[Senate Hearing 109-609]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-609
 
                  MOELLER AND WELLINGHOFF NOMINATIONS

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                   to

CONSIDER THE NOMINATIONS OF PHILIP D. MOELLER AND JON WELLINGHOFF TO BE 
          MEMBERS OF THE FEDERAL ENERGY REGULATORY COMMISSION

                               __________

                              JUNE 8, 2006


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


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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho                JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming                DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee           BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska               RON WYDEN, Oregon
RICHARD BURR, North Carolina         TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida                MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri            DIANNE FEINSTEIN, California
CONRAD BURNS, Montana                MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia               KEN SALAZAR, Colorado
GORDON SMITH, Oregon                 ROBERT MENENDEZ, New Jersey
JIM BUNNING, Kentucky
                     Bruce M. Evans, Staff Director
                   Judith K. Pensabene, Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel


                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     6
Cantwell, Hon. Maria, U.S. Senator from Washington...............     3
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............     1
Moeller, Philip D., Nominee to be a Member of the Federal Energy 
  Regulatory Commission..........................................     8
Murray, Hon. Patty, U.S. Senator from Washington.................     2
Reid, Hon. Harry, U.S. Senator from Nevada.......................     1
Smith, Hon. Gordon, U.S. Senator from Oregon.....................     6
Thomas, Hon. Craig, U.S. Senator from Wyoming....................     6
Wellinghoff, Jon, Nominee to be a Member of the Federal Energy 
  Regulatory Commission..........................................    10
Wyden, Hon. Ron, U.S. Senator from Oregon........................     6

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    27

                              Appendix II

Additional material submitted for the record.....................    57


                  MOELLER AND WELLINGHOFF NOMINATIONS

                              ----------                              


                         THURSDAY, JUNE 8, 2006

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

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

    The Chairman. The hearing will please come to order. Good 
morning everybody. We are here this morning to consider the 
following nominations: Philip Moeller to be a Commissioner of 
the Federal Energy Regulatory Commission, and Jon Wellinghoff 
to be a Commissioner of the Federal Energy Regulatory 
Commission.
    Before we begin, I understand that the distinguished 
Minority Leader, Senator Reid, and the two Senators from 
Washington, Senators Murray and Cantwell, would like to say a 
few words regarding these nominees. Senator Reid, if you would 
please begin, then we will follow with Senators Murray and 
Cantwell, in that order.

          STATEMENT OF HON. HARRY REID, U.S. SENATOR 
                          FROM NEVADA

    Senator Reid. Thank you very much, Mr. Chairman.
    The Chairman. You are welcome.
    Senator Reid. I appreciate you and Senator Bingaman getting 
us to this point. I know that we have had a lot of qualified, 
good commissioners on the Federal Energy Regulatory Commission, 
but there will never be anybody that is better qualified and a 
better person than Jon Wellinghoff. He will do as well as 
anyone has ever done. We know that there are a lot of problems 
facing our Nation; for example, the Enron trial underscored the 
need for a nominee of Jon's caliber and experience. He is a 
person with strong commitment to consumer protections and 
diversity of experience, not only with traditional sources of 
energy, but also with renewable sources.
    I think he is the right person at the right time. He has 
three decades of experience in energy markets, spanning both 
the public and private sectors. His public experience included 
not only time back here working in the Senate and the Federal 
Trade Commission, but extensive experience at State level, 
working to protect Nevada consumers. He has served as chief of 
the district attorney's consumer fraud division in Reno, 
counsel to the Nevada Public Utilities Commission and for 7 
years he was appointed by the Nevada Governor as consumer 
advocate.
    Jon saved Nevada utilities customers millions and millions 
of dollars. He helped write and enact Nevada's renewable energy 
requirements, which is one of the strongest of the Nation. He 
has extensive experience representing private clients, hotels, 
renewable energy providers and others, and his current role as 
a member of a prominent law firm in Las Vegas.
    Members of the committee, I certainly have to say that Jon 
is not only well-qualified personally, but he has a wonderful 
wife, a close personal friend to former Secretary of Labor, 
Secretary of State, and what ever else Secretary Shultz did. 
She was a presidential scholar working at the White House where 
she met Secretary Shultz. In addition to that, he has a 
brother-in-law, a prominent Las Vegas lawyer, one of the best-
known lawyers Nevada has ever had--Neal Galatz, who is in the 
audience--he and his lovely wife Helene are longtime friends of 
mine. I can say nothing more to you, Mr. Chairman and members 
of this committee, but that he will do a good job, he is not a 
partisan, he will do what is right for America. Thank you very 
much.
    The Chairman. Thank you very much, Senator Reid.
    Senator Reid. If I could be excused, may I do that, Mr. 
Chairman?
    The Chairman. You may be excused.
    Senator Murray.

         STATEMENT OF HON. PATTY MURRAY, U.S. SENATOR 
                        FROM WASHINGTON

    Senator Murray. Well, Mr. Chairman I am very pleased to be 
here this morning to help introduce Phil Moeller as a nominee 
to be a Commissioner of the Federal Energy Regulatory 
Commission, and I believe that Phil's wife, Elizabeth Vella 
Moeller, is in the audience. I want to welcome her and thank 
her for being here as well. In Washington State and in 
Washington, D.C., Phil Moeller has built a repetition as 
someone who knows energy issues, and as someone who people want 
to work with to solve problems.
    Personally, I am excited that Phil will bring a working 
knowledge of hydropower systems and the perspective of the 
Pacific Northwest to FERC. In the 10 years that he was a staff 
coordinator for Washington State Senate committee on energy, 
utilities, and telecommunications, Philip Moeller learned the 
value of hearing all sides of an issue, and built an 
understanding of how different policy issues are related.
    When Phil served on the staff of Senator Slade Gorton, he 
stood out as an example of what an excellent Hill staffer 
should be. He was willing and open to working with anyone on 
the issues. He operated in a bipartisan fashion while 
protecting the positions of his boss. He spoke clearly and 
intelligently on a wide variety of energy issues. That is why 
Phil was one of the widely respected voices on Capitol Hill and 
an assets for the Washington State delegation.
    Phil has traveled far from the days of growing up on a 
ranch in Washington State. He has dedicated his life to public 
service, and he offers a perspective and expertise that is 
badly needed on the Commission. Mr. Chairman, I am proud to 
join with Senator Cantwell today to support the nomination of 
Phil Mueller to the Federal Energy Regulatory Commission, and 
know that his voice and his experience will serve our country 
well.
    The Chairman. Thank you very much, Senator.
    Senator Cantwell.

        STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR 
                        FROM WASHINGTON

    Senator Cantwell. Thank you Mr. Chairman. It is great to be 
here with my colleague, Senator Murray, and I thank the 
chairman and the entire committee for holding this hearing 
today. And it is my pleasure to join with Senator Murray in 
introducing the nomination of Philip D. Moeller to the Federal 
Energy Regulatory Commission. It is hard to believe, but in 
Washington State the Federal Energy Regulatory Commission has 
actually become a household word. And so I actually want to 
congratulate President Bush on this appointment and nomination 
of Phil Moeller from the State of Washington.
    As Senator Murray points out, Phil Moeller was raised in 
the Northwest just outside of Spokane, Washington, I think in 
the Freeman school district, probably just a few miles from the 
State of Idaho, so all of eastern Washington is proud of Mr. 
Moeller. All of the State of Washington is proud of Mr. 
Moeller. And all of the Northwest is proud of Mr. Moeller.
    I say that because as we talk about energy policy here in 
the Northwest, and here in the U.S. Senate, I do not think we 
have ever had a nominee to the Federal Energy Regulatory 
Commission from the Northwest, so we think this is a very 
important issue for us, and for energy issues that need the 
emphasis of collaboration, consensus, and innovation.
    In the rich tradition carried on by my Northwest colleagues 
on this committee, Mr. Moeller I think represents the heritage 
and fine tradition of being a good practitioner of these 
Northwest traditions on the Commission. And I think that when 
we talk about the energy crisis of 2001, and the voices from 
the region, I think Mr. Moeller both represents good practical 
experience here in Washington, D.C., and outside private-sector 
experience as well.
    I think it is very important, as Senator Murray pointed 
out, that Mr. Moeller has a long and distinct career in public 
service. Before his recent work in private-sector, Mr. Moeller 
was a leader in Washington State energy policy with the 
Washington State legislature on energy and telecom issues for 
more than 10 years. He worked for the Senate energy 
telecommunications committee. At the time of his departure from 
the Legislature, began a wide involvement in a variety of 
policy issues here at the Federal level, working with Senator 
Slade Gorton on Federal legislation. I think Mr. Moeller's 
approach is one of problem solving and I think one of the main 
accomplishments that I think that Mr. Moeller in his tenure 
here in Washington, D.C. was successful in first passing 
legislation out of the Senate in 2000 on mandatory and 
enforceable electricity reliability standards, something that 
was then later passed by this committee again, and then adopted 
into Federal policy legislation in 2005.
    I want to note perhaps a little less known but important 
achievement made during his working career. He has been quite 
involved in groundbreaking policy as it relates to affordable 
broadband telecommunication policy to rural communities, using 
the Bonneville Power Administration backbone. Today, many local 
exchanges in rural areas are strapped and challenged, and I 
think this is another example of commonsense problem-solving 
and leadership on public policy issues that I think are the 
spirit of the execution and talent that Mr. Moeller brings to 
this position.
    In the Northwest, as I said, we understand that there are a 
variety of views, but we think that there is a great deal of 
sensibility that Mr. Moeller will bring to the Federal Energy 
Regulatory Commission, so I hope that this committee and the 
U.S. Senate will swiftly approve the nomination of Mr. Moeller 
to the Federal Energy Regulatory Commission, and I thank the 
Chairman.
    [The prepared statement of Senator Cantwell follows:]

Prepared Statement of Hon. Maria Cantwell, U.S. Senator From Washington

    Thank you Mr. Chairman and thank you committee colleagues. It is my 
pleasure to join my friend from the State of Washington, Senator Murray 
to introduce the nomination of Philip D. Moeller, to the Federal Energy 
Regulatory Commission (FERC). I want to congratulate President Bush on 
this appointment, and I am proud to join Senator Murray and many others 
from the State of Washington in support of Phil's nomination.
    As Senator Murray points out, Phil was raised in the Northwest, 
just outside of Spokane, Washington. Throughout his career in both 
public service and the private sector, he has earned an impeccable 
reputation, not just for his knowledge of complex energy policy 
issues--but also for his common-sense, proactive, balanced approach to 
problem-solving.
    These are the hallmarks of the way we consider energy policy in the 
Pacific Northwest. For decades, the Northwest approach to energy issues 
has emphasized collaboration, consensus and innovation.
    It is a rich tradition, carried on by my Northwest colleagues on 
this Committee today--and Phil is clearly a product of this heritage. 
If confirmed, we are confident he will be an able practitioner of this 
Northwest tradition when he reaches the Commission.
    Now, I think we have reached an interesting milestone with these 
nominations today. When I joined this Committee in 2001 in the midst of 
the Western energy crisis, several of us in the Northwest delegation 
got the idea that it was about time to add a voice from our region to 
the Commission, and Phil was at the top of our list.
    In fact, we've done a little research: since the DOE Organization 
Act of 1977 created the Federal Energy Regulatory Commission as it 
exists today, we have never had a Northwest FERC Commissioner.
    So, to put that in some historical perspective: 1977 also happens 
to be the Seattle Mariners' inaugural season, which brought Major 
League Baseball back to the Pacific Northwest.
    While we came close in 2001, the Mariners have yet to make it to 
the World Series. I know Phil's an avid baseball fan, so he probably 
looked at the standings himself this morning. This might not be the 
Mariners' year, so Phil, I hope it's not too much pressure to suggest 
that the Pacific Northwest is relying on you to break this other streak 
this year.
    On a more serious note, I mentioned at the outset that Phil has had 
a long and distinguished career in public service, before his more 
recent work in the private sector. Our paths initially crossed when 
Phil worked in the Washington State Legislature on energy and 
telecommunication issues. For almost ten years, he served as the staff 
coordinator for the state Senate's Energy and Telecommunications 
Committee.
    Nor is Phil a stranger to my colleagues on this Committee. After 
his time with the legislature, he served for four years as Senior 
Legislative Assistant to my predecessor Senator Slade Gorton.
    I noted at the outset Phil's proactive approach to problem-solving. 
One of the major accomplishments that can be traced back to his work 
with Senator Gorton is legislation to establish mandatory and 
enforceable electric reliability standards, which first passed the 
Senate in June 2000--that is, three years before the largest blackout 
in U.S. history struck the Northeast and Midwest in August 2003. When I 
got to the Senate, I was pleased to join that legislative effort and 
last year, with the leadership of the Chairman, Ranking Member, and my 
fellow committee members, the Energy Policy Act of 2005 included 
provisions based on that original bill.
    I want to note for the Committee one more, perhaps little-known, 
but vitally important, contribution Phil made during his career working 
for the people of Washington state. He was quite involved in 
groundbreaking efforts to make broadband available to a number of our 
most rural communities, using the Bonneville Power Administration's 
fiber optic backbone. Today, many local exchanges in rural areas of our 
state tap into this system, which is crucial for economic development.
    I raise this issue as another example of the outstanding 
leadership, vision, and spirit of innovation that Phil will bring with 
him to the Commission.
    In the Northwest, we understand the importance of affordable, 
reliable energy. It's is in our blood, because it shaped our history. 
It built our economy. And it is a key to our continuing prosperity. I 
know Phil shares this view, and will bring this sensibility to FERC--
along with a wealth of experience in the public and private sectors.
    So in closing, Mr. Chairman, I urge my colleagues to swiftly 
approve the nomination of Phil Moeller to serve at the Federal Energy 
Regulatory Commission.

    The Chairman. Thank you very much, Senator.
    With that, I welcome both of the nominees to the committee. 
Senators, you are excused if you care to be, and would the two 
nominees please assume their chairs.
    If either of you have family members present, please 
introduce them now if you would like.
    Mr. Moeller, would you start.
    Mr. Moeller. Thank you, Mr. Chairman. In addition to my 
wife, my sister, Anne Marie Moeller is here, my wife's sister, 
Tristan Vella is here, and I have a special friend, a college 
roommate, Jim Illich and his son Colter, who are here from 
Houston.
    The Chairman. Would they at least stand up so we can see 
they are. All right, thank you very much.
    Now, Mr. Wellinghoff, do you have anyone you would like to 
introduce?
    Mr. Wellinghoff. Yes, Mr. Chairman, and thank you. I have 
here what I consider to be one of the best attorneys in this 
country, and who also happens to be my brother-in-law, Mr. Neal 
Galatz.
    The Chairman. Very nice having him here, thank you very 
much. Now we are going to proceed with the hearing. Let me just 
begin by noting that the Energy Policy Act that we passed last 
year gave very broad authority to FERC, the Commission that you 
are going to join if you succeed in what you have been 
appointed for. Both in the areas of electricity and gas, great 
new authorities were given to the Commission. These include 
electric reliability provisions, removal of barriers to 
competition, and the streamlining permitting of new facilities. 
Thus far, FERC, through the superior leadership of Chairman 
Kelliher, has done a fantastic job of moving forward on the 
implementation of these provisions, but there is a lot of work 
to be done. And I am hoping that if confirmed, the two of you 
will use your expertise to assist the chairman in continuing to 
shape the energy policy as we envisioned it in the Energy 
Policy Act.
    This is a very big job. I want to thank both of you, each 
of you individually, for your willingness and devotion, and 
commitment to your country, that brings you before us today, 
having accepted the President's presentation to us for 
acceptance to these two respective Commission positions.
    Are there any Senators here on the dais who would like to 
make opening statements.
    Senator Bingaman.

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

    Senator Bingaman. Thank you, Mr. Chairman. I would like to 
welcome both nominees. I think the President has sent us two 
very well-qualified nominees for the Federal Energy Regulatory 
Commission and obviously, as you pointed out, there are some 
very new and important responsibilities at the Commission. It 
is a very important time in the history of the Commission, and 
the full panoply of issues that are pending before the 
Commission, so I look forward to supporting these nominees, and 
look forward to their statements. I will have a couple of 
questions once we get to that part of the hearing, thank you.
    The Chairman. Thank you very much, Senator.
    Any opening statement, Senator Thomas?

         STATEMENT OF HON. CRAIG THOMAS, U.S. SENATOR 
                          FROM WYOMING

    Senator Thomas. Just very briefly, Mr. Chairman. I too 
welcome the candidates and I am certainly pleased that we 
nominated well-qualified individuals for these important 
positions. Wyoming, of course as you know, produces a good deal 
of energy, and the infrastructure to get that to the market is 
one of the key issues before us. And so we are very hopeful 
that we can continue to work on that, and FERC has done a good 
job of adhering to our congressional intent in this bill, I 
believe, and we look forward to working with you. Thank you for 
being here.
    The Chairman. Senator Wyden.

           STATEMENT OF HON. RON WYDEN, U.S. SENATOR 
                          FROM OREGON

    Senator Wyden. Very briefly as well, Mr. Chairman. I think 
we have two good people. I am going to be supporting them. I do 
have some questions to ask. I think business as usual at FERC 
is unacceptable. I think it is hurting the consumer in a number 
of areas. That is what I will be asking about, and I look 
forward to supporting both of the nominees.
    The Chairman. Good.
    Senator Smith.

         STATEMENT OF HON. GORDON SMITH, U.S. SENATOR 
                          FROM OREGON

    Senator Smith. Thank you, Mr. Chairman. I join all of my 
colleagues in expressing admiration for these two nominees. 
They are excellent, and I intend to support them.
    I want to note that Mr. Moeller is a native of the 
Northwest, and a neighbor to Oregon. I am particularly pleased 
with what he will obviously bring to FERC, which is an 
understanding of hydropower and the unique challenges that we 
have in generation and transmission of electricity. These are 
challenges that frankly have not been very well reflected in 
FERC rulemaking in the past, and I hope that he will be able to 
add some understanding to that. Proposals like standard market 
design and others have caused great angst in the Pacific 
Northwest.
    Mr. Wellinghoff obviously has a great background in 
consumer protection, and I think Nevada, like the rest of the 
West, is still recovering from the west coast energy crisis, 
and I believe it will be very important for you, sir, to focus 
on the criteria by which FERC will renew and improve BPA rates.
    The administration in its 2000 budget proposal was going to 
require BPA to prepay debt, which would have a very likely 
consequence of keeping market rates higher in the Pacific 
Northwest than they need to be, and therefore harmful to 
consumers. So I believe it is very important that FERC ensures 
that BPA power rates are not raised arbitrarily from such a 
proposal, and I hope that you will be sensitive to that. With 
that I look forward to supporting your nominations, and I will 
have some questions for the record.
    [The prepared statement of Senator Smith follows:]

   Prepared Statement of Hon. Gordon Smith, U.S. Senator From Oregon

    Mr. Chairman, I appreciate your willingness to hold this hearing on 
the nominations of Philip Moeller and Jon Wellinghoff to be 
Commissioners of the Federal Energy Regulatory Commission.
    I intend to support both of these nominees, and believe they are 
highly qualified to serve on FERC. Mr. Moeller is a native of the State 
of Washington, and worked for several years on issues related to 
northwest utilities and the Bonneville Power Administration. I think 
that background will be helpful during his tenure on FERC. The Pacific 
Northwest is the only region of the country where hydroelectricity is 
the predominant resource for the generation of electricity. This 
provides our region with unique challenges for both the generation and 
transmission of electricity.
    These challenges have not always been reflected in draft FERC 
rulemakings, such as the Standard Market Design proposal. I'm pleased 
that the current FERC leadership understands the unique nature of the 
various regional electricity markets, and appears ready to allow for 
regional flexibility in transmission organizations. I am confident that 
Mr. Moeller will embrace this approach, and will add to FERC's 
understanding of electricity issues facing the Pacific Northwest.
    Mr. Wellinghoff, from your background, it would appear that you 
bring a strong consumer protection background and a long-term knowledge 
of utilities in the rapidly growing southwestern United States. For 
those of us whose constituents are still paying for the West Coast 
energy crisis of 2000-2001, we are seeking a strong FERC to ensure just 
and reasonable rates for consumers.
    One issue I will follow closely in the coming years is the criteria 
by which FERC will review and approve BPA's rates. There is a long-
standing precedent, in accordance with the Transmission Act of 1974, 
that requires the BPA Administrator to consider all revenues in the 
aggregate when setting rates. In its fiscal year 2007 budget proposal, 
the Administration has proposed to earmark BPA's secondary revenues in 
excess of $500 million annually in order to pre-pay BPA debt. This 
would require BPA to raise firm power rates in order to do so. We have 
been able to stop this proposal for this fiscal year, but it is 
important that FERC ensures that BPA power rates are not raised 
arbitrarily to reduce the federal deficit.
    I look forward to hearing from nominees, and will have a few 
questions for the record for each of you.

    The Chairman. Thank you, Senator.
    Now, the rules of the committee which apply to all nominees 
require that you be sworn in, in connection with your 
testimony. Would you please raise your right hands.
    [Witnesses sworn.]
    The Chairman. Please be seated. Before you begin your 
statements I will ask three questions addressed to each nominee 
before this committee. Each of you please respond separately to 
each question.
    Would you be available to appear before this committee and 
congressional committees to request departmental positions, and 
respond to issues of concern to the Congress?
    Mr. Moeller. I will.
    Mr. Wellinghoff. Mr. Chairman, I will.
    The Chairman. Are you aware of any personal holdings, 
investments, or interests that could constitute a conflict or 
create the appearance of such a conflict should you be 
confirmed and assume the office to which you have been 
nominated by the President? Each of you will answer that, 
please.
    Mr. Moeller. My investments, personal holdings and other 
interests have been reviewed by both myself and the appropriate 
ethics counselors within the Federal Government. I have taken 
appropriate action to avoid any conflicts of interest. There 
are no conflicts of interest or other appearances thereof, to 
my knowledge.
    Mr. Wellinghoff. My investments, personal holdings and 
other interests been reviewed by both myself and the 
appropriate ethics counselors within the Federal Government. I 
have taken appropriate action to avoid any conflicts of 
interest. There are no conflicts of interest or other 
appearances thereof, to my knowledge.
    The Chairman. I thank you very much. Now we will move to 
your statements. Your statement will be made part of the record 
as you read. We will start now--oh, I had one third question 
about trusts that I forgot. Would you answer it now? Are you 
involved with, or do you have any assets held in blind trusts? 
Mr. Moeller, you first.
    Mr. Moeller. No.
    Mr. Wellinghoff. No, I do not.
    The Chairman. All right. Now we will proceed. I encourage 
you to summarize your statements. They will be made part of the 
record in their entirety.
    Please proceed, Mr. Moeller.

 TESTIMONY OF PHILIP D. MOELLER, NOMINEE TO BE A MEMBER OF THE 
              FEDERAL ENERGY REGULATORY COMMISSION

    Mr. Moeller. Mr. Chairman, Senator Bingaman, members of the 
committee, it is a great honor to be before you today to be 
considered to be a member of the Federal Energy Regulatory 
Commission. I express thanks to President Bush for nominating 
me to this position. Thank you for holding this hearing, and I 
appreciate the compliments from Senators Murray and Cantwell, 
as well.
    I've been involved in energy policy for over 20 years. Most 
of that, in my early career, was in Olympia, Washington, as the 
head of the State senate energy and telecommunications 
committee. There I saw firsthand the effects of Federal 
decisions such as those from FERC to the State, both in good 
ways and in challenging ways. First, really, in the 1980's with 
the restructuring of the natural gas industry, and then in the 
1990's as the competitive wholesale market in transmission 
started to emerge.
    I came to work here for the U.S. Senate for Senator Slade 
Gorton in 1997. My primary responsibility was to work on a wide 
array of energy policies that of course included not just 
national policies, but a real focus on the Pacific Northwest 
with its hydropower, its Bonneville issues, and a variety of 
complicated matters that made life always very interesting.
    We saw the Western energy crisis develop before our eyes in 
the spring of 2000, May and June of 2000, and it was a 
frustrating experience to see it unfold before us and to see 
the devastating impacts that it had on the entire West, 
particularly on the citizens of California and the Pacific 
Northwest, as prices rose. I pledge to you that that will 
always be a memory that will stay with me and will guide me in 
terms of consumer protection, if I am confirmed to the FERC.
    After leaving public service I worked in the private sector 
both for a generating company and for a utility. This has given 
me a broader range of experience, particularly as it pertains 
to Midwest issues in the energy markets.
    Thanks in large part to the efforts of Chairman Domenici, 
Senator Bingaman, and the rest of the members this committee, 
the provisions of EPAct 2005 are now law, and a lot of those 
things that deal with both the supply side and the demand side 
of energy will be positive for this Nation. You also gave FERC 
a lot of things to do. Part of the provisions that you gave to 
FERC include more consumer protection and an effort to make 
markets more transparent, and to get the kind of fines and 
penalties that FERC needs to hopefully prevent any kind of 
market manipulation in the future. FERC has had a lot of these 
things to do. As far as I know, Chairman Kelliher has done a 
great job along with the rest of the staff and Commissioners in 
making sure that they have been done on time and under budget, 
and if I am confirmed, I will work to make sure that that 
continues.
    It's also essential that the FERC and Congress work very 
closely together and maintain strong lines of communication. If 
confirmed by the Senate, I think my experience working for a 
member of this committee will enhance this relationship at a 
critical time of energy policy implementation. It would be an 
honor and a privilege to return to public service at the FERC, 
and I appreciate the chance to testify before you and look 
forward to answering any of your questions.
    [The prepared statement of Mr. Moeller follows:]

Prepared Statement of Philip D. Moeller, Nominee to be a Member of the 
                  Federal Energy Regulatory Commission

    Chairman Domenici, Senator Bingaman and members of the committee, 
it is a great honor to be before you today as a nominee to the Federal 
Energy Regulatory Commission (FERC). I express thanks to President Bush 
for nominating me to this position, and I thank you for holding this 
hearing.
    I have been involved in energy policy development for over 20 
years. For much of my early career, I was the staff director for the 
Washington State Senate Energy and Telecommunications Committee in 
Olympia, where I saw firsthand both the positive and challenging 
effects of decisions by FERC on my state of Washington and the Pacific 
Northwest region--most notably with the restructuring of the natural 
gas industry in the 1980s and the development of more competitive 
interstate wholesale electricity markets in the 1990s.
    I came to work here in the United States Senate for Senator Slade 
Gorton of Washington State in 1997, where my primary responsibility was 
to work on a wide range of energy policy legislation. In addition to 
focusing on regional energy issues and hydropower policy, I spent a 
great deal of time developing electric reliability legislation. As a 
Senate office, we saw the Western electricity crisis develop in the 
early summer of 2000 and witnessed the devastating impacts that high 
prices had on the economy of the state and region, and on the lives of 
the consumers and citizens of our state and the entire West. The 
memories of that experience will always motivate me to work at assuring 
that energy consumers are protected when energy policy is actually 
implemented in the marketplace.
    After leaving public service I have worked in the private sector on 
energy policy, both with a generating company and a utility. This 
experience has broadened my perspective, especially regarding energy 
issues that are crucial to the Midwest states.
    Thanks in large part to the efforts of Chairman Domenici, Senator 
Bingaman and this entire committee, last year's Energy Policy Act is 
now law. In addition to the law's wide range of policies promoting both 
the supply side and the demand side of energy, EPACT 2005 also aided 
energy consumers through new consumer protection mechanisms and 
modernized authority for FERC to impose fines and penalties intended to 
prevent market manipulation.
    The law gave FERC a long list of responsibilities and tasks to 
accomplish. Chairman Kelliher and the rest of the Commission have 
worked diligently to assure that, to date, all of the tasks assigned to 
FERC have been completed on time and under budget. Many of the tasks 
assigned to FERC remain to be addressed, and if confirmed I would work 
to assure that this trend continues. I would also closely follow 
whether the provisions of EPACT 2005 are working to meet the intent of 
Congress.
    It is essential that FERC and Congress work closely together and 
maintain strong lines of communication. If confirmed by the Senate, I 
believe my experience working for a member of this committee will 
enhance this relationship at a critical time of energy policy 
implementation. It would be an honor and a privilege to return to 
public service at the FERC. I appreciate the chance to testify before 
you today and look forward to answering your questions.

    The Chairman. Thank you very much.
    Now we will have your statement, please, Mr. Wellinghoff.

  TESTIMONY OF JON WELLINGHOFF, NOMINEE TO BE A MEMBER OF THE 
              FEDERAL ENERGY REGULATORY COMMISSION

    Mr. Wellinghoff. Thank you, Mr. Chairman. Chairman 
Domenici, Senator Bingaman, and distinguished members of the 
committee, I'm honored to be considered today by you for 
confirmation of my nomination to the Federal Energy Regulatory 
Commission. I thank President Bush for my nomination, and I'm 
also grateful for the trust and confidence placed in me by 
Senator Reid, who recommended me for this position. Energy and 
regulatory law and policy have been the primary focus of my 
career for more than 30 years. I have worked in both the public 
and private sectors, and I have supported business and public 
interests advocating numerous energy issues over that time.
    When I first got out of law school, my first job was with 
the Nevada Public Utilities Commission. This was at the time of 
the Arab oil embargo. I was there for approximately 2 years, 
and in that 2 years I saw more rate increases than had been 
seen in the previous 10 years. So I really definitely feel that 
I earned my Ph.D. in utility regulation in that job. After 
working for the Nevada Commission in the early 1980's, I held a 
number of positions in the public sector. And then I worked 
with the Nevada attorney general to create the first consumer 
advocate office. I was appointed by the attorney general to 
serve as Nevada's first consumer advocate, and in that office I 
represented the interests of Nevada's utility ratepayers before 
the Nevada commission, before the FERC, and other regulatory 
agencies. In that position I managed and developed strategy for 
multiple electric and natural gas proceedings in Nevada. I also 
developed legislative policy and instituted a number of energy 
policy initiatives during my two terms. The most important 
initiative was drafting the first comprehensive integrated 
resource planning act for Nevada's electric utilities.
    In the 18 years since leaving the consumer advocate office, 
I've been primarily in private practice, with a short stint 
back at the Public Utilities Commission as a staff counsel to 
the commission, and been working both as attorney and an energy 
consultant. I've testified or consulted in numerous 
jurisdictions including Colorado, New Mexico, Arizona, Texas, 
Washington, Hawaii, Oregon, Nevada, and California, and on 
various energy issues including integrated resource planning, 
energy efficiency demand response, natural gas decoupling, and 
others.
    I have represented numerous clients in energy related 
matters, including utility rate proceedings, integrated 
resource planning cases, legislative proceedings, and power 
contract negotiations.
    My clients included the Department of Energy, the 
Department of Defense, the Department of the Navy, Sandia 
National Labs, major international corporations, utilities, 
manufacturers of energy efficiency equipment, and renewable 
resource developers.
    I also, like Mr. Moeller, experienced firsthand the 
challenges of electric market restructuring in representing 
clients after the aftermath of the electric market failures in 
the West during the 1999 to 2002 time frame. The FERC is an 
important independent regulatory agency with an essential 
mission. The Congress has placed even greater responsibility on 
the agency with the enhancement to FERC's powers in EPAct 2005.
    Resource adequacy, electric system reliability, demand 
response and transmission planning are all integral to the 
integrated resource planning process that I helped initiate in 
Nevada in the early 1980's, and in numerous other States where 
I acted as a consultant. These are also issues for which the 
FERC has been given a the level of responsibility under the 
energy act of 2005.
    If confirmed, I will transfer my experience I've gained in 
these areas working at the State level to my work at FERC. I 
also plan to bring with me if confirmed my 30 years of 
experience in regulation of electric and gas utilities and my 
general philosophy of energy regulation, which is to keep it 
efficient, effective, and responsive to the needs of consumers.
    In closing, I want to acknowledge and thank my wife Karen 
Galatz, who has been with me for over two thirds of my energy 
law career. I could have accomplished little without her by my 
side. She unfortunately could not be here today. She is with 
our two sons who are taking their junior high and high school 
exams in Nevada. I appreciate the opportunity to be here to 
testify before you. I am honored to be considered, and I am 
happy to answer any questions that you may have. Thank you, Mr. 
Chairman.
    [The prepared statement of Mr. Wellinghoff follows:]

 Prepared Statement of Jon Wellinghoff, Nominee to be a Member of the 
                  Federal Energy Regulatory Commission

    Chairman Domenici, Senator Bingaman and distinguished members of 
the Committee, I am honored to be considered today by you for 
confirmation of my nomination to the Federal Energy Regulatory 
Commission (FERC). I thank President Bush for nominating me. I am also 
grateful for the trust and confidence expressed by Senator Reid who 
recommended me for this position.
    Energy and regulatory law and policy have been the primary focus of 
my career for more than thirty years. I have worked both in the public 
and private sectors. I have represented both consumers and utilities. I 
have supported business and public interests advocating energy 
efficiency, renewable energy, retail competition, and clean coal 
technologies.
    Like Chairman Domenici, I first worked as a junior high school math 
teacher. Like Chairman Domenici, I too quickly turned to law. After law 
school I became a legal assistant to Evo Granata, Commissioner of the 
Nevada Public Utilities Commission (NPUC). This was the time of the 
Arab oil embargo, and utility rates were rising faster than ever 
before. In my two years at the Nevada Commission I saw more utility 
rate cases compressed into that short period of time than in the 
preceding ten years. I definitely felt as if I had earned my ``Ph.D.'' 
in utility regulation in that job under the expert tutelage of 
Commissioner Granata and Chairman Noel Clark.
    After working for the Nevada Commission, I held a number of 
positions in the public sector including Deputy District Attorney in 
Nevada and staff attorney for the U.S. Senate Commerce Committee and 
the Federal Trade Commission in Washington, D.C. All of these positions 
encompassed work on energy-related matters.
    Returning to Nevada, I worked with the then Attorney General, later 
Governor and U.S. Senator, Richard Bryan, and a private citizen, 
Randolph Townsend, who would later become a prominent State Senator, to 
create the first Consumer Advocate in Nevada for Customers of Public 
Utilities. I was appointed by Attorney General Bryan to serve as 
Nevada's first Consumer Advocate. In that office, I represented the 
interests of Nevada's utility ratepayers before the Nevada Commission 
and the FERC. I was Nevada's Consumer Advocate for seven years, serving 
term appointments under both Democratic and Republican Attorneys 
General. I managed and developed strategy for multiple electric and 
natural gas proceedings in Nevada. I also developed legislative policy 
and instituted a number of energy policy initiatives during my two 
terms. The most important initiative was drafting the first 
comprehensive integrated resource planning (IRP) act for Nevada's 
electric utilities. Nevada's act was passed in 1983 and became a model 
for similar acts that were subsequently passed in 17 other states. 
After passage of the act, I participated in the IRP rulemaking process 
before the NPUC and managed numerous related cases.
    In the eighteen years since, with the exception of a short return 
to the public sector as Staff Counsel to the Nevada Commission, I have 
been in private practice as both an attorney and an energy consultant. 
I have testified and/or consulted in various states including Colorado, 
New Mexico, Arizona, Texas, Washington, Hawaii, Oregon, Nevada, and 
California on the IRP process, energy efficiency, demand response, 
natural gas decoupling, and other energy issues.
    For the past six years I have been in private practice with the law 
firm of Beckley Singleton in Las Vegas and Reno, Nevada. I have been a 
Shareholder in the firm for the past four years. During my time at 
Beckley, I have represented numerous clients in energy-related matters 
including utility rate proceedings, IRP cases, legislative proceedings, 
and power contract negotiations. My clients have included the 
Department of Energy, DOD/Department of the Navy, Sandia Labs, major 
international corporations, utilities, manufacturers of energy 
efficiency equipment, and renewable resource developers. During this 
period, one of the legislative energy policy initiatives I proposed on 
behalf of my clients was Nevada's Renewable Portfolio Standard (RPS). 
That RPS legislation originally created a market for the sale of 15% 
renewable energy to Nevada's electric utilities as enacted in 2001 and 
was then amended by a proposal I submitted to the legislature in 2005 
to a 20% RPS market. Since the first enactment of an RPS in Nevada in 
2001, I have consulted on RPS proposals in California, Oregon, Idaho, 
New Mexico, Arizona, and Colorado. In addition to my policy work on RPS 
legislation, I also experienced first hand the challenges of electric 
market restructuring in representing clients in the aftermath of market 
failures in the West during the 1999-2002 timeframe.
    The FERC is an important independent regulatory agency with an 
essential mission. The Congress has placed even greater responsibility 
on the agency with the enhancements to FERC's powers in the Energy 
Policy Act of 2005. Resource adequacy, electric system reliability, 
demand response, and transmission planning are all integral to the IRP 
process that I helped initiate in Nevada and numerous other states. 
These are also issues for which FERC has been given a level of 
responsibility under the Energy Policy Act of 2005. If confirmed, I 
hope to transfer the experience I have gained in these areas working at 
a state level to my work at FERC. I also hope to bring with me, if 
confirmed, my thirty years of experience in the regulation of electric 
and gas utilities and my general philosophy of energy regulation which 
is to keep it efficient, effective, and responsive to the needs of the 
energy consumer.
    In closing, I want to acknowledge and thank my wife, Karen Galatz, 
who has been with me through over two thirds of my career in energy 
law. I could have accomplished little without her by my side. She could 
not be here today at my confirmation hearing as she had to be with our 
two sons who are taking their junior high and high school final exams 
in Nevada.
    I appreciate the opportunity to testify before you today and am 
happy to answer any questions you may have.

    The Chairman. Thank you very much. Thanks to both of you. I 
have been told there will be a vote around 10:45, just for each 
one's information.
    I have a lead-off question. If I have any further ones 
after the vote comes, I will submit them to you if I do not get 
them in. My first one has to do with the energy reliability 
organization, ERO. The new law directed FERC to ensure the 
reliability and security of the Nations bulk power system. 
Pursuant to the energy bill, a single electric reliability 
organization, the ERO, will have the authority to establish and 
enforce mandatory reliability standards. We are now in the 
process, nationally, of transitioning from a system of 
voluntary compliance to this new mandatory regime. In order to 
avoid a one-size-fits-all approach, Congress carefully provided 
a role for these regional reliability organizations, as it 
called them. The national ERO, which set reliability standards, 
must--and these are words from the act, quote, ``Arebuttably 
presume that a standard proposed by a regional entity is 
valid.`` As a commissioner, how will you address the issue of 
regional flexibility? How will this fit into the ERO's national 
standard, and their enforceability? We will start with you, Mr. 
Moeller.
    Mr. Moeller. Thank you, Mr. Chairman. As a commissioner of 
course I would follow the law and give deference as the law 
states to different regions. Different regions operate 
differently in this country. The transmission system was not 
set up as a national grid, even though in many ways it has 
evolved into something close to that. But particularly in the 
West, generation sources are often farther from the load 
centers, and they have a very legitimate concern about having 
their own regional differences. This is something I've heard 
about for years, so I would plan to pay a lot of attention to 
it, follow the law, be deferential, but ultimately we have to 
make sure that we have a system that works coupled with 
enforceability and reliability that works for the whole Nation, 
but with a deference to the regions.
    The Chairman. Thank you very much. Mr. Wellinghoff.
    Mr. Wellinghoff. Mr. Chairman, yes, I would generally agree 
with Mr. Moeller's response, and let me add to it that the 
contracts between the ERO and the regional reliability entities 
such as the WECC in the West are going to be essential, and I 
think this rebuttable presumption that you mentioned is 
essential as well, to ensure that entities like the WECC can in 
fact run their region in a way to operate most efficiently and 
best for that particular region. I will have to look with 
respect to every region, and I think it will be essential to 
have stakeholder meetings to ensure that those contracts 
reflect what the regions need, to make sure there is 
reliability there.
    The Chairman. Thank you very much. With that, I will yield 
to you, Senator Bingaman.
    Senator Bingaman. Thank you very much, Mr. Chairman.
    Let me ask about one of the sections in the Energy Act and 
the way the Commission is proposing to implement it. This is 
section 203. You know, one of the most important things we did 
in the energy bill last year was to repeal the Public Utility 
Holding Company Act. As we did that, we also gave FERC 
additional responsibilities to approve mergers and 
acquisitions. A specific part of what we tasked FERC with doing 
was to make a determination that the proposed merger or 
acquisition would not result in cost-subsidization of a non-
utility associate company, or the pledge or encumbrance of 
utility assets for the benefit of an associate company.
    This was of course in response to some abuses that had come 
to light, in connection with inter-affiliate relationships. A 
couple of utilities come to mind, Allegheny Electric and 
WestStar were two examples.
    My thought at the time we did that provision of energy 
bill, was that in order for the Commission to implement it, the 
Commission would probably need to, by rule, impose some strict 
structural rules, that controlled any inter-affiliate 
transactions and prohibited those, except in rare 
circumstances.
    The truth is the Commission's proposed rulemaking does not 
do that. In its rulemaking implementing this subsection, it 
requires something very different. It says that the applicant 
must provide an explanation with appropriate evidentiary 
support of how it is providing assurance that the proposed 
transaction will not result in cross-subsidization. It sounds 
to me as though it is going to be on a case-by-case basis, much 
more than adhering to structural rules for ensuring that this 
cross-subsidization not occur.
    I would just be interested in whether either of you have 
thoughts as to how this is going to work, whether this is going 
to be adequate to protect consumers, whether just taking these 
cases one at a time is really an adequate way to proceed to 
deal with this possible problem. Mr. Moeller, do you have a 
thought?
    Mr. Moeller. Thank you, Senator Bingaman. I'll be a little 
careful since it's a pending matter in my comments. But first 
of all, thanks to the committee and the Congress for giving 
FERC additional authority in this matter, through last year's 
bill. Cross-subsidization is something that shouldn't just be 
followed on a snapshot basis, for instance, in the case of a 
merger or whatever, but it's something that the Commission 
should keep their eye on constantly. That would be my 
philosophy. I will study the merits of the proposal and get 
back to you in writing, as appropriate, but it's a concept that 
should be continuously observed and followed to make sure that 
consumers are protected.
    Senator Bingaman. Mr. Wellinghoff, do you have any thoughts 
on this?
    Mr. Wellinghoff. Yes I do, Senator Bingaman. Thank you. 
Actually, I have more than thoughts, I have some experience in 
the area. When I was consumer advocate, it was an issue 
actually with telephone companies that were regulated in 
Nevada, ones that were subsidiaries of major national 
companies.
    The cross-subsidization between the Nevada company and the 
national company is a very difficult thing to deal with. Given 
that it is a pending rulemaking for the Commission, I don't 
want to comment specifically on the rule, but I will comment 
generically on my view and philosophy of the cross-
subsidization issue. I think you may need more than strict 
structural rules. In fact, you need the ability to fully audit, 
and you have to have the ability to go in and determine where 
the money is going, and I need to ensure that FERC does have 
the authority. I haven't looked into this in detail, but I 
assure you that I will if confirmed. Thank you.
    Senator Bingaman. Thank you. Let me ask one more question. 
This relates to this so-called Mobile-Sierra doctrine. It is an 
issue that is complex, and has sort of gotten us wrapped around 
the axle here in Congress, and in the administration as well, 
in my view. As I understand, the Federal Power Act, it 
essentially says that the Commission shall assure that the 
rates that are charged are just and reasonable.
    Under this proposed rule, again, talking about the proposed 
rule that FERC has come out with, they have proposed to revise 
the standard of review for modifications of jurisdictional 
agreements. Essentially, what they have said that they are 
doing there is to codify the Mobile Sierra doctrine. I am not 
sure that that is what in fact is happening. The Commission 
rule would provide that in cases where the contracting parties 
did not explicitly agree to allow contract revisions, to 
provide for changes in rates, or terms, or conditions of 
service, then the standard of review is no longer whether those 
rates are just and reasonable, but there is some other standard 
which is a public-interest standard.
    That concerns me somewhat. It seems to me that the effect 
of what is going here is that FERC is in some ways delegating 
to the contracting parties the responsibility for determining 
whether rates are just and reasonable, and in some ways 
stepping back and saying that it is no longer their 
responsibility under the Federal Power Act, which is not my 
understanding of the law. I do not know if that is something 
you could comment on, if it is something you have looked into, 
but it is an issue I am sure you will hear a lot about in your 
new position, and let me just give you a chance to give any 
comment that you want to on that. Mr. Moeller?
    Mr. Moeller. Thank you, Senator. I'll be real careful, 
because it is a pending matter. It seems to me you have a 
couple things going on from a public policy perspective. You 
want to assure that contracts remain--you want to encourage 
contracts to be executed and respected. On the other hand, you 
have the public interest involved, and those potentially can 
collide. But FERC needs to maintain the ability to revisit 
contracts in the event that they are not just and reasonable.
    Senator Bingaman. Very good. Mr. Wellinghoff, did you have 
any thoughts on this?
    Mr. Wellinghoff. Yes, Senator Bingaman. I think--again, I 
don't want to comment on the pending rule before the Commission 
because I may have to vote on it, but as a general matter, the 
law as you stated it says that rates should be ``just and 
reasonable.'' That is fairly clear. The Mobile-Sierra doctrine 
is a doctrine as I understand that--I read the case--applies to 
a particular set of facts, a particular situation. So I think 
what needs to be followed is the overall law; rates should be 
just and reasonable.
    Senator Bingaman. Well, thank you both for those responses, 
thank you Mr. Chairman.
    The Chairman. Senator Thomas.
    Senator Thomas. Thank you.
    Gentlemen, unfortunately in some parts of the country, the 
necessary levels of partnership between the Commission and the 
States is lacking. FERC has the authority to convene joint 
boards with State regulators, but they do not do that. How do 
you build a partnership with the States to ensure a reliable 
power grid? How can States and State entities have better 
interaction and contact with the Commission?
    Mr. Moeller. Senator Thomas, the joint boards are a good 
idea. I think particularly in electricity issues, it is 
essential to keep the lines of communication open between FERC 
and the States, particularly State utility commissions. There 
are a variety of issues where you just have to have a good 
working relationship to move forward, because States have a 
duty to their citizens, but in many cases this is interstate 
commerce, it is involved with putting electrons across State 
lines. So maintaining and enhancing those relations would be a 
priority of mine, if confirmed.
    Mr. Wellinghoff. Senator Thomas, thank you. I would only 
add to that that I think joint boards are an excellent idea, 
and not only that but the participation I have had, for 
instance, in the Western Governors' Association, activities 
with the Frontier Line, for example, give some type of a 
framework to the type of thing that FERC needs to get involved 
in with respect to looking at these joint transmission issues 
throughout the West and other parts of the country. I think 
FERC definitely needs to be involved in those types of things.
    Senator Thomas. Just a little follow-up. Seems pretty clear 
that regional transmission organizations will not be 
established in the West. How do you think it affects project 
like Frontier Line?
    Mr. Wellinghoff. Senator, I think we have a number of 
different experiments going on in different parts of the 
country. There are some places where RTOs seem to be working to 
some degree. There are others where things are just fine 
without them. I think we can do interstate agreements, in 
essence, that would allow for the cooperation and collaboration 
and development of things like the Frontier Line, and other 
lines in the West, and other areas where there are not RTOs. 
Without necessarily having an RTO there if the utilities and 
the stakeholders in that region think they can operate 
otherwise and think they can operate in a way collaboratively 
and cooperatively to make those things possible, I think there 
are opportunities to work with or without an RTO.
    Senator Thomas. Any comment, Mr. Moeller?
    Mr. Moeller. I think the Frontier Line, as Mr. Wellinghoff 
said, is a good example. From my understanding, the Governors 
of the various States have gotten together. They are working 
toward a solution, a regional energy solution. FERC has to be, 
if appropriate, a part of that, to make sure that it works as 
well as possible. Wyoming has energy to export, and there are 
other areas where the energy is needed.
    Senator Thomas. Thank you, Mr. Chairman.
    Senator Wyden. Thank you, Mr. Chairman, and I commend both 
of you for your thoughtful responses and I think one of the 
reasons you're getting these questions is because we have high 
expectations for you both. And that is essentially what I am 
going to be looking for, as well, in the areas I am going to 
ask about now.
    As you both know, Enron's former chief executives have now 
been found guilty in their criminal trials. The bankruptcy case 
has been wrapped up. And yet FERC continues to keep secret 
evidence of Enron's manipulation of the energy markets. And I 
just cannot come up with a logical reason why FERC should 
continue to keep secret documents, trader tapes, and other 
evidence of how Enron manipulated energy markets back in 2000, 
2001. So 5 years has gone by and we have had the criminal 
convictions, we have had the bankruptcy process go forward, and 
yet still the State regulators and the public cannot get access 
to critical information. My question for both of you, and why 
not start with you, Mr. Moeller, is at what point should State 
regulators and the public be able to get access to information 
that in my view should have been out some time ago?
    Mr. Moeller. Senator Wyden, thank you for the question. My 
general feeling is that as much as can be legally released 
should be, and I think that FERC is moving in that direction. 
Generally, that applies to generally transparent issues, that 
more is better.
    Also, my understanding is that the Department of Justice 
still has restricted a lot of that information because there 
are more criminal prosecutions being investigated. So I think 
that's the primary reason most of that haven't been released 
yet.
    Senator Wyden. Mr. Wellinghoff.
    Mr. Wellinghoff. Senator Wyden, thank you. I have a similar 
understanding. I certainly believe anything that would not 
jeopardize a criminal investigation should be released to the 
public, and/or to State regulatory agencies for access. And so 
to that extent, I would support that.
    Senator Wyden. My concern is that it does not seem that 
FERC is striking the right balance between protecting 
information for example which obviously is needed as it relates 
to criminal prosecutions, certainly needed with respect to 
legitimate reasons of business confidentiality, and yet at the 
same time the public has a right to know. For example, I have 
been getting recent reports that FERC is making additional 
information secret under what is called a form one. This is a 
privileged kind of document. Again, there can be business 
grounds that are legitimate, but also the public has a right to 
know in a lot of these instances.
    I hope that the two of you will push FERC to strike a 
better balance. Let us protect information where it is needed 
for criminal prosecution, or other legitimate reasons of 
business confidentiality, but let us also respect the public's 
right to know. And I think you are two people who will do a 
good job. Go in there and see if you can push the agency to 
strike a better balance with respect to these concerns that I 
am raising.
    The other question that I had for both of you is, when 
Chairman Domenici had the oil executives up last year, 
ExxonMobil CEO Lee Raymond testified to our committee that 
speculation in the oil markets raised the price by $20 per 
barrel. Now, that is the oil sector, and obviously FERC does 
not have jurisdiction over the oil markets. But there is some 
authority over speculation in sales of electricity and natural 
gas. Do you think it makes sense for the agency to do more to 
watchdog speculative practices in areas where the agency does 
have some jurisdiction?
    Mr. Moeller.
    Mr. Moeller. Yes.
    Senator Wyden. Good answer.
    Mr. Wellinghoff.
    Mr. Wellinghoff. Senator Wyden, thank you. Yes, I would 
also answer yes, and I would add to that a little bit in that I 
think it actually goes somewhat to your previous question with 
respect to information. I think transparency in these markets 
is essential to the extent that we can get more data out and 
have that available, not only for the public but for FERC to 
review and analyze. It will help FERC stop speculation.
    Senator Wyden. Well, I look forward to working with both of 
you, and I think in a lot of these areas what has happened 
particularly as relates to speculation is the public has gotten 
very little information. Chairman Domenici, to his credit, 
brought the executives up. Lee Raymond gave us information that 
I found pretty amazing; that speculation in the oil market is 
raising the price by such a large amount per barrel. It forced 
me to start looking at speculation in other areas. I am glad 
that you all want to see the Commission do more in this area, 
and Mr. Chairman, I think it is been a good hearing, and we 
have got two good people, and I look forward to moving ahead 
with their nomination.
    The Chairman. We were just looking at the clock and trying 
to figure what we were going to do. Senator what are your 
plans?
    Senator Menendez. Well, I have two brief questions, Mr. 
Chairman.
    The Chairman. Two questions, and then you would go vote?
    Senator Menendez. Yes, if I may.
    The Chairman. Well, why do we not let you take over on the 
understanding that you will proceed with two questions while I 
go vote. We will be in recess until the Chair or a designee 
returns to open the meeting, and that will be the 
understanding. It will not be closed until either I or a 
designee returns and closes it. Thank you.
    Senator Menendez [presiding]. Thank you, Mr. Chairman.
    Congratulations to both of you on your nominations, and I 
look forward to the answers to these questions that I would 
like to pose to you. The people of New Jersey, like so many 
others around the country, are facing much higher electric 
bills this year because of the high cost of natural gas and 
other fuels. Just last week New Jersey ratepayers were told 
that they would be paying over 12 percent more, which is bad, 
but not as bad as it could have been, because of the State's 
competitive auction, getting better prices than neighboring 
States. But the auction system cannot work without a vibrant, 
effective, and competitive regional power market.
    So my question in this one set is will you work to ensure 
that regional markets in the mid-Atlantic, Midwest, and 
Northeast, all of which are critical to power consumers in my 
State, grow and thrive? And can you help guarantee that as many 
competitive generating companies as possible get access to a 
reliable open transmission grid, so they can compete, to 
provide my constituents with electric power?
    Mr. Wellinghoff. Senator, if I may. Thank you for the 
question. And I would only hope that we in Nevada can only have 
a 12 percent increase. We just had a 23 percent one proposed 
there, so I understand the difficulty of these types of 
increases. And I would say these kinds of competitive regional 
markets are essential. The more access we can have to 
generators of all types, using all sources of fuel, and also 
not only generators but other things we can do to help 
consumers with respect to lowering overall costs in the market, 
such as demand response, I think are essential things that we 
need to look at.
    So these will certainly be things that I would like to work 
with, and work on when I'm at FERC, and I intend to do so if 
confirmed. Thank you.
    Mr. Moeller. Senator, I agree with most everything Mr. 
Wellinghoff said, as well. We need to make sure that regional 
markets work. The key to that is a vibrant and open 
transmission system, and the Commission now is kind of taking 
another look at those policies after they were initially 
implemented about 10 years ago. I look forward to being part of 
that to make sure that the system works as efficiently as 
possible.
    Senator Menendez. I appreciate those answers. I just want 
to stress how important the open grid transmission system is to 
a State like New Jersey, which is a net importer of 
electricity. Our regional transmission organization, PGM, has 
done an excellent job of operating a competitive market, and 
maintaining the reliability of the grid. PGM is one of the 
reasons that the blackout of 3 years ago did not affect New 
Jersey as badly as it could have. So it's my hope that as the 
Commission focuses on areas of the country that don't have 
regionalized transmission organizations, that we don't 
backslide on the gains we had made in New Jersey and in the Mid 
Atlantic.
    And my second question is, my State has an interest in 
seeing the development of renewable sources such as solar power 
and wind power, and demand-side resources such as energy 
efficiency as a means to diversify our resources and reduce our 
dependency on foreign oil. Now New Jersey has, on its own 
initiative, helped create a huge boom in solar power, thanks to 
a number of incentives to homes and businesses, and I am proud 
to join Senator Smith, who introduced a bill that would extend 
the Federal tax incentives for solar and fuel-cell 
installations.
    I've been told by a number of suppliers of energy 
efficiency devices and renewable resources that a competitive 
wholesale power market is key to stimulating new markets for 
energy efficiency and renewable resources, and my question is 
do you agree, and what will you do to spur development of 
competitive markets that enable these alternative energy 
sources to grow and develop in States like my own?
    Mr. Wellinghoff. Senator, if I may. I would agree that 
development of solar, wind, and demand-side resources is 
essential for many different reasons. But one of the best 
reasons is that it really does have the ability to drive down 
prices and make markets work better, especially things like 
demand-side resources, and demand response, where there have 
been some studies that have shown that if you could just reduce 
peak load by, say, 5 percent, you could reduce prices in that 
market by 50 percent during that peak. You have tremendous 
opportunities there, and I do agree that competition in those 
markets will help those different resources participate.
    You also have to look at market barriers to those 
resources, though. I think it is an essential part. They have 
to have equal access to the market. That is one thing I really 
want to look at at FERC, to make sure that solar, wind, 
geothermal--that we have a lot of in the Western United 
States--biomass, DSM, demand response, all can participate in 
that market equally. That is really essential to make those 
markets work well and work effectively and efficiently.
    Mr. Moeller. Senator, I would just add that the Commission 
is, as a reference, taking a 10-year look-back on open access 
of transmission. And one of the issues there is how to treat 
intermittent generators--renewables sometimes fall into that 
category. And so the Commission is looking forward, 
specifically, on that aspect of renewables in a way that should 
give it guidance to allow the industry to grow.
    Senator Menendez. Thank you both.
    [Recess.]
    Senator Murkowski [presiding]. The meeting will be back in 
order. Appreciate the opportunity for a little break there and 
stretch while we took our vote. Welcome to both of you this 
morning. I appreciated the opportunity that I had to meet with 
both of you to discuss a little bit about your background and 
some of the concerns, and the issues certainly before the State 
of Alaska as they relate to the FERC. This is probably not 
going to be any surprise to you this morning that I continue 
with my questions as they relate to probably Alaska's leading 
energy issue; that of supplying the rest of the United States 
with our vast supplies of natural gas.
    As you know, we have got about 35 trillion cubic feet of 
proven reserves with hopefully another 150 trillion cubic feet 
awaiting discovery up there on the North Slope. As you know, 
the Alaska legislature is working to finish a special session 
in fact they are supposed to conclude this evening to consider 
the contract with the North Slope producers, intended to lead 
to construction of this natural gas pipeline, a line that would 
bring about 4.5 billion cubic feet a day of natural gas to the 
market over the next decade.
    So we are very hopeful that we will see passage of a 
contract, perhaps sometime later this summer, and most 
possibly, or most probably, a second special session. So I want 
to ask both of you this morning to just speak to the 
importance, if you will, the importance to the Nation for the 
Alaska gas line to win approval now, could I speak to the 
timing issue. And second, if there is anything that you might 
consider that the FERC could do to perhaps facilitate 
construction, or facilitate progress towards a natural gas 
pipeline, to bring this very, very important resource to the 
rest of the lower 48. I throw it out to both of you, and Mr. 
Wellinghoff, you look like you are ready to take the question.
    Mr. Wellinghoff. Senator, I'd be happy to take the 
question, thank you very much. I think this pipeline is 
critical to the Nation. I know it's very important to Alaska, 
but it's also very important for the entire Nation's security. 
We do need to absolutely increase our supplies of natural gas 
in this country. The State I am from, Nevada, has a number of 
very large natural gas generating facilities that depend upon 
that gas resource, as do many places in the West, and I know 
more and more generation in the recent times has been in the 
area of natural gas.
    So utilizing it is essential. Also, I think it can be 
essential as a shaping resource for renewables, as well. So it 
has a part to play there. And of course for natural gas, other 
than generation, there are so many other essential uses in this 
country.
    So, I can't think of anything, can't imagine anything more 
critical for this country. And as for timing and the ability to 
facilitate it via FERC, I think we can just look at the 
wellhead logs out of Canada, out of the Permian basin, and just 
see that we are not in a situation of increasing supplies 
there. We do have to accelerate supply from someplace, and this 
seems to be the most promising location within our country.
    To do so, I believe that FERC has in process, in place, 
procedures with respect to accelerating pipeline permitting and 
the environmental impact statement aspects of pipelines that I 
am certain the FERC will do everything they can to facilitate. 
I certainly, if I am confirmed, will be happy to participate in 
that process in a way that will recognize my feeling that this 
is a critical resource for the country. Thank you.
    Senator Murkowski. Thank you.
    Mr. Moeller.
    Mr. Moeller. Senator Murkowski, I will echo Mr. 
Wellinghoff's comments. I learned early in life the 
relationship between the price of natural gas and the price of 
fertilizer, for instance. It affects many aspects of our 
economy, and we need more of it, and as you said in Alaska 
there is an abundant supply of domestic natural gas. I would 
work to ensure appropriately that if confirmed that 
infrastructure be part of our Nation's supply of energy.
    Senator Murkowski. Mr. Moeller, your background familiarity 
with Midwestern natural gas, you know, you have mentioned the 
connection there between fertilizer and natural gas, and the 
significance there. We had a hearing yesterday in Foreign 
Relations, and former Chairman Greenspan addressed the issue of 
oil dependency in pretty general terms. And I asked him a 
question about the natural gas picture, supply-demand picture. 
And he really chose to focus on the importance of imported LNG, 
to meet the Nation's demand for natural gas. I happened to 
disagree with the chairman and expressed the concern that we 
not go down the same path with natural gas that we are 
currently with oil; in a place for we are some 57, 58 percent 
dependent on foreign sources of oil, on countries that might 
have been our friend a couple years ago, but are no longer our 
friends now. It puts us in a very unstable position, a very 
volatile position, if you will.
    And my concern is that we don't want an energy policy that 
guides us with natural gas in that same direction. Right now, 
we are only importing about 3 percent of our natural gas, but 
the increase over the past few years has been phenomenal, 
because we are trying to meet that demand. So from the 
perspective of certainly the Midwest, isn't getting gas to the 
upper Midwest better for the Nation than relying solely on LNG 
imports that are going to be arriving on our coasts, that will 
require new infrastructure, new pipelines, new siding 
terminals, which we have acknowledged is a difficult task right 
now?
    Can you just kind of speak to this direction of doing more 
domestically, and of course I am coming from the advocacy 
position of Alaska's natural gas because of those vast 
quantities, but doing more domestically as opposed to a policy 
direction that takes us to further imports of a resource that 
is incredibly critical to the economic security of this nation?
    Mr. Wellinghoff. Senator, I think that our demand is such 
that we need to look frankly at all sources. But domestically, 
it's closer. Sometimes we have challenges in terms of the 
infrastructure--the pipeline that is not there, or needs to be 
expanded--to take advantage of domestic and international 
sources. Every aspect of the supply equation comes with its 
trade-offs, both positive and negative. Sometimes there are 
quality issues with LNG. But it all has to be part of the 
picture. As does demand-side management, because that also, 
although that often falls to the States, can be a part of 
shaving that peak demand that then can benefit the marketplace. 
I think everything has to be on the table, but domestic sources 
are our own, and they're going to be naturally more secure if 
we can get them to the market.
    Senator Murkowski. Well, and that is certainly the 
direction I think we should start first. Start domestically 
first and then if you are not able to meet that demand, that is 
when you look to the external. I do not disagree with you from 
a comprehensive approach. We do need to be looking to all 
sources because of the demand that we have, and we do need to 
be looking to the conservation side.
    Mr. Wellinghoff, I had an opportunity yesterday to talk 
just very briefly about the renewable aspect of energy 
development, and your interest in promoting electricity 
development from renewable sources, and we spoke a little bit 
about the geothermal, which I too believe has great potential, 
as does ocean, energy, and wind.
    Can you tell me your views about where you feel most of our 
electricity in the future will come from, whether from natural 
gas, from coal, ICGG development, or from other renewables? 
Where do you see the direction that this Nation will take, in 
terms of renewable development?
    Mr. Wellinghoff. Well, Senator, if I may, thank you. I 
believe it's going to have to come from many, multiple sources. 
And I'll answer this question by somewhat going back to your 
previous question to Mr. Moeller with respect to developing the 
gas supplies in Alaska. We need to do the most efficient things 
in this country first. And so one of the most efficient things 
would be to develop the sources of gas supply in Alaska rather 
than take LNG from Qatar. We may have to someday take LNG.
    But let's do the most efficient things first. Certainly, 
demand response and energy efficiency are traditionally usually 
the least expensive things to do. There are advancing 
technologies that are going to reduce our energy loads in this 
country tremendously in the next 10 to 15 years in lighting, in 
air-conditioning, and other end-use load areas. So that is 
going to be one piece, and I think that is probably the most 
efficient and least expensive piece.
    Another piece is going to be renewables. That is going to 
include a wide array of renewables. Regarding geothermal, as we 
talked about yesterday, not only are there significant 
geothermal resources in the West and in Alaska as well, but 
there are also substantial geothermal resources, for example in 
Texas in geopressure zones, that people aren't even aware of, 
where we have oil and gas wells very deep in the earth, where 
there is actually hot water that can be brought up and used to 
produce electricity. Wind energy and solar energy have great 
potential. We have advances in solar photovoltaic technology 
such that once the price of a solar photovoltaic system, the 
solar cells that you put on top of the roof of your house or a 
business, is equal to the price of the retail price of 
electricity--because they compete at the retail level and not 
at the wholesale level--we are going to have a massive change 
in what is happening in this country. People are just going to 
roll into the mortgage the cost of putting a solar system on 
their house. It is going to be much less expensive to do that 
than to pay the utility company 15, 18 to 20 cents a kilowatt-
hour, to where we will get someday, or where we already are in 
some parts of this country, in the price of electricity. That 
is going to have a massive effect on how much transmission we 
need in this country, on how much central generation we need in 
this country. Other efficient ways to generate electricity 
include combined heat and power, where I think we just 
scratched the surface, where you can go into a large facility 
and put in a co-gen system that provides electricity to the 
facility and also provides waste heat out of backend that can 
be used for hot water, be used for space heating, and can even 
used for cooling, through absorption chilling. That is an 
extremely efficient use of natural gas, for example. By using 
natural gas in that manner, combined heat and power, you can 
ultimately produce total energy at an efficiency level of 75 to 
95 percent as opposed to producing it at the generating source 
with the natural gas powerplant at 40 to 50 percent. So it's a 
much, much more effective use of using natural gas.
    We need to look at all of these things. We need to look at 
them very hard, and we need to start doing the most efficient 
things as quickly as we can.
    Senator Murkowski. And again, it underscores the need to 
get those domestic supplies down to the----
    Mr. Wellinghoff. Absolutely.
    Senator Murkowski. One very quick question for the two of 
you, and then I will go over to my colleague here. Is there 
anything more that the FERC should be doing to promote 
renewable energy usage, or is this a policy direction that is 
left to the Congress? Is there anything else that the 
Commission should be moving forward with to get us further in 
the direction of renewable usage?
    Mr. Moeller.
    Mr. Moeller. Senator, we spoke a little bit earlier about 
the fact that the Commission is taking a look at its general 
transmission policies, really kind of its first look-back after 
10 years of Order 888. As part of that, intermittent generation 
is being considered, and thoroughly analyzed, to see how it 
should fit into the transmission grid. Typically, that's 
something that's affecting renewable energy right now because, 
usually, it's of intermittent nature. So clarifying that should 
help the industry. At least give it direction for the future.
    Senator Murkowski. Mr. Wellinghoff, anything to add to 
that?
    Mr. Wellinghoff. Yes, Senator Murkowski. Just a little, in 
the sense that I think I would expand just a little bit. On 
that intermittent issue with respect to wind. Some of the 
penalties that are put on intermittent resources I think 
inappropriately discriminate against those resources to 
interconnect with the grid. I think this needs to be looked at, 
and I believe the FERC is doing that. I hope to participate in 
that process if confirmed. But beyond that, I think we need to 
look at what are the market barriers to ensuring that both 
renewables and energy efficiency; i.e., demand response, have 
equal access to the grid--equal access in a way that they can 
participate with other generating resources to provide for 
overall supply.
    It is not simply a matter of economics in some instances. 
In some instances, there also are structural market barriers 
that need to be looked at in the way that rules have been set 
up either on a Federal level or a State level--and certainly 
FERC has the primary jurisdiction on the Federal level. We need 
to look at this type of thing and determine how we can better 
integrate them into the overall grid system. That's one thing 
I'd be very interested in doing if confirmed.
    Senator Murkowski. Well, thank you, both of you, for your 
responses, and for giving me the time yesterday to inquire a 
little bit further. I appreciate your willingness to serve on 
the Commission. I think we learned yesterday that you are 
moving onto a Commission that is incredibly important, 
certainly to my State, but to the entire country in terms of 
how we move forward with the implementation of our energy 
policy as a result of the Energy Policy Act last year. The FERC 
has a lot more on its plate in terms of responsibilities and 
tasks that we are looking for you to take up. And the reality 
is that you have not been working with a full Commission for 
some time. So the burden on you, should you be confirmed, which 
we anticipate that we will move forward with this very shortly, 
it is going to be a tall order, and we appreciate your 
willingness to serve on this very, very important Commission.
    Senator Alexander.
    Senator Alexander [presiding]. Thank you, Senator 
Murkowski. Senator Domenici said he would not be coming back to 
the committee, and unless you have other questions you would 
like to ask, what I am going to do is request to adjourn the 
meeting unless other Senators are expected to have a question. 
I want to thank our witnesses for being here, the nominees. I 
enjoyed my visit with each of you, and appreciate your taking 
the time to come by. I would like to say, at the chairman's 
request, that any additional questions from Senators be filed 
with committee staff by close of business today. Now I wonder 
if either of you have any of the comment that you would like to 
make before we close the hearing?
    Mr. Wellinghoff. I just want to thank you, Senator, and 
thank all the members of the committee for this opportunity. 
Thank you very much.
    Mr. Moeller. Same here. I appreciate your time, and having 
us here today.
    Senator Alexander. Thank you both very much for coming.
    The hearing is adjourned.
    [Whereupon, at 11:30 a.m., the hearing was adjourned.]


                               APPENDIXES

                              ----------                              


                               Appendix I

                   Responses to Additional Questions

                              ----------                              

   Responses of Philip D. Moeller to Questions From Senator Domenici

                   ELECTRIC RELIABILITY ORGANIZATION

    Question 1. EPAct directed FERC to ensure the reliability and 
security of the nation's bulk-power system. Pursuant to the Energy 
bill, a single Electric Reliability Organization--the ``ERO''--will 
have the authority to establish and enforce mandatory reliability 
standards. We are now in the process of transitioning from a system of 
voluntary compliance to this new mandatory regime.
    In order to avoid a ``one size fits all'' approach, Congress was 
careful to provide a substantial role for regional reliability 
organizations. The national ERO which sets reliability standards must 
``rebuttably presume'' that a standard proposed by a Regional Entity is 
valid.
    As a Commissioner, how will you address the issue of regional 
flexibility? How will this fit into the ERO's national standards and 
their enforceability?
    Answer. As a Commissioner, I would follow the law in regards to the 
rebuttable presumption of a standard proposed from a Regional Entity. 
Ultimately, the Commission must do all that it can to assure that 
reliability standards are workable and enforceable for all regions and 
the nation.

                        TRANSMISSION INVESTMENT

    Question 2. There has been sustained underinvestment in 
transmission in recent years. In order to encourage greater investment, 
EPACT directed FERC to issue a transmission incentives rule to 
establish incentives for greater investment. Do you think there is a 
need for greater transmission investment, and if so, would you comment 
on whether you believe transmission incentives are the way to secure 
that investment? ? Do you think incentives should be extended to 
vertically integrated utilities?
    Answer. The nation needs significant investment in new electric 
transmission infrastructure. Transmission rate incentives are one way 
to help promote this-investment. Congress has also aided these 
investments through tax depreciation policies. This is a serious issue 
and one I would follow very closely as a Commissioner. As a general 
matter, I support sufficient transmission incentives that will work to 
assure more actual (as opposed to proposed) investment that leads to 
open and non-discriminatory access regardless of its ownership 
structure.

                        FERC-STATE RELATIONSHIP

    Question 3. With FERC's new expanded responsibilities in the areas 
of reliability and backstop transmission siting, there is the potential 
for federal/state conflict. How do you propose to promote greater 
cooperation and coordination with the states in these areas? How can 
FERC best work with the states to identify and resolve congestion 
issues?
    Answer. With both reliability and backstop transmission siting, 
FERC and the states must communicate effectively and frequently to 
minimize any potential conflict. Active joint collaborative efforts 
between FERC and the states is a good start to this process. Key to the 
concept of ``backstop'' authority is that primary responsibility to 
site transmission will remain with the states. These joint 
collaborative efforts, with appropriate participation from USDOE, 
should provide a good forum to identify and resolve congestion issues. 
In addition, the Commission on June 15 issued proposed regulations on 
this subject that should provide the necessary framework for a thorough 
consideration of this issue.
    Question 4. How would you suggest that FERC and the states better 
coordinate to provide regulatory consistency on transmission expansion 
issues such as cost allocation and cost recovery?
    Answer. Coordination of these key principles is based on regional 
recognition of costs and benefits. As stated above, joint collaborative 
efforts between the Commission and states should provide a good forum 
to address these issues.

                             COAL DELIVERY

    Question 5. While FERC does not have direct statutory authority 
pertaining to coal deliveries, coal constitutes approximately 50% of 
the fuel for electric generation today, and utilities are seeking to 
build more baseload coal plants in the future. Coal delivery issues, 
then, can greatly impact electric reliability. FERC has scheduled a 
meeting with utility and railroad representatives on June 15th to 
discuss coal-delivery matters and their impact on markets and electric 
reliability.
    Do you think there is a regulatory gap in this area?
    Answer. This is an extremely serious issue for the reliability, 
cost and future of the nation's electricity system. The results of the 
June 15th meeting should provide an answer to whether there is a 
regulatory gap or whether existing regulatory authority should be 
exercised in a different manner.
    Question 6. Do you believe FERC should coordinate more closely with 
the Surface Transportation Board to ensure adequate and timely coal 
deliveries?
    Answer. Yes.

               REGIONAL TRANSMISSION ORGANIZATIONS (RTOS)

    Question 7. RTOs are subject to FERC regulation, but have 
independent boards, not shareholder boards like other utilities. 
Independent RTOs presently serve about 2/3 of this country. What can 
the Commission do to hold RTOs accountable for their costs like other 
utilities? How do you measure ``reasonable'' charges?
    Answer. Part of the challenge with developing RTOs is that they are 
relatively new entities, and regional differences will be reflected in 
some differences between RTOs. Startup costs should be ``one time'' in 
nature, and the Commission needs to closely monitor these costs to 
assure the benefits of RTOs flow to consumers. ``Reasonable'' charges 
are those that are necessary to allow regional markets to work in an 
efficient manner, and the concept is likely to evolve as the markets 
mature.
    Question 8. What do you see as the Commission's role in fostering 
independent operation of the transmission grid?
    Answer. The Commission should place a high priority on both 
fostering independent operation of the transmission grid and constantly 
monitoring operation to assure that open access to the grid is 
maintained.
    Question 9. How do you envision the new ERO working with the RTOs? 
How do you envision the new Regional Entities working with the RTOs?
    Answer. The Commission needs to assure that as the ERO is 
developed, its structure allows for an extremely close working 
relationship with the RTOs. Similarly, the new Regional Entities should 
maintain open lines of communication with RTOs.

                        OPEN ACCESS TRANSMISSION

    Question 10. Rather than pursue a Standard Market Design proposal, 
which would have fundamentally restructured the electric power 
industry, FERC is now focused on revising the Commission's open access 
transmission policy under Order 888. How will you approach revision of 
Order 888?
    Answer. It's critical for the Commission to thoroughly review what 
has worked with Order 888 and also identify any deficiencies. The 
transmission system and the wholesale market have undergone truly 
fundamental changes in a relatively short time frame, and the 
Commission's goal should be to assure that wholesale markets are open, 
non-discriminatory, and promote the interests of reliability and energy 
consumers.
    Question 11. In Section 1231 of EPAct, Congress gave FERC the 
authority to require government-owned utilities and electric 
cooperatives to provide open, non-discriminatory transmission access on 
their systems in a comparable manner to that required for public 
utilities. In its recent NOPR on Order 888, the Commission chose not to 
propose a generic rule to implement Section 1231, but instead to apply 
its provisions on a case-by-case basis. Do you agree with this 
approach?
    Answer. As part of its review of Order 888, the Commission needs to 
examine the role of government-owned utilities and electric 
cooperatives in the transmission system. The vast majority of these 
utilities are small and are minor players in the transmission system. A 
generic rule may not be necessary unless it is demonstrated that these 
smaller utilities are behaving in a way that is counter to the 
principles of open access. Until evidence is presented otherwise, a 
case-by-case approach appears to be a good balance.

                         RELIABILITY INVESTMENT

    Question 12. Reliability, of course, is one of FERC's top 
priorities. The Commission had indicated that for prudent reliability 
expenditures, such as vegetation management charges, it will consider 
separate rate recovery mechanisms, such as surcharges. Consequently, 
companies need not undertake a full blown rate case. When utilities 
seek rate recovery for a reliability investment, do you agree that the 
Commission should address this in a single issue rate case rather than 
examine the utility's entire set of rates?
    Answer. Yes. The Commission should take actions that encourage 
these investments and expenses, and reliability should not be seen as a 
profit center but rather as a vital and necessary activity.

                              NATIVE LOAD

    Question 13. In EPAct, Congress provided that utilities with 
service obligations to their native load customers are entitled to use 
the transmission they own or hold under contract to meet these service 
obligations. Do you agree that the statute makes clear that there is 
nothing discriminatory about exercising this right?
    Answer. I agree with the statue that protecting native load 
customers is very important, and that the statute makes clear that 
load-serving entities are entitled to use firm transmission rights to 
deliver energy to meet their service obligations.
    Question 14. Where there are competing uses of utility transmission 
under the open access framework, do you believe that the Commission 
must recognize the utility's statutory right to use its transmission to 
serve its native load customers?
    Answer. Yes, I believe that the Commission needs to follow the 
statute and recognize the rights of load serving entities as they 
pertain to native load customers.

                              NATURAL GAS

    Question 15. Inadequate gas storage capacity contributes to 
volatility of gas prices. In order to reduce volatility, the Energy 
Policy Act of 2005 authorized FERC to grant market-based rates to gas 
storage developers, even if they have market power, as long as a 
proposal meets a three part test: (1) it is in the public interest, (2) 
market based rates are needed, and (3) customers are adequately 
protected. I recognize it is unusual for Congress to authorize market-
based rates to a company that has market power.
    Are you prepared to support implementation of this provision and 
authorize market-based rates, assuming the public interest, need, and 
adequate protection criteria are met?
    Answer. Yes, and I intend to follow the law.
    Question 16. According to FERC, Liquified Natural Gas (LNG) 
presently comprises 2% of the natural gas used in the Northeast and it 
could provide up to 17% by 2025. Additionally, there are currently 
about 40 LNG terminals either before FERC consideration or being 
contemplated by the natural gas industry.
    As we meet this growing trend toward LNG in the U.S., what do you 
envision FERC's priorities should be and how do you think FERC can meet 
these priorities?
    Answer. FERC's highest priority has to be safety. Once safety is 
adequately addressed, gas quality should be assured. LNG is not the 
sole solution to the nation's natural gas supply needs, it is part of 
the solution. FERC needs to assure that adequate pipeline and storage 
capacity exists for existing and new sources of domestic and imported 
natural gas.
    Question 17. In the Energy Policy Act of 2005, Congress clearly 
grants FERC exclusive authority to approve or deny an application for 
the siting, construction, expansion, or operation of an LNG terminal. 
Do you see any practical threats to this authority by those opposed to 
the construction of LNG facilities through the use of other laws to 
potentially place roadblocks (not intended by Congress) to the 
construction and siting of LNG facilities?
    Answer. I am not aware of any specific threats to this authority, 
but if any develop I would be very interested in making certain that 
the nation's infrastructure needs are not delayed by laws that are used 
out of context.
    Question 18. If so, how do you think this is best alleviated?
    Answer. Both Congress and FERC should remain vigilant to assure 
that needed infrastructure is constructed, and that unrelated laws are 
not used to delay necessary investment.

                          NATURAL GAS MARKETS

    Question 19. Please comment on what you think the impact of 
commodities trading is on the price of natural gas. Do you believe that 
executive branch currently has the appropriate authority to effectively 
oversee the energy markets? Do you think that FERC has the appropriate 
authority necessary?
    Answer. As a general matter, I support the goal of additional 
transparency in natural gas commodity trading. I believe that FERC has 
been given appropriate authority, but some have suggested the. 
Commodities Futures Trading Commission (CFTC) could benefit from 
additional authority. I defer to the CFTC as to whether additional 
statutory authority would be beneficial.
    Question 20. In recent testimony before another Senate Committee, 
Commissioner Brownell stated, ``The natural gas and electricity markets 
are inextricably linked. . . . The emergence of renewable wind energy 
as an important electricity supply alternative, for example, will have 
a mitigating impact on natural gas prices.''
    First, do you agree with this statement?
    Answer. Yes.
    Secondly, do you believe that the present authorities under current 
law are effective with respect to advancing the production of renewable 
energy on federal lands and federal submerged lands?
    Answer. I am not aware of any changes that are needed in present 
law in order to promote additional renewable energy development on 
federal lands and federal submerged lands. However, I am aware that 
when multiple federal agencies are landowners in a specific area, this 
can present unique challenges to energy development.
    Question 21. In the Commission's report to Congress in February on 
the subject of bringing natural gas from Alaska's North Slope to the 
lower 48 states, the Commission identified a number of obstacles that 
have emerged over several years that have impeded the development of 
the Alaska natural gas pipeline. Additionally, the report comments on 
the wide-ranging federal and state cooperation, inter-agency 
cooperation, and government and industry cooperation necessary to meet 
this challenge. Please comment on what you think FERC's role in this 
process is and how you think FERC can reasonably help to expedite the 
resolution of these issues so that the American people can have the 
benefit of Alaska's vast supply of natural gas?
    Answer. Alaska's natural gas is an enormously valuable and needed 
domestic source of energy. Although many of the specific policies are 
currently being debated in the Alaska Legislature, FERC can play a 
constructive role by acknowledging the benefits of this energy source 
and by thoroughly examining any impediments to the project in its 
regular reports to Congress on the project. Once the state of Alaska 
has decided how to proceed, FERC can play a role in coordinating 
appropriate federal cooperation.
    Question 22. Without getting into the specifics of a matter 
potentially before the Commission, I would like to ask you a question 
on gas pipeline infrastructure. One of FERC's main priorities is the 
expansion of U.S. domestic energy infrastructure. Do you think that a 
mandated return on equity on a pipeline system that would be lower than 
the return on equity of any pipeline in the past 40 years would be 
consistent with FERC's priority of expanding energy infrastructure?
    Answer. FERC needs to assure that returns are such that the 
investment community continues to make these needed infrastructure 
investments.
    Question 23. I am fully aware that the United States consumes about 
a 1/4 of the natural gas consumed worldwide. I am also aware that over 
95% of the world's proven natural gas reserves lies outside of North 
America. Additionally, I am concerned that a large portion of the 
United States, specifically most of the OCS, remains currently off-
limits to exploration and production of natural gas. As such, LNG is an 
important part of our energy mix in this country. However, how do you 
think we avoid becoming reliant upon foreign sources of natural gas, 
the same we are dependent upon foreign oil, from areas that are 
unstable and unfriendly to U.S. interests?
    Answer. The nation has to have a range of natural gas supply 
options so that we do not become dependent on LNG. In addition to 
existing and new sources of domestic gas, both additional gas storage 
and additional gas pipeline capacity would help stabilize the market 
and help prevent price spikes that could occur if foreign sources of 
natural gas were disrupted.
    Question 24. Recently, I have grown concerned about the potential 
for LNG shipments to be diverted away from the U.S. markets to other 
consuming nations. Can you comment on the state of this trend, the 
future of this trend as you see it, and how we can mitigate this 
potential diversion of significant natural gas supply?
    Answer. LNG is a commodity, and the owner of the commodity is able 
to move it to potentially more lucrative markets with willing buyers. 
In addition to developing more domestic sources of natural gas, 
additional natural gas storage and additional pipeline capacity would 
allow for a more stable market that would in turn create more certainty 
for sellers of the commodity.
    Question 25. Pursuant to Section 316 of the Energy Policy Act, the 
Natural Gas Act was amended and the Commission was directed to 
facilitate price transparency in markets for the sale or transportation 
of physical natural gas in interstate commerce. Further, the Commission 
is granted the authority to prescribe such rules as the Commission 
deems necessary and appropriate to carry out the purposes of Section 
316. Have you had the opportunity to examine the question of 
transparency in the natural gas markets? If so, have you drawn any 
conclusions that you could share with this committee that could help us 
promote and advance fair competition, market integrity, and ultimately 
protect the consuming public?
    Answer. Additional price transparency would help consumers and 
regulators, and I support this general effort. If confirmed, I would 
expect this is an issue that the Commission will spend a lot of time 
considering, and I would welcome the opportunity to report to the 
committee my thoughts on any policy recommendations that would further 
protect the consuming public.
    Question 26. Along those same lines, as mandated by EPACT, FERC and 
the CFTC entered into a memorandum of understanding with respect to 
information sharing to prevent procedural duplication in the oversight 
of the commodity markets. Do you commit to working with the CFTC to 
ensure that this issue of natural gas market transparency is given 
continued attention at FERC?
    Answer. Yes.
    Question 27. FERC has a strategic plan and the first goal stated in 
the plan is promote development of a robust energy infrastructure. I 
think that's a critical mission statement for this agency. Through a 
combination of legislation, regulation and litigation we've made it 
very difficult to develop major new energy facilities in this country. 
Do you share the vision that FERC's primary mission is to promote the 
development of energy infrastructure for this country?
    Answer. FERC's primary mission is to protect the consuming public; 
part of that mission is to promote the development of energy 
infrastructure, with safety, reliability, and consumer protection as 
major components of that entire effort. I strongly support the 
development of additional energy infrastructure in this country.
    Question 28. What are the critical elements of a FERC policy that 
will ensure that needed infrastructure is built and built in a timely 
manner? How does an agency like FERC make sure that regulated companies 
are allowed to a sufficient return to attract capital into that 
business?
    Answer. There are many critical elements to ensuring the 
construction of critically needed infrastructure. Identifying the types 
and locations of needed infrastructure, providing for investment 
certainty through timely and sufficient returns on investment, and 
assuring efficient and transparent energy markets are all necessary and 
complicated components of this goal.
    Question 29. You are both from the West and had the experience of 
seeing the California energy crisis and its fallout for other Western 
states first hand. One of the obvious lessons from that experience is 
that electricity markets have to be structured properly if competition 
is to benefit consumers. Do you agree that competitive wholesale 
markets, properly structured, do benefit consumers and what about the 
use of price caps, bid caps and similar price mitigation measures?
    Answer. I agree that properly structured competitive wholesale 
markets benefit consumers. Various price mitigation measures should 
only be used in rare cases but need to remain an option when markets 
have become dysfunctional.
    Question 30. What more does FERC need to do so that consumers see 
the full benefits of competitive markets? How would you proposed that 
FERC work with the state regulatory authorities, RTOs and others to 
advance fairness for merchant generators when it comes to access to the 
grid and in bidding for new capacity?
    Answer. In reviewing Order 888, FERC is taking the necessary action 
to evaluate what is working and what needs improvement in open access 
transmission policy. FERC needs to maintain a constant dialogue with 
all the parties in wholesale transmission markets to assure that there 
is open access to the grid and that consumers benefit from multiple 
sources of new capacity.
    Question 31. The Mobile Sierra doctrine and the public interest 
standard were established by the U.S. Supreme Court in a series of 
cases a half-century ago. The public interest standard does not protect 
sellers, it protects contracts, it protects the agreement. Sometimes 
the public interest standard works to the advantage of the seller, 
sometimes to the advantage of the buyer. Recently, it has worked to the 
advantage of the buyer. The power sales contracts between Calpine and 
California are costing Calpine $1 billion, and helped drive it into 
bankruptcy. Under the just and reasonable standard, there is little 
doubt the contract would have been modified. Under the public interest 
standard, Calpine continued to perform. So, the public interest 
standard saved California consumers $1 billion. The Supreme Court is 
presumed to be competent to read a statute. They read the Federal Power 
Act and came up with the Mobile Sierra doctrine and the public interest 
standard. What is your view of the Mobile Sierra doctrine? Is it good 
law? Do you agree with the Supreme Court?
    Answer. This specific issue is pending at the Commission as it 
pertains to a default standard for future contracts, so my answer will 
be guarded. In general, the primary task of the Commission is to guard 
the consumer. Many wholesale power sales occur under contract, and 
there is a benefit to encouraging this practice. At times it still may 
be necessary for the Commission to modify a power sales contract. 
Whatever approach the Commission takes should be consistent with the 
law, including the Federal Power Act and decisions of the Supreme 
Court.
    Question 32. I want your views on FERC authority over buyer market 
power. FERC has been encouraged to regulate buyer market power, by 
forcing utilities to buy available lower cost power rather than self-
generate. I am not convinced FERC has legal authority in this area. 
Also, there is serious potential for conflict with the states, since a 
FERC order to a utility to buy power instead of self generating would 
undercut state decisions on ratebasing generation. Do you think FERC 
has this kind of legal authority and do you think it is good policy?
    Answer. This is a complex area where FERC should be cautious in 
setting policy. In addition to the questions about legal authority, 
there are major questions about the need to put stable generating 
sources into the ratebase and the role of the states in making these 
decisions. Especially as it relates to the cost of fuel, the cost of 
some power may be lower for some duration but not over the life of the 
facility. For example, the cost of electricity generated from natural 
gas has seen a steep rise in price in only a few years, and points to 
the need for balance in sources of generation. Due to this complexity, 
FERC must be very careful in attempting to regulate buyer market power.
    Question 33. The market-based rate proposed rules FERC issued last 
month ask questions about what happens when a utility loses market-
based rates. For example, if a utility loses market-based rates in some 
markets, but retains it in other markets, should FERC force a utility 
to sell at cost-based rates in lieu of making market-based sales? I am 
concerned that such forced sales would hurt the native load customers 
of the utility, by reducing wholesale revenues that would otherwise be 
shared with native load. It also allows the buyer of the cost-based 
power to resell it at a profit, so it could constitute a wealth 
transfer. What is your view of such forced sales?
    Answer. As a general matter, I do not prefer the option of forced 
sales. This issue is part of what the Commission is presently 
considering as part of its comprehensive review of Order 888. The 
Commission needs to balance the needs of native load customers with 
concern over the exercise of market power. Presumably, a utility would 
only lose market-based rate authority if it is found to have market 
power. If confirmed, I look forward to reviewing the range comments 
that the Commission receives on this subject and having the opportunity 
to thoroughly consider the Commission's alternatives.
    Question 34. One of the obstacles in building transmission is cost 
allocation. FERC has taken different approaches to this issue in 
different regions, which seems appropriate. However, some have urged 
FERC to roll in all transmission expansion costs. That seems very 
unfair to me. Since most transmission is owned by vertically integrated 
utilities, it would burden the native load customers of those 
utilities, while the beneficiaries contribute nothing. Do you believe 
FERC should roll in all transmission expansion costs?
    Answer. FERC needs and has flexibility in dealing with assigning 
transmission costs. In some cases the costs should be rolled-in, in 
other cases these costs should be directly assigned, and in some cases 
there should be a combination of both approaches.
    Question 35. Under current law, the only way a licensee can 
challenge an arbitrary condition included in a FERC hydro license 
through exercise of mandatory conditioning authority is to seek 
judicial review of the FERC license. That is true even when FERC 
believes the mandatory condition is unsupported by the record or even 
contradicted by the record. The EPAct alternative condition provisions 
should reduce the prospect of arbitrary mandatory conditions, but they 
may still be proposed. For reasons of comity FERC sometimes does not 
highlight its disagreement with the federal or state agency when they 
propose an arbitrary condition. I think that approach is fundamentally 
unfair to licensees, since it deprives them of any prospect of 
overturning an arbitrary condition through judicial review. I believe 
FERC should make any disagreement with a conditioning agency plain in 
its orders. Do you agree?''
    Answer. Yes.
    Responses of Philip D. Moeller to Questions From Senator Thomas
    Question 1. Will you pledge to work closely with states to enable 
the timely development of transmission that is needed to meet future 
load growth?
    Answer. Yes, that is a critical issue. If confirmed, it will be one 
of my priorities.
    Question 2. In Wyoming and elsewhere, it's not always easy to ship 
our coal to customers. There are a number of proposals for mine-mouth 
coal power plants in my state and others as a result. These projects 
will benefit the communities by building a tax base, and the nation, by 
diversifying our energy supply. They will not move forward without 
access to competitive regional power markets through a strong, open 
power grid. Can I count on you to support the development of these 
strong regional markets and the open-access power grid that will be so 
essential to their success? Will you make sure that new power plants 
can connect with the interstate power grid at reasonable cost and have 
the opportunity to reach the customers they need to succeed?
    Answer. Yes, both transmission expansion and open access to the 
grid are priorities of mine.
    Question 3. In the Energy Bill, DOE was given authority to 
designate National Interest Electric Transmission Corridors. If there 
were a transmission project ready to move forward tomorrow, do you 
think that those projects should have to wait for DOE to complete their 
study and designations in order to benefit from the permitting 
improvements that exist under EPACT?
    Answer. It is in the nation's interest to assure that those 
projects start as soon as possible.
    Question 4. According to the Commission's current strategic plan, 
FERC's highest priority goal is to ``Promote Development of Robust 
Energy Infrastructure.'' Do you agree with that priority, and if so, 
can you provide me with some detailed insights as to how you believe 
FERC can best promote that objective?
    Answer. Yes, I agree with that priority as long as consumer 
interests, safety and reliability are part of that goal. I strongly 
support the development of additional energy infrastructure in this 
nation. There are many critical elements to ensuring the construction 
of critically needed infrastructure. Identifying the types and 
locations of needed infrastructure, providing for investment certainty 
through timely and sufficient returns on investment, and assuring 
efficient and transparent energy markets are all necessary and complex 
components of this goal.
     Responses of Philip D. Moeller to Questions From Senator Allen
    Question 1. Virginia both produces electricity through coal, 
nuclear and natural gas resources and also, at times, imports power 
from the Midwest when the costs to generate electricity in that region 
are lower than the costs to generate in Virginia. I have been 
approached by constituents who are interested to know what assurance 
you can provide the Committee that the region will not end up with 
``least common denominator'' solutions that might work for other 
regions of the country but work contrary to the wholesale competitive 
market model that is in place in Virginia?
    Answer. All the regional markets are going through some sort of 
transition, and all need significant energy infrastructure investments, 
whether it is in new generation, new transmission or both in order for 
wholesale markets to work properly and provide consumer benefits. I am 
very aware that each region has its differences, and each market will 
reflect those differences.
    Question 2. Do you believe that a competitive market model for 
wholesale markets can stimulate new investment in transmission, 
renewable resources and energy efficiency? If so, what can be done to 
support development of such models? If not, why not?
    Answer. Yes, I believe that properly constructed competitive 
wholesale markets will provide the certainty that will lead to needed 
incentives for investments in transmission, new generation--including 
renewable resources--and energy efficiency. Various market models exist 
and are being developed throughout the nation, and the Commission needs 
to monitor the development of these different models to determine which 
market characteristics best provide for the actual investment in energy 
infrastructure.
    Question 3. The Regional Transmission Organization that operates 
the transmission grid in Virginia presently undertakes an independent 
regional planning process to determine needed new transmission 
infrastructure. All of the instate electricity producers, Dominion, 
AEP, Allegheny and the municipal and cooperative utilities, participate 
in that process which is open to the public. On the other hand, 
Virginia borders other States that do not have similar processes. What 
is the best way for the Commission to address the ``seam'' that is 
created along the borders where regional planning is undertaken in some 
regions and not others?
    Answer. The Commission needs to closely follow seams issues 
wherever they occur throughout the nation, as they are a critical 
element of making markets work for consumers on both sides of the seam. 
The FERC-State Joint Boards need to keep this a priority so that 
states, regions, and the Commission remain informed of potential 
planning deficiencies. Ultimately, greater transmission investment can 
alleviate many of the problems that can occur at seams.
     Responses of Philip D. Moeller to Questions From Senator Smith
    Question 1. As you know, FERC has a statutory responsibility in 
reviewing rates filed for approval by the Bonneville Power 
Administration, to ensure that the proposed rate is sufficient to cover 
its Treasury obligation. Do you agree that FERC would have to reject 
any rate that ``walled off'' revenues from BPA secondary sales and 
required such funds be used to pre-pay debt, rather than being used 
consistent with established precedent?
    Answer. It is my understanding that this latest proposal has been 
resolved through recent Congressional action. However, any rate that 
``walled off'' revenues would have to be examined very skeptically to 
make certain that BPA retained needed flexibility and sufficient 
revenue to assure that it could meet its ongoing Treasury obligation.
    Question 2. Do you agree that the Federal Columbia River 
Transmission System Act (P.L. 93-454) requires the BPA Administrator to 
consider all revenue sources ``in the aggregate'' when setting rates?
    Answer. I agree with the law.
    Question 3. Are you aware that that CAISO has filed a Market 
Redesign proposal (MRTU) with FERC and that a number of entities, 
including other control areas, in the Western Interconnection have 
objected to that filing? After seeing the impact on Nevada and the 
Western markets of the 2000-2001 California energy crisis, are you 
concerned about this? Do you plan to insist that no decision be made on 
this filing until you are confirmed? Do you think the FERC has the 
obligation to resolve the specific seams issues articulated by the 
other western utilities before implementing such a dramatic market rule 
change?
    Answer. I am aware of the proposal, and the objections, and given 
the severity of the Western energy crisis I can assure you that I will 
do everything I can to promote policies that prevent anything 
resembling a repeat of those events. I would hope to be a part of this 
decision, and I agree that seams issues need resolution in the West and 
the rest of the nation.
    Question 4. I understand that there is significant concern at FERC 
about development of the bulk transmission system and the failure of 
organized markets to effectively encourage these investments. 
Specifically, I understand that the Locational Marginal Pricing 
mechanism used in organized markets has not resulted in substantial 
transmission investment, however ISOs continue to try to implement 
these mechanisms. Most recently, the CAISO, in its MRTU, is proposing 
LMP for its members and in doing so, threatens to unwittingly bring in 
the entire region. At the same time, the FERC's 2004 State of the 
Markets Report clearly identifies that the stable markets in the West 
generate more investment in transmission than in California or any 
other region dominated by RTO-administered financial markets.
    What are your thoughts on this subject? Should regions be forced to 
embrace a mechanism that has not resulted in its promised benefits, 
when what we are already doing is working better?
    Answer. The Commission needs to determine which policies are 
resulting in actual investment in new transmission infrastructure. 
There are regional differences in both what is proposed and what is 
resulting in transmission investment. I believe regional differences 
should be embraced if they are working to get actual transmission 
built.
    Question 5. You are perhaps aware that many entities in the West 
opposed the imposition of the FERC's version of Standard Market Design 
or ``SMD,'' which included LMP. Some of the concerns raised by the West 
involving SMD were the clear differences between Eastern pool-based 
markets, with tightly clustered transmission systems and the 
predominance of thermally-based generation and Western bilateral 
markets, with long transmission systems (dispersed consumers) and vast 
hydroelectric systems, particularly in the pacific northwest. In other 
words, many entities in the West continue to be concerned about the 
imposition of Eastern-style market designs in a vastly different, both 
from a resource and system perspective, West.
    What are your views on the significance of these East vs. West 
distinctions? How heavily should the FERC weigh these distinctions when 
evaluating current and future market design proposals, including MRTU?
    Answer. As referenced in the preceding answer, I fully recognize 
there are distinct differences in the physical and market structure of 
regional markets, even within the East and the West, and these 
differences should be reflected in the market designs in each of the 
regional markets.
    Responses of Philip D. Moeller to Questions From Senator Bunning
    Question 1. A number of Kentucky electric distribution companies 
(and other customers) signed new service agreements with the Tennessee 
Valley Authority (TVA) in 1997. The agreements included provisions 
under which the Kentucky distributors agreed to remain TVA customers 
for another 10 years. However, the agreements also stated that the 
Kentucky customers could provide TVA Notice of their intent to leave 
TVA after five years and would then be allowed to leave TVA after an 
additional 5 years. The contracts also specifically stated that any 
departing customers would not be liable for any exit fees or stranded 
costs. The agreements further contained language concerning services 
(eg transmission) TVA would provide departing customers. Several 
Kentucky customers (and a Tennessee customer) of TVA have exercised the 
rights they have under these contracts and given Notice of their intent 
to leave TVA. The Kentucky customers provided this Notice for, among 
other reasons, their ability to secure much less expensive power for 
their customers from sources other than TVA. Since giving Notice, these 
Kentucky customers have attempted to negotiate with TVA on the rates 
and terms of conditions of the requested transmission service. TVA has 
been entirely unwilling to even discuss the transmission services the 
departing customers are requesting.
    Please provide your views on whether the FERC, as a matter of 
public policy, should facilitate access to the interstate transmission 
grid and encourage competition in the electric generation market by 
ordering the wheeling of power for electric distribution companies that 
wish to secure transmission service on our interstate transmission 
grid. For purposes of this question, please assume that the FERC has 
the legal authority to compel transmission on behalf of customers on 
the TVA system (ie ``inside the fence'').
    Answer. I believe FERC should facilitate access to the interstate 
transmission grid. Specific to TVA customers, the Commission has shown 
a willingness to address these concerns. Any major changes to 
transmission policies related to TVA must be done carefully to assure 
that any action does not threaten remaining TVA customers.
    Question 2. Kentucky has the least expensive electric rates in 
America. This is in large part due to the abundance of coal in Kentucky 
and the use of this coal to generate power. The railroads play an 
integral part in moving coal from the mine locations to the power 
generating facilities. Recently, problems with the reliability of coal 
deliveries and the rates railroads are charging for transporting coal 
have begun to develop. These problems have the potential to impact the 
ability of Kentucky to use its coal to generate reasonably priced power 
in Kentucky and to send its coal to other markets.
    I understand the FERC has recently scheduled a conference on these 
coal issues. Please provide your views on what role the FERC's should 
play in assuring an adequate, reliable supply of coal for our nation's 
generating facilities.
    Answer. This is a very serious issue that has reliability and cost 
ramifications for Kentucky and much of the nation. Although FERC does 
not have a statutory role in railroad issues, it should work closely 
with the Surface Transportation Board to help facilitate a resolution 
of delivery problems of coal via rail.
    Question 3. As I noted above, Kentucky has the least expensive 
power in the nation. Kentucky is anxious to make sure its citizens and 
businesses continue to enjoy this reasonably priced power.
    Please explain your views on the importance of the FERC recognizing 
and respecting differences in regional energy markets as it makes 
decisions on the structure of the interstate energy markets.
    Answer. There are distinct differences between regional markets, 
and those differences must be recognized and respected. The key issue 
for FERC is determining what is working in each market to actually get 
more infrastructure built. As long as these investments are being made 
and that the investments facilitate competitive wholesale markets, 
regional differences can be managed.
    Question 4. The Energy Policy Act of 2005 (EPAct) gave the 
Department of Energy authority to establish National Interest Electric 
Transmission Corridors. EPAct further gave the FERC the authority to 
authorize the construction of transmission lines in these corridors.
    Please provide your views on the responsibility of the FERC to 
consult and collaborate with states that may be impacted by the 
construction of electric transmission lines in these corridors.
    Answer. FERC must be extremely sensitive to the concerns of the 
states involved, and must maintain frequent and open communication with 
the states involved in any transmission corridor. Some type of formal 
collaborative effort between FERC and the states should help in 
facilitating this communication, but it must remain a priority for FERC 
regardless of whether such collaborative effort is formalized. In 
addition, the Commission on June 15 issued proposed regulations on this 
subject that should provide the necessary framework for a thorough 
consideration of this issue.
    Question 5. Concerns have recently been raised that the operating 
costs charged by Regional Transmission Organizations are excessive. 
These costs can eventually be absorbed by residential and industrial 
electricity consumers in states like Kentucky.
    Please provide your views on the responsibility of the FERC to 
oversee and review these types of RTO costs.
    Answer. FERC has a responsibility to closely monitor these costs 
and urge the RTOs to contain them. Many of these start-up costs should 
be one-time expenditures, but FERC needs to work to assure that costs 
are managed so that the benefits of more competitive wholesale markets 
flow to actual consumers and are not eroded by unnecessary 
expenditures.
    Question 6. Transparency of energy markets and the availability of 
timely information about costs and capacity in energy markets is 
crucial for state commission to perform their duties.
    Please provide your views on the FERC's responsibility and legal 
authority to provide for transparency in energy markets and the timely 
availability about conditions in the energy markets.
    Answer. Market transparency is not only crucial to state 
commissions, it is necessary for customers to feel confidence in the 
markets in which they are participating. FERC was given new authority 
in EPACT 2005 to require certain market transparency disclosures, and 
is in the process of implementing this authority. I fully support these 
efforts and would welcome any suggestions for improving market 
transparency.

   Responses of Philip D. Moeller to Questions From Senator Bingaman

                               HYDROPOWER

    Question 1. Section 241 of the Energy Policy Act of 2005 amends the 
Federal Power Act to modify some aspects of the hydroelectric 
relicensing process with respect to conditions and fishway 
prescriptions. I want to ensure that these modifications are 
implemented in a manner that does not undermine protection of federal 
reservations or Indian lands or trust resources.
    Do I have your commitment that you will work to ensure that the 
FERC staff coordinates closely with the resource agencies and takes 
other steps necessary to ensure that these provisions are implemented 
in a manner that protects federal reservations and Indian lands and 
trust resources during the licensing process?
    Answer. Yes.
    Question 2. In 1986, the Federal Power Act was amended to require 
the Commission, in addition to power and development purposes, to 
``give equal consideration to the purposes of energy conservation, the 
protection, mitigation of damage to, and enhancement of, fish and 
wildlife . . ., the protection of recreational opportunities, and the 
preservation of other aspects of environmental quality'' in deciding 
whether to issue a hydroelectric license.
    As a commissioner, will you ensure that environmental protection is 
given equal consideration during the hydroelectric relicensing process?
    Answer. Yes, environmental protection is critical in this process.

                      TRIBAL TRUST RESPONSIBILITY

    Question 3. Do I have your commitment that you will carry out your 
duties as Commissioner in a manner consistent with FERC's tribal trust 
responsibility?
    Answer. Yes.
    Responses of Philip D. Moeller to Questions From Senator Dorgan
    Question 1. In recent months, North Dakota oil producers have 
experienced a marked price discount between the price of crude oil that 
they produce and the prevailing West Texas Intermediate (WTI) price of 
oil. Part of the reason for this price differential is a lack of 
pipeline capacity to transport expanded North Dakota production out of 
the region and to other refining markets.
    I note that FERC's web site and its ``Strategic Plan'' emphasize 
the Commission's role in the ``development of a robust energy 
infrastructure.'' Do you see this as an important role for the 
Commission?
    Answer. Yes, developing energy infrastructure is essential to 
allowing consumers to benefit from competitive markets.
    Question 2. What can the Commission do to encourage construction of 
energy infrastructure, including for pipelines serving constrained 
markets?
    Answer. There are many critical elements to ensuring the 
construction of critically needed energy infrastructure. Identifying 
the types and locations of needed infrastructure, providing for 
investment certainty through timely and sufficient returns on 
investment, and assuring efficient and transparent energy markets are 
all necessary and complex components of this goal.
    Question 3. Specifically, what can be done in establishing rate 
structures that would encourage investment in new pipelines and ensure 
that needed capacity is built in a timely manner?
    Answer. Similar to other energy infrastructure, investment in new 
pipelines is encouraged by certainty of the permitting process and 
sufficient return on the investment.
    Question 4. Is there additional legislative authority that Congress 
should provide the Commission to encourage development of needed energy 
infrastructure?
    Answer. I am not aware of the need for any additional authority 
that FERC has requested. Congress has addressed and can choose to 
address in the future both environmental policy and tax policy in an 
effort to encourage the development of energy infrastructure.
   Responses of Philip D. Moeller to Questions From Senator Cantwell
    Question 1. Under the Northwest Power Act, FERC has the final say 
in approving the Bonneville Power Administration's rates provided that 
the proposed rates are ``sufficient to assure repayment of the Federal 
investment in the Federal Columbia River Power System over a reasonable 
number of years after first meeting the Administrator's other costs . . 
. and are based upon the Administrator's total system costs.''
    When determining the definition of terms like ``reasonable number 
of years'' and other terms in BPA's various organic statutes what 
deference would you give to years of agency precedent and practice in 
defining those terms?
    Answer. I would give great deference to the agency's precedent. BPA 
has a long history of managing the financial implications of weather 
variations in the Pacific Northwest's hydro-dependent system.
    Question 2. What deference would you give to federal statues that 
define certain provisions in BPA's organic statutes?
    Answer. I would follow the law and give appropriate deference.
    Question 3. As a FERC Commissioner, would you rely on relevant 
judicial precedent in order to define terms in BPA's organic statutes?
    Answer. Yes.
    Question 4. As you probably know, you will have a number of 
applications for renewal of hydroelectric licenses before you in the 
next few years. The Northwest is heavily reliant on hydroelectric 
generating resources. In WA State alone some 13 projects representing 
5,863 MW of generating capacity will be in various stages of the 
relicensing process between now and 2015.
    Can you provide the Committee with your perspective on 
hydroelectric power and your thoughts on the relicensing process under 
EPACT '05 and the Interim Final Rule published last year?
    Answer. Hydroelectric power is essential not only to the state of 
Washington, but to the Pacific Northwest and the entire West. Licensing 
and relicensing of hydropower projects always entails the balancing of 
various interests. It is my impression that most of the interested 
parties have cautious optimism toward the new process that was included 
in EPACT '05 and addressed in the Interim Final Rule, and that it will 
be a fairer and more predictable process for most of,the parties. If 
confirmed, I intend to monitor the process to assure that its 
implementation meets the intent of Congress on this issue.
    Question 5. The Northwest has spent more than a decade locked in 
contentious debate over various forms of regional transmission 
management. The region is currently looking at an option--known as 
ColumbiaGrid--that appears very promising, both in its substance and 
broad base of support. I will note, however, that it does not meet the 
RTO standards of FERC Order 2000.
    Do you think FERC should nonetheless encourage the development of 
this region-specific development as it moves forward?
    Answer. Yes. FERC should encourage regional solutions as long as 
they appear likely to result in additional transmission investment and 
the development of efficient wholesale markets.
    Question 6. As you know, western energy markets and ratepayers in 
WA State are still suffering negative effects of deregulation and 
related market manipulation during the 2000-2001 energy crisis. 
Ratepayers in the Northwest and the larger regional economy continue to 
suffer the ill effects of related energy hikes--some as high as 50%. 
The GAO noted in a report last November that ``. . . consumers in 
California and across other parts of the West will attest, there have 
been many negative effects [related to restructuring], including higher 
prices and market manipulation.'' Has energy market restructuring been 
successful?
    Answer. Greater competition in the wholesale electric market has 
clearly benefited consumers in the West and throughout the nation. 
However, negative impacts of the 2000-2001 Western energy crisis 
continue to affect the economies of Western states. The initial causes 
of the crisis--high demand and short supplies combining to expose the 
flaws of the California market--were exacerbated by regulatory inaction 
and market manipulation. Restructuring of the energy market is an 
ongoing process that if done correctly will be successful by providing 
consumers with lower cost energy and more choices.
    Question 7. Of those areas of the country that have not 
restructured and have not deregulated retail rates, like the Pacific 
Northwest, do you believe those regions should largely be left alone to 
address the needs of their specific industry structure as they see fit? 
If not, how far should FERC go in changing them?
    Answer. States will continue to decide whether they want to 
implement retail competition in their markets. FERC should allow 
regions to develop markets based on regional characteristics, with the 
recognition that regional markets affect each other. FERC needs to 
assure that one region's market design does not negatively impact a 
neighboring region.
    Question 8. In recent press reports, the head of the California 
Independent System Operator has suggested that the rest of the West 
will simply have to comply with California markets and that the seams 
created between California and other areas in the west is a failure of 
the neighboring states to adopt compatible models. My region has 
suffered once as a result of California's experiments, and stakeholders 
throughout the west are very concerned by these comments.
    Do you believe that FERC has a responsibility, when reviewing 
filings for California's market redesign efforts, to assess the impact 
and consequences for neighboring states?
    Answer. As referenced in the preceding answer, yes.
    Question 9. Last year's comprehensive energy legislation included a 
broad ban on the market manipulation practices exercised by Enron. As 
you know, the Northwest continues to suffer from the ill-effects of 
Enron's market manipulation practices. I imagine you are acquainted 
with the smoking-gun Enron memos, in which the company laid out 
strategies such as `Fat Boy,' `Get Shorty,' `Death Star' and the like, 
to drive up prices in the West.
    I would like to know whether you believe there is any circumstance 
in which a transaction resulting from manipulative market practices can 
be ``in the public interest,'' or ``just and reasonable?''
    Answer. It's theoretically possible that such a transaction is 
somehow in the public interest. However, my real world focus would be 
on enforcement of the ban on market manipulation practices.
    Question 10. Under FERC's Notice of Proposed Rulemaking RM-05-35-
000, the Commission has proposed amending its regulations regarding the 
standard of review that must be met to justify proposed modifications 
to Commission-jurisdictional agreements. Essentially, with the 
exception of transmission service agreements under the Open Access 
Transmission Tariff and certain natural gas transportation agreements, 
when proposed modifications to FERC jurisdictional agreements are not 
agreed to be dealt with by contract signatories under the `just and 
reasonable' standard, the Commission will review such agreements under 
the `public interest' standard, in accordance with the Mobile-Sierra 
doctrine. Most people believe that the ``public interest' standard is 
practically insurmountable.
    I know you can't tell me how you might vote as a Commissioner. I am 
concerned about any diminishment of consumers ability to find relief 
when they are exposed to rates, terms, and conditions of service that 
are not just and reasonable--the standard found in the Federal Power 
Act. However, can you tell me your views on the application of the 
``public interest'' standard and how you think it should be applied in 
contracts where there is no standard of review specified?
    Answer. That question is at the heart of the matter that is now 
under consideration at the Commission. The public policy questions 
center on two issues. The Commission needs to encourage the use of 
contracts, as contracts have been historically widely used in the 
wholesale market. Secondly, the Commission needs to protect the public 
interest. Ultimately, the Commission needs to retain the authority to 
review contracts.

     Responses of Philip D. Moeller to Questions From Senator Wyden

                         PROMOTING GREEN POWER

    Question 1. Recently, the Federal Energy Regulatory Commission 
certified an incremental hydroelectric upgrade for the first time under 
provisions of the Energy Policy Act of 2005, allowing PacificCorp, an 
Oregon energy company, to qualify for a renewable energy tax credit. 
Are there other FERC policies and programs that can boost the 
production, use and sales of renewable energy? What will you do as a 
commissioner to encourage FERC to promote green power?
    Answer. The position of commissioner can serve as a prominent voice 
in promoting and encouraging green power development. I have worked 
extensively on policies promoting both wind power and geothermal power, 
in addition to policies related to hydropower. Specifically, FERC is 
now reviewing the effects of its transmission policies under Order 888, 
and one of the many issues related to that review pertains to the 
question of how to deal with ``intermittent'' generation. Providing 
more certainty on that issue--something that is especially important to 
wind power and solar power--will help encourage the development of 
these forms of renewable energy.

                           CONSUMER ADVOCATE

    Question 2. Chairman Kelliher and Commissioner Kelly both support 
my proposal to create a Federal consumer advocate at FERC similar to 
what more than 40 states currently have. My proposal to create this 
position was unanimously agreed to during consideration of the Senate 
Energy Bill. Will you support creating a Federal ratepayer advocate at 
FERC?
    Answer. I feel that the primary job of the Commission is already to 
protect ratepayers, so any consumer advocate position would need to be 
carefully structured. If the roles and responsibilities of the consumer 
advocate position can be structured in an acceptable manner, I would 
support the creation of the position.

             RESPECT FOR STATE/LOCAL VIEWS IN LNG LICENSING

    Question 3. As you know, the Energy Bill gave FERC exclusive 
authority over siting, construction and operation of liquefied natural 
gas (LNG) import facilities. The role of states and local communities 
is limited to making suggestions to FERC during the licensing process. 
What will you do to ensure that the views of states and local 
communities are not only considered but given deference in the 
licensing process? Will you support licensing of facilities over the 
strong objections of the state and local community?
    Answer. FERC needs to assure that states and local communities are 
given opportunities throughout the process to express their views and 
concerns about any LNG facilities, and I will commit to that premise. 
It is in the interest of all the parties that state and local community 
concerns be heard throughout the process. I will give those concerns 
careful consideration and deference to the extent authorized by law. I 
would expect that there would be at least some opposition to nearly 
every proposed energy-related project in this nation, including LNG 
facilities. With LNG facilities, FERC needs to make public safety its 
primary goal.

                     HYDRO RELICENSING SETTLEMENTS

    Question 4. I understand the Commission's practice has generally 
been to encourage hydro relicensing settlement agreements, but that the 
Commission has never addressed in a comprehensive manner the question 
of what kinds of settlement provisions may be incorporated into license 
conditions. As a result, similar proposed conditions have been accepted 
in some cases and rejected in others. This has caused confusion among 
parties to these settlements as to how FERC draws these distinctions. 
There appears to be a growing recognition within the Commission that 
additional guidance is needed and that prompt agency action is 
necessary to provide negotiating parties the regulatory certainty and 
clarity they've been lacking. Do you share that view, and if so, would 
you agree that the Commission's treatment of proposed hydro licensing 
conditions ought to be consistent and predictable for all parties 
involved?
    Answer. As a general matter, I strongly support providing entities 
more certainty in hydropower relicensing, as the lack of certainty was 
one of the major complaints that led to legislative changes of the 
relicensing process in EPACT 2005. My impression is that most entities 
are guardedly optimistic that those changes in the relicensing process 
will provide that certainty, but I will commit to following this area 
very closely and working to assure that conditions are consistent and 
predictable for the parties involved.
                                 ______
                                 
    Responses of Jon Wellinghoff to Questions From Senator Domenici

                   ELECTRIC RELIABILITY ORGANIZATION

    Question 1. EPAct directed FERC to ensure the reliability and 
security of the nation's bulk-power system. Pursuant to the Energy 
bill, a single Electric Reliability Organization--the ``ERO''--will 
have the authority to establish and enforce mandatory reliability 
standards. We are now in the process of transitioning from a system of 
voluntary compliance to this new mandatory regime.
    In order to avoid a ``one size fits all'' approach, Congress was 
careful to provide a substantial role for regional reliability 
organizations. The national ERO which sets reliability standards must 
``rebuttably presume'' that a standard proposed by a Regional Entity is 
valid.
    As a Commissioner, how will you address the issue of regional 
flexibility? How will this fit into the ERO's national standards and 
their enforceability?
    Answer. I agree that new Section 215 does not contemplate a `one 
size fits all' approach to reliability standards. I recognize that 
there are circumstances under which regional differences are 
appropriate, such as to reflect physical differences in the grid, and 
if confirmed, I intend to carefully consider any requests for regional 
differences, particularly from regional entities that are organized on 
an interconnection-wide basis.

                        TRANSMISSION INVESTMENT

    Question 2. There has been sustained underinvestment in 
transmission in recent years. In order to encourage greater investment, 
EPACT directed FERC to issue a transmission incentives rule to 
establish incentives for greater investment. Do you think there is a 
need for greater transmission investment, and if so, would you comment 
on whether you believe transmission incentives are the way to secure 
that investment? Do you think incentives should be extended to 
vertically integrated utilities?
    Answer. Yes, I believe there needs to be greater investment in more 
efficient electric grid infrastructure both at the transmission level 
(primarily FERC jurisdiction) and at the distribution level (primarily 
state jurisdiction). Incentives are usually a preferred method of 
spurring investment (as opposed to fines or penalties or mandates). 
However, it is important to have properly structured incentives to 
ensure that the most efficient investments are pursued. Efficient 
alternatives to grid infrastructure investments should also be 
encouraged so that we do not have stranded transmission investments if 
alternatives to transmission prove to be more economically viable and 
efficient. Distributed generation and demand response are two possible 
examples.

                        FERC-STATE RELATIONSHIP

    Question 3. With FERC's new expanded responsibilities in the areas 
of reliability and backstop transmission siting, there is the potential 
for federal/state conflict. How do you propose to promote greater 
cooperation and coordination with the states in these areas? How can 
FERC best work with the states to identify and resolve congestion 
issues?
    Answer. FERC should collaborate with the states in electric grid 
efficiency improvements to the extent practicable and appropriate 
through coordination of reliability requirements with the regional 
reliability organizations and state commissions. As for congestion and 
other transmission planning issues, FERC again should collaborate to 
the extent practicable and appropriate with state commissions, regional 
planning organizations (Southwest Area Transmission, for example), and 
RTOs/ISOs to identify electric grid infrastructure efficiency 
improvements (increasing reliability and/or economic grid operation) 
that would include identification of areas of congestion.
    Question 4. How would you suggest that FERC and the states better 
coordinate to provide regulatory consistency on transmission expansion 
issues such as cost allocation and cost recovery?
    Answer. To the extent new transmission expansions are in the 
planning stages, it may be appropriate to open a dialog with the 
appropriate state commission(s) involved to discuss cost allocation and 
cost recovery issues.

                             COAL DELIVERY

    Question 5. While FERC does not have direct statutory authority 
pertaining to coal deliveries, coal constitutes approximately 50% of 
the fuel for electric generation today, and utilities are seeking to 
build more baseload coal plants in the future. Coal delivery issues, 
then, can greatly impact electric reliability. FERC has scheduled a 
meeting with utility and railroad representatives on June 15th to 
discuss coal-delivery matters and their impact on markets and electric 
reliability.
    Do you think there is a regulatory gap in this area?
    Answer. I have not studied this issue in any depth and do not know 
if there is a regulatory gap in this area. If confirmed, I look forward 
to reading the information developed from the June 15th meeting and 
exploring this issue further.
    Question 6. Do you believe FERC should coordinate more closely with 
the Surface Transportation Board to ensure adequate and timely coal 
deliveries?
    Answer. I would include this question among those to consider when 
I have had an opportunity to explore the issue in more depth.

               REGIONAL TRANSMISSION ORGANIZATIONS (RTOS)

    Question 7. RTOs are subject to FERC regulation, but have 
independent boards, not shareholder boards like other utilities. 
Independent RTOs presently serve about 2/3 of this country. What can 
the Commission do to hold RTOs accountable for their costs like other 
utilities? How do you measure ``reasonable'' charges?
    Answer. I believe expenses incurred by the RTOs should be held to 
the high standard required of other utility expenses. First, the costs 
must be ``used and useful''. That is, the costs must be incurred for 
the purpose of carrying out the utility responsibilities of the entity. 
Second, the costs must be prudently incurred. That is, those costs must 
be comparable to costs incurred in the industry for similar services. 
Thus, costs need to be compared across RTOs and with other non-RTO 
entities that may provide similar services and incur similar costs. 
These two tests should be used by independent auditors that audit RTO 
costs and recommend approval of cost recovery for these expenses.
    Question 8. What do you see as the Commission's role in fostering 
independent operation of the transmission grid?
    Answer. I see the Commission as an enabler and overseer of grid 
independence. This can in part be accomplished with greater 
transparency in grid operation and with oversight and enforcement of 
equal/open access to the grid by all resource providers including 
renewable energy, distributed generation, demand response, and other 
demand-side measures. This can be done in the context of RTOs, 
independent transmission owner/operators, and vertically integrated 
utilities.
    Question 9. How do you envision the new ERO working with the RTOs? 
How do you envision the new Regional Entities working with the RTOs?
    Answer. I hope that these relationships can be collaborative rather 
than confrontational and punitive. That collaboration needs to be 
fostered, however, by the Commission.

                        OPEN ACCESS TRANSMISSION

    Question 10. Rather than pursue a Standard Market Design proposal, 
which would have fundamentally restructured the electric power 
industry, FERC is now focused on revising the Commission's open access 
transmission policy under Order 888. How will you approach revision of 
Order 888?
    Answer. See response to Question 8 above.
    Question 11. In Section 1231 of EPAct, Congress gave FERC the 
authority to require government-owned utilities and electric 
cooperatives to provide open, non-discriminatory transmission access on 
their systems in a comparable manner to that required for public 
utilities. In its recent NOPR on Order 888, the Commission chose not to 
propose a generic rule to implement Section 1231, but instead to apply 
its provisions on a case-by-case basis. Do you agree with this 
approach?
    Answer. Given that, if confirmed, I will be asked to vote on this 
pending NOPR, it would not be appropriate for me to comment regarding 
this issue. It is my understanding, however, that there currently is 
some level of reciprocity required of government-owned utilities and 
co-ops regarding open access. In general if a government-owned or 
member owned utility is currently benefiting from open access use of 
utility lines under FERC jurisdiction, there should be reciprocity with 
respect to open access on the lines owned by the government-owned or 
member-owned utility by investor owned utilities within the constraints 
of the native load requirements of EPAct.

                         RELIABILITY INVESTMENT

    Question 12. Reliability, of course, is one of FERC's top 
priorities. The Commission had indicated that for prudent reliability 
expenditures, such as vegetation management charges, it will consider 
separate rate recovery mechanisms, such as surcharges. Consequently, 
companies need not undertake a full blown rate case. When utilities 
seek rate recovery for a reliability investment, do you agree that the 
Commission should address this in a single issue rate case rather than 
examine the utility's entire set of rates?
    Answer. I believe that single issue rate cases should only be used 
in very limited circumstances. Such circumstances may include, for 
example, where the expense is volatile and a large proportion of total 
cost of service such as fuel, or the expense is one that is essential 
to reliable service. Vegetation management may fall into the latter 
category.

                              NATIVE LOAD

    Question 13. In EPAct, Congress provided that utilities with 
service obligations to their native load customers are entitled to use 
the transmission they own or hold under contract to meet these service 
obligations. Do you agree that the statute makes clear that there is 
nothing discriminatory about exercising this right?
    Answer. Sec. 1233 of EPAct 2005 states in part: ``(k) Effect of 
Exercising Rights--An entity that to the extent required to meet its 
service obligations exercises rights described in subsection (b) shall 
not be considered by such action as engaging in undue discrimination or 
preference under this Act.'' Yes, the statute makes clear that an 
entity exercising the right shall not be consider as engaging in undue 
discrimination.
    Question 14. Where there are competing uses of utility transmission 
under the open access framework, do you believe that the Commission 
must recognize the utility's statutory right to use its transmission to 
serve its native load customers?
    Answer. Yes, generally. That does not, however, give that utility 
the right to use the transmission system in a manner that is unduly 
discriminatory or preferential. The system should be used efficiently.

                              NATURAL GAS

    Question 15. Inadequate gas storage capacity contributes to 
volatility of gas prices. In order to reduce volatility, the Energy 
Policy Act of 2005 authorized FERC to grant market-based rates to gas 
storage developers, even if they have market power, as long as a 
proposal meets a three part test: (1) it is in the public interest, (2) 
market based rates are needed, and (3) customers are adequately 
protected. I recognize it is unusual for Congress to authorize market-
based rates to a company that has market power.
    Are you prepared to support implementation of this provision and 
authorize market-based rates, assuming the public interest, need, and 
adequate protection criteria are met?
    Answer. If all the statutory criteria are met, if confirmed, I 
would support the implementation of this provision.
    Question 16. According to FERC, Liquefied Natural Gas (LNG) 
presently comprises 2% of the natural gas used in the Northeast and it 
could provide up to 17% by 2025. Additionally, there are currently 
about 40 LNG terminals either before FERC consideration or being 
contemplated by the natural gas industry.
    As we meet this growing trend toward LNG in the U.S., what do you 
envision FERC's priorities should be and how do you think FERC can meet 
these priorities?
    Answer. FERC's priority should be to maximize the efficient 
production, distribution, and use of energy consistent with its 
statutory authority. FERC can meet these priorities by considering 
applications for LNG terminals in the context of the storage and 
delivery of other natural gas options and alternatives.
    Question 17. In the Energy Policy Act of 2005, Congress clearly 
grants FERC exclusive authority to approve or deny an application for 
the siting, construction, expansion, or operation of an LNG terminal. 
Do you see any practical threats to this authority by those opposed to 
the construction of LNG facilities through the use of other laws to 
potentially place roadblocks (not intended by Congress) to the 
construction and siting of LNG facilities?
    Answer. I have not participated in the siting, construction, 
expansion, or operation of an LNG terminal. Thus, I am not aware of any 
practical threats to FERC's authority in this area.
    Question 18. If so, how do you think this is best alleviated?
    Answer. See response to Question 17 above.

                          NATURAL GAS MARKETS

    Question 19. Please comment on what you think the impact of 
commodities trading is on the price of natural gas. Do you believe that 
executive branch currently has the appropriate authority to effectively 
oversee the energy markets? Do you think that FERC has the appropriate 
authority necessary?
    Answer. I am not familiar with the impact of commodities trading on 
the price of natural gas. I also am not aware of the extent of 
oversight by the executive branch regarding energy markets. I do 
believe, however, that the expanded authority that the Congress has 
conferred on FERC through EPAct 2005 may provide sufficient authority 
to the Commission to effectively oversee energy market activity. It is 
my understanding that market oversight is an area in which FERC is 
currently placing a great deal of effort. To the extent that any 
deficiencies exist they should be readily revealed in FERC's monitoring 
of that oversight activity. To the extent that commodity trading 
influences energy and specifically gas markets, this is an area that 
FERC should review and suggest to Congress, if necessary, additional 
authority.
    Question 20. In recent testimony before another Senate Committee, 
Commissioner Brownell stated, ``The natural gas and electricity markets 
are inextricably linked. . . . The emergence of renewable wind energy 
as an important electricity supply alternative, for example, will have 
a mitigating impact on natural gas prices.''
    First, do you agree with this statement?
    Secondly, do you believe that the present authorities under current 
law are effective with respect to advancing the production of renewable 
energy on federal lands and federal submerged lands?
    Answer. Natural gas and electric markets are currently linked to 
some degree, given the level of electric generation from natural gas. 
To the extent that renewable energy sources can be increased in 
proportion to the total load serving resource portfolio, the linkage 
will be reduced. Similarly, independent studies have indicated that to 
the extent that more electric load requirements are met with renewable 
energy resources, pressure on gas demand will decline and with that 
decline in demand there may be a commensurate decline to real gas 
prices. Electric markets are also linked to other factors such as 
weather and peak demand. These factors are independent of natural gas 
markets.
    Present authority under current law provides for mechanisms to site 
renewable systems on federal lands and federal submerged lands. Whether 
these authorities are effective to advance production of renewable 
energy on federal lands is in question. For example, the Geothermal 
Steam Act was significantly revised in EPAct 2005. Whether these 
revisions will effectively advance the development of geothermal energy 
on federal lands has not yet been determined. It is hoped that they 
will. Similarly, the BLM has recently completed a programmatic EIS on 
the siting of wind systems on BLM lands. Again, whether this authority 
and new regulatory initiative will effectively advance wind energy 
production on federal lands has not been determined.
    Question 21. In the Commission's report to Congress in February on 
the subject of bringing natural gas from Alaska's North Slope to the 
lower 48 states, the Commission identified a number of obstacles that 
have emerged over several years that have impeded the development of 
the Alaska natural gas pipeline. Additionally, the report comments on 
the wide-ranging federal and state cooperation, inter-agency 
cooperation, and government and industry cooperation necessary to meet 
this challenge. Please comment on what you think FERC's role in this 
process is and how you think FERC can reasonably help to expedite the 
resolution of these issues so that the American people can have the 
benefit of Alaska's vast supply of natural gas?
    Answer. FERC has taken an active role in advancing this project. As 
stated in their February report to Congress:

          The Commission has been actively preparing to meet its 
        responsibilities in the authorization process for any Alaska 
        natural gas pipeline project. To this end, the Commission's 
        activities have included: (1) entering into memoranda of 
        agreements with the Regulatory Commission of Alaska and the 
        National Energy Board of Canada; (2) working on a memorandum of 
        understanding with 13 federal agencies and the Office of 
        Federal Coordinator to establish a project management framework 
        that ensures early coordination and compliance with the many 
        deadlines and procedures that will attach to the process; (3) 
        touring the pipeline routes; and (4) conducting meetings with 
        federal and Alaska agencies, prospective sponsors, and other 
        Alaskan stakeholders as recently as January 2006.
          Additionally, the Commission's new open-season rules 
        governing any Alaska natural gas pipeline should be beneficial 
        to the overall development of the project in several ways. 
        First, the rules provide the sponsors with important 
        flexibility to design open seasons that could help yield firm 
        transportation contracts needed to secure the capital to 
        develop and construct the project. Second, the ability to 
        secure the significant capital required to develop and 
        construct the project has been enhanced by the rules' allowance 
        of pre-subscriptions of reserved capacity. Third, the 
        regulations provide that a presumption of rolled-in rate 
        treatment will attach to voluntary expansions of the Alaska gas 
        pipeline.

    FERC needs to continue this effort and seek other possible roles 
including the development of analyses that would demonstrate the 
urgency for the project and economic benefits to the nation from its 
construction. Such analyses should be communicated to project 
stakeholders and state officials in order to provide those decision 
makers with the necessary information to reach expeditious and informed 
decisions.
    Question 22. Without getting into the specifics of a matter 
potentially before the Commission, I would like to ask you a question 
on gas pipeline infrastructure. One of FERC's main priorities is the 
expansion of U.S. domestic energy infrastructure. Do you think that a 
mandated return on equity on a pipeline system that would be lower than 
the return on equity of any pipeline in the past 40 years would be 
consistent with FERC's priority of expanding energy infrastructure?
    Answer. Such a return, absent other mitigating circumstances, would 
seem to be inconsistent with a goal of expansion of domestic energy 
infrastructure. Again, such infrastructure should be expanded in an 
efficient manner that promotes reliability and considers alternatives 
that may result in lower societal costs.
    Question 23. I am fully aware that the United States consumes about 
a 1/4 of the natural gas consumed worldwide. I am also aware that over 
95% of the world's proven natural gas reserves lies outside of North 
America. Additionally, I am concerned that a large portion of the 
United States, specifically most of the OCS, remains currently off-
limits to exploration and production of natural gas. As such, LNG is an 
important part of our energy mix in this country. However, how do you 
think we avoid becoming reliant upon foreign sources of natural gas, 
the same we are dependent upon foreign oil, from areas that are 
unstable and unfriendly to U.S. interests?
    Answer. Reliance on LNG poses several concerns. One certainly is 
the issue of unstable and unfriendly interests controlling our energy 
future. Other concerns include the economic instability of reliance on 
a fuel whose supply, and therefore price, may depend on alternative 
uses of the base resource, such as conversion of natural gas to liquid 
fuel instead of LNG. This could result in not only disrupted supplies 
of LNG, but also stranded investments in infrastructure that may be 
born by utility ratepayers in this country. These concerns can be 
alleviated to the extent we can balance our resource mix with renewable 
energy, energy efficiency, and more efficient means of using fossil 
fuels such as combined heat and power systems, and the use of 
indigenous fuels for generation such as coal in advanced clean coal 
technologies like IGCC.
    Question 24. Recently, I have grown concerned about the potential 
for LNG shipments to be diverted away from the U.S. markets to other 
consuming nations. Can you comment on the state of this trend, the 
future of this trend as you see it, and how we can mitigate this 
potential diversion of significant natural gas supply?
    Answer. I, too, think this is a serious concern and see no real 
answer except to diversify our portfolio as I have suggested in my 
response to Question 23 above.
    Question 25. Pursuant to Section 316 of the Energy Policy Act, the 
Natural Gas Act was amended and the Commission was directed to 
facilitate price transparency in markets for the sale or transportation 
of physical natural gas in interstate commerce. Further, the Commission 
is granted the authority to prescribe such rules as the Commission 
deems necessary and appropriate to carry out the purposes of Section 
316. Have you had the opportunity to examine the question of 
transparency in the natural gas markets? If so, have you drawn any 
conclusions that you could share with this committee that could help us 
promote and advance fair competition, market integrity, and ultimately 
protect the consuming public?
    Answer. I have not had the opportunity to examine this question 
with reference to natural gas markets. I have had experience in the 
electric markets. With respect to those markets, there is some question 
as to whether transparency promotes or inhibits competition. Some 
market analysts claim that transparency may lead to market collusion 
and ultimately price uniformity rather than true price competition. My 
experience indicates that transparency should promote fair competition 
and assist in protecting consumers. If confirmed, I look forward to 
exploring these issues at FERC with respect to both gas and electric 
markets.
    Question 26. Along those same lines, as mandated by EPACT, FERC and 
the CFTC entered into a memorandum of understanding with respect to 
information sharing to prevent procedural duplication in the oversight 
of the commodity markets. Do you commit to working with the CFTC to 
ensure that this issue of natural gas market transparency is given 
continued attention at FERC?
    Answer. Yes, if confirmed, I do.
    Question 27. FERC has a strategic plan and the first goal stated in 
the plan is promote development of a robust energy infrastructure. I 
think that's a critical mission statement for this agency. Through a 
combination of legislation, regulation and litigation we've made it 
very difficult to develop major new energy facilities in this country. 
Do you share the vision that FERC's primary mission is to promote the 
development of energy infrastructure for this country?
    Answer. With the caveat that the Commission's mission is to promote 
the development of efficient energy infrastructure I would generally 
agree. Promoting such development may entail promoting efficiency 
improvements to distribution infrastructure rather than transmission 
infrastructure where such development may be more cost effective and 
provide higher societal benefits. See also my responses to Question 2 
and Question 16 above.
    Question 28. What are the critical elements of a FERC policy that 
will ensure that needed infrastructure is built and built in a timely 
manner? How does an agency like FERC make sure that regulated companies 
are allowed to a sufficient return to attract capital into that 
business?
    Answer. FERC's rate-setting authority for infrastructure 
investments is the key policy that will drive such investments. 
Sufficient returns are those that allow companies that invest in 
efficient infrastructure project returns commensurate with those earned 
by companies that experience similar levels of business risk. If 
confirmed, I would support providing those companies that make such 
investments a return at that level.
    Question 29. You are both from the West and had the experience of 
seeing the California energy crisis and its fallout for other Western 
states first hand. One of the obvious lessons from that experience is 
that electricity markets have to be structured properly if competition 
is to benefit consumers. Do you agree that competitive wholesale 
markets, properly structured, do benefit consumers and what about the 
use of price caps, bid caps an similar price mitigation measures?
    Answer. Properly structured competitive wholesale electric markets 
may benefit retail consumers to the extent that those consumers have 
sufficient choices in those markets and can also respond to retail 
price signals. The choices I refer to include access to capital and 
information that would allow those consumers options including 
enhancing energy efficiency of their end-use consumption, considering 
distributed generation, having the option to participate in and be 
compensated adequately for demand response activities. Price mitigation 
measures may be appropriate as market oversight tools in markets that 
are not fully competitive or properly structured.
    Question 30. What more does FERC need to do so that consumers see 
the full benefits of competitive markets? How would you proposed that 
FERC work with the state regulatory authorities, RTOs and others to 
advance fairness for merchant generators when it comes to access to the 
grid and in bidding for new capacity?
    Answer. Many of the things that need to be done for consumers to 
see the full benefits of competitive markets are within the 
jurisdiction of the states and not FERC. To the extent that FERC can 
collaborate with state commissions to determine what federal barriers 
exist to state implementation of effective markets for consumers, FERC 
should do so. FERC should work within its statutory authority with all 
parties mentioned to provide all resources--merchant generators, 
renewable generators, providers of energy efficiency and demand 
response resources, and distributed generators--equal and fair access 
to consumers in order to establish truly competitive markets.
    Question 31. The Mobile Sierra doctrine and the public interest 
standard were established by the U.S. Supreme Court in a series of 
cases a half-century ago. The public interest standard does not protect 
sellers, it protects contracts, it protects the agreement. Sometimes 
the public interest standard works to the advantage of the seller, 
sometimes to the advantage of the buyer. Recently, it has worked to the 
advantage of the buyer. The power sales contracts between Calpine and 
California are costing Calpine $1 billion, and helped drive it into 
bankruptcy. Under the just and reasonable standard, there is little 
doubt the contract would have been modified. Under the public interest 
standard, Calpine continued to perform. So, the public interest 
standard saved California consumers $1 billion. The Supreme Court is 
presumed to be competent to read a statute. They read the Federal Power 
Act and came up with the Mobile Sierra doctrine and the public interest 
standard. What is your view of the Mobile Sierra doctrine? Is it good 
law? Do you agree with the Supreme Court?
    Answer. In general I believe that regulators should be retain the 
power necessary to carry out their statutory responsibilities. The 
requirements of sections 205 and 206 of the Federal Power Act require 
that all rates, charges, terms, and conditions be just and reasonable 
and not unduly discriminatory or preferential. The Commission should 
have full authority to implement the provisions of the statute. 
Therefore, the Commission must, in determining how or whether to apply 
the Mobile Sierra doctrine, consider whether the full requirements of 
the statute are being met.
    It should be noted that the Mobile Sierra doctrine was applied by 
the Supreme Court to rates. Thus, there remains a question whether the 
doctrine also applies to non-rate terms and conditions such as 
termination clauses. The First Circuit has held that FERC has 
substantial discretion in determining how or whether to apply the 
Mobile Sierra doctrine to ensure that customers are adequately 
protected. Specifically, several years ago, Judge Boudin, writing for 
the First Circuit in a Mobile-Sierra case, noted that,

        ``whether and when Mobile-Sierra applies in varying contexts is 
        going to remain in confusion unless and until the FERC makes up 
        its mind and squarely confronts the underlying issues. It is 
        not at all clear to us that FERC, which is now becoming hostile 
        to Mobile-Sierra, needs to tolerate it at all. FERC has broad 
        powers to regulate the substantive terms of filings that it 
        accepts and allows to become effective, whether they are 
        ordinary tariffs or contracts, [. . .]; and such powers may 
        include the power to require prospectively by regulation, that 
        all contracts set their rates subject to the FERC's just and 
        reasonable standard.'' . . . Alternatively, if FERC were 
        neutral to or opposed to such clauses but wanted to eliminate 
        much of the existing uncertainty as to the parties intent, it 
        might prescribe prospectively the terms the parties would have 
        to use to invoke Mobile-Sierra protection.''

        [Boston Edison Co. v. FERC, 233 F.3d 60, 68 (1st Cir. 2000)]

    Question 32. I want your views on FERC authority over buyer market 
power. FERC has been encouraged to regulate buyer market power, by 
forcing utilities to buy available lower cost power rather than self-
generate. I am not convinced FERC has legal authority in this area. 
Also, there is serious potential for conflict with the states, since a 
FERC order to a utility to buy power instead of self generating would 
undercut state decisions on ratebasing generation. Do you think FERC 
has this kind of legal authority and do you think it is good policy?
    Answer. I do not believe FERC has jurisdiction in this area either. 
I would need to see the authority under which it ordered a retail 
utility to buy in a specific market from a specific seller rather than 
self-generate. If lower cost power was available in the market to that 
utility, however, I do not see any prohibition in FERC informing the 
appropriate state regulatory agency that would have jurisdiction over 
recovery of the costs associated with the ultimate retail sale. Thus, 
FERC may have an impact on the buying decisions of retail distribution 
companies, but not in a direct regulatory manner. The general policy is 
to encourage the utility to make efficient purchasing decisions that 
minimize total societal costs. FERC may play some role in this, but the 
primary role is for the state commissions. And a state commission may 
have a valid rationale, based on a state policy such as a renewable 
portfolio standard that produces lower societal costs, to allow a 
utility under its jurisdiction to self-generate higher cost power than 
can be purchased in the market.
    Question 33. The market-based rate proposed rules FERC issued last 
month ask questions about what happens when a utility loses market-
based rates. For example, if a utility loses market-based rates in some 
markets, but retains it in other markets, should FERC force a utility 
to sell at cost-based rates in lieu of making market-based sales? I am 
concerned that such forced sales would hurt the native load customers 
of the utility, by reducing wholesale revenues that would otherwise be 
shared with native load. It also allows the buyer of the cost-based 
power to resell it at a profit, so it could constitute a wealth 
transfer. What is your view of such forced sales?
    Answer. Given that, if confirmed, I will be asked to vote on this 
pending NOPR, it would not be appropriate for me to comment regarding 
this issue. Further, the questions presume a number of assumptions that 
make it difficult to provide an useful answer. If confirmed, I would 
commit to carefully review this issue and be open to all views 
presented.
    Question 34. One of the obstacles in building transmission is cost 
allocation. FERC has taken different approaches to this issue in 
different regions, which seems appropriate. However, some have urged 
FERC to roll in all transmission expansion costs. That seems very 
unfair to me. Since most transmission is owned by vertically integrated 
utilities, it would burden the native load customers of those 
utilities, while the beneficiaries contribute nothing. Do you believe 
FERC should roll in all transmission expansion costs?
    Answer. Transmission expansion costs should generally be allocated 
to those entities who either cause the costs to be incurred--a 
generator or large load on a radial line necessary to interconnect to 
the transmission provider's network--or to those customers who benefit 
from the expansion via reliability improvements and/or direct or 
indirect economic benefits. So to the extent that ``rolling in'' 
transmission costs as defined in the question would result in 
``beneficiaries'' contributing nothing to the expansion costs, I do not 
believe that it is appropriate regulatory policy.
    Question 35. Under current law, the only way a licensee can 
challenge an arbitrary condition included in a FERC hydro license 
through exercise of mandatory conditioning authority is to seek 
judicial review of the FERC license. That is true even when FERC 
believes the mandatory condition is unsupported by the record or even 
contradicted by the record. The EPAct alternative condition provisions 
should reduce the prospect of arbitrary mandatory conditions, but they 
may still be proposed. For reasons of comity FERC sometimes does not 
highlight its disagreement with the federal or state agency when they 
propose an arbitrary condition. I think that approach is fundamentally 
unfair to licensees, since it deprives them of any prospect of 
overturning an arbitrary condition through judicial review. I believe 
FERC should make any disagreement with a conditioning agency plain in 
its orders. Do you agree?''
    Answer. Yes.
     Responses of Jon Wellinghoff to Questions From Senator Thomas
    Question 1. Will you pledge to work closely with states to enable 
the timely development of transmission that is needed to meet future 
load growth?
    Answer. Yes. I have extensive experience working with state 
commissions and agencies. If confirmed, I will work with them within 
the statutory authority of FERC to enable the timely development of 
efficient electric grid enhancements and demand-side measures to meet 
load requirements.
    Question 2. In Wyoming and elsewhere, it's not always easy to ship 
our coal to customers. There are a number of proposals for mine-mouth 
coal power plants in my state and others as a result. These projects 
will benefit the communities by building a tax base, and the nation, by 
diversifying our energy supply. They will not move forward without 
access to competitive regional power markets through a strong, open 
power grid. Can I count on you to support the development of these 
strong regional markets and the open-access power grid that will be so 
essential to their success? Will you make sure that new power plants 
can connect with the interstate power grid at reasonable cost and have 
the opportunity to reach the customers they need to succeed?
    Answer. I believe that mine-mouth coal base generating facilities 
using advanced clean coal technologies are an essential and integral 
part of this nation's energy future. If confirmed, I will work within 
the statutory authority of FERC to provide for open, fair, and 
reasonably priced access to all efficient load serving resources 
including mine-mouth clean coal facilities.
    Question 3. In the Energy Bill, DOE was given authority to 
designate National Interest Electric Transmission Corridors. If there 
were a transmission project ready to move forward tomorrow, do you 
think that those projects should have to wait for DOE to complete their 
study and designations in order to benefit from the permitting 
improvements that exist under EPACT?
    Answer. No. If there is a project ready to move forward tomorrow, 
it should be allowed to proceed in parallel to the DOE study.
    Question 4. According to the Commission's current strategic plan, 
FERC's highest priority goal is to ``Promote Development of Robust 
Energy Infrastructure.'' Do you agree with that priority, and if so, 
can you provide me with some detailed insights as to how you believe 
FERC can best promote that objective?
    Answer. With the caveat that the Commission's mission is to promote 
the development of an efficient as well as a robust energy 
infrastructure, I would generally agree. Promoting such development may 
entail promoting efficiency improvements to distribution infrastructure 
rather than transmission infrastructure where such development may be 
more cost effective and provide higher societal benefits. It also may 
entail promoting demand response and demand measures to the extent 
appropriate within the statutory authority of FERC. In any case, FERC 
can promote this objective by providing equal, fair, and reasonably 
priced access to all resource providers that meet load requirements in 
an efficient and effective manner. Promoting an efficient expanded 
energy infrastructure would also apply to the delivery of natural gas 
and the provision of hydro services. In the natural gas arena for 
example, gas compressor stations on interstate pipelines can be made 
more efficient through the use of heat recovery systems that generate 
electricity from what would otherwise be waste heat. FERC should 
encourage such efficiency improvements.
      Responses of Jon Wellinghoff to Questions From Senator Allen
    Question 1. Virginia both produces electricity through coal, 
nuclear and natural gas resources and also, at times, imports power 
from the midwest when the costs to generate electricity in that region 
are lower than the costs to generate in Virginia. I have been 
approached by constituents who are interested to know what assurance 
you can provide the Committee that the region will not end up with 
``least common denominator'' solutions that might work for other 
regions of the country but work contrary to the wholesale competitive 
market model that is in place in Virginia?
    Answer. I firmly believe that the states and regional stakeholders 
should determine their own regional energy solutions. I hope that FERC 
can provide Virginia with information as to ``best practices'' that may 
be considered for adoption in your region, however, to improve 
efficiency and lower total bills. But I am not a proponent of imposing 
uniform solutions on states or regions.
    Question 2. Do you believe that a competitive market model for 
wholesale markets can stimulate new investment in transmission, 
renewable resources and energy efficiency? If so, what can be done to 
support development of such models? If not, why not?
    Answer. Yes, possibly. That model must be properly structured and 
provide consumers with appropriate access to information and capital to 
make the most efficient decisions. Support of such a model will require 
collaboration and cooperation among FERC, the states, utilities, 
transmission operators, market operators, and other stakeholders. 
Investors will need to be provided assurances of a reasonable return 
and a tolerable level of business risk. These conditions can be met, 
but cross-jurisdictional cooperation is essential. A number of states 
have in place mechanisms to stimulate investment in renewable energy 
development and energy efficiency. FERC needs to review its statutory 
authority in these areas and determine within the boundaries of that 
authority how it may collaborate with the states to stimulate these 
investments.
    Question 3. The Regional Transmission Organization that operates 
the transmission grid in Virginia presently undertakes an independent 
regional planning process to determine needed new transmission 
infrastructure. All of the instate electricity producers, Dominion, 
AEP, Allegheny and the municipal and cooperative utilities, participate 
in that process which is open to the public. On the other hand, 
Virginia borders other States that do not have similar processes. What 
is the best way for the Commission to address the ``seam'' that is 
created along the borders where regional planning is undertaken in some 
regions and not others?
    Answer. Within the boundaries of its statutory authority, the 
Commission should encourage the type of regional transmission planning 
that is conducted by the RTO that operates in Virginia and in other 
areas that border Virginia. To the extent that those jurisdictions do 
not choose to engage in such regional planning, it may be appropriate 
to institute a dialog to provide information as to how such planning 
may be beneficial to consumers in those jurisdictions. Once such data 
is provided to them, consumers, utilities, commissions, and other 
stakeholders in those border regions can make an informed decision as 
to the efficacy of such regional transmission planning activities.
      Responses of Jon Wellinghoff to Questions From Senator Smith
    Question 1. During your testimony, you stated your support for the 
development of more renewable energy resources to meet the nation's 
electricity needs. However, you did not include hydropower in your 
response. Do you believe that hydropower is a renewable energy 
resource? What are your views regarding its contribution and value to 
the country's energy mix?
    Answer. Large hydropower (> 30 MW) is not defined as a renewable 
resource in the Nevada portfolio standard. Certainly the currently 
installed hydropower generation is a valuable asset to our country's 
energy portfolio. As for new hydropower, it is my understanding that 
there are not significant sites for new hydropower development.
    Question 2. Hydropower has significant potential for new 
development at traditional sites and with emerging hydro technologies. 
This growth potential includes capacity and efficiency gains at 
existing hydro facilities, installing hydro generation at non-hydro 
dams, and development of in-stream, ocean/tidal and conduit power.
    Given the energy problems the country currently faces, the growing 
demand for electricity, and the need for clean energy sources, would 
you support policies at FERC that encourage and facilitate development 
and licensing of these hydropower resources?
    Answer. Yes, to the extent that they improved efficiency of 
hydropower production or utilized new technologies such as in-stream or 
ocean/tidal and conduit power, these are new energy sources that should 
be pursued.
    Question 3. As you know, FERC has a statutory responsibility in 
reviewing rates filed for approval by the Bonneville Power 
Administration, to ensure that the proposed rate is sufficient to cover 
its Treasury obligation. Do you agree that FERC would have to reject 
any rate that ``walled off'' revenues from BPA secondary sales and 
required such funds be used to pre-pay debt, rather than being used 
consistent with established precedent?
    Answer. I am not familiar enough with the BPA rate setting 
requirements to offer an opinion. If confirmed, I would be open to 
consider the rejection of such a restricted rate if one was proposed 
consistent with the evidence presented and the law governing the BPA 
rate setting authority of FERC.
    Question 4. Do you agree that the Federal Columbia River 
Transmission System Act (P.L. 93-454) requires the BPA Administrator to 
consider all revenue sources ``in the aggregate'' when setting rates?
    Answer. I am not familiar with the Act. If confirmed, I would 
intend to review the statute in preparation for participation in BPA 
rate setting proceedings.
    Question 5. Are you aware that that CAISO has filed a Market 
Redesign proposal (MRTU) with FERC and that a number of entities, 
including other control areas, in the Western Interconnection have 
objected to that filing? After seeing the impact on Nevada and the 
Western markets of the 2000-2001 California energy crisis, are you 
concerned about this? Do you plan to insist that no decision be made on 
this filing until you are confirmed? Do you think the FERC has the 
obligation to resolve the specific seams issues articulated by the 
other western utilities before implementing such a dramatic market rule 
change?
    Answer. Yes, I am aware of the filing and the concern expressed by 
certain entities. If confirmed, I may be required to rule on this 
pending matter, and so it would not be appropriate for me to comment on 
my position with respect to the filing or the objections to it. If 
confirmed, I will give the matter every consideration and review the 
evidence presented and concerns expressed by all parties prior to 
rendering my decision.
    Question 6. I understand that there is significant concern at FERC 
about development of the bulk transmission system and the failure of 
organized markets to effectively encourage these investments. 
Specifically, I understand that the Locational Marginal Pricing 
mechanism used in organized markets has not resulted in substantial 
transmission investment; however, ISOs continue to try to implement 
these mechanisms. Most recently, the CAISO, in its MRTU, is proposing 
LMP for its members and in doing so, threatens to unwittingly bring in 
the entire region. At the same time, the FERC's 2004 State of the 
Markets Report clearly identifies that the stable markets in the West 
generate more investment in transmission than in California or any 
other region dominated by RTO-administered financial markets.
    What are your thoughts on this subject? Should regions be forced to 
embrace a mechanism that has not resulted in its promised benefits, 
when what we are already doing is working better?
    Answer. No, I do not believe that regions should be forced to 
embrace mechanisms that are not efficient in producing intended 
results. We must look also to the results we are trying to encourage. 
Transmission investment in and of itself should not be a goal. The goal 
should be the investment in efficient energy infrastructure that 
produces the greatest societal benefits at the least societal cost. 
This may entail implementing demand response in some instances instead 
of making transmission investments or encouraging investments in 
distributed generation. We must look at the energy problem from an 
integrated perspective of optimizing overall efficiency. So what is 
being done in areas outside the CAISO with respect to transmission 
investment may not be ``working better'' if the metric used to measure 
``better'' is simply new transmission miles installed.
    Question 7. You are perhaps aware that many entities in the West 
opposed the imposition of the FERC's version of Standard Market Design 
or ``SMD,'' which included LMP. Some of the concerns raised by the West 
involving SMD were the clear differences between Eastern pool-based 
markets, with tightly clustered transmission systems and the 
predominance of thermally-based generation and Western bilateral 
markets, with long transmission systems (dispersed consumers) and vast 
hydroelectric systems, particularly in the pacific northwest. In other 
words, many entities in the West continue to be concerned about the 
imposition of Eastern-style market designs in a vastly different, both 
from a resource and system perspective, West.
    What are your views on the significance of these East vs. West 
distinctions? How heavily should the FERC weigh these distinctions when 
evaluating current and future market design proposals, including MRTU?
    Answer. FERC needs to carefully consider regional differences when 
reviewing market structures and appropriate mechanisms to encourage 
efficient markets. The West's electric system is distinct from that 
operating in the East, and FERC should give careful consideration to 
the characteristics of each region and the policies within each state 
within the regions (such as renewable portfolio standards) when 
evaluating proposals that are being considered for implementation in 
those markets.
     Responses of Jon Wellinghoff to Questions From Senator Bunning
    Question 1. A number of Kentucky electric distribution companies 
(and other customers) signed new service agreements with the Tennessee 
Valley Authority (TVA) in 1997. The agreements included provisions 
under which the Kentucky distributors agreed to remain TVA customers 
for another 10 years. However, the agreements also stated that the 
Kentucky customers could provide TVA Notice of their intent to leave 
TVA after five years and would then be allowed to leave TVA after an 
additional 5 years.
    The contracts also specifically stated that any departing customers 
would not be liable for any exit fees or stranded costs. The agreements 
further contained language concerning services (eg transmission) TVA 
would provide departing customers. Several Kentucky customers (and a 
Tennessee customer) of TVA have exercised the rights they have under 
these contracts and given Notice of their intent to leave TVA. The 
Kentucky customers provided this Notice for, among other reasons, their 
ability to secure much less expensive power for their customers from 
sources other than TVA. Since giving Notice, these Kentucky customers 
have attempted to negotiate with TVA on the rates and terms of 
conditions of the requested transmission service. TVA has been entirely 
unwilling to even discuss the transmission services the departing 
customers are requesting.
    Please provide your views on whether the FERC, as a matter of 
public policy, should facilitate access to the interstate transmission 
grid and encourage competition in the electric generation market by 
ordering the wheeling of power for electric distribution companies that 
wish to secure transmission service on our interstate transmission 
grid. For purposes of this question, please assume that the FERC has 
the legal authority to compel transmission on behalf of customers on 
the TVA system (ie ``inside the fence'').
    Answer. It is not clear to me that FERC has sufficient jurisdiction 
to effectuate a resolution to the controversy you have described, and 
it is not an issue that I have researched. If I assume that FERC does 
have authority to compel TVA to wheel power for the distribution 
customers, then public policy would favor allowing the distribution 
customers to access the most efficient resources to meet their demand.
    Question 2. Kentucky has the least expensive electric rates in 
America. This is in large part due to the abundance of coal in Kentucky 
and the use of this coal to generate power. The railroads play an 
integral part in moving coal from the mine locations to the power 
generating facilities. Recently, problems with the reliability of coal 
deliveries and the rates railroads are charging for transporting coal 
have begun to develop. These problems have the potential to impact the 
ability of Kentucky to use its coal to generate reasonably priced power 
in Kentucky and to send its coal to other markets.
    I understand the FERC has recently scheduled a conference on these 
coal issues. Please provide your views on what role the FERC's should 
play in assuring an adequate, reliable supply of coal for our nation's 
generating facilities.
    Answer. I have not studied this issue in any depth. If confirmed, I 
look forward to reading the information developed from the June 15th 
FERC conference on this matter and exploring this issue further.
    Question 3. As I noted above, Kentucky has the least expensive 
power in the nation. Kentucky is anxious to make sure its citizens and 
businesses continue to enjoy this reasonably priced power.
    Please explain your views on the importance of the FERC recognizing 
and respecting differences in regional energy markets as it makes 
decisions on the structure of the interstate energy markets.
    Answer. It is important for FERC to both recognize and respect the 
regional differences in energy markets. This is necessary to not only 
preserve regional autonomy, thereby producing alternative models that 
can produce data for the benefit of all regions, but more importantly 
it is necessary to structure markets in the most efficient manner 
possible by considering the particular characteristics of a region and 
tailoring the region's market structure to optimize those 
characteristics.
    Question 4. The Energy Policy Act of 2005 (EPAct) gave the 
Department of Energy authority to establish National Interest Electric 
Transmission Corridors. EPAct further gave the FERC the authority to 
authorize the construction of transmission lines in these corridors.
    Please provide your views on the responsibility of the FERC to 
consult and collaborate with states that may be impacted by the 
construction of electric transmission lines in these corridors.
    Answer. FERC has a responsibility to consult and collaborate with 
the states regarding the construction of transmission lines in 
designated corridors. In addition to review and analysis of the most 
efficient options to line construction, that collaboration should 
include consultation on efficient siting and construction alternatives, 
generation alternatives, demand response, and distributed generation.
    Question 5. Concerns have recently been raised that the operating 
costs charged by Regional Transmission Organizations are excessive. 
These costs can eventually be absorbed by residential and industrial 
electricity consumers in states like Kentucky.
    Please provide your views on the responsibility of the FERC to 
oversee and review these types of RTO costs.
    Answer. FERC has the responsibility to oversee and review these 
costs. I believe expenses incurred by the RTOs should be held to the 
high standard required of other utility expenses. First the costs must 
be ``used and useful.'' That is, the costs must be incurred for the 
purpose of carrying out the responsibilities of the entity. Second, the 
costs must be prudently incurred. That is, those costs must be 
comparable to costs incurred in the industry for similar services. 
Thus, costs need to be compared across RTOs and with other non-RTO 
entities that may provide similar services and incur similar costs. 
These two tests should be used by independent auditors that audit RTO 
costs and recommend approval of cost recovery for these expenses.
    Question 6. Transparency of energy markets and the availability of 
timely information about costs and capacity in energy markets is 
crucial for state commission to perform their duties.
    Please provide your views on the FERC's responsibility and legal 
authority to provide for transparency in energy markets and the timely 
availability about conditions in the energy markets.
    Answer. EPAct 2005 provided FERC with the authority to provide for 
transparency in energy markets. This information is not only necessary 
for state commissions to perform their duties, but transparency can 
assist consumers in making informed decisions with respect to 
alternative investments in energy efficiency, distributed generation 
and demand response. Thus, transparency is not only essential for state 
regulators, it is one of the precepts to an efficient market structure.
    Responses of Jon Wellinghoff to Questions From Senator Bingaman

                               HYDROPOWER

    Question 1. Section 241 of the Energy Policy Act of 2005 amends the 
Federal Power Act to modify some aspects of the hydroelectric 
relicensing process with respect to conditions and fishway 
prescriptions. I want to ensure that these modifications are 
implemented in a manner that does not undermine protection of federal 
reservations or Indian lands or trust resources.
    Do I have your commitment that you will work to ensure that the 
FERC staff coordinates closely with the resource agencies and takes 
other steps necessary to ensure that these provisions are implemented 
in a manner that protects federal reservations and Indian lands and 
trust resources during the licensing process?
    Answer. Yes, if confirmed, I will, to the extent possible and 
consistent with statute, request that FERC staff coordinate closely 
with the resource agencies and take other steps necessary to provide 
for the protection of federal reservations and Indian lands and trust 
resources during the hydroelectric licensing process.
    Question 2. In 1986, the Federal Power Act was amended to require 
the Commission, in addition to power and development purposes, to 
``give equal consideration to the purposes of energy conservation, the 
protection, mitigation of damage to, and enhancement of, fish and 
wildlife . . ., the protection of recreational opportunities, and the 
preservation of other aspects of environmental quality'' in deciding 
whether to issue a hydroelectric license.
    As a commissioner, will you ensure that environmental protection is 
given equal consideration during the hydroelectric relicensing process?
    Answer. If confirmed, I will to the extent of my authority and 
consistent with other statutory provisions, give equal consideration to 
the purposes of energy conservation, the protection, mitigation of 
damage to, and enhancement of, fish and wildlife . . ., the protection 
of recreational opportunities, and the preservation of other aspects of 
environmental quality in deciding whether to issue a hydroelectric 
license

                      TRIBAL TRUST RESPONSIBILITY

    Question 3. Do I have your commitment that you will carry out your 
duties as Commissioner in a manner consistent with FERC's tribal trust 
responsibility?
    Answer. Yes. If confirmed I will do so to the extent of my 
authority consistent with other statutory requirements.
     Responses of Jon Wellinghoff to Questions From Senator Dorgan
    Question 1. In recent months, North Dakota oil producers have 
experienced a marked price discount between the price of crude oil that 
they produce and the prevailing West Texas Intermediate (WTI) price of 
oil. Part of the reason for this price differential is a lack of 
pipeline capacity to transport expanded North Dakota production out of 
the region and to other refining markets.
    I note that FERC's web site and its ``Strategic Plan'' emphasize 
the Commission's role in the ``development of a robust energy 
infrastructure.'' Do you see this as an important role for the 
Commission?
    Answer. Yes, I do.
    Question 2. What can the Commission do to encourage construction of 
energy infrastructure, including for pipelines serving constrained 
markets?
    Answer. It can ensure that under its rate-setting authority it 
provides for a return on investment commensurate with the risks 
involved in developing and operating the infrastructure project.
    Question 3. Specifically, what can be done in establishing rate 
structures that would encourage investment in new pipelines and ensure 
that needed capacity is built in a timely manner?
    Answer. Alternative rate structures may encourage investments in a 
more timely manner if those rate structures provided for some method of 
accelerated recovery of investment. I have not investigated the 
feasibility of such rate structures, but if confirmed, I would be open 
to considering such mechanisms to the extent they encouraged efficient 
infrastructure investments. Also, as noted above, the Commission can 
ensure that under its rate-setting authority it provides for a return 
on investment commensurate with the risks involved in developing and 
operating the infrastructure project.
    Question 4. Is there additional legislative authority that Congress 
should provide the Commission to encourage development of needed energy 
infrastructure?
    Answer. I am not aware of the need for additional legislative 
authority from Congress to encourage development of needed energy 
infrastructure.
    Responses of Jon Wellinghoff to Questions From Senator Cantwell
    Question 1. Under the Northwest Power Act, FERC has the final say 
in approving the Bonneville Power Administration's rates provided that 
the proposed rates are ``sufficient to assure repayment of the Federal 
investment in the Federal Columbia River Power System over a reasonable 
number of years after first meeting the Administrator's other costs . . 
. and are based upon the Administrator's total system costs.''
    When determining the definition of terms like ``reasonable number 
of years'' and other terms in BPA's various organic statutes what 
deference would you give to years of agency precedent and practice in 
defining those terms?
    Answer. If confirmed I would give a great deal of deference to the 
agency's precedent and practice in defining those terms.
    Question 2. What deference would you give to federal statues that 
define certain provisions in BPA's organic statutes?
    Answer. I would give a great deal of deference to federal statues 
that define certain provisions in BPA's organic statutes.
    Question 3. As a FERC Commissioner, would you rely on relevant 
judicial precedent in order to define terms in BPA's organic statutes?
    Answer. Yes, I would rely on relevant judicial precedent in order 
to define terms in BPA's organic statutes.
    Question 4. As you probably know, you will have a number of 
applications for renewal of hydroelectric licenses before you in the 
next few years. The Northwest is heavily reliant on hydroelectric 
generating resources. In WA State alone some 13 projects representing 
5,863 MW of generating capacity will be in various stages of the 
relicensing process between now and 2015.
    Can you provide the Committee with your perspective on 
hydroelectric power and your thoughts on the relicensing process under 
EPACT '05 and the Interim Final Rule published last year?
    Answer. I believe that hydroelectric power is an integral part of 
our nation's resource portfolio. It is my understanding that EPACT 2005 
and the Interim Final Rule provide for procedures for relicensing that 
are anticipated to streamline the process. If confirmed, I will review 
that process to determine if it is operating efficiently and take 
appropriate action within my statutory authority, if in my opinion, the 
process is not operating efficiently.
    Question 5. The Northwest has spent more than a decade locked in 
contentious debate over various forms of regional transmission 
management. The region is currently looking at an option--known as 
ColumbiaGrid--that appears very promising, both in its substance and 
broad base of support. I will note, however, that it does not meet the 
RTO standards of FERC Order 2000.
    Do you think FERC should nonetheless encourage the development of 
this region-specific development as it moves forward?
    Answer. Yes, I support region specific transmission management, and 
I believe it should be encouraged by FERC.
    Question 6. As you know, western energy markets and ratepayers in 
WA State are still suffering negative effects of deregulation and 
related market manipulation during the 2000-2001 energy crisis. 
Ratepayers in the Northwest and the larger regional economy continue to 
suffer the ill effects of related energy hikes--some as high as 50%. 
The GAO noted in a report last November that ``. . . consumers in 
California and across other parts of the West will attest, there have 
been many negative effects [related to restructuring], including higher 
prices and market manipulation.''
    Has energy market restructuring been successful?
    Answer. No, energy market restructuring has not been successful in 
many respects. Therefore, the Commission must, in regulating wholesale 
markets, seek to ensure that any jurisdictional market rules or tariffs 
are designed to provide effective protection to customers. Competition 
can serve to lower prices and benefit consumers only if competition is 
effective and markets are structured efficiently.
    Question 7. Of those areas of the country that have not 
restructured and have not deregulated retail rates, like the Pacific 
Northwest, do you believe those regions should largely be left alone to 
address the needs of their specific industry structure as they see fit? 
If not, how far should FERC go in changing them?
    Answer. Each region of the country should decide, based on the 
characteristics of the electric system in that region, the appropriate 
market structure for the region. FERC should provide market oversight 
and assistance to convey ``best practices'' and ``lessons learned'' 
from other regions so that efficiencies can be gained in all regions 
from the experiences of others. In addition, FERC has the statutory 
responsibility to provide for open access to the transmission system in 
those areas where it is given jurisdiction and to oversee reliability 
and resource adequacy to the extent of its statutory authority. FERC 
also has authority to oversee markets to determine if there is market 
manipulation occurring and take appropriate action consistent with its 
statutory authority.
    Question 8. In recent press reports, the head of the California 
Independent System Operator has suggested that the rest of the West 
will simply have to comply with California markets and that the seams 
created between California and other areas in the west is a failure of 
the neighboring states to adopt compatible models. My region has 
suffered once as a result of California's experiments, and stakeholders 
throughout the west are very concerned by these comments.
    Do you believe that FERC has a responsibility, when reviewing 
filings for California's market redesign efforts, to assess the impact 
and consequences for neighboring states?
    Answer. Yes.
    Question 9. Last year's comprehensive energy legislation included a 
broad ban on the market manipulation practices exercised by Enron. As 
you know, the Northwest continues to suffer from the ill-effects of 
Enron's market manipulation practices. I imagine you are acquainted 
with the
    smoking-gun Enron memos, in which the company laid out strategies 
such as `Fat Boy,' `Get Shorty,' `Death Star' and the like, to drive up 
prices in the West.
    I would like to know whether you believe there is any circumstance 
in which a transaction resulting from manipulative market practices can 
be ``in the public interest,'' or ``just and reasonable?''
    Answer. I cannot think of an example where such a practice would 
either be consistent with the public interest or be just and 
reasonable.
    Question 10. Under FERC's Notice of Proposed Rulemaking RM-05-35-
000, the Commission has proposed amending its regulations regarding the 
standard of review that must be met to justify proposed modifications 
to Commission-jurisdictional agreements. Essentially, with the 
exception of transmission service agreements under the Open Access 
Transmission Tariff and certain natural gas transportation agreements, 
when proposed modifications to FERC jurisdictional agreements are not 
agreed to be dealt with by contract signatories under the `just and 
reasonable' standard, the Commission will review such agreements under 
the `public interest' standard, in accordance with the Mobile-Sierra 
doctrine. Most people believe that the `public interest' standard is 
practically insurmountable.
    I know you can't tell me how you might vote as a Commissioner. I am 
concerned about any diminishment of consumers ability to find relief 
when they are exposed to rates, terms, and conditions of service that 
are not just and reasonable--the standard found in the Federal Power 
Act.
    However, can you tell me your views on the application of the 
``public interest'' standard and how you think it should be applied in 
contracts where there is no standard of review specified?
    Answer. First, I am also concerned about the consumers' limited 
ability to be afforded relief when rates, terms, and conditions of 
service clearly are not just and reasonable. The Commission is provided 
with the statutory responsibility to ensure that rates, charges and 
conditions of service are just and reasonable. The Mobile-Sierra 
doctrine's test of public interest was applied by the Supreme Court 
specifically to rates. Thus, it may not be applicable to all contract 
terms such as termination clauses. The doctrine also was applied by the 
Supreme Court in situations where there were arms length transactions 
that did not involve fraud, or market manipulation. So, these would 
seem to be situations where the public interest test may not be 
appropriate and the statutory standard of just and reasonable would 
apply. With respect to the issue of the application of the public 
interest standard, the courts could not have intended it to be an 
insurmountable test because it would then become no test at all but 
rather a barrier to ever reforming a contract. Thus, there are 
certainly circumstances where if the application of the test fits the 
criteria of the Mobile-Sierra cases, the public interest would dictate 
modifying the contract terms.
      Responses of Jon Wellinghoff to Questions From Senator Wyden

                         PROMOTING GREEN POWER

    Question 1. Recently, the Federal Energy Regulatory Commission 
certified an incremental hydroelectric upgrade for the first time under 
provisions of the Energy Policy Act of 2005, allowing PacificCorp, an 
Oregon energy company, to qualify for a renewable energy tax credit. 
Are there other FERC policies and programs that can boost the 
production, use and sales of renewable energy? What will you do as a 
commissioner to encourage FERC to promote green power?
    Answer. Yes, there are a number of policies and programs where FERC 
can assist in integrating renewable energy into the nation's energy 
resource portfolio and thereby boost renewable energy production. Chief 
among these are FERC policies regarding open access transmission. If 
confirmed as a FERC commissioner, I would support policies that 
recognize the unique characteristics of renewable resources such as 
size, location, efficiency, and in some cases intermittency, to insure 
that those attributes are considered in a manner to reduce and 
hopefully eliminate any discriminatory treatment of renewable resources 
when interconnecting with the transmission grid. Another area where 
FERC may be in a position to act to boost production of renewable 
energy is consideration of the role of renewable energy in maintaining 
and augmenting the reliability of the transmission grid. For example, 
in certain instances it may be more efficient (and less expensive) to 
improve grid reliability by the encouragement of additional distributed 
generation such as solar photovoltaic systems rather than solely 
through transmission upgrades. If confirmed as a FERC commissioner, I 
intend to investigate these opportunities to enhance the use of 
renewable energy while making our grid system more efficient.

                           CONSUMER ADVOCATE

    Question 2. Chairman Kelliher and Commissioner Kelly both support 
my proposal to create a Federal consumer advocate at FERC similar to 
what more than 40 states currently have. My proposal to create this 
position was unanimously agreed to during consideration of the Senate 
Energy Bill. Will you support creating a Federal ratepayer advocate at 
FERC?
    Answer. Retail utility ratepayers who are not otherwise represented 
at FERC should have an opportunity to advocate their positions before 
the Commission. Whether the creation of a Federal ratepayer advocate is 
the most effective way to accomplish this is not clear. As you 
indicate, at least 40 states now have a utility consumer advocate 
incorporated into the structure of each state's regulatory system. I 
was the first utility consumer advocate appointed in Nevada. From that 
perspective, I would suggest that those individual state advocates are 
best equipped to represent the interests of their retail constituents 
before FERC in contested matters. So if the goal is to enable retail 
utility consumers to be adequately represented before FERC, I would 
suggest it may be appropriate to consider the creation of a statutory 
right to be awarded attorney's fees and costs for state consumer 
advocates that intervene in FERC proceedings to represent the rights of 
their retail utility consumers. This would guarantee adequate 
representation of retail consumers in most states for the majority of 
matters before FERC. This should be limited to contested cases where 
FERC determines retail ratepayers have a substantial interest in the 
outcome of the proceeding. Cases that immediately come to mind are the 
Enron contract termination cases. A Federal ratepayer advocate may 
provide some benefit, however, in the instance of more generic 
proceedings such as rulemakings and other investigations of more 
general applicability.

             RESPECT FOR STATE/LOCAL VIEWS IN LNG LICENSING

    Question 3. As you know, the Energy Bill gave FERC exclusive 
authority over siting, construction and operation of liquefied natural 
gas (LNG) import facilities. The role of states and local communities 
is limited to making suggestions to FERC during the licensing process. 
What will you do to ensure that the views of states and local 
communities are not only considered but given deference in the 
licensing process? Will you support licensing of facilities over the 
strong objections of the state and local community?
    Answer. Under the Energy Bill, the exclusive authority of FERC to 
site LNG facilities is subject to applicable federal environmental 
statutes such as the Coastal Zone Management Act (CZMA), the Clean Air 
Act, and the Federal Water Pollution Control Act, and applicable 
states' rights thereunder. Thus the views of states and local 
communities must be considered in the siting process and given 
deference to the extent that they raise legitimate issues under those 
Federal acts where they are given specific rights. If confirmed, I 
intend to follow the law in this regard and give deference to those 
views where appropriate. If states and/or communities raise strong 
objections to the siting of such facilities due to the inability of the 
project to meet Federal statutory requirements, I will give those 
concerns due consideration and deference to the extent of my statutory 
authority.

                     HYDRO RELICENSING SETTLEMENTS

    Question 4. I understand the Commission's practice has generally 
been to encourage hydro relicensing settlement agreements, but that the 
Commission has never addressed in a comprehensive manner the question 
of what kinds of settlement provisions may be incorporated into license 
conditions. As a result, similar proposed conditions have been accepted 
in some cases and rejected in others. This has caused confusion among 
parties to these settlements as to how FERC draws these distinctions. 
There appears to be a growing recognition within the Commission that 
additional guidance is needed and that prompt agency action is 
necessary to provide negotiating parties the regulatory certainty and 
clarity they've been lacking. Do you share that view, and if so, would 
you agree that the Commission's treatment of proposed hydro licensing 
conditions ought to be consistent and predictable for all parties 
involved?
    Answer. I am unfamiliar with the details of the settlement process 
before FERC on hydro relicensing. If confirmed, I would be open, 
however, after learning more about the history and issues involved, to 
considering the need for additional guidance in this area. I would 
certainly agree that the treatment of licensing for hydro projects 
should be consistent and predictable.

                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

                                                      TAPS,
                                                      June 1, 2006.
Chairman Pete Domenici,
Senate Energy and Natural Resources Committee, U.S. Senate, Washington, 
        DC.
    Dear Mr. Chairman: I am writing on behalf of TAPS to support the 
confirmation of the President's nominees for FERC Commissioner, Philip 
D. Moeller and Jon Wellinghoff, and to encourage the Energy and Natural 
Resources Committee to quickly approve the two nominees so that the 
full Senate may vote on their confirmation as soon as practical.
    TAPS is an informal association of transmission-dependent electric 
utilities located in more than 33 states. Its members are utilities 
that must rely on transmission facilities owned by others to serve 
their loads. TAPS' focus is on transmission and market power issues 
that are crucial to the competitive viability of small systems and to 
creation and maintenance of truly competitive wholesale markets.
    The FERC is currently undertaking multiple initiatives that will 
shape the future of the electric markets including, implementing the 
provisions of EPAct 2005, considering updating policies related to open 
access for transmission through revising Order 888, and, guiding the 
development of regional markets. During this period, it is imperative 
that the FERC have a full compliment of commissioners to participate in 
the process.
    Phil Moeller and Jon Wellinghoff are both very well qualified to 
serve on the FERC. On behalf of the TAPS membership, I encourage rapid 
action to confirm these nominees.
            Sincerely,
                                                Roy Thilly,
                                                        TAPS Chair.
                                 ______
                                 
                                 Preston Gates & Ellis LLP,
                                         Seattle, WA, June 5, 2006.
Hon. Pete V. Domenici,
Chairman, Energy and Natural Resources Committee, Washington, DC.
Re: Phil Moeller

    Dear Pete: It would be difficult for me to endorse anyone more 
highly for a position than I do Phil Moeller as the current nominee for 
a position on FERC. As I believe you know, Phil worked for me as my 
L.A. for energy for several years, after a number of years in a similar 
position for the Washington state legislature.
    He was a hard working and invaluable assistant to me in all of the 
issues that has come before your committee.
    Since leaving my staff, as you know, he has held a number of wide 
ranging and important positions outside of the federal government, all 
adding to his background in energy policy and energy regulatory issues. 
He would make a magnificent addition to the Commission.
            Sincerely,
                                                      Slade Gorton.
                                 ______
                                 
                           American Public Gas Association,
                                      Washington, DC, June 6, 2006.
Hon. Pete V. Domenici,
Chairman, U.S. Senate Energy and Natural Resources Committee, 
        Washington, DC.
    Dear Chairman Domenici: On behalf of the American Public Gas 
Association (APGA), I want to express our strong support for the 
confirmation of Mr. Philip D. Moeller to the Federal Energy Regulatory 
Commission (FERC) seat vacated by former FERC Chairman Patrick Wood.
    APGA is the national association for approximately 650 public gas 
distribution systems operated by municipalities, counties and utility 
districts in thirty-six states. Our members are owned by, and 
accountable to, the communities they serve. Nationwide, there are about 
1,000 publicly-owned gas utilities in this country serving almost 5 
million natural gas customers.
    Mr. Moeller's experience as a Senior Legislative Assistant to 
Senator Slade Gorton provides him with a strong background in energy 
policy issues. In addition, his experience as a utility employee has 
given him an excellent perspective on the gas and electric operations 
of a utility. APGA believes that this work experience will be of great 
value to Mr. Moeller in his deliberations as a FERC Commissioner. We 
also believe that Mr. Moeller will be a strong champion for consumer 
interests during his service on the Commission and will maintain the 
balance of regulatory oversight for all.
    Prompt attention to the filling of the vacancy created by former 
Chairman wood will put the FERC back in balance with its defined 
organizational structure. We strongly urge the Committee's thorough and 
quick action towards the confirmation of Mr. Moeller.
            Sincerely,
                                              Bert Kalisch,
                                                   President & CEO.
                                 ______
                                 
                           American Public Gas Association,
                                      Washington, DC, June 7, 2006.
Hon. Pete V. Domenici,
Chairman, U.S. Senate Energy and Natural Resources Committee, 
        Washington, DC.
    Dear Chairman Domenici: On behalf of the American Public Gas 
Association (APGA), I want to express our strong support for the 
confirmation of Mr. Jon Wellinghoff to the Federal Energy Regulatory 
Commission (FERC) seat vacated by former FERC Commissioner William 
Lloyd Massey.
    APGA is the national association for approximately 650 public gas 
distribution systems operated by municipalities, counties and utility. 
districts in thirty-six states. Our members are owned by, and 
accountable to, the communities they serve. Nationwide, there are about 
1,000 publicly-owned gas utilities in this country serving almost 5 
million natural gas customers.
    Mr. Wellinghoff's span of three decades of broad experience in 
energy industry advocacy that includes state and regional energy 
legislation, consumer fraud, power contracting, renewable energy 
resource development and public utility law practice provides him with 
a strong background in energy policy issues suitable to the nominated 
position. In addition, his experience heading the Nevada Attorney 
General's Consumer Advocate Division has given him an excellent 
perspective on the gas and electric operations of a utility. APGA 
believes that this work experience will be of great value to Mr. 
Wellinghoff in his deliberations as a FERC Commissioner. We also 
believe that Mr. Wellinghoff will be a strong champion for consumer 
interests during his service on the Commission and will maintain the 
balance of regulatory oversight for all.
    Prompt attention to the filling of the vacancy created by former 
Commissioner Massey will put the FERC back in balance with its defined 
organizational structure. We strongly urge the Committee's thorough and 
quick action towards the confirmation of Mr. Wellinghoff.
            Sincerely,
                                              Bert Kalisch,
                                                   President & CEO.
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