[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
      ENSURING THE RELIABILITY OF THE NATION'S ELECTRICITY SYSTEM

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

                                HEARING

                               before the

                  SUBCOMMITTEE ON ENERGY AND RESOURCES

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 8, 2005

                               __________

                           Serial No. 109-87

                               __________

       Printed for the use of the Committee on Government Reform


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                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
GINNY BROWN-WAITE, Florida           C.A. DUTCH RUPPERSBERGER, Maryland
JON C. PORTER, Nevada                BRIAN HIGGINS, New York
KENNY MARCHANT, Texas                ELEANOR HOLMES NORTON, District of 
LYNN A. WESTMORELAND, Georgia            Columbia
PATRICK T. McHENRY, North Carolina               ------
CHARLES W. DENT, Pennsylvania        BERNARD SANDERS, Vermont 
VIRGINIA FOXX, North Carolina            (Independent)
------ ------

                    Melissa Wojciak, Staff Director
       David Marin, Deputy Staff Director/Communications Director
                      Rob Borden, Parliamentarian
                       Teresa Austin, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

                  Subcommittee on Energy and Resources

                 DARRELL E. ISSA, California, Chairman
LYNN A. WESTMORELAND, Georgia        DIANE E. WATSON, California
ILEANA ROS-LEHTINEN, Florida         BRIAN HIGGINS, New York
JOHN M. McHUGH, New York             TOM LANTOS, California
PATRICK T. McHENRY, North Carolina   DENNIS J. KUCINICH, Ohio
KENNY MARCHANT, Texas

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                   Lawrence J. Brady, Staff Director
                 Dave Solan, Professional Staff Member
                          Lori Gavaghan, Clerk
          Richard Butcher, Minority Professional Staff Member


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 8, 2005.....................................     1
Statement of:
    Wood, Pat, III, chairman, Federal Energy Regulatory 
      Commission; Michehl R. Gent, president and CEO, North 
      American Electric Reliability Council; David Owens, 
      executive vice president, Edison Electric Institute; and 
      Dr. Mark Cooper, director of research, Consumer Federation 
      of America.................................................     8
        Cooper, Dr. Mark.........................................    59
        Gent, Michehl R..........................................    30
        Owens, David.............................................    42
        Wood, Pat, III...........................................     8
Letters, statements, etc., submitted for the record by:
    Cooper, Dr. Mark, director of research, Consumer Federation 
      of America, prepared statement of..........................    62
    Gent, Michehl R., president and CEO, North American Electric 
      Reliability Council, prepared statement of.................    33
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California, prepared statement of.................     3
    Owens, David, executive vice president, Edison Electric 
      Institute, prepared statement of...........................    45
    Wood, Pat, III, chairman, Federal Energy Regulatory 
      Commission, prepared statement of..........................    13


      ENSURING THE RELIABILITY OF THE NATION'S ELECTRICITY SYSTEM

                              ----------                              


                        WEDNESDAY, JUNE 8, 2005

                  House of Representatives,
              Subcommittee on Energy and Resources,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:35 p.m., in 
room 2154, Rayburn House Office Building, Hon. Darrell Issa 
(chairman of the subcommittee) presiding.
    Present: Representatives Issa, Westmoreland, Kucinich, 
Higgins and Watson.
    Staff: Larry Brady, staff director; Lori Gavaghan, clerk; 
Dave Solan, Steve Cima, and Chase Huntley, professional staff 
members; Richard Butcher, minority professional staff member; 
and Cecelia Morton, minority assistant clerk.
    Mr. Issa. Good afternoon.
    A quorum being present, this hearing of the Government 
Reform Subcommittee on Energy and Resources will come to order.
    I want to thank all of our witnesses for their indulgence 
in the slight delay. I also want to apologize in advance for 
stepping in and out during this hearing as we vote on U.N. 
reform in another committee. My vice chairman will do an able 
job, I am sure, of continuing the meeting.
    Meeting the Nation's increasing energy demand is essential 
to empowering our dynamic economic economy. According to the 
Energy Information Administration, electricity demand is 
forecasted to rise 45 percent by 2025. A competitive 
electricity marketplace must ensure reliability of the system 
and reasonable prices in the wholesale and retail markets. In 
the past few decades, the electricity marketplace has moved 
beyond the depression era legal regulatory framework. The 
system has been superseded by developments in technology and 
new ownership structures as well as concerns about the 
diversity of sources of energy for electricity generation.
    Deregulation at the Federal level in wholesale bulk power 
markets and increased competition at the retail level in many 
but certainly not all States has occurred with the aim of 
increasing efficiency and lowering prices for wholesale and 
retail customers. However, the result of the patchwork of 
deregulation and restructuring has been inconsistent from State 
to State. Management, investment, and maintenance of the 
electricity system have varied widely across geographic 
regions, as demonstrated by the experience in my home State of 
California and the August 14, 2003 Northeast and Midwest 
blackout.
    I will add, as a Californian and a native of Ohio, I have 
been impacted by both the unfortunate experiences so I have an 
especially keen interest in these issues. I should also note 
that I am disappointed to hear reports that southern California 
has an especially tight supply of electricity and may this 
summer according to our first witness, experience blackouts 
again.
    Bearing these events in mind, the subcommittee meets today 
to conduct a frank assessment of the Nation's electricity 
system, to analyze challenges to investment in transmission 
infrastructure and capacity, and to discuss how these issues 
must be addressed as part of a comprehensive energy policy. 
Ensuring reliability is essential to meeting the growing needs 
of the 21st century. I look forward to hearing from this panel 
and I particularly look forward to the passage and the signing 
of an energy bill out of this Congress, one which the House has 
passed repeatedly and on which the Senate has not taken action. 
And as chairman here today, I call on everyone who anticipates 
that we may have a blackout in California to ask would such 
blackout occur if we in fact had passed an energy bill 3 or 4 
years ago as we should have.
    With that, I will yield to the ranking member.
    [The prepared statement of Hon. Darrell E. Issa follows:]

    [GRAPHIC] [TIFF OMITTED] T2412.001
    
    [GRAPHIC] [TIFF OMITTED] T2412.002
    
    Mr. Kucinich. I want to thank the Chair for holding this 
meeting. I note in the prepared testimony for Mr. Wood that he 
cites the need for adequate electric infrastructure. I think I 
could agree with him on that although I do not agree that the 
Public Utility Holding Company Act should be repealed.
    Mr. Chairman, in the last 10 years, the deregulation of 
electricity markets has pushed electric utilities to cut their 
costs to boost profits. I saw that in my own area where First 
Energy cut costs and did not adequately maintain their 
infrastructure which led to the blackouts that we had 
throughout the Northeast. They failed to maintain critical 
reliability standards and that led directly to the blackouts.
    The blackout began in Ohio and spread quickly as far west 
as Michigan and east to New York, north to Ontario, Canada and 
as far south as Maryland. The analysis of the blackout revealed 
that the principal cause was trees short circuiting major 
transmission lines and then critical computer malfunction. Mr. 
Wood is familiar with that.
    Proper tree maintenance and computer maintenance would have 
prevented the blackout. An electric utility has the 
responsibility to ensure reliable electricity. That 
responsibility includes the prevention of blackouts like the 
August blackout of last year that crippled the northeastern 
United States. First Energy Corp. was clearly identified as the 
leading cause of the blackout because they did a bad job, they 
didn't trim the trees around the power lines and laid people 
off who were supposed to do that. So when you talk about 
infrastructure, you also have to keep in mind there have to be 
people around to maintain the infrastructure. If you lay them 
off, then work is not going to get done. Tree trimming has been 
a necessary task since the electric utilities were created, but 
First Energy, in order to save money, didn't perform that task 
and that was one of the reasons for the blackout.
    What has happened in response is that First Energy Corp. 
has swung to the other end of the spectrum and has declared 
that all the trees be chopped down in these right-of-ways 
because it is cheaper to chop a tree down than to trim it every 
3 years. Think about this. You live in a nice community; it 
depends on trees for quality of life and all of a sudden, your 
local utility is beginning to use this axe to chop down all the 
trees instead of trimming them. This is a problem in some of 
the suburban areas where these lines run.
    First Energy has even instituted a bonus pay system that 
may, and I underscore may, encourage its tree trimmers to chop 
down trees rather than trim them. Such a system would 
incentivize tree trimmer priorities to cut more than necessary 
and it would harm property values.
    So, First Energy is placing profits above all other 
considerations. The last time it was sacrificing reliability; 
this time they are sacrificing property values. First Energy 
has a right-of-way for power lines, and it is not being a good 
neighbor despite this last House energy bill in efforts to 
improve reliability of the electric grid. The failure of First 
Energy and other utilities in placing safety, security and 
reliability before profits I think is going to ensure continued 
blackouts.
    I want to thank the Chair for holding the hearing and thank 
the panelists for being here.
    Mr. Issa. We will now hear from the vice Chairman of the 
committee, Mr. Westmoreland.
    Mr. Westmoreland. Thank you, Mr. Chairman.
    I want to thank you also for having this hearing on the 
reliability of our electrical system, something each one of us 
takes for granted every day when we walk into a room and flip 
on a light switch. I also want to thank the witnesses for being 
here today. I look forward to hearing your testimony and what 
you have to say.
    Electricity transmission is a complicated issue. When you 
really get down to it, the bottom line is we have over 680,000 
miles of transmission lines in the United States that feeds 
about 100,000 substations which then distributes the power 
through 2\1/2\ million miles of local power lines to the 
people, our constituents and all of us.
    Our grid is the largest and most reliable in the world and 
of course we are not without problems. We all know that, but in 
the past 10 years there have been two instances that come to 
mind and they end up being international news because it is so 
unusual for us to have these transmission problems. I think we 
will have our work cut out for us over the next few years when 
we look at the growing demand of electricity we are all going 
to have, but I think before we jump the gun on some of the 
proposals that are out there, we need to realize that some 
parts of the country have things under control. I think in the 
southeast our rates are low, we have a good delivery system and 
are doing a great job of delivering power and hopefully, we 
will pass that along to the rest of the country.
    While we have been fortunate in our State to escape the 
power outages that other regions of the country have seen, I 
know that it is not out of the realm of possibility for us to 
experience such an outage. I look forward to hearing what 
everyone has to say and I am sure we will learn a thing or two 
this afternoon about the importance of making sure that our 
grid system stays reliable.
    Thank you.
    Mr. Issa. Mr. Higgins, do you have an opening statement?
    [Mr. Westmoreland presiding.]
    Mr. Higgins. Actually, I didn't. I have nothing to say 
because I wanted to hear what was going to be said but I am 
told we have to fill in some time here, so I will have to give 
you something.
    The reliability issue is obviously very important to the 
Nation. Lessening our dependence on foreign oil is obviously 
important for economic reasons as well as national security. 
Tom Friedman's recent book, ``The World is Flat,'' where he 
argues the old vertical model of economic superiority is over, 
that the world is flat, it is horizontal and knowing who is 
emerging, who is up and down is a much more complicated 
exercise today.
    In the book, he also argues that the United States, in 
essence, is funding both sides in the war on terrorism. Because 
of our over-dependence on foreign oil, we are paying a lot of 
money that would be used for other things to help finance the 
wrong side of terrorism as far as we are concerned. Then, 
through our tax dollars, we are financing the American 
interests in the fight against terrorism.
    I think when we look at energy reliability, its impact on 
our Nation, if you consider since World War II, anytime the 
cost of oil has increased beyond 40 or 50 percent, the economy 
goes into recession. The reason for that is money, being more 
broadly spread throughout the world economy, is going to every 
oil producing nation. If you look at the impact on our cities, 
why is it kids in the inner city are disproportionately stuck 
with asthma and upper respiratory diseases? It is our reliance 
on fossil fuels to move our engines and move us around.
    I think when we look at an energy policy in this Nation, 
obviously reliability is very, very important for the 
efficient, safe transmission of electricity, but also the issue 
of a more diversified portfolio of energy sources including 
renewable sources is fundamentally as important to the economy 
as it is to national security as well.
    I have talked to people from Chariman Wood's office who 
have been very helpful by the way and I thank you for that.
    On the issue of New York State who is experiencing all 
kinds of problems, we have the State's energy use on a daily 
basis which is approximately 31,000 megawatts. The supply is 
about 35,000. Those narrow margins do not produce the cost 
cutting savings stimulus, if you will, that was to result from 
competition because there are not enough competitors in the 
system.
    We in western New York have an extraordinary resource in 
the Niagara Power Project which produces about 10 percent of 
the State's energy supply but because the demands throughout 
New York State and through seven States outside of New York are 
so great, we are unable to use that cheap hydropower for 
economic development because it is spread so thin over a large 
campus, if you will. Historically, the Niagara Power Project 
which is powered by Niagara Falls was built as an economic 
development tool for western New York and now is being used to 
subsidize the losing operations of a state authority that is 
responsible.
    The chairman is on his way back and I will stop with my 
discourse in a minute.
    I have talked to your office and they have been very, very 
helpful in terms of information and confirming certain 
assumptions, etc. and we appreciate that.
    With that, the chairman has returned.
    Mr. Issa [presiding]. Thank you.
    No ranking member has ever done better by his Chair.
    At this time, I would like to request that the witnesses 
and anyone else who may be consulting to the witnesses please 
rise and raise your right hands.
    [Witnesses sworn.]
    Mr. Issa. The clerk will report that all present nodded or 
spoke in the affirmative.
    I would like to at this time introduce the Honorable Pat 
Wood III, chairman, Federal Energy Regulatory Commission, the 
independent regulator of the Nation's wholesale electric power 
supply industry and natural gas, oil and refined products, 
pipelines and hydroelectric facilities.
    Prior to joining FERC in 2001, Mr. Wood served as chairman 
of the Public Utilities Commission in Texas. He has also worked 
as an engineer with ARCO Indonesia and as an attorney with 
Baker and Botts. He holds degrees from Texas A&M and Harvard 
School of Law.
    Without further ado, Mr. Wood, you can deliver your 
testimony as your able staff prepared it and as we all have 
copies of it or at any point you may consider it all in the 
record as it will be, and go off script and give it to us from 
the heart.

STATEMENTS OF PAT WOOD III, CHAIRMAN, FEDERAL ENERGY REGULATORY 
COMMISSION; MICHEHL R. GENT, PRESIDENT AND CEO, NORTH AMERICAN 
   ELECTRIC RELIABILITY COUNCIL; DAVID OWENS, EXECUTIVE VICE 
  PRESIDENT, EDISON ELECTRIC INSTITUTE; AND DR. MARK COOPER, 
      DIRECTOR OF RESEARCH, CONSUMER FEDERATION OF AMERICA

                   STATEMENT OF PAT WOOD III

    Mr. Wood. Thank you.
    Actually, I will give you what I worked on last night which 
is a version of what I wrote but it tells you a bit more and I 
think tries to address the concerns you have.
    I would venture that nothing is as directly relevant to our 
Nation's economic well being than the topic you are looking at 
here today which is a dependable electricity system. The severe 
economic impact of the 2003 blackout more than underscored how 
critical electricity has become to our way of life. Not only 
does there need to be enough power plants to generate the 
electricity, but the delivery grid also needs to be robust and 
reliable. And, as we saw in the last decade, the need to keep a 
vigilant eye on the grid and on the players that use the grid, 
who buy and sell the power there, is a critical role for the 
Government.
    I would like to focus today on two issues, the current 
state of our electric infrastructure, which includes the need 
for more investment, and the actions the Nation should be 
taking today to beef up the grid. Right now, our electricity 
transmission system is the weakest link in our electric supply 
system. Only about 6 to 10 percent of a customer's power bill 
pays for transmission and the men and women who build and 
maintain it, but transmission is such a crucial part of keeping 
the lights on that it doesn't matter that it is only 6 to 10 
percent.
    Unfortunately, however, transmission investment is not 
keeping up with customer demand for power. This trend has 
occurred in every area of the country. Although in the last few 
years, we have seen a short term increase in transmission 
investment, growth in transmission capacity still appears to be 
lagging the growth in demand overall.
    According to FERC public reports, transmission investment 
increased this last year for the 4th year in a row and it is up 
69 percent since 2001, but in the same years, few new high 
voltage lines came on line. So just talking about transmission 
in the aggregate is a bit of a difficult thing to do when it is 
really the interconnectivity of the grid that we are talking 
about. It is challenging to measure those on a form that 
anybody can agree with.
    In the last 4 years, 931 circuit miles nationally out of 
150,000 circuit miles were added to the grid on the high 
voltage side. This modest progress is in contrast to the 500 to 
2,000 miles of interstate natural gas pipeline that FERC 
authorized each year of the last 4 years.
    There are a number of factors that cause this and I would 
like to address those today. At one of our recent workshops on 
transmission investment which we held about 6 weeks ago, a 
witness for investor-owned utilities discussed the forecast of 
a significant increase in transmission investment in the coming 
few years. Other witnesses at the same hearing asserted that 
much of the investment is catch up to make up for years of 
under investment and that U.S. investment levels are 
significantly below those in other countries.
    In any case, there have been two serious consequences for 
the overall under investment, increased transmission congestion 
and degradation of reliability. We have seen the increase of 
transmission congestion in almost every region of the country. 
When the grid is under built, more expensive, less efficient 
and in many cases, dirtier, power plants must be run in order 
to serve the customers' needs, to keep the lights on, or worse 
yet, economic transactions aren't scheduled in the first place.
    Congestion is handled several different ways across the 
United States from the more market-based mechanisms here in the 
East and in the Midwest to manual reconfiguring of the system 
through slower processes elsewhere. The amount of congestion 
has increased steadily since 2000 and this has cost customers 
billions of dollars since then.
    I would like to show you the extent of the national 
transmission congestion problem. This schematic map is drawn 
from the Department of Energy's 2002 National Transmission Grid 
Study and shows there is significant congestion and 
transmission constraints across the United States. The red 
arrows indicate the paths of flow that are often congested 
which reflect where transactions cannot be scheduled in the 
first place, or if they can be scheduled, they run the risk of 
being curtailed.
    Only one new large, inter-utility transmission project was 
completed in recent years and that was the famous Path 15 in 
central California, 500 kilovolt, which is a very big line, 
from north to south in the State. The new byproduct of building 
this one transmission line is that congestion increases on the 
neighboring line. So Path 26 is now the new poster child of 
western potential development. This is not unrecognized because 
after all each of the Nation's three interconnective grids 
carry a product that moves at the speed of light, 186,000 miles 
a second, so you can believe the congestion can spread pretty 
easily.
    To focus on southern California, not for any particular 
reason but just because the chairman mentioned it in his 
opening statement and our wonderful staff was foresightful 
enough to envision this, this chart focuses on what we view as 
one of the most concerning areas for the summer for a few 
different reasons than we have seen in the past. Yes, southern 
California is experiencing congestion problems because imports 
are a major factor in meeting the demand in southern 
California. Due to a lack of local generation supplies, 
congestion has to be closely watched there. There are other 
regions of the country that are similar.
    Imports from one source curiously impact the ability to 
import from another, so depending on how you take power over 
the D.C. tie from the hydropower in Oregon, it might affect the 
ability to take in gas-fired power imported from Arizona. So 
that balancing act is very important and the dispatch of one 
line may actually pinch off the ability to bring in power 
another way.
    If we have normal temperatures this summer, there should be 
adequate electricity to meet peak loads in southern California. 
However, if it is warmer than normal, a 1 in 10 summer, for 
example, we could have problems meeting electricity demand, 
particularly in the peak month of August. Population and 
economic growth will continue in that region which, of course, 
is a good thing, but southern California will have continued 
difficulties the next summer to match delivered supplies with 
the increased demand.
    Our commission met at the California Public Utilities 
Commission's offices with the CPUC commissioners and with the 
California Energy Commission commissioners and chairman last 
Thursday to talk about this issue and to work on solutions for 
this problem so that in fact we do not have a repeat of 2000 
even if there are shortfalls and that they can be contained, 
localized and not replicated elsewhere.
    In addition we see this type of congestion not only in 
southern California but in many regions of the country. I think 
Mr. Owens' testimony points out how that has increased eight-
fold. There are reliability concerns for not having a robust 
transmission infrastructure. We saw this most recently in the 
summer of 2003 when the northeast States and Canadian provinces 
were affected by that. It was estimated that brief but profound 
blackout cost American and Canadian customers $4 billion to $10 
billion in costs for just the day or in some cases, up to 6 
days that the power was out in Canada.
    If customers are to get the benefits, and there are many, 
of competitive wholesale markets and also avoid the cost of 
congestion and reduced reliability, we have to find ways to 
accelerate investment in transmission. Inadequate transmission 
infrastructure becomes particularly acute as we look at 
developing a large transmission grid to handle new clean coal 
supplies and more nuclear power which I think have to be a big 
part of our future development. Those types of plants are, by 
nature, going to be located distant from the cities and from 
where the load is and will require a much more robust and 
stable grid than we have today.
    I think one of the thoughts we have been grappling with at 
the Commission since I have been there and actually before are 
what are the hurdles to getting transmission built? I think 
from several conferences and several years of experience on my 
part, and on our staff's part as well, we categorize them into 
about five: local and State siting approvals; retail rate 
freezes at the State level that discourage new investment; and 
where you don't have those, the lengthy regulatory cost 
recovery proceedings that do ensue; intra-corporate competition 
for capital, if you have a chance to build a power plant or 
build some distribution lines or build a transmission line, 
transmission tends to always be third in that race; and 
concerns about losing customers to outside competitors.
    Why build a line that is going to help your competitor take 
away your customer? It is just an intuitive thing that you have 
to address your fiduciary obligation to your shareholders if 
you are privately held companies, so if it doesn't make a lot 
of sense to them, why are you building that line to help your 
competitor take away your customer? It is tough.
    We are working within our current statutory authority to 
encourage an adequate investment climate and additional 
measures are needed. I think we have before you in the Congress 
a bill that you mentioned, Mr. Chairman, that I think can 
address three of these things.
    Those things are only in service of a greater vision. We 
brought copies of a study that came out unfortunately a week or 
so before the blackout in North America. The Department of 
Energy did an excellent study which has been a fixture at our 
Commission for the last couple of years, ``The Vision: Where 
Are We Going To? What is it we want to build toward?'' This is 
Grid 2030, it is a vision, a high level document but it is one 
I think is important to get the ball rolling. What is it we are 
building toward? We are building toward interconnection of the 
regions across the country so that the fuel diversity of our 
great country can work to the advantage of everybody without 
working to the detriment of the people who have the supplies 
near them.
    This vision statement is one I fully support and it 
describes a regulatory framework as well as a technological 
framework that governs system planning and market operations 
for the years ahead. It builds on existing infrastructure much 
as the interstate highway system was built on the old U.S. 
highway system and doesn't try to Federalize the transmission 
grid but indicates there are some areas of national interest 
that need to be addressed. I would highly recommend that as 
really the end point.
    This bill before the Congress has a number of steps in it 
that I think move in that direction and for that reason, I 
share your exultation that the Congress should adopt and get it 
to the President so he can sign it. You have passed it a few 
times as has the Senate. It is just sewing that suit together 
that makes an ugly part, so if that could be done this year, I 
think it will be important for America.
    I want to close with three things of particular interest to 
us at the Commission as we try to look after the broad public 
interest that are real critical parts of this bill. The first 
is the mandatory and enforceable reliability standards of 
setting up a system by which the rules of the road are not only 
clear and enforceable but they have a sting if you don't obey 
them. That is an important step we do not have today. As I have 
heard my friend Michehl Gent say a lot of times, this is going 
to be one of the most important things we could do this century 
to make our grid reliable and it could have prevented what 
happened in your colleague's hometown and I think your former 
hometown.
    An important thing the House did stick in was a specific 
explicit authority over the interstate grid's cyber-security 
standards. While I think anybody would view these as 
incorporated in reliability standards, the current situation 
that allows utilities or doesn't really govern utilities' 
ability to get inconsistent cyber protection for their grid 
across the country would be remedied here and be put under all 
the other reliability standards and treated that way.
    I think a focused cyber attack is one of the things I am 
concerned about. I think, more than inadequate tree trimming, 
the potential for somebody at a desk to infect the weakest part 
of the grid and reek some damage is a real concern. I think the 
standards that govern that need to be very agile and very smart 
and need to be mandatory and consistent. It has been 2 years 
since the blackout and I think it is unconscionable that we 
don't have this enacted despite the recent actions of the 
Congress.
    Back stop siting authority for our Commission is the second 
of the three big items. I think some certain critical electric 
corridors can be identified by the Department of Energy. Much 
like the Grid 2030 vision, those types of corridors are the 
ones where you would focus the backstop authority, but not 
Federalize the whole system as we have on natural gas which 
admittedly has worked quite well, but make sure the focus is on 
the backbone systems that are not being built if a State cannot 
or does not act in a timely manner.
    Finally, I know there are some points of discussion about 
this but I do think repeal of PUHCA, the Public Utility Holding 
Company Act, is overdue. I think the protections that were not 
in place in 1935 that would have prevented the need for PUHCA 
in the first place are in place and have been in place for 
quite a while at the State and Federal level both at the 
utility commissions and at the Securities and Exchange 
Commission. I think those laws do ensure quite an amount of 
redundant customer protection which PUHCA was intended to 
adopt. I think it would spur investment in transmission 
infrastructure and would facilitate competition across the 
country.
    Thank you for the opportunity to talk on a topic near and 
dear to my heart and I look forward to any questions you may 
have after our good panelists get through.
    [The prepared statement of Mr. Wood follows:]

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    Mr. Issa. I will note for the record, without objection, 
the entire document, ``The Grid 2030,'' will be included in the 
record of this hearing.
    [Note.--The U.S. Department of Energy document entitled, 
``Transforming the Grid to Revolutionize Electric Power in 
North America `Grid 2030' A National Vision for Electricity's 
Second 100 Years, July 2003,'' may be found in subcommittee 
files.]
    Mr. Issa. At this time, if I may go back to regular order 
for a moment, I would like to introduce the rest of our 
speakers and then get to Mr. Gent.
    Our next speaker will be Michehl R. Gent, president and 
CEO, North American Reliability Council. After he speaks, we 
will have Mr. David Owens, executive vice president, Edison 
Electric Institute; and then Dr. Mark Cooper, Director of 
Research, Consumer Federation of America.
    With that, we would next go to Mr. Gent.

                  STATEMENT OF MICHEHL R. GENT

    Mr. Gent. Thank you.
    As we approach the second anniversary of the largest 
blackout in North American history, I think it is important 
that I share with you the status of our efforts to prevent such 
a reoccurrence. I thank you for that opportunity. My prepared 
comments have the details of many of the programs, processes 
and standards that we have implemented and I again make the 
case that the next move, passing the reliability legislation, 
is up to Congress.
    The electricity industry has undergone profound changes in 
the past decade as competition has taken the place of 
regulation in major parts of our country. Those changes have 
had significant consequences for how the industry maintains the 
reliability of the bulk electric supply systems serving North 
America. The introduction of competition means that we must 
change the way we deal with reliability matters. I think the 
blackout of August 14, 2003 proves that the old way of handling 
reliability will not work effectively in a restructured 
electricity market.
    There are understandable reasons why the old ways will not 
work. Before restructuring, the industry was comprised of 
entirely vertically integrated utilities, both investor owned 
and publicly owned, each owning its own generation, each owning 
its own transmission, its own distribution system, and in fact 
owning its own customers, if you will.
    Utilities sold electricity to one another but it was mostly 
between neighbors trading back and forth and then in later 
years, it developed into emergency purposes and then finally 
with the advent of the passage of the Energy Act of 1992 we 
have more transactions on the interconnections.
    As the competitive wholesale electric market developed, 
trade in electricity spanned longer and longer distances with 
organizations moving larger and larger blocks of power from one 
region to the other. However, the electric transmission system 
was not designed, nor was it built, to move such large amounts 
of power. In fact, it hasn't changed substantially in the last 
10 years.
    Along with the increased competition and supply of 
electricity came what we call corporate restructuring. Here are 
just a few examples of what has happened. Some organizations 
have sold off generation assets as part of their move to 
competitive wholesale markets. Other organizations have turned 
operation of their transmission system over to independent 
transmission operators or regional transmission organizations. 
Some have become transmission only organizations. Independent 
power producers have become the primary developers of new 
generation plants and services have been unbundled in many 
parts of the country. We no longer have this link between the 
generation plant and the customer.
    The net result is often that several generating plants 
under separate ownership might now sell their output to an 
unaffiliated marketer who would arrange for an unaffiliated 
transmission company to transmit the electricity to an 
unaffiliated distribution company for delivery to the ultimate 
customer who may feel unaffiliated. With that degree of 
unbundling and restructuring, the required near constant 
coordination and communication among the operators of the 
transmission system that formerly took place in a vertically 
integrated system became at the same time more difficult and 
yet more important than ever.
    An important indicator of the status of the electric 
system, as Chairman Wood said, is the amount of congestion 
occurring on the system. For each year in the last decade, more 
transmission lines have been experiencing congestion for more 
hours of the year. We have fashioned reliability rules for 
handling that congestion but that could also mean that someone 
doesn't get transmission service. Someone is going to have to 
pay more for their electric energy because of the congestion. 
It is obvious to me that the needed construction of additional 
transmission capacity has not kept pace either with the 
expansion of generation or with the increase in the customer's 
demand.
    Since the blackout of August 14, 2003, the electricity 
industry has accomplished much to strengthen the reliability of 
bulk electric systems in North America, yet much more needs to 
be done. Long before the blackout, the industry realized that 
the way we had been handling reliability for the previous three 
decades would no longer suffice. The voluntary system of 
cooperation and peer pressure that had worked so well for 30 
years would not be sufficient to maintain the reliability of 
the system. We all agreed that the answer was to make the 
reliability rules mandatory and enforceable.
    To accomplish that, we started about 6 years ago--that is 
NAERC and a broad coalition of the electric industry 
stakeholders from all industry sectors as well as the customers 
and regulators--to put together legislation that we could all 
live with. We have been seeking amendments to the Federal Power 
Act and as you mentioned, that has been passed in the House 
bill. That legislation would make reliability rules mandatory 
for all owners, operators and users of the bulk electric system 
regardless of those entities' jurisdictional status under the 
Federal Power Act.
    It would authorize creation of an industry-based electric 
reliability organization to set and enforce reliability 
standards subject to the oversight in the United States of the 
Federal Energy Regulatory Commission. I might add, in Canada, 
that would include a provisional agreement.
    Legislation also recognizes that the international nature 
of the interconnected grid does exist and that the reliability 
activities have to be carried out by regional entities, not 
some central force located in either Washington or Princeton, 
again with FERC oversight.
    Congress now appears poised to finally enact the 
reliability legislation that we have been seeking as part of 
the comprehensive energy bill, but we have been here before and 
we have been disappointed before. This time it is a little 
different because, as a result of the blackout we had 2 years 
ago, we even have the support of the United States and Canadian 
governments. In fact, the U.S.-Canada Power System Outage Task 
Force that investigated the 2003 outage concluded, ``The single 
most important step for maintaining a high level reliability is 
for Congress to enact the reliability provisions in the pending 
legislation you already passed.'' NERC is very hopeful that 
this will be our year.
    I am convinced that if we had the legislation 3 years ago, 
the blackout would not have occurred. In my written testimony 
is a brief description of many of the steps that we have taken 
to assure that a blackout like the one that occurred in August 
2003 cannot be repeated. We have implemented many of the steps 
that were called for in our own report, recommendations in the 
report of the U.S.-Canada Power System Outage Task Force and 
steps in the proposed legislation.
    Those implemented steps include a rewrite of our standards 
to make them sharp and clear; required training programs for 
system operators that will be handling emergencies; standards 
for vegetation management; and readiness audits of the 
operating centers to just name a few. However, memories are 
short and all we have are promises. We need the reliability 
legislation to make all of this mandatory and lasting.
    After the blackout, we were able to accomplish much because 
everyone was focused on reliability. However, as time has 
passed, priorities have shifted, people have moved on, and 
other issues are competing for your time and my time. Having 
the reliability legislation in place finally will make sure 
that NERC and the entire electricity industry can make the 
proper focus on reliability an ongoing and sustainable 
activity.
    Thank you, and I would be pleased to answer your questions.
    [The prepared statement of Mr. Gent follows:]

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    Mr. Issa. Mr. Owens is executive vice president for 
business operations with the Edison Electric Institute. He 
joined the Institute in 1980 and has held a number of positions 
related to power supply policy and industry regulation. Prior 
to joining Edison, he served as Chief Engineer of the Division 
of Corporate Regulations of the Securities and Exchange 
Commission.
    Mr. Owens holds a Bachelors and Masters degree in 
engineering from Harvard University as well as a Masters from 
George Washington University.
    Welcome, Mr. Owens. Your entire testimony will be put in 
the record. So again, feel free to, within our timeframe, 
expand upon your written testimony.

                    STATEMENT OF DAVID OWENS

    Mr. Owens. Thank you.
    You dated me a little. In 1980, I was a child prodigy. I 
was about 4 years old when I started my career.
    Mr. Issa. I was a child prodigy captain in the Army at that 
time, so our prodigy background is duly noted. [Laughter.]
    Mr. Owens. On a serious note, EEI is the association of 
U.S. shareholder-owned electric utilities and industry 
affiliates and associates worldwide. We certainly do appreciate 
this opportunity to testify on electric reliability and 
transmission issues.
    As you know, the energy bills now pending in Congress 
contain a number of important transmission reform provisions 
that would help to strengthen our Nation's transmission 
infrastructure. EEI strongly supports these provisions. I would 
like to take a moment and highlight for you eight items I think 
are very critical to maintaining reliability and enhancing our 
overall transmission infrastructure.
    Like the other witnesses, I feel very strongly that 
Congress should establish mandatory reliability rules for all 
market participants with important FERC oversight. We strongly 
urge the inclusion of these provisions in an energy bill, but 
without the budget limitations contained in this year's House 
passed version of H.R. 6.
    My second point would be that Congress should require FERC 
to reform its transmission rate policy in a manner that will 
provide greater certainty to investment in the transmission 
system. We certainly do support the FERC pricing and 
technologies provisions in H.R. 6, and particularly those 
incentives to expand transmission infrastructure. I also 
appreciate the comments that Chairman Pat Wood has made with 
respect to some of the things FERC is seeking to undertake.
    Third, I would urge that Congress give FERC backstop 
transmission siting authority for many of the various reasons 
that Chairman Pat Wood spoke of. In my view, regional 
electricity markets require a transmission siting process that 
has the ability to consider regional and even national needs. 
As you know, most siting laws do not allow the consideration of 
regional benefits. Many of them also do not recognize the role 
of some new important entities such as multi-state, regional 
transmission organizations or independent transmission 
companies. These entities, in my view, play a significant role 
in the planning and siting of transmission.
    H.R. 6 would give FERC limited backstop transmission siting 
authority. This authority would certainly not be as 
comprehensive as the authority that FERC currently has with 
respect to natural gas pipelines, but it would help site 
transmission lines in interstate congested areas, which are 
designated by the Department of Energy. This would occur only 
if States have been unable to agree or to act within a year.
    My fourth point is that Congress should reform the 
transmission permitting process on Federal lands by designating 
the Department of Energy as the lead agency to coordinate and 
set deadlines for the Federal environmental review and 
permitting process. As you know, the Federal transmission 
permitting process needs to be coordinated, needs to be 
simplified, and needs to be able to work. It is a very 
cumbersome, complicated process today. We strongly support the 
provisions in H.R. 6 that would accomplish this goal.
    My fifth point is that Congress should ensure all 
transmissions providers must allow open access to their 
transmission lines to any third party power seller. The current 
system that we have today is one where government-owned 
utilities and electric cooperatives collectively own and 
operate about 32 percent of the Nation's transmission system. 
Unfortunately, these transmission owners are not subject to the 
same level of FERC jurisdiction over transmission that applies 
to shareholder owned utilities.
    In my view, this bifurcated regulation of interstate 
transmission lines certainly will not work as the industry 
structure continues to evolve. We believe that sound public 
policy to protect consumers would mean putting all utilities 
participating in interstate wholesale electricity markets under 
FERC's full, just, and reasonable requirements. At a minimum, 
EEI strongly supports inclusion of an effective FERC-lite 
provision in any electricity bill, which would make all types 
of utilities subject to non-discriminatory open access 
transmission rules.
    My sixth point is that Congress should clarify Federal law 
to authorize Federal utilities to join an RTO or independent 
transmission system operators voluntarily. I am not supporting 
mandatory RTOs but I do believe that certain Federal entities, 
such as in the Pacific Northwest, where the Bonneville Power 
Administration controls over 70 percent of the transmission 
system in that region, has to have the clarity that they can 
become a part of a regional transmission organization.
    My seventh point is that Congress should repeal and 
modernize the Public Utility Holding Company Act of 1935. As 
the Chair correctly pointed out, PUHCA acts as a substantial 
impediment to new investment in energy infrastructure. It is 
keeping billions of dollars of capital out of the industry and 
particularly capital that could be very useful in modernizing 
our transmission system. We believe this outdated statute has 
contributed to the failure of electricity infrastructure to 
keep pace with growing electricity demand and the development 
of regional wholesale electricity markets.
    H.R. 6 contains provisions that will repeal PUHCA and 
transfer consumer protections to FERC and the States. These 
provisions are similar to PUHCA repeal language that has been 
included in every major electricity bill considered by the 
Congress over the last decade, and which have been endorsed by 
every administration, Republican and Democratic, since 1982. 
They should be included in the energy bill again this year.
    My eighth and final point is that Congress should provide 
for enhanced, accelerated depreciation for electric 
transmission assets, in other words, reducing the depreciable 
lines from 20 years to 15 years similar to the tax treatment 
governing other major capital assets. Currently, transmission 
assets received less favorable tax treatment than any other 
critical infrastructure and technology. Accelerated 
depreciation for transmission will help increase investment in 
and strengthen our energy infrastructure.
    Let me conclude. Congress needs to finish the job and pass 
an energy bill as soon as possible to help promote fuel 
diversity, to improve the energy efficiency and conservation of 
our systems, to provide regulatory certainty in energy markets, 
and to encourage investment in critical infrastructure. We urge 
Congress to adopt an energy bill that includes the transmission 
provisions contained in H.R. 6.
    This completes my statement and I would be pleased to 
answer any of your questions.
    [The prepared statement of Mr. Owens follows:]

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    Mr. Issa. Thank you, Mr. Owens.
    We now turn to Dr. Mark Cooper, an author of many books and 
writings and a scholar. Dr. Mark Cooper is director of 
research, Consumer Federation of America, where he is 
responsible for energy, telecommunications and electronic 
policy analysis. Dr. Cooper is author of a book, ``Equity in 
Energy,'' and has published numerous articles on energy policy 
and deregulation over the last 20 years.
    Dr. Cooper received his Ph.D in sociology from Yale 
University, a Masters degree in sociology from the University 
of Maryland, and a Bachelors degree in English from the City 
College of New York.
    With that, I very much look forward to hearing parts of 
your written testimony and anything wlse you may be willing to 
give us that is not yet included in your written statement.

                  STATEMENT OF DR. MARK COOPER

    Mr. Cooper. There is always a tendency to just throw them 
away and respond to what went before because I have a rather 
different point of view, but let me sort of lay the base by 
explaining why we view the electric utility industry rather 
differently from the market philosophy you have heard 
heretofore. Then I will try and go through about 10 points at 
which we disagree.
    Frankly, the failure of Congress to pass the legislation 
the last couple of years has not troubled us a great deal 
because bad legislation is worse than no legislation. We don't 
think that the legislation will do us a great deal of good.
    I want to start with a simple observation. I commend the 
committee for focusing on the important point here, the 
reliable supply of electricity and casting a very broad net, 
because the framework of the letter invited me to go where I 
thought I needed to go to make my points.
    Electricity is like oxygen in the 21st century. The way I 
like to get my audiences to understand this is the ``E'' in e-
commerce stands for electronic. If the electrons don't flow, 
all the gee-whiz digital gadgets we love won't work. This is 
the foundational service in our society. In fact, we believe 
that reliability is a public good. The transmission system is a 
commons in the following sense.
    The benefit of reliability is shared. Once people are 
hooked to the grid, it is hard to exclude anyone from enjoying 
the benefits of the reliability that is provided to the group 
as a whole and is non-rivalrous. That is, the fact that I get 
the benefit of reliability does not deny my neighbor the 
benefit of reliability. In that sense, it is a classic public 
good. But there is more than that.
    Electricity has massive positive externalities. You heard 
the numbers. A few days' blackout cost $4 billion to $6 
billion. That is the external value of electricity. There are 
also severe negative externalities with respect to building 
these facilities, so people do resist having lines built 
through their neighborhoods because there are environmental, 
health, and property values that are undermined by these 
facilities. This is a legitimate source of debate between 
people about the private value of transmission versus the 
external negative values that it imposes on people.
    We firmly believe that as long as you try and take this 
public good and commodify it, this infrastructure, you will in 
fact restrict the supply of reliability and undermine the 
public benefits that it can provide. So we see critical public 
values here in electricity. The law says it is affected with 
the public interest. It is a public good in its infrastructure, 
it relies on public resources, it demands public participation 
and cooperation between all these many entities that must make 
the system work.
    I believe that we had the best electric utility system in 
the world precisely because we found the way to balance the 
public obligations with the private incentives, the social 
responsibility, and the private profit motive. We believe 
irrational exuberance for deregulation in the 1990's undermined 
that important balance.
    Electricity is not a commodity that can be easily sold in 
the marketplace on a spot market basis, and we have seen that 
in the last 10 years. It is not shirts or shoes. You can't 
build them in Taiwan, transfer them to Brooklyn and put them in 
a warehouse for a year and wait to sell them. It is not a 
store-bought commodity. It doesn't behave well as a commodity 
market, and therefore, we have to treat it very, very 
differently.
    The cost of capital in this industry, if you try and treat 
it on a merchant basis, goes through the roof because it needs 
a very long term perspective, but the merchants want to recover 
the costs on a very short term basis. You have heard about 
accelerating depreciation to 15 years. This is for facilities 
that will last 30 and 40 years. When I studied economics, the 
idea of financial accounting was to match the financial life to 
the economic life because that is what keeps things in balance. 
These are assets that need long financial lives because they 
have long economic lives and they are shared facilities.
    As we look out at the experience of deregulation, we 
understand that restructuring puts stress on the grid. You 
heard some of the reasons here: a dramatic increase in the 
number of transactions, a dramatic increase in the complexity 
of transactions, increased difficulties of coordinating these 
sales, and contracts which were not what the system was built 
to do.
    It is a physical system, intending to move electrons, and 
electrons are the most nasty little beings in nature on which 
we depend. First of all, they go where they want, the path of 
least resistance; when they arrive under the wrong 
circumstances, they actually do a great deal of harm. In the 
end, the engineers are going to tell what is supposed to 
happen, not the market transaction. So we have wasted a 
tremendous amount of effort and energy in trying to build 
transactions on top of the physical system.
    This leads us to a very different view of how to deal with 
the transmission system. It needs to be affected deeply at its 
core, its root has to be in the public interest, not in the 
maximizing of profits and markets transactions. When we look 
down the list of things, you have heard about what needs to be 
done. We need long term, integrated resource planning around 
these facilities, that is a comprehensive, rigorous approach. 
We need a study of the grid to figure out exactly which 
facilities need to be built.
    We don't need the marketplace to figure out where we need 
to build facilities; the engineers know exactly where to build 
facilities. In fact, we can move that around if we want, but 
the simple, physical nature of the system dictates in the end. 
We don't need to have the marketplace to discover that 
mechanism.
    Frankly, every time we amend the Public Utility Holding 
Company Act, a consumer pays the price. Enron lost its Public 
Utility Holding Company Act exemption about 2 years after the 
disaster in California and, in fact, if they had never been 
given it, the consumer would have been better off.
    The Public Utility Holding Company Act has a simple 
purpose, to keep utilities focused on their central task, which 
is providing electrons to consumers, to not get distracted with 
other businesses, to not get distracted with maximizing 
profits. In California, we learned a lesson. Electric utilities 
worry about keeping the lights on. Merchant generators only 
worry about getting paid and maximizing profits. When the 
lights went out, we have now discovered they were joking in 
their control rooms about the pain being imposed on people. We 
cannot run the system that way. The Public Utility Holding 
Company Act went a long way to protecting us from those 
difficulties.
    Ultimately, we believe in open access systems, but the 
problem is not with governmental entities who are in fact 
created to promote solely the public interest. We think the 
problem has been with the investor-owners who have used their 
control over the grid to prevent the flow of electrons.
    On each of these points we have a rather different view 
which arises from a fundamental difference of opinion about how 
we need to organize this sector. The primary core of the 
electric utility industry, the transmission grid, is not a 
market, it is a commons. It is a public good and that needs to 
be the way it is designed, thought about and administered.
    Thank you.
    [The prepared statement of Dr. Cooper follows:]

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    Mr. Issa. Thank you.
    With that, I would ask unanimous consent that all Members 
be allowed to put their opening statements and any other 
pertinent or extraneous information into the record for 5 days 
after this hearing.
    The Chair would recognize, as is our custom, myself for 5 
minutes. I will make my questions short and we will alternate, 
and undoubtedly, we will get a second round.
    Dr. Cooper, I really enjoyed your testimony. I say that 
with no reservations. I think you hit on something that is 
very, very important. Perhaps I agree with you in part and 
disagree with you in part. You said that electricity isn't a 
market. Might I ask you a leading question, isn't it, no matter 
how you look at it, a market? What we are debating in 
deregulation is whether it is, as you used the term, a spot 
market or whether it is a market in slow motion, in other words 
a market of 30 year purchases, a market of 30 minute purchases.
    In California, we had a market of 30 year purchases for 100 
years. You bid the plant prior to construction based on a 
formula of what you anticipated to be the cost and you 
recovered it. If you bid a hydroelectric plant that cost 2 
cents a kilowatt hour and never changed prices for all 
practical purposes for 100 years, or you bid a natural gas-
fired plant that might be 2 cents a kilowatt hour at the 
beginning, but over the years because of the cost of that fuel, 
might go up higher and higher, you were still bidding its cost 
plus a profit.
    Would it be fair to say that the debate is between that 
model which I would still call a market, but a market that in a 
sense is a 30 year market versus the market that you didn't 
seem to like which you called the spot market?
    Mr. Cooper. We were vigorous supporters of the 1992 EPACT. 
We were one of the few groups that supported it. There was not 
a market before that. There were regulated franchise service 
territories. There were no bids or a few bids but very little 
bidding. In the 1980's, we discovered that every time a utility 
was told to go out to bid, this was for bid chunks, not a 
retail spot market. Every time they went out to bid for 
capacity, they were offered 10 megawatts for every 1 they 
needed. It looked like why couldn't we run the system in that 
bidding framework.
    In fact, the previous 30 years, the whole history of the 
industry did not have that market discipline. We were 
interested in that market discipline, but let us be clear, in 
the 1990's, we never tried that model of what we could call 
managed competition. It wasn't very popular around here when 
you talked about health care, but that was the model that was 
in the 1992 act.
    That model was never tried. It got hijacked into the short 
term spot market transactions model, the Enron model, which I 
have testimony from 1997 in Pennsylvania where we were opposing 
it even before we saw how ugly it was precisely for these 
principles.
    I agree with you in that sense. There was a middle ground 
which was not dependent upon the spot market, and in fact, in a 
certain sense when people tell me just get long term contracts 
and you can protect yourself, the utility franchise was a long 
term contract between the ratepayers and the utility. So one 
answer is yes, there may be a middle ground we need to get back 
to but that looks very different than what we had in the one-
third of the States that tried it.
    The second problem with the 30 year versus 30 minutes, once 
you start with the mixed model, what happens is, and you heard 
this described, the people who think they can maximize their 
profit in the 30 minute market don't want to sign deals in the 
30 year markets. So it gets very difficult to have that mixed 
basis. So there are people outside in two-thirds of the States 
who are signing long term contracts and doing long term deals, 
but in the area where you have this 30 minute market, you have 
difficulty raising funds even around prominent projects 
obviously needed.
    On the one hand, there is a middle model; on the other 
hand, it is very, very difficult to run this mixed set because 
everyone keeps holding out for the fantastic profits they think 
they can make in the 30 minute market, starving the 30 year 
market of the capital it needs.
    Mr. Issa. Let me ask not a followup question but a question 
that came out of the part of your testimony that was 
extemporaneous. I appreciate that. You seemed to be concerned 
that accelerating depreciation was somehow unjust. Perhaps I am 
a recovering businessman, but say we are talking 30 year 
assets, matching assets with depreciation is an interesting 
question of accounting more than economics.
    Isn't it true that for the first 15 years of a 30 year 
depreciation, even if you accelerated the 30-year lifespan to 
15, what you really have is you have loaned the Federal 
Government money because you have put in your tax paid capital 
and now you are waiting to get back against the loss. At the 
15-year mark, in a 15 year depreciation of a 30 year asset, you 
actually only get even. You paid the Government as though it 
was profit, and then get your money back over 15 years.
    I might suggest for your future testimony, that when you 
match it, remember that capitalization is to a certain extent 
loaning the Government against tax revenue and getting it back 
over time. If you match it 30 for 30, what it really means is 
you put all your money up front, pay the taxes and then were 
allowed to depreciate it as it went to zero value, but 
essentially you still made a loan of that tax money to the 
Government.
    Mr. Cooper. In the utility model, the matching between the 
long and the short term is much less of a problem because you 
have that long term relationship, which is precisely why the 
cost of capital is so much lower.
    The other problem that I see with the incentives schemes, 
and you heard two of them here, accelerated depreciation and 
higher rates of return, is that the theory of giving those 
incentives is to induce people to build things that they might 
not otherwise have built. The impediment to building 
transmission by and large is not an economic impediment. We 
have social impediments, we have socially imposed scarcity 
frequently, and we have heard a lot about that. We can argue 
about whether that is a rational or irrational choice, but it 
certainly is a choice that people have to make.
    From my point of view, throwing incentives at transmission 
projects is good money out for bad. I don't need to incentivize 
these things. I know where they are, I can guarantee, or pretty 
much guarantee, the rate of return without paying too much for 
them. So to me these two incentive schemes are in fact not 
efficient. The problem in this industry is that it is rich in 
rents, and rents have nothing to do with efficiency.
    The other point about acceleration is that on the tail end, 
the rate payer is supposed to get it back because what they are 
paying for depreciation declines. Our experience has been that 
when the tail end finally arrives, as it did with the nuclear 
power plants, they decided to find some other way to make sure 
they didn't lower my rates. They decided they needed to 
transfer those assets to companies that were about to face 
competition.
    My problem is that I paid the price in the short term and I 
don't tend to get the benefit in the long term.
    Mr. Issa. I appreciate that.
    My time has really expired. I will give one more question 
for Commissioner Wood if I have my vice chairman's permission.
    The repeal of PUHCA, or its substantial elimination and 
reform, is timely according to Warren Buffett, one of the most 
trusted men in America. And we might all say Warren Buffett is 
no Enron and get very little if any argument. His estimate is 
that there will be $10 billion to $15 billion in new energy 
capital that will come in if PUHCA is either reformed or 
repealed, a win-win, if you will.
    Could you give us your thoughts on how accurate Mr. Buffett 
is and how much of that relates to your belief as an outgoing 
commissioner that PUHCA ought to go?
    Mr. Wood. Of course that may be Mr. Buffett's share, what 
he is talking about.
    Mr. Issa. It could be just his share. That is a good point.
    Mr. Wood. I think it is common knowledge.
    Mr. Issa. I apologize, it is his share, so I guess we are 
talking about probably double that if we include the rest of 
the investors.
    Mr. Wood. It is an attractive business, if the two big 
impediments which are cost recovery and siting issues can be 
dealt with. As a regulator of a State that has kind of gone 
through the full transition, when it was all fully regulated, 
the cost recovery and the siting issues were dealt with pretty 
cleanly, so there was investment in transmission, not 
necessarily the kind of transmission we need to facilitate a 
market but transmission got built.
    When it gets fully unregulated, you have clear mechanisms 
in place as, for instance in my home State of Texas where they 
have now transmission, is getting built there as well, 
windmills are getting interconnected, and new power plants. It 
is this awkward transition that we are in and I think PUHCA can 
address all three worlds.
    Allowing utilities to bulk up is not a bad thing, if we are 
talking about their wires business. Having one wires company 
over maybe four States like in Mr. Westmoreland's case, 
Southern Co. covers a lot of States as opposed to having four 
companies in one State, just natural intuition tells you 
economies of scale, those four companies could pack together 
and become one company and you could probably save some money 
and run a smooth operation That is not a bad thing and PUHCA 
doesn't necessarily prevent that but I think it does discourage 
that the way it is set up.
    So unleashing capital, yes, I think you would have also 
some foreign investment in the United States, which I am not 
concerned about, you would allow companies to buy across the 
country, which from a generation market power point of view, we 
actually like better than companies buying their next door 
neighbor, which is about the only thing you can merge with the 
way PUHCA is written.
    I think the capital is there, but I do think the bigger 
questions honestly could be addressed by cost recovery and 
siting. PUHCA is important. I don't know if it is the 
dispositive one.
    Mr. Issa. As a followup, wouldn't you say that we have 
hundreds of billions of dollars of foreign investment coming 
into this country from Canadian electricity, Canadian gas, 
Middle Eastern oil, and soon to be large amounts of LNG. In a 
sense, we have that investment and the choice is will it be 
dollars, or will it be an imbalance of payments that we have to 
make every day by buying their products?
    Mr. Wood. That is fair and I think certainly electricity is 
a little different for the reasons I think Mark Cooper laid 
out. It is going to be made in America because of the way you 
can't store it and you have to consume it right away, but the 
interconnectivity of us with Canada, as a good example, one Mr. 
Gent went through with the blackout, we do have a lot of 
investment across border and energy, particularly to the north 
going both ways. Now with LNG coming in, we will have it much 
more like it is with oil, stretched around the world. It is not 
necessarily a bad thing.
    I do think the balance of payments issue is of concern, but 
an interdependent economy does probably lead to a more peaceful 
world. I guess as one who plans to be here a few years longer, 
that is not a bad outcome.
    Mr. Issa. Very good.
    I will now turn to Mr. Westmoreland for his questions. You 
certainly will have any extensions of time you feel you need. I 
have taken them.
    Mr. Westmoreland. Thank you, Mr. Chairman. You have always 
been fair about that.
    I want to put it on a simpler level since we are talking 
about the reliability of electricity. Most people who go into a 
room and turn on their light may not know where this 
electricity comes from. They just know they have it. They know 
when they have a power outage. I think a lot of people assume 
when they have a power outage that it is the lack of 
electricity when it could be too much electricity or too much 
demand on the lines.
    As you mentioned, electricity cannot be stored. This is an 
energy that you cannot store, so it is a complicated situation 
I am sure when you look at how much power is being generated 
and how much of the 680,000 miles of transmission line can put 
into these substations that distributed 2.5 million miles of 
power lines. We were talking about building more generation 
plants.
    I know in my district we have built what they call peak 
plants. When the loads are there, they cut on and in the peak 
power use, they put them through there. It is almost as if we 
are taking congestion, and I will use traffic congestion as an 
example, and saying rather than building more roads, we are 
going to build more cars to help with the congestion.
    I think Mr. Owens said to let any generation go on 
anybody's transmission line, you can't use more power than what 
that transmission line will accept. It can only handle X amount 
of power. So I don't know that generating more and allowing 
somebody else to put on a commodity that cannot be used, unless 
it is used at that moment, it can't be stored anywhere.
    I guess my question is this, is there any technology, or 
whatever, that is going about? We talk about the siting 
problems. Nobody wants a transmission line in their backyard. 
Is there anything about these lines being able to carry more 
electricity on the same routes as they are now? I know it used 
to be when you had a telephone line put in your house, that is 
exactly what you got, one line.
    Now, with some of the cables and capabilities that we have, 
you can get an unlimited number of telephone lines in your 
house by just running one line. Is there any technology that we 
are looking at from that standpoint that may make our power 
situation more reliable?
    Mr. Wood. One that comes to mind is one I heard about 2 
weeks ago, XCEL Energy, which is the investor-owned utility 
that serves Minneapolis Twin Cities as well as other areas 
which put in a conductor, the same diameter conductor, the same 
diameter wire. It has the capability to carry over a 10 mile 
period a pretty tight right-of-way, right there in the Twin 
Cities and was able to double the capacity without a new right-
of-way. They didn't have to condemn any more land or have any 
more landowner hearings, or do any more environmental reviews. 
They were able to use a newer technology for metal alloy and 
actually use a line that was lighter and because it is lighter, 
it can carry more load and not require a bigger tower.
    Those types of things cost more, so each of these utilities 
is going to run through a cost benefit. Is it cheaper for me to 
buy more expensive wire than to go through another siting 
hearing?
    I saw the same thing in New England. They are using some 
newer technologies in some of the cities there and go 
underneath the city. We have seen that in Detroit as well. I 
think the cost benefit issues are very real to these utilities. 
It is true with public power as well. TVA and Bonneville have 
been very much leaders in exploring new technologies because 
they had some leeway from their boards and from their corporate 
structure to do that.
    I do think the laboratories, and I know Mike probably knows 
about them as well, are approving a lot of new technology. As 
with telecoms, the power industry will be transformed by 
technology I would predict. Right-of-ways is certainly the most 
easy point to think of it.
    Mr. Cooper. I would just offer the observation, Chairman 
Wood has sort of described of what is an incremental advance. I 
don't think we will see the exponential advances that you have 
mentioned in the digital products, telephone products. One of 
the fundamental differences is in contrast to electrons, which 
are these nasty little beings, bits are wonderfully, remarkably 
behaved. You can take a bit and tell it what to do and if you 
download something on your screen, you will see the packets 
arriving as it goes in pieces, so they are very different, the 
physics of the two things are different.
    So the incremental improvement is certainly there and ought 
to be encouraged. Things like distributed generation which 
saves on both generation and transmission are interesting and 
advances in technology, but I think it is incremental as 
opposed to the exponential hope and advances that we have had 
in information services.
    Mr. Westmoreland. Thank you.
    I guess the last question is for Mr. Wood and I will give 
you these extra questions since you are leaving in a couple 
weeks.
    You mentioned four companies becoming one company. Does 
that not take away a little of the competition? I know you said 
maybe they could do it for less money by having one company but 
what we found especially in Georgia is we have some EMCs and 
different power companies along with the Southern Co. and even 
though we have not deregulated, we do offer competition. I 
think if you use more than 900 kWs or something you have your 
choice of using any power company that will come in there. It 
has made it very competitive.
    I was talking to some folks that do business in Georgia and 
some of the other southeast States and they were talking about 
how much money they save by us doing that and not just having 
to buy from one power company. I guess my question is, do you 
think we need to federally deregulate power and what is the 
real reason, the guts of it? Why do you think it would be 
better?
    Mr. Wood. That has kind of been my career for the last 10 
years, which is allowing customers to choose. What we do at 
FERC is regulate the wholesale level between and among parties 
but I think I differ from what Mark Cooper laid out, in that I 
do think it is very important not just for ideological reasons 
but for the innovations in both technology and in customer 
service, the improvement in price, to allow customers to pick.
    A guy introduced me the other day who was chairman of the 
Maryland Commission. He said the best way to get to deregulated 
power in Maryland would be to put my poster board up and say, 
do you want this man setting your power rates or do you want to 
pick them yourself? That is a little flippant but the point is 
true. In so much else in our economy, customers have gotten a 
choice in items we never dreamed we would have choices in. I do 
look forward in a month to moving home to Houston and I have 21 
choices of electric power providers. Some are 100 percent 
renewable, some give you airline miles with it, one was at an 
18 percent discount to the going rate everybody else was 
paying. I like that, I like that when I shop for cars, but I do 
think that the State should make that choice.
    You asked me about Federal. I testified 9 years ago to Mr. 
Blyley's committee and I had to think long and hard about that, 
but I think each State is different. Some of the States, for 
example, that have low cost resources, some of the hydro and 
coal plants that have been depreciated, it is probably better 
to keep those in rate base because customers have paid those 
off and the price would actually go up in the competitive 
market.
    My four to one comment was really talking about the part 
that stays regulated. Wires are regulated yesterday, today and 
tomorrow. If you aggregate a bunch of generation in one area, 
then you have a problem because of what Congress said in 1992 
and everybody has agreed since that generation is competitive. 
So if you have one big competitor on the block, that does 
deprive customers of the choices that they should have. We have 
tools to deal with that.
    Mr. Westmoreland. So you are talking about just the grid?
    Mr. Wood. Yes. I think the aggregation of just the grid 
companies is a good idea. I hope it does accelerate. I do think 
PUHCA reform could allow that to happen and so long as either 
our commission or the Justice Department, Congress or somebody 
is keeping an eye on making sure that the generation stays 
diverse and competitive, then I think we have a win-win there.
    Mr. Westmoreland. Thank you.
    That is it, Mr. Chairman.
    Mr. Issa. Thank you.
    Since Chairman Wood did such a great job of mentioning his 
testimony 9 years ago, I will read my testimony of much less 
than that ago before the Energy and Commerce Committee when I 
said three markups ago of the energy bill, ``I would like to 
urge the body to think federally, to think long term. First of 
all, deregulation has not proven to be a failure because,'' and 
this was at the time the lights were going out in California, 
``because California has not deregulated. Second of all, 
deregulation of any free market system to work, it must tear 
down barriers to entry. California did not do so.''
    Mr. Chairman, like you, I believe in deregulation. I just 
was in Moscow last week and I have seen they haven't quite 
figured out that they can't run things from the top anymore, 
proven by the government taking over Yukos, in order to get 
back one of their significant commodities that happens to be 
producing today but much of its efficiency came from the time 
in which it was privatized. Now they want it back because oil 
is at $50 a barrel and at that point, any inefficient 
organization can make a profit. It really rings a bell, doesn't 
it, that anyone can make a profit if the price is high enough?
    Looking at the likelihood that California is going to be 
somewhere between just enough power and very tight and not 
quite enough power and the lights go out, more than 3 years 
after we had the lights go out or 4 or 5 years after we had the 
lights go out, and more than 3 years after an energy bill 
initially left this House, do you think that if we had passed 
the energy bill, we would have gone a long way toward not 
having that tight market this summer in California? Because I 
suspect that alone wouldn't have done it. What should 
California and States like it be addressing now if we are not 
going to have the lights go out? That goes more broadly to 
yourself but also to Edison and so on because you are part of 
the producers.
    Mr. Wood. Let me say I don't think the problem you have in 
southern California would have been addressed by the Federal 
bill, either the 2002 version or the one on deck now. The 
California issues have to be solved by California. The first 
one they have to resolve is do they want to go to a retail and 
bundled state, do they want to stay at the interim phase, or do 
they want to go all the way back?
    I think the debate is probably between go all the way to a 
competitive world and stay in the middle. Nobody will make 
investments unless they know we are talking about the 5 to 10 
year future. You can't ask utilities or even public power 
companies to live in that world. That is one of the problems, 
there is not a vision about where they are going longer term.
    Second, I think what is problematic in southern California 
is what is called resource adequacy. This is what we had our 
hearing about with the California PUC last week. That is a 
problem that is actually teed up. The Governor has gotten very 
involved, the bipartisan commission of the CPUC is very engaged 
on this issue and I think they will be resolving some core 
points on that by the end of the summer.
    By next summer, every utility and everybody serving power 
in California will be obligated to have 15 percent or X percent 
margin over and above their peak needs, and the PUC will be 
looking at making sure everybody has that and is enforcing 
that. That provides more security. That obligation does not 
exist under State law there today.
    I don't think that a Federal solution was even offered that 
would have fixed this. This is one the State knows it has to 
fix and to their credit, they are addressing it although I 
think a little more slowly than I would have liked.
    Mr. Issa. Being the sixth largest economy in the world, 
California tends to be closer to France than to a small State. 
France is fifth I understand but soon California will pass 
them.
    Following up on that, and my ranking member has arrived--
this is the real ranking member not each of the other ranking 
members I introduced earlier--I just want to ask one sort of 
leading question. Mr. Westmoreland talked about peaker plants 
and as some here know, I have a 500 megawatt peaker plant that 
is under proposal. It has gone through the FERC, it is going 
through the process, it has been funded. It is a pump storage 
station in my district and I am very excited about that because 
I think it brings that opportunity not to build a 500 megawatt 
plant somewhere else and yet still have 100 percent clean power 
when you need it.
    To that extent, particularly for those who look at the 
savings we have had in California, isn't it true that 
California to a certain extent has been its own worst enemy 
because of its past good behavior? We have a good system of 
shutting down or peak shaving due to various uses, we have done 
a good job of insulating, we have done a good job of updating 
our air conditioners, lights and so on.
    What we have done is all the easy fixes other than build 
power production and now aren't we in a position in which for 
all practical purposes, the things others will say what about 
this, ``what about this, you don't have to build,'' have 
already been done and in some ways we would have been better 
off if we had been building. Isn't that sort of the trend that 
public utilities often incentivize us to do things that reduce 
consumption or at least reduce peak and that is good except at 
some point you run out of that and then you have to build that 
capacity?
    Mr. Wood. Build now or build later. I think that 
conservation buys you some time but it doesn't avoid the need 
to do it at all. That California was able to wait until much 
later to build probably is a lot of money that stayed in their 
pocket, but it is not free. To do conservation, in which 
California certainly probably leads the world, costs money and 
I think the customers have paid for it.
    Mr. Issa. Mr. Gent.
    Mr. Gent. I can speak to that issue personally because I 
worked in Los Angeles in the 1960's and it was well known to 
every electric utility in the State that we could never build a 
plant in-State again. That was public policy. You may not be 
able to find that in the papers or in the books, but it was 
certainly known to all of us in the business.
    Mr. Issa. Mr. Owens.
    Mr. Owens. I think you have to have all of the above and I 
do agree with Chairman Wood, you can only count conservation 
once. I think unfortunately California historically had an 
attitude against building major new facilities.
    You made reference to peaking facilities. I think there is 
also a recognition that there is a need for base load 
facilities. All the things Dr. Cooper talked about increased 
electrification of our systems, and so forth, and the average 
consumer--even though we are conserving--is still using more 
electricity and they are using it longer hours of the day. 
Obviously that suggests to me that the infrastructure, 
particularly in California that exists, will not be sufficient 
to sustain the level of service customers are demanding.
    I think there is a need to recognize that more and new and 
efficient facilities need to be constructed. Unfortunately, 
California had an environment that was opposed to that.
    Mr. Issa. Thank you.
    Mr. Cooper. Let me offer the observation that is exactly 
one of the things that needs to be in the Federal legislation 
is the fact that California did do more than other States and 
their neighbors didn't and in the public good sense, if you go 
back and look at the press when the lights started going out, 
the first tune was oh, those Californians consumed too much 
energy for their swimming pool heaters and stuff and they were 
mostly solar installations and we quickly discovered that 
California was more efficient than other States.
    So precisely because this is a public good, reliability is 
a shared product, the neighboring States and the other States 
in their grid who haven't done what California has done need to 
do it. They need to stop being free riders, the classic 
economic question, and make their contribution to the public 
good. That observation is fundamentally correct. Californians 
have higher standards.
    Mr. Issa. I appreciate that. You are going to get a 
followup question before you can blink, because Ms. Diane 
Watson has joined us and she has not had a question yet and I 
know she has them for you.
    Ms. Watson. I would like to read my statement because it 
then places the position that I probably share with you as 
well.
    Mr. Issa. We have already put it in the record but you can 
read all or part of it as you see fit. That is what you get to 
be the ranking member for.
    Ms. Watson. Let me just say I thank Dr. Cooper for coming 
and I am sure he expressed the position coming from a consumer 
standpoint. I want to join the Chair of the committee and 
really comment that I think California has been shortchanged. 
You have to take into consideration, and I am sure you have, 
the size of our State and the climate of most of our State and 
the need for air conditioning and the need for warming, cooling 
and so on, all electrical matters and the fact that we over the 
years have set in place policies that would restrain the use, 
not necessarily rationing, but we have been very sensitive to 
the issue.
    Solar power has come into play in the last few decades and 
many people are turning toward it, but I don't think we were 
treated fairly by the FERC and the middleman. I do think that 
California is owed some credit and maybe some returns, and I 
can't appreciate enough the fact that you have presented this 
timely hearing publicly.
    If my statement is already in the record, I won't reiterate 
it but I just wanted to say that we have to look at ways of 
restructuring and ways of saving and ways of implementing our 
policy so it is serving the public good. I promise you I will 
not be late on the next hearing of this kind.
    Thank you very much, Mr. Chairman.
    Mr. Issa. Thank you and you can now go forward with your 
questioning. For everyone's understanding, to be honest you 
were doing your duty in the International Relations Committee 
while I was flicking back and forth and not quite doing my duty 
to either one, so I appreciate your efforts in IR.
    Ms. Watson. One of the questions I would like to raise, to 
whoever would like to respond, is--I think a couple of years 
ago--the Governor of the State of California said we would need 
19 new peaker plants. One was proposed in a neighborhood in 
which I live. I never saw so many homeowners at a meeting, 
1,800. That was a miracle. That peaker stack was going to go 
right up in the center of their residence and so they were very 
concerned.
    That one was taken off the list but the Governor at that 
time had a goal of 19. Can someone inform me if those 19 peaker 
plants and stations were completed?
    Mr. Wood. Ms. Watson, I work at the FERC. We do track that. 
I will get that information to you. I know all were not built, 
some were. I was actually at the dedication of one Friday in 
San Jose. It is more than a peaker though. I think it runs a 
bit more often than that but some progress has been made. 
Governor Davis did set some ambitious goals. He directed his 
agencies to process the permits and to his credit, they were. 
It is the investment climate: people were reluctant to come and 
invest there.
    As one who has dealt with siting, there is always another 
site that will work if you have to. That is probably why yours 
got taken off.
    Ms. Watson. There were a couple of Native American 
reservations that came forth with proposals, particularly in 
the Palm Springs area. Are any of you familiar with those 
proposals and what happened to them in the long run? I know I 
was getting telephone calls and trying to get some 
consideration for their proposals but something happened with 
the ownership of the land and so on. Can anyone shed any light 
on what happened with those proposals?
    It seemed like they had the capacity to take care of the 
peaker operations and so on. I just want to get a followup as 
to what has happened?
    Mr. Wood. I will get that information for you.
    Ms. Watson. Good. If you can give it to me in writing, I 
would be satisfied.
    Mr. Wood. I would be glad to.
    Mr. Owens. Congresswoman, I think you are raising a 
fundamental point. I don't know the details or the status of 
any of those facilities. A point we were trying to make and I 
think all of the witnesses sought to make, I think even Dr. 
Cooper sought to make, was the recognition that if we are 
expanding our infrastructure, siting is always going to be a 
big issue. Nobody wants a power plant built in their backyard, 
nobody wants a transmission system running through their 
neighborhood but the reality is if we are going to seek to 
provide the level of reliability and low cost electricity that 
our customers are demanding, then we do have to find a way to 
streamline and harmonize the siting laws and get public 
acceptance of these areas.
    Ms. Watson. This is the reason I was so interested, Mr. 
Owens, in the proposals that came from the Native American 
groups, because there is a lot of vacant land, desert land and 
so on out there. It seems to me there was a mechanism by which 
they could pump electricity into the urban areas in southern 
California. So I just need to have some followup.
    Mr. Cooper. Let me make two points to followup on that. I 
said this on the Senate side at one of the first forums they 
held. I think there are three critical elements and these are 
going to be tough decisions. The health and safety and land 
value impacts are real and this is a democracy, so we are going 
to have to deal with them.
    I think it is important to have a structure in 
decisionmaking that accomplishes three things. One, the people 
have to be convinced that you really need this facility, 
whether it is a transmission line or power plant. A lot of 
debate goes around whether we really need it. You have to have 
a framework that they come away with, understanding that we 
really need it. Second of all, they have to be convinced this 
is the best way to meet that need. Third, they have to be 
convinced they have the opportunity to represent their 
interests in the process. There will always be people who are 
disgruntled, but a fair and democratic process is critical to 
getting these things built.
    The more we work on designing that process so that they 
understand they need it; this is the best thing to do and they 
get to give their side about why they would be the most 
impacted and have others come forward and say if there is an 
economic benefit here, we will take the impact. That process is 
a part of the democracy and we have not spent a lot of time 
working on that process. We have spent more time fighting about 
jurisdiction than really figuring out whether it is the State 
or Federal level, how to accomplish those three things in the 
process.
    Ms. Watson. Mr. Chairman, if I can reclaim my time for a 
second, I would like you, Dr. Cooper, to put that in writing to 
me and I am asking the Chair to talk to the FERC. We might see 
a piece of Federal policy here. We ought to be doing this all 
over the country in grids. So if we can concentrate maybe in 
the southwestern areas of the United States, it might be very 
helpful as we try to solve this problem.
    Mr. Issa. You are absolutely right and even before you came 
in, it was one of the areas of great agreement between the FERC 
and Dr. Cooper that some of these things can very much be 
agreed on and we certainly understand the impediments. Nimbyism 
is not a debatable infection. It is certainly something we 
have.
    If it would be OK with Dr. Cooper, we can allow 2 weeks for 
any answers to any questions, any additional information you 
want to add. If you need more time, let us know, but without 
objection, we will hold the record open for 2 weeks from this 
date.
    Mr. Owens. Are we also invited to provide some additional 
input as well?
    Mr. Issa. Absolutely. Not only would we enjoy it, but so 
would the majority and minority staffs that made this all 
possible today, that did all the background work to have this 
be effective and who lobbied all of you to come here. We don't 
get the kind of great witnesses we had here today without their 
efforts coaxing and I suspect making promises they can't keep.
    Once again, I want to thank our witnesses and our staff for 
making this happen and with that, this hearing is adjourned.
    [Whereupon, at 2:52 p.m., the subcommittee was adjourned.]

                                 
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