goals. Recently, this view was echoed by New Jersey Administrative Law Judge Gail Cookson, who ruled that JCP&L failed to demonstrate that the transmission line is necessary and noted that JCP&L has not seriously considered alternative corridors and ignored non-transmission solutions entirely. In the past, building a new transmission line may have been the only way to increase reliability. However, now there clearly are other options available. Other options include distributed generation storage, various new grid technologies. They can not only increase reliability but also modernize the grid. So Judge Cookson's decision which I will send to you, but I am going to probably get back to you further, if that's OK, but her decision supports my long-held suspicion that often projects like this Monmouth County reliability project are more about the rate of return for shareholders than reliability for consumers. So my question to all of you is--whoever wants to ask it-- how can you change this dynamic to ensure that utilities look at more than just new transmission lines, that they look at non-transmission alternatives to ensure reliability? And how can we change incentives so that these non- transmission alternatives are still financially attractive to utilities? Can anybody take a guess? Sure. Mr. Powelson. Congressman Pallone, your home State, working with your State BPU--and we are seeing it across other States like New York with their reinventing the energy vision in Ohio, their Power Four docket, is to address exactly your point, getting at these non-wire solutions that we are seeing now with greater customer engagement behind the meter. Your State is a leader in that because of the lessons learned in the post- Hurricane Sandy where a grid resiliency bank has been launched under the BPU's leadership a lot of microgrid investment in your home State. And these are all good outcomes. It goes back to my earlier point of this evolving grid. We are not building 1,200 megawatt cathedrals anymore. We are doing things behind the meter and, yes, in front of the meter--cleaner, more efficient. Mr. Pallone. Can FERC play a role in this, though, because everybody says, oh, where's the Federal Government---- Mr. Powelson. Well, to the wholesale piece, and this is just my quick observation, we are finding in certain jurisdictions where, one, there is a lack in the post-FERC Order 1000 world of not really seeing competitive transmission being built, and that's a PJM problem. The other thing is addressing cost caps associated with these projects. I have a concern when industrial customers come in to the commission as energy users telling us that they're seeing a 400 percent increase in transmission costs as wholesale prices are dropping. That's alarming. That tells me that the RTOs at the wholesale level of transmission planning are not doing a very good job with cost containment, and we are all paying for that as consumers. So these are the things that I plan to work on with my colleagues, and I know Commission LaFleur wants to jump in on that. Ms. LaFleur. Well, just adding to that, first of all, legally the transmission planning tariffs that First Energy and others live within require consideration of non-transmission alternatives. That is what's legally supposed to happen. I think the problem is sometimes that it's more difficult to see the company making money from some of the non- transmissional alternatives. That's where things like our storage rule comes in to make sure that those things are fairly paid for, and also the work--I was in New Jersey on Friday at an all-day meeting on New Jersey's energy future and the work that's being done at the State level to make sure those technologies are rewarded so that everyone has an incentive to install them like the wonderful work you have done on solar already, where New Jersey's a leader. We've done a lot of work on the planning processes to make sure that a company can't just go off and plan something. There has to be an open process. We issued an order last month about supplemental transmission projects in PJM requiring more sunlight in the planning to make sure that all the alternatives were considered including by consumer reps and State representatives and others, and those are some of the kind of detailed things we can do to make sure that the process doesn't ineluctably force in a certain direction. Mr. Pallone. Mr. Chairman, I don't know if we are out of time but I would like to be able to get back further on this, with your permission. Mr. Upton. Yes, absolutely. Absolutely. Mr. Pallone. All right. Thank you. Mr. Upton. I know written questions and written answers. Mr. Pallone. Yes. Mr. Upton. Is that all right? Is that OK? Great. Thank you. Mr. Pallone. Yes. Mr. Upton. Mr. Olson. Mr. Olson. I thank the chair and welcome to our friends at FERC. I want to discuss pipelines and the MLPs that many companies use to finance getting steel in the ground. None of the things we talked about today, whether it's gas turbines or exports of liquefied natural gas, can happen without pipelines. And this is not the Ways and Means Committee, nor do I ever want to be a tax litigator or a tax legislative person. But I've heard from a number of Houston area companies that are worried by the changes that FERC did of whether pipelines can recover their costs under MLP structures. Companies like Ambridge, who has merged with Spectra, said, ``They intend to ask for rehearing of this policy change at FERC.'' Their argument is that FERC made this move without a long enough time for debate and you all didn't take into account that not all MLPs are created equal. Chairman McIntyre, welcome. You talked about this ruling. Do you think your approach was appropriate? Mr. McIntyre. Yes, Congressman. Happy to address that. The ruling you referenced was actually a series of steps we took in response to a court of appeals case called SFPP and we had before us fairly clear direction from the court of appeals to address the so-called double recovery issue of taxation. We felt we had no choice but to take decisive action in a manner that we read as being directed by the court. It doesn't surprise me that a number of companies out there affected adversely monetarily by that would have a quarrel with it and they're not bashful in sharing their views with us on that, I assure you. Mr. Olson. Their texts aren't bashful at all. Mr. McIntyre. Perfectly legitimate. It is their right, under their governing statutes, to seek rehearing where they are aggrieved by an order of ours. And so we would look forward to processing those in accordance with our law and procedures. Mr. Olson. Thank you. And Commissioner Chatterjee, putting your House thinking hat on, any thoughts about this situation with the MLPs and the changed law? Mr. Chatterjee. Yes, sir. I agree substantively that the chairman is correct that our hands were tied by the courts. Coming from the legislative branch, we focus a lot on process and I think--look, I am new to the commission. Four of the five of us are new to the commission. I am not afraid to say that we are all still learning and progressing, and procedurally I do now recognize, in looking back, that perhaps there were some things that we could have done differently. For instance, voting during the market day was perhaps unfortunate. I think we incorrectly assumed, once we posted our Sunshine Act notice, that that was enough of a sort of disclaimer that this was coming and that the markets would factor that in. Clearly, that was a misread. I am sympathetic to the argument that beyond an NOI process that took place a couple, in the past, maybe a technical conference, some more process could have been necessary. And so I am always learning and trying to do my job better and will try and learn from this experience as well, going forward. Mr. Olson. Thank you. That's the man of the house. My final question is you all know I am not shy about supporting LNG exports. In fact, I was in India 2 weeks ago. I left there being--they called me the congressman for LNG exports from America. I spoke to Secretary Perry last week about how important these exports are to Texas, our country, and our world. Despite that, I've heard some concerns back home that you are slipping behind schedules of some very viable Gulf Coast LNG projects. I've heard rumors that FERC had only six to eight employees targeted with approving these booming permits. I've heard you actually approached the DOE for new members to help out with the backlog of approving LNG permits. To the whole panel or the chairman, is that true? How can we help you get these things rolling as quickly as possible? Mr. McIntyre. Thank you for the question, Congressman. We are paying very close attention to the pending applications, not only for LNG export infrastructure but also for natural gas pipeline infrastructure. It's consuming an enormous amount of attention and manpower within the agency. We are looking to beef up the ranks of our Office of Energy Projects and we are actively pursuing hiring in that regard right now. But if there's any suggestion that we are somehow not giving it our full effort right now, I can assure you that that that is not the case at all. It's consuming a huge amount of attention and effort in Energy right now. Mr. Olson. Thank you. Mr. Powelson, a quick question. Can you say you all? Mr. Powelson. You all. Mr. Olson. Very good. Welcome to Texas. Mr. Upton. The gentleman's time has expired. The gentleman from California, Mr. McNerney. Mr. McNerney. I thank the chair and I thank the commission, and your opening statements were interesting and useful. It's good to see a body working together like this and I appreciate that. Last year, we narrowly dodged the bullet at the Oroville Dam when a section of the emergency spillway collapsed. Evacuation of over 100,000 people was ordered and there was considerable damage to the dam, associated structures, the river, and many downstream communities. In January of this year, a FERC-required independent forensic team issued their report on the Oroville incident and the report is not flattering at all to the agencies responsible for the dam safety. So I will read you a summary of the report. Although the practice of dam safety has certainly improved since the 1970s, the fact that this incident happened to the owner of the tallest dam in the United States under regulation of a Federal agency with repeated evaluation by reputed outside consultants in a State with leading dam safety regulatory program is a wake-up call for everyone involved in dam safety. Challenging current assumptions on what constitutes best practice in our industry is overdue. So that's the quotation from the report. So this calls into question the adequacy of the FERC Part 12(d) regulatory for ensuring comprehensive reviews of dam designs and construction. Mr. Chairman, is the commission planning to revise Part 12(d) regulations to improve the inspection process? Mr. McIntyre. Thank you for the question, Congressman. We don't have a specific plan to address the 12(d) regulation process right now. I certainly acknowledge the importance of the issues you raise and, in fact, it wasn't only the emergency spillway but, indeed, the main spillway that was very much called into question--the integrity of that. Our office of energy projects is working, literally, daily hand in hand with the appropriate California authorities to ensure that the remediation process is completed in an appropriate fashion so there's complete safety all around. And my understanding, based on conversations as recently as yesterday, is that that is from our perspective going very well and that all involved on the Oroville end are doing their job very well. Mr. McNerney. OK. Is the commission reconsidering its policies with respect to the ways in which information is submitted by participants to the license process that specifically deal with questions of safety? Will that be evaluated? Mr. McIntyre. Yes. I can tell you that that will be a matter of internal deliberation and whether that proceeds to any formal commission action is something that I can't say right now. I do know my colleague, Commissioner LaFleur, may want to chime in here. Ms. LaFleur. Well, I was at the--commission and chairman-- when Oroville happened and spent some time out at the dam and it was really an extraordinary event. We were very fortunate not to have had loss of life when the spillway ruptured. We really have been responding on three levels and the first is the actual facility itself, closely working with the Division of Water Resources and the California agencies. We've had people on site ever since that happened, 24/7, for several months to make sure they do what they need to do over a 2-year period to correct that and, of course, the relicensing is pending as well, which we can't talk about, but that these issues are being brought in there. Secondly, looking at other spillways of common construction in California, there were several and elsewhere to make sure they're all closely inspected and we directly learned the lessons of the forensics panel that you mentioned. And third is our own safety program, and in addition to the forensics panel that you mentioned, we also set up a team of outside people to look at how we do our inspections and we are waiting for their report and we'll be taking action, just as you suggested. Mr. McNerney. OK. To change gears a little bit here, we are experiencing more extreme weather events. What steps is FERC taking to ensure the resiliency of the grid? Again, Mr. Chairman. Mr. McIntyre. Well, we are in the process of doing the comment intake I referenced earlier on our grid resilience proceeding. The recent extreme weather events have been instructive in this regard and it's varied by region. But, certainly, just to pick a region, in New England it's particularly challenging-- this bomb cyclone event over the passage of last year into this year where increasing amounts of oil-generating resources, oil- fired generating resources were needed to be called upon in order to ensure the electricity needs of that region, triggering, of course, not only environmental concerns but significant cost increases. So these weather events are directly tied to our statutory obligation to ensure that the rates are just and reasonable and also directly tied to our need to ensure reliability of our bulk power system. Mr. McNerney. Thank you. Mr. Chairman, I yield back. Mr. Upton. Gentleman from Illinois, Mr. Shimkus. Mr. Shimkus. Thank you, Mr. Chairman. It's great to see you all here today. Thank you for coming, and you have got a big portfolio of things that you deal with. I am going to stay on the electricity side. But I just want to mention that New England, the Northeast, needs more natural gas pipelines. Especially with home heating oil and stuff like that, that's why you're in power to help resolve the difficulties of crossing state lines and siting and that stuff because it just needs to happen. Obviously part of your mission statement is regulates the transmission and wholesale sales of electricity and interstate commerce. So the first one is, hopefully to you all, is with the States intervening to some extent in wholesale market support generation, how are you handling that? That kind of addresses a couple things--reliability possibly. If you're trying to ensure low-cost reasonable prices in the wholesale sector, the two issues kind of conflict, do they not? And elatively quickly, because I want to go down on a couple other questions. Mr. McIntyre. Well, you have gone directly to one of the trickiest areas that we deal with, Congressman. The States have their valid role in making policy choices as to energy resources that are preferred by the State and they reflect that through their legal decision making. We have an obligation at the FERC level to ensure that the electricity generated by those resources that makes its way onto our grid is sold at rates that are just and reasonable. The costs behind that generation are affected by the resource policy choices. So we have to be respectful of the states' roles while ensuring that we do our Federal role right of ensuring just and reasonable rates. Mr. Shimkus. So does everyone, quickly, agree with that analysis? Mr. Glick. Mr. Shimkus, if I could just butt in here for a second. I think that it's true that we actually have to do a balancing. But the Federal Power Act gave the States the authority over resource decision making, not--the generation resource decision making, not the FERC. And so I think it's up to the commission within our responsibilities to ensure that wholesale rates are just and reasonable, and also that the markets are reliable to accommodate those State policies, not to override those state policies, and I think that's an important objective for us. Mr. Shimkus. Go ahead. Chime in. Mr. Chatterjee. I support States' rights. Mr. Shimkus. I testified to that, I think. [Laughter.] Mr. Powelson. I come from a market state, now recognizing those regional differences in these markets, as Commissioner LaFleur mentioned. Some markets have capacity. Some are energy only. But I am having an epiphany now as a new FERC commissioner. States are, clearly, to my colleagues' point, allowed to design things like renewable portfolio standards. But what's happening, Congressman, is we are bastardizing these markets in such a way where the States are picking winners and losers. They're allowed to do that. But now it's coming at the consequences of the capacity market construct. And let me just say, Secretary Perry was right. These constructs are bastardizing these markets and the availability of generators to receive adequate compensation for that resource. And so I might be Debbie Downer here in my approach, but it is a concern that we have to be cognizant of to the point of giving States flexibility I will say within reason of Federal Power Act. Mr. Shimkus. OK. Let me throw another one and I--sorry to not go to Commissioner LaFleur, but RTOs and ISOs are struggling to find consensus to drive the needed investments that we say they all need. What can you all do about that? I've been on this committee for a long time. So I understand when we had regulated markets and we went to competition and now we are schizophrenic--some regulated, some competition--transmission going across state lines. I think we need to continue for reliability is to make sure that we have needed pathways. But we are being told we can't fund them. Do you have a role? Is there something you can do to help in the process of the build out? Mr. McIntyre. In terms of transmission? Mr. Shimkus. Yes. Mr. McIntyre. Yes. Well, Commissioner LaFleur mentioned the importance of attention to our transmission planning processes. I think that's something that is ripe for evaluation as to whether it's working as well as it should, as well as was hoped for when we issued our landmark Order 1000. I think it's a valid question that does indeed cry out for attention. Mr. Shimkus. OK. If anyone wants to jump in. My time has expired, but go ahead. Mr. Glick. I would just add quickly, as you know, as you worked on this in 2005 Energy Policy Act, it added a provision that provided incentives or allowed FERC to provide incentives for transmission. And I think it's a good time maybe now to revisit that policy and are we really incentivizing what we need to do--are we incentivizing the right investments and are we incentivizing the actual investments that are needed? And so that's what I would look at first is the incentives for transmission. Mr. Shimkus. Yes. My time has expired. I would just say if we ever move on infrastructure, expansion of the transmission grid might be a good thing to put an infrastructure package to. I yield back. Thank you, Mr. Chairman. Mr. Upton. Mr. Green. Mr. Green. Thank you, Mr. Chairman, and since our commissioner talked about the Republic of Texas, being a Texan and I have the Houston area, and if you look at your maps on pipelines you don't see anything. It might be white in outer parts of the country but in my area in southeast Texas, pipelines are the way we move product, and crude oil will come in or natural gas to come to in to make chemicals out of it. Texas was an independent nation for 10 years and some of us still think we should be. But we lost that battle in 1865, too. But we got a pretty good deal in Texas. The Federal Government in 1845 paid off our $10 million of State debt and we got to keep our State lands. And so that's why some of our Western States friends have problems. But we kept those lands and the Federal Government didn't get them. But we are in the middle of a revolution almost, I guess, in generation, and our subcommittee has held a number of hearings about looking at how other markets do. And one of the things I want to say is that Texas, a decade ago, produced 492,000 megawatts of wind power. This last year, Texas produced 58 million megawatts of hours a year. And so we are benefiting from the wind power. In fact, there are certain days that wind power actually is producing more electricity than coal in Texas. Of course, we also benefit from the regional price of natural gas. It's in our back yard. One of my concerns, and we've heard the talk of resiliency, and I disagree with Secretary Perry, even though I served in the legislature with him many years ago, and Texas went the route we have when he was governor for so many years. But many supporters of the proposed subsidies have said that we are on the brink of resiliency crisis. Chairman McIntyre, can you elaborate on the commission's views about the state of resiliency in the grid and do we face an immediate crisis due to future closing of coal and nuclear plants? Mr. McIntyre. Resilience is now a matter of declared priority for the FERC, and we are proceeding in that fashion. We are assembling the record that I referenced earlier. We've heard already from our nation's operators of regional transmission organizations and independent system operators-- their perspectives and we are awaiting further input from stakeholders on it. It's a critical issue, and there are different ways of looking at it. One is operational in terms of is there equipment or are there facilities that would be needed to help shore up the resilience of the grid. The other is economic and, in effect, a need to ensure that our markets are properly compensating the resources that we regard as important to ensure resilience of our grid. So we are looking very hard at those issues now. We'll continue to examine the materials submitted to us in the record and in the hope of getting this right. Mr. Green. And you're looking at alternatives too, because I know the same problem--we get about 20 percent of our electricity in Texas from nuclear power. We couldn't expand it because the investment is not available now. And so there are other ways and, of course, from Texas, as my colleague from Fort Bend County would say, we'd be glad to put another pipeline up to the Northeast to send them some more natural gas or export it around the coast for them. My colleague, Pete Olson, mentioned--my next question is on the concern about United Airlines Inc. versus FERC, and I apologize--I haven't read that case. But I always view that mastered limited partnerships, it's been so successful in capitalizing pipelines, particularly, it's almost like a Chapter S corporation. You pass through that so it's not corporate double taxation, and if we cannot use that as an investment instrument I don't know how we are going to continue the expansion of growth--that I think FERC recognizes we need more pipelines to get product to the market so we won't have a resiliency problem. Mr. Chairman, I realize FERC's public policy as precipitated by the D.C. Circuit Court's opinion, I would like to know if FERC has conducted its own analysis of whether or not double recovery existed before the decision. Has FERC thought there was a problem at the policy prior to the United case. Mr. McIntyre. That's a matter that was in effect handed to us by the court so we had no choice really as a regulatory agency but to take it at face value and to act upon it. We had no independent analysis of the double recovery issue as is customary under the statutes that govern our actions. We act in accordance with the arguments that are put forward for us by the litigants, in most instances, and this was such a situation. Mr. Green. I thought the court directed the FERC to consider how it could demonstrate there was no double recovery. Is FERC looking at that particular issue to be able to answer whatever the circuit court said? Mr. McIntyre. Well, here too, back to legal processes, I suspect that we will have no choice but to look closely at that issue in light of further procedural steps that the parties will have a right to invoke, such as request for rehearing. Mr. Green. OK. Mr. Chairman, thank you, and I know the jurisdiction of that typically is in Ways and Means. But since it deals with FERC we have some jurisdiction in our own committee. So we might look at that to make sure we don't eliminate this ability for investment in the pipelines that the whole country needs, and I will yield back my time. Thank you. Mr. Upton. Thank you. Gentleman from Ohio, Mr. Latta. Mr. Latta. Thank you very much, Mr. Chairman, and thanks to the commissioners for being with us today. Really appreciate it and hearing your views. Commissioner Powelson, if I could start my questions with you. As you point out in your testimony, under the Energy Policy Act of 2005, FERC was given the authority to oversee the reliability of the bulk power system. This included the authority to improve mandatory cybersecurity reliability standards and during the first half of 2018 we have seen new stories about hackers working to undermine the safety and security of our nation's energy infrastructure including cyberattacks launched by Russian agents against the power grid energy, nuclear, and commercial facilities and critical manufacturing sectors. Would you go into more detail about what FERC is doing to address these attacks and how will you work with the North American Electric Reliability Corporation to reassess and, if necessary, revise the reliability standards? Mr. Powelson. Thank you, Congressman, for your question. First and foremost, these reliability standards, which apply to users, owners, and operators of the bulk power system, were developed, as you mentioned, by NERC, and I think we continue to collaborate with other Federal agencies in those compliance measures. You also have on top of that the critical infrastructure protocols, or CIP standards, and I mentioned earlier in my testimony the collaborative effort with NERC and working with the ISACs and the collaborative effort around the utilities, the gas industry, and the other impacted entities, working in collaboration together. Some of these reporting requirements are a little onerous. I would refrain from saying that because, again, we can't really cut corners on cybersecurity. We've got to give you all peace of mind that we are protecting and applying the needed resources to protect the bulk power system. And as I mentioned earlier, these threat vectors are changing radically, daily, and it's important that we continue to work with the other agents. That's why I gave a nice shout out this morning to Secretary Perry and the leadership that DOE has shown on this issue with the launching of their new Office of Cybersecurity. Mr. Latta. And we appreciate it. When the secretary was here when he gave his testimony, let me just follow up, because to address the threat of cyberattacks to our energy grid, I am working with my colleague, Representative McNerney, introducing two bipartisan pieces of legislation. These bills, H.R. 5239, the Cyber Sense Act, and H.R. 5240, the Enhancing Grid Security Through Public-Private Partnership Act, was the subject of a legislative hearing in the subcommittee last month. Under H.R. 5239, the secretary of energy would be directed to establish a voluntary cyber sense program to test cyber secure products intended for use in the bulk power system. The secretary would then maintain a database on these products and the technologies and provide technical advice to energy stakeholders to develop solutions to mitigate identified Cybersecurity vulnerabilities. You mentioned in your testimony that FERC has worked closely with DOE to maintain an awareness of emerging cyber threats. Do you think this policy would help improve the safety and security of our energy infrastructure and would help address these threats? Mr. Powelson. Congressman, I think it is a wonderful effort that any type of legislative construct that recognizes, one, collaboration in the cyberspace; two, adequate capacity building even in--even at the State level. So I can just at first glance tell you I would be very supportive of a bipartisan bill to give those resources to DOE. Working with the FERC, as Chairman McIntyre mentioned, we do have a strong collaborative effort in place with TSA, FMSA, DOT, Homeland Security, and I think this is another example of how we can build on those capacities. Mr. Latta. Thank you. Chairman McIntyre, I've long believed in an all of the above energy policy. Our nation has vast energy resources that need to be utilized and we should be doing everything we can to make sure that our energy industries grow. By doing this, we can make sure that we are truly energy independent. Mr. Chairman, do you believe that it is of vital importance to our national security that we continue to maintain a diverse portfolio of energy sources for electricity generation? Mr. McIntyre. Very much so, Congressman. I, too, express my view in the same terms. All of the above is the appropriate approach to how we should satisfy our electricity needs as a Nation. All different types of electrical generating resources and other resources indeed--storage, distributed energy resources, and the like. Where this will be tested is in the very tricky area that a number of us have addressed here today--the interplay between State resource choices and our Federal role of ensuring that our markets operate properly. If we really do mean that we are committed to an all of the above resource policy, can we be content to see a category resources go away and exit the scene? Very, very tricky public policy question that we are grappling with as we proceed with our grid resilience work. Mr. Latta. Well, thank you very much. Mr. Chairman, my time is expired and I yield back. Mr. Upton. Mr. Doyle. Mr. Doyle. Thank you, Mr. Chairman. Good morning and thank you all for appearing before us today. Many of us are running between two hearings simultaneously. So I apologize that I wasn't here to hear your testimony. Commissioner Powelson, as a fellow Pennsylvanian, I am going to pick on you first. At your confirmation hearing last year you said, what I learned from my experience in NARUC is that what works in Pennsylvania might not work in other jurisdictions, and you highlighted the proud appreciation that we all have for individual States' rights in supporting our State energy policies. However, I also read that you may have some reservations explaining that State interventions come with consequences to reliability and I can't arge with Secretary Perry's point that these markets aren't pure but the policies all sound good and I respect that. But the reality is the policies aren't synchronizing with the system and therein lies a significant challenge. Your testimony highlights an inherent tension--the oversight role of FERC with the independence of the States. And I know my good friend, Representative Shimkus, asked for some additional clarification here. But I wasn't present for that. So I understand you said you felt the commission should respect States' rights within reason. Do you think FERC oversight or potential intervention will or should be applied on a case by case basis? Do you think that Congress ought to provide additional clarity here also? Mr. Powelson. Congressman Doyle, I will start--well, I think the FERC is well equipped, if you look at some cases that we've had over the last decade--Talen Energy v. Hughes in Maryland, Talen Energy v. Solomon in New Jersey--recent constructs of addressing in the post-Polar Vortex, we had an issue in PJM with a 24 percent forced outage rate. We dealt with capacity performance. So I think the markets and the work that the FERC does, we have the tools to address these issues. When you say case by case basis, if I look over those cases where we had to send a loud and clear message to the State of New Jersey and the State of Maryland on capacity resources being subsidized in the market and, by the way, it would have had with generation in Pennsylvania, the FERC, in terms of a rule of law, did its job and the court recognized that. I have said it earlier, I am very proud of my Pennsylvania experience. Pennsylvania has a very successful renewable portfolio standard led under Governor Rendell and former DEP Secretary Katie McGinty. Let me give you, as a former state senator, what happened. In that construct, the State picked really 13 categories of what qualifies for a renewable portfolio standard. Well, guess what? Back then I remember there were pushes to get nuclear as part of that RPS. It was outright rejected. So here we are today is we are having conversations. That state construct in Pennsylvania, as an example, did not recognize the value of nuclear power. And if the State wants to go down that path, we are seeing it more recently this past week in New Jersey, they're more than willing to do so. My drawing the line in the sand is how it impacts the wholesale power markets. And once we surrender that flag, we are out of business. We've got to protect the sanctity of those organized markets. So I recognize that as a Pennsylvanian but I also recognize in my new role that oversight of those highly functioning well organized markets. Mr. Doyle. And many Pennsylvanians, including myself, are strong supporters of nuclear power. It both satisfies reliability issues and it's also carbon free, and I think there should be alarm bells going across the country as we see how many of these plants may not go through relicensing and they're going to be replaced mostly for baseload capacity with--whether it's natural case or something else that emits greenhouse gases and it makes it almost impossible for us to meet our climate change goals. Commissioner LaFleur, I want to quote from your statement regarding the NOPR because I think it's exceptional in describing the current situation we face: ``The commission should continue to focus on its efforts not on slowing transition from the past but on easing the transition to the future. We must continue to guide grid operators in sustaining reliability and resilience within a system that is likely to be cleaner, more dynamic and, in some instances, more distributed, and deployed by an efficient market for the benefit of customers.'' I am amazed by the technological developments we've witnessed in the energy sector. The pace has gone from a walk to a jog to a sprint. And looking into the next decade or two decades from now, how do you think the regulatory bodies or agencies need to change to better reflect and adapt to these changes and what can we do here at our committee to facilitate those changes? Ms. LaFleur. Well, thank you for the question and for the compliment. I think one of the points of stress in the future is going to be the line between Federal and State, not because of any overweening ambition on the part of this commission or the Federal Government but because we are seeing more distributed resources, even behind the customer meter, collectively behaving just like a central station resource. And sometimes even more resilient because of the ability to modularize them if there's any kind of a weather event or an attack. So I think that we--as has been mentioned, we had a 2-day tech conference last week. But I think figuring out how we best deploy those resources for the future is where the public policy people, like everyone in this room have to be working now because the technology is coming so quickly. Mr. Doyle. Thank you. Mr. Chairman, thank you very much. Mr. Upton. Mr. Harper. Mr. Harper. Thank you, Mr. Chairman. Thanks to each of you for being here and for the dedicated job that you're doing on important issue. Maybe as a follow up to Mr. Doyle's questions, Mr. Chairman, if I could ask you, traditionally the regulation of DERs had been the jurisdiction of States and localities. However, with the issuance of Order No. 841 and its proposal for the aggregation of DERs for the purpose of participating in wholesale electricity markets, FERC could expand its authority at the expense of States and localities. So my question would be how will you deal with any jurisdictional challenges that may come about? Mr. McIntyre. Thank you for the question, Congressman. There are a couple of different things going on here. One is electricity storage resources and then, separately from that, distributed energy generating resources. As to each category, honestly, I am not particularly troubled by any sort of jurisdictional creep because that power would make its way onto our grid in a way that we could regulate it only after it had been aggregated and put forth to a market that we regulated--a wholesale electricity market. And there certainly is no attempt on the part of this commission to in any way thwart the ability of the State, for example, to determine in a retail level transaction what the owner of the generating resource would be--what level that owner would be compensated. And so, honestly, I don't see that as being a particularly great concern. Mr. Harper. Well, thank you for that answer. And Mr. Chairman, if I may ask you, you know, certainly, as you know, we talk about energy infrastructure. It's a very capital intensive venture, and Wall Street investors require a very high degree of regulatory certainty and sound rate making policies before committing capital. Does FERC currently have a methodology in place to set transmission ROEs? Mr. McIntyre. Yes, we do, sir, longstanding. Mr. Harper. OK. Longstanding. And how many complaints are currently pending regarding transmission ROEs? Mr. McIntyre. We have a number of them pending. Mr. Harper. A ballpark. You said a number. Mr. McIntyre. A dozen or so. Mr. Harper. OK. So what is the timetable for resolving those complaints that you just mentioned? Mr. McIntyre. Those matters are actively being worked upon within our agency right now. They are not subject to a specific timetable. They are something we are paying attention to. Our most important job, obviously, is to get it right. Mr. Harper. Obviously, and we want you to do that. That's good. Under EPACT 2005, FERC developed a policy, and that's in Order 679, I believe, which provides for incentive rate treatment to encourage the development of transmission line infrastructure. While this policy had been in effect since 2006, can you elaborate on the status of this incentive policy now? Mr. McIntyre. It's something that Commissioner Glick mentioned in his view as something that probably is ripe for some fresh attention. In a general sense, I would agree with that. Mr. Harper. Commissioner Glick, do you care to comment? Mr. Glick. Thanks, Mr. Harper. You were exactly right. So in 2005 Congress did provide FERC the authority to provide incentive rate making and the commission did have an incentive rate making policy and there was a believe that the commission was going too far in providing incentives for too many activities. So the commission subsequently issued a new policy statement that somewhat retransformed that particular policy and I think that the criticism may be that the commission may have gone too far in the other direction. I think that we need to take a fresh look at the policies or are we incentivizing the right things. For instance, we incentivize RTO participation but a lot of people already--utilities are participating in RTOs regardless of whether they have an incentive or not. But we really should be incentivizing are we using new technologies to make transmission capacity more efficient. Those are the type of things that I think Congress gave us the authority to do and I think it's a good idea to take a look at it. Mr. Harper. Are we still seeing our transmission developers filing applications for incentive rates? Is that still happening? Mr. Glick. Absolutely. We do often. Mr. Harper. OK. And do you believe it's at the appropriate rate and amount? Mr. Glick. I think we have to take that on a case by case basis. I actually dissented from one of those particular cases. But for the most part, I think the commission has approved those incentive rates. Mr. Harper. Thank you, Commissioner Glick. And with that, I yield back, Mr. Chairman. Mr. Upton. The chair recognizes the lady from Florida, Ms. Castor. Ms. Castor. Thank you, Chairman Upton, and welcome to our FERC commissioners, thank you for being here today. In the hearing last week on the Department of Energy budget with Secretary Perry, I asked him about research and development investments in energy storage because energy storage is so crucial to increasing America's renewable energy sources, incorporating them, and modernizing the electric grid. And even though the budget doesn't really match what we'd like to do, I think the Congress will come back and say we are committed to doing this just like we did in the omnibus bill. In fact, I noticed the Department of Energy just this morning issued a big press release on solar technology and investments. So but I have to say I was heartened by FERC's recently issued order, a 5 to 0 vote to remove market barriers for energy storage to participate in wholesale markets in the bulk power grid, because allowing energy storage should compete with fossil fuels like gas and coal will enhance competition. It will help us develop more clean energy resource and hopefully keep electric rates affordable for the average American. And experts say that the number one issue in clean innovative technologies is being able to integrate renewable energy with the large bulk transmission grid. So I commend you on your recent efforts to accommodate the growing clean renewable energy sources. However, the commission declined to also eliminate barriers for distributed energy resources, something that we were just talking about, which would help further integrate renewable sources into the electric grid. I saw in one press report it said that the commission was disappointed that you could not issue an order similar to your storage decision for distributed energy resources. So Mr. Glick, why did the commission not remove market barriers for distributed energy sources, like it did for energy storage, and what's the next step? Mr. Glick. Thank you for your question, Ms. Castor, and I agree with you, I think the technologies origin and distributed energy resources are the wave of the future and are going to provide significant amounts of benefits. There's still some questions that were left during the rulemaking process about reliability and how we interact with the States in terms of the distributed resource aggregation. So we actually had a technical conference last week. We had a 2- day conference, seven panels. I think we had enough information, in my opinion, to address the issue. The commission has a statutory responsibility to make sure that there's no undue discrimination again as any particular technologies and I think this is a good example where I think we are required to address this matter. Ms. Castor. So what are the next steps? You have the technical conference. Mr. McIntyre, what's next on your agenda on this? Mr. McIntyre. We did, indeed, have the technical conference. It was a 2-day technical conference. A lot of very, very good input from stakeholders of various roles within the industry and I agree with Commissioner Glick that the record that we are assembling through that process will enable us to take steps comparable, I would suggest, to the steps that you noted with regard to storage. I am not intending to forecast a particular outcome. I am just saying that we've got enough now to go on the make a determination about what the appropriate steps forward are. Ms. Castor. So would stakeholders still have the ability to weigh in with FERC? Mr. Glick. Yes, ma'am. Ms. Castor. OK. Ms. LaFleur, where do you think this is going? What advice would you give to stakeholders and folks in the public who are interested in weighing in? Ms. LaFleur. Well, the advice I always give is to be as specific as possible to help us and that's true even more so in this docket because of the real complexity of what we are looking at. There are only two macro issues. The first is the money issues, where you have these deployed distributed storage resources that can be paid at the State level. They can be used by the customer or they can be paid at the wholesale level. Who pays what to whom, how do we figure out we don't have double counting and so forth--I think that'll require some very specific rules. But the more suggestions we get, the better. The second is the operating issues of how the different control centers talk to each other. We've got some great testimony on that. I think one of the big issues we are going to have to think about as a body now is how uniform we make the rules as we put them out versus allowing regional variation. We heard a lot from some of the people who testified about wanting different regions to go in different directions here. I am somewhat of the belief that the technology is marching so quickly that we should try to figure out what best practices are now. But that's what we'll be debating and I think we'd like input on that. Ms. Castor. Well, thank you very much. I think it is an exciting time for the development of clean energy technology and I commend you on your interest in pushing this forward. Thank you very much. Mr. Upton. Mr. McKinley. Mr. McKinley. Thank you, Mr. Chairman. Over the past 8 years on this committee, we've heard a lot of comments in hearings about the--our aging coal and nuclear fleet--that it's out there, and unfortunately, in many regards, it's very expensive to upgrade those facilities and, in so doing, when they do make those upgrades, sometimes they lose their competitiveness and it puts them in a dilemma. Now, what we are talking about now is, again, we have across this country 531 coal-fired power plants shuttered in the last 10 years. We've had 11 nuclear power plants closed down during that period of time, and we keep having hearings but I want to move from the abstract to something concrete. I've got a power plant in Pleasants County, West Virginia. It's a 1,300 megawatt--1.3 gigawatts of power. They tried to sell that plant back in--because it's a merchant plant--they tried to move it over to the regulated and they were denied. So as a result, the operator now is seriously considering--and I believe it'll happen before the end of the year--declaring bankruptcy and shutting that plant down. Just follow the ramifications of that. This is a small county. Thirty percent of the tax revenue comes from that power plant--30 percent. So 30 percent, that's an overnight reduction that's going to affect their school system. What about their EMS? What about their hospital? All of the things that the country provides services are now a 30 percent reduction as a result of this. It goes further. We can further this domino effect. If this power plant closes down, there's a very high likelihood the coal producer that supplies that power plant will similar declare bankruptcy. If he declares bankruptcy, his relief will be to get away from his pension, is UMWA pension responsibility, which currently now funds 120,000 retirees. Now, the object would be, if that's reduced, they would be shifted over likely to the Federal pension guarantee fund. But I've got a letter from the pension guarantee fund that says don't put those 120,000 on us because then we'll go under. So you see the domino effect of this. A mere request-- somehow provide some assistance so they could be an existing power plant and have been--have been rebuffed. Just wouldn't it be more efficient and prudent to try to find a vehicle--a means, whether it's a 403, whether it's a 202--some modification of that so we can keep some of our marginal power plants operative? So, Mr. Chairman, if I could ask you, when FERC denied the 403, did anyone come up with what the cost to the consumer could have been if 403 had been imposed on, let's say, in Pleasants County power plant? Does anyone have an idea what the costs could be just to keep it operating? I guess the answer is none of you know. Mr. McIntyre. I am sorry, Congressman. You refer to the costs of the Secretary of Energy's fourth NOPR directed to us? Mr. McKinley. Just what would it cost to keep that power plant operating. Are you talking about $50 a year per customer? Mr. McIntyre. I do not have that figure. Mr. McKinley. Could you get that to me? Because we have reason to believe it's less than $50 a year per customer and the consumer currently is paying $50 a year for tree trimming. That's hundreds of jobs that could be lost--the pensions that could be lost for our miners and our steelworkers, all that would be affected with this. I think we have a moral responsibility to look at this thing holistically rather than just an ideological fight against what we think is a free market and I think too many of you have said both publicly and privately that we really-are questioning whether we have a free market system in energy. Let me just ask you, do we have a free market system in energy? Mr. McIntyre. We do not have a perfect market system in energy, that is certain. Mr. McKinley. OK. Because I think, Mr. Powelson, you said in Pennsylvania that without the subsidy for wind and solar there wouldn't have been any build up there. Is that correct? Mr. Powelson. I put it in the context of the renewable portfolio standard, how it was designed. Mr. McKinley. OK. Mr. Powelson. We also, though, in our RPS I believe we have a requirement set aside for waste coal in that RPS. So yes, to the chairman's point and to Secretary's point, these are not pure markets. There's been---- Mr. McKinley. Thank you. I don't think they are either. So I will just close with again, I am asking look seriously at the bigger picture--what we are going to do to communities like Pleasants County. A 30 percent overnight loss of tax revenue-- how are they supposed to meet their education demands, their health care needs? Thank you. I yield back. Mr. McIntyre. Thank you, Congressman. Mr. Upton. Mr. Tonko. Mr. Tonko. Thank you, Mr. Chair, and thank you, Chair McIntyre and all of our commissioners for appearing here this morning. Last month, I held a round table with a variety of stakeholders interested in storage, and everyone agreed that Order 841 was a necessary step forward to lower barriers for storage's participation in the markets. Chairman McIntyre or Commissioner Glick, do you believe that reducing barriers and enabling greater storage deployment will be beneficent to grid reliability and resilience? Mr. McIntyre. I will jump in first. I think every avenue for reliable energy that can make its way to our grid can only help resilience and reliability, hence my expression earlier of my support for an all of the above approach to satisfying our nation's energy needs. Mr. Tonko. Thank you, and Commissioner Glick. Mr. Glick. Thank you, Mr. Tonko. I agree. There are numerous benefits with access in distributive resources and aggregating distributed resources. I would point out that, too, would be one, increased competition in the market will certainly lower wholesale electric prices, but secondly, I think it gives RTO and ISO operators more input, more understanding of what's going on behind the meter, which is certainly, I think, an increasing concern with regard to the reliability of the grid. Adding aggregation to the mix would actually increase and enhance reliability on resilience. Mr. Tonko. Thank you. That's good to hear, because I believe it has a number of significant benefits--reduction of peak demands, integration of variable renewable energy, frequency of regulation, and congestion relief. So it's encouraging. As this order moves forward, I hope you will continue to seek to reduce barriers for emerging technologies and work to resolve issues from the distributed energy resources technical conference. But I also want to address another recent issue that was considered by the commission. The relationship between FERC electricity markets and State policies is not a simple one. But, certainly, States have a significant role in determining their generation mix. I want to ask about ISO New England's competition auctions with sponsored policy resources proposal. In paragraph 22 the commission's order states, we intend to use the minimum offer price rule to address the impacts of State policies on the wholesale capacity markets, and minimum offer price rule will be the ``standard solution'' to manage the impact of sState policies. I know that there's been some discussion about State opportunity, State rights. But Commissioner Glick, I would like to hear from you. I know you dissented due to this section. Can you explain your concerns about the use of MOPR to interfere with state policies? Mr. Glick. Thank you, Mr. Tonko. Yes, I did dissent and dissented in large part to that paragraph 22 that you referenced. In large part, I don't believe the Federal Power Act gives FERC the ability to make resource decisions. I think it's up to the States to do that. In addition to that, I have some grave concerns that it's actually going to dramatically increase the cost of electricity in these regional markets as well because states may still choose to pursue these policies, but if those resources have been replaced with another generation of resources it's just going to lead to overbilling and then consumers are going to pay more. Mr. Tonko. And thank you for that. And do you believe there's a role for governmental programs to address legitimate policy considerations that arise as a consequence of power generation such as clean air or climate change, if I dare mention that? Mr. Glick. Absolutely. These electric markets, for the most part, don't take into account externalities. So I think States and the Federal Government both have a role in ensuring externalities such as greenhouse gas emissions need to be addressed in another manner. Mr. Tonko. And I believe you're indicating this, but just for clarity, if MOPR is a standard solution, could it result in consumers paying more to prop up generators that run counter to the policies adopted by those states? Mr. Glick. Absolutely. That's one of my significant concerns, yes. Mr. Tonko. In my home State of New York, we recently implemented a clean energy standard to make significant reductions in greenhouse gas pollution, which is not currently priced into the market. Should New York have the right to determine its energy future and protect its citizens from environmental impacts? Mr. Glick. Certainly New York should have the right and I think one of the concerns if you are supportive of these capacity markets is that if State policies are then overturned by FERC decision making those States are going to cause their utilities to pull out of these capacity markets. Mr. Tonko. Yes. And I know you all supported the storage order. But similarly, we are seeing States enact or consider mandates and incentives for storage resources. Like you all, States have recognized the benefits of these technologies including reliability benefits and want to see them as part of their resource mix. As storage resources are able to participate in capacity markets, might some of these State policies come into conflict with the MOPR solution? Mr. McIntyre. I think there's a very little danger of that under paragraph 22. Mr. Chatterjee. If I could just add to that, Congressman, in regards to specifically paragraph 22. I voted for the underlying CASPR order because I thought it was important and a necessary step in ISO New England. I put a great amount of time and effort into it. Having worked in this chamber before, you don't always agree with every single word of legislative text on a bill that you vote for and I think, going forward, I thought it was more important that CASPR pass than to focus on every word of paragraph two, what's in there, and I agree with the valid concerns that you're raising. Mr. Tonko. So with that being said, is there a need for addressing this as we go forward? Mr. Chatterjee. I think that, as the chairman quite eloquently spoke to earlier, that juxtaposition, that collision between market forces and our wanting to uphold these markets with state policy rights and state interventions that is going to be something that we continue to juggle with and I, for one, believe that some accommodation is necessary. Mr. Tonko. Well, I am proud of the efforts my State is making and as a downwind State we don't want to be impacted by poor policy. So with that, I appreciate all of your comments and I yield back, Mr. Chair. Mr. Upton. Gentleman's time has expired. The gentleman from Illinois, Mr. Kinzinger. Mr. Kinzinger. Thank you, Mr. Chairman. Thank you all for being here and spending some time with us today. We appreciate it, and I just want to thank you also for your commitment to making sure that our homes and businesses have reliable energy. I think we all recognize how vital your mission is to our nation's economic and national security. That being said, our main concern about the resiliency and reliability of our energy supply. For years now, we've recognized the precarious situation that our nuclear plants are in. My district is home to four nuclear power plants and--which is the most in the country and it accounts for 12 percent of the Nation's nuclear power. These plants provide good jobs. They're good for our environment and I think we've seen that they're proven performers during extreme weather events, whether it's Polar Vortex, hurricanes, things like that. Yet, two plants in Illinois are still almost closed. Thousands of jobs and a significant amount of clean energy were almost lost. The State of Illinois had to step in to recognize the important role that these plants play in our state economy but also in the reliability of our energy supply. Unfortunately, now other plants in other States are facing the same fate. So to the whole panel, as you know, in some wholesale energy markets certain resources like nuclear are struggling to recover costs and remain competitive, which has led to the earlier retirement of plants that could otherwise continue to run for decades. Do you think energy markets can better value resource attributes for all types of energy generators and what about resiliency and reliability specifically? Mr. McIntyre. Congressman, I will jump in first here. Thank you for the question. Mr. Kinzinger. Sure. Mr. McIntyre. We have acknowledged here the importance of ensuring that States are able to exercise their legitimate role in making resource decisions and expressing resource preferences through law, such as you have acknowledged that Illinois has done with regard to the nuclear fleet there, and we just have to ensure that with regard to the wholesale markets that we oversee that rates are indeed just and reasonable, which is our longstanding statutory standard, and that nothing done at the State level amounts to a pressing of the thumb on the scale or, as my colleague, Commissioner Powelson has said, picking winners and losers in a way that we would regard as inconsistent with the statutory role---- Mr. Kinzinger. But let me ask you, kind of more deeply on that, is there a value to the reliability issue? Is there a value to resiliency, reliability, things along that line? Mr. McIntyre. As to nuclear? Mr. Kinzinger. Yes. Mr. McIntyre. Certainly my view is we very much need to be an all-of-the-above. We need an all-of-the-above policy in terms of satisfying our nation's generating needs and I certainly personally include nuclear in that mix. Mr. Kinzinger. Well, that's great. I appreciate that. But the question is do you think that you can better value resource attributes like that to nuclear, for instance? Mr. McIntyre. That's a question that's before us now in our ongoing proceeding on grid resilience. Are there resilience attributes that are present but are not being adequately compensated? If the answer to that question is yes, then I think we've got to decide what steps are appropriate. Mr. Kinzinger. OK. Anybody else want to add to that? Mr. Powelson. I would pick up on it. I heard earlier from Chairman Walden we talked about customers and customers having choice in these competitive markets. In your State, your former governor and your legislature adopted electric restructuring. Those nuclear plants you referenced, customers paid a competitive transition charge as part of a stranded cost investment. And so where we are today in my State and your State where we have--we are the second largest nuclear production State-- where something that was ``too cheap to meter'' is coming back into the market, whether it's a value around resiliency, and we are being asked--theoretically, your constituents are being asked to do another stranded cost for those assets. So if I am a gas operator or I am an emerging technology in the market, I am not getting any type of backstop for my resource, and I could be clean and efficient and resilient. So I think, to the chairman's credit, we are looking at that and developing this record. There are characteristics of nuclear plants that will clear in these markets. It's a concern that I've seen in my State that where a standalone nuclear reactor like Three Mile Island is under tremendous stress, and why is that? Well, it's because 100 miles north up the 83 corridor is gas coming out of the ground at $1.21 per MMBTU and a power plant that has a much lower cost to run and can provide baseload resource on the grid. Mr. Kinzinger. But I think the question is long term. How do we value the fact that that may change? It may go from $1.20 to a billion dollars, right? In which case now we find ourselves, as some European markets and other markets have that undervalued nuclear power in a tail chase against the cost of electricity. Specifically, I just got back from Australia and they're finding themselves in that kind of a situation as well. So my time has run out. I thank you all for being here and, Mr. Chairman, I yield back. Mr. Upton. Thank you. The chair would recognize Mr. Griffith. Mr. Griffith. Thank you, Mr. Chairman. I appreciate it very much. A lot of good information floating around here. I want to go talk about pipelines. We've talked about how we need pipelines to get the natural gas where it needs to go, particularly in the northeast. But in the Commonwealth of Virginia, we have two pipelines coming through right now pretty much at the same general area, and people have a lot of questions and I have a lot of questions, and FERC can do a better job. And I talk to you all about this because a lot of you all are new and we got to figure it out. And so I appreciate, Mr. Chairman, you revisiting the 1999 standing policy on pipeline applications. But let me just tell you about the one coming through my district. One comes through my district and one doesn't but they're fairly close together. I learned about when a member of a board of supervisors in the county called me up and said there's surveyors all over the county. Nobody knows what they're doing but they claim it has something to do with a gas pipeline. Now, that's not your all's fault. I get it. That's somebody else's fault--the folks who were not informing the elected officials. But I didn't know anything about it. The county didn't know anything about it. Nobody knew anything. Then comes FERC, adding insult to injury. Had two public hearings. Goodlatte, Hurt, who was here then, and myself begged for more public hearings so that people could travel a shorter distance to get to these hearings because it was affecting their communities. Didn't happen. Crickets. And so I am glad you're looking at it and I am going to assume, Chairman McIntyre, that this new plan that you're looking at will review the public comment meeting process as part of your evaluation. Is my assumption correct? Yes or no. Mr. McIntyre. Yes, it is correct. That's very much within the scope of what we intend to review. Mr. Griffith. And can I further assume that you are committed to working to ensure there's a method by which FERC offers full and transparent comment from the public about potential projects? Can I make that assumption as well? Yes or no. Mr. McIntyre. Yes. Mr. Griffith. I have a bill and it's been so frustrating that Senator Tim Kaine and I--we don't generally agree on a lot of things--we both have bills in. Now, we got different versions because we don't always agree on things, but we have bill in on this. Mine is H.R. 2893, the Pipeline Fairness and Transparency Act, and this is to express these concerns that our constituents have been living with now for several years and still feel very frustrated. But I would like to even look at going further than that. So I want you all's input on that. But I would also like input on things that we can do like on placing the lines, on putting the lines in the same corridor. While the folks in that corridor may not appreciate it, you don't have two different sets of communities all across the Commonwealth of Virginia being disrupted, and then maybe taking a look at where are the companies and what are the policies where the companies are placing not only the pipeline but the pumping facilities to move the pipe down the line and do they need to be quite as big. A lot of folks are concerned about that. So as we go forward, are you all willing to work, and I would ask each of you, are you willing to work with us to try to get some legislation that makes folks feel like it's not just being crammed down their throats but they actually have input and that somebody out there is actually listening? Mr. McIntyre. We welcome the opportunity to work with you on that. I don't want to leave you with the false impression that we don't have mechanisms in place today for proper public input because we certainly do, and one of the key issues that's before us even under our existing policy is to make a determination as to whether a particular project is needed and that's to root---- Mr. Griffith. OK. Mr. McIntyre. Sorry to interrupt, sir. Mr. Griffith. Well, and I will be happy to give more answer, but my time is running out and I've got another subject to hit. But I will just tell you the frustration level in Virginia is so high, that while you all have a system I appreciate you looking at it because it apparently isn't working to give confidence to the public, and I appreciate that. Now I've got to move on to some issues related to businesses and homes that are on non-Federal hydropower project facilities. I have gotten a lot of questions from Friends of Claytor Lake that I will submit for the record and hope that you all will answer after the fact because we have some real issues related to shoreline management plans. This issue didn't really develop until in the last 10 or 15 years and so we have some questions about how that goes forward. I picked up Robert Hurt's bill on shoreline management, the SHORE Act, which is H.R. 1538, and I hope that you all give us some input on that. But I think this is something that we need to work on together, because a lot of folks feel their property rights have been affected and, of course, economic development has been affected as well. So I look forward to working with you all on those issues as well, and I see that my time is up and, Mr. Chairman, I yield back. Mr. Upton. The gentleman yields back. Dr. Bucshon. Mr. Bucshon. Thank you, Mr. Chairman. Chairman McIntyre, in your testimony you state that one of your top priorities is to protect and promote the resilience of the bulk power system. I am pleased to hear that we share this same priority. But I remain concerned with the lack of urgency to address properly valuing reliable and fuel security energy sources. There are many sources of energy that can power the grid and I am a supporter of an all-of-the-above energy strategy. However, after every major winter storm, whether it be the 2014 Polar Vortex or the most recent bomb cyclone, studies conclude that coal-fired electricity was needed to prevent major blackouts, establishing coal-fired electricity as one of the most reliable, fuel-secure, and affordable energy sources available. Just so you know, every coal mine in the State of Indiana is in my district and many of the coal-fired power plants. Even with its reliability, coal-fired power plants continue to retire in alarming numbers for many of the reasons we've already discussed. Thirty-nine coal-powered generating units have been forced to close in my home State of Indiana alone. I am supportive of the efforts you're taking to properly value traditional baseload generation that provide our nation with a more reliable and secure grid. But I am concerned that if we don't act soon, more coal plants will continue to retire prematurely, leaving my constituents in my State without reliable energy and many of the risks--that risk of losing their jobs, as was outlined by Congressman McKinley about how that goes down the line. This is why I have introduced H.R. 5270, the Electricity Reliability and Fuel Security Act, which would create a temporary tax credit covering only a small portion of the cost to operate and maintain existing coal-fired power plants. And in fact, just yesterday, Senator Capito from West Virginia introduced a companion bill to H.R. 5270 in the Senate showcasing the urgency of this matter. I believe the temporary tax credit, which would last for 5 years, is necessary to maintain the reliability and resilience of the grid while policy makers work together to agree on a long-term plan for the grid. We need a little bit more level playing field. Chairman McIntyre, can you provide an update on FERC's efforts on this issue and are you supportive of congressional action to maintain a reliable grid while the commission collects comments on how to best address grid reliability? Mr. McIntyre. Yes, sir. The question you have raised about coal is very much wrapped up within our grid resilience work, particularly given the way that the grid resilience topic was teed up for us in the first instance by Secretary Perry with the Section 403 action--the NOPR that was presented to us for our consideration. So we have to look at this and ask ourselves the question whether those coal-fired generating resources are contributing grid resilience attributes in a way that cries out to be compensated at levels higher than they currently are receiving in the marketplace. If the answer to that question is yes, then I think we have to address the very difficult question of what is it appropriate for us to do about that. The question is completely legitimate and, as you suggest in your statement, Congressman, this is broader than just grid resilience. There are economic issues here in play as well. So we understand how important the issue is. Mr. Bucshon. Yes. When we are importing LNG for energy sources and we are using a lot of energy from our friends in Canada, to turn a blind eye to our own ways to generate energy, at least in the short run, is not the right thing. Mr. Chatterjee. Mr. Chatterjee. Congressman, I just want to echo that I share your sense of urgency. I am optimistic about the resilience proceeding and the docket that we have ongoing. But I am concerned that it'll take time and that's why, during the course of our consideration of Secretary Perry's NOPR, I had advocated for an interim solution. What I've come to learn in the subsequent months since we dealt with that NOPR is there are real challenges and in sight of the situation in New England--the ISO New England fuel security study, you know, highlights that and I do think the moment will come sooner rather than later when we are going to have to confront this and your sense of urgency is right on and look forward to seeing how the legislative effort you have progresses. Mr. Bucshon. Thanks. And also just because--all of the above, earlier this Congress the House unanimously passed my bill 2872, the Promoting Hydropower Development at Existing Non-Dams Act. You may or may not be aware of that. But it would promote hydropower development at existing non-power dams by establishing an expedited licensing process for qualifying facilities that would result in a decision on an application 2 years or less. Senator Portman and Senator McCaskill just recently introduced a companion bill in the Senate and I think we have a good chance of getting that across the finish line so that we can convert some non-hydro power generating dams across this country in ones that produce long-standing clean energy. Thank you. I yield back. Mr. Upton. Mr. Johnson. Mr. Johnson. Thank you, Mr. Chairman, and thank the commission for being here with us today. I've been closely following the discussion surrounding DOE's NOPR that the commission rejected. As some of you probably know, my district in eastern and southeastern Ohio is home to an abundance of natural energy production, particularly natural gas and coal. So these issues hit especially close to home and I take notice when major employers in my district speak out on this issue. For instance, the CEO of Murray Energy recently stated that FERC did not do its job when it rejected this proposal-- that is, the DOE NOPR. Commissioner Powelson, I believe you recently made some comments indicating that you disagree with Mr. Murray. Can you expound on that? Mr. Powelson. I take offense to the word feckless being used to colleagues that I serve with here, and as I mentioned earlier---- Mr. Johnson. That term was what again? Mr. Powelson. Feckless, used to describe the FERC, my colleagues, and the 1,320 employees that show up to work every day to do their job around safety and economic regulation and making sure our wholesale power markets are functioning. So---- Mr. Johnson. I think your statement on social media, though, was more about conducting a debate, right? Mr. Powelson. I refrain from going down that path. I thought it was inappropriate and I dialed it back rather quickly. Mr. Johnson. All right. Commissioner Chatterjee, I've read your testimony and wondered if you had any further thoughts on this issue. Mr. Chatterjee. Yes, sir. Obviously, throughout our consideration of the DOE NOPR, I expressed great sympathy with what Secretary Perry had proposed and I saw first-hand during my time serving Leader McConnell and working in the Kentucky delegation, working with folks like yourself through various energy caucuses in the Congress the severe impact that was taking place in whole communities throughout Appalachia, throughout Kentucky, throughout Ohio. The challenge we had is serving at the commission at the independent regulator. We have to work based on the record that was before us and, unfortunately, the record did not support compensating fuel sources based on having that onsite fuel capability. That doesn't mean that the question that was posed by Secretary Perry wasn't the right question and that doesn't mean that in our further work we won't be able to address these sensitive issues. But speaking to the manner in which the NOPR was handled, I am a conservative. I believe in a narrow interpretation of statute and my narrow reading of the record in this case was it simply didn't support it, and while I have deep sympathy for the sentiments that Mr. Murray, folks in your community, are expressing and the concerns they have about the economic impact, the job impact, the cultural impact of these shutdowns from the seat I sit in now, our records simply didn't support taking action at that time. Mr. Johnson. Thank you for clarifying. Moving on to another subject, we've also discussed cyberattacks and data policy violations have been issues recently and frequently highlighted in the news--attacks on U.S. government agencies and universities including FERC, for example, the recent Energy Services Group attack, and the platform policy violation by a Facebook developer. In light of these events, what are the commission's thoughts on its current security practices for protecting sensitive information such as CEII, Critical Electric Energy Infrastructure Information, that FERC collects from regulated energy companies and shares with third parties? Is there any discussion on evaluating methods to strengthen those practices? And let me go back to you, Commissioner Powelson, in light of your focus on cybersecurity in your testimony. Do you have any insight on this issue? Mr. Powelson. Well, I think the work that's being done right now working with NERC and refining some of these standards, one, there's kind of four points we are looking at. One is the vendor remote access to data, also software authenticity and information system planning, and then vendor risk management. This all coincides with what I call the, say, best practices around cyber hygiene, and to your point of that critical infrastructure information being lockboxed and protected is critically important. You mentioned the situation that unfolded at the FERC where our internal system was violated. We are still looking at that issue, making assessments on what kind of data might have been exposed, and I think to the work of the folk at the FERC, we seem to be in a good spot in developing proper protocols around fishing expeditions and making sure that we are hygiene proficient as well, and that's what happened in that particular case. Mr. Johnson. OK. Well, thank you very much. Mr. Chairman, I yield back. Mr. Upton. Mr. Long. Mr. Long. Thank you, Mr. Chairman, and thank you all for being here today and for your testimony. Chairman McIntyre, recently City Utilities of Springfield, Missouri, has seen a substantial rise in transmission costs in the Southwest Power Pool. Most of these costs are related to funding transmission projects outside of Missouri. Some of the projects allow utilities to access renewable energy located outside the State. However, the benefits far outweigh by the rise in transmission costs for the projects located far away. Southwest Power Pool's own studies have shown the City Utilities' transmission costs and energy prices are substantially higher than other customers in the Southwest Power Pool. What will FERC do to address the issue of rising transmission costs in the Southwest Power Pool's footprint? Mr. McIntyre. I am not familiar with the study you reference, Congressman. But I will say that, as a general matter, our transmission costs allocation is subject to policies under a landmark order we call Order 1000 that governs our transmission planning processes and the determination of how to allocate the cost of transmission projects across their geographic footprint. Generally speaking, it would be surprising that a particular entity paying those transmission costs is paying significantly higher than other entities served by the same facility. Mr. Long. These are studies that Southwest Power Pool--they had their own study, City Utilities--Southwest Power Pool did. So I will get you that information, and if you can have your folks look into it and get with my people, I would really appreciate it because---- Mr. McIntyre. Yes, I was going to make that offer. We'd be delighted to. Mr. Long. It sounds like an egregious situation. So will FERC address the concerns that some customers like the City Utilities are paying for assets for which they have no benefits? Mr. McIntyre. Well, we do have processes in place today that enable any entity that feels that it is paying for something it should not have to pay for--in effect, to initiate a complaint proceeding with us--and our role at that point would be to address the merits of the complaint and determine whether there is legitimacy to it and, if so, what steps we should take to remedy the situation. Mr. Long. OK. Well, I know you have---- Mr. McIntyre. This is also something we can follow up on. Mr. Long. Yes. I know you have some good folks and I have some good folks so, hopefully, we can get them together and I think we are going to be in close contact for a while on that until we get some answers. Mr. McIntyre. I would welcome that. Mr. Long. Thank you. And Commissioner Chatterjee, in May or on May 22nd in 2011--I had been in Congress for 5 months--and we had an F5 tornado ravage through Joplin, Missouri, in my district--killed 161 people, took out 8,000 homes, 500 businesses, leaving 161 people dead and thousands without power. In your testimony, you talk about the importance of planning for potential catastrophes as it relates to electric vulnerabilities in a region and you highlight the work being done by IOS New England. Can you talk about the proactive working being done to mitigate these risks and how other RTOs and ISOs can plan for catastrophic weather events? Mr. Chatterjee. I want to start, Congressman, with saying that, such events like that are tragic. They can devastate communities and, obviously, we all need to work collectively to get ahead of these kinds of tragedies. We at the commission focus on electric reliability and in ensuring that power remains available, that the lights stay on. The reason we are undergoing this resilience proceeding is we want to make sure that in the event that the power goes off that it can be restored quickly. I think as these types of severe weather events become the new normal, we've got to take great steps to get ahead of that. I was actually in Georgia last week meeting with folks from Georgia Power about the extensive efforts that they take in advance of storm preparation and afterward. And so I think the private sector will continue to do a tremendous job. I think our linemen and women are some of the bravest people in this country. They should be honored and recognized for the sacrifices that they make and we at the commission will continue to do our job to maintain electric grid reliability and I am counting on the great linemen and women of our country to be responsive in the light of tragic events like, unfortunately, to your district. Mr. Long. OK. Thank you. And I am running close to being out of time so, Chairman McIntyre, I have a question that I will get to your folks from my folks, once again, concerning the Iranian hackers' attempt to breach FERC's computer systems and I know we are in an unclassified setting here. I was going to have you explain as much in a unclassified setting as you can. But I will submit that in writing to your office and I would like to have some answers on that. And also what steps are being taken to prevent this from happening again? Mr. McIntyre. Absolutely, sir. I look forward to following up with you and your staff on that. Mr. Long. Mr. Chairman, I yield back. Mr. Upton. Mr. Walberg. Mr. Walberg. Thank you, Mr. Chairman, and thanks to the panel. This is a panel we've looked forward to for a long time. It's good to have you all here. I want to dive right in with a fairly straightforward question which I hope will be just a simple yes/no answer. We can all agree that the energy landscape is vastly different than it was back in 1978 and even in 2005. Do you believe that PURPA should be updated or modified to reflect today's energy environment? Yes or no, and beginning with the chairman. Mr. McIntyre. Yes, I believe it's time for us to look at that issue. Ms. LaFleur. Yes. I think it would be timely for Congress to look at PURPA. Mr. Chatterjee. Yes, but I think not only should Congress look at PURPA but FERC should look at our own regulations and see what steps we may be able to take. Mr. Powelson. Yes, PURPA needs to be modernized. Mr. Glick. I think it's appropriate for FERC to take a look at some of the issues of PURPA but I think the major issues that were addressed in the 2005 Energy Policy Act need to be addressed by Congress in terms of PURPA's future. Mr. Walberg. Well, I appreciate the fact that it's a generally yes answer. I think PURPA right now is holding us back on an all-of-the-above energy plan. Its intentions, certainly, assisted in moving forward renewables. But right now, we are holding back some of the renewables in being more efficient in the process. So I appreciate that. Chairman McIntyre, I am pleased that FERC held a PURPA technical conference in June 2016. The docket has been open for nearly 2 years now and I am curious as to the timeline for acting and what possible actions you believe the commission could take. Mr. McIntyre. There are a number of different actions we could take. As has been referenced, any significant overhaul of PURPA would have to come from the Congress. Within the scope of FERC, some of the issues that we look at and that we hear from constituents on--constituencies, I should say--stakeholders on, are have we properly treated the question of how a particular project is measured. Some accuse some of the players in industry as engaging in gamesmanship in how they slice the size of a project--to take a project of a certain size and break it into smaller components for purposes of PURPA treatment so that it gets the benefit of being considered to be a so-called qualifying facility under PURPA. That's one of many examples I could give you. The States have a role here too because it is the States that determine the rate at which PURPA generators are compensated--the so- called avoided cost rates. So I think that these are issues that we can look at within our existing statutory authority. Mr. Walberg. I appreciate hearing that. I would agree with you and I agree in looking at PURPA myself that while Congress I think ought to take action on it, yet there are significant upgrades, modifications that I believe FERC can make on your own, and then we can follow on and be an asset to you. Commissioner Chatterjee, you stated in your testimony that significant changes related to PURPA would require congressional action, as we agree. But I am under the belief that FERC can address many issues with PURPA right now, including problems with the 1-mile rule, which I think goes into gaming, as you talked about, Chairman, and reduce the 20- megawatt threshold of a QF in organized markets if the FERC decided to do. So would you consider, Mr. Chatterjee, fixing the 1-mile rule and adjusting the megawatt size of QFs in organized markets a significant change? Mr. Chatterjee. Thank you for the question, Congressman. Just to clarify, what I said in my testimony was that major structural changes to PURPA need to come from Congress but that does not mean that we can't look at things within FERC's own regulations and I do believe both issues that you have identified the 1-mile rule and the 20-megawatt threshold are things that FERC could consider and address. I think the record is already there to potentially act on the one-mile rule and while additional development of the record could be helpful on the 20-megawatt threshold, there is already arguably enough in the existing record that the commission could proceed on it. And in the limited time I served as chairman I stated that this was a top priority of mine and I hope to work with Chairman McIntyre and my colleagues to work on these and other elements of it. While you have an excellent bill, the likelihood of that bill getting through my former colleagues in the United States Senate could be a challenge and therefore I think it's incumbent upon us to do what we can. Mr. Walberg. Don't curse the project. [Laugher.] Thank you. I see my time has expired so I yield back. Mr. Upton. Mr. Duncan. Mr. Duncan. Thank you, Mr. Chairman. Commissioner Powelson, you mentioned in your opening statement I believe that FERC is aware of the frequency of cyber and physical threats to the Nation's infrastructure and that you believe that threat is only increasing. And I want to commend the commission for making cyber and physical security a top priority. How can Congress work together with you and with the administration to make this a top priority in our upcoming infrastructure reform bill? Mr. Powelson. Congressman, great question, and I think it starts with where we've evolved over the last 8 years with building these cyber protocols. Interagency cooperation has been critically important. It started off really as a silo mentality, and now the dissemination of that information and that capacity building, as I mentioned earlier, down to the States, your State included, that's a big challenge, going forward. But I think it's a resource issue. Our operation at the FERC there's probably 20 to 25 people who are fully engaged in this effort-- the effort that Secretary Perry is undertaking with his Office of Cybersecurity another step forward. But I just think it continues to evolve. There's no silver bullet to this, if I could use that expression lightly. Mr. Duncan. Are you all working with any private entities? And I guess the question is are you familiar with what Clemson University is doing with grid simulator and infrastructure simulator down in Charleston? Are you all familiar with that? Mr. Powelson. So two things that you're seeing across the States that we are involved with--one is the GridX exercise, which I understand is run by NERC. We also have these tabletop exercises in my home state. We did what we call a black sky event and you look at all these different scenarios and under I guess Chairman---- Mr. Duncan. Is it primarily looking at cyberattacks when you do that? Mr. Powelson. It is all part of that, yes. Mr. Duncan. Because, you're familiar with the geomagnetic storm that have hit in the northeast and Canada--power outages and-- we've got to be prepared for both natural GMDs but also EMPs--manmade--because we've got ``Rocket Man'' in North Korea that could definitely send a nuclear weapon into the atmosphere and create an EMP and I hope that you guys are looking at that as well. Mr. Powelson. I think from a preparedness posture, I think we--I can say we are. But it is--again, it's evolving. Again, another great step is the work at DOE in their cyber office, and collaborating with the states. I firmly believe we are helping states build much-needed capacity. Mr. Duncan. Can we drill down on that, helping states? And let me ask how you're helping, say, the private or the small cooperative--electrical cooperatives in the states. What are you doing to help those guys? Mr. Powelson. I don't know. That's a good question. The reason I don't know is some of these entities are not regulated by a state public utility commission. They're part of public power. But I do know that public power is participating in these cyber protocols. So---- Mr. Duncan. Just bringing it up with Duke Energy then, and you're working with companies like Duke and Southern? Mr. Powelson. We are. Mr. Duncan. OK. In what ways? Technical advice, inviting them to these simulations? Mr. Powelson. Well, Southern--under their chairman and CEO Tom Fanning, he's a leader in the ISAC. We also do it through an audit process. Lynn Good, who runs Duke Energy, is also active in that. We've had through the working groups at EEI, the evolution of a cyber mutual assistance protocol which, again, was a newly tasked effort. Again, these are merging resources that are coming out of the discussions here in Washington. I think it's a good posture for us to be leading. But there are challenges and I think those challenges start with providing those resources to build up these capacities. Mr. Duncan. As we work on the infrastructure bill. I am one member of Congress that hopes we will look at grid hardening as part of the infrastructure package that we do. Let me just ask one further question. Duke Energy has the Bad Creek project in northern Pickens County, which has a hydro storage facility to pump water from Lake Jocassee to a hydro storage facility, release it. Turns the turbines during peak demand, provide electricity for that demand, and then during low peak it'll pump the water back up, reverse the turbines, and store that water. It's a great energy storage concept. I know we are doing that with solar power. How active are you all involved with--I think Ms. Castor asked that question--with the hydro storage for basically battery capacity for wind and solar? Mr. Glick. Mr. Duncan, if I may, I think we actually issued a rule several weeks ago which actually provides--and it's not only for battery storage but also for pump storage in terms of facilitating their participation in the wholesale markets and I think in addition to that, the commission has authority over the licensing of hydro projects as well. So we'll be involved in that. For the most part, it's actually just facilitating or ending or eliminating those market barriers that currently exist for those types of technologies participating. Mr. Duncan. I thank you for that. My time is expired. I yield back. Mr. Upton. Mr. Lance. Mr. Lance. Thank you, Mr. Chairman, and I want to thank you and Ranking Member Rush for permitting me to participate today. I am a member of the full committee but I am not a member of this subcommittee. Chairman McIntyre, on January 19th, FERC issued a certificate of public convenience and necessity to the PennEast Pipeline Company authorizing a natural gas pipeline through Pennsylvania and New Jersey, including in the congressional district that I serve. The certificate also gave PennEast the legal ability to file eminent domain lawsuits against private landowners. As FERC opens a docket to re-examine the pipeline certification policy, what kinds of measures will you consider to ensure a robust economic analysis of public need, especially in those instances when precedent agreements are largely signed with affiliates of the owner like in the case of PennEast? Mr. McIntyre. Well, as you know, Congressman, we have initiated a fresh look at our 1999 certificate policy statement that addresses some of these issues. We are looking forward to robust public input, input from stakeholders and the public on the important issues involved here including the ones that you have cited. Mr. Lance. I thank you. Commissioner LaFleur, how will you ensure a project's environmental impacts are sufficiently considered, a topic you discussed in your concurring opinion? Ms. LaFleur. I think that's one of the main issues we will be teeing up for looking at when we look at the policy statement, both how we best do our environmental work on the traditional parts of the pipeline but also downstream impacts of the end uses that the pipeline contributes to, including climate impacts. I think that'll be directly to that. Mr. Lance. Commissioner Chatterjee, what steps will you take to prevent negative consequences on landowners, a concern you described in your concurring opinion? Mr. Chatterjee. Yes, sir. I did have concerns about landowner protection and it's something that as we explore the revisitation of our pipeline certificate process I want to ensure that landowners' voices are heard, that they understand the steps available to them to potentially mitigate concerns that they may have--rerouting and other types of elements. I want to make sure that they feel that their voices are recognized as part of that process and there's a commitment. Mr. Lance. Thank you. Chairman McIntyre, as FERC reviews the pipeline certification policy, how will you ensure State and local rights are adequately protected? This past June, the New Jersey Department of Environmental Protection denied PennEast a freshwater wetlands individual permit and a water quality certificate, which are required to begin construction under the Natural Gas Act. What steps, if any, will FERC take to safeguard state and local autonomy? Mr. McIntyre. There are certain actions that are well beyond our reach in terms of our ability to restrict State roles assigned to them by statute. Often, it is the case that these questions that come up have to be resolved by the courts and I do not expect that to change anytime soon. But, certainly, we are reflective of and respectful of the State's role. Mr. Lance. Thank you. It's my considered judgment that this is not in the best interest of the United States. It's certainly not in the best interest of New Jersey, and we in New Jersey--our sState officials have significant concerns with this. Some of the pipeline would be under preserved land and there is in the underlying statute I think written in the 1930s a belief in comity with state statutory law and I would hope that the commission would re-examine all of this. On a completely unrelated issue, Chairman McIntyre, with regard to FERC's March 15th revised policy statement on the treatment of income taxes for masters limited partnerships, could you please explain your rationale in advancing a blanket prohibition of recovering of an income tax allowance for oral MLPs? You may have discussed this previously. But I respectfully ask you that question. Mr. McIntyre. Yes, that's fine, Congressman. We were faced with an appellate court decision directing us to address that specific issue. We took action that we regarded as appropriate in light of the directives from the court. Mr. Lance. Does any other member of the commission wish to discuss that? Commissioner LaFleur. Ms. LaFleur. I would just say that even before the United Airlines case that led to the March order there was an earlier case where we were chastised by a court for double taxation. It's been brewing ever since then. We did a notice of inquiry and took a lot of testimony from people in the pipeline industry and others to try to build a full record and did not find any way to achieve the requirements of the court other than the way that we---- Mr. Lance. Thank you for your responses, and I yield back 3 seconds. And thank you very much, Mr. Chairman. Mr. Upton. Gentleman's time has expired. Mr. Kennedy. Mr. Kennedy. Thank you, Mr. Chairman. I want to thank all our witnesses for being here. It's nice to have a full complement of the commissioners testifying before Congress. Grateful for your service. Grateful for the time. For those of you that I have not met yet, I look forward to working with you. For those of you who I have, welcome back. Over the past 5 years, I've become very familiar with FERC processes, more so than I ever thought I would. I've appreciated the willingness of both members from the commission and, critically, your staff to engage with both me and my staff on this issue and I look forward to continuing that cooperation in the future. As you all know, the issue of transparency and the opportunity to be heard have been a focal point of my work here in Congress and with the commission, and you have heard the issue about transparency come up a number of times from my colleagues today. Several years ago, ratepayers in my home region, ISO New England, were shut out of the administrative and judicial review processes due to an unintended consequence in the Federal Power Act. Chairman McIntyre, I gratefully appreciate your comments in your written testimony describing your commitment to transparency, sir, and as I've said before, if there's any lesson that I've learned from Washington is that the more complex an issue is, the more likely that someone's being taken advantage of. So we've worked on a bipartisan basis on this committee to advance, in my estimation, a straightforward bill to address that issue. We are working with our colleagues in the Senate to try to find agreement on the legislation. Under Section 205, the rates are allowed to take effect by operation of law if the commission does not act within a statutory time period of 60 days. To start, I guess, with Mr. Glick, to the extent that you know, sir, how often does that happen? How often do rates take effect by operation of law? Are you familiar at all? Mr. Glick. Thank you, Mr. Kennedy. I couldn't give you an exact number. I will supply that for the record. I can tell you it is relatively rare, although it is certainly foreseeable. We have five commissioners now, you would think, but the commissioners do recuse themselves on certain occasions and you could very well have a 2-2 vote, in which case the commission would actually not be able to stop or prevent a particular proposed change in the tariff under Section 205 of the Federal Power Act from becoming law. Mr. Kennedy. And is there a difference--if, for instance, the commission fails to act within 60 days? A difference in the actual distinction? Mr. Glick. The only distinction is that, and I think as you pointed out, that the party that feels itself aggrieved doesn't have the ability to seek rehearing or take it on appeal to the D.C. Circuit. Mr. Kennedy. And how do we know if a commission actually deadlocked? Is there a requirement that a vote be held or is that more out of custom than formal practice? Mr. Glick. There's not requirement a vote can be held. If, again, if the commission doesn't act at all within 60 days it automatically--the tariff change automatically goes into effect. Mr. Kennedy. And so, Mr. Glick, what is the commission doing to ensure that aggrieved parties are not locked out of that review process? Mr. Glick. Well, again, I think that, at least for this particular issue, I think it does require a congressional change, and I know you have a bill and there's a bill in the Senate as well Mr. Markey has put forward. But I think the best we can do is actually ensure as much transparency as possible and involve public participation. But if there is a 2-2 deadlock I don't think we have the authority currently to address that. Mr. Kennedy. And I appreciate that, sir, and I guess I would go back to Mr. McIntyre, given your comments about transparency. Your thoughts on this issue and whatever else the commission should be doing or can be doing to take on that issue of transparency. Mr. McIntyre. Thank you, Congressman. It's a valid concern, but I personally am heartened by the fact that it arises very, very rarely, and I don't have a figure for you either. But the one I've heard informally within the agency is once every dozen years or so. Mr. Kennedy. And, Mr. McIntyre, and I appreciate that, sir. I don't mean to make light of that. The fire hydrants outside my street haven't been used all that frequently either. I am glad they're there because when they do need to be used I hope they work. And so, respectfully, and understood that it doesn't happen very often, but when it does, it comes with a fairly big consequence, as we saw in FCCA for residents in Massachusetts. And so just because it doesn't happen very often I don't think--well, we can be heartened by it--doesn't mean that we shouldn't address the fact because when it does it can be a big deal. Mr. McIntyre. I agree with you. In terms of legislative approach, if this is something where it would be helpful for us to work with you on language, we'd be happy to do that, because language-wise right now under existing law, unless a party is aggrieved by an order of the commission, it cannot go forward to judicial review. And so the lack of an order is what would be a stymieing factor there. Mr. Kennedy. Yes, I agree. Ms. LaFleur. Ms. LaFleur. Well, I am on record in favor of the Fair Rates Act. I believe I've testified or done it in a QFR or something before. I think it would be a good improvement to the Federal Power Act. I was on the commission. I was the chairman of the commission when we split 2-2. We did put out statements of the underlying views in dispute to provide transparency and I think we worked very hard to avoid deadlocks. I was in the group that thought that the rates were just and reasonable but I think the act would be a good improvement. Mr. Kennedy. I appreciate that. Thank you, Chairman. Mr. Upton. Thank you. Being that there are no further members wishing to ask questions, I would like to thank all of our witnesses for appearing today for sure. Before we conclude, I want to ask unanimous consent to submit the following documents for the record: a letter from the Utilities Technology Council and a joint letter from the American Public Power Association and the National Rural Electric Cooperative Association. [The information appears at the conclusion of the hearing.] And in pursuant to committee rules, I remind members that they have 10 business days to submit additional questions for the record. I would ask that the witnesses submit their response within 10 days upon receipt of those questions if you can. Without objection, this subcommittee stands adjourned. [Whereupon, at 12:53 p.m., the subcommittee was adjourned.] [Material submitted for inclusion in the record follows:] [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]