[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT OF FERC: ENSURING ITS ACTIONS
BENEFIT CONSUMERS AND THE ENVIRONMENT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
JUNE 12, 2019
__________
Serial No. 116-44
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
govinfo.gov/committee/house-energy
energycommerce.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
40-586 PDF WASHINGTON : 2020
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COMMITTEE ON ENERGY AND COMMERCE
FRANK PALLONE, Jr., New Jersey
Chairman
BOBBY L. RUSH, Illinois GREG WALDEN, Oregon
ANNA G. ESHOO, California Ranking Member
ELIOT L. ENGEL, New York FRED UPTON, Michigan
DIANA DeGETTE, Colorado JOHN SHIMKUS, Illinois
MIKE DOYLE, Pennsylvania MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois STEVE SCALISE, Louisiana
G. K. BUTTERFIELD, North Carolina ROBERT E. LATTA, Ohio
DORIS O. MATSUI, California CATHY McMORRIS RODGERS, Washington
KATHY CASTOR, Florida BRETT GUTHRIE, Kentucky
JOHN P. SARBANES, Maryland PETE OLSON, Texas
JERRY McNERNEY, California DAVID B. McKINLEY, West Virginia
PETER WELCH, Vermont ADAM KINZINGER, Illinois
BEN RAY LUJAN, New Mexico H. MORGAN GRIFFITH, Virginia
PAUL TONKO, New York GUS M. BILIRAKIS, Florida
YVETTE D. CLARKE, New York, Vice BILL JOHNSON, Ohio
Chair 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 TIM WALBERG, Michigan
SCOTT H. PETERS, California EARL L. ``BUDDY'' CARTER, Georgia
DEBBIE DINGELL, Michigan JEFF DUNCAN, South Carolina
MARC A. VEASEY, Texas GREG GIANFORTE, Montana
ANN M. KUSTER, New Hampshire
ROBIN L. KELLY, Illinois
NANETTE DIAZ BARRAGAN, California
A. DONALD McEACHIN, Virginia
LISA BLUNT ROCHESTER, Delaware
DARREN SOTO, Florida
TOM O'HALLERAN, Arizona
------
Professional Staff
JEFFREY C. CARROLL, Staff Director
TIFFANY GUARASCIO, Deputy Staff Director
MIKE BLOOMQUIST, Minority Staff Director
Subcommittee on Energy
BOBBY L. RUSH, Illinois
Chairman
SCOTT H. PETERS, California FRED UPTON, Michigan
MIKE DOYLE, Pennsylvania Ranking Member
JOHN P. SARBANES, Maryland ROBERT E. LATTA, Ohio
JERRY McNERNEY, California, Vice CATHY McMORRIS RODGERS, Washington
Chair PETE OLSON, Texas
PAUL TONKO, New York DAVID B. McKINLEY, West Virginia
DAVID LOEBSACK, Iowa ADAM KINZINGER, Illinois
G. K. BUTTERFIELD, North Carolina H. MORGAN GRIFFITH, Virginia
PETER WELCH, Vermont BILL JOHNSON, Ohio
KURT SCHRADER, Oregon LARRY BUCSHON, Indiana
JOSEPH P. KENNEDY III, BILL FLORES, Texas
Massachusetts RICHARD HUDSON, North Carolina
MARC A. VEASEY, Texas TIM WALBERG, Michigan
ANN M. KUSTER, New Hampshire GREG WALDEN, Oregon (ex officio)
ROBIN L. KELLY, Illinois
NANETTE DIAZ BARRAGAN, California
A. DONALD McEACHIN, Virginia
TOM O'HALLERAN, Arizona
LISA BLUNT ROCHESTER, Delaware
FRANK PALLONE, Jr., New Jersey (ex
officio)
C O N T E N T S
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Page
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 1
Prepared statement........................................... 3
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 3
Prepared statement........................................... 5
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 6
Prepared statement........................................... 7
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 8
Prepared statement........................................... 10
Witnesses
Neil Chatterjee, Chairman, Federal Energy Regulatory Commission.. 11
Prepared statement........................................... 14
Answers to submitted questions............................... 96
Cheryl A. LaFleur, Commissioner, Federal Energy Regulatory
Commission..................................................... 19
Prepared statement........................................... 21
Answers to submitted questions............................... 105
Richard Glick, Commissioner, Federal Energy Regulatory Commission 29
Prepared statement........................................... 31
Answers to submitted questions............................... 110
Bernard L. McNamee, Commissioner, Federal Energy Regulatory
Commission..................................................... 45
Prepared statement........................................... 47
Answers to submitted questions............................... 120
Additional material submitted for the record................. 129
Submitted Material
Letter of June 12, 2019, from American Chemistry Council, et al.,
to Mr. Rush, et al., submitted by Mr. Sarbanes................. 87
Letter, undated, from Andrew Hudson, Founder, 198 Methods, to
House Committee on Energy and Commerce, submitted by Mr.
Sarbanes....................................................... 90
Letter of June 10, 2019, from Jim Matheson, Chief Executive
Officer, National Rural Electric Cooperative Association, to
Mr. Rush and Mr. Upton, submitted by Mr. Sarbanes.............. 94
OVERSIGHT OF FERC: ENSURING ITS ACTIONS BENEFIT CONSUMERS AND THE
ENVIRONMENT
----------
WEDNESDAY, JUNE 12, 2019
House of Representatives,
Subcommittee on Energy,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:30 a.m., in
room 2322, Rayburn House Office Building, Hon. Bobby L. Rush
(chairman of the subcommittee) presiding.
Members present: Representatives Rush, Peters, Doyle,
Sarbanes, McNerney, Tonko, Loebsack, Butterfield, Welch,
Schrader, Kennedy, Veasey, Kuster, Barragan, O'Halleran, Blunt
Rochester, Pallone (ex officio), Upton (subcommittee ranking
member), Latta, Rodgers, Olson, McKinley, Kinzinger, Griffith,
Johnson, Flores, Walberg, Duncan, and Walden (ex officio).
Also present: Representative Long.
Staff present: Jeffrey C. Carroll, Staff Director; Adam
Fischer, Policy Analyst; Waverly Gordon, Deputy Chief Counsel;
Omar Guzman-Toro, Policy Analyst; Rick Kessler, Senior Advisor
and Staff Director, Energy and Environment; Brendan Larkin,
Policy Coordinator; John Marshall, Policy Coordinator; Elysa
Montfort, Press Secretary; Lisa Olson, FERC Detailee; Alivia
Roberts, Press Assistant; Tim Robinson, Chief Counsel; Tuley
Wright, Energy and Environment Policy Advisor; Justin Discigil,
Minority Press Secretary; Theresa Gambo, Minority Financial and
Office Administrator; Peter Kielty, Minority General Counsel;
Ryan Long, Minority Deputy Staff Director; Mary Martin,
Minority Chief Counsel, Energy, and Environment and Climate
Change; Brandon Mooney, Minority Deputy Chief Counsel, Energy;
Brannon Rains, Minority Legislative Clerk; and Peter Spencer,
Minority Senior Professional Staff Member, Environment and
Climate Change.
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Rush. I am going to call the subcommittee to order. And
the Chair recognizes himself for 5 minutes for the purposes of
an opening statement. And I want to begin by thanking all of
the FERC Commissioners for appearing before the subcommittee
this morning for the purposes of discussing critical issues
related to the governance of the Nation's electric grid.
In the last oversight hearing this subcommittee held last
year, I made it clear that I did not support FERC putting its
proverbial thumb on the scale to ambiguously prop up coal and
nuclear facilities as the 2017 DOE Notice of Proposed
Rulemaking proposed. In that same hearing, I also stated that
elected officials in the States should have the authority to
choose the type of energy sources within their own portfolios
and that would mostly benefit their own constituents.
To this point, we are seeing my home State of Illinois as a
national leader in enacting legislation to promote renewables
and nuclear power as safe and reliable and carbon-free sources
of energy. And the bipartisan Future Energy Jobs Act, which was
passed in 2016, along with a more recent proposal by Governor
Pritzker of Illinois, will move my State towards a cleaner,
greener, more sustainable energy future. And I for one do not
want to see FERC stand in the way of that progress.
Why don't you all come on in, please.
Mr. Upton. Maybe we should take the Judiciary Committee's
room and swap them. What do you think?
Mr. Rush. Well, let's take the Judiciary's jurisdiction and
when we take their room? All right.
You all please come on in so they can close the door, all
right.
The bipartisan Future Energy Jobs Act that was passed in
2016, along with a more recent proposal by the Governor of
Illinois, Pritzker, will move my State forward towards a
cleaner, greener, more sustainable energy future. And I do not
want to see FERC stand in the way of that progress. However,
FERC's ruling on PJM capacity market will undo this historic
progress and make it harder to achieve my State's energy goals.
It is extremely important that the Commission wants to
unveil a market structure that allows for individual States to
make decisions regarding the makeup of their particular
portfolios, energy portfolios, that helps to address climate
change, provides reliable energy, and keeps prices affordable.
One of the biggest challenges facing FERC is how to
integrate more renewable energy and distributing energy
resources into the grid and putting them on the road to help
accomplish these goals. Consumers are demanding this type of
change, and it is important that FERC works as a partner to
make this happen, rather than as another obstacle standing in
the way.
I applauded the Commission's storage and distributed energy
resources, DER, Notice of Proposed Rulemaking issued back in
November 2016, and Order 841 issued in February 2018 directing
RTOs and ISOs to upgrade and update market rules so that
storage could participate. However, we are now in 2019, and it
is past time now for the Commission to issue a final decision
on this particular issue.
I look forward today to engaging FERC on these important
issues, including allowing States to dictate every energy
portfolio that they deem would be beneficial to their
constituents, allowing more States to integrate more renewables
into the grid through transmission and finding a way for
distributed energy resources to participate in capacity markets
and making sure that consumers' voices are heard and respected
throughout the RTOs.
How the Commission moves forward is utterly
important.I21[The prepared statement of Mr. Rush follows:]
Prepared Statement of Hon. Bobby L. Rush
I want to thank all of the FERC Commissioners for appearing
before the subcommittee this morning to discuss critical issues
related to the governance of the Nation's electric grid.
In the last oversight hearing this subcommittee held last
year, I made it clear that I did not support FERC putting its
thumb on the scale to ambiguously prop up coal and nuclear
facilities as the 2017 DOE NOPR proposed.
In that same hearing I also stated that elected officials
in the States should have the authority to choose the type of
energy sources within their portfolios that would most benefit
their constituents.
To this point, we have seen my home State of Illinois act
as a national leader in enacting legislation to promote
renewables and nuclear power as safe, reliable, carbon-free
sources of energy.
The bipartisan Future Energy Jobs Act, passed in 2016,
along with more recent proposals by Governor Pritzker, would
move my State towards a cleaner, greener, more sustainable
energy future, and I do not want to see FERC stand in the way
of that progress.
However, FERC's ruling on the PJM capacity market would
undo this historic progress and make it harder to achieve my
State's clean energy goals.
It is extremely important that the Commission works to
unveil a market structure that allows for individual States to
make decisions regarding the makeup of their energy portfolios
that helps to address climate change, provides reliable energy,
and keeps prices affordable.
One of the biggest challenges facing FERC is how to
integrate more renewable energy and distributed energy
resources into the grid and putting forth rules of the road to
help accomplish these goals.
Consumers are demanding this type of change and it is
important that FERC works as a partner to make this happen,
rather than as another obstacle standing in the way.
The Commission must make sure that consumer voices are
heard throughout the regional transmission organizations and
that the interests of the public are protected through the
agency's decisions.
I applauded the Commission's Storage and Distributed Energy
Resource (DER) Notice of Proposed Rulemaking (NOPR) issued back
in November 2016, and Order 841 issued in February 2018,
directing RTOs and ISOs to update market rules so that storage
could participate.
However, we are now in June 2019, and it is past time for
the Commission to issue a final decision on this issue.
So I look forward to engaging with the Commissioners on
these important issues, including allowing States to dictate
energy portfolios that benefit their constituents, integrating
more renewables into the grid through transmission, finding a
way for distributed energy resources to participate in the
capacity markets, and making sure that consumer voices are
heard and respected throughout the regional transmission
organizations.
How the Commission moves forward on each of these issues
will have a dramatic impact on the Nation's energy portfolio
and our ability to combat climate change moving forward and I
will be watching closely to how the agency responds to each of
these issues.
Now, let me recognize my friend and colleague from
Michigan, Ranking Member Upton, for his opening statement.
Mr. Rush. And I want to now yield 5 minutes to my friend
from Michigan, the ranking member, for his opening statement.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Well, thank you, Mr. Chairman. And this is an
important hearing to examine FERC's budget and priorities for
fiscal year 2020. I want to extend a warm welcome to all of our
Commissioners. It has been about a year since FERC testified
before the committee, and in that time the Commission has dealt
with its share of challenges, and certainly the change in
leadership due to the passing of former Chairman McIntyre. A
good guy by all accounts.
Chairman Chatterjee has performed admirably, that is for
sure, stepping back into the role of Chairman of FERC. The
Commission also has received a new member, Commissioner Bernard
McNamee--welcome--who brings a wealth of experience in State
and Federal energy policy matters.
You know, as members of the Energy and Commerce Committee,
we are closely monitoring the shifts occurring across our
energy landscape, so that we are prepared to confront the
challenges and take full advantage of the opportunities that
lay ahead. Under my chairmanship of the full committee and
continuing under Chairman Walden, we have worked on a
bipartisan basis to remove unnecessary barriers to growth,
streamline the path for the permitting process for energy
projects, and encourage innovation and technological
development, and I know that will continue under Chairman
Pallone and Chairman Rush.
FERC has many important responsibilities to help us
navigate the changes that we are seeing with our generation
resources mix and to ensure the resilience and security of our
energy systems, including the import-export terminals, natural
gas pipelines, and electric transmission facilities. FERC has
also had a responsibility to oversee energy markets, ensure
just and reasonable rates, advise on State energy policies, and
oversee the development of mandatory electric reliability, and
security standards for the bulk power system.
As we have learned, managing this wide array of issues is
no simple task. Building new pipelines and electric
transmission facilities has become increasingly challenging.
And while FERC as the lead agency has established a process to
allow for thorough environmental reviews and meaningful
stakeholder input, we have started to see this process strained
by States that are not performing their federally delegated
responsibilities in perhaps a timely fashion.
We are also seeing big changes on the generation side with
the decline of coal and nuclear coinciding with the rise of
natural gas and renewables, which is placing pressure on State
and regional resource planning. Many of the issues we discussed
at our hearing last year are still actively under consideration
at FERC, including fuel security and grid resiliency, grid
storage, pipeline permitting, and market reforms.
I look forward to today's hearing to receive an update on
progress in these areas. I also look forward to discussing
physical and cyber security for our grid and pipeline network,
which is an issue that all of us care deeply about. While FERC
has authority to approve mandatory cybersecurity reliability
standards for the bulk power system, the regulatory framework
for pipelines may have gaps that should be examined. Given the
interdependency of our gas pipelines and the electric systems,
we need to make sure that we are doing everything that we can
do to remain secure.
The last point: I would ask unanimous consent that Mr. Long
from Missouri be able to sit in--not a member of the
subcommittee, but obviously a member of the full committee--be
able to sit in on this and be able to submit questions as well.
Mr. Rush. Yes, seeing no objection, so ordered.
Mr. Upton. And with that, Mr. Chairman, I yield back.
[The prepared statement of Mr. Upton follows:]
Prepared Statement of Hon. Fred Upton
Thank you, Mr. Chairman, for holding this hearing to
examine FERC's budget and priorities for fiscal year 2020. I
would also like to extend a warm welcome to our FERC
Commissioners. It has been about a year since FERC testified
before the Committee, and in that time, the Commission has
dealt with its share of challenges, and sadly, a change in
leadership due to the passing of former Chairman Kevin
McIntyre.
By all accounts, Chairman Chatterjee has performed
admirably, stepping back into the role of Chairman of FERC. The
Commission has also received a new member, Commissioner Bernard
McNamee, who brings a wealth of experience in State and Federal
energy policy matters.
As members of the Energy and Commerce Committee, we are
closely monitoring the shifts occurring across our energy
landscape, so that we are prepared to confront the challenges
and take full advantage of the opportunities that lay ahead.
Under my chairmanship of the full committee, and continuing
under Chairman Walden, we have worked on a bipartisan basis to
remove unnecessary barriers to growth, streamline the
permitting process for energy projects, and encourage
innovation and technological development. I hope that we can
continue this important work under Chairman Pallone and
Chairman Rush.
FERC has many important responsibilities to help us
navigate the changes we are seeing with our generation resource
mix, and to ensure the resilience and security of our energy
systems, including import/export terminals, natural gas
pipelines, and electric transmission facilities. FERC also has
a responsibility to oversee energy markets, ensure just and
reasonable rates, advise on State energy policies, and oversee
the development of mandatory electric reliability and security
standards for the bulk power system.
As we have learned, managing this wide array of issues is
no simple task. Building new pipelines and electric
transmission facilities has become increasingly challenging.
While FERC, as the lead agency, has established a process to
allow for thorough environmental reviews and meaningful
stakeholder input, we have started to see this process strained
by States that are not performing their federally delegated
responsibilities in timely fashion. We are also seeing big
changes on the generation side, with the decline of coal and
nuclear coinciding with the rise of natural gas and renewables,
which is placing pressure on State and regional resource
planning.
Many of the issues we discussed at our hearing last year
are still actively under consideration at FERC, including fuel
security and grid resiliency, grid storage, pipeline
permitting, and market reforms. I look forward to today's
hearing to receive an update on progress in these areas.
I also look forward to discussing physical and
cybersecurity for our grid and pipeline network, which is an
issue that I care deeply about. While FERC has authority to
approve mandatory cybersecurity reliability standards for the
bulk power system, the regulatory framework for pipelines may
have gaps that should be examined. Given the interdependency of
our gas pipelines and the electric systems, we need to make
sure we are doing everything we can to remain secure.
With that, I would like to thank the Commissioners for
appearing before us today, I will yield back the balance of my
time.
Mr. Rush. I want to thank the gentleman for yielding back.
Before I bring the chairman of the full committee on, I want to
take a moment to introduce to those who are gathered here a
very resourceful and very dedicated group of young people here
from Illinois, including from my district. The Illinois
Environmental Council is with us this morning, and they are
here to advocate for 100 percent clean energy.
So please recognize them as they stand, the Illinois
Environmental Council.
[Applause.]
Mr. Rush. OK, thank you very much.
The Chair now recognizes the chairman of the full
committee, Mr. Pallone, for 5 minutes.
OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Chairman Rush. I would like to
begin by thanking the Commissioners for being here today and
for their collective work at the Federal Energy Regulatory
Commission.
FERC's decisions and rulemakings have a large impact on our
Nation's energy and environmental future. The Commission's
activities directly affect electric and gas consumers across
the United States, both the costs to ratepayers and the
reliability of electric grid systems. They also affect the
environment, particularly in the form of greenhouse gas
emissions. And I am interested in learning how FERC intends to
address greenhouse gas emissions in natural gas pipeline
permitting approvals. To date, FERC's efforts to account for
greenhouse gas emissions in the pipeline review process leaves
much to be desired, in my opinion.
In 2017, the DC Circuit found in the Sabal Trail decision
that FERC cannot ignore the indirect effects of projects it
approves, including emissions from downstream use. And I know
FERC has great analysts who are up to the task of accounting
for greenhouse gas emissions, but they need to be empowered to
ensure that these impacts are fully considered. This is
particularly concerning, because FERC seems more than willing
to approve any pipeline, even though the Natural Gas Act
directs the Commission to only approve projects that are in the
public convenience and necessity.
And I am also concerned that FERC looks at each pipeline
project in a vacuum without regard to any other pipeline
application. This could result in two pipelines running right
next to each other. And I think we can all agree that it is
just not a smart or responsible way of planning our system,
particularly when people's private property could be taken by a
pipeline company. The bottom line is that this whole process
needs a more thoughtful strategy of planning and broad-ranging
analysis.
On the electric side, it has been roughly 20 years since
the implementation of wholesale markets. Though I had my doubts
in the past, it is now clear that these markets have promoted
competition in generation, ensuring lower prices and a reliable
bulk power system. And this is good for consumers, and it has
also been good for the environment. New technologies can
deliver, store, manage, and reduce power needs with a near
instantaneous response to dispatch signals.
And I would particularly like to applaud the Commission's
work on Order 841, integrating storage resources into wholesale
power markets. I look forward to hearing more about the
distributed energy resource aspect of that effort. Innovation
and technology are leading the way, and FERC can and should be
a partner in that effort.
I also think it is important we look at Order 1000, which
governs how transmission is planned and developed and how the
costs are allocated. Chairman Chatterjee recently said it was
not working as intended, and I agree, particularly regarding
consideration of nontransmission alternatives when looking at
new system investments and interregional transmission planning,
and I would like to hear about your plans to lead the
Commission in addressing the shortcomings.
I also want to say that I am not happy with the way RTOs
are assessing their transmission needs, and in my experience in
New Jersey, it is potentially resulting in the construction of
unnecessary projects. And, finally, we need greater scrutiny of
wholesale capacity markets. Frankly, the current state of
affairs is a mess, especially in the PJM market where New
Jersey participates. PJM participants are currently left in the
lurch of both an old and new capacity market design, and the
result of this uncertainty is higher electricity bills. It is
vital that we figure this out immediately.
[The prepared statement of Mr. Pallone follows:]
Prepared Statement of Hon. Frank Pallone, Jr.
I'd like to begin by thanking the Commissioners for being
here today, and for their collective work at the Federal Energy
Regulatory Commission.
FERC's decisions and rulemakings have a large impact on our
Nation's energy and environmental future. The Commission's
activities directly affect electric and gas consumers across
the United States--both the costs to ratepayers and the
reliability of the electric grid and system.
They also affect the environment, particularly in the form
of greenhouse gas emissions. I'm interested in learning how
FERC intends to address greenhouse gas emissions in natural gas
pipeline permitting approvals. To date, FERC's efforts to
account for greenhouse gas emission in the pipeline review
process leaves much to be desired.
In 2017, the DC Circuit found in the Sabal Trail decision
that FERC cannot ignore the indirect effects of projects it
approves, including emissions from downstream use. I know FERC
has great analysts who are up to the task of accounting for
greenhouse gas emissions, but they need to be empowered to
ensure these impacts are considered fully.
This is particularly concerning because FERC seems more
than willing to approve any pipeline even though the Natural
Gas Act directs the Commission to only approve projects that
are in the public convenience and necessity. I am also
concerned that FERC looks at each pipeline project in a vacuum,
without regard to any other pipeline application. This could
result in two pipelines running right next to each other. I
think we can all agree that's just not a smart or responsible
way of planning our system--particularly when people's private
property could be taken by a pipeline company.
The bottom line is that this whole process needs a more
thoughtful strategy of planning and broadranging analysis.
On the electric side, it has been roughly 20 years since
the implementation of wholesale markets. Though I had my doubts
in the past, it's now clear that these markets have promoted
competition in generation, ensuring lower prices and a reliable
bulk power system. This is good for consumers and it's been
good for the environment.
New technologies can deliver, store, manage and reduce
power needs with a near instantaneous response to dispatch
signals. I would particularly like to applaud the Commission's
work on Order 841, integrating storage resources into wholesale
power markets. I look forward to hearing more about the
distributed energy resource aspect of that effort. Innovation
and technology are leading the way and FERC can and should be a
partner in that effort.
I also think it's important we look at Order 1000, which
governs how transmission is planned and developed, and how the
costs are allocated. Chairman Chatterjee recently said it was
not working as intended. I agree, particularly regarding
consideration of nontransmission alternatives when looking at
new system investments and interregional transmission planning.
I'd like to hear about your plans to lead the Commission in
addressing the shortcomings. I also want to say that I'm not
happy with the way RTOs are assessing their transmission needs
and, in my experience in New Jersey, it is potentially
resulting in the construction of unnecessary projects.
Finally, we need greater scrutiny of wholesale capacity
markets. Frankly, the current state of affairs is a mess,
especially in the PJM market where New Jersey participates. PJM
participants are currently left in the lurch of both an old and
new capacity market design. The result of this uncertainty is
higher electricity bills. It is vital that we figure this out
immediately.
And with that I would like to yield the balance of my time.
Mr. Pallone. So I have some time left, and I would like to
yield the balance of my time to Mr. Kennedy.
Mr. Kennedy. Mr. Chairman, I want to thank the chairman for
yielding and thanks to the subcommittee for hosting this
hearing and thank the Commissioners, everybody, for being here.
I would like to add one more area of focus to today's
conversation and something that is particularly important to
me: RTO governance and transparency into the stakeholder
process in our wholesale markets. Focus on RTO governance is
not only essential to good governance, but also critical to
accountability. Too often, parties involved in the energy
markets can just simply pass the buck and responsibility to
others, but the result is often the same. Consumers end up
paying more, and no one is held accountable.
I am not suggesting FERC is the sole responsible party
here, but the Commission is invaluable in upholding the
stability and reliability of a system when it works properly,
and you are also the enforcers when the system breaks down. So
I look forward and to continue to work with all of you on all
of this, and I yield back the time to the chairman. Thank you.
Mr. Pallone. And I yield back. Unless someone else wants
the remaining time, I will yield back, Mr. Chairman.
Mr. Rush. The Chair thanks the gentleman for yielding. The
Chair now recognizes Mr. Walden, the ranking member of the full
committee, for 5 minutes for the purposes of his opening
statement.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. Good morning, Mr. Chairman. I want to thank our
witnesses for being here today, the Commissioners. We really
appreciate the tough challenges you face. We have a couple of
projects in Oregon that are under review at different levels,
both State and Federal approvals, and I am observing that and
watching that, and we appreciate what you do to allow public
input on those projects. I think that is really an important
part of this.
And so, we thank you and we recognize the tough challenges
you face in trying to figure out what is best for the country.
And to that point, you know, a lot has changed in the energy
picture. We know that. I am old enough to remember when we
thought we were going to run out of natural gas and oil, and we
are all on watch for what do we do then? And now through
innovation and technology we have discovered we can become a
net exporter of energy and really lead the world, and we can do
it in an environmentally smart way, and we can replace more
polluting sources around the world if we can get our natural
gas into markets.
We can also stick it to Putin, let me be direct and clear
here. It is a geopolitical force as well. I have met with
leaders of foreign countries who beg us--beg us--to get our
natural gas into market so they have a competitor to Gazprom.
And when natural gas does get into the market, guess what, the
prices go down and we quit funding Russia, or they do. So I
think there are important international issues here as well
that America needs to look at. They may not all be in your
statutory process, but they are important for America going
forward, and so I think that is an important piece.
We are on the breakthrough of major battery storage. I met
with some folks from some of our national labs this morning
about research they are doing to capture carbon, perhaps with a
film that could capture carbon at $30 a ton, which would be
remarkable if they are able to take it from a computer process
into a reality in the marketplace, and we think about how
transformative that could be to reduce carbon emissions and
continue to provide baseload energy.
My region, hydropower. This committee did a lot of work on
hydropower licensing for small scale. We believe in it. It is
carbon free. It is there. It is an enormous resource, but we
also need to make sure we have got transmission capacity. And I
know you all focus on the grid, on its reliability and security
and safety and adequacy. We do too. We try to address those
issues. I would love to know more about the choke points in the
country, you know, you have the Northeast heating oil issue.
We have situations where we are importing foreign gas into
the Northeast, I think maybe even from Gazprom. And we have
fights over transmission lines in the Northeast. We have fights
over pipelines in the Northeast, and even access to America's
great energy reserves there. I would love to know what that
means to consumer prices. It is not my part of the world, but
it is our country, and so I would love to know what that means
for consumers when pipelines are blocked, power lines are
blocked, and access to American energy is blocked. Does that
make them pay more or less to keep their homes warm in the
winter and cool in the summer?
So those are issues I think are important as we move
forward on renewable energy development. We have a couple
projects in my part of the world. Swan Lake, which is a closed
loop hydro project. There is another one out of Goldendale
where we can use surplus capacity from renewable energy to pump
water uphill and then bring it back down through a hydro system
and have a closed loop process. That is a great battery in and
of itself. We have solar projects and we see the price of solar
and wind coming down and being very competitive in the
marketplace. And so, what I would love to hear from you is,
what does the future look like? What is working, what is not?
Where are the choke points in America, and what should we do
about it? And then how safe and secure is the grid?
And I would tell you at the outset, we also have a surprise
medical billing hearing going on with Mr. Pallone and my bill
downstairs, so I will be coming and going, because that
actually matters to consumers a whole bunch and oftentimes is
much more expensive than their energy bill, so we are trying to
fix that as well. But we thank you for the work that you are
doing. We know it is tough, but it is very important.
[The prepared statement of Mr. Walden follows:]
Prepared Statement of Hon. Greg Walden
Good morning and welcome to our FERC Commissioners. I look
forward to today's hearing to examine FERC's budget proposal
and priorities for the year ahead.
The Federal Energy Regulatory Commission plays an integral
role in the safety, security, and economic prosperity of all
Americans, given its responsibility for overseeing our Nation's
energy infrastructure.
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.
As members of this committee know, the Nation's energy
landscape continues to shift, driven by large increases in the
domestic production of crude oil and natural gas, continued
technological innovation, existing market and regulatory
structures, and evolving consumer preferences.
The U.S. is becoming a net exporter of energy, with growing
natural gas pipeline exports and LNG exports. We're also seeing
big shifts in the fuels used to generate electricity, with coal
and nuclear plants closing at a record pace, and a growing
share of new natural gas power plants, and intermittent
renewables such as wind and solar coming online--the long-term
implications of which are yet to be fully understood.
Meanwhile, energy efficiency continues to improve, keeping our
consumption relatively flat, even though our economy continues
to grow.
These broad trends present both challenges and
opportunities. FERC is on the front lines of all of this, with
an important mission to ensure safe, reliable, and secure
energy for consumers.
As policymakers, we need to be realistic about the
challenges we face. To maximize our Nation's energy abundance,
we need to modernize and expand our infrastructure of pipelines
and electric transmission facilities. We need new export
capacity for our surplus energy supplies to keep our prices at
home low and stable while improving the energy and security of
our allies. We need to modernize our grid and examine the state
of our energy markets to ensure consumers are benefiting. We
also need to strengthen our protections against emerging cyber
and physical threats to our energy infrastructure to ensure
they remain resilient and reliable.
For these projects to get built, we need to make sure FERC
has the tools it needs to carry out its regulatory
responsibilities. The Commission already has a lot on its plate
with the difficult task of coordinating a broad range of
stakeholders and balancing a wide range of factors, such as
property rights, environmental impacts, State and Tribal
interests, and consumer protections.
In my home State of Oregon, we're dealing with these issues
with the Jordan Cove LNG project and the Swan Lake closed loop
hydro project. Being on the front lines, I can appreciate how
complex the FERC process can be, and understand the importance
of getting it right.
While the challenges may sound daunting, I am excited about
the opportunities that lay ahead. As we modernize our
infrastructure, we have the opportunity to integrate new
technologies and services to benefit consumers. We are already
seeing this with ``smart grid'' technologies that help deliver
electricity more reliably and efficiently and restore power
more quickly after an outage. I am also excited about ways to
take advantage of the advances in digital and information
technologies to provide consumers with greater control and
choice when it comes to energy consumption.
With our 12-part ``Powering America'' hearing series in the
last Congress, we took a close look at solutions to harden and
modernize our energy infrastructure. I expect today's hearing
will give Members another opportunity to explore these
important issues. With that, I'd like to thank the
Commissioners for appearing before us today, and I look forward
to their testimony.
Mr. Walden. With that, Mr. Chairman, I would yield back the
balance of my time.
Mr. Rush. The Chair wants to thank the ranking member for
yielding back. And the Chair would like to remind Members that,
pursuant to committee rules, all Members' written opening
statements shall be made part of the record.
And now it is my privilege to introduce our panel of
witnesses for today's hearing. The Honorable Neil Chatterjee is
the Chairman of FERC, and he is a witness--at the witness table
today, and I certainly want to welcome the Chairman.
Next will be the Honorable Cheryl A. LaFleur, Commissioner
for FERC. Then next to her is the Honorable Richard Glick, who
is also a Commissioner at FERC. And last but not least, the
Honorable Bernard L. McNamee, who is also a Commissioner. And I
want to thank each and every one of you for appearing before us
today, and we certainly want to congratulate you on your past
accomplishments, and we look forward to hearing from your
testimony at today's hearing.
And at this time, the Chair now wants to recognize each
Member for 5 minutes to provide your opening statement. But as
a part of what we do here, I would like to explain the lighting
system, which you probably don't need any explanation for, but
it is written here, and I am going to read it. In front of you
is a series of lights. The light will initially be green at the
start of your opening statement. The light will turn yellow
when you have 1 minute remaining. Please begin to wrap up your
testimony at the occasion of the yellow light. The light will
turn red when your time has expired, and please conclude your
statement, and then the light will turn to red.
Chairman Chatterjee, you are now recognized,. After being
fully instructed on the lighting system, you are finally
recognized for 5 minutes for the purposes of an opening
statement.
STATEMENTS OF NEIL CHATTERJEE, CHAIRMAN, FEDERAL ENERGY
REGULATORY COMMISSION, AND CHERYL A. LaFLEUR, RICHARD GLICK,
AND BERNARD L. McNAMEE, COMMISSIONERS, FEDERAL ENERGY
REGULATORY COMMISSION
STATEMENT OF NEIL CHATTERJEE
Mr. Chatterjee. Thank you, Chairman Rush, Ranking Member
Upton, and members of the subcommittee. I really appreciate the
opportunity to be here before you today to discuss the
importance work that we are doing at the Federal Energy
Regulatory Commission. As was mentioned, my name is Neil
Chatterjee and I am the Chairman of FERC. I appreciate the
subcommittee's attention to the major energy issues facing our
Nation and the role that FERC plays in addressing those issues
for the American people.
This is an exciting and transformational period for our
Nation's energy landscape. I take very seriously the
responsibility to work with my colleagues to ensure that all
Americans have reliable and affordable energy supplies. Today,
I will focus my remarks on two of my priorities: the
Commission's efforts to allow for storage resources to better
participate in the wholesale electric markets, and our focus on
the importance of security measures to protect from cyber and
physical threats to the Nation's bulk power system. I will also
address FERC's efforts to reform our regulations under the
Public Utility Regulatory Policies Act of 1978, or PURPA, an
issue I know many of you have been following closely.
Over the last decade or more, our country has seen many
changes in the energy industries that FERC regulates. As such,
it is essential for FERC to remain vigilant about these changes
and respond to them in ways that enhance competition in the
electricity markets, support the resilience of the bulk power
system, and lower costs to consumers. One of these recent
transformations we have seen is the improvement in electric
storage technologies. I want to highlight the Commission's
work, which I am extremely proud of, regarding the
participation of electric storage resources in wholesale
electricity markets as an example of how FERC is responding to
our ever-evolving energy landscape.
Traditionally, a variety of factors have created challenges
to storage resources participation in the wholesale electric
markets. Because of this, in 2018 FERC issued Order 841 to
remove barriers to the participation of electric storage
resources in the capacity, energy, and ancillary services
markets operated by the Regional Transmission Organizations and
Independent System Operators.
FERC is now evaluating the December 2018 filings that RTOs
and ISOs made to implement Order 841. As a result of this
order, I expect an increase in the deployment of storage
resources, which should result in greater reliability and lower
prices for customers by enhancing competition. This is but one
example of how FERC is proactively addressing shifts in the
energy industries that we regulate and ensuring the emerging
technologies can serve an integral role in wholesale electric
markets.
In addition to our work to reduce barriers for storage
resources, FERC is evaluating barriers to the participation of
distributed energy resource aggregations in markets operated by
RTOs and ISOs. Last year, FERC staff held a technical
conference to gather more information regarding the
participation of distributed energy resource aggregations in
wholesale electricity markets as well as to discuss more
broadly the potential effects of distributed energy resources
on the bulk power system. FERC is currently considering the
record as we determine how to move forward.
Another priority I would like to discuss today is cyber and
physical security. As you are aware, America's critical
infrastructure is increasingly under attack by foreign
adversaries. The Department of Homeland Security and FBI have
issued multiple public reports describing cyber intrusion
campaigns by foreign government actors against our critical
infrastructure, including the electric grid. Physical and cyber
attacks on our critical infrastructure systems have the
potential to create significant, widespread and potentially
devastating effects that threaten the health, safety, and
economic prosperity of the American people whom we serve. This
evolving threat landscape demonstrates the importance of an
unwavering focus on the security of the Nation's critical
energy infrastructure.
Of course, these issues are of paramount concern to us all,
including the subcommittee, and I appreciate the subcommittee's
attention to this crucial subject, including efforts to examine
legislative solutions like those that recently moved to the
markup process. At FERC we have and continue to address cyber
and physical security risks as consistent with section 215 of
the Federal Power Act, which grants us the authority to approve
and enforce mandatory Reliability Standards developed by the
North American Electric Reliability Corporation.
We have also taken up voluntary initiatives with Federal,
State, and industry partners. In 2018, FERC issued two
significant order that improved bulk power system security.
First, at our October 2018 Commission Meeting, we approved
NERC's proposed reliability standards to address supply chain
threats. This action is particularly significant given that
these specific threats to the energy sector continue to grow.
Second, at our July 2018 Commission Meeting, we approved a
final rule directing NERC to expand reporting requirements for
critical systems. That final rule directed NERC to develop a
standard that requires registered entities to report successful
and attempted intrusions into critical systems to NERC's
Electricity Information Sharing and Analysis Center as well as
to DHS. NERC recently filed a new reliability standard to
satisfy the directive, which is currently pending before the
Commission.
But FERC does not just approve reliability standards. Since
2016, FERC has conducted audits of industry's compliance with
cybersecurity reliability standards, the goal of which is not
only to assess compliance with the reliability standards, but
also to learn and share best practices.
Seeing that I am about to get the light, I am just going to
say that it is time to bring PURPA into the 21st century. Major
changes to PURPA should come from Congress, but we have some
tools available to us at the Commission, and we are currently
working to utilize those tools. Thank you.
[The prepared statement of Mr. Chatterjee follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Rush. I want to thank you, Chairman Chatterjee. You
have passed the lighting test for this morning.
Now the Chair recognizes Ms. LaFleur for 5 minutes for the
purposes of an opening statement.
STATEMENT OF CHERYL A. LaFLEUR
Ms. LaFleur. Thank you, Chairman Rush, Ranking Member
Upton, Chairman Pallone, Ranking Member Walden, and members of
the subcommittee. I am Cheryl LaFleur. I have been a
Commissioner at FERC for almost 9 years, and I have been
honored to appear before you several times.
Today I will comment on three major issues that are shaping
our work. The first is resource selection in the Nation's
competitive markets. In the 20 years since their creation,
organized wholesale power markets have grown to serve more than
two-thirds of Americans. These markets save customers money by
dispatching resources over a large footprint, facilitating
innovative technologies, and shifting investment risk from
consumers to shareholders.
In recent years, markets have been roiled by low-cost gas
generation and renewables. These lower-cost resources have
significantly decreased wholesale prices to the benefit of
customers, but have also threatened the financial viability of
certain existing resources, particularly coal and nuclear
plants. Many States have sought either to retain resources that
are not thriving in the market or to support new resources that
the market would not select. These efforts have triggered a
debate about how wholesale market design should be adapted in
response.
FERC is encouraging regional solutions to adapt capacity
markets to State initiatives. We approved such a proposal for
ISO New England, have an open proceeding to consider changes to
the PJM market, and are watching New York ISO consider ways to
use carbon pricing to incorporate State climate goals in its
market structure.
Second, once we have selected resources, how do we pay for
them? Until recently, it was accepted without question that
electric power was priced on volume, since a major component of
its cost was the fuel you had to burn to make it. With low gas
prices, zero marginal cost renewables, and change in load
curves, the traditional cost structures that supported
resources may no longer work. We have seen this trend most
famously with the so-called duck curve in California, where
solar resources generate too much energy in the middle of the
day and resources needed when the sun goes down are not making
enough money to stay in business.
Similar trends are appearing in other regions. To help
adapt, market operators and others are considering new ways to
pay for power, with the focus not just on volume but on
services such as ramping, scarcity pricing, reserves, and
essential reliability services. FERC has also taken steps to
ensure that new resources like storage can compete to provide
these services.
Finally, infrastructure to deliver resources to customers.
Electric transmission is needed to support the reliability of a
changing grid, particularly for location-constrained
renewables. The Commission's issuance of Order 1000 in 2011
anticipated the growing need for transmission. I believe the
planning and cost allocation tenets of Order 1000 are sound;
however, the introduction of competitive transmission that it
required has been much more difficult than anticipated. In
addition, the growth of domestic natural gas and gas-fired
generation has led to considerable build-out of the Nation's
gas pipeline network. I have called for reconsideration of how
FERC determines the needs for pipelines, looking at a regional
look.
I also believe we must do a better job assessing the
climate impacts of pipeline and LNG projects. Starting in 2016,
FERC began disclosing more information on a project's climate
impacts in our orders and environmental documents in response
to the growing debate in our dockets. I strongly supported this
decision. However, in May 2018, the Commission reversed course
and elected to remove much of the greenhouse gas information
from orders going forward.
Since June 2018, I have tried to reconcile my disagreement
with the Commission's revised policy with my obligation to
consider pipelines one by one under the Natural Gas Act. Where
I otherwise conclude a pipeline is needed, I have done my own
greenhouse gas calculation and analysis to weigh against the
pipeline benefits. I believe the Commission, the public, and
the regulated community would be better served if we
proactively addressed these issues before the courts require us
to do so.
It has been a tremendous honor to serve on FERC and to work
with this committee. Thank you very much, and I yield my time
to Commissioner Glick.
[The prepared statement of Ms. LaFleur follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Rush. Commissioner Glick, you are recognized for 5
minutes, and you have 30 seconds remaining from----
STATEMENT OF RICHARD GLICK
Mr. Glick. Thank you, Commissioner LaFleur.
Thank you, Mr. Chairman, Ranking Member Upton, and members
of the subcommittee, and thank you for the opportunity to
testify this morning.
FERC has sometimes been referred to as a sleepy little
agency, but the fact is that many of the actions we take have a
significant impact on the everyday lives of Americans. The
Commission is entrusted with protecting the public interest by
regulating swaths of the U.S. energy industry. FERC's exercise
of this responsibility has significant consequences for the
prices of energy, the ability of public utilities to reliably
and safely serve consumers and the environment.
The American electric sector is in the midst of a dramatic
transformation to a less carbon-intensive, more distributed
electric generation fleet. This transformation is good for
consumers, the economy, and the environment. As the cost of
newer, cleaner technologies continue to decline, consumers are
seeing the benefits. The two fastest-growing occupations
nationwide are solar PV installers and wind turbine service
technicians, and more than 3 million American men and women now
are employed in the clean energy industry in the United States.
This clean energy transformation will also have a lasting
positive impact on the environment and climate change.
Consumers are increasingly demanding that their energy
comes from renewable or zero-emission sources, and businesses
are delivering consumers what they want. Dozens of
corporations, including some of the largest in the country,
have announced or already achieved the goal of procuring all of
their electricity needs from zero emissions or renewable
resources. Although FERC is not a climate regulator, the
Commission's actions have substantial consequences for climate
change.
As Chairman Chatterjee mentioned a second ago, for example,
many wholesale market roils that were designed for a grid
composed mostly of conventional generation facilities can pose
unintended barriers to newer technologies' full participation
in wholesale markets. And by helping to create a level playing
field for all resources, the Commission can indirectly
facilitate newer technologies' participation in wholesale
electric markets. Indeed, the Commission did just that earlier
last year when it issued a final rule that requires RTOs and
ISOs to eliminate barriers to the participation of electric
storage resources in the wholesale electric markets.
The Notice of Proposed Rulemaking that led to the final
rule on electric storage also proposed reforms to remove
barriers to aggregated distributed energy resource
participation in wholesale markets. The Commission in April
2018, conducted a 2-day technical conference to gather
additional information on this matter. I believe the time has
come for the Commission to also eliminate barriers to
distributed energy resources.
The Commission's energy future, energy infrastructure
permitting responsibilities can also affect emissions. FERC has
authority over the licensing of certain hydroelectric
facilities as well as the siting of interstate natural gas
pipelines and facilities used to import or export liquefied
natural gas. Under the Natural Gas Act, FERC must make a public
interest determination before issuing a certificate for an
interstate natural gas pipeline or an LNG facility. Because
environmental effects factor directly into the public interest
standard, the Commission must analyze the environmental impacts
of a proposed interstate natural gas pipeline.
Unfortunately, the Commission has chosen to treat
greenhouse gas emissions differently than all other aspects of
its environmental reviews and, in my opinion, effectively
ignored its statutory obligation to examine those emissions'
impacts on the public interest. Indeed, last year, the majority
of Commissioners announced a new policy that chose to ignore
reasonably foreseeable upstream and downstream greenhouse gas
emissions in almost all cases. This policy prevents the
Commission from performing the public interest analysis that
Congress required and the DC Circuit has told us that we have
to do. Just last week, the DC Circuit admonished the Commission
for this approach, and I hope to work with my colleagues to
revisit the Commission's approach in light of the court's
guidance.
Chairman Rush and Ranking Member Upton, thank you again for
the opportunity to appear before the subcommittee. I look
forward to answering your questions and the questions of your
colleagues.
[The prepared statement of Mr. Glick follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Rush. The Chair wants to thank the Commissioner.
And now the Chair recognizes Commissioner McNamee for 5
minutes. And Commissioner, see if you can beat him, because he
had 1 minute, 27 seconds remaining, so.
STATEMENT OF BERNARD L. McNAMEE
Mr. McNamee. I will do my best. Thank you, Chairman Rush
and Ranking Member Upton. And I also want to thank Chairman
Pallone and Ranking Member Walden, everybody on the committee
for having me. As you know, this is my first time appearing
before you. My name is Bernie McNamee. I just joined the
Commission 6 months ago, and it has been a great joy to be able
to work with my colleagues here and everybody at the FERC
staff.
As you have heard from my fellow Commissioners, there are a
number of important items that the Commission deals with. You
all know this, but it is important to the Commission, the
energy industry, consumers, and the Nation.
First of all, I want to talk a little bit about LNG
facilities. In 2017, the United States became a net exporter of
natural gas, and FERC has played a role in this accomplishment
by authorizing the construction of liquefied natural gas
facilities pursuant to section 3 of the Natural Gas Act and
pursuant to the National Environmental Policy Act. After 2
years in which no new LNG facility was approved, the Commission
now has approved, in a 3-month period, four LNG projects with a
total estimated export capacity of 8 billion bcf a day. I am
happy to say that I was able to play a part with my fellow
Commissioners in finding a compromise in order to move these
projects forward. And it also was an example of, if we look at
the law and the facts we can usually come to a resolution of
the issues for the benefit of the American people.
And currently the Commission has 10 LNG export applications
pending before it, and four LNG expert facility proposals are
in the prefiling process. We will address each of these
applications that come before us based on the law and the
facts.
More generally, since 2009, the United States has been the
world's top producer of natural gas. Just think about that,
when we used to wish that we could have energy independence and
now we are a net exporter. This natural gas is transported
across the United States using over 300,000 miles of interstate
natural gas pipeline, and in 2018 over 13 billion cubic feet a
day, or 689 miles, of Commission jurisdictional approved
pipeline capacity entered service. Moreover, in 2018, the
Commission authorized 44 new projects, representing 9.3 bcf a
day, and 676 miles of new pipeline capacity.
And we have heard some issues about how are we approving
these. As you know, the Commission issued a notice of inquiry
in order to examine whether or not we should be changing our
certificate policy. The Commission has received over 3,000
comments, and my colleagues, our staffs, and the Commission are
all working through these comments.
I also want to touch on how the Commission is trying to
implement the tax cuts that you implemented under the Tax Cuts
and Jobs Act of 2017. The Commission issued its Order 849 to
determine whether natural gas pipeline rates should be adjusted
to account for those tax cuts. And the Commission is dealing
with a review, and so far, there have been 21 rate settlements
between pipelines and their shippers and 11 weight reduction
filings. The Commission has also initiated six section 5 show-
cost proceedings to see about reducing rates, trying to ensure
that the tax cuts you ordered into the code are flowing through
the customers.
Next, I want to talk a little bit about the electric
markets. The transformation of the electric grid through the
markets and competition has been amazing. Two-thirds of the
Nation's load is served under an RTO or an ISO, and Congress
and FERC should be proud of this achievement. Because of
competition, new energy sources can participate in the market,
and customers are seeing the benefits. But there are also
legitimate concerns, many of the things that you have dealt
with in your time here in Congress. They include debates about
the role of the different resources, capacity markets, price
formation, environmental goals, State energy policy goals,
Federal policy goals, market manipulation, affordability, and
of course the overarching goal, making sure the lights turn on
when the switch is flipped.
There are also a number of other issues. We are trying to
deal with PURPA, Order 1000, distributed energy resources,
hydroelectric power, return on equity, transmission
investments, and the specific tariffs that come before us. Each
of these is important to each one of us here on the Commission,
and we take them seriously, and we need to deal with them.
I will finally touch on one thing that is brought up by a
number of my fellow Commissioners and which I find very
important as well, and that is energy storage. I was not on the
Commission when the energy storage issue was issued, Order 841,
but I agree with its portions of it that promote the use of
energy storage resources at the grid, at the transmission
level, and the bulk power system. But as you may know, I issued
a concurrence in dissent focused on the jurisdictional issue. I
do not believe that Congress provided the Commission under the
Federal Power Act the authority to regulate the distribution
facilities that are needed for those certain types of
distribution or energy resource batteries to be able to connect
behind the meter or at the distribution level.
So this was a position that I looked at seriously,
especially after comments filed by the National Association of
Regulatory Utility Commissioners and the National Rural
Electric Cooperative Association. In the end, I did say that I
didn't think we have jurisdiction, but I also believe that we
should have at least considered an opt out. Thank you very
much.
[The prepared statement of Mr. McNamee follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Rush. I want to thank all of the Commissioners for
their opening statement, and we have now concluded the time for
opening statements. We will move into Members' questions. Each
Member will have 5 minutes to ask questions of these witnesses,
and I will start by recognizing myself for 5 minutes for the
purposes of an opening--for questioning the Commissioners.
Commissioner LaFleur, one of my concerns that I have stated
earlier is that consumer voices are often overlooked, ignored,
or cut out on the RTO process entirely. I understand that the
role of the consumer varies between the different RTOs, but how
do we ensure that consumers' voices are always heard and their
interests are being protected consistently no matter what
region they live in?
And I would like for all the Commissioners to weigh in this
question also.
Ms. LaFleur. Well, thank you, Congressman, Chairman Rush.
That is an important question. As you noted, all of the six
RTOs and ISOs that are under the Commission's jurisdiction have
stakeholder processes that were approved by the Commission some
years ago, and they all include a consumer segment. It varies
in the different States, whether it is the Attorneys General,
the Citizens Utilities board as in your State, or sometimes
municipal concerns are in the consumer segment in the various
RTOs, and they have a vibrant role in participating in the
dockets.
But I also think this Commission has a role. When we see
tariff proposals come before us, our obligation is to make sure
they are just and reasonable to the end consumer that is going
to be paying the bills at the end of the day. But we have heard
a lot recently about potential ways to relook at Order 719 and
improve stakeholder processes ,and I think we should be alert
to ways to do that.
Mr. Chatterjee. If I could weigh in on that as well,
Chairman Rush. You have identified a very important issue, and
I think, you know, transparency and ensuring the consumers'
voices are heard is critical. That is why we have our rules in
place. I think it is so important that stakeholders and
consumers have their voices heard on these issues, because
these issues have implications for consumers.
I think the best way for consumers to have their voices
heard, you know, go back to our rule. We can look at changes we
can make, but we also need to make sure that consumers'
concerns are met as they arise, with an eye towards ensuring
consumers' voices are being heard as they come up through the
process. And this is something that my colleagues and I will
continue to look at and be vigilant on, because I think that
transparency and accountability, these are very, very complex
matters, and I think it is important that consumers are
protected.
Mr. Rush. Commissioner Glick?
Mr. Glick. Thank you, Mr. Chairman. You know, one of the
things that has been very enlightening since I have been at the
Commission for a little over a year now is just the amount of
frustration there has been with RTO governance around the
country. And it is not just consumer groups, it is other
stakeholders as well who have been very frustrated with. And I
think it is worth it for the Commission to take a look at how
the governance process works and how the various stakeholders
get to participate.
I would say that Congress in the late 1970s, early 1980s
passed legislation creating an Office of Public Participation
at FERC that I think would help provide for some consumer input
at the Commission. As I understand it, Congress never did fund
that Office, but I think it would be helpful if Congress did
fund it, and I think that would be one way for consumers to
participate in some of the decisionmaking processes we engage
in.
Mr. Rush. Commissioner----
Mr. McNamee. Just briefly. I think that you are talking
about the importance of----
Mr. Rush. Commissioner McNamee, I am sorry.
Mr. McNamee. That is quite all right. I think you touch on
what is so very important, is that in our entire system of
government, people want to be heard. And I know that we all
take very seriously our obligation to understand that every
person that files something in the Commission, that that case
is important to them and that they need to be heard. And I
think we always need to be vigilant to make sure that we are
paying attention to what consumers want, what stakeholders
want, every participant wants, in order to make sure that we
are at least considering and hear their concerns even though
sometimes it won't always be the result any particular
individual or group wants. Thank you.
Mr. Rush. I am going to yield back the remainder of my time
and now recognize the ranking member of the great State of
Michigan, Mr. Upton, for 5 minutes.
Mr. Upton. Thank you, Mr. Chairman. It is the great State
of Michigan, so that is good we put that adjective in there.
Mr. Chairman Chatterjee, first, I want to say to all four
of you, I appreciate your interaction with all of us. This is
something that is so important. We appreciate the relationships
that we have.
For me, we know that rogue hackers and state-sponsored
adversaries continue to launch cyber attacks at our Nation's
energy infrastructure virtually every single day. And as you
know, under the EPAct 2005, Congress gave FERC the authority to
oversee the reliability of the electric grid including the
authority to approve mandatory cybersecurity reliability
standards. The current framework for setting cyber standards
for the grid seems to be working pretty well, I think, but FERC
does not have the authority over pipelines. And even though we
are increasingly relying on natural gas pipelines to keep our
power plants running--and I know in my congressional district
we are expecting to break ground on a new Indeck facility in
one of my communities back home.
So the question is, should Congress be concerned about the
lack of cyber oversight for pipelines, and I would note that
TSA, in a hearing that we had a couple weeks ago, has less than
a handful of folks--anybody here from TSA? Didn't think so--
less than a handful of folks out of their 50,000 employees that
oversee pipelines. They did refuse despite bipartisan efforts
to try to get them to testify before the committee, but what
are your thoughts about the involvement of cyber and the
relationships that you might have with other agencies as well?
Mr. Chatterjee. Thank you, sir, for the question and also
for your leadership on this issue, and particularly during the
time that you chaired the committee. I think this is a very
serious issue, and I think it is exacerbated by the increasing
interdependence between gas and electricity generation in this
country. Twenty years ago, if a single gas pipeline went out, a
generator might not have flinched. Today, you might have eight
or nine generators depending on a single gas pipeline, and a
physical or cyber attack on such a pipeline could have
catastrophic cascading effects. And our adversaries know this.
I think TSA does a remarkable job on things like the safety
of our aviation fleet, our highways, our rail, transportation
area, but they need to put a greater focus on securing these
pipelines because of this increasing interdependence for
electricity. Since you, Senator Cornyn, Senator Cantwell, and a
number of others have come out on this issue, Commissioner
Glick and I have also been very vocal about our concerns in
this area.
We have seen some progress from both TSA and industry. I
have met multiple times with the TSA Administrator Pekoske, and
he has assured me that TSA is taking this seriously and they
are going to commit more resources to it. I have also seen
industry react positively and come forward and make the
commitment that they will make the requisite investments in
this area, but we have to remain vigilant on it. I think both
TSA and industry need to follow through on the commitments that
they are making. And if they don't, I think it is incumbent
upon us at the Commission and you all to keep the pressure on.
Mr. Upton. Well, we want to help you do that. Any other
Commissioner wish--Commissioner Glick?
Mr. Glick. Mr. Upton, as the Chairman said, we wrote a
joint op-ed on this issue, and I share the Chairman's concerns.
I would say that I continue to have serious concerns about the
TSA's ability here. And I read the GAO Report recently that I
think expressed some serious concerns about their resources and
their efforts in the program. And I am not entirely sure what
their plans are. We just need to see what their plans are in
terms of responding.
But we had a technical conference on cybersecurity just a
few months ago and a TSA witness participated, and I asked her
about the success rate of their voluntary guidance. And they
said, ``Well, our hope is to have a success rate of 80
percent.'' Eighty percent doesn't cut it. We need to have the
success rate of a hundred percent. And again, the TSA does a
wonderful job on airports and other transportation, but I think
the pipeline industry, I think we need to see that moved. I
would actually recommend the Department of Energy, which is, as
you know, the lead energy sector agency for cybersecurity.
Mr. Upton. Commissioner LaFleur?
Ms. LaFleur. Thank you, Congressman. I was in the electric
industry when the mandatory standards were first handed down
after the 2005 act, and we did not exactly welcome them. Our
attitude was, we already do this, right, why do we need
mandatory standards? But I believe they have definitely
improved the reliability and security of the grid, and I
actually think most people in the industry would concede that
now too.
I think, although I know the pipeline industry is not
calling for mandatory standards, I think the cybersecurity of
the pipeline grid is so important that it would be worthwhile
for Congress to require some sort of mandatory authority. It
doesn't have to be at FERC. It could be at TSA and give them
the resources, it could be at DHS. It could be at DOE. I am not
in the business of looking for more responsibilities at FERC,
that is up to you all. But I do think a structure with some
teeth to it would be very helpful.
Mr. Upton. Thank you, Mr. Chairman. I yield back.
Mr. Rush. I want to thank the gentleman. And now the Chair
recognizes Mr. Peters for 5 minutes.
Mr. Peters. Thank you. Thank you to the Commissioners for
your work and for being here today. I want to just mention
climate change, which is exacerbating natural disasters. For
California that means more intense wildfires each year, with a
huge impact on personal safety, communities' health, and the
economy. The Midwest has seen flooding. The South has seen
hurricanes. The Northeast has a cold snap, polar vortex
conditions.
So I want to talk a little bit about how we are managing
the electric system and planning for that. How is FERC looking
at accounting for climate change in the design of wholesale
markets and in grid investments? Let's start with the Chairman,
if I could.
Mr. Chatterjee. Thank you for your question, Congressman.
And, look, similarly, I share your concerns about climate
change and the impacts of climate change. I am a conservative,
I grew up in coal country. But I believe that climate change is
real, that man has an impact, and that we need to take steps to
mitigate emissions. I have been very proud of the work that the
Commission has played in really helping the U.S. become a
leader in emissions reductions. And if you look at the
statistics, the U.S. has been a leader in emissions reductions.
Power sector emissions in the U.S. are at 1990s levels, and I
think that is due to a couple of things. The markets that FERC
oversees, we are allowing breaking down barriers to access so
that newer technologies can be----
Mr. Peters. And how is that happening? I want to be very
specific about what actions you are taking with respect to
market design.
Mr. Chatterjee. Yes, sir. So, I think the market works.
Competition works. Consumers are demanding cleaner energy
sources, those sources are dropping in price and are able to
compete and that----
Mr. Peters. Is there anything specifically that FERC is
doing?
Mr. Chatterjee. I could point to Order 841, the order we
did on battery storage to break down barriers to entry to allow
battery storage to be compensated for all of the attributes it
provides. That is going to lead to an increased deployment, we
think a dramatic increase in the deployment of battery storage
technology which will have a direct and, I think, significant
impact on mitigating carbon emission.
Mr. Peters. There was a resilience docket that you opened
with the coal, nuclear NOPR was denied back in, I think,
January 2018. You haven't taken any action on the resilience
docket yet, is that correct? And when can we expect that?
Mr. Chatterjee. That is correct. We don't make projections
on timing. It is a very complex docket. When Secretary Perry
proposed the rulemaking in the fall of 2017, the action that he
was asking for, compensating plants for having onsite fuel, we
all found collectively that our record did not support that
action. Now, a year and a half later, we have a far more robust
record and we are looking at these very complex challenges.
I think the next step ought to be--and I don't want to get
in front my colleagues--but to engage the RTOs and the ISOs and
the States on fuel security, to look at this very serious
issue. But what I can assure you we will not do is, as the
chairman said at the onset, we are not going to put our thumb
on the scale for one fuel source or the other. We are going to
look very seriously at these markets and the future of our
grid.
Mr. Peters. Ms. LaFleur, do you have any thoughts on this
question?
Ms. LaFleur. Yes, I certainly agree that the Commission has
a responsibility to make sure that the resource rules and the
markets are adapted to new resources and not just the
traditional resources that existed when the markets were built.
And I think we have done a lot over the last decade on
demand response, variable energy, renewables, storage and so
forth, but beyond that what we are seeing now is that, since
there has not been--in other environmental issues that the
Nation confronts, if Congress passes a law and says you have to
reduce sulfur dioxide or whatever, then all the power plants
have to conform and the cost of doing that gets priced into the
market. Because there is not any national climate legislation,
as you know, it is being handled on a State by State basis.
And that is the issue that I mentioned earlier, that the
markets are working to figure out how they can run a regional
market with multiple States with all different climate
policies, but I think it is essential that they do, and the
markets have to be adapted. If that is where climate action is
going to happen on the State level, we have to adapt the
markets to function in that environment.
Mr. Peters. Are you saying that you think that a Federal
standard, a low-carbon fuel standard or something like that
would be helpful in getting----
Ms. LaFleur. Absolutely. I think that it is a global issue.
It should be addressed at the highest level possible. And if we
had a Federal standard, whether we were deciding whether a
pipeline was consistent with the standard or whether a tariff
in the market was consistent, we would have a benchmark to look
at. Do they have enough allowances? Does this work with their
standards? And it would be far more compatible because the
Nation's electric grid is not State by State, it is big, big
regions.
Mr. Peters. OK. Just a quick question for Commissioner
Glick, I don't have a lot of time. But I am interested in
hydropower as a valuable zero-emission energy source. You
mentioned it in the testimony. Really quickly, how do you think
we increase hydropower facilities with pump storage
capabilities?
Mr. Glick. Well, pump storage can play a very important
role, and I think our storage rule didn't just apply to battery
storage, it applied to pump storage and other forms of storage
as well. I think what we need to do and what we are doing, I
think, is through our licensing process consider proposals for
pump storage products and approve them, assuming they are in
the public interest.
And I think----
Mr. Peters. OK, I am out of time. I am sorry. I don't want
to take my colleagues' time, but if you want to give me
anything in writing on that, that would be helpful too.
Mr. Glick. Will do, sir.
Mr. Peters. Mr. Chairman, I yield back.
Mr. Rush. The chairman thanks the gentleman. The Chair
recognizes now Mrs. McMorris Rodgers for the purposes--no, Mr.
Latta. I am sorry. Mr. Latta. Mr. Latta.
Mr. Latta. Thank you, Mr. Chairman, and thanks for holding
today's hearing and thanks to our witnesses for being with us
today. It is very, very important that you are here.
Chairman, if I could ask some questions of you this
morning, you recently mentioned that you would like to see FERC
to do more to consider landowners affected by pipeline
projects, saying, ``It is not a landowner's responsibility to
be tracking FERC's filings.'' Would you tell the committee what
you see FERC doing, and tell us if there is anything that you
need from Congress at this time?
Mr. Chatterjee. Yes, absolutely. And thank you for the
question, Congressman. I think energy infrastructure is
important. We need it for our economy, for our security, for
the reliability of the grid, but we have to be mindful that
landowners, you know, need to understand what their rights are,
need to understand what options there are for mitigation, for
restoration and the like. And I don't think the Commission nor
project sponsors have done a good enough job in communicating
these things to landowners.
And so, as we opened a review of our 1999 certificate
policy statement, which is our process for evaluating pipeline
applications, that was one area that I zeroed in on, is what
can we do to ensure that landowners' rights are taken into
consideration and they are aware of what options are available
to them. And that is something that we are looking to do. We
are actively meeting with stakeholders to figure out where we
can make improvements.
I have seen some improvements from project sponsors.
Project sponsors, since I have made this clarion call, have
come to the Commission and shown me the lengths that they go to
and the investment that they make in communicating with the
landowners. And that is a step in the right direction, but I am
hoping that we at the Commission can do our part to ensure that
landowners----
Mr. Latta. Do you have any specific examples right now that
what FERC has been doing?
Mr. Chatterjee. So we are in the process right now--it may
not seem that significant, but it really is--in just updating
our website and ensuring that, you know, information is more
easily disseminatable to people who, as I stated, it is not
their job. It is not their responsibility to track these very
complex filings. They shouldn't know--a need to know and track
these proceedings, and we need to make this information more
readily available to them and get it out proactively.
Mr. Latta. OK, thank you. Let me follow up with another
question to you. The reliability and resiliency of the bulk
electric system requires support from generation and
transmission assets. Given the ever-adapting nature of
electricity supplies, would you talk about the importance of
the transmission assets to the future reliability and
resilience regardless of the type of fuel?
Mr. Chatterjee. Yes, sir. I think there is no question that
we are experiencing rapid transition in our energy landscape.
And I think as the grid adapts and as we move towards the grid
of the future, I fundamentally believe that transmission will
be the key, and we have to make sure that we get, at the
Commission, get transmission policy right to ensure that that
grid of the future is in place.
We currently have two open proceedings, two notice of
inquiries that we opened a few months ago to look at how we
calculate ROEs, return on equities, for these investments as
well as our incentives policy. What types of transmission
should we be incenting? And I think for me, a current approach
is to evaluate, put out incentives based on the risks of a
particular project. I don't know if that is the smartest
approach to ensuring that the grid of the future that we need
is built, and so we are going to look to see what are the smart
investments that need to be made to ensure that that
transmission system is in place so we can maintain the
reliability and resilience of the grid.
Mr. Latta. OK. Well, thank you. One more question. You
mentioned in your testimony that in October of last year, FERC
approved new mandatory reliability standards to bolster supply
chain risk management protections for the Nation's bulk
electric system. Would you expand on this and other activities
that FERC is undertaking, especially on the supply chain and
critical infrastructure?
Mr. Chatterjee. Yes. Thank you, sir. I mean, the supply
chain is something that we all need to, you know, be focused
on, because again it is a challenge for FERC because we don't
have jurisdiction in some of these areas and so we have to be
coordinated and work with NERC and others to stay ahead on
this. The reality is cybersecurity and the reliability of the
grid, this is the new reality that we must contend with. And
while we are the beneficiaries, consumers are the
beneficiaries, America is the beneficiaries of this tremendous
evolution and technological innovation, that innovation comes
with a downside risk, and that is increasing vulnerability to
threats from bad actors and on the cyber side.
And I think it is incumbent that we are partners with NERC,
Congress, the Department of Energy, and across the Federal
Government work together because we do have criss-crossing
jurisdictions in some areas and we need to ensure that those
lines of communication are in place so that we cannot just have
standards, because I believe standards to be the floor not the
ceiling of what we can do, I think if we all work together
because our adversaries are continually evolving, and we have
to evolve to stay one step ahead of them.
Mr. Latta. Well, thank you very much, Mr. Chairman. My time
has expired, and I yield back.
Mr. Rush. The Chair thanks the gentleman. The Chair now
recognizes Mr. Doyle for 5 minutes. I am sorry. Mr. Pallone is
here, the chairman of the full committee. Mr. Pallone for 5
minutes.
Mr. Pallone. Thank you. Thank you, Chairman.
In his opening statement, Mr. Kennedy raised concerns about
regional transmission organization, RTO, governance, and I
share many of his concerns. FERC Order 719 directs RTO
procedures and practices to be inclusive, to fairly balance
diverse interests, and to ensure adequate consideration of
minority positions. And that Order 719 was issued in 2008, and
it provides stakeholders process requirements for RTOs to
follow, but to my knowledge there has not been a comprehensive
review by FERC of each RTO stakeholder process to ensure
compliance with the requirements of Order 719.
So, Chairman Chatterjee, I just would say it is time to
review the requirements and to review RTO compliance. And I
want to know if you agree and, if so, would you consider taking
action on this matter in the immediate future?
Mr. Chatterjee. Thank you for the question, Mr. Chairman.
We were discussing earlier, this is something that we
continually hear from people around the country, concerns about
ensuring that consumers' voices are heard, that the process is
transparent, that people are aware of what is transpiring
within the RTOs and the ISOs. And yes, it has been a decade
since we looked at Order 719.
I do think, you know, going back to the rule is one option,
but, you know, looking with an eye towards ensuring consumers'
voices are heard as they come up through the process is another
manner in which to do this. I think, particularly as new
technologies come into play and we look to break down barriers
to entry, we need to ensure that these new voices have an
opportunity to be heard at the RTOs and the ISOs, and certainly
it is something I am committed to working towards.
Mr. Pallone. Well, I appreciate that and, you know, want to
continue working with you. I also want to reiterate what I said
in my opening statement regarding concerns with the process by
which RTOs assess their transmission infrastructure needs. We
must provide greater incentives for nontransmission
alternatives so that companies are not building unnecessary
infrastructure that increases costs to ratepayers.
So let me ask Commissioner Glick, do you believe that in
certain cases nontransmission alternatives can be used to
increase reliability while also limiting costs to ratepayers?
Mr. Glick. Thank you, Mr. Chairman. Absolutely, they do.
And as a matter of fact, you know, in the Commission's Order
1000 issued several years ago, it requires transmission
planners and the various RTOs and the ISOs around the country
to consider nontransmission alternatives. What I think is
missing is that I think there is an incentive for utilities
many times to build more transmission, because if you build,
you invest something that costs a lot of capital----
Mr. Pallone. Exactly. And that is what I hear from my
consumers.
Mr. Glick. So I think what we need to do, and Chairman
Chatterjee earlier mentioned that we have a new incentives
process at FERC looking at our incentives policy, and I think
what we need to do is incentivize using newer technologies and
nontransmission alternatives, but also using our existing grid
more efficiently rather than--sometimes we can do that rather
than build a line. We need to encourage utilities to look into
those types of investments.
Mr. Pallone. Oh, this is music to my ears, I want to be
honest with you. Now let me see if I can get a climate question
in. In May 2018, FERC issued a new policy that eliminated from
consideration most upstream and downstream greenhouse gas
emissions. Just last week, the DC Circuit in the Broad Run case
flatly rejected the core legal arguments that form the basis
for that policy.
So let me just ask Commissioner Glick and LaFleur, not much
time left, but do you think the Court's decision in Sabal Trail
and Broad Run require FERC to reform how it considers upstream
and downstream greenhouse gas emissions? I guess I will start
with Ms. LaFleur since I haven't asked you.
Ms. LaFleur. Yes, the Sierra Club case and the Sabal Trail
definitely changed the rules that apply to the Commission, or
made clear what they were. It specifically related to
downstream emissions, and I think the Commission has been too
stinting in its interpretation. I dissented in our order on
remand because I think we have only taken the court's guidance
to heart when it is a specific power plant exactly like the
situation in the Sabal Trail pipeline. And I think the
implications of the decision go much broader. And as
Commissioner Glick testified earlier, a couple weeks ago we got
another decision from the DC Circuit that made clear that FERC
is a legally relevant cause of the downstream emissions, and we
should be looking at them.
Mr. Pallone. Mr. Glick?
Mr. Glick. Mr. Chairman, I would just say that there has
been some question recently as to whether the Commission has
the authority to look at reasonably foreseeable greenhouse gas
emissions, and I think the two court cases, including the one
last week have, I think, put that question to bed. I think we
clearly have that authority.
Mr. Pallone. Quickly, how does FERC's analysis of a
project's greenhouse gas emissions relate to the requirement of
the Natural Gas Act to only approve projects that are in the
public convenience and necessity?
Mr. Glick. Well, when we consider the public interest, we
also look at the environmental impacts of the pipeline, for
instance, wetlands or migratory birds or anything like that.
And if we find that the impacts of the environment are too
adverse, then we won't consider the project to be in the public
interest. Here, we are actually ignoring what impacts the
project might have on climate change.
Mr. Pallone. Thank you. Thank you, Mr. Chairman.
Mr. Rush. The Chair now recognizes Mrs. McMorris Rodgers
for 5 minutes.
Mrs. McMorris Rodgers. Thank you, Mr. Chairman. I
appreciate everyone being here and for your work at FERC. I am
from Washington State. And if you are not aware, my district in
Washington State is very dependent upon hydropower, and I
believe that we should be embracing what hydropower can provide
for us as we continue to move towards a 21st century clean
energy future.
You know, in Washington State right now, our carbon
emissions are actually up, and some of that is--one of the big
drivers is because of the--from power plants, more dependence
on power plants. And I look at this and I think there is so
much more capacity for hydroelectricity, even in Washington
State as well as across the country. The National Hydropower
Association did a report a few years ago highlighting that we
could double hydropower in America without building a new dam,
because only 3 percent of the dams actually produce
electricity.
So there is huge infrastructure investment there, and as
the largest renewable with lots of potential, I just believe
that we should be doing more. It is renewable. It is reliable.
It is affordable. We enjoy some of the lowest electricity rates
in the country because of hydropower. Last Congress, I had
introduced the Hydropower Policy Modernization Act, which would
have modernized the hydropower licensing review process. Just
to put this in perspective, it takes on average 10 years to
relicense a hydropower facility in America today. You can
compare that to a natural gas facility at 18 months, I believe
that we can do better.
This legislation passed the House with bipartisan support,
and I would like just to use this opportunity today to ask
about the FERC process for licensing, relicensing of hydropower
projects. It is my understanding that there are hundreds of
hydropower projects scheduled to come up for relicensing before
the Commission in the next 10 years. While Congress has passed
some improvements for the licensing of new projects, we haven't
yet passed the significant reforms for the existing projects
across this country.
This lack of action and its impact on our existing
hydroelectric facilities is why I continue to advocate for us
addressing the relicensing of hydropower in America. I have
concerns that the uncertainty in the cost as currently
associated with hydro relicensing, particularly for the smaller
projects, may result in fewer relicensing efforts and will lead
to a loss of flexible generation, less reliable grid.
Hydropower provides the largest natural batteries in the
country also. There are lots of benefit.
So I wanted just to ask the Chairman and the others, do you
agree that this lack of effort to address and improve our
relicensing process is of concern and, if so, what are some of
the areas you would recommend that we work on to reduce the
duplication of effort, unnecessary delays, and undue cost?
Mr. Chatterjee. Thank you for the question and for your
support of this. I agree with you on the significance of hydro
and the concern about the licensing process. We have been
working very hard on it. We issued a final rule establishing an
expedited licensing process for original hydropower licenses
for certain facilities at existing nonpower dams and for
closed-loop pump storage projects. We are fully aware that
another wave is coming, and we have alerted the licensees far
in advance to give them time to work on their applications.
I also share your concern that a number of the relicenses
are small projects, which have the downside of them possibly
having limited resources and expertise on relicensing but the
upside of the amount of actual work and paperwork not being as
much as for a larger facility with bigger upsides, and so we
are taking these things into consideration. I also want to
note, existing licensees can continue to operate under 1-year
extension if their relicensing isn't done by the time that
their license expires, so no one is shut down if they are not
relicensed before expiration. But to answer your question, you
know, we totally understand and have undertaken a flexible
approach to approving requests for license term modifications
to facilitate coordinated relicensing of projects that are
located in the same sections as river basin, where
periodically----
Mrs. McMorris Rodgers. Excuse me. Excuse me, real quick. I
appreciate that. I have very little time left. But would you
also just speak very quickly to how hydropower could benefit
the grid?
Mr. Chatterjee. It is a reliable, clean source of energy,
and as we look to continue to squeeze carbon emissions out of
the grid, I think hydro can play an incredibly important role.
Mrs. McMorris Rodgers. Thank you. Thank you so much.
Mr. Rush. The Chair now recognizes Mr. Doyle for 5 minutes.
Mr. Doyle. Thank you, Mr. Chairman. And welcome to our FERC
Commissioners, we appreciate you being here.
Last year, FERC determined that PJM's capacity auction
structure was unjust and unreasonable with regards to the
State-supported resources such as renewables or nuclear. And in
response, PJM submitted a proposal that has been pending for a
year. FERC suggested alternatives to this structure but has not
yet released any details for an acceptable mechanism. FERC
permitted PJM to delay its capacity auction from May of 2019
and hold it this August instead. That decision on a rule was
supposed to come in January, but now it is June and we still
haven't seen a rule.
So either a rule is going to be published right before
August, which won't give auction participants enough time to
adjust, or a decision will not be published and participants
will have to take part in an auction under rules that FERC has
found to be unjust and unreasonable. That raises lots of
concerns and uncertainty. I am interested in hearing what the
Commissioners say. When do you intend to issue this rulemaking,
and what tools does FERC have to provide some clarity to this
situation?
And, Mr. Chairman, I will start with you.
Mr. Chatterjee. Sir, so I have to be, and my colleagues and
I all have to be very careful here. This is a pending contested
matter, and our rules prevent us from discussing internal----
Mr. Doyle. Well, I understand it is a pending case, but the
reality is that you are creating a considerable amount of
uncertainty here. PJM's capacity auction in May of 2018
procured 160,000 megawatts of capacity at a value of $9
billion. That is a lot of risk for companies to take in.
Mr. Chatterjee. Sir, we completely understand. At a very
macro level, again not getting into the specifics of the matter
before us, this is a vexing challenge. Because you have a
situation where, two things that I think we all believe in,
States' rights and the markets, are colliding. We all want
these markets to succeed and to function and work properly, and
we want to respect States' rights.
But we are coming to a point where actions that States are
taking to make decisions about their local energy futures are
impacting the markets, and trying to figure out how to sort
through that while ensuring just and reasonable rates has
proven to be very, very challenging. And so, while I can't
speak against the specifics or timing, please understand we
take this very seriously. We understand the need for clarity
and to calm the markets, and we are working as diligently as we
can.
Mr. Doyle. Well, let me ask Commissioner LaFleur and Glick,
are there any things that FERC can do to provide some guidance
to PJM and provide some clarity if that is the situation, if we
are not going to have a rule?
Ms. LaFleur. Well, I also can't comment on the merits of
what is before us, but I am deeply, deeply troubled by the
delay. And I had dissented in the initial order because I
thought it would put PJM in an impossible situation, and I am
afraid that is exactly what has come to pass. And I have been
using my world-class powers of nagging to be a nag about it,
but so far we have not gotten an order out. I think we have a
lot of tools at our disposal, but we have to agree on them and
use them.
Mr. Doyle. Commissioner Glick?
Mr. Glick. I have spent a lot of time in the private
sector, and one thing I learned from working there is that you
need regulatory certainty. Companies can't make investments
without knowing where the government is going, so I think it is
incumbent upon us to make a decision and act. Obviously, I
can't talk about timing or the nature of it, but I do want to
point out that you mentioned that, if the auction is held under
the current rule, it may be considered unjust and unreasonable.
So I am not entirely sure how the auction can go forward until
there is some more clarity from FERC.
Mr. Doyle. Well, let's hope that is sooner rather than
later. This is June.
Commissioner Glick, let me ask you. Capacity markets don't
consider the impact of carbon on the atmosphere in each
generator's bid. Do you think capacity market rules should be
rewritten to reflect this, and how do we protect States' rights
in the process?
Mr. Glick. Well, I think, in general, if capacity markets
are run properly, I think that the most competitive resources
will succeed. And I think in this case, and lately we have seen
lower greenhouse gas-emitting technologies will certainly do
well in those markets, I will say that I think that--I am not
entirely sure if FERC has the authority to require capacity
markets to take into account emissions, greenhouse gas
emissions, but----
Mr. Doyle. Do you think they should?
Mr. Glick. Well, I think if Congress gave us the authority
we should--we certainly can consider, and I know that PJM and
New York are two ISOs and RTOs right now that are considering
imposing some sort of carbon pricing regime. And I think we
could consider that and maybe approve that, assuming it is just
and reasonable. But I am not sure if we can do that on our own
authority right now.
Mr. Doyle. Well, I see my time is running out, but I would
encourage you to please provide some clarity to what is going
on with PJM. I don't know how they can hold an auction in
August without a rule or without some direction from the
Commission. I would urge that.
Mr. Chairman, thank you. I yield back.
Mr. Rush. The Chair now recognizes Mr. Olson for 5 minutes.
Mr. Olson. I thank the Chair, and welcome to our four FERC
witnesses. A special howdy to a native-born Texan, Commissioner
McNamee. Howdy.
Mr. McNamee. Howdy.
Mr. Olson. I want to start with a question to you, Mr.
Chatterjee, that is very important to the people I work for in
Texas 22 and my entire State. As you know, Houston is the heart
of the American energy economy. We aren't just powering
America, we are now powering the entire world. And as American
energy becomes more dominant, that role keeps increasing for
soon-to-be the third-largest city in America. We are going to
overtake Chicago within 2 years.
Sorry, Mr. Chairman, but those are the facts.
Mr. Rush. Don't bet on it.
Mr. Olson. FERC knows that fact and that there is a need
for FERC to adjust to that reality. I think it is high time
that we have Commission staff right there in Houston, Texas,
down where they are needed. You seem to agree. At the annual
CERAWeek a couple months ago in Houston, you told the Houston
Chronicle, ``A Houston office makes a lot of sense.'' Can you
talk about why a regional office in Houston makes sense, what
are your plans to make it happen, and how can I help?
Mr. Chatterjee. Yes, sir. Thank you for the question and
for your leadership in this area. How this all came about,
there was a period last summer where I became genuinely
concerned that we didn't have the staff and the resources in
place to consider the number of LNG applications that were
before us. And I truly believed there was a chance that we
could miss this incredible American moment where U.S. LNG
exports could benefit the economy, could benefit the
environment by lowering global carbon emissions, and have
geopolitical significance for America. But I was worried that
FERC would miss our deadlines.
And so we frantically worked to hire the lawyers and the
engineers that were necessary to streamline the bureaucracy. We
had an MOU with PHMSA which enabled us to earlier this year we
have now approved four LNG applications. We hadn't in 2 years;
we have done four. That is very significant, and it is due to
this hard work. But I want to make sure that as the next wave
of applications comes through that we have the infrastructure
in place to continue to consider them, because we are
responsible not just for reviewing new applications but for
existing approved facilities as well.
The expertise is in and around the Houston area. As you
mentioned, you guys are the epicenter of the energy universe.
That is where the schools are training the engineers and the
lawyers who will do this work. And so, perhaps, you know,
attracting and retaining the kind of talent we need to process
this can be very difficult. Maybe having an office in Houston,
which is something that we are actively working towards and
hope to have an announcement on soon, would give us that venue
to get the talent where it is, identify the people on the
ground, and make sure that America continues to take advantage
of this incredible opportunity.
Mr. Olson. You brought up LNG, and that is my next
question. Like you, I was worried a few years ago. FERC was
being overwhelmed by applications for LNG export projects. You
had some problems. Not your fault, but hey, getting somebody
through the Senate, confirmed, delays, explosive permits, as
you mentioned, manpower. And as you know, speed is the key to
approval. We have to have quick approval to make these things
viable. Companies need to line up financing. They need to lock
in buyers. These delays could have hurt our jobs right here in
America. They could have hurt our allies who are craving our
liquefied natural gas that are being stuck right now with gas
from Mr. Putin.
But you and your colleagues turned that ship around through
some challenging seas. We have now seen some key projects
approved. You mentioned four. We have American liquefied
natural gas going to India, Japan, South Korea, Poland,
Lithuania, China, just to mention a few. We are exporting
liquid American freedom. Can you talk about your challenges,
how you got those approvals headed out the door, and what is
next for LNG export rounds?
Mr. Chatterjee. Thank you, sir. So I mentioned some of the
procedural things we did, the MOU with PHMSA, hiring people,
cutting through bureaucracy, streamlining the process, but the
most significant thing that we did because we had a timeline in
which we needed to consider these applications and there are
four of us at the Commission that have, you know, very strong
views and we consider each application on a case-by-case basis,
but I think one of the things that I am most proud of is
myself, Commissioner LaFleur, and Commissioner McNamee came
together to overcome what had been the biggest obstacle to our
approving these projects, once we go through our application
analysis, which was how to account for greenhouse gas
emissions.
And Commissioner LaFleur didn't get everything she wanted
but was willing to compromise. Commissioner McNamee gave some
things up that he was reluctant to do but was willing to
compromise. And the three of us came through and were able to
negotiate a bipartisan compromise that enabled these projects
to move forward, which is so important for America. And I am
very proud of it, because it is an example of people putting
the public good ahead of partisan interests. And as far as I
know, I think we are the only three people in the Federal
Government to have successfully negotiated a climate
compromise, and it is a big deal for America on LNG, and it is
something I am proud of.
Mr. Olson. You all are the model for America in the future.
My time is expired. I yield back.
Mr. Chatterjee. Thank you, sir. Can I quote you on that?
Mr. Olson. Sure. It is public.
Mr. Rush. The Chair now recognizes Mr. McNerney for 5
minutes.
Mr. McNerney. I thank the chairman, and I thank the
Commissioners this morning.
Commissioner LaFleur, you mentioned some interesting
comments about how to pay for selected resources in your
statements. Would you expand on your comments and include how
it might affect reducing greenhouse gases?
Ms. LaFleur. Yes. What we are seeing is that right now many
States, including your own, have taken a pledge to do all they
can at the State level to mitigate the impact of climate
change, and they are doing it by in many cases selecting,
requiring either carbon targets or percentages of clean
resources or carbon-free resources. And they are also doing it
in some cases by subsidizing carbon-free resources that would
otherwise be retiring.
What we are finding is that in regions with multistate
markets, when different States have different rules it is
difficult for the markets to accommodate that. And that is why
we have been doing a lot of work in our dockets, as in the ISO
New England docket, to put in place new rules where States
can--because other resources are bidding into the markets
without any subsidy or in States that don't have any carbon
rules, then how do we fairly price all of this. That has been a
significant issue.
Mr. McNerney. Thank you.
Commissioner Glick, do you feel that the electric grid can
both expand service, say, to the transportation sector and
reach 80 percent of penetration with renewable sources, and if
so, how soon do you think we can do that?
Mr. Glick. I don't want to make a prediction about what
year that might occur, but I am certainly confident that we can
do it. I think there have been a number of studies both at NREL
and various RTOs around the country that show that much greater
penetrations of renewable energy are possible with very limited
changes to transmission, for instance, and do it reliably.
I will give you examples. Iowa, Kansas, Oklahoma, all three
of them already currently have more than 30 percent of wind
power just on their grid. SPP, one of the RTOs in the region,
has, I think, had a couple times where they were over 60
percent renewables just at one particular time and no
reliability problem. California ISO, I think 76 percent, if I
am not mistaken, 1 day earlier this year. So there are enormous
possibilities there, and I think they can be done relatively
quickly, but I can't give you an exact actual year.
Mr. McNerney. Thank you. That is pretty exciting if we can
reach 80 percent with renewables, you know, in a reasonable
time frame.
Chairman Chatterjee, the FERC has approved the natural gas
pipelines and LNGs, and that sounds good. But if only 2 percent
of the natural gas escapes through to the atmosphere, then we
are going to be in worse shape than if we used coal. So are you
taking leakage into consideration? Are you putting in high
standards for the pipelines that are going in and for LNG? I
mean, this is a pretty serious issue in my mind.
Mr. Chatterjee. I understand, sir, and we take very
seriously our responsibility to evaluate the safety and
environmental considerations of the energy infrastructure that
we consider, and we look at each project on a case-by-case
basis. What I can say is, you know, the U.S. is currently at
1990s levels when it comes to carbon emissions in the power
sector. I think that it is direct----
Mr. McNerney. But it is not just carbon. I mean, natural
gas emissions are very much stronger in terms of greenhouse gas
effects than carbon.
Mr. Chatterjee. But, sir, I think we are seeing market
forces and the deployment of clean energy----
Mr. McNerney. But the question is, are you putting high
standards in for these pipelines?
Mr. Chatterjee. I believe we have the highest environmental
standards and will continue to enforce them.
Mr. McNerney. Thank you. Also, regarding cybersecurity, Mr.
Latta and I introduced H.R. 359, the Enhancing Grid Security
Through Public-Private Partnerships Act. Would you speak about
how this and other cyber legislation would add the better
defense at the grid?
Mr. Chatterjee. So I am not familiar with the specifics of
the legislation. Can you just give me a sort of top line on
what it would achieve?
Mr. McNerney. Well, it uses public and private resources to
give grid, the electricity companies, the resources they need
to implement cyber measures.
Mr. Chatterjee. I would like to look at it more closely,
but again, based on that description it is certainly something
that I am interested in. As I mentioned earlier, the
cybersecurity, I believe ensuring the reliability of the grid
is the most important job that my colleagues and I play.
Cybersecurity is a real threat, and we all have to remain
vigilant on it. And I applaud you for your legislation.
Mr. McNerney. Briefly, what reliability gaps still exist
that could be addressed by legislation?
Mr. Chatterjee. So, look, we have to constantly remain
vigilant in ensuring the reliability of the grid. I do believe
that the U.S. grid is the most reliable on the planet, but we
are increasingly facing threats from hostile actors, and we
need to do what we can. We discussed it earlier, the potential
vulnerabilities to the cybersecurity or physical security of
our pipeline infrastructure. That is certainly an area where we
need greater focus.
Mr. McNerney. All right. Thank you, Mr. Chairman.
Mr. Rush. The Chair now recognizes the ranking member of
the full committee, Mr. Walden, for 5 minutes.
Mr. Walden. Thank you, Mr. Chairman. Again, to all of you,
thanks for your service to the country and thanks for being
here today to help us do our proper oversight. Under my
chairmanship of the full committee, we prioritized policies
that I think were both good for consumers and the environment.
And we said they weren't mutually exclusive, either. You can do
both. In the last Congress, in fact, this committee passed more
than a dozen bills signed into law to give FERC new authorities
and streamline existing processes to encourage new hydropower
development and bring more accountability to the ratemaking
process.
So what I would like to know is, what is the status on
FERC's implementation of these bills, which were incorporated
into the America's Water Infrastructure Act of 2018? And so, I
might go to Chairman Chatterjee. If you can, can you give me an
update on what you are finding, what you are implementing, what
is working, what is not, what do we need to do improve upon?
Because I think hydro, to Mr. McNerney's point on some of the
other sources of energy, hydro, we know, has no emissions to
it. And so, we would like to know how you are doing
implementing this.
Mr. Chatterjee. Thank you for the question and for your
leadership on this issue as chair of the committee. You know,
over the past few Congresses, this committee has pushed an
infrastructure legislative reform initiative that included
hydropower licensing reform. When it comes to implementation of
these, where the provisions further details into the
regulations that FERC was directed to promulgate pursuant to
the America's Water Infrastructure Act of 2018, we are working
on it. I think that shared decisionmaking in the regulation of
hydropower projects has complicated the Commission's efforts to
timely and efficiently process applications.
Mr. Walden. Right.
Mr. Chatterjee. In particular, these large, complex
relicense applications in certain regions. And therefore, I
totally support the efforts that you all have made to
streamline the hydropower review process. Having said that, the
committee already attempts to set schedules for agencies, but
none of that overrides these agencies' independent authority
for the processes under their own statutes.
Statutory requirements give other agencies a significant
role in the licensing process, thus limiting our Commission's
control of the cost, timing, and efficiency of licensing, but
it is something that we take very seriously are working
towards.
Mr. Walden. But in terms of implementing, the regulations
to implement these laws, what should we look for in terms of
timing on that?
Mr. Chatterjee. We don't like to make predictions on
timing, but please know that we are taking it very seriously.
Mr. Walden. All right, good, because we----
Ms. LaFleur. We vote.
Mr. Walden. Yes.
Mr. Chatterjee. Commissioner LaFleur reminds me that we did
vote this out at our April open meeting.
Mr. Walden. April, OK.
Ms. LaFleur. I believe it was April, yes.
Mr. Walden. Yes. I know you are all juggling a lot like we
are, so we appreciate that.
Ms. LaFleur. We made it by days in the statutory deadline
to get the regs out. The staff did a great job.
Mr. Walden. Well, now I am going to give you a gold star. I
think you are the only agency that has met things--well,
anyway.
So I mentioned in my opening about constriction points and
bottlenecks, and I know the Northeast suffers from it. And I am
just curious, you know, we did 11 hearings on electricity
issues and grid modernization pricing, electricity markets,
because we are concerned on the electricity side especially
about this, but we know it is more than that. And I just wonder
what kind of barriers you have identified to the development
and deployment of new technologies that will harden the grid,
reduce emissions, and allow for new transmission
infrastructure. What are you seeing on the ground around the
country that we need to be aware of that is holding back our
ability to get more less-emitting energy sources onto the grid?
Mr. Chatterjee. So what we have seen is just, you know,
there are some obstacles in place in the various RTOs and the
ISOs to new entrants, to new technologies in that, you know,
legacy incumbents have procedural processes in place that they
can use to prevent some of these new technologies from being
compensated for the attributes that they provide.
And so, I think, I point to Order 841 on battery storage
that we were able to pass in 2018 and that we just dealt with
on rehearing as a major breakthrough to enable battery storage
technology to be compensated for all of the attributes and
resources it provides in terms of energy capacity and ancillary
services. We are now currently working on distributed energy
aggregators to see similarly what barriers to entry there could
be for these resources and the attributes that they could
provide. And we will take the same careful, thoughtful, and
legal approach that we did in addressing battery storage in
considering that docket.
Mr. Walden. Good, because I know some of that is starting
to come to fruition. There is a project in my district that is
going to be, I think, 300 megawatts now. I was told of one out
of Texas, I think, where it is 300 megawatt hours, which is
different. They can deal with the duck curve and maybe have 4
hours of storage. So are you seeing more and more of those
sorts of combined projects coming to fruition since that order?
Mr. Chatterjee. I can let my colleague----
Mr. Walden. Yes, anybody that wants to----
Ms. LaFleur. I think we are seeing more proposals to
develop storage and renewables----
Mr. Walden. Good.
Ms. LaFleur [continuing]. In tandem, almost like we
developed nuclear and pump storage together in the '60s. And on
your other question on the choke points, I would say one of the
biggest issues we have is the difficulty of building long-line
transmission between regions----
Mr. Walden. Yes.
Ms. LaFleur [continuing]. For the location-constrained
renewables like the wind in the Midwest. And there are a number
of reasons, but I think the State control of siting and the
difficulty of going across multiple States is one of them.
There was a company called Clean Line that tried to build
HVDC----
Mr. Walden. Right.
Ms. LaFleur [continuing]. And almost--they hit one State on
every line, now somebody is trying to take a couple of their
routes. But I think that is the thing where Congress could
maybe restore backstop siting would be really helpful.
Mr. Walden. All right. My time has expired. Thank you, Mr.
Chairman. And thanks to all of you.
Mr. Rush. The Chair now recognizes Mr. Tonko for 5 minutes.
Mr. Tonko. Thank you, Mr. Chairman.
I welcome all of our Commissioners here today. I believe
all of our Federal agencies need to do more to consider how to
best address climate change. I believe an approach that is
science-based, evidence-based is essential. Commissioner
LaFleur mentioned earlier that it is difficult with climate
processes that are different in each of the States or regions.
We need a national approach. It is time for us to get into
gear.
That being said, Commissioner Glick, I was very happy to
see a recent Law Review article about FERC and climate change.
Commissioner, do you believe FERC can and should be doing more
under its existing obligations to consider climate change? I
know we heard from a couple of our Commissioners. I would like
to hear from you.
Mr. Glick. Well, as I mentioned earlier, the Commission is
not an emissions regulator. Obviously, that is up to EPA and
the States and other branches of the Federal Government. But I
do think there are a lot of things that we do, and that was the
purpose of that article that I jointly wrote with one of my
advisors, is that there are a lot of things that we do that
have a significant impact. And the Chairman mentioned
eliminating barriers to newer technology storage, distributed
energy resources, wind, solar. That certainly would be very
helpful. Building more transmission to access remotely located
renewable resources, certainly another benefit.
And then, as we discussed earlier, just our analysis when
we consider the public interest, whether it be a hydroelectric
license or a natural gas pipeline or LNG facility, we are
supposed to consider the environmental impacts, and I think we
definitely need to take greenhouse gas emissions into account.
Mr. Tonko. Thank you. And I would like to focus on a few
areas where barriers for market participation exist, many of
which, in my view, are inhibiting our electricity systems
transition to one that is cleaner.
Chairman Chatterjee, I would like to thank you for your
leadership in ensuring that storage can compete in markets. As
RTOs seek to comply with Order 841, how important is it that
energy storage resources will actually be able to participate
effectively in all markets, including capacity markets?''
Mr. Chatterjee. Yes, I can't say enough how bullish I am on
the future of energy storage. And I say this frequently, and
people roll their eyes because they think it is a cliche, but I
think energy storage is a game changer and I think it has the
capacity to fundamentally alter the way that we generate,
distribute, and consume power in this country. And I think the
point of Order 841 was to ensure that storage technologies
could be compensated for energy for capacity and for ancillary
services. I am optimistic and hopeful that that will lead to a
rapid and exponential increase in the deployment of these
resources.
I think increasingly seeing storage coupled with renewable
resources like solar could address some of the intermittency
and reliability concerns and will really accelerate the
deployment of clean energy technologies, which is good for
America, which is good for the economy, and is good for the
environment.
Mr. Tonko. Well, I would encourage our Commissioners to
make certain the rule is implemented as was intended by all the
Commissioners and enable the greatest participation possible
for these resources. Similarly, I would encourage the
Commission to move forward with finalizing the aggregated DER
rule. As I recall, in February 2018, the FERC organization
found it needed more information, and I believe there was a
technical conference--was it in April of 2018? Now we are in
June of 2019. There was a need to break down market barriers
for DERs 3 years ago, and there is now an ample record.
So what can we expect here? When will this be finalized? Is
there other information that you are waiting for? What is the
update on the DER rule?
Mr. Chatterjee. Sir, if I could just speak to that. So we
had originally, in 2016, under Chairman Bay's leadership,
considered both the storage rule and DERs together. As some of
the newer members--myself, Commissioner Glick--came to the
Commission, we realized that both rulemakings were further
behind than we thought they were in the process prior to our
confirmation. We were further ahead on storage than we were on
DER. And so we made the decision, since storage was ready, to
move forward with it despite the fact that we still had more
work to do on DER.
I made a commitment to Commissioner Glick at that time
that, as long as I was serving on the Commission, as Chair or
not, that I would not allow DER to languish. We continue to
work on it. There are some legal questions that we need to
answer. I don't want to make a prediction on timing. We don't
do that. But please know that we are all working diligently
towards addressing that.
Mr. Tonko. So there is no more information, you are just
going through the----
Mr. Chatterjee. We have some complex legal questions that
we are currently wrestling with. I don't like to comment on our
internal deliberations, but there are some complex legal
challenges. I do believe we have sufficient record, it is just
we made some additional things to address some legal questions.
Mr. Tonko. OK. I would just hope that we could complete
that as soon as possible, because it is so important to the
future of the industry. Thank you.
With that I yield back, Mr. Chair.
Mr. Rush. The Chair now recognizes Mr. McKinley for 5
minutes.
Mr. McKinley. Thank you, Mr. Chairman.
Earlier this year, Secretary Moniz, former Secretary Moniz,
came out with a statement that he was saying that we just don't
have enough battery backup in the long term. He says there is
nowhere near enough to back up the power on the high-voltage
grids in the long term. Now building off that, the supply chain
for battery development is becoming more and more dependent on
foreign sources. And ``60 Minutes'' just came out with this
report on Sunday talking about, for example, rare earths and
our dependency on something where China is dominating 80
percent of the rare earths. But yet for battery storage, we are
relying on Chile, Argentina, the blood diamonds of Congo to get
our cobalt, and we are also in Asia.
So we are becoming more and more reliant on other--because
we don't want it in our backyard. We don't want to harvest
these minerals in our backyard. How is that going to interact
our ability to sustain or to develop this battery storage
capability, if we are depending on other Nations? So, Mr.--
Secretary Chatterjee, could you tell us a little bit about that
please?
Mr. Chatterjee. Thank you for the question, sir. So as to,
you know, critical minerals and their availability, that is
outside the purview of the Commission. I do have some
familiarity with it during my time in Congress. I recall
legislation being introduced in the Senate to address the very
questions that you raise. I will say from our standpoint as an
economic regulator, I can't speak to the supply chain and what
component parts go into battery technology. Our role doesn't
fit there.
But what we do is, you know, enable the--in our oversight
of the markets to enable these technologies to be deployed in
markets, and so the market demand is going to be there because
of some facilitations that we have done through our
rulemakings. But I leave it to others to speak to the dynamics
of the component parts----
Mr. McKinley. I hope we can get back and have more of a
conversation about this, because I think it is going to be
something that we are going to have to address, and I would
like to understand what Congress can do to help expedite that.
But let's continue on that, because I have a high regard for
former Secretary Moniz when he was with DOE and now in his role
speaking out.
He is continuing to say--he said it first in 2013 and he
said it again earlier this year that we need to be spending
more time and focus on carbon capture and nuclear energy. Now
he said that in '13. And so, from '13 to '19, during the 6-year
period of time, coal utilization went from 40 percent down to
23 percent, and in that same time, nuclear power, they are
going to be over 10 percent of their capacity is going to be
lost.
So my question in part, given that what we were just
talking about, about battery storage, if we don't have the
capability of being able to have battery storage now, what is
going to happen--what is the challenge to the grid for
dependability, reliability, and resilience if we are losing
more coal production and we are losing more nuclear and we
don't have battery storage? What is the impact?
Mr. Chatterjee. Sir, so thank you for the question, and
again, you and I have had numerous conversations about this and
you are very passionate about it. I, like you, come from coal
country, and I have seen firsthand the devastation that occurs
in communities when the plants and the mines that feed them
shut down. Similarly, because of my concern about carbon
mitigation, I am worried about the retirement of nuclear
generation.
What we are doing at the Commission is closely examining
whether, in fact, some of the concerns that you raise could
come to fruition, whether the premature retirement of some of
these units, could they lead potentially to--depending on the
deployment of other technologies and other resources--to an
impact on the reliability and the resilience of the grid. Thus
far, as I mentioned earlier, when Secretary Perry submitted his
NOPR, our record did not support taking action in that area. We
currently have a far more robust record in front of us as we
examine the question of resilience. We are going to be very,
very careful about it, to look to see what the energy
transition, its impacts are going to have, but any action we
may or may not take has to be based on the record, has to be
based on the evidence, and we will very, very thoughtfully and
carefully examine that record.
Mr. McKinley. In the closing seconds I have, I would just
like--maybe it is the elephant in the room. We don't have a
fifth Commissioner. Would having a fifth Commissioner, would
that expedite some of the rules that have been sitting there
for--we heard earlier, some of the time that they haven't--no
action has been taken. Would a fifth Commissioner move things
along?
Mr. Chatterjee. I think the Commission is always strongest
when it has a full complement of five Commissioners. That
said--and I want to see five full Commissioners here. But I
point to the bipartisan agreement that my colleagues and I
reached on LNG as well as on battery storage that were 3-1
votes that had different combinations of us, and I think that
is a great example of how we are continuing to get our work
done despite the fact that we are in a 2-2 environment.
Mr. McKinley. Thank you. I yield back.
Mr. Chatterjee. Thank you.
Mr. Rush. The Chair now recognizes Mr. Welch for 5 minutes.
Mr. Welch. Thank you, Mr. Chairman. I will start with a
man-bites-dog story. The largest utility in Vermont has a lot
of dams, and they are going through relicensing and they tell
me that working with FERC is tremendous. So I don't know how
that happened, but maybe you ought to get the word out to some
of your other agencies.
Second, I want to thank Commissioner LaFleur for coming to
Vermont. We appreciated having you, and someday your colleagues
may show similar good judgment. Third, I want to talk about
battery storage technology. Last week, I visited a company in
South Burlington, Vermont, called Dynapower, and it is by most
standards a small company, a couple of hundred people, big by
Vermont. But it is doing cutting-edge work on battery storage.
And we have talked a little bit about the incredible
benefit to reduce peak demand, and I want to thank you for your
Order 841, which was a great step in integration of storage
into the wholesale markets, but we do have some issues. In PJM
there is a proposed method to use a 10-hour duration test, as I
understand it, to qualify energy storage for capacity market
participation. This is what I learned from the Dynapower folks.
But most commercial and industrial facilities which could
provide really good resources to the grid do not require a 10-
hour duration system, and the cost would be prohibitive. And
MISO transmission service charges are being inappropriately
applied to storage. It charges at the instruction of the grid
operator.
So there are similar examples, I guess, in NYISO in the
Southwest Power Pool. So on one hand, I thank you very much for
your work on Order 841, but we really want to ensure that
storage can undertake market operations that fully realize the
value of their flexibility. So I will start with you, Mr.
Chairman. Can you comment on your view on how these efforts and
how FERC intends to support full use of the storage resources,
which, in addition to saving money and reducing carbon
emissions, is just a tremendous growing part?
Mr. Chatterjee. Sure. As I have stated repeatedly, I am
very proud of the rule, and I think it is a tremendous
achievement. And I think the implementation challenges that you
are pointing to demonstrate the sheer gravity of the rule and
its implications and how really significant it may be. I think
we may look back and say that Order 841 was, you know, a
foundational block of transitioning our energy future.
So, as the compliance filings come in, as the various RTOs
and ISOs sort through some of the complexities that you are
referring to, we will consider those compliance filings as they
come in. And I think my colleagues will all do our part to
ensure that the rule is implemented.
Mr. Welch. Well, you know, I appreciate that, because there
has got to be practical adjustments made as a result of what is
going on in the field.
Do you want to comment on that, Commissioner LaFleur?
But thank you for that.
Ms. LaFleur. Yes. I can't comment on the specific PJM
dispute that you mentioned because I believe that is pending.
But your questions and what you hear from the battery
manufacturer show that the devil is really in the details. It
is easy to say we want the market rules to be fair to storage,
but figuring out where all the landmines are where the rules
have been written for other resources requires the various
storage providers to come in and tell us and requires detailed
work at HRTO. A few years ago, when we did Order 755 on
frequency regulation, we had a company called Beacon Power in
upstate New York come in and tell us they weren't getting paid
right for the timing following the signal. And we had to get
really picky-dicky----
Mr. Welch. Right.
Ms. LaFleur [continuing]. In like explaining how to change
the rules. But we later did change the frequency. That is just
one small example.
Mr. Welch. Well, that is great. I don't have much more
time, but, you know, it is very reassuring to hear that,
because you do the rule and then it is out in the field and
then there has got to be information back from the field. And
when, like, for instance, if Dynapower gets back to you with
real-world information, you will pay attention to that, is what
you are telling me, and that is really reassuring.
The one final question, you know, a number of us, we are
interested in distributed energy resources, and we wrote a
letter. I had a letter on the topic to FERC and I appreciated
your response. That was some time ago, and it appears we share
a goal. But my question is this: For 2\1/2\ years since the
original proposed rule and over a year since the technical
conference on DER was held, in recognizing this timeline, what
is FERC's plan to finalize the rule on DER participation and
wholesale markets, Commissioner?
Mr. Chatterjee. Yes, thank you for the question. I will be
very brief. Congressman Tonko asked the same. We originally
were doing DERs and battery storage together. When we came--
when Commissioner Glick and I were confirmed to the Commission,
we saw that storage was further ahead than DERs, so we severed
the two dockets and completed storage, because we didn't want
to delay it while we sorted through the complexities of DERs.
We are now actively working towards it. I made a commitment
to Commissioner Glick that we would not allow DERs to languish,
and I intend to honor that. And so, there are some complex
legal issues that have arisen, and we are just sorting through
whether that will require more process or not.
Mr. Welch. I yield back.
Mr. Rush. The Chair now recognizes Mr. Griffith for 5
minutes.
Mr. Griffith. Thank you very much, Mr. Chairman. They have
called the votes, and so I will try to rifle through what I
have. But first, I have to say congratulations to you,
Commissioner McNamee. The Commissioner and I have worked
together for many years at the State level, and I am now glad
to be able to work with you at the Federal level as we go over
a lot of issues. I appreciate the Commission's work on
executing the rulemaking process for the Promoting Closed-Loop
Pumped Storage Hydropower Act, which was my bill from last
session. I also appreciate the Commission-led workshop on
closed-loop pump storage.
That being said, Chairman McIntyre had a review going on
about current pipeline approval processes based on the FERC
1999 standing policy. I would hope that you all would continue
that. Chairman Pallone of this committee mentioned earlier
about having two pipelines, you know, going side by side and
the Commission doesn't look at that. That is one of the reasons
why I introduced the Pipeline Fairness and Transparency Act.
Maybe you need two pipelines going side by side or close
together, or maybe you don't, but the Commission ought to be
able to look at that.
And I will tell you that one of the concerns that comes up
there is affecting how landowners' rights are being considered.
And I appreciate your comments earlier this year, and speaking
with Commissioner McNamee I know he is concerned about some of
these issues too, that people at least get heard and know that
somebody's listening, because it has seemed that sometimes
there is some deafness, or in the past has been some deafness
there.
And I received this this morning from a constituent, and I
am just going to rattle it off and then give you whatever time
we have got left: ``Landowners dealing with the siting of
natural gas pipelines are frustrated, and we have no property
rights in the current FERC process. There are lots of
assurances that our rights are respected, and the companies
advertise that they will work with landowners. However, our
experience has proved all that to be patently untrue.
``My experience is that they won't consider the needs of my
family's existing business, a farm of over 117 years. We have
asked repeatedly that they move the pipeline to the edges of
our fields so that we can fully respect the pipeline as we go
about our business. They insist on bisecting nine fields and
will destroy the terraces in one of our fields. They have the
opportunity to move the line within our property, thus not
affecting anyone else, but they won't.''
And the concern that--and she is getting hit twice. She
lives in my district near the Mountain Valley Pipeline, and her
property is a family farm that she hopes to retire to that is
being dissected by the Atlantic Coast Pipeline. And so, these
are the concerns that people have out there. I know you can't
fix everything, but she wants to know, and I do too. What are
the FERC Commissioners doing to understand landowners' rights,
to make landowners believe that they see the documents that we
file? I mean, you all see--and to hear the statements that we
make in hearings, and that those needs are being considered.
And I know that you have some thoughts on that. Chairman, if
you could very quickly.
Mr. Chatterjee. Yes, sir. So I mentioned earlier, we are
trying to make some improvements to our website and our
process. We do have a Landowner Hotline so that the Commission
can be made aware of these kinds of considerations. I think we
need to do better. We can do better. I think energy
infrastructure is critical, it is important, but we have to
ensure that we are respectful of landowners and their
considerations and their rights.
I also think it is incumbent upon project sponsors to be
more responsive. You know, the landowner and the project
sponsor are going to have, you know, a long-term relationship,
and I think it is important that project sponsors be responsive
and be respectful of these landowners' considerations.
Mr. Griffith. Yes. And I don't know the lay of the land,
but when a farmer is telling me a family farm that is over a
100-and-some years in the family, you could move it on their
property, it may be a little bit more expensive, but it seems
to me that would be a reasonable accommodation.
Mr. Chatterjee. And one thing that you have expressed to me
in the past that I take very seriously is, we need to do a
better job at the Commission of hearing out peoples' concerns.
And if that means--if landowners are seeking, you know, public
comment and opportunity to present their considerations to the
Commission, we need to be responsive to that. My understanding
is that you have been frustrated because in the past, maybe a
few years ago, we weren't as responsive to that. I want you to
know that you have a commitment from me that we are going to
take those kinds of things seriously.
Mr. Griffith. I appreciate that, and I yield back.
Mr. Chatterjee. Thank you.
Mr. Rush. The Chair now recognizes Ms. Kuster for 5
minutes.
Ms. Kuster. Thank you very much, Mr. Chair. And we have
been called to vote, so I will make my remarks short. But I
want to join my colleague in a bipartisan concern. We have this
very same issue in my district in New Hampshire with a pipeline
and lots of obvious concerns by homeowners, by towns, by--one
town where it was on the map to cross a small stream in that
community 12 times, I just had the impression that these people
hadn't even come to New Hampshire or at least gotten out of the
truck to see it. It was proposed to go right between two
schools that were a couple of hundred yards apart, so--and I
would invite my Republican colleague to join us.
I am joining Congresswoman Jan Schakowsky and Joe Kennedy
today, introducing legislation to establish an Office of Public
Participation at the FERC to elevate the voices of average
Americans and ensure that they have a seat at the table when
FERC makes approval decisions. We can only ask so much of you
if it is not within your purview to take that into
consideration. So that was the main concern I wanted to raise.
The second thing, though, is about the issue of climate
change. And in New Hampshire, as in districts all across this
country, I believe that climate change poses a very real and
existential threat to human life, and I think we can look no
further than the Trump administration's own national climate
assessment, outlining that, without dramatic reductions in
greenhouse gas pollution, our economy will lose hundreds of
billions of dollars in the coming decades, and not to mention
the irreversible impact on human health and environment.
So I just want to ask you, Commissioner LaFleur, my
constituents voice concerns repeatedly. This is on a daily
basis. We get emails and calls and letters about the dramatic
expansion of natural gas infrastructure because of the
contribution to greenhouse gas emissions. I understand your
tenure on the FERC is coming to a close, but do you believe the
damaging effects of climate change should be more strongly
considered when FERC approves fossil fuel projects?
Ms. LaFleur. Thank you for the question and yes, I do. I
think that first of all we should make sure that all of the
pipelines that we are approving are truly needed by looking at
the regional need. I happen to think New England, where there
are a lot of gas restraints, might need more gas, although they
are doing well with the import in the winter so far. But in
addition to making sure things are truly needed, I think that
we should take into account in our balancing the impact of the
downstream combustion of the gas when it is used.
And I have tried to do that on my own by doing some of
those figures, and my concurrence isn't saying no, for example,
in the two colocated pipelines that Congressman Griffith talked
about. I had dissented because I thought they were too close
together, but I think it would behoove the Commission to have a
process to more squarely consider it.
Ms. Kuster. Thank you very much.
And, Commissioner McNamee, I understand FERC's
responsibility to approve energy projects that are in the
public interest. Do you believe that mitigating the damaging
effects of climate change are in the public interest and the
interest of future generations of Americans?
Mr. McNamee. I think, I believe that climate change is
something that we all need to be concerned about. I think the
issue about how FERC addresses the issue of climate change and
greenhouse gas emissions really has to originate first in our
organic statute about the authority, and that is the Natural
Gas Act and how that is supposed to be used to interpret public
interest.
Ms. Kuster. Do you interpret that law is giving you any
leeway on taking into account the damaging impacts of----
Mr. McNamee. Well, I can tell you that I--what I do is I
also look at our obligations underneath, but to take a look at
all the environmental issues, including climate change, when I
make a decision. I don't think it would be appropriate because
it is a legal issue that comes before us about what does the
statute specifically mean, but I do--I can say that we do take
a serious look. I personally take a serious look at the issues
of greenhouse gas emissions, particularly pursuant to our NEPA
responsibilities.
Ms. Kuster. Great, thank you very much. I yield back.
Mr. Rush. The Chair thanks the gentlelady.
Votes are occurring on the floor, and the subcommittee will
stand in recess until immediately after the votes have
concluded.
[Recess.]
Mr. Kennedy [presiding]. The committee will come back into
order, and the Chair recognizes Mr. Flores from Texas for 5
minutes.
Mr. Flores. So, thank you. I appreciate all of our FERC
Commissioners for joining us today.
I have a question for Commissioner Glick. You have
dissented against approval of some recent energy infrastructure
projects that are integral to our country's energy security,
national security, and economic opportunity including the Port
Arthur LNG export project in my home State of Texas. These
critical energy infrastructure projects create well-paying jobs
at home, they help our allies in Europe diversify their energy
security, and they reduce the impact of dirtier fuels that are
replaced by clean LNG.
In your dissents and in testimony today, you mentioned the
need to explore possible mitigation measures with respect to
greenhouse gas emissions, and I would like to know more about
what you mean by this. My first question is this: Do you have a
mitigation standard by which future energy projects could earn
your approval?
Mr. Glick. Well, thank you for the question, Mr. Flores. It
is actually a very important issue. And, you know, if you go
back and look at all of our approvals--and Port Arthur is a
good example--we found other environmental concerns, for
instance, wetlands, loss of wetlands associated with the
project or migratory birds, for instance, in some cases.
Mr. Flores. Do you have a mitigation standard?
Mr. Glick. And what we did in those cases, we actually
mitigated those losses essentially. So I don't know if I have a
single standard, but one potential option, certainly, a company
could buy renewable energy credits and could certainly use
renewable energy or zero emissions like nuclear power to
liquefy the natural gas. There is a variety of options for the
company.
Mr. Flores. OK. Well, if you have more, go ahead and
supplementally advise that. My next question is this, is what
your mitigation expectations might be and, more importantly,
what are the costs of those mitigation measures, including the
following: What is the impact on project delay costs; what is
the impact on lost jobs; what is the impact on balance of trade
payments; what is the environmental impact while the
prospective consumers using your dirtier fuel that would have
been replaced by the fuel that you are dissenting coming from
the project against which you are dissenting; and then the
lossed tax revenue to the Federal Government as well as impact
on the deficit?
Mr. Glick. Those are all relevant points, and I think that
we are required to consider what is in the public interest, and
all those issues need to be considered as well. But if we find
an environmental impact to be significant, we have to figure
out whether that impact can be mitigated or not, and in this
case in the LNG facilities, we specifically said we are not
going to consider that. And that is where I think the
Commission erred and courts have agreed so far.
Mr. Flores. OK. What I would like to get you to do is
supplementally advise as to what the cost of the mitigation is
because of the dissent, if you would.
Mr. Glick. I will try my best.
Mr. Flores. OK, thank you.
Chairman Chatterjee, I have a question for you. This has to
do with the power markets. In Texas, ERCOT allows large
consumers to participate in a power market that drives
competition, innovation, and efficiency. It has also brought
more renewable into the Texas grid. It is my understanding that
our neighboring RTO, the Southwest Power Pool, has only one
large consumer, and that is Walmart, which joined a while back,
and Texas has about 170 consumer members by comparison.
FERC recently ruled regarding a fee at SPP that some
considered to be a hefty barrier to participating in the
market, while the good news is ERCOT is not subject to FERC
jurisdiction and most Texans want to keep it that way. Texas
consumers are benefiting by having that other 170 large voices
as part of the market, and I think the country can learn from
the experience of ERCOT.
So what--are other RTOs opening up their membership to more
diverse consumer technology interests to help drive up choice,
to improve efficiency, to improve the implementation of
additional renewable energy sources into their grids, and to
additional clean energy supply?
Mr. Chatterjee. So, obviously as you referenced,
Congressman, we don't--ERCOT is not jurisdictional to us, so I
don't have as much visibility into what goes on in Texas. I
learned my lesson, don't mess with Texas, but----
Mr. Flores. That is a good idea.
Mr. Chatterjee [continuing]. Each of the different RTOs and
ISOs have various different, you know, governance approaches as
well, these are just different organizations. So what I can
speak to is that all of these entities can and should learn
from each other, including from ERCOT.
Mr. Flores. OK. That actually answers my second question,
is that should the other RTOs move in the same direction that
ERCOT has and that the SPP has been blocking but now they are
starting to move that direction?
Mr. Chatterjee. There are different challenges and
opportunities in different parts of the country. I am not
certain--there are no one-size-fits-all approaches, but we can
all do better to learn from each other.
Mr. Flores. Right, OK.
And, Chairman Glick, we will provide the rest of our
questions supplementally.
Mr. Glick. Thank you.
Mr. Flores. Thank you. I yield back the balance of my time.
Mr. Kennedy. The Chair thanks the gentleman from Texas and
recognizes himself for 5 minutes for questions. I want to thank
the chairman, the real chairman, for holding the important
hearing, and for all of our Commissioners for being here today.
As I mentioned in my opening statement a little bit
earlier, I am increasingly concerned about the regional
transmission organizations, or RTOs, and their governing
structures. My State benefits from the wholesale market
competition at ISO New England, and that means that it is
affected by the decisions made by NEPOOL, the sole formal
stakeholder advisory group for ISO New England. However, my
fellow citizens and I have no idea who makes decisions or how
they are made at NEPOOL, because unless you are a member you
can't even observe any meeting or proceeding, let alone talk
about it publicly.
Other RTOs are benefiting from governance structures that
enjoy slightly more transparency, still I believe that more has
to be done. Transparent and fair representation in governance
is good governance. All parties from generators to ratepayers
to regulators deserve this. In addition, regional markets
operated by the nation's RTOs continue to grow in size and
complexity.
Mr. Glick, you pointed out earlier your experience in the
private sector and about the importance of stability. In my
region, for example, ISO England has now run 14 different
forward capacity auctions under 14 separate sets of rules.
Finally, RTO rules are also increasingly, or increasingly,
effectively create new public policies. Some regional grid
operators are debating whether to adopt new rules to compensate
fuel security, yet RTOs are governed by industry stakeholders,
many of them who have an incentive to earn revenues through
higher prices in these markets.
So beginning with Commissioner LaFleur and Commissioner
Glick, are you concerned about certain stakeholder groups that
have an outsized amount of power in some RTOs with the current
structures of governance? Ms. LaFleur?
Ms. LaFleur. I do think these are important issues. I was
on the Commission when we did the 719 compliance orders, and we
looked at the stakeholder processes of each RTO and basically
found them acceptable. They had different sets of stakeholder
bodies and so forth. But I agree with what I have heard said
earlier, that it is probably a good time for a relook. I think
that initially the transmission owners probably batted above
their weight because they were the ones that had to decide to
go into the RTOs, and so the RTOs were so grateful to have
them, they seemed to have a louder voice.
I would say recently we have been hearing more from the
generation sector, because with all of the changes in resources
they are on the hot seat, and no group should have more power
than their role in the stakeholders, so I think we have to be
vigilant toward it, and it is probably worth a relook.
Mr. Kennedy. Should the public have more access, even just
as a passive observer?
Ms. LaFleur. Well, you know, we have a case pending
rehearing on press access to NEPOOL which we, the Commission
,ruled that we didn't have jurisdiction over under the--from
the CAISO case. But I think most members of the public can't
afford to take the time off from work to go to all of the
stakeholder meetings of their RTOs, so bodies that represent
them, be they consumer groups to the----
Mr. Kennedy. Madam Chair, or excuse me, Commissioner, that
the press that is also the----
Ms. LaFleur. I can't comment on that because that is still
pending.
Mr. Kennedy. Right, understood.
Ms. LaFleur. But I think Mr. Glick wrote separately, so I
will let him talk.
Mr. Glick. Yes. I certainly can't comment on the existing
proceeding which is on rehearing----
Mr. Kennedy. Of course.
Mr. Glick [continuing]. But I will say what we did
previously, which is that Commissioner LaFleur is exactly
correct. We actually said we didn't have the jurisdiction, and
that is because the courts have told us that we only have
jurisdiction over practices affecting jurisdictional rates.
Having said that, I wrote separately, because I agree with
you, Congressman Kennedy, that transparency is a very important
element of appropriate RTO functioning. And to the extent that
we are keeping the press out or keeping people out from knowing
what is actually happening behind the closed doors, we aren't
actually having the type of transparency and we are not
engaging in the independence that RTOs and ISOs are supposed to
represent.
Mr. Kennedy. Thank you. And only a minute left here, so a
little bit quickly. But, Chairman Chatterjee, has the
Commission considered reforms to RTO governance to ensure that
the public interest is better represented in these
organizations?
Mr. Chatterjee. Absolutely. Congressman, I agree with the
concerns that you are raising and want to associate myself with
the comments of my colleagues. I believe in consumer
protections, in transparency. The one thing that I would
caution is, as I mentioned in speaking with Congressman Flores,
each of these different RTOs and ISOs is a completely different
entity with different structures. And so, I am not certain a
one-size-fits-all approach could work here.
What we currently do to address these matters is as--again,
we can't speak to it, because it is on rehearing at NEPOOL--but
when these matters come up, we take them up on a case-by-case
basis. And I think we all have to be vigilant in ensuring that
this transparency and consumer protection are in place. I just
have to caution that a one-size-fits-all approach might not
work.
Mr. Kennedy. Understood. I will close with my last 2
seconds by commending my colleague, Jan Schakowsky, who has
been a champion for consumers throughout her career. And she is
introducing a Public Engagement at FERC Act which would ensure
that FERC establishes the Office of Public Participation and
Consumer Advocacy, which I think a few of you have mentioned
already.
I am over time. I will recognize the gentleman from
Michigan for 5 minutes.
Mr. Walberg. I thank the chairman. We hang around long
enough, we move up, don't we? But thanks to the----
Mr. Kennedy. Give me 35 years, and we will get there. Thank
you.
Mr. Walberg. Thanks to the panel as well. You have hung
around longer than any of us, I think, so I appreciate you
being here.
Chairman Chatterjee--no, you have been here long enough. I
am going to give you all a question and see if you can answer
it. If anybody can tell me what was playing on the radio at the
top of the charts at this point in 1978. Do you remember?
Mr. Chatterjee. Well, ``Star Wars'' was in theaters.
Mr. Walberg. Talking about the charts.
Mr. Chatterjee. I know people were probably listening to it
on their Walkman or record player.
Mr. Walberg. Paul McCartney and the Wings, ``With a Little
Luck.'' And I remember that because I was hoping to graduate
from graduate school about that time, with a little luck, and
it did take place. Just using that a bit here, because with a
little luck--and a little push--from both Congress as well as
FERC, we could shake it up and bring our energy laws into the
21st century and lower costs for consumers. And that is, I
think, at least for most of us up here, that is what it is
about, with the quality.
Three years ago, FERC held a technical conference to
discuss what needed to be done to modernize the rules
implementing PURPA, a law passed in 1978, with a little luck.
This issue is incredibly important in many areas of the
country, especially mine, because customers are paying billions
of dollars in, I believe, unnecessary costs right now for PURPA
contracts. It started with a great idea, did what it was
supposed to do, but it is time for some improvement.
FERC's current rules encourage the uneven, unplanned, and
uneconomic development of QFs and provide subsidies that
promote QFs at the expense of customers, of system reliability,
and more competitive, cost-effective generation resources. For
example, Consumers Energy in my district currently has over
2,000 megawatts worth of PURPA contracts for 20-year terms
pending in the queue. These would lock in prices around $54 per
megawatt hour compared to the 5-year average of $34 per
megawatt hour that could be purchased from the MISO market. If
Consumers is forced to buy all of this power at these above-
market rates, it equates to Michigan customers paying more than
$1\1/2\ billion over the life of the 20-year contracts,
significant dollars.
I have introduced H.R. 1502, as you know, the PURPA
Modernization Act, to help address these issues. But there are
several issues that don't need to be addressed, I believe,
through statutory change. The Commission could simply act and
amend the rules, I believe. FERC's 1-mile rule, for instance,
which developers game to force legally enforceable obligations
onto utilities is written into FERC's regulations.
Mr. Chairman, yes or no, is this something that FERC could
address on its own?
Mr. Chatterjee. Yes.
Mr. Walberg. Often developers will split projects into
smaller megawatt projects in order to come in under the 20-
megawatt threshold for organized markets. FERC has already
reinterpreted the threshold for noncompetitive entry into these
markets from 80 megawatts to 20. In light of developers gaming
this rule, could FERC lower this threshold on its own?
Mr. Chatterjee. Yes, we could.
Mr. Walberg. That is good to know. Does it make sense to
allow utilities to competitively bid renewables to set PURPA-
avoided cost, and is there any help or guidance FERC could give
to States to help come up with more accurate avoided cost
calculations to better follow the spirit and the intent of
PURPA?
Mr. Chatterjee. I don't want to get into any internal
deliberations or conversations I am having with my colleagues,
but it is something that we could do within our ranks.
Mr. Walberg. So it is capable of doing that.
Mr. Chatterjee. Yes, sir.
Mr. Walberg. It comes down to the willingness to do these
things. Well, these are important. I mean, they are key
components of my legislation, but relief is needed before I
think Congress will be capable in its processes of acting on
it. So I would truly encourage FERC to push as far as you can
into bringing PURPA into the 21st century, into something that
truly does do what it was intended to do and has done well, but
now is doing well at an expense that is unnecessary, and so I
appreciate that. To quote Paul McCartney and the Wings again,
``There is no end to what we can do together.'' I won't sing it
for you. But I look forward to working with you to modernize
our current state of affairs. Thank you. I yield back.
Mr. Sarbanes [presiding]. The gentleman yields back. I am
going to yield myself 5 minutes for a few questions.
Commissioner Glick--and first of all, thank you all for
staying as long as you did, and you saw from the earlier
attendance here at the hearing there is a lot of interest.
Commissioner Glick, in your testimony you talk about how
the environmental effects factor directly in the public
interest standard at the Commission and is supposed to meet
under the Natural Gas Act, and I certainly agree with that.
There are public-interest and environmental-interest
considerations under the Federal Power Act as well.
Unfortunately, my view is the Commission doesn't always
give those interests the sufficient weight that they deserve in
the decisionmaking that happens, and I am aware of several
examples, actually, in the case of the relicensing of the
Conowingo Dam. States have a very important role to play in the
licensing of projects that FERC considers, but too often it
seems that FERC is siding with project applicants at the
expense of State concerns for broader public and environmental
interests.
So could you just speak quickly to what you think the
Commission can do to ensure that these broader public interests
like climate change, environmental quality, and so forth get
the appropriate consideration?
Mr. Glick. Well, as you mentioned, we have a very broad
public-interest standard in terms of our hydroelectric
licensing responsibilities as well, so I think certainly on
climate change, we certainly need to take that into account,
the zero emissions qualities of hydropower, for instance.
But on those other environmental issues that you mentioned,
it is my understanding, the way the process works, whether it
be the State agencies pursuant to section 401 of the Clean
Water Act or various, the resources agencies, the Fish and
Wildlife Service, for instance, they actually have the ability
and the authority to impose conditions on those licensing
processes, and we have to include those conditions in our
licenses.
Mr. Sarbanes. Well, I hope those continue to get the
attention, as I say, that is warranted in terms of making sure
the process lands in the right place. As you are aware, I am
sure, Exelon Corporation applied for a new 50-year hydropower
license to operate the Conowingo facility in August of 2012.
After extensive discussions between the State and Exelon and
several iterations of applications to the Maryland Department
of the Environment, the State of Maryland issued a water
quality certificate to Exelon in April of last year.
Unfortunately, as you probably also know, the situation is
still not resolved. Exelon has opposed the conditions that
Maryland attached the water quality certificate. But early on
in this project, FERC denied several study requests that
Maryland made, denials that actually created delays and
additional haggling between the State and Exelon.
The Federal Power Act requires applicants to submit
``satisfactory evidence'' to demonstrate that an applicant has
complied with State laws. And my concern is that the
administration's proposed policy changes on State oversight of
water quality certification could weaken our efforts to achieve
clean water in the Chesapeake Bay. How would you describe the
appropriate role of State participation in FERC licensing in
light of what I have just described?
Mr. Glick. Well, I don't want to speak specifically about
the Conowingo Dam, because that is a pending matter, I think,
before the Commission. But I think we have the responsibility
to actually defer to the States under section 401 of the Clean
Water Act.
Mr. Sarbanes. Well, thank you for that. I think overall the
Commission could probably be doing more to cooperate with
States, really view it as a collaborative effort and ensure
that licensees provide sufficient information early in the
licensing process to support State decisions and ensure
projects are operated in compliance with State law. The
Commission's mandate to give equal consideration--I will repeat
that--equal consideration to natural resources and
environmental quality should translate into greater support for
ensuring that older hydropower projects are held to modern
environmental standards. And I know that can be tricky, but it
is really critical that that happen.
And so, let me just close by saying that the State of
Maryland also has been working with neighboring States and the
States within the Susquehanna River Basin to improve water
quality conditions in the Chesapeake Bay. We really take that
as our signature charge, in a sense, on the environmental front
because we are aware the watershed meets the Bay, and we take
that very seriously. All of the States continue to work on
programs to reduce sediment and nutrient inputs into the
watershed. The Conowingo facility has to be part of that
solution as well.
And this relicensing provides that once-in-a-generation
opportunity to get it right, to address the sediment issues
associated with the dam and the facility's operation. So we
have to address that issue, and if we don't address it, we are
going to be putting the health in the entire Chesapeake Bay in
jeopardy. It is impossible to overstate how critical this
project is to the Bay. So as a member of the Maryland
delegation, as somebody who takes that charge extremely
seriously, I ask you to give that real consideration. I yield
back the balance of my time.
The Chair recognizes Mr. Veasey from Texas.
Mr. Veasey. Thank you, Mr. Chair. I want to thank you and
the witnesses for appearing before the subcommittee today to
discuss the critical role FERC has in ensuring our energy
markets are operating fairly. I would like to discuss the
Department of Energy coal and nuclear bailout proposal that
would have resulted in higher energy bills for consumers. And
in late 2017, the Trump administration revised a plan to force
consumers to buy power from coal and nuclear plants on the
decline, claiming that the costly and legally dubious plan was
necessary due to fuel threats faced by our power grid.
While FERC unanimously opposed the plan, when asked
yesterday in an event hosted by Edison Electric about providing
incentives to failing plants, the Secretary suggested asking
the question of FERC instead. And so, given the nature of
today's hearing and the witnesses we have before us today, I
would like to follow Secretary Perry's suggestion and ask you
to respond to these questions.
Is providing incentives to failing coal and nuclear plants
a priority for FERC at this time?
Mr. Chatterjee. Thank you for the question, Congressman. So
as you mentioned, in the fall of 2017, Secretary Perry
submitted a Notice of Proposed Rulemaking asking that certain
plants, baseload plants, be compensated for having the
attribute of having onsite fuel. At FERC we are a record-based,
evidence-based agency, and we examined the record and we
determined that we did not--the record did not support taking
the action that Secretary Perry had suggested. In the process
of voting down the Notice of Proposed Rulemaking from DOE, we
opened a new docket to do a thorough examination of grid
resilience, and now about 18 months later we have a far more
robust understanding and record of what the potential
challenges that may arise from the premature retirements of
these baseload plants.
My colleagues and I need to sort through what, if any,
actions need to be taken. I think, from my vantage point, the
next step ought to be engagement with the RTOs and the ISOs and
the States to see what they are seeing in terms of fuel
security and what is working, what potential, you know, risks
are on the horizon. But I will assure you, should the
Commission take any action--and I am not saying it is certain
we will take any action--should the Commission take any action,
it would be fuel-neutral, technology-neutral based on the
evidence in the record before us without any political
influence.
Mr. Veasey. I know also in an earlier interview, Secretary
Perry was quoted as saying that the Department of Energy was
pretty much done with the idea of providing funding for
resilience as it awaits its input from stakeholders. And in
January of last year, FERC initiated a new proceeding to
examine the resilience of the bulk power system. Can you share
any of your findings pursuant to this proceeding?
Mr. Chatterjee. So that is the proceeding that I was
referring to, sir. All I will say is Secretary Perry raised a
very serious question. And I do think over the past year and a
half, the concept of resilience and this question about what
the energy transition means for the security and stability of
the grid is one that we are having in energy circles. And I
think that is productive, and I think that we will continue to
engage in this kind of productive dialogue.
But at this time, I am not going to speak to any potential
actions the Commission may or may not take, because my
colleagues and I need to still further determine what the next
steps should be in reviewing the record that is before us in
this new proceeding.
Mr. Veasey. When do you estimate there will be further
reviews or actions?
Mr. Chatterjee. So, again, I think I myself and my team
have worked our way through the record. I have come to the
conclusion that I would like to see some further engagement
with the RTOs and the ISOs in the States, but I need to--I
don't want to get ahead of my colleagues or Commission staff. I
need to confer with my colleagues to see if they agree if
further examination in this area is necessary.
Mr. Veasey. Thank you. I yield back.
Mr. Sarbanes. The gentleman yields back. I don't think we
have any additional Members, so that concludes our panel. I
want to thank you all.
I request unanimous consent to enter the following items
into the record: a letter from associations representing
commercial, industrial, and residential ratepayers and public
interest groups; a letter from the 198 Methods; a letter from
the National Rural Electric Cooperative Association.
And again, let me thank our witnesses. I know you have been
here for quite a while. We thank you for participating in
today's hearing.
I want to remind Members that, pursuant to committee rules,
they have 10 business days to submit additional questions for
the record to be answered by the witnesses who have appeared.
And I ask each witness to respond promptly to any such
questions that you may receive. We appreciate that.
At this time, the subcommittee is adjourned.
[Whereupon, at 1:34 p.m., the subcommittee was adjourned.]
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