[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:]
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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:]
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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:]
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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:]
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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:]
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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:]
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