[Senate Hearing 108-184]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 108-184
 
                     KELLY AND DEARBORN NOMINATIONS

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

 TO CONSIDER THE NOMINATION OF SUEDEEN GIBBONS KELLY TO BE A MEMBER OF 
                THE FEDERAL ENERGY REGULATORY COMMISSION

                                  AND

    TO CONSIDER THE NOMINATION OF RICK A. DEARBORN TO BE ASSISTANT 
  SECRETARY OF ENERGY FOR CONGRESSIONAL AND INTERGOVERNMENTAL AFFAIRS

                               __________

                           SEPTEMBER 9, 2003


                       Printed for the use of the
               Committee on Energy and Natural Resources






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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
DON NICKLES, Oklahoma                JEFF BINGAMAN, New Mexico
LARRY E. CRAIG, Idaho                DANIEL K. AKAKA, Hawaii
BEN NIGHTHORSE CAMPBELL, Colorado    BYRON L. DORGAN, North Dakota
CRAIG THOMAS, Wyoming                BOB GRAHAM, Florida
LAMAR ALEXANDER, Tennessee           RON WYDEN, Oregon
LISA MURKOWSKI, Alaska               TIM JOHNSON, South Dakota
JAMES M. TALENT, Missouri            MARY L. LANDRIEU, Louisiana
CONRAD BURNS, Montana                EVAN BAYH, Indiana
GORDON SMITH, Oregon                 DIANNE FEINSTEIN, California
JIM BUNNING, Kentucky                CHARLES E. SCHUMER, New York
JON KYL, Arizona                     MARIA CANTWELL, Washington

                       Alex Flint, Staff Director
                   Judith K. Pensabene, Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                  Karen Billups, Deputy Chief Counsel












                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     4
Bunning, Hon. Jim, U.S. Senator from Kentucky....................     2
Craig, Hon. Larry E., U.S. Senator from Idaho....................     3
Dearborn, Rick A., Nominee To Be Assistant Secretary of Energy 
  for Congressional and Intergovernmental Affairs................    10
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............     1
Feinstein, Hon. Dianne, U.S. Senator from California.............     6
Kelly, Suedeen Gibbons, Nominee To Be a Member of the Federal 
  Energy Regulatory Commission...................................     7
Reid, Hon. Harry and Ensign, Hon. John, U.S. Senators from Nevada     3
Sessions, Hon. Jeff, U.S. Senator from Alabama...................     5

                                APPENDIX

Responses to additional questions................................    17

















                     KELLY AND DEARBORN NOMINATIONS

                              ----------                              


                       TUESDAY, SEPTEMBER 9, 2003

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m. in room 
SD-366, Dirksen Senate Office Building, Hon. Pete V. Domenici, 
chairman, presiding.

          OPENING STATEMENT OF HON. PETE V. DOMENICI, 
                  U.S. SENATOR FROM NEW MEXICO

    The Chairman. The hearing will please come to order. We 
would ask you to please keep the silence in the room. We won't 
be here too long, so it shouldn't be too difficult for anybody. 
Good morning, everyone. Senator Sessions, I understand, will be 
here to introduce Rick Dearborn. Rick, just be patient, we 
don't intend to proceed to you until he has introduced you. 
That will be worked into this, and I'm sure he'll be here in a 
moment.
    The rules of the committee which apply to all nominees 
require that they be sworn in in connection with their 
testimony. So I would ask that each of you rise and raise your 
right hands. Do you solemnly swear that the testimony that you 
are about to give to the Senate Committee on Energy and Natural 
Resources shall be the truth, the whole truth and nothing but 
the truth?
    Mr. Dearborn. I do.
    Ms. Kelly. I do.
    The Chairman. Please be seated. Before you begin your 
statement I will ask you three questions addressed--each of the 
nominees will have to answer it for the committee. So let's 
start. Let's both sit at the table and we'll put the Senator in 
in a moment. All right, we'll start with you, Ms. Kelly. Will 
you be available to appear before this committee and other 
congressional committees to represent the Department positions 
and respond to issues of concern to Congress?
    Ms. Kelly. I will.
    The Chairman. Are you aware of any personal holdings, 
investments or interests that could constitute a conflict or 
create the appearance of such conflict should you be confirmed 
and assume the office to which you have been nominated by 
President Bush?
    Ms. Kelly. My investments, personal holdings and other 
interests have been reviewed both by myself and the appropriate 
ethics counselors within the Federal Government. I have taken 
appropriate action to avoid any conflicts of interest. There 
are no conflicts of interest or appearances thereof to my 
knowledge.
    The Chairman. Are you involved or do have you have any 
assets held in blind trust?
    Ms. Kelly. No, I don't.
    The Chairman. It is your responsibility to ensure that the 
Federal Energy Regulatory Commission, FERC, has sufficient--
it's our responsibility that it has a sufficient number of 
commissioners to conduct the business of the agency. Currently 
FERC has only three members, that's a bare minimal quorum for 
FERC to meet its, to meet and issue orders. One of these three 
is serving on borrowed time, since his term technically expires 
in June. He can only serve until the end of this session of 
Congress.
    And unless action is taken soon, FERC will lose the 
necessary quorum to meet and issue its orders, disabling FERC, 
the agency charged with regulating our interstate transmission 
grid. Particularly in the wake of the August 14 blackout that's 
not acceptable to me.
    Today we have the opportunity to hear from Ms. Kelly, to 
move her nomination along in the process. and furthermore, I 
remind the committee that another FERC nominee, Joe Kelliher, 
who the committee voted on in February, has been waiting an 
opportunity to be voted on by the Senate on the floor. And I 
might ask Senator Bingaman as I understand it, there will be no 
objection to the approval of the two together as soon as we 
report out Ms. Kelly, is that correct?
    Senator Bingaman. Mr. Chairman, that is correct. I think we 
should approve the two together.
    The Chairman. The Senate has a duty in my opinion to act to 
ensure that the agency with responsibility over regulation of 
the interstate transmission grid continue to function, moving 
forward on these nominations is part of that duty, and I would 
also like to thank Mr. Dearborn for his willingness to serve as 
Assistant Secretary for Congressional Affairs at the Department 
of Energy. We look forward to his, to hearing from him on his 
job.
    Now, in the absence of Senator Sessions, if you don't mind, 
we will start by asking that Senator Bingaman make his remarks 
with reference to Ms. Kelly. And when the Senator arrives he 
will make remarks regarding you, and I'm hopeful the two will 
overlap. If not, we will proceed with her.
    Senator Bingaman.
    [The prepared statements of Senators Bunning, Craig, Reid 
and Ensign follow:]
   Prepared Statement of Hon. Jim Bunning, U.S. Senator From Kentucky
    Thank you, Mr. Chairman.
    Today, we have before us Ms. Suedeen Kelly, nominee to be a member 
of the Federal Energy Regulatory Commission, and Mr. Rick Dearborn, 
nominee to be Assistant Secretary of Energy, Congressional and 
Intergovernmental Affairs.
    The nomination of Ms. Kelly is especially important given the 
electricity problems that plagued the northeast with the recent 
blackouts and FERC's proposal to change the nation's electricity grid.
    Kentucky residents enjoy the lowest electricity rates in the 
country. Its electricity market has worked. Kentucky has not 
experienced rolling blackouts, price spikes, or market manipulation 
seen in other parts of the country, and Kentucky does not expect to 
under its current power grid.
    As a member of FERC, it will be Ms. Kelly's job to examine the 
nation's current electricity policies and determine a structure that 
allows consumers to benefit from a competitive market. She will deal 
with FERC's SMD and mandatory RTO proposals. This is a big job and I 
expect Ms. Kelly will stay receptive to suggestions and comments by 
members of Congress.
    We also have Mr. Dearborn before us today. As some of my colleagues 
on the Committee know, we have been dealing with contamination at the 
uranium gaseous diffusion plant in Paducah, Kentucky for some time now.
    Many workers at the plant have also been exposed to radioactive 
materials and have subsequently become ill. During my tenure in the 
House and Senate, I have worked hard to help those workers receive 
compensation for their illnesses due to radiation and beryllium.
    On both the cleanup and worker compensation issues much remains to 
be done. I hope that if the Senate confirms Mr. Dearborn he will work 
hard to make sure that the DOE effectively completes them.
    I look forward to the testimony of both nominees today.
    Thank you.
                                 ______
                                 
   Prepared Statement of Hon. Larry E. Craig, U.S. Senator From Idaho
    The need for FERC Commissioners with technical and practical 
regulatory expertise has never been more compelling. The very stability 
of the gas and electric utility industries depends on a high degree of 
competency of each member of this Commission.
    The most well-researched economic theory is useless in the hands of 
those with an inadequate understanding of business systems and poor 
business judgment.
    We must never forget that regulation is an extraordinary grant of 
government power that must be applied cautiously, responsibly, and 
respectfully to ensure that our business and investment communities 
continue to trust and have confidence in the decisionmaking of our 
regulatory agencies.
    I will submit questions to Ms. Kelly to answer for the record that 
will probe her depth of experience and knowledge of FERC regulatory 
matters, particularly as those matters effect the West.
    Thank you, Mr. Chairman.
                                 ______
                                 
      Prepared Statement of Hon. Harry Reid and Hon. John Ensign, 
                       U.S. Senators From Nevada
    Mr. Chairman, thank you for your courtesy in sharing with the 
Committee and the nominee before you, Ms. Suedeen Kelly, these brief 
comments and for including our joining statement in the official record 
of this hearing.
    As recent events spanning the country have underscored, the Federal 
Energy Regulatory Commission is one of our nation's most important 
independent regulatory bodies.
    Mr. Chairman, we have sought this time to share with the Committee 
and Ms. Kelly our profound concern that the Commission has thus far 
failed to fulfill its fundamental mandate to protect ratepayers, and 
the result of that failure could be catastrophic for the ratepayers of 
Nevada.
    Nevada's ratepayers and its leading utility now stand on the brink 
of a second financial disaster because of FERC's failure to protect it 
from the predatory acts of one of the most ravenous corporate swindlers 
of modern history--Enron.
    Specifically, FERC has ruled that even though Enron was guilty of 
violating the law, its regulations, and its tariffs--violations which 
had the purpose and effect of manipulating and distorting the market 
for electricity--and even though those violations earned Enron the so-
called ``death penalty''--the withdrawal of its right to sell power in 
the open market in the future--Nevada's ratepayers are not entitled to 
any relief from its long-term contracts with Enron. What good does it 
do to prospectively give the death penalty to an already dead 
corporation rather than retrospectively granting relief to those it 
defrauded?
    The result of this ruling has been nothing short of a disaster; not 
only have Nevada's ratepayers been forced to pay prices for electricity 
under its contract with Enron that are clearly unjust and unreasonable, 
but adding insult to injury, just 10 days ago a bankruptcy court judge 
found that since FERC had refused to reform the contracts, Nevada 
ratepayers owe Enron an additional $300 million for power that Enron 
never even delivered. On the day that order was issued, the Nevada 
utility was forced to issue a warning regarding its financial 
viability. A utility on the financial precipice is not in anyone's 
interest--it hurts ratepayers, shareholders, and taxpayers alike.
    Mr. Chairman, we recognize that there are different points of view 
with respect to the appropriate standard FERC should use in reviewing 
long-term contracts. Some believe that FERC has the obligation to use 
the ``just and reasonable'' standard in this situation, a standard that 
would allow FERC to look at the rates, terms and conditions in the 
contract more critically; others, including a bare majority of the 
sitting Commissioners, believe that the stricter ``public interest'' 
standard applies, a standard principally designed to preserve the 
``sanctity of contracts.''
    Contracts freely entered into should only be disturbed in 
exceptional circumstances. We cannot think of circumstances more 
exceptional than those found here: on the one side, you have one of the 
biggest perpetrators of fraud and deceit standing to benefit again from 
the very fraud it committed; and on the other side, you have a utility 
and ratepayers that have been the victim of this fraud on the verge of 
financial ruin. Regardless of what standard is used, the only just 
result; the only result that doesn't reward criminal behavior; the only 
result that protects rather than punishes the victim; is a result that 
frees Nevada ratepayers from the unjust and unreasonable consequences 
of its contracts with Enron.
    Mr. Chairman, again, thank you for your courtesy in allowing us to 
address the Committee and nominee on this very critical issue for our 
constituents.

         STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR 
                        FROM NEW MEXICO

    Senator Bingaman. Thank you very much for having the 
hearing, Mr. Chairman. I've known Suedeen Kelly now for more 
than 20 years. When I first became acquainted with her, she was 
an attorney in the public utility section of the attorney 
general's office when I was attorney general. From there she 
went on to serve as a commissioner and ultimately chairwoman of 
the New Mexico Public Service Commission. Since then she has 
simultaneously pursued a successful career in the private 
practice of law in Albuquerque, and also a career as a law 
school professor.
    In my view, President Bush made a wise choice in nominating 
Suedeen for a seat on the Federal Energy Regulatory Commission. 
She'll bring to the Commission over two decades worth of 
academic knowledge and practical expertise with energy law and 
with public utility regulation. She's looked at these issues as 
a State regulator, as an attorney for all segments of the 
regulated industry and from the perspective of the consumer. In 
short, she'll bring to the Commission broad experience and a 
deep understanding of utility issues. I'm pleased that she is 
before the committee today and urge colleagues to support her 
nomination.
    I've not had the opportunity to meet Mr. Dearborn before. 
I've reviewed his credentials and I'm pleased to support his 
nomination for the position of Congressional and 
Intergovernmental Affairs position with the Department of 
Energy. I hope both nominees can be reported quickly to the 
Senate for action. As you indicated, I think we should at the 
same time urge the Senate to act as well on Joe Kelliher's 
pending nomination to the Federal Energy Regulatory Commission. 
Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator Bingaman. Any 
other Senator have anything to say? If not we'll ask Senator 
Jeff Sessions to speak to us for a few moments regarding 
nominee Rick Dearborn.
    We're very glad to have you, Senator, and glad to make room 
for you to testify immediately so you won't waste any of your 
time. Would you please proceed.

         STATEMENT OF HON. JEFF SESSIONS, U.S. SENATOR 
                          FROM ALABAMA

    Senator Sessions. Thank you, Mr. Chairman, and thank you 
for your leadership on this very important committee that's 
important to America's economy and growth, and we appreciate 
your steadfast leadership and work, as all the members of the 
committee have worked on this energy bill that's so important 
coming up.
    Rick Dearborn is one of the finest people I've gotten to 
know in Washington. He was originally from Oklahoma, University 
of Oklahoma, which had a little bout with the University of 
Alabama the other day and came out on top again. But we gave 
them a good run for their money even though they're number one 
in the Nation.
    Rick, his father was career Air Force, he got involved in 
politics and worked for Senator Trent Lott and Senator Bob 
Kasten. He spent 3 years with the Heritage Foundation, and I 
was able to get him to come as my legislative director.
    I didn't know him when I came here; several people told me 
if you could get Rick Dearborn, it would be the best thing you 
could do. I interviewed him, I believed that was correct, and 
my goal was to have the best staff you could have in 
Washington. I interviewed quite a number of people for that 
job; I really felt that he had the drive and the energy and the 
dedication and the commitment to America and the right thing 
that would be valuable to me and my office.
    I've never known a person who would work harder, be there 
nine, ten o'clock at night; I would make no difference 
whatsoever. The job needed to be done, Rick Dearborn was there. 
He had a tremendous reservoir of contacts and knowledge around 
the Hill which will serve him in great stead and the Secretary 
of Energy in great stead, as he knows how this system works. 
For over 6 years, he was my legislative director, and just 
trained a first great group of people in my office, was a 
terrific manager of the young people, brought them along, 
encouraged them and promoted them. He's a person of integrity 
and ability.
    I think that this Department of Energy can't do better that 
to have him on their staff. I know this. He knows the staff and 
the Senators in this body, every one of them, he knows the 
practical difficulties each Senator and each staff must face as 
they evaluate legislation. He will know how to appeal to them 
in a direct and honest way. They like him; he is very popular 
around the Hill. And I just, what was my great loss is going to 
be a tremendous benefit to the Department of Energy, and I am 
pleased beyond words to recommend him to this committee. I know 
he's going to do a terrific job. And thank you Mr. Chairman for 
allowing me to say these words.
    The Chairman. Senator Sessions, Thank you very much. I know 
he's a great loss to you and that that will be a great plus to 
the Department. And while he had a lot to do working for you, I 
guarantee you, and I guarantee him, he will have plenty of work 
to do in this job.
    Senator Sessions. It certainly appears that way, and I do 
have an Armed Services Committee hearing on Iraq.
    The Chairman. You're excused.
    Senator Sessions. And will be excused. Thank you so much.
    The Chairman. Yes, indeed. Any other Senator have anything 
after Senator Sessions? Please.

        STATEMENT OF HON. DIANE FEINSTEIN, U.S. SENATOR 
                        FROM CALIFORNIA

    Senator Feinstein. I would just like to--Mr. Chairman, I 
really wanted to utilize this hearing; in addition to a 
question that I will ask Ms. Kelly, I think both these nominees 
are obviously qualified. I don't have a problem with either of 
them.
    However, I have followed now the Federal Energy Regulatory 
Commission for a long time. I am increasingly of the view that 
it's not going to be able to do its job. And this Senator is 
increasingly of the view that California's only recourse may 
well be to re-regulate. And I will be having more to say about 
that in my State, putting forward a case for re-regulation, 
putting forward a rationale for re-regulation.
    I think it begins with the fact that the FERC budget is 
paid for by the very people it regulates, which to me produces 
an innate conflict of interest. And I have followed very 
carefully when California made its presentation of the 3,000 
pages, and I never really thought I would hear the comments 
that I heard from, or that I read from the e-mails of the 
traders that participated during the California energy crisis. 
And to me what it meant was such a suborning of morality, such 
a lack of ethics in that entire energy trading field.
    It is my deep belief that energy is not pork bellies; 
energy is not Rice Krispies. Energy is really in a sense a 
commodity, and in another major sense not a commodity. And when 
I viewed the amount of fraud that was inherent over that period 
of time, and the absence of an adequate response from FERC, 
despite meetings I've held, despite comments I've made before 
this committee, it's like they fall on deaf ears, that FERC 
inhabits another planet.
    And so I am now on a road, I won't bring it before this 
committee but I will bring it before Californians, that we need 
to take another course in California. And I just hope that you 
go into that position with a strength of leadership and a view 
of what is right and what is wrong, because a lot, you know, 
initially everybody blamed it on a broken law, and California 
does have a broken law, no question. However, the massive 
amount of manipulation that took place, and then the fact that 
FERC doesn't even really have a definition for manipulation. I 
gather they're now working on it. And that FERC has all the 
authority to provide just and reasonable rates it really needs. 
Increasingly I am of the belief that cost-based rates plus a 
set margin of profit are really the way we ought to proceed in 
the energy markets, at least for my State. And I want to do 
everything I can to at least get my State in a position to be 
able to do that.
    So I felt, I came this morning to ask you one question when 
it's my time to do so. But you come with a vast reservoir of 
knowledge and I just think that what we need are more people 
like Bill Massey, who have the gumption on that committee to 
really be able to tell it like it is, to protect the consumer, 
to see beyond the veneer of what's happening. And I appreciate 
the opportunity to say that.
    The Chairman. Thank you, Senator, I'm not going to be able 
to stay for the entire hearing but I thought what I'd do if you 
would not object, Senator Bingaman, is rather than proceed with 
Suedeen, to ask the questions of the other witness so he will 
have finished.
    I have questions, standard questions of you, Mr. Dearborn. 
I've asked you these three questions. Will you be available to 
appear before this committee and any other congressional 
committees to represent the Department's positions and respond 
to issues of concern to Congress?
    Mr. Dearborn. I will.
    The Chairman. Are you aware of any personal holdings, 
investments or interests that could constitute a conflict or 
create the appearance of such a conflict should you be 
confirmed and assume the office to which you have been 
nominated by the President?
    Mr. Dearborn. Mr. Chairman, my investments, personal 
holdings and other interests have been reviewed both by myself 
and the appropriate ethics counselors within the Federal 
Government. I've taken the appropriate action to avoid any 
conflict of interest. There are no conflicts of interest or 
appearances thereof to my knowledge.
    The Chairman. Are you involved or do you have any assets 
held in a blind trust?
    Mr. Dearborn. No.
    The Chairman. All right. Now you've answered all the 
questions required, and so we're going to proceed in order, 
complete Suedeen Kelly's testimony and questions and then we'll 
take you up, Mr. Dearborn. And Ms. Kelly would you proceed with 
your opening remarks, and make them as brief as possible, 
please.

 TESTIMONY OF SUEDEEN GIBBONS KELLY, NOMINEE TO BE A MEMBER OF 
            THE FEDERAL ENERGY REGULATORY COMMISSION

    Ms. Kelly. Thank you, Mr. Chairman and Senator Bingaman and 
distinguished members of this committee. I am honored to be 
here today as a nominee for FERC, and I would like to thank the 
chairman and Senator Bingaman for their support of me and for 
their leadership on behalf of the people of New Mexico. And I'd 
also like to express my appreciation to the President for his 
confidence in me and for nominating me to this position.
    I have worked on energy law and policy matters from various 
perspectives for nearly 25 years and I would like to try to 
give you just a brief summary of my experience. In the 1980's, 
as Senator Bingaman said, I had the privilege to serve on the 
Public Utility Commission of New Mexico, and during my tenure 
there the condition of Western intrastate natural gas markets 
was a significant issue. Another significant issue was the 
bringing into rate base expensive new generation for two of our 
utilities, that if rolled into rates in the traditional manner 
would have increased them in excess of 25 percent. With the 
cooperation and collaboration of affected parties, rate paths 
were negotiated that avoided rate shock and the natural gas 
industry in New Mexico was restructured. These experiences left 
me with great respect for the challenges that are associated 
with implementing significant regulatory change.
    After leaving the commission I joined the faculty of the 
University of New Mexico School of Law where I have taught 
public utility regulation, energy law, administrative law and 
legislative process. My work at the school has enabled me to 
stay abreast of many developments in energy law over the last 
18 years. For much of this time I have also served as a trustee 
on the board of the Rocky Mountain Mineral Law Foundation, a 
membership organization of western interests concerned with the 
law and policies surrounding the natural resources of the West. 
From this association I've learned about the industries that 
develop, produce and consume these resources in the West.
    I have also been a legal advisor to the University of New 
Mexico and New Mexico State University in their roles as 
utility consumers and cogenerators of electricity. I've worked 
for the New Mexico legislature to help draft legislation for 
the restructuring of New Mexico's public utility commission. 
Before serving on the commission as Senator Bingaman mentioned, 
I worked for him in the office that he established to represent 
the interests of New Mexico's residential and small business 
customers in utility proceedings before the commission.
    Both before and after serving on the commission I have 
practiced energy law. Over the course of my career I've been 
fortunate to have been able to represent persons and businesses 
from many segments of the utility industries, including 
investor-owned, member-owned and publicly-owned utilities, non-
utility generators, companies doing business with utilities, 
and small and large utility consumers. And I've developed an 
understanding of the profound importance of energy utilities to 
the people of our country, to our way of life and to our 
economy.
    From January to August 2000 I worked at the California 
Independent System Operator, and so I was personally present 
when California's electricity market experienced its dreadful 
disruption. That experience was a highly significant one in my 
life, and has left me anxious to work to assure that nothing 
even remotely similar ever happens again in California or the 
rest of our country.
    I understand that our electricity, natural gas and 
hydropower industries are all facing tremendous challenges 
today and that the solutions to the problems will not be easy 
to identify or implement. I'm thankful to the members of this 
committee and to Congress in general for all of their work on 
energy legislation to this end. It would be a privilege and an 
honor for me to work to implement your legislation at FERC, and 
if I am confirmed by the Senate I will work with the 
commissioners of FERC and with this committee to accomplish the 
goals of ensuring reliable and safe electric and gas 
transmission at just and reasonable rates and expeditious 
relicensing of hydropower projects. And I appreciate this 
opportunity, Mr. Chairman, to testify before you today and will 
be happy to answer any questions you might have.
    [The prepared statement of Ms. Kelly follows:]
Prepared Statement of Suedeen Gibbons Kelly, Nominee To Be a Member of 
                the Federal Energy Regulatory Commission
    Chairman Domenici, Senator Bingaman, and distinguished members of 
the Committee, I am honored to be here today as a nominee for the 
Federal Energy Regulatory Commission (FERC). I would like to thank 
Senator Bingaman and Chairman Domenici for their support of me and for 
their leadership on behalf of the people of New Mexico. I would also 
like to express my appreciation to President Bush for his confidence in 
me and for nominating me to this position.
    I have worked on energy law and policy matters from various 
perspectives for nearly twenty-five years, and I would like to try to 
give you a brief summary of my experience. In the 1980's I had the 
privilege to serve on the Public Utility Commission of New Mexico, and 
from 1984 to 1986 I was its Chairwoman. During my tenure there, the 
condition of western intrastate natural gas markets was a significant 
issue. The Legislature of New Mexico passed a statute to expand the 
market opportunities for New Mexico gas producers selling into the 
intrastate market and to allow natural gas consumers to buy gas 
directly at the wellhead or from a marketer. To accomplish this goal, 
the legislation called for the restructuring of New Mexico's intrastate 
natural gas pipelines and local distribution companies, and my two 
colleagues on the commission and I presided over this momentous change. 
Another significant challenge the Commission faced while I was there 
was bringing into rate base expensive new generation for two of our 
utilities that, if rolled into rates in the traditional manner, would 
have increased rates in excess of 25%. With the cooperation and 
collaboration of all affected parties, rate paths were negotiated that 
avoided rate shock for consumers and financial catastrophe for the 
utilities. These experiences left me with great respect for the 
challenges that are associated with implementing significant regulatory 
change.
    After leaving the commission, I joined the faculty of the 
University of New Mexico's School of Law, where I have taught public 
utility regulation, energy law, administrative law and the legislative 
process. My work at the law school has enabled me to stay abreast of 
many of the developments in energy and natural resources law over the 
last eighteen years. For much of the time I have been at the law 
school, I have served as a trustee on the board of the Rocky Mountain 
Mineral Law Foundation, a membership organization of western interests 
concerned with the law and policy surrounding the natural resources of 
the West, including coal, oil, gas, nuclear, hydropower and renewable 
resources. From this association I have learned about the industries 
that develop, produce and consume these resources in the West. I have 
also been a legal advisor to the University of New Mexico and New 
Mexico State University, in their roles as an electricity consumer, gas 
consumer and cogenerator of electricity. Additionally, I have worked 
for the New Mexico Legislature's Legislative Council Service to help 
draft legislation for the restructuring of New Mexico's public utility 
commission.
    Before serving on New Mexico's Public Utility Commission, I worked 
for New Mexico's Attorney General, Jeff Bingaman, in the office that he 
established to represent the interests of New Mexico's residential and 
small business customers in utility proceedings before the commission.
    Both before and after serving on the commission, I have practiced 
law in the energy and public utility areas. Over the course of my 
career I have been fortunate in having been able to represent persons 
and businesses from many segments of the utility industries, including 
investor-owned utilities, member-owned utilities, county-owned utility, 
non-utility generators, companies doing business with utilities, and 
utility consumers. I have developed an understanding of the profound 
importance of energy utilities to the people of our country, our way of 
life and our economy.
    From January to August 2000, I worked at the California Independent 
System Operator, and so I was present when California's electricity 
market experienced its dreadful disruption. That experience has left me 
anxious to work to assure that nothing remotely similar ever happens 
again in our country.
    I understand that our electricity, natural gas and hydropower 
industries are all facing tremendous challenges today and that the 
solutions to the problems will not be easy to identify or implement. I 
am thankful to the members of this Committee in particular and the 
members of Congress in general for all their work on energy legislation 
to this end. It would be a privilege and an honor to work to implement 
your legislation at the Federal Energy Regulatory Commission. If I am 
confirmed by the Senate, I will work with the Commissioners of FERC and 
with this Committee to accomplish the goals of ensuring reliable and 
safe electric and gas transmission, just and reasonable wholesale 
electric rates, and expeditious re-licensing of hydropower projects.
    I appreciate this opportunity to testify before you today and will 
be happy to answer any questions you may have.

    The Chairman. Thank you very much. Because I have to leave 
rather quickly I wonder if you object, if there'd be an 
objection to us hearing from Rick Dearborn now before we ask 
questions of Ms. Kelly.
    Without objection, please proceed, give us your opening 
remarks and submit your statement for the record.

    TESTIMONY OF RICK A. DEARBORN, NOMINEE TO BE ASSISTANT 
  SECRETARY OF ENERGY FOR CONGRESSIONAL AND INTERGOVERNMENTAL 
                            AFFAIRS

    Mr. Dearborn. Thank you, Mr. Chairman, first of all I'd 
like to thank Senator Sessions for joining us today and for 
that fantastic introduction. I appreciate having worked for him 
for the last 6\1/2\ years and truly respect the Senator and 
valued every day I was there working for him.
    Mr. Chairman, Senator Bingaman, and members of the 
committee, I am honored to appear before you today as President 
Bush's nominee to serve as the Assistant Secretary of Energy 
for Congressional and Intergovernmental Affairs. There are many 
challenges confronting this committee, the Department of Energy 
and our Nation. If confirmed, I look forward to working with 
you and your staff to meet the challenges we will face 
together.
    Mr. Chairman, I've had the distinct privilege to work for 
six Senators over the course of 10 years of service on staff in 
the Senate. I have learned a great deal about public service 
from each of them. Notably, over the past 6\1/2\ years I have 
served as the legislative director for Senator Jeff Sessions of 
Alabama. Managing his legislative staff and the portfolio of 
policy issues he sponsored helped me gain a greater 
appreciation for and understanding of our legislative branch of 
government. If confirmed I am confident that my managerial 
experience in running a legislative office, my understanding of 
the legislative process and the working relationships I have 
forged in both parties and in both houses of Congress has well 
prepared me for service in this administration.
    If confirmed I plan to be engaged with the members of this 
committee during your work on the energy issues that confront 
our Nation. I believe it is the primary responsibility of the 
Congressional Affairs Office to ensure that lines of 
communication between the Department and the Congress are 
always open. I believe it will be my job to stay in constant 
contact with Congress and other energy stakeholders to make 
sure that the laws and the regulations applicable to the 
Department of Energy are implemented effectively.
    I believe the Office of Congressional and Intergovernmental 
Affairs should serve to provide you the information you may 
need on any given issue in a timely manner. If confirmed, I 
also believe it will be my role to provide you assistance with 
problems affecting your constituents. Having dealt with 
constituents daily, I would be committed on behalf of the 
Department to helping each of you serve them.
    Understanding the oversight role of this committee, I 
believe it is paramount to make every effort to provide you the 
witnesses you may request for your hearings. Further, any 
documents or information needed for committee hearings or to 
help you draft or amend legislation will be provided. If 
confirmed, your official duties on this committee will be our 
focus in the Congressional Affairs office.
    In addition to working with Congress, the Office of 
Congressional and Intergovernmental Affairs is responsible for 
working with State and local governments, tribal governments, 
and interested individual and organizational stakeholders. The 
Department's activities impact communities all over the Nation. 
The Department owes these communities timely and accurate 
information about our programs and policies and I take this 
charge seriously.
    Finally, if confirmed, managing my department wisely will 
be one of my top priorities. Everything from meeting my budget 
to the hiring of staff will receive my undivided attention. As 
a steward in this office, you have my commitment that your 
trust and the public's trust will be well placed.
    Mr. Chairman, I can't think of a more fascinating and 
challenging place to work than at the Department of Energy. The 
opportunity to serve as the assistant secretary to President 
Bush and Secretary Abraham will be a challenging role, and I 
look forward to working with you and the members of the 
committee. Thank you for the opportunity to appear before you 
today, and I look forward to answering your questions.
    [The prepared statement of Mr. Dearborn follows:]
    Prepared Statement of Rick A. Dearborn, Nominee To Be Assistant 
  Secretary of Energy for Congressional and Intergovernmental Affairs
    Mr. Chairman and members of the committee, I am honored to appear 
before you today as President Bush's nominee to serve as the Assistant 
Secretary of Energy for Congressional and Intergovernmental Affairs. 
There are many challenges confronting this committee, the Department of 
Energy and our nation. If confirmed, I look forward to working with you 
and your staff to meet the challenges we will face together.
    Mr. Chairman, I have had the distinct privilege to work for six 
Senators over the course of ten years of service on staff in the 
Senate. I have learned a great deal about public service from each of 
them. Notably, over the past six and half years I served as the 
Legislative Director for Senator Jeff Sessions of Alabama. Managing his 
legislative staff and the portfolio of policy issues he sponsored 
helped me gain a greater appreciation for and understanding of our 
legislative branch of government. If confirmed, I am confident that my 
managerial experience in running a legislative office, my understanding 
of the legislative process and the working relationships I have forged 
in both parties and in both Houses of Congress has well prepared me for 
service in this Administration.
    If confirmed, I plan to be engaged with the members of this 
committee during their work on the energy issues that confront our 
nation. I believe it is the primary responsibility of the congressional 
affairs office to ensure that lines of communication between the 
Department and the Congress are always open. I believe it will be my 
job to stay in constant contact with Congress and other energy 
stakeholders to make sure that the laws and regulations applicable to 
the Department of Energy are implemented effectively.
    Further, I believe the Office of Congressional and 
Intergovernmental Affairs should serve to provide you the information 
you may need on any given issue and in a timely manner. If confirmed, I 
also believe it will be my role to provide you assistance with problems 
affecting your constituents. Having dealt with constituents daily, I 
would be committed on behalf of the Department to helping each of you 
serve them.
    Understanding the oversight role of this committee, I believe it is 
paramount to make every effort to provide you the witnesses you may 
request for your hearings. Further, any documents or information needed 
for committee hearings or to help you draft or amend legislation will 
be provided. If confirmed, your official duties on this committee will 
be our focus in the Congressional Affairs office.
    In addition to working with Congress, the Office of Congressional 
and Intergovernmental Affairs is responsible for working with state and 
local governments, tribal governments, and interested individual and 
organizational stakeholders. The Department's activities impact 
communities all over the nation. The Department owes these communities 
timely and accurate information about our policies and I take this 
charge seriously.
    Finally, if confirmed, managing my department wisely will be one of 
my top priorities. Everything from meeting my budget to the hiring of 
staff will receive my undivided attention. As a steward in this office 
you have my commitment that your trust and the public's trust will be 
well placed.
    Mr. Chairman, I can't think of a more fascinating and challenging 
place to work than at the Department of Energy. The opportunity to 
serve as Assistant Secretary to President Bush and Secretary Abraham 
will be a challenging role, and I look forward to working with you and 
the members of the Committee.
    Thank you for the opportunity to appear before you today, and I 
look forward to answering your questions.

    The Chairman. Thank you very much. Ms. Kelly, I regret that 
I did ask you to introduce your relatives who are present. 
Would you care to do that, please?
    Ms. Kelly. Thank you, Mr. Chairman, I would be happy to do 
that. With me today is my mother, Dolores Gibbons, who lives 
near me in Albuquerque, New Mexico. And my brother on my far 
right, Jack Gibbons, who is director of residential life at the 
University of California at Los Angeles, and my husband John 
Kelly, who is a lawyer with the Modrall Sperling firm in 
Albuquerque. And one of our daughters, Katherine, who is a 
sophomore at the University of Pennsylvania; she just started 
school last week and she has permission from her English 
professor to miss class today.
    [Laughter.]
    Not with us is our other daughter, Vickie. She just started 
her first year of medical school at the University of New 
Mexico and she does not have permission from her professors to 
miss class today. And I've noticed friends of mine in the 
audience, and I'd like to acknowledge them, Senator, and thank 
them for being here.
    The Chairman. Thank you. Rick, do you have any relatives 
here?
    Mr. Dearborn. Yes, Mr. Chairman. My mother, Joyce Dearborn, 
is here with me today. I was hopeful that my father could make 
it but unfortunately he was too ill to travel. And a myriad of 
friends that I consider part of my Senate family who have 
joined in the back of the room.
    The Chairman. Great. Thank you all for coming, and 
congratulations. And now I'm going to yield the chair to the 
Senator from Wyoming and will wish you both the best. I see no 
reason why we should not be voting soon on reporting you out 
and then asking the Senate to confirm you. Thank you.
    Ms. Kelly. Thank you.
    Senator Thomas. Mr. Chairman, we'll give you permission to 
leave for the rest of the day. Thank you.
    Senator, would you care to have questions, sir?
    Senator Bingaman. Mr. Chairman, I had no questions of 
either nominee. I support the two nominees, as I indicated 
before.
    Senator Thomas. Okay. Thank you. Well, I do, too. But I do 
have a couple of questions. Ms. Kelly, obviously things have 
changed in the generation and distribution of electricity. 
Years ago if you had a distribution area, why you generated for 
that and that was then. Now, market generators, of course, are 
very important and therefore you have to move, to move it.
    I guess one of the things that we deal with is the division 
of responsibility between the Federal Government, and FERC in 
this case, and the States, and more probably RTOs. Tell me how 
you view that and how we might move forward in identifying and 
establishing those responsibilities.
    Ms. Kelly. Yes, Senator. Well, in 1935 when the Federal 
Power Act was passed, Congress set up those responsibilities 
and gave the Federal Government responsibility for the 
transmission in interstate commerce of electricity and the 
wholesale sales of electricity and left all other 
responsibilities to the States. I understand that FERC has 
proposed RTOs as early as the year 2000 as voluntary 
organizations for the managing of markets, and that some areas 
have formed RTOs. I think it's very important that the States 
be involved at the very beginning in the formation of any RTO.
    Senator Thomas. There obviously are differences among 
regions, and we find that increasingly as we go into this, and 
even among States, so I think the movement then interstate, 
within the RTO, pretty much would remain with the States 
collectively. Do you agree with that?
    Ms. Kelly. Senator, I agree that those markets are 
regional. And I think that the States have been working 
individually as well as with other States in their region to 
determine what kind of market structure they think is best. And 
I think it's important for FERC to work with the States to 
determine on a region by region basis what the best market 
structure is for each region.
    Senator Thomas. One of the difficulties is some of the 
structures like Bonneville Power, for instance, WAPA, so on, 
have not been under the jurisdiction, particularly. Now WAPA 
does allow in their transmission others. How do you think we 
deal with that?
    Ms. Kelly. Well, Senator I agree with you that the Federal 
utilities are not jurisdictional to FERC, and neither are the 
municipal utilities and neither are the coops. And so again, 
for an integrated transmission system to operate as a single 
entity, there has to be agreement among those entities that it 
would be to everyone's advantage to form that kind of an 
organization.
    Senator Thomas. The coops are not all out of our bill, just 
the smaller ones, 4 million hours.
    You mentioned I think you were in California with the 
independent transmission group, is that right?
    Ms. Kelly. Yes, Senator, the organization that was 
operating California's transmission system at the time. And I 
guess still is.
    Senator Thomas. Were they involved at the time? They didn't 
seem as if they worked very well.
    Ms. Kelly. It did not work very well, Senator. I agree. 
There was, it was a dreadful, dreadful experience. And now we 
know that there were many reasons for the problems, but as 
Senator Feinstein mentioned, there was fraud and market abuse 
and rampant market manipulation.
    Senator Thomas. But aren't there a number of agencies that 
are responsible for that, in addition to FERC? Who are 
responsible when there's fraud, when there's
    Ms. Kelly. Well, actually Senator, you're right. FERC does 
not have express jurisdiction over market manipulation. I know 
that the committee has considered the possiblity of adding that 
to the legislation, and I think that would be a good idea.
    Senator Thomas. But there are agencies that do.
    Ms. Kelly. Yes, and I understand that they are being 
prosecuted under criminal law.
    Senator Thomas. I hope so. I have one final question. This 
independent--what--how would you see we might be able to 
increase the incentive to invest in transmission? Would third 
party ownership be an alternative?
    Ms. Kelly. I think, Senator, that you've raised a very 
significant question. In the post-California era and after the 
blackout in the Northeast, there appears to be inadequate 
investment in transmission around the country and I think that 
FERC is responsible or should be responsible for determining 
what those roadblocks are. There are potentially a number of 
them. One is the riskiness of building a transmission project 
with the long lead times that are involved. One is potentially 
the difficulty with siting transmission, the uncertainty over 
what the transmission ownership is going to be. And the concern 
about whether or not there would be a rate path established by 
FERC and by the States that would allow them to recover their 
investment. And I think, Senator, that we need to determine 
what the exact causes are and take steps to eliminate those 
barriers.
    Senator Thomas. My final question, there's been a lot of 
resistance, largely from the idea of having some State 
involvement here on the standard market design. It was my 
understanding it has pretty much been withdrawn from FERC. 
What's your view on that?
    Ms. Kelly. I think that as you mentioned earlier, that 
there is not a standard market, there are regional markets. And 
the concerns of the regions are different. And the generation 
mixes are different, and the concerns of the region including 
the concerns of the States should be of paramount importance in 
determining which market should be structured which way.
    Senator Thomas. Thank you.
    Senator Feinstein.
    Senator Feinstein. Thanks very much, Mr. Chairman. If I 
might, Ms. Kelly, California has asked the Commission to order 
$8.9 billion in refunds for overcharges in 2000 and 2001. And 
initially FERC said it would not consider almost $7 billion of 
California's request, so California had to go to the Federal 
court, and the Ninth Circuit Court of Appeals ordered FERC to 
allow introduction of evidence of market manipulation into the 
refund proceeding. The staff report comes out recommending only 
$1.9 million. Nobody has to admit wrongdoing. And yet you have 
one company that did 80 percent of their business in wash 
trades, phony trades, 80 percent of their entire business in 
phony trades. And I'd like to know how as a commissioner you 
would assure those of us in California that FERC will fully 
consider this evidence.
    Ms. Kelly. Senator, I understand that that case is pending 
before FERC, and I hope that I will, if I'm confirmed by the 
Senate, will sit on that case. And I look forward to 
considering it with the highest degree of concern. As I said, I 
was there and I saw the damage that the high rates did and rate 
increases of 400 percent, people unable to do their business--I 
read about an owner of a laundry, and he said all he really 
does is buy and resell electricity, and he had to close his 
business--and the disaster it's wreaked on the economy of 
California. And I will make it one of my priorities.
    Senator Feinstein. Well, don't let them intimidate you. Mix 
it up a little bit.
    Ms. Kelly. Thank you.
    Senator Feinstein. I think that's really important, because 
I think there's a lot of intimidation when it comes to energy. 
So be strong.
    I have to ask another question because a constituent 
brought this to my attention. And I want to be careful in the 
way I ask it because it's in litigation. But this has to do 
with your representation of Valencia Energy Company that wants 
to build a natural gas powerplant 86 feet from a residential 
community outside of Albuquerque. And apparently, and I have 
the transcript, you stated that the natural gas plant would 
emit only water vapors and carbon dioxide into the air, and yet 
the plant has gone in for an environmental permit to allow it 
to essentially emit a large amount of other toxic materials 
into the air.
    Ms. Kelly. Thank you, Senator.
    Senator Feinstein. Do you stand by that, that that plant 
would not emit any toxic vapors into the air?
    Ms. Kelly. I'd like to explain the context for that case.
    Senator Feinstein. Please. Thank you.
    Ms. Kelly. I do represent the Valencia energy facility 
being built by People's Energy, and the facility had received 
two permits, a site design permit from the county commission 
and a clean air permit stating that it was a minor source from 
the New Mexico Environment Department. And Mr. Alba, your 
constituent, who owns property across from the industrial park 
that is undeveloped land, did not appeal the clean air permit. 
However he did appeal the county's site design approval. He 
sued the county and People's Energy intervened. And in the 
case, the issue was whether the county interpreted their zoning 
ordinance correctly to allow gas-fired electric generating 
facilities in a heavy industrial park.
    And during the course of oral argument, the judge posed a 
hypothetical to me and said in essence, if the county 
commission interprets their ordinance in this manner, doesn't 
that mean that a nuclear powered facility could be placed in 
the industrial park. And I was trying to distinguish the 
chemical process associated with the combustion of natural gas 
from the chemical process associated with the fission of 
uranium. And I guess I would point out that I was not 
testifying; it was oral argument. Mr. Alba was represented by 
an attorney on rebuttal who did not take issue with any of my 
statements. I am certain that being unprepared for the 
question, I could have been and should have been more artful in 
my response.
    Senator Feinstein. So pollutants--the question I had, I 
mean, this is 87 feet from homes, if I understand it correctly. 
It is not?
    Ms. Kelly. There are no homes on the property. The property 
was subdivided in the 1960's and the corporation went bankrupt 
and no infrastructure was ever put in the property, so there's 
no utilities, there's no water lines or gas or electricity. And 
the, it was actually rather fraudulent sales. It was sold to 
people all over the country, retirees. It is a very sad 
situation. And there has been no development on that land. It 
is platted as a residential community of 3,000 lots, but it is 
a wasteland.
    Senator Feinstein. Thank you, Thank you very much.
    Senator Thomas. Thank you very much.
    Senator.
    Senator Bingaman. Mr. Chairman, let me just ask one 
question. On standard market design, there has been a lot of 
controversy about whether or not there is any standard market, 
and whether or not FERC should be stepping in. The issue that 
sort of confronts us as a result of the blackout in the 
Northeast is much more with regard to reliability. And I'd be 
interested in any thoughts you have as to the role FERC can 
usefully plan in ensuring that the transmission system we have 
around the country is reliable.
    Ms. Kelly. Thank you, Senator. In particular with respect 
to the blackout in the Northeast, I look forward to finding out 
what the precise cause or causes were and having, hopefully, 
FERC involved in insuring that those problems are solved. More 
generally, FERC does not have a specific reliability mandate in 
the Federal Power Act, and I know that Congress is considering 
the adoption of mandatory reliability standards, and they would 
be mandatory and enforceable. And I think that would be an 
excellent step in the right direction.
    Also, it is time for individual transmission owners to plan 
individually and regionally for the adequacy of transmission, 
and also for States to plan regionally for their future needs, 
and I would like to see FERC involved in the planning efforts 
with the States. And then finally as I mentioned before to 
Senator Thomas, I think it's incumbent upon FERC to determine 
what the roadblocks are, specifically, that exist with the 
necessary investment in adequate transmission infrastructure 
and work to eliminate those road blocks.
    Senator Bingaman. Thank you very much.
    Senator Thomas. Thank you. Mr. Dearborn, you know, of 
course, that we are in process of an energy policy which we 
hope will be a policy that shows us where we want to be in 10 
or 15 years or 20. Do you expect that the department will be 
involved with that, and be able to assist with their ideas and 
points of view?
    Mr. Dearborn. Senator, I'm very hopeful that they already 
have been. If confirmed, I look forward to working with you and 
the members of this committee to provide you with the 
administration's views on energy policy.
    Senator Thomas. Thank you. Unless you have further 
questions, Senator.
    I thank both of you. Certainly I'm impressed by both of 
your backgrounds and I just want to point out how important it 
is for us to get these FERC nominations in place. By the time 
this Congress is over it will be a desperate situation unless 
we do. So we need to do that. And then of course we are faced I 
think with the challenge of an energy policy for this country, 
in order to not have blackouts, in order to not have shortages. 
At the same time of course create a better economy and stronger 
jobs.
    We look forward to dealing with you quickly, and I hope 
positively. So all additional questions for the record will be 
submitted to the chief counsel's office by 5 this afternoon. 
Otherwise, thank you so much for being here. The committee is 
adjourned.
    [Whereupon, at 10:50 a.m., the hearing was adjourned.]
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

                              Department of Energy,
               Congressional and Intergovernmental Affairs,
                                Washington, DC, September 15, 2003.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Mr. Chairman: Enclosed are answers to the post-hearing 
questions submitted to Rick Dearborn in writing by members of the 
Committee on Energy and Natural Resources following his appearance 
before the Committee as Assistant Secretary for Congressional and 
Intergovernmental Affairs-designate for the Department of Energy.
    Please let me know if I can be for any further assistance.
            Sincerely,
                                      Shannon D. Henderson,
                                        Acting Assistant Secretary.
[Enclosure]
      Responses of Rick Dearborn to Questions From Senator Bunning
    Question. The Department of Energy is setting up an office in 
Lexington, Kentucky to provide direct funding and communication between 
Paducah and the DOE, which presently goes through the Oakridge DOE 
office. It has taken the DOE almost two years to establish this direct 
funding and communication leaving uncertainty and confusion at the 
Paducah Plant. I have had assurances from Assistant Secretary Roberson 
that this office would be set up in October. Will you work to make sure 
that the DOE will meet its deadline of opening the Lexington office in 
October and that the office will work effectively?
    Answer. If confirmed, I will be committed to assisting the new 
Lexington office as needed in meeting the Department's 
responsibilities. To this end, several positive actions have taken 
place including the signing of an office lease and the posting of job 
vacancies. In addition, I understand that the new office manager, Mr. 
William Murphie, has relocated to Kentucky and is transitioning into 
his new position. I believe these actions are clear indicators of the 
Department's commitment to the success of the Lexington office. The 
Department remains committed to opening the Lexington office this fall.
    Question. Kentucky and the DOE recently signed a letter of intent 
to complete an accelerated cleanup agreement for the Paducah plant. 
Does the DOE expect that an accelerated cleanup agreement will be 
signed by the end of September?
    Answer. The Office of Environmental Management is working 
diligently with Kentucky to achieve a signed accelerated cleanup 
agreement by the end of September. Collaboration and commitment by all 
parties are critical to achieving this goal. Reaching an agreement also 
involves resolving several complex enforcement matters that remain 
outstanding. It is my understanding that the Department believes it is 
possible for those issues to be resolved by the end of September; 
however, this requires the State to remain actively engaged with DOE to 
resolve outstanding issues.
    Question. During the Cold War, workers employed at the Department 
of Energy sites across the country served our country by helping to 
make nuclear weapons. Many of these workers subsequently became ill due 
to their work with radioactive and toxic substances at the sites. The 
DOE has worked to align the Physician's Panel rule for the Energy 
Employees Occupational Illness Compensation Program Act with 
Congressional intent. However, workers' claims for the Physician Panel 
under Subtitle D of the Act are backlogged. Do you think that the DOE 
will be able to meet Secretary Abraham's assurances of having almost 
100 cases per week processed?
    Answer. As I understand the situation, the Department has proposed 
an FY03 reprogramming request that is currently on the Hill in the 
amount of $9.7 million that would allow the Department to dramatically 
accelerate the processing of these cases.
    Question. The DOE General Counsel has indicated that the DOE does 
not have entities that will pay claims for many workers whose claims 
have been approved by the Physicians Panels. This problem involving 
thousands of claims has not been solved in states such as Kentucky, 
Iowa, Missouri, Ohio, and Colorado. This problem was revealed to 
Congress nearly a year ago, and was identified by your advisory 
committee nearly 18 months ago. Last year, I co-sponsored legislation 
that would give the Department of Labor a role in helping to solve some 
of the obstacles to DOE's implementation of this program. I believe 
that you don't fix something that isn't broken, but we know this is 
broken so it should be fixed. Do you have any recommendations on how to 
fix this problem?
    Answer. At this time, I do not. I know that DOE is trying to help 
as many applicants as it can, consistent with the constraints of the 
EEOICPA statute itself. I would be glad to discuss this issue with you 
further.
                                 ______
                                 
                                                September 16, 2003.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Mr. Chairman: Enclosed are my responses to questions for the 
record of the Senate Energy and Natural Resources Committee's September 
9, 2003 hearing to consider my nomination to be a member of the Federal 
Energy Regulatory Commission.
    If you have any further questions or need additional information, 
please let me know.
            Sincerely,
                                                  Suedeen G. Kelly.
[Enclosure]
              Responses to Questions From Senator Domenici
    Question 1. Describe your view on how the delineation between State 
and Federal oversight of our electrical system should function and 
where the greatest challenges lie as wholesale competitive markets 
develop.
    Answer. In 1935, with the passage of the Federal Power Act, 
Congress gave FERC authority over wholesale sales and interstate 
transmission of electricity provided by public utilities. States have 
authority over retail sales and local distribution, as well as the 
siting of generation, transmission and distribution facilities. As 
wholesale competitive markets develop, one challenge will be ensuring 
that federal and state policies are not working at cross-purposes. 
Ongoing communication and coordination among the states and FERC is 
essential to avoiding this problem. FERC and the states must also work 
together to ensure the transmission infrastructure is adequate and 
reliable.
    Question 2. What are the major lessons we should learn from the 
recent blackout?
    Answer. Clearly, a robust transmission system is essential to the 
health, safety and welfare of all Americans, and we must make sure our 
county has adequate and reliable transmission. When we know the precise 
causes of the blackout, we must determine and implement the appropriate 
solution to ensure this does not happen again. Even without knowing the 
precise causes of the blackout, we know reliability will be enhanced if 
we institute mandatory and enforceable reliability standards. It is 
also important for FERC, the States and transmission owners to 
determine what other barriers stand in the way of assuring that 
adequate and reliable transmission is in place and operated dependably 
throughout the country, and then to act to remove those barriers.
    Question 3. How well do you think FERC has done in recent years 
collaborating with States and stakeholders as the agency has moved 
forward in its Order 888 and Order 2000 efforts as well as Standard 
Market Design?
    Answer. In some areas of the country the transmission owners are 
voluntarily forming RTOs and ISOs and there seems to be a fair amount 
of collaboration among FERC, those States and those stakeholders. 
However, in other areas of the country, particularly in the West, there 
is little collaboration and some significant hostility to Standard 
Market Design.
    Question 4. Describe your view of the Mobile-Sierra Doctrine and 
how its application affected the long-term contracts in the West.
    Answer. The Mobile-Sierra Doctrine, which derives from United 
States Supreme Court case law, permits parties to enter into fixed rate 
contracts that may not be revised unless they are found to be contrary 
to the public interest. I am aware that the issue of the Mobile-Sierra 
Doctrine and its application to long-term contracts in the West is 
still pending on rehearing in several cases at the Commission. 
Therefore, it would be inappropriate for me to prejudge any decision I 
might have to make on such cases if my nomination is confirmed by the 
Senate.
              Responses to Questions From Senator Bunning
    Question 1. Kentucky has the lowest residential electricity rates 
in the country. The FERC's proposed Standard Market Design rule, or 
SMD, appears to penalize states with low costs to benefit those with 
high costs. Do you believe that FERC's SMD rule will negatively affect 
Kentucky's rates?
    Answer. I do not believe that FERC should adopt a rule that 
penalizes states with low costs to benefit those with high costs. I am 
not able to predict whether FERC's proposed SMD rule would negatively 
affect Kentucky's rates without understanding in some detail the 
generation resources available in Kentucky and the surrounding region 
and the adequacy of transmission in Kentucky and the region. I would 
not support a rule that penalized Kentucky's ratepayers.
    Question 2. One size does not fit all. The nation's electricity 
market is not uniform, and instead, each region of the country has 
different needs. Do you believe that SMD takes into account unique 
regional differences and individual state interests?
    Answer. I agree that the country has regional electricity markets, 
each with different needs and different state interests. SMD as 
proposed by FERC did not take these differences into account.
    Question 3. A portion of Kentucky is served by TVA. It is my 
understanding that public power companies within TVA will not be 
subject to SMD. How do you propose that the SMD rule will benefit the 
country if public power companies and TVA, which make up a large 
portion of the nation's electricity market, do not even have to follow 
it? How will this affect the rest of Kentucky companies that will be 
forced to follow SMD?
    Answer. I am not certain that SMD would achieve its goals of 
enhancing reliability of transmission and non-discriminatory open 
access to transmission if, non-FERC jurisdictional transmission owners 
do not follow it. Kentucky's FERC-jurisdictional companies should 
follow it only if the benefits of SMD outweigh its costs.
    Question 4. TVA recently announced a rate increase for its 
customers. Currently, TVA is not subject to FERC jurisdiction for its 
rates, charges, and terms, and therefore is not subject to any 
oversight other than by themselves and Congress. Placing TVA under FERC 
would require it to be subject to the same regulatory requirements as 
other utility companies. What do you think of FERC overseeing TVA for 
how it operates its transmission grid and how it charges its customers 
for wholesale electricity? Do you think FERC oversight will bring more 
competition into the TVA's region that right now operates under its 
monopoly?
    Answer. I understand that TVA's public power customers are 
contemplating legislative changes that would allow them to buy a large 
share of their power from sources other than TVA. In return, they are 
willing to accept some measure of FERC regulation over TVA's 
transmission to facilitate their access on equitable terms and 
conditions. To the extent they support some FERC regulation, they must 
believe they will benefit from it. As I understand it, they would 
support the Commission having authority over TVA's terms and conditions 
of transmission service, but not over full public utility regulation 
over TVA's rates. If Congress chose to empower FERC with the authority 
to oversee TVA in this fashion, I would support Congress' choice. If 
Congress chooses to bring more competition in wholesale electricity 
sales to Tennessee Valley, then some FERC implementation and increase 
in FERC oversight of the wholesale market, for which FERC has 
responsibility under the Federal Power Act, would naturally follow from 
that decision. However, whether more competition would actually occur 
would depend on whether the buyers in the Tennessee Valley decide to 
purchase from sellers other than TVA and the sellers decide to sell.
             Responses to Questions From Senator Murkowski
    Question 1. As I'm sure you know, during the past year natural gas 
prices have reached near historic levels. As stated by many industry 
experts and confirmed by the DOE Natural Gas Summit last June, the 
fundamental reason for these high natural gas prices is a mismatch 
between supply and demand. Simply put, demand for natural gas is 
exceeding supply. This is the result of many factors including the 
reliance of most new electric generating facilities on natural gas and 
the fact that gas is an environmentally desirable fuel.
    Many of my colleagues on this Committee know the impact the natural 
gas shortage has had on industries and employment in their states--not 
to mention on homeowners energy bills. Even Chairman Greenspan 
testified before Congress about the significant negative impact the 
natural gas shortage was having on the economy.
    We in Alaska know we can be part of the solution to this looming 
crisis. In addition to providing many new employment opportunities, the 
Alaska Natural Gas Pipeline will significantly increase the supply of 
natural gas available to American consumers. Most importantly, this 
will be a secure, domestic source of energy. The Energy bill now in 
Conference includes language authorizing the Federal Energy Regulatory 
Commission to certificate the construction of an Alaska Natural Gas 
Pipeline. The Commission is also designated as the lead agency for 
purposes of the environmental review necessary for pipeline 
construction. I'd appreciate hearing your thoughts on the importance of 
prompt Commission action on the pipeline certificate application.
    In this regard, would you consider securing the services and 
expertise of local Alaska contractors to facilitate the expeditious 
review and certification of the pipeline project?
    Answer. I share your concern for the rising cost of natural gas, 
and agree that Alaskan gas can play a key role in increasing America's 
gas supply. The Commission will play a strategic role in the 
autirorizatior1 of any natural gas pipeline that would deliver Alaskan 
gas to the lower 48 states. In that vein, I would ensure that the 
Commission takes all steps necessary to expeditiously review and act on 
an Alaskan gas pipeline certificate application as soon as that 
application is filed by the project sponsors. I have discussed this 
with Commission staff and understand they are preparing for the receipt 
of an application by holding early discussions with other federal and 
Alaska agencies on coordinating reviews. Further, I understand the 
Commission staff has opened discussions with Native Alaskans to speed 
the identification of issues and facilitate their resolution. From what 
I have learned of the Commission's preparation andmy own interest in 
this critically important resource, I feel confident that the 
Commission will respond to the challenge.
    The Commission staff frequently uses environmental contractors to 
assist them in conducting their required environmental reviews of 
pipeline proposals. In most instances, staff uses a ``third-party'' 
contracting process under which it selects contractors based on a 
review of submitted proposals in consideration of both expertise and 
cost, and evidence that an organizational conflict of interest does not 
exist. I support the principle of the federal government using locally 
available services, and 1 am sure that local Alaskan consulting firms 
with local Alaskan expertise would compete well in the Commission 
staff's open bidding process.
       Responses to Questions From Senator Domenici on Behalf of 
                        Senators Reid and Ensign
    Question 1. Generally, do you believe that the ``public interest'' 
standard or the ``just and reasonable'' standard should be used in the 
context of reviewing long-term contracts entered into in a manipulated 
and fraud filled market, in the midst of the electricity crisis that 
affected the West?
    Answer. The Mobile-Sierra Doctrine, which derives from United 
States Supreme Court case law, permits parties to enter into fixed rate 
contracts that may not be revised unless they are found to be contrary 
to the public interest. The ``just and reasonable'' standard in the 
Federal Power Act imposes on FERC the duty to prevent unjust and 
unreasonable rates for the sale of wholesale electricity. Which 
standard Congress intended to have FERC apply in the context of 
reviewing long-term contracts entered into in a manipulated and fraud 
filled market in the midst of the electricity crisis that affected the 
West is a complex question of first impression and whether these 
standards were violated is a question of fact. Both these questions are 
central in several cases now pending before the Commission. If 
confirmed by the Senate, I would sit on these cases and I have a legal 
responsibility not to prejudge the issues in them, and to make 
decisions based on the record.
    Question 2. Do you believe that it is sufficient to only 
prospectively take away Enron's certificate to sell power in the 
wholesale electricity market, or should its certificate be revoked 
retroactively to the point in time when Enron first violated the law, 
FERC's regulations and its tariff obligations?
    Answer. This is a significant question of fact and law that is 
central in a case pending before the Commission. For example, a 
seller's violation of FERC approved tariff requirements may,justify the 
imposition of a remedy for the period before the refund effective date, 
however, the Commission needs to consider all of the circumstances to 
ensure that imposing a particular remedy is lawful. If confirmed by the 
Senate, 1 would have a legal responsibility not to prejudge these 
issues in this case, and to make decisions based on the record.
    Question 3. Do you believe that it is either ire the public 
interest or just and reasonable to allow Enron to enforce its contracts 
in light of its violations of the law, FERC's regulations, and its 
tariff obligations?
    Answer. Whether Enron's wholesale electricity contracts can be set 
aside as contrary to the public interest standard or just and 
reasonable standard of the Federal Power Act in light of Enron's 
violations of the law, FERC's regulations and its tariff obligations is 
an important question of fact that is now pending in a case before the 
Commission. If confirmed by the Senate, I would sit on this case and I 
have a legal responsibility not to prejudge this issue, and to make 
decisions based on the record.
              Responses to Questions From Senator Cantwell
    Question 1. In June FERC issued rulings in several cases concerning 
whether refunds should be owed for forward contracts signed in the West 
during the 2000-2001 electricity crisis. In each instance, the 
Commission declined to grant refunds oil the basis that the 
complainants failed to meet the so-called ``public interest'' standard. 
The Commission refused to apply the Federal Power Act's statutorily 
mandated ``just and reasonable'' standard of review to the 
consideration of these contracts. Do you believe the Federal Power Act 
authorizes FERC to apply any standard other than the just and 
reasonable standard?
    Answer. The ``public interest'' standard of review derives from 
United States Supreme Court case law interpreting the FPA. It permits 
parties to enter into fixed rate contracts that can be revised only if 
they are found to be contrary to the public interest. The ``just and 
reasonable'' standard imposes a duty on FERC to ensure no wholesale 
rate is unjust or unreasonable. The question of whether the ``just and 
reasonable'' or ``public interest'' standard should be applied to the 
contracts is a significant question of first impression on which the 
sitting commissioners have split. In fact, this question is now pending 
before the Commission again in cases that ate on rehearing. These cases 
also involve significant questions of fact. If confirmed by the Senate, 
I would sit on these cases and therefore I have a legal responsibility 
not to prejudge these issues and to make decisions based solely on the 
record.
    Question 2. One of the controversial issues that arose in these 
forward contract cases is whether the Mobile-Sierra doctrine's public 
interest standard can be applied to market-based rate contracts. Under 
the old regime, when FERC had a cost-based contract before it the 
Commission would first approve the contract pursuant to the just and 
reasonable standard contained in Section 205 of the Federal Power Act. 
Subsequently, when someone tried to change the rate, FERC would (at 
times) apply the public interest standard. Do you believe the public 
interest standard can be applied to market-based rate contracts when 
FERC has never originally approved the contract pursuant to Section 205 
of the Federal Power Act? If so, what circumstances would have to exist 
for you to apply the public interest standard?
    Answer. I believe the question you pose is a significant one of 
first impression, and it is currently pending before the Commission on 
rehearing. I understand that its resolution could have widespread 
impact on consumers and electricity producers in the West. If confirmed 
by the Senate, I would sit on this case, and I have a legal 
responsibility not to prejudge the issue. Additionally. I would not 
want to decide the issue without giving thorough consideration to the 
record created by all the parties to the case.
    Question 3. Do you believe a contract rate can ever be in the 
public interest if is was the result of market manipulation or a 
dysfunctional spot market, such as existed in California and Western 
markets?
    Answer. Whether a rate in a contract for the purchase of wholesale 
electricity that is high as a result of market manipulation or a 
dysfunctional spot market can be set aside as contrary to the public 
interest standard or just and reasonable standard of tile Federal Power 
Act is a question of fact that must be decided on a case by case basis. 
With respect to the contracts entered into in the California and 
Western markets in the midst of the 2000-2001 market upheaval in 
California and tile West, this very issue is pending before the 
Commission. If confirmed by the Senate, I would sit on those cases and 
therefore, I cannot prejudge this question and must decide it based on 
tile record.
    Question 4. In the Pacific Northwest, regional stakeholders are 
divided about the prospect of forming a regional transmission 
organization (RTO) and are almost unanimously opposed to FERC's 
Standard Market Design (SMD) proposal. Movement to an RTO or compliance 
with SMD would represent significant changes in the structure of our 
energy markets. In particular, I have been vocally opposed to SMD. 
Before any proposal moves forward too quickly, we must be certain there 
has been considerable input and participation from all regional 
interests, and that any RTO or market structure's costs and benefits 
are sufficient to merit such a change. Do you agree that individual 
regions should be encouraged to find solutions that meet their unique 
needs and fit their characteristics and that regional processes and 
solutions should be respected and acknowledged?
    Answer. Yes. I believe that regional solutions should be encouraged 
and respected. Having the stakeholders in a region agree on what is 
best for their region is tile best way to take into account the unique 
local characteristics and requirements of regional electricity markets.
               Responses to Questions From Senator Thomas
    Question 1. Do you believe that the level of wholesale trade in 
electric power that presently exists throughout the country is 
generally beneficial?
    Answer. Yes, I believe the wholesale electricity trade that exists 
today is beneficial. Today's wholesale transactions are voluntary, and 
they would not be occurring unless both consumers and sellers are 
benefiting from them.
    Question 2. Would the wholesale markets for electric energy in the 
various parts of the country benefit from greater regional cooperation 
and greater cooperation between state and federal regulators? Could 
Regional Transmission Organizations (RTOs) be a vehicle for 
accomplishing these goals? Should participation in such organizations 
be voluntary or mandatory on the part of FERC jurisdictional entities?
    Answer. Wholesale electricity markets have benefited in the past 
from cooperation among buyers and sellers within regions and between 
state and federal regulators. For example, in the West, such 
cooperation has been the basis for much of the seasonal trading in 
electricity. More cooperation is important today, and RTOs could be one 
way to facilitate these types of cooperation. RTOs were provided for in 
early 2000 and have been forming voluntarily since then. Making RTOs 
mandatory has been proposed in a proceeding now pending at FERC, so I 
do not want to prejudge this issue or decide it without reviewing the 
record. Two issues that I have questions about are whether FERC has the 
legal authority to make them mandatory and whether this is necessary to 
achieve non-discriminatory open access to transmission. Also, even if 
FERC has the authority to order FERC-jurisdictional entities to 
participate in RTOs, there are many transmission owners, particularly 
in the West, that are not jurisdictional; thus I am not convinced it 
would make sense to mandate RTOs where there might be significant 
regional non-participation.
    Question 3. Realizing that Public Power entities such as the 
Bonneville Power Administration, Western Area Power Administration and 
other non-FERC jurisdictional entities own substantial amounts of the 
electric transmission grid in the west, do you believe that regional 
cooperation on planning, expanding and operating the interconnected 
system can be accomplished without tile full participation of the non-
jurisdictional entities? Should participation in RTOs by these entities 
be voluntary or mandatory?
    Answer. I do not believe that worthwhile regional cooperation on 
planning, expanding and operating tile interconnected system can be 
accomplished without the full participation of the significant non-
jurisdictional entities in the west. It is vital that all federal 
power, public power, and other non-jurisdictional transmission owning 
entities participate fully in any such cooperative region-wide process 
for it to be successful. The West has a history of credible cooperative 
planning through such institutions as the Western Electricity 
Coordinating Council (WECC) that encompasses public and private 
entities, jurisdictional and otherwise. For example, the WECC's 
predecessor agency, the Western Systems Coordinating Council, 
facilitated the development of an agreement for the coordinated use of 
phase shifters to help control problematic power flows throughout the 
western interconnection. Because entities like Bonneville Power 
Administration and Western Area Power Administration are not subject to 
FERC's jurisdiction, participation by them in RTOs would have to be 
voluntary.
    Question 4. Do you believe that there should be a strong role for 
federal/state cooperative oversight and monitoring of wholesale power 
markets that includes the ability to take corrective action against 
market participants who violate established market rules?
    Answer. State and federal cooperation is important to the 
establishment and ongoing function and monitoring of power markets. in 
order for markets to function with clear rules, federal responsibility 
for oversight of wholesale markets operating under federal law, working 
with states, and complementary state responsibility for oversight at 
tile retail level of entities operating under state law must be in 
place with appropriate authority to revise rules and take corrective 
action against market participants that violate rules at each level.
    Question 5. Do you believe, as a matter of national policy, in 
cases where a regional or national public interest can be shown, that 
there is a federal role, perhaps at FERC, in assuring that transmission 
projects that meet such regional and national interest standards, can 
be permitted, sited and constructed?
    Answer. Under the current law, the states generally have exclusive 
authority to site transmission. (There is a federal role in the siting 
of transmission when the land through which it will go is under the 
control of the federal government.) I do not believe Congress should 
change this unless a case can be made that state siting is not working.
    Question 6. Do you believe that greater standardization of 
wholesale market rules and greater standardization of wholesale 
electricity services would facilitate greater competition in tile 
wholesale trade of electric energy? Would this benefit customers?
    Answer. I would like to distinguish between standardization within 
a region and across the country. Because our electricity markets are 
regional, if a market region lacks uniform wholesale market rules and 
electricity services, making these more uniform in a manner tailored to 
the particular needs of the region could facilitate sales that are 
beneficial to customers. However, I am not convinced that greater 
standardization across regions would facilitate greater competition in 
the wholesale trade of electric energy.
    Question 7. What is your view on establishing mandatory reliability 
standards and establishing enforcement and penalty mechanisms for non-
compliance? Would FERC have a role in establishing or enforcing such 
standards?
    Answer. A system of mandatory reliability standards established and 
enforced by a reliability organization subject to the Commission's 
oversight is necessary to assure the reliability and security of our 
Nation's transmission's system. In order to ensure compliance with 
these reliability standards, I believe the Commission should have the 
ability to establish a penalty mechanism.
    Question 8. What is your view on the development of incentives to 
foster private investment in transmission infrastructure? How would 
such incentives be developed?
    Answer. Adequate and reliable transmission is essential to the well 
being of Americans. FERC needs to identify the factors that prevent 
necessary investment in transmission infrastructure and work to 
eliminate them. These factors may include the long lead times needed to 
plan and site transmission, the uncertainty that surrounds the outcome 
of the transmission permitting processes, the uncertainty as to whether 
all the infrastructure costs will be allowed to be recovered in 
wholesale and retail rates, the uncertainty over the ownership and 
operation of the transmission being invested in, the return allowed on 
the investment, and the time necessary for recovery of investment. To 
the extent any of these are determined to be barriers, and to the 
extent it has the authority to do so, FERC needs to provide clarity and 
certainty in regard to these issues, revise the allowed return, shorten 
recovery time and work with states to make necessary state-
jurisdictional reforms.
    Question 9. Given the catastrophic blackout that occurred in the 
northeast last month, which we all collectively desire to avoid 
repeating in the future, do you have any other suggestions or ideas for 
us that would lead to a more reliable and efficient electric service in 
the future?
    Answer. We need to find out the precise cause or causes of the 
disruption to our power supply and delivery systems that occurred over 
such an extensive area of the nation before we decide what specific, 
long term corrective actions are necessary. However, even now, we can 
say with some assurance that a more reliable and efficient electric 
service system will depend upon mandatory and enforceable electric 
reliability standards. Additionally, the transmission owners and 
operators should work with the states in their region to determine what 
is needed to make sure there is adequate and reliable transmission to 
meet today's and tomorrow's needs. The states and FERC must also work 
to remove regulatory obstacles to appropriate transmission investment 
and siting.
               Responses to Questions From Senator Craig
    Please provide with each answer to these questions a statement 
explaining whether the staff of the Federal Energy Regulatory 
Commission or current Commissioners of FERC provided assistance in 
preparing your response and describe the form of that assistance (e.g., 
written draft of a proposed response, review of your written response, 
etc.).

    Question 1a. Background for Standard Market Design questions: The 
proposed SMD rule contains no evidence of systematic discrimination in 
access to the transmission system. The minimal anecdotal evidence in 
the proposed rule is from experiences in the Eastern Interconnection. 
The Commission has been unwilling or unable to provide systematic 
evidence of transmission discrimination in the Western Interconnection 
despite the fact that the Commission's Order 888, which prohibits such 
discrimination, has been in effect since 1996. Before jettisoning the 
Commission's original remedy for discrimination (Order 888) in favor of 
imposing SMD in the West, the Commission should be obligated to present 
systematic evidence of transmission discrimination in the Western 
Interconnection.
    Prior to making decisions on the Commission, will you require that 
systematic evidence be presented on the issues?
    Answer. Yes, I agree that SMD should not be imposed by the 
Commission without systematic evidence of transmission discrimination.
    (FERC staff provided me with a copy of the Notice of Proposed 
Rulemaking for SMD but otherwise provided me no assistance in answering 
this question.)
    Question 1b. In the case of the proposed SMD rule, the Commission 
has not presented systematic or even anecdotal evidence of 
discrimination in access to transmission in the Western 
Interconnection. Remedying discrimination is the fundamental objective 
of the SMD rule. Will you commit to developing such information prior 
to rendering a decision oil the proposed SMD rule?
    Answer. I would not agree to the adoption of SMD without evidence 
of discrimination in access to transmission.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 2a. In numerous orders the Commission has stated that 
electricity markets are regional in nature, and specifically that the 
boundary of the Western electricity market is defined by the 
electrically-separate Western Interconnection which covers all or parts 
of 14 states, two Canadian provinces and Northwest Mexico. Do you agree 
that electricity markets are fundamentally regional in character and 
that FERC policies need to reflect the needs of such regional markets?
    Answer. Yes, I agree that electricity markets are fundamentally 
regional in character and that FERC policies need to reflect the needs 
of the regional markets.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 2b. In devising policies to meet the needs of regional 
markets, do you believe that the states within those regions that are 
affected by such policies should have a role in deciding such policies? 
Specifically, would you support FERC granting deference to the 
collective advice it receives from states in the Western 
Interconnection?
    Answer. I believe that the states in the regions that are affected 
by FERC policies should have a substantial role in the development of 
FERC policies. I would support FERC granting deference to the 
collective advice it receives from states in the Western 
Interconnection to the extent it is consistent with FERC's primary 
responsibility to carry out the obligations that Congress has given it.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 3a. For at least the last 20 years, no Commissioner on the 
Federal Energy Regulatory Commission has brought to the Commission 
first-hand experience in working in the Western Interconnection. This 
serious lack of experience with the Western electricity system has 
hampered the Commission in taking appropriate action in response to 
challenges in the West. You share this lack of experience in the 
Western Interconnection. To overcome this Commission handicap would you 
advocate that the Commission hold decision meetings in the West when 
addressing Western issues?
    Answer. As a Westerner with twenty-five years' experience in the 
public utility and energy industries in the West, including their 
regulation, I do have significant first-hand experience with the 
Western electricity system. Nevertheless, given the importance of the 
Western Interconnection to the health, safety and economic well-being 
to the people of the West, I believe it is important for me to know 
even more about the Western Interconnection, to spend time in the West 
to accomplish this, and not to lose first-hand contact with the people 
and experiences in the Western Interconnection. I also agree that the 
Commission should hold meetings in the West.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 3b. The existing FERC Commissioners have undertaken some 
efforts to make FERC less of a Beltway-insular agency through devices 
such as regional panels. However, this attempt has been half-hearted 
and typically amounts to little more than an opportunity for state PUC 
commissions to get on a conference call with FERC Commissioners. For 
FERC Commissioners to understand the realities of the Western 
electricity system and hear directly from the people impacted by the 
Commission's policies, the Commission needs to better engage those 
affected by FERC policies. Would you advocate that the Commission 
experiment in the Western Interconnection with new approaches, such as 
joint boards under Section 209, to provide for joint decision-making by 
the Commission and the states on electricity issues before FERC that 
affect citizens of the West?

          Note: Section 209 (16 USC Sec. Sec. 824h)

          824h. References to State boards by Commission:

          (a) Composition of boards; force and effect of proceedings. 
        The Commission may refer any matter arising in the 
        administration of this Part [16 USC Sec. Sec. Sec. Sec. 824 et 
        seq.] to a board to be composed of a member or members, as 
        determined by the Commission, from the State or each of the 
        States affected or to be affected by such matter. Any such 
        board shall be vested with the same power and be subject to the 
        same duties and liabilities as in the case of a member of the 
        Commission when designated by the Commission to hold any 
        hearings. The action of such board shall have such force and 
        effect and its proceedings shall be conducted in such manner as 
        the Commission shall by regulations prescribe. The board shall 
        he appointed by the Governor of such State if there is no State 
        commission. Each State affected shall be entitled to the same 
        number of representatives on the board unless the nominating 
        power of such State waives such right. The Commission shall 
        have discretion to reject the nominee from any State, but shall 
        thereupon invite a new nomination from that State. The members 
        of a board shall receive such allowances for expenses as the 
        Commission shall provide. The Commission may, when in its 
        discretion sufficient reason exists therefor, revoke any 
        reference to such a board.

    Answer. I think that the idea of joint boards under Section 209 is 
an interesting one, and, if confirmed by the Senate, I would look into 
that idea as an approach for the Commission to better engage those 
affected by FERC policies.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 4a. The reliability provisions of pending energy 
legislation authorize governors in a region to create regional advisory 
bodies to oversee regional reliability councils and advise FERC. The 
legislation provides that where regional advisory bodies cover an 
entire interconnection, FERC may defer to the advice of such bodies. If 
an interconnection-wide body is created in the Western Interconnection, 
will you defer to the advice of that body?
    Answer. I would defer to the advice of such regional advisory 
bodies to the extent it is consistent with FERC's primary 
responsibility to carry out the obligations that Congress has given it.
    (FERC staff provided me with a copy of the reliability provisions 
of pending energy legislation but otherwise provided me no assistance 
in answering this question.)
    Question 4b. Will you vote to direct regional reliability councils 
to use their fee collection mechanism that is authorized in the pending 
reliability legislation to support state-created regional advisory 
bodies?
    Answer. If the reliability legislation authorizes regional 
reliability councils to use their fee collection mechanism to support 
state-created regional advisory bodies, as a general matter I see no 
reason why they should not do so, up to a reasonable amount. However, 
any vote by the Commission on this issue would have to be based on the 
record, and, accordingly, if confirmed by the Senate, I would vote on 
this issue based on the record.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 5. If a state agency, such as a PUC or Attorney General, 
has in place provisions to prevent the release of confidential data, 
will you vote that FERC should promptly share all of its market 
monitoring information with such agencies if they request such 
information?
    Answer. I support the release of market information to the public 
subject to constraints the law imposes, and I also support FERC's 
cooperating with state regulators and federal and state enforcement 
authorities regarding market monitoring. However, any vote by the 
Commission on this issue would have to be based on the record, and, 
accordingly, if confirmed by the Senate, I would vote on this issue 
based on the record.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 6a. If Congress were to give FERC the authority to grant 
eminent domain for transmission lines, under what circumstances would 
you vote to exercise such authority?
    Answer. As a general matter, I believe authority to site 
transmission lines, as well as any eminent domain authority connected 
to it, should stay with the states. If confirmed by the Senate, and if 
Congress were to give FERC the authority to grant eminent domain for 
transmission lines to FERC, I would vote to exercise this authority 
consistent with the law, the facts and, to the extent permissible given 
the law and the facts, my general philosophy that it should remain a 
state decision.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 6b. If you would exercise ``backstop'' eminent domain 
authority, what would you advocate FERC do to prevent project sponsors 
from submitting sham or incomplete permit applications to states (that 
states are unable to review and make decisions on) as a means of 
getting their application to FERC as quickly as possible?
    Answer. I would advocate that FERC work with the states to 
encourage them to implement regulations prohibiting the filing of sham 
or incomplete permit applications.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 6c. Under what circumstances would you substitute your 
judgment for a state's judgment on the issuance of a permit for a 
transmission line:

          (A) The state was arbitrary and capricious? (B) You didn't 
        like the tradeoff the state made between land use values and 
        the desirability of new transmission? (C) The line is needed to 
        maintain reliability and there are no alternatives (e.g., 
        siting generation near loads)? (D) The line is needed to 
        mitigate the exercise of market power and there are no other 
        options (e.g., price caps or ``must run'' requirements in the 
        transmission constrained area)? (E) You believe the line is 
        needed to allow consumers in a transmission constrained area to 
        buy power from different types of resources (e.g., coal or 
        renewable energy generators) located outside the constrained 
        area?

    Answer. If confirmed by the Senate, I would not substitute my 
judgment for a state's judgment on the issuance of a permit for a 
transmission line unless I was authorized to do so by law and if, based 
on the facts and law in the record of the case, such a decision was 
necessary for FERC to carry out the obligations that Congress has 
entrusted to it--unless the law establishes a different legal criteria 
for exercise of such judgment. In the hypotheticals presented in this 
question, it appears that scenarios (C) and (D), relating to situations 
where it is necessary to maintain reliability and to mitigate the 
exercise of market power, would meet this criteria because these are 
obligations Congress has directed FERC to carry out.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 6d. Would you commit to FERC commissioners personally 
attending and participating in public meetings in the region where FERC 
is considering exercising eminent domain for a transmission line?
    Answer. Yes. I think it is important that government decisionmakers 
understand how people affected by the decision feel about the issue.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 7a. Unlike most other parts of the country, major parts of 
the transmission system in the Western Interconnection are owned by 
parties not under FERC jurisdiction (e.g., Western Area Power 
Administration, Bonneville Power Administration, Salt River Project, 
Los Angeles Department of Water and Power, etc.). In some cases, FERC-
jurisdictional utilities are surrounded by public power (e.g., Xcel, 
aka Public Service Company of Colorado). Particularly in the Southwest, 
many of the major transmission paths are partly owned by FERC-
jurisdictional entities and partly owned by entities not under FERC 
jurisdiction. Do you think it makes sense to push for the creation of 
RTOs in the West when non-jurisdictional utilities elect not to join 
the RTO?
    Answer. RTOs have been proposed as a means to enhance reliability 
of transmission and non-discriminatory open access to transmission. One 
problem with their formation in the West, as you suggest, is that if 
less than all transmission owners join, these goals may not be able to 
be achieved. Additionally, I would not support the formation of an RTO 
where reliability and open access are thwarted rather than enhanced.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 7b. What would you do to entice non-jurisdictional 
entities to participate? Would you force a FERC-jurisdictional entity 
to do things under an RTO that a non jurisdictional member of an RTO 
would not be required to do?
    Answer. It seems to me that a non-jurisdictional entity would 
decide to participate if, on balance, participation benefited its 
consumers. If an RTO were deemed to be desirable in a particular 
region, I would encourage FERC-jurisdictional and non-jurisdictional 
entities to work together to create one that would mutually benefit 
their customers. If an RTO were formed by FERC-jurisdictional and non-
jurisdictional entities, I believe that the goal should be equal rights 
and responsibilities under the RTO and that any difference in their 
rights or responsibilities should not be discriminatory of either 
entity.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 8. The Blackout of 2003 affected parts of the Northeast 
and Midwest regions, not the entire nation. Do you agree that the 
immediate problem in preventing another blackout concerns reliability 
of the grid, namely, ensuring that procedures exist to prevent outages 
from spreading and operators follow those procedures?
    Answer. It is my hope that the Task Force that is investigating the 
Blackout of 2003 will be able to identify the cause or causes of the 
blackout so that we can determine and implement the proper solution to 
ensure that this does not happen again. However, even without knowing 
the cause of the Blackout of 2003, I agree that ensuring that 
procedures exist to prevent outages from spreading and that operators 
follow those procedures is of immediate importance.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 9. Would you agree that imposing on the entire country 
standard market design, or wholesale market platform, which involves 
designing generation markets, congestion (which was not an issue in the 
Blackout) and matters beyond reliability and incentives for investment 
should wait until we fix the reliability issues in the Northeast and 
Midwest and provide incentives for transmission investment? Please 
explain.
    Answer. Because electricity markets in our country are regional and 
because within each region we have different generation mixes, 
different types of transmission owners and different market-related 
issues, I do not think a standard market design or wholesale market 
platform should be imposed on the country. Additionally, I do not think 
any change should be made to any market without determining that the 
benefits of any change will outweigh the costs and that the time is 
right for a change.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 10. Do you favor mandatory Regional Transmission 
Organizations, even for parts of the country that have done well under 
traditional structures? If so, in light of the fact that the FERC 
admitted its mistake in approving the California ISO, do you think you 
can design an RTO that fits the urban fossil-fired Northeast and the 
rural hydro-based West and Southeast without creating the potential for 
a national, rather than statewide disaster?
    Answer. RTOs were provided for in early 2000 with Order 2000, and 
since then RTOs have been forming voluntarily. Making RTOs mandatory 
has been proposed in a proceeding pending before FERC so I do not want 
to prejudge this issue or decide it without reviewing the record. Two 
issues that I have questions about are whether FERC has the legal 
authority to make them mandatory and whether this is necessary to 
achieve non-discriminatory open access to transmission. Also, even if 
FERC has the authority to order FERC-jurisdictional entities to 
participate in RTOs, there are many transmission owners, particularly 
in the West, that are not jurisdictional; thus I am not convinced it 
would make sense to mandate RTOs where there might be significant 
regional non-participation.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 11. Unlike the Northeast and parts of the Midwest, the 
rest of the country, including the West, operates under the traditional 
retail regulation. Do you favor protection of native load customers in 
those states that have such laws?
    Answer. Yes, I favor protection of native load customers.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 12. Where do you draw the line between federal and state 
authority over electricity?
    Answer. Congress drew this line in 1935 with the passage of the 
Federal Power Act. The federal government was given jurisdiction over 
transmission of electricity in interstate commerce and wholesale sales 
of electricity. The suites have jurisdiction over transmission in 
intrastate commerce and retail sales, as well as the siting of 
generators, transmission and distribution lines.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 13a. Where do you stand on participant funding?
    Answer. I believe that a policy of having the beneficiaries of the 
transmission addition pay for it is the fairest pricing policy.
    (FERC staff provided me with no assistance in answering this 
question.)
    Question 13b. Do you think the FERC has defined it in a meaningful 
way when it talks about beneficiaries? Is it not true that, on a 
transmission networks, all customers benefit from the network, so that 
the FERC really wants to continues its current policy that has led to 
insufficient investment? How do you define the concept?
    Answer. It is not clear to me how FERC is defining participant 
funding or whether FERC wants to continue its policy of rolled-in 
pricing. In its SMD Notice of Proposed Rulemaking, FERC suggests a 
default pricing policy, in the absence of an independent regional 
planning process, that would allow rolling-in on a region-wide basis 
all high voltage network upgrades of 138kV and above. In its White 
Paper, FERC effectively states that a definition of the types of 
economic enhancements that benefit customers within a region can be 
more or less expansive. In the White Paper, FERC proposes to allow RTOs 
and ISOs flexibility in choosing a definition. How to define the 
concept of participant funding is a complex issue. Additionally, 
because it is part of a pending FERC proceeding, if confirmed by the 
Senate, it would not be appropriate for me to reach a conclusion on 
this question without thoroughly studying the record being made on it. 
As a general matter, though, I would want it to be defined so that the 
burden of paying for it follows the benefits received by it, it is fair 
to the ratepayers and it encourages sufficient investment in 
transmission.
    (FERC staff directed me to those portions of FERC's SMD Notice of 
Proposed Rulemaking, White Paper, and rule on Standardization of 
Generator Interconnection Agreements and Procedures that discuss 
participant funding but otherwise provided me with no assistance in 
answering this question.)
    Question 14. What other incentives for investment do you favor? 
Does the FERC have current authority to enact them? Why do you think 
the FERC has not stuck with the incentives in Order No. 2000?
    Answer. Adequate and reliable transmission is essential to the 
health, safety and welfare of Americans. FERC should determine what the 
precise barriers are in each region to having adequate investment in 
transmission and work to remove them, including implementing incentives 
to remove them. Barriers could include a long lead time and expensive 
process associated with regulatory requirements for siting, coupled 
with uncertainty whether the siting will ultimately be approved; 
uncertainty that the federal and state regulators will allow the 
recovery of the transmission investment in rates; uncertainty over who 
will ultimately operate, or perhaps even own, the transmission 
facilities; lengthy time for recovery of investment; and inadequate 
return on investment. To the extent regulatory uncertainty is a 
barrier, FERC should remove its uncertainties and work with states to 
do the same. To the extent the time associated with the siting process 
or the period of recovery of investment is too long, FERC should 
shorten it and work with states to do the same. To the extent 
inadequate return on investment is a barrier, FERC should increase the 
return. I believe FERC has the authority to do these things. I do not 
know whether FERC has stuck with the incentives in Order No. 2000 and, 
if not, why not.
    (FERC staff provided me with a copy of FERC's Notice of Proposed 
Pricing Policy for Efficient Operation and Expansion of Transmission 
Grid and directed me to the portions of Order No. 2000 that discuss 
transmission rate treatments for RTOs but otherwise provided me no 
assistance in answering this question.)
    Question 15. I continue to have serious concern about the lingering 
legal question of the Commission's authority to order dam removal at 
the end of a relicensing proceeding. First, do you agree that the 
Commission's legal authority to order dam removal in a factual scenario 
similar to the Edwards Manufacturing case (Project No. 2389) is a 
lingering legal question?
    Answer. Yes, I believe the Commission's legal authority to order 
dam removal in a factual scenario similar to the Edwards Manufacturing 
case is a lingering legal question.
    (FERC staff provided me with FERC's Orders (1) Denying New License 
[to Edwards Manufacturing Co.] and Requiring Dam Removal; (2) Granting 
Rehearing for Further Consideration; (3) Approving Settlement; (4) 
Denying Motion to Vacate; and (5) Denying Rehearing, and FERC's Policy 
Statement on Project Decommissioning at Relicensing, but otherwise 
provided me no assistance in answering this question.)
    Question 16. In more than 70 years prior to the Commission's 
decision in the Edwards case on November 25, 1997, the Commission never 
ordered a licensee to remove a dam at its own expense when the licensee 
is in good standing and wishes to continue operating its project. Thus, 
the issue that was before the Commission in the Edwards case on 
November 25, 1997 was one of first impression. Moreover, the 
Commission's decision on its authority to order dam removal in that 
proceeding was not unanimous.
    Clearly, the question concerning the Commission's authority to 
order dam removal is an extremely important one. Without judicial 
review, Congress and the citizens of this country are left without a 
definitive legal answer to this question.
    Please provide your opinion on the legal significance of the 
Commission's Edwards dam decision and explain how you would have 
approached that case if you had been a sitting Commissioner at the time 
this matter was before the Commission. Include in that discussion your 
views on the dissenting opinions that were filed by Commissioners 
Bailey and Hebert in those proceedings.
    Answer. The Commission's Edwards dam decision is a commission 
precedent but not a court precedent. Thus, a subsequent FERC panel 
could follow it or not, explaining in the latter case why it was not 
following it.
    In reviewing the orders issued in the Edwards dam case and FERC's 
1994 Policy Statement on Project Decommissioning at Relicensing, I 
observe that the Federal Power Act has no language addressing dam 
removal. A review of the legislative history discussed in the opinions 
and in the policy statement also reveals no evidence that Congress ever 
had a discernible intent regarding dam removal. The majority and the 
dissent both seem to agree with these statements. Rather, they disagree 
regarding what to do in the face of legislative silence on this issue.
    The commissioners had before them a case where ``all federal and 
state resource agencies [but not the licensee, at least not initially] 
participating in the relicensing proceeding support[ed] the denial of 
the license and removal of the dam.'' The majority addressed this issue 
head-on and determined that the license should be denied and the dam 
removed, citing dam removal as the ``only alternative that will be 
consistent with all comprehensive plans that have been identified under 
Section 10(a)(2)(A) of the FPA'' and concluding that this was 
authorized by the FPA because otherwise ``the Commission would be 
powerless to carry out the comprehensive development function that is 
recognized as the central purpose of the Federal Power Act.'' In a 
later order in this case, the majority adds that ``the Commission found 
that the public interest was best served by dam removal.'' Commissioner 
Bailey, in dissent, does not agree or disagree that the public interest 
would be best served by dam removal in this case, but explains that she 
cannot support such a decision because she finds nothing in the 
language of the FPA or its legislative history that supports ``the 
conclusion that the Commission has the authority to order dam 
removal.'' Commissioner Bailey explains that ``there are major social 
consequences, in the broadest sense, that derive from the decision to 
imply the authority to order dam removal, and I remain unwilling to do 
so.'' In a subsequent order issued in the case, Commissioner Hebert, in 
dissent, criticizes the majority for postponing indefinitely a decision 
on the merits such that Edwards is unable to pursue a court appeal of 
the Commission's decision regarding its authority to order 
decommissioning of the project. In the final order issued in this case, 
Commissioner Hebert, again in dissent, explains his position that ``no 
authority can be found in the text and legislative history of the 
Federal Power Act to allow the Commission to deny a hydroelectric 
license and to direct decommissioning.'' The Commissioner also explains 
that, as a matter of policy, he believes the majority's choice is bad 
because ``it inhibits development of low-cost and environmentally-
friendly hydroelectric generation.'' Finally, Commissioner Hebert 
argues that since subsequent to the issuance of the initial decision 
all the parties have settled the case by agreeing to have the license 
transferred from Edwards to the State of Maine and the State, in turn, 
has removed the dam, the Commission should vacate its initial decision.
    Although it is difficult to know exactly how I would have 
approached this case if I had been sitting since I do not have timely 
access to the record of this case, I believe that in recognition of the 
fact that the Commission was dealing with a case of first impression 
with absolutely no legislative guidance on the issue, I would have, 
first, labored mightily to have the parties settle the case prior to 
having to issue a decision (which they ultimately did, but not until 
after a decision had issued). If that failed, I believe I would have 
tried to have a decision issue with a stay attached to it so as to 
allow and encourage an immediate appeal along the lines suggested by 
Commissioner Hebert so that the courts could ultimately decide the 
question and the citizens of the country could have a definitive legal 
answer. In the meantime, I would have asked Congress to provide the 
Commission with some legislative guidance in the, hopefully unlikely, 
event a similar case presents itself. It also seems to me that, given 
the settlement, the Commission should have vacated its original 
decision.
    (FERC staff provided me with FERC's Orders (1) Denying New License 
[to Edwards Manufacturing Co.] and Requiring Dam Removal; (2) Granting 
Rehearing for Further Consideration; (3) Approving Settlement; (4) 
Denying Motion to Vacate; and (5) Denying Rehearing, and FERC's Policy 
Statement on Project Decommissioning at Relicensing, but otherwise 
provided me no assistance in answering this question.)

                               

      
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