[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
                        FEDERAL POWER MARKETING


                       ADMINISTRATION BORROWING


                      AUTHORITY: DEFINING SUCCESS

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



                           OVERSIGHT HEARING

                               before the

                    SUBCOMMITTEE ON WATER AND POWER

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                        Tuesday, March 10, 2009

                               __________

                            Serial No. 111-9

                               __________

       Printed for the use of the Committee on Natural Resources



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                     COMMITTEE ON NATURAL RESOURCES

              NICK J. RAHALL, II, West Virginia, Chairman
          DOC HASTINGS, Washington, Ranking Republican Member

Dale E. Kildee, Michigan             Don Young, Alaska
Eni F.H. Faleomavaega, American      Elton Gallegly, California
    Samoa                            John J. Duncan, Jr., Tennessee
Neil Abercrombie, Hawaii             Jeff Flake, Arizona
Frank Pallone, Jr., New Jersey       Henry E. Brown, Jr., South 
Grace F. Napolitano, California          Carolina
Rush D. Holt, New Jersey             Cathy McMorris Rodgers, Washington
Raul M. Grijalva, Arizona            Louie Gohmert, Texas
Madeleine Z. Bordallo, Guam          Rob Bishop, Utah
Jim Costa, California                Bill Shuster, Pennsylvania
Dan Boren, Oklahoma                  Doug Lamborn, Colorado
Gregorio Sablan, Northern Marianas   Adrian Smith, Nebraska
Martin T. Heinrich, New Mexico       Robert J. Wittman, Virginia
George Miller, California            Paul C. Broun, Georgia
Edward J. Markey, Massachusetts      John Fleming, Louisiana
Peter A. DeFazio, Oregon             Mike Coffman, Colorado
Maurice D. Hinchey, New York         Jason Chaffetz, Utah
Donna M. Christensen, Virgin         Cynthia M. Lummis, Wyoming
    Islands                          Tom McClintock, California
Diana DeGette, Colorado              Bill Cassidy, Louisiana
Ron Kind, Wisconsin
Lois Capps, California
Jay Inslee, Washington
Joe Baca, California
Stephanie Herseth Sandlin, South 
    Dakota
John P. Sarbanes, Maryland
Carol Shea-Porter, New Hampshire
Niki Tsongas, Massachusetts
Frank Kratovil, Jr., Maryland
Pedro R. Pierluisi, Puerto Rico

                     James H. Zoia, Chief of Staff
                       Rick Healy, Chief Counsel
                 Todd Young, Republican Chief of Staff
                 Lisa Pittman, Republican Chief Counsel
                                 ------                                


                    SUBCOMMITTEE ON WATER AND POWER

              GRACE F. NAPOLITANO, California, Chairwoman
     CATHY McMORRIS RODGERS, Washington, Ranking Republican Member

George Miller, California            Adrian Smith, Nebraska
Raul M. Grijalva, Arizona            Mike Coffman, Colorado
Jim Costa, California                Tom McClintock, California
Peter A. DeFazio, Oregon             Doc Hastings, Washington, ex 
Jay Inslee, Washington                   officio
Joe Baca, California
Nick J. Rahall, II, West Virginia, 
    ex officio
                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Tuesday, March 10, 2009..........................     1

Statement of Members:
    Coffman, Hon. Mike, a Representative in Congress from the 
      State of Colorado..........................................     9
    Grijalva, Hon. Raul M., a Representative in Congress from the 
      State of Arizona, Prepared statement of....................    74
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................     5
        Prepared statement of....................................     7
    McMorris Rodgers, Hon. Cathy, a Representative in Congress 
      from the State of Washington...............................     4
        Prepared statement of....................................     4
    Napolitano, Hon. Grace F., a Representative in Congress from 
      the State of California....................................     3
        Prepared statement of....................................     3
    Smith, Hon. Adrian, a Representative in Congress from the 
      State of Nebraska..........................................     7
        Prepared statement of....................................     8

Statement of Witnesses:
    Corwin, R. Scott, Executive Director, Public Power Council, 
      Portland, Oregon...........................................    37
        Prepared statement of....................................    39
    Crowley, Chris, President, Columbia Energy Partners, LLC, 
      Vancouver, Washington......................................    41
        Prepared statement of....................................    42
        Response to questions submitted for the record...........    47
    Ellenbecker, Steve, Energy Policy Advisor to Wyoming, 
      Governor Dave Freudenthal, Cheyenne, Wyoming...............    29
        Prepared statement of....................................    30
    James, Leslie, Executive Director, Colorado River Energy 
      Distributors Association (CREDA), Tempe, Arizona...........    33
        Prepared statement of....................................    34
        CREDA Membership List....................................    37
    Meeks, Timothy J., Administrator, Western Area Power 
      Administration, U.S. Department of Energy, Lakewood, 
      Colorado...................................................    10
        Prepared statement of....................................    11
        Response to questions submitted for the record...........    15
    Rahill, Edward M., Senior Vice President of Finance and CFO, 
      ITC Holdings, Transmission Company, Novi, Michigan.........    48
        Prepared statement of....................................    49
    Wright, Stephen J., Administrator, Bonneville Power 
      Administration, U.S. Department of Energy, Portland, Oregon    20
        Prepared statement of....................................    22
        Response to questions submitted for the record...........    25

Additional materials supplied:
    American Public Power Association, Statement submitted for 
      the record.................................................    73


OVERSIGHT HEARING ON ``FEDERAL POWER MARKETING ADMINISTRATION BORROWING 
                     AUTHORITY: DEFINING SUCCESS.''

                              ----------                              


                        Tuesday, March 10, 2009

                     U.S. House of Representatives

                    Subcommittee on Water and Power

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 2:30 p.m., in 
Room 1324, Longworth House Office Building, Hon. Grace 
Napolitano [Chairwoman of the Subcommittee] presiding.
    Present: Representatives Napolitano, Miller, Grijalva, 
Costa, DeFazio, Baca, McMorris Rodgers, Smith, Coffman, 
McClintock, and Hastings.
    Mrs. Napolitano. Good afternoon, ladies and gentlemen.
    This meeting of the Subcommittee on Water and Power will 
come to order.
    The purpose of today's meeting is to hold an oversight 
hearing on the Federal Power Marketing Administration borrowing 
authority, and defining its success as a prelude to stimulus 
action affecting Bonneville and WAPA.
    I do ask unanimous consent that any Members of Congress who 
come and want to join the dais be allowed to sit on the dais 
and participate in the Subcommittee proceedings today.
    Without objection, so ordered.
    Before we begin this hearing, I would first like to mention 
that this is the first meeting of the Subcommittee on Water and 
Power of the 111th Congress. I consider it to be a very great 
privilege to serve as the Chairwoman of the Subcommittee; and I 
am very, very pleased to welcome back as the Ranking Member of 
the Subcommittee, my colleague, Congresswoman Cathy McMorris 
Rodgers of Spokane, Washington, who has been a very great 
pleasure to work with.
    As we begin to work on the Subcommittee for the 111th 
Congress, rest assured I will try to do my best to administer 
the Subcommittee with a fairness and with a respect for every 
Member; and I expect the same respect in return. I have an open 
door policy; and all of you are welcome to contact me in my 
office or Amelia Jenkins, the Subcommittee Director, the 
Majority Staff Director at any time. And this applies to both 
sides of the aisle, my colleagues. We will listen to anybody 
who has a water problem. That has always been what we consider 
essential for this Subcommittee.
    While there will be times when we may have partisan 
differences, the Subcommittee shall be handled on a nonpartisan 
basis and has been for a number of years. I intend to work with 
all who wish to help solve water problems and expand renewable 
energy in the West, and we can only accomplish this if we set 
aside our partisan differences.
    Allow me to briefly introduce my Democratic Members.
    I would like to first start off with Congressman Jim Costa 
of Fresno, California. Jim and I served together in the 
California State Legislature in the 1990s, and his knowledge of 
California water issues is very comprehensive, and is now in 
his third term on the Subcommittee.
    Welcome back, Jim.
    I would like to recognize Congressman Joe Baca from Rialto 
in San Bernardino County in California. Welcome back, Joe. He's 
the Chair of the House Subcommittee on Department Operations, 
Oversight, Nutrition, and Forestry on the full Agriculture 
Committee. I know he is especially concerned with protecting 
groundwater supplies from perchloric contamination, and it will 
continue to be a priority for our Subcommittee.
    I would also like to welcome our new colleague on the 
Subcommittee. He is serving on my Subcommittee, and I have 
added my name to his Subcommittee. It is Raul Grijalva from 
Tucson, Arizona. He is the Chairman of the Subcommittee on 
National Parks, Forests, and Public Lands, and I gladly joined 
his Subcommittee. He has been a tireless devotee to 
conservation efforts during his time in Congress, from working 
to protect the public lands to encouraging water conservation 
through recycling programs. He is interested in the Colorado 
River issues, which will continue to be one of the focal points 
of the Subcommittee.
    I will do the statements after, Cathy, if you will 
introduce your Members.
    Mrs. McMorris Rodgers. Thank you, Madam Chairman.
    I am glad to be back as the Ranking Member on this 
Subcommittee. I have enjoyed working with you on a variety of 
issues over the last term and look forward to working with you 
this Congress.
    Yes, I would definitely like to introduce the Members of 
the Subcommittee on Water and Power, but let me first start by 
introducing the new Ranking Member for the Natural Resources 
Committee, Doc Hastings, who is my neighbor in Washington 
State, my neighbor to the east, and has been a mentor to me 
since I arrived in Congress. We have worked together on a 
variety of issues, and I am really pleased to see him in this 
leadership role for resources.
    Next, we have Representative Adrian Smith from Nebraska's 
Third Congressional District, which includes 68 counties in the 
western part of the State. He served with distinction on this 
Subcommittee in his first term, and we are pleased to have him 
back for his second term.
    Representative Mike Coffman comes to us from Aurora, 
Colorado. We served on the Armed Services Committee together, 
and I am pleased to now have you on this Subcommittee.
    And, with that, I will turn it back to the Chairwoman.
    Mrs. Napolitano. Thank you.
    After my opening statement, I will recognize all of the 
Members of the Subcommittee for any statement they may have. 
Any Member who desires to be heard will be heard.
    Additional material may be submitted for the record by 
witnesses, Members, or any interested party. The record will be 
kept open for 10 business days following today's hearing.
    The 5-minute rule with our timer will be enforced. 
``Green'' means go, ``yellow'' near the end, and ``stop'' means 
if you don't, I will.

STATEMENT OF THE HON. GRACE F. NAPOLITANO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mrs. Napolitano. I am very pleased to continue to address 
power issues at this, our first meeting of the Subcommittee. 
Renewable energy generation through the West is a very critical 
topic for all of us. We all understand that for generation to 
meet ever-growing market demand, we need to assist in the 
development of additional transmission infrastructure.
    Last year, I visited the Western Area Power Administration 
and was able to get a much-needed perspective on that grid from 
the air and in talking to some of the folks on the ground. It 
is a totally impressive system, serving 15 States total.
    I was also fortunate to visit a control center to get a 
firsthand view of the rooms where transmission is managed and 
how the system is operated. And it is something to behold, to 
see those lights and the transmission power lines indicating 
how it is managed, how it is set up for transmission by putting 
in orders for what is going to be needed.
    Senator Reid was the champion of the provisions in the 
American Recovery and Reinvestment Act of 2009 that provided 
expanded financial tools for the Bonneville Power 
Administration and Western Area Power Administration. We did 
not have the opportunity to fully vet these provisions, and I 
am hopeful this hearing will provide both Bonneville and WAPA 
the opportunity to hear from various interests and then clarify 
how they intend to move forward.
    [The prepared statement of Mrs. Napolitano follows:]

      Statement of The Honorable Grace F. Napolitano, Chairwoman, 
                    Subcommittee on Water and Power

    I am pleased to continue to address power issues at this, our first 
meeting of the Subcommittee. Renewable energy generation throughout the 
West is a very critical topic. We all understand that in order for 
generation to meet ever-growing market demand, we need transmission 
infrastructure.
    Last year I visited Western Area Power Administration and was able 
to get a much-needed perspective of that grid from the air. It is an 
impressive system, serving 15 states in total. I also was fortunate to 
visit a control center to get a first-hand view of the rooms where 
transmission is managed, and how the system is operated.
    Senator Reid was the champion of provisions in the American 
Recovery and Reinvestment Act of 2009 that provide expanded financial 
tools for Bonneville Power Administration and Western Area Power 
Administration. As part of a larger package, we did not have the 
opportunity to fully vet these provisions. I am hopeful this hearing 
today will provide both Bonneville and Western the opportunity to hear 
from various interests and then clarify how they intend to move 
forward.
    With that said, I am pleased to now yield to my friend and 
colleague, Ranking Member Congresswoman Cathy McMorris Rodgers, for the 
introduction of her MOCs and her statement.
                                 ______
                                 
    Mrs. Napolitano. I am pleased now to yield to my friend and 
colleague, Ranking Member Cathy McMorris Rodgers, for her 
statement.

STATEMENT OF THE HON. CATHY McMORRIS RODGERS, A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF WASHINGTON

    Mrs. McMorris Rodgers. Thank you, Madam Chairwoman.
    Today, we are going to be talking about the need for 
transmission lines. Most everyone agrees we need more 
transmission. But there are still a lot of questions as to who 
will build it, how it will be built, and who ends up paying for 
it. These might seem like simple questions, but nothing is 
simple in the electric industry.
    Back home in the Pacific Northwest, the Bonneville Power 
Administration continues to have a positive impact on the 
region. BPA's energy sales constitute 40 percent of the market, 
and three-quarters of the transmission lines belong to the 
agency. Even though costs are higher due to a number of 
factors, BPA's ratepayers continue to enjoy the benefits of a 
hydropower-based system.
    We are here today to discuss BPA's borrowing authority and 
the new WAPA borrowing authority. BPA's borrowing authority has 
been around since 1974. It can be used for building 
transmission for all sources of energy, fish and wildlife 
mitigation, and conservation.
    We look forward to hearing from the Administrator, Steven 
Wright, and the Executive Director of the Public Power Council, 
Scott Corwin, on how the agency will carry out its access to 
new funding.
    Some in Congress recently chose to give the Western Area 
Power Administration a brand-new borrowing authority. There are 
some similarities between BPA and WAPA, as we will hear today. 
There are also some differences, and I am aware there are some 
concerns over WAPA's new borrowing authority, and setting up a 
process to resolve those concerns is one reason why we are 
having the hearing. We have some of the best and brightest here 
to enlighten us. I applaud my colleague, Mr. Smith, for asking 
for this hearing.
    Madam Chairwoman, I look forward to working with you on 
these issues.
    Mrs. Napolitano. Thank you.
    [The prepared statement of Mrs. McMorris Rodgers follows:]

  Statement of The Honorable Cathy McMorris Rodgers, Ranking Member, 
                    Subcommittee on Water and Power

    Thank you, Chairwoman Napolitano. I'm glad to be back as Ranking 
Member of the Water and Power Subcommittee. We've worked well together 
in the past to solve problems and I once again look forward to working 
with you this Congress.
    Like you, I would like to introduce my fellow Subcommittee 
Members--but first let me introduce to you our new Ranking Member of 
the full House Natural Resources Committee, Mr. Doc Hastings. Doc is my 
neighbor in eastern Washington where we've worked closely together 
since I came to Congress. Doc has been a mentor and I'm thankful to 
have his leadership on the Committee.
    Next we have Representative Adrian Smith from Nebraska's Third 
Congressional District, which includes 68 counties in the western part 
of the State. Adrian served with distinction on the Subcommittee in the 
last Congress and I look forward to having him aboard for another 
Congress.
    Representative Mike Coffman is a new Member and comes to us from 
Aurora, Colorado. Mike Represents Colorado's 6th Congressional 
District. Mike and I also serve together on the House Armed Services 
Committee. Next we have Representative Tom McClintock from northern 
California 4th district. I'm grateful that Tom's on this Subcommittee 
since so many of our issues involve California water. Madam Chairwoman, 
I am confident we have a good team put together and we all look forward 
to working with you this Congress.
    We gather to talk about the need to build more transmission lines. 
Most everyone agrees that we need more transmission but there are still 
many questions as to who will build it, how it will be built, and who 
ends up paying for it. These seem like simple questions, but nothing is 
simple in the electricity industry.
    Back home in the Pacific Northwest, the Bonneville Power 
Administration continues to have a positive impact on the region--BPA's 
energy sales constitute 40% of the market and three-quarters of the 
transmission lines belong to the agency. Even though costs are higher 
due to a number of factors, BPA's ratepayers continue to enjoy the 
benefits of a hydropower-based system
    We're here today to discuss BPA's borrowing authority and the new 
WAPA borrowing authority. BPA's borrowing authority has been around 
since 1974 and can be used for building transmission for all sources of 
energy, fish and wildlife mitigation, and conservation. We look forward 
to hearing from Bonneville's Administrator, Steve Wright, and the 
Executive Director of the Public Power Council, Scott Corwin, on how 
the agency will carry out its access to new funding.
    Some in Congress chose to give the Western Area Power 
Administration a brand new borrowing authority. There are indeed many 
similarities between BPA and WAPA and, as we will hear today, there are 
significant differences. I'm aware that there are some concerns over 
WAPA's new borrowing authority and setting up a process to resolve 
those concerns is one reason for this hearing. We have some of the best 
and brightest here today to enlighten us and work in a productive way. 
I applaud my colleague, Adrian Smith, for asking for this hearing.
    Madame Chairwoman, I look forward to another two years working with 
on this Subcommittee.
                                 ______
                                 
    Mrs. Napolitano. I would like to welcome to our 
Subcommittee Congressman Peter DeFazio from Springfield, 
Oregon, representing the southwest portion of that State. 
Congressman DeFazio is currently the Chair of the 
Transportation Committee's Subcommittee on Highways and 
Transit, and he is truly dedicated to transportation and 
environment issues. In his more than two decades in this House, 
he has been an advocate for land and wildlife in the Pacific 
Northwest as well as for the expansion of renewable energy; and 
we also want to welcome him to the Subcommittee.
    Mrs. McMorris Rodgers. Madam Chairwoman, I am pleased to 
introduce Tom McClintock from California's Fourth Congressional 
District; and I am really pleased that he has joined this 
Subcommittee. As we all know, there is a variety of water 
issues especially important to California, and I know he will 
bring an important perspective as we address them.
    Mrs. Napolitano. We have no statements on our side. Do you 
have some?

    STATEMENT OF THE HON. DOC HASTINGS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. Hastings. Thank you, Madam Chairwoman.
    I am especially pleased to be here today as the Water and 
Power Subcommittee has a profound and direct impact on my 
constituents in central Washington.
    Water is at the heart of our economy and our way of life. 
The Bureau of Reclamation's Columbia Basin and Yakima Projects 
turned what used to be a desert into some of the most 
productive farmland in the world. They serve as a major 
economic force in central and eastern Washington and also feed 
millions in domestic and international food markets.
    In addition, the Federal Columbia River power system and 
its flagship dam, the Grand Cooley Dam, which I might add is a 
Bureau of Reclamation dam, provides clean, renewable and 
emissions-free hydropower to millions throughout the Pacific 
Northwest.
    The historical value of these projects is proven to many, 
but they are under a constant assault due to age, litigation, 
and regulatory schemes. For example, the Snake River Dam 
continues to be a target, yet it is illogical to talk about 
removing these dams when they provide the Nation's free 
hydropower and help boosts other energy renewables.
    Certainly, the President's recently released budget 
proposed an undefined and extensive global climate change cap-
and-trade system that could very well punish Northwest rate 
payers for using carbon-free hydropower and giving carbon 
credits to those in fossil-burning regions.
    Today's hearing examines the growing need for transmission 
in the West. In the Pacific Northwest, the Bonneville Power 
Administration has 75 percent of the transmission assets. The 
agency now has expanding borrowing authority--which, of course, 
is the subject of this hearing--to integrate more wind 
generation, some of which will be sold to California rate 
payers. As we all know, there have been serious wind 
integration issues in the region.
    As part of this discussion, I would like to hear whether 
BPA might have to reduce its lower-cost hydropower generation 
to accommodate the more expensive wind energy that may be used 
within the region or shipped to California. Whether the wind 
energy gets delivered to customers in or out of the region, it 
could force an uneconomic BPA business decision, possibly to 
the detriment of Northwest rate payers.
    Similar cost concerns apply to the current customers of the 
Western Area Power Administration, who would face higher 
electricity costs if the agency fails to be transparent and 
allocates costs accordingly to the new borrowing authority.
    As both the Chairwoman and the Ranking Member have said, 
there are differences with the expanding borrowing authority as 
in relation between WAPA and BPA, and I have to tell you that I 
have serious concerns from reading what that authority is to 
WAPA. Some have tried to tie BPA's proven, effective use of 
borrowing authority to WAPA's new authority, but this really is 
like comparing apples to oranges, starting with the fact that 
Northwest rate payers repay every debt with interest, versus a 
new WAPA provision that allows similar debts be forgiven or 
potentially forgiven and paid for by all American taxpayers. 
So, simply put, that provision puts an unnecessary cloud over 
the whole Federal program.
    So, Madam Chairman, I am pleased that we are having this 
hearing today. I look forward to the testimony of all of the 
parties as we move forward, because we clearly do have to make 
sure that we can move our electricity around to keep our ever-
growing economy ever growing.
    With that, I yield back.
    [The prepared statement of Mr. Hastings follows:]

       Statement of The Honorable Doc Hastings, Ranking Member, 
                     Committee on Natural Resources

    Thank you, Chairwoman Napolitano and Ranking Member McMorris 
Rodgers. I'm especially pleased to be here today, as the Water and 
Power Subcommittee has a profound and direct impact on constituents in 
my Central Washington district. Water is at the heart of our economy 
and way of life.
    The Bureau of Reclamation's Columbia Basin and Yakima projects 
turned the desert into some of the most productive farm land in the 
world. They serve as a major economic force in Central and Eastern 
Washington and also feed millions in domestic and international food 
markets. In addition, the Federal Columbia River Power System and its 
flagship dam, Grand Coulee, provide clean, renewable and emissions-free 
hydropower to millions throughout the Pacific Northwest.
    The historical value of these projects is proven to many, but they 
are under constant assault due to age, litigation and regulatory 
schemes. The Snake River dams continue to be a target, yet it's 
illogical to talk about removing these dams when they provide 
emissions-free hydropower and help bolster other renewable energies. 
Similarly, the President's recently released budget proposes an 
undefined and expensive global climate change cap-and-trade scheme that 
could very well punish Northwest ratepayers for using carbon-free 
hydropower and giving carbon credits to those in fossil-burning 
regions.
    Today's hearing examines the growing need for transmission in the 
West. In the Pacific Northwest, the Bonneville Power Administration has 
75% of the transmission assets. The agency now has expanded borrowing 
authority--the subject of this hearing--to integrate more wind 
generation, some of which will be sold to California ratepayers. As we 
all know, there have been serious wind integration issues in the 
region. As part of this discussion, I want to hear whether BPA might 
have to reduce its lower cost hydropower generation to accommodate more 
expensive wind energy that may be used in the region or California. 
Whether the wind energy gets delivered to customers in or out of the 
region, it could force an uneconomic BPA business decision--possibly to 
the detriment of Northwest ratepayers.
    Similar cost concerns apply to the current customers of the Western 
Area Power Administration, who could face higher electricity costs if 
the agency fails to be transparent and allocate costs accordingly with 
its new borrowing authority. I have been strongly supportive of 
expanding borrowing authority for BPA, but I have serious concerns 
about WAPA's newly granted authority. Some have tried to tie BPA's 
proven, effective use of borrowing authority with WAPA's new authority. 
This is an apples-to-oranges comparison, starting with the fact that 
Northwest ratepayers repay every debt with interest versus the new WAPA 
provision that allow similar debts to be forgiven and paid for by all 
American taxpayers. Simply put, that provision puts an unnecessary 
cloud over the entire federal power program.
    In addition, it is highly unlikely that this new WAPA borrowing 
authority will have a profound stimulus effect on the economy when it 
takes many years just to plan major transmission lines. I fear that 
WAPA's new borrowing authority may create more problems than solutions, 
but hopefully this hearing will help sort through some of these 
concerns. I look forward to hearing testimony on these issues.
    Madam Chairwoman and Ranking Member McMorris Rodgers, I look 
forward to participating actively with you on this and many other 
hearings. Thank you.
                                 ______
                                 
    Mrs. Napolitano. And now we have Mr. Smith.

    STATEMENT OF THE HON. ADRIAN SMITH, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF NEBRASKA

    Mr. Smith. Thank you, Madam Chairwoman, Ranking Member 
McMorris Rodgers, for holding this hearing.
    I also want to welcome audience members here today from the 
Midwest Electric Consumers Organization, an organization 
representing thousands of rate payers in western Nebraska. I 
certainly appreciate you being here.
    My reason for requesting this hearing is rather simple. Our 
Nation needs more electricity transmission to meet the growing 
demands for all sources of electricity, including abundant wind 
resources in my home State of Nebraska. However, as I hope to 
learn today, there are a growing number of questions about the 
most effective way to build new transmission. One such method 
is the new borrowing authority for the Western Area Power 
Administration, or WAPA.
    As Members of the Water and Power Subcommittee, we ought to 
ensure this new borrowing authority will not stifle private-
sector transmission and lead to loan defaults, which ultimately 
are laid to rest on the backs of American taxpayers.
    In addition, WAPA's traditional mission and its customers 
cannot be forgotten or superseded by this new program; and I 
personally appreciate the value of WAPA's historical mission, 
as my grandfather worked in the Federal power program.
    The plain States have great potential for wind generation, 
yet transmission is necessary to bring that power to population 
centers elsewhere, And that transmission will mainly be built 
on private land in Nebraska. Under its new authority, WAPA can 
use Federal eminent domain to build new transmission lines over 
private property.
    Throughout my time in the Nebraska Unicameral and now here 
in the U.S. Congress, I have been a strong defender of 
landowners' rights and ensuring farmers, ranchers and others 
are treated fairly.
    Finally, as the graph by the witness table shows, private 
investment in transmission far outweighs Federal efforts. As we 
do move forward, it is very important for private investments 
to continue to play a leading role in new transmission and not 
be hindered by WAPA's new program.
    We have many witnesses here, one of whom is Joel Bladow 
from Tri-State Generation and Transmission Association, a 
wholesale power utility with six members in western Nebraska.
    With the witnesses we have before us, I hope we can begin 
to answer my questions and together solve potential issues. 
Today will hopefully be the first step toward many of a 
successful program. To that end, I would urge WAPA to convene a 
task force of its customers, private utilities and investors in 
the renewables industry as a way of making sure this program 
meets success through cooperation.
    [The prepared statement of Mr. Smith follows:]

 Statement of The Honorable Adrian Smith, a Representative in Congress 
                       from the State of Nebraska

    Let me begin by thanking Chairwoman Napolitano and Ranking Member 
McMorris Rodgers for holding this hearing. I also want to welcome 
audience members of the Mid-West Electric Consumers Association, an 
organization representing thousands of public power ratepayers in 
western Nebraska. I appreciate you being here.
    My reason for requesting this hearing is simple: our nation needs 
more electricity transmission to meet growing demand for all sources of 
electricity, including abundant wind resources in my home state of 
Nebraska. However, as I hope to learn today, there are a growing number 
of questions about the most effective way to build new transmission.
    One such method is the new borrowing authority for the Western Area 
Power Administration, or WAPA. As members of the Water and Power 
Subcommittee, we ought to ensure this new borrowing authority will not 
stifle private sector transmission and lead to loan defaults, which 
ultimately are laid on the backs of American taxpayers. In addition, 
WAPA's traditional mission and its customers cannot be forgotten or 
superseded by this new program--and I personally understand the value 
of WAPA's historical mission as my grandfather worked in the federal 
power program.
    The Plains States have great potential for wind generation, yet 
transmission is necessary to bring that power to population centers 
elsewhere. And that transmission will mainly be built on private land 
in Nebraska. Under its new authority, WAPA can use federal eminent 
domain to build new transmission lines over private property. 
Throughout my time in the Nebraska Unicameral and now in the U.S. 
Congress, I have been a strong defender of landowner rights and 
ensuring farmers, ranchers and others are treated fairly.
    Finally, as the graph by the witness table shows, private 
investment in transmission far outweighs federal efforts. As we move 
forward, it is very important for private investments to continue to 
play a leading role in new transmission and not be hindered by WAPA's 
new program.
    We have many witnesses here, one of which is Joel Bladow from Tri-
State Generation and Transmission Association, a wholesale power 
utility with six members in western Nebraska. With the witnesses we 
have before us, I hope we can begin to answer many questions and 
together resolve potential issues. Today will hopefully be a first step 
of many towards a successful program. To that end, I would urge WAPA to 
convene a task force of its customers, private utilities and investors 
and the renewable industry as a way of making sure this program meets 
success through cooperation. Thank you.
                                 ______
                                 
    Mrs. Napolitano. Now we will hear from Mr. Coffman.

    STATEMENT OF THE HON. MIKE COFFMAN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Mr. Coffman. Thank you, Madam Chairman and Ranking Member, 
for holding this hearing today. And welcome to our witnesses.
    I would like to extend a special hello to our witnesses 
from the State of Colorado. It is always a pleasure to see 
fellow Coloradans here in Washington, D.C.
    As our Nation works to meet our growing energy needs, 
investing in our transmission infrastructure is of great 
importance. The government can play a role in this, but it is 
important that it does not alienate consumers or hinder private 
industry investment.
    Thank you.
    Mrs. Napolitano. We will proceed to hear from our 
witnesses. We have one panel, and the witnesses will be 
introduced before they testify. After we hear from the panel, 
we will open it for questions from our Members.
    All of your submitted prepared statements will be entered 
into the record, and all witnesses are asked to kindly 
summarize the high points of your testimony because we will 
have it to read. In fact, most of us have already read it. And 
please limit your remarks to 5 minutes.
    Again, the timer is before you; and we will enforce the 
rule, unless there is something really key that we want to hear 
on.
    The rule also applies to all questioning, a total of 5 
minutes for questions, including responses, which also applies 
to our Members. If there are any additional questions, we may 
have a second round, if time permits.
    For our panel, we have Timothy Meeks, Administrator of 
Western Area Power Administration; Steve Wright, Administrator 
of Bonneville Power Administration; Steve Ellenbecker, Energy 
Policy Advisor to Wyoming Governor Dave Freudenthal; Leslie 
James, Executive Director of the Colorado River Energy 
Distributors Association; Scott Corwin, Executive Director of 
the Public Power Council; Chris Crowley, President of Columbia 
Energy Partners, LLC; and Edward M. Rahill, Vice President of 
Finance, CFO of ITC Holdings, Transmission Company.
    Welcome to our panel.
    We will proceed with Mr. Meeks. You are on, sir.
    Before you start, and Doc Hastings, to your point in regard 
to the debt forgiveness, the Ranking Member and I, we have been 
talking. We need to work with you on that, because I am with 
you on that.

 STATEMENT OF TIMOTHY MEEKS, ADMINISTRATOR, WESTERN AREA POWER 
               ADMINISTRATION, LAKEWOOD, COLORADO

    Mr. Meeks. My name is Timothy Meeks, Administrator of the 
Western Area Power Administration. I would like to thank you 
all for inviting me here today to hear your concerns and the 
concerns of your constituents as far as Western's new authority 
to build transmission under the American Recovery and 
Reinvestment Act. I understand the huge responsibility that has 
been given to Western under this provision, and we do not take 
it lightly.
    Basically, though, we are not a stranger to responsibility 
when it comes to building transmission, though. We own and 
operate 17,000 miles of high voltage transmission. We have 
partnered with public and private entities, many of those who 
are sitting in this room today. I do believe that, if this is 
executed properly, that we do have a role to play in building 
new transmission in the western United States to help 
facilitate the delivery of renewable energy.
    The key balance that we must strike, obviously, is, one, as 
it was mentioned, our primary, first and foremost mission is 
delivering low-cost Federal hydropower to our preference 
customers; and we have to ensure that there is a wall between 
the people who benefit under the new authority and the people 
who have benefited under our traditional authority. We are 
taking steps that are necessary to ensure that there is a 
separation between these two programs so that those who do 
benefit from each program pay for their fair share of that 
program.
    As I have mentioned, we believe in order for this authority 
to be maximized to its fullest extent we must partner with 
other entities. $3.25 billion is a lot of money. But when it 
comes to the needed transmission in the western United States, 
it is just a drop in the bucket. So, in order for us to 
maximize that authority, we have to seek partnership with other 
entities, public and private entities; and, as stated, the law 
requires that I certify that these projects are economically 
viable. In order to do that, there must be a consensus, a 
ground swell of support for these projects that we undertake.
    We have a Federal Register notice out soliciting input or 
statements of interest for individuals interested in building 
new transmission under this authority.
    Prior to this authority, we have been contacted numerous 
times throughout our existence of how can Western help, how can 
Western help build new transmission that is needed in the 
United States; and up until this authority we have had a 
limited ability to respond. So, I do believe there is a role 
for us to play.
    Visibility. We do have another Federal Register notice, as 
required by law to have a public process that solicits input 
for the authority, on how to set up policies and procedures on 
this new program. So, we are seeking comments from all 
interested parties as to the many questions that come with this 
new authority.
    But, remember, we do have a proven track record. About 4 or 
5 years ago, we entered into a public-private partnership in 
California to build the Path 15 Project. That project has been 
a constrained path that was known for 20 years but was never 
built until we were able to pull it together with the help of 
the private sector. That constrained path caused blackouts in 
the early 2000s in California. And so, with our ability to 
partner with others, we were able to accomplish this needed 
link under budget and under schedule. From the time we began 
construction, we completed the project, turned it on in 10 
months.
    That is proven success that we are able to bring to the 
table.
    And, yes, this is a new authority for us. We did not have 
borrowing authority before; and we--as I said before, we do not 
take it lightly. I welcome the comments from all of you and the 
questions.
    And with that, Madam Chairwoman, I am happy to answer any 
questions you may have.
    [The prepared statement of Mr. Meeks follows:]

   Statement of Timothy J. Meeks, Administrator, Western Area Power 
               Administration, U.S. Department of Energy

    I am Timothy J. Meeks, Administrator of the Western Area Power 
Administration (Western). This is my testimony for the March 10 
oversight hearing on ``Federal Power Marketing Administration Borrowing 
Authority: Defining Success.''
    Good afternoon and thank you, Madame Chairwoman and Subcommittee 
members. It's a privilege to update you on the actions Western is 
taking right now to deliver the results envisioned under Section 402 of 
the American Recovery and Reinvestment Act of 2009 (Recovery Act). 
Section 402 grants borrowing authority to Western, which is a 
tremendous milestone--a solid step toward energy independence. I am 
honored that Congress and the Obama Administration called upon Western 
to help address the clear need for new transmission in the West.
    Today, I will talk about how Western is moving forward 
expeditiously, yet with due diligence, to carry out the law's intent 
because the demand for transmission infrastructure is immediate. I will 
describe how we will wisely invest funds to create and preserve jobs 
for workers to develop and build projects that lead to the delivery of 
clean, renewable, home-grown energy to consumers across the West, 
promoting economic stability and energy security for our Nation as a 
whole. I want to emphasize that we will implement Section 402 as 
intended; and, at the same time, honor our commitment to continue 
providing excellent service to our existing customers and fully execute 
our power marketing mission.
Continuing commitment to traditional customers--our core mission
    Western delivers--not only power and energy--but results. Our long-
standing core mission was, is and will continue to be, the marketing 
and reliable delivery of more than 10,000 megawatts of power annually--
primarily clean, renewable hydropower generated at Federally-owned 
dams. This power is sold according to preferences established in 
Federal Reclamation Law at the lowest cost consistent with sound 
business principles.
    Together with our customers, we have brought comfort and security 
to people from small and large communities alike--Native American 
reservations, universities, military bases and hospitals--through 
today's Federal hydropower marketing program, which has thrived for 
more than 100 years. We have decades of experience and well-established 
partnerships with both public and private entities in providing 
affordable, reliable, renewable and clean Federal hydropower to our 
customers who serve millions of consumers across 15 western and central 
states. We have built those partnerships by working through challenges 
and change together. We envision partnerships having an even greater 
role with this new authority.
    Section 402 does not replace and is not intended to compromise 
Western's current mission; it grants new responsibility to support a 
critical need for transmission infrastructure to facilitate delivery of 
renewable energy to market. We will meet the challenges of implementing 
Section 402 and deliver results without sacrificing our core mission 
and our high standards of providing quality service to existing 
customers.
    Our marketing mission and programs should improve and get even 
stronger as we move forward. With this new authority, the critical role 
of the Federal hydropower program has received more national attention. 
Increased attention will bring the value of Federal hydropower into 
clearer focus and demonstrate what we can do to meet the renewable 
energy goals of Congress and the Administration.
Today's Federal transmission infrastructure
    Western delivers Federal hydropower over an integrated 17,000-
circuit mile, high-voltage transmission system--an electrical Federal 
highway--that spans a 1.3 million square-mile service area. This system 
was primarily developed to deliver Federal hydropower to preference 
customers. While our role as transmission owner and provider is 
critical to the delivery of Federal power, the role we play in 
transmission is integral to our Nation's interconnected electrical grid 
and helps ensure the reliable and secure delivery of our Nation's power 
supply. Our customers, the industry and others look to Western as a 
partner in initiatives to increase transmission capacity and 
reliability, to eliminate congestion points and to respond to 
additional requests for interconnection onto the grid.
    In these types of collaborations, we are known for bringing many 
parties with differing interests together to solve difficult 
transmission issues across our service territory. In addition, we 
openly work with landowners, local and state agencies, interest groups 
and others in balancing competing interests and minimizing impacts 
resulting from transmission projects while protecting the resources of 
the landscapes across the West.
    Our management of Path 15, 84 miles of new 500-kV transmission line 
to alleviate a 20-year old major bottleneck in California, is an 
example of how we deliver results. We placed 246 lattice towers and 98 
steel poles to support 756 miles of conductor and 168 miles of overhead 
ground wire in just 10 months, ahead of schedule and under budget. I 
commit to you that--to the best of our abilities--we'll deliver results 
like this again, and then again.
Facilitating renewables to market: transmission under the Recovery Act
    We view Section 402 of the Recovery Act, which grants Western $3.25 
billion in borrowing authority, as another opportunity for Western to 
show Congress, the Administration and industry what we can do to 
deliver on the promise of energy independence. With this authority, 
Western can borrow funds from the Treasury to finance, facilitate, 
plan, construct, operate and maintain or study the construction of new 
or upgraded transmission lines and related facilities, with at least 
one terminus in Western's service area. The goal is building new 
transmission to deliver or facilitate the delivery of power generated 
by renewable energy resources to meet growing demand for power and to 
create jobs in the process.
    The law calls for each project funded under this authority to be 
repaid separately and distinctly from Western's other power and 
transmission facilities and from other projects funded using borrowing 
authority. This safeguard assures that costs are properly allocated to 
entities that benefit from each project funded by Section 402 authority 
and protects existing projects and customers. Last week, we initiated 
the public processes, required by the law, to seek requests for 
interest in identifying potential projects and to develop policies and 
practices to implement this authority.
    For each project in which Western participates under this 
authority, I must certify, before committing any funds, that:
      the project is in the public interest,
      the project won't adversely affect system reliability, 
operations or other statutory obligations; and,
      it is reasonable to expect that the project proceeds will 
be adequate to repay the loan.
Borrowing Authority--``lining up jobs and projects''
    Use of this authority will be pivotal in addressing two of the 
major energy challenges we now face in the West--the need for 
additional transmission infrastructure and integration of renewables 
onto the grid. While it is evident that new transmission is urgently 
needed, getting ``lines in the air'' has not occurred to any 
significant degree in the past decade. We know that there are entities 
interested in working with us to deliver renewables. For example, our 
November 2008 Federal Register notice, seeking partners interested in 
contributing up to $100 million in third-party funding to develop a 
transmission project under section 1222 of the Energy Policy Act of 
2005, generated considerable interest. Five parties responded with 13 
proposals to build transmission for renewables.
    Parties interested in developing renewable resources have 
consistently come to Western seeking transmission services. However, 
until passage of the Recovery Act, Western lacked sufficient funding 
and authority to meet these requests. It's been a vicious circle--a 
lack of funding has been the weak link in building transmission and the 
lack of transmission has been the weak link in the development of 
renewable generating resources. Using this borrowing authority, we will 
link renewables to transmission and workers to green jobs. Again, we 
will deliver results.
Linking renewables to transmission
    Based upon the level of developer interest and how well our service 
territory overlays areas with renewable energy potential and 
transmission needs, we know projects are out there that are ready to 
go. Private entities and Western's power customers are looking to us as 
partners to help meet transmission demands for renewables.
    For example, there are 78 active requests for transmission 
interconnections for wind pending in Western's interconnection request 
queue--representing a total of 18,800 megawatts of wind to add to the 
grid. Each of these requests represents a wind farm with an average 200 
megawatts each. In addition, several major transmission projects to 
deliver renewable resources to market are in various stages of planning 
and development.
    Our service area fits well into the energy picture of the West. 
First, we conduct business in the heart of our Nation's renewable 
energy potential. Nine of the 10 windiest states and the best 
geothermal and solar potential in the Nation are in our geographic 
footprint. Second, some areas in our service territory (as outlined in 
the DOE's 2006 National Electric Transmission Congestion Study) are 
considered critically congested and need to be addressed immediately, 
are congestion areas of concern where a congestion problem exists or 
may be emerging, or are conditionally congested areas where future 
congestion would result if large amounts of new generation were to be 
developed without simultaneous development of associated transmission. 
The latter category includes the Montana-Wyoming and Dakotas-Minnesota 
areas in our service territory. In addition, one of the national 
interest electric transmission corridors is in our marketing area. 
Third, about three-fourths of the Western Interconnection's congested 
transmission paths are in our service territory, pointing to the need 
for upgrades. Many of these congested paths are in areas rich in 
renewable resource potential.
Stimulating the Economy
    To meet transmission demands means that we will need the expertise 
of engineers, project managers, construction workers, environmental 
specialists, economists and equipment manufacturers--meaning an 
infusion of new jobs into the industry and dollars into the economy. 
The level of borrowing authority in Section 402 will equal about three 
decades worth of Western's current construction program. In addition to 
contract awards to the commercial sector for government-furnished 
equipment needed to build each project, Western contracts out much of 
the environmental work associated with our projects and 100 percent of 
actual construction, which is the majority of project costs.
    In the short term, we envision private sector jobs being created by 
injecting dollars into the economy to get projects started that haven't 
had the critical mass to move forward to date. Jobs will be created by 
the demand for workers to perform environmental work, acquire land and 
conduct preliminary field work for construction. In addition, there 
will be large contract awards for long-lead-time equipment purchases.
    Depending on the projects we receive from the statements of 
interest and their state of readiness, we are striving for ``lines in 
the air'' for renewables in about 18 months to two years, which will 
contribute to the Administration's goal for energy independence and a 
green economy.
Principles, practices and policies designed for results and benefits
    The demand for transmission infrastructure is enormous. While the 
$3.25 billion in borrowing authority is a substantial boost to our 
ability to meet transmission demands, it will not close the gap between 
what exists today and tomorrow's demands. Therefore, one of Western's 
implementation objectives is to encourage non-Federal participation in 
order to leverage this new authority.
    Western does not have a vested interest in any particular solution. 
Therefore, we can serve as a neutral facilitator, assuring that 
projects that best accomplish the intent of the law will rise to the 
surface. Any projects constructed using this authority will be 
considered separately from procedures and requirements for arranging 
for transmission service or interconnection under Western's existing 
open access transmission tariff.
    Western has designed and proposed a set of principles to serve as 
overarching guidance and a series of policies and practices to produce 
tangible results and concrete quantifiable benefits, the cost of which 
will be paid by those who use the facilities. The overall goal is to 
implement a program that fully meets the intent of the law and the 
Administration's promise of accountability and transparency.
    We will provide opportunity for participation in projects by other 
entities, use revenues from project beneficiaries as the only source of 
repayment of all associated project costs, and maintain controls to 
ensure project repayment is treated separately from Western's other 
projects, including other projects developed with this authority. All 
selected projects, including upgrades to Western's existing 
transmission lines, must meet the requirement that there is a 
reasonable likelihood that it will generate enough transmission service 
revenue to repay the principal investment, all operating costs and the 
accrued interest.
Progress Report--moving at a high speed
Program Development
    To expedite the process of developing this new program, Western has 
issued two Federal Register notices (FRN) simultaneously, one 
soliciting interest in projects and the other defining the program.
    The first FRN, Notice of Availability of Request for Interest, 
published on March 4, seeks interest from entities in identifying 
proposed projects. Responses for initial consideration are due April 3.
    Also on March 4, Western published the Notice of Proposed Program 
and Request for Public Comment, which lays out the rules of the road--
how the authority will be implemented. This began a public process with 
a 30-day public comment period. A public meeting, also available via 
webcast, is set for March 23. We expect to obtain third-party input to 
help us develop policies and procedures to effectively and efficiently 
implement this new authority. Western will analyze the comments 
received and make any necessary revisions to its proposed program 
principles, policies and practices.
Financial Management and Program Funding
    Western is modifying its business systems in order to track and 
manage the projects and funding mechanisms under this new authority 
separate from our other projects. Discussion is underway with the 
Treasury on the terms and conditions under which Western will obtain 
loans to fund transmission projects under this authority. We are 
consulting with the Bonneville Power Administration on its use of and 
experience with borrowing authority.
Transmission Infrastructure Program
    A new and separate function, Transmission Infrastructure Program, 
charged with implementing this new authority, has been formed. Its 
manager reports directly to me and it will initially be a small group. 
If growth in staff is required, it will occur at a measured pace. The 
staff includes a program manager, project manager, transmission 
planning engineer, public utilities specialist, industry economist and 
administrative assistant. A small team of existing staff was assigned 
to develop the program while the process of permanently filling 
necessary positions takes place.
Delivering on the promise of sustainability and clean energy
    As a hydropower and transmission service provider, Western has 
learned to effectively respond to changes in the power industry. We 
have learned how to better meet our customers' needs by adapting and 
changing how we do business. Western is an essential part of the 
electric utility industry with important roles to play today and 
tomorrow.
    Today, with the support of Congress, the Administration, our 
customers and industry partners, we now have borrowing authority--a 
mechanism to contribute even more as a Federal agency, to play a more 
significant role in our Nation's energy solutions and in our Nation's 
energy future. We will report our progress, pledge accountability to 
the Treasury, our customers and the taxpayers, and will move as quickly 
as possible to do our part for economic recovery and energy 
independence. This is an exciting time for our industry, and we 
appreciate your trust and confidence in us to help build the electrical 
grid of tomorrow while continuing to fulfill our core mission.
    Thank you, Madame Chairwoman. I would be pleased to answer any 
questions that you or the Subcommittee members may have.
                                 ______
                                 

  Response to questions submitted for the record by Timothy J. Meeks, 
 Administrator, Western Area Power Administration, U.S. Department of 
                                 Energy

QUESTION FROM REPRESENTATIVE GRIJALVA
 Q1. Is Western limiting itself to the projects in the queue, which was 
        formed before Western was given a specific charter to pursue 
        new renewable energy sources?
    Answer 1. The Recovery Act requires Western to seek Requests for 
Interest from entities interested in identifying potential projects 
through one or more notices published in the Federal Register. The 
program proposes to consider projects that may be constructed pursuant 
to its authority under section 402 of the Recovery Act separately from 
procedures and requirements for arranging for transmission service or 
interconnection under Western's Open Access Transmission Tariff. 
Therefore, the proposed program would not limit itself to projects in 
the interconnection request queue.
 Q2. What precautions is Western taking to ensure that these 
        investments do not expand carbon-heavy coal-fired generation?
    Answer 2. Western is still in the process of developing its 
Transmission Infrastructure Program (TIP), but Western is clearly 
required by the Recovery Act to construct, finance, facilitate, plan, 
operate, maintain, or study construction of new or upgraded electric 
power transmission lines and related facilities that ``support delivery 
of power generated by renewable energy resources.'' Western intends to 
fully comply with the intent of this requirement in evaluating projects 
and established this as a criterion in Western's Federal Register 
notice on the TIP.
 Q3. Is WAPA doing everything possible to work with other entities in 
        the transmission infrastructure building business to avoid 
        needless duplication of lines with the attendant added damage 
        to natural resources?
    Answer 3. Western is involved in many regional and sub-regional 
transmission planning groups to work with transmission entities in 
coordinating numerous proposed transmission additions in an effort to 
avoid duplication of lines. Western is a member of the WestConnect 
transmission planning group which provides an annual 10-year regional 
transmission plan that coordinates all transmission plans across the 
WestConnect planning area. Western also participates in the Mid-
continent Area Power Pool (MAPP) west Reliability Organization (MRO) 
Transmission Planning Subcommittee (TPSC) which facilitates the 
development of a biennial coordinated transmission plan for all 
transmission facilities in the MAPP region.
QUESTION FROM REPRESENTATIVE INSLEE
 Q1. Please provide a list of ongoing multi-stakeholder regional 
        transmission planning efforts that are focused on the 
        construction of new or upgraded transmission infrastructure 
        within your service area. Please describe which of these 
        planning efforts in qwhich you are currently engaged and/or 
        working to help facilitate the construction of new or upgraded 
        transmission infrastructure, particularly transmission 
        infrastructure that is designed to deliver or facilitate the 
        delivery of power generated by renewable resources.
    Answer 1. Within the Western Interconnection, the Western 
Electricity Coordinating Council (WECC) has a specific Regional 
Planning Process within its Procedures for Regional Planning Project 
Review and Rating Transmission Facilities document.
    Within the Eastern Interconnection, Western participates in the 
Mid-Continent Area Power Pool (MAPP) Transmission Planning Subcommittee 
(TPSC) and other transmission planning groups.
    Following are some of the ongoing multi-stakeholder regional 
transmission planning efforts within Western's service area:
      Wyoming Colorado Intertie (WCI)--800 MW increase in TOT3 
by construction of a new 345-kV line from southeastern Wyoming to 
northeastern Colorado. There are specifically 585 MW of wind resources 
signed up to acquire long-term agreements on the WCI. Western is 
involved in this project which has recently gone through the WECC 
Regional Planning Process.
      Joint Coordinated System Plan (JCSP)--Western 
participates in the JCSP through the MAPP TPSC which facilitates the 
coordination for the MAPP members.
      Green Power Express--Developer ITC intends to use the 
Midwest Independent Transmission System Operator (MISO) regional 
planning process. Western is not a member of MISO; we are exploring our 
options to participate in the MISO process.
      American Electric Power (AEP) 765-kV Transmission--At 
this time, Western is not involved in the planning process.
      Regional Generation Outlet Study (RGOS)--At this time, 
Western is not involved in the planning process since it started as a 
MISO related study. However, due to its impact to the Upper Midwest 
Transmission Development Initiatives, Western intends to begin 
participation in this process.
      Upper Midwest Transmission Development Initiative 
(UMTDI)--Western has been involved in this Initiative from its 
creations. Western has members on both the Planning Working Group and 
the Cost Allocation Working Group. The Planning Working Group has been 
relying on the MISO RGOS and Western intends to become involved in this 
MISO study.
      Eastern Wind Integration and Transmission Study--At this 
time, Western is not involved in the planning process.
 Q2. How is the Obama Administration's stated climate and renewable 
        energy policy goals factored into your planning and public 
        review processes for providing new electric transmission to 
        facilitate the increased use of renewable energy resources. Are 
        you considering any scenarios in which there would be a price 
        associated with carbon dioxide emissions from fossil-powered 
        electricity sources and the U.S. achieves a 15 percent 
        greenhouse gas emissions reduction below currently levels by 
        2020? If so, what carbon prices are assumed under such 
        scenarios? Are you considering scenarios in which U.S. 
        utilities generate 25 percent of their electricity from 
        renewable sources by the year 2025?
    Answer 2. Section 402 of the Recovery Act authorizes Western to 
construct, finance, facilitate, plan, operate, maintain, or study 
construction of new or upgraded electric power transmission lines and 
related facilities that ``support delivery of power generated by 
renewable energy resources.'' Western is currently conducting a public 
process to develop its Transmission Infrastructure Program (TIP). 
Western has not included consideration of carbon dioxide emission 
prices in its proposed TIP. Western encourages the public to comment on 
this and other issues related to the TIP.
 Q3. Could you describe in greater detail how WAPA intends to use its 
        borrowing authority to partner with the private sector?
    Answer 3. Western outlined its proposed program for the 
Transmission Infrastructure Program, which is the vehicle Western will 
use to implement borrowing authority in a Federal Register notice 
published March 4, 2009 (74 FR 9391). One of Western's objectives in 
implementing this program is to encourage nonfederal participation so 
as to leverage Western's borrowing authority. One of the proposed 
program principles states that ``Western will ensure the program 
provides an opportunity for participation of other entities in 
constructing, financing, owning, facilitating, planning, operating, 
maintaining or studying construction of new or upgraded electric power 
transmission lines under this authority by seeking requests from 
entities interested in identifying potential projects through one or 
more notices published in the Federal Register.''
    Western is currently conducting a public process on its proposed 
program with comments due April 3. Concurrent with this public process, 
Western is also seeking interest from any entity or entities interested 
in identifying a proposed transmission project, primarily in Western's 
service area, and/or desiring to participate with Western and possibly 
others by constructing, financing, owning, operating or maintaining 
transmission facilities or acquiring transmission rights or entering 
into long-term transmission service agreements on that project (74 FR 
9391). These statements are also due April 3.
    Western has a long history of partnering with other entities in 
developing transmission across our 15-state service territory. Each 
project has had different mixes of participants that assume a variety 
of roles and responsibilities, based on the specifics of that project. 
Western expects to continue this business model in implementing the 
Transmission Infrastructure Program. However, because the proposed 
program is still in development and Western has not yet identified 
specific projects and participants, it would be premature to speculate 
on the specific roles and responsibilities that partners, including 
Western, would likely assume.
QUESTION FROM REPRESENTATIVE SMITH
 Q1. You said in your testimony that in response to WAPA's November 
        2008 Federal Register notice seeking partners interested in 
        contributing up to $100 million in third-party funding to 
        develop a transmission project under section 1222 of the Energy 
        Policy Act of 2005, five parties responded with 13 proposals to 
        build transmission for renewables.
 a.  Are you moving forward to build any of these proposed projects?
 b.  If so, which ones?
 c.  If not, why not?
    Answer 1. In February 2009, after completing an initial screening 
of the responses, Western contacted each of the parties that provided 
an initial response with a request for additional information, in order 
to complete an initial assessment of project viability and readiness 
for construction. Four of the five entities responded to this request 
by the March 18 deadline. Western is now examining this data and will 
provide a report to the Secretary of Energy later this spring. All of 
the entities responding to both Western's initial and subsequent data 
requests noted that specific details they provided should be held as 
business confidential, so specific entity or project identification is 
not included here. Western will not move forward to complete further 
analysis on the project(s) proposed by the entity that did not respond 
to the second data request.
    Finally, one of the respondents suggested that the new borrowing 
authority granted to Western under the Recovery Act might be a better 
fit for the respondent's business model, and that they would also be 
responding to Western's March 4 Request for Interest Federal Register 
notice.
 Q2a. You also said in your testimony that there are 78 active requests 
        for transmission interconnections for wind pending in Western's 
        interconnection request queue--representing a total of 18,800 
        megawatts of wind.
 How many requests for the interconnection of renewable generation has 
        WAPA granted in the past three years? Please provide number of 
        projects and megawatts of transmission capacity requested.
    Answer 2a. Twelve installations with 259.5 MW of wind capacity have 
been installed in the past three years.
 Q2b. You also said in your testimony that there are 78 active requests 
        for transmission interconnections for wind pending in Western's 
        interconnection request queue-- representing a total of 18,800 
        megawatts of wind.
 What is WAPA doing to reduce this interconnection queue?
    Answer 2b. Western has assembled a team to develop proposals for 
revising Western's queue processing to address backlogs in its queues, 
which is a similar issue experienced by other transmission providers 
including the regional transmission organizations. This team identified 
a number of initial short term and long term proposals to address 
issues that Western has faced in processing requests in its generation 
interconnection queues. These proposals include stricter requirements 
to ensure that necessary environmental studies are completed on a 
timely basis by the interconnection customer, review of Western's 
resources to attempt to more rigorously meet its obligations in 
processing generation interconnection requests, including the use of 
additional outside resources to expedite completion of required 
studies. The longer-term proposals include more significant tariff 
changes to attempt to reduce the large number of speculative requests 
creating backlogs in Western's queues, including more stringent 
requirements on the interconnection customer (e.g. deposits, 
milestones, and limitations on suspension abilities) and also 
streamlined processing changes (e.g., ``first ready-first served'') 
similar to some elements of the queue reforms incorporated recently by 
regional transmission organizations. Western is in the process of 
evaluating and implementing the proposals.
 Q2c. You also said in your testimony that there are 78 active requests 
        for transmission interconnections for wind pending in Western's 
        interconnection request queue--representing a total of 18,800 
        megawatts of wind.
 What would be the cost of building the transmission necessary to 
        accommodate all these interconnection requests?
    Answer 2c. Multiple requests for a certain points of 
interconnection exist in the queue. Until transmission planning studies 
are further refined, the costs to accommodate all of the 
interconnection requests are not known.Question from Representative 
SMITH
 Q3. You indicate that WAPA is, ``Striving for ``lines in the air'' for 
        renewables in about 18 months to two years.'' What does that 
        mean in terms of when you will select the projects to build?
    Answer 3. Western will use the information gathered from its 
initial solicitation for potential projects and participants to 
identify projects on which construction can be started in the very near 
future. While it's difficult to predict with any certainty which 
projects or partners will be identified, and therefore difficult to 
predict the roles and responsibilities that are envisioned for 
participants, Western expects to be able to identify potential projects 
within 90 days of completing the public processes and to complete 
negotiations for participation soon thereafter.Question from 
Representative SMITH
 Q4a. You testified that, ``Western has designed and proposed a set of 
        principles to serve as overarching guidance and a series of 
        policies and practices to produce tangible results and concrete 
        quantifiable benefits, the cost of which will be paid by those 
        who use the facilities.'' I understand that you published these 
        principles, policies and practices in the Federal Register on 
        March 4.
 One of your principles states that Western will ensure that each 
        transmission project approved for funds ``[h]as the necessary 
        capabilities to provide generation-related ancillary 
        services.'' What are these ``necessary capabilities'' and how 
        would a transmission company or a renewable generation 
        developer be able to meet this requirement?
    Answer 4a. Section 402 of the Recovery Act contains four separate 
references related to ancillary services. Western interprets these 
references as requiring any new transmission projects to be financially 
responsible for necessary ancillary services, and further, that these 
new projects may not turn to Western's existing Reclamation projects to 
provide uncompensated ancillary services.
    Section 1.2 of the Federal Energy Regulatory Commission's pro forma 
open access transmission tariff defines Ancillary Services as ``[t]hose 
services that are necessary to support the transmission of capacity and 
energy from resources to loads while maintaining reliable operation of 
the Transmission Provider's Transmission System in accordance with Good 
Utility Practice.''
 Q4b. You testified that, ``Western has designed and proposed a set of 
        principles to serve as overarching guidance and a series of 
        policies and practices to produce tangible results and concrete 
        quantifiable benefits, the cost of which will be paid by those 
        who use the facilities.'' I understand that you published these 
        principles, policies and practices in the Federal Register on 
        March 4.
 Would rates for transmission service over projects approved by WAPA 
        for use of its new stimulus funding authority be subject to 
        FERC regulation? If not, how would the rates for such projects 
        be determined?
    Answer 4b. As noted above, one of Western's objectives is to 
encourage nonfederal participation to leverage Western's borrowing 
authority. Depending upon the roles and responsibilities agreed to by 
the parties, the transmission rates charged by another entity may be 
subject to FERC rate jurisdiction. This will need to be determined on a 
case-by-case basis.
    It is expected that the transmission projects will be subject to 
FERC electric reliability rules.
    Western's transmission rate setting process is described in the 
Federal Register notice for Western's Transmission Infrastructure 
Program. ``[t]ransmission rates for transmission capacity Western owns 
or controls will be developed in a public process following the 
applicable requirements outlined in 10 CFR 903 and set by the 
Administrator as specified in relevant DOE orders.
 Q4c. You testified that, ``Western has designed and proposed a set of 
        principles to serve as overarching guidance and a series of 
        policies and practices to produce tangible results and concrete 
        quantifiable benefits, the cost of which will be paid by those 
        who use the facilities.'' I understand that you published these 
        principles, policies and practices in the Federal Register on 
        March 4.
 What are the, ``concrete, quantifiable benefits'' you will use in 
        evaluating projects? What value will you attribute to 
        interconnecting renewable generation?
    Answer 4c. Section 402 of the Recovery Act gives three primary 
requirements for evaluation. For each project in which Western 
``participates pursuant to this section, the Administrator shall 
certify...that...(A) the project is in the public interest; ``(B) the 
project will not adversely impact system reliability or operations, or 
other statutory obligations; and ``(C) it is reasonable to expect that 
the proceeds from the project shall be adequate to make repayment of 
the loan.'' In addition to these primary requirements, Section 402 
contains other specific items of direction in evaluating projects; for 
example, as related to ancillary services. In its Federal Register 
notice on the Transmission Infrastructure Program (TIP), Western 
developed a series of principles to guide the TIP and also evaluation. 
The notice opened a public comment process on the TIP and Western 
expects to receive comments on the specifics of the evaluation process. 
The final evaluation criteria will be established following the closure 
of the public process.Question from Representative SMITH
 Q4d. You testified that, ``Western has designed and proposed a set of 
        principles to serve as overarching guidance and a series of 
        policies and practices to produce tangible results and concrete 
        quantifiable benefits, the cost of which will be paid by those 
        who use the facilities.'' I understand that you published these 
        principles, policies and practices in the Federal Register on 
        March 4.
 How will you determine ``those who use the facilities?'' Does this 
        mean that transmission built to interconnect renewable 
        generation will be paid for entirely by the renewable 
        generator, by the customers that purchase that generation, by 
        any customer who might benefit, now or in the future, from the 
        transmission built to accommodate renewable generation? All of 
        these?
    Answer 4d. ``All of these'' or better perhaps, ``all, or any of 
these'' is probably the best answer that can be given at this time. 
Section 402 of the Recovery Act clearly requires, for repayment 
purposes, Western to treat each project funded with Treasury borrowings 
as separate and distinct from all other Western transmission facilities 
and that proceeds from use of each project are to be used to repay the 
Treasury. Therefore, the obligation of repayment of a transmission 
projects funded by the Treasury falls generally on two groups--
generation and load. This obligation can be allocated in any number of 
ways. Section 402 of the Recovery does not set out any particular model 
for repayment except that the costs of a project shall not be charged 
to users of Western's facilities constructed prior to the Recovery Act.
    Western expects the Statements of Interest it receives in response 
to its Request for Interest will propose a wide variety of repayment 
methodologies.
 Q5a. Finally, you say in your testimony that, ``several major 
        transmission projects to deliver renewable resources to market 
        are in various stages of planning and development.''
 What is WAPA's role with respect to these projects?
    Answer 5a. Western is currently seeking interest from any entity or 
entities interested in identifying a proposed transmission line 
project, primarily in Western's service area, and/or desiring to 
participate with Western and possibly others by financing, constructing 
or owning facilities or acquiring transmission rights or entering into 
long-term transmission service agreements on that project (74 FR 9391). 
Since Western has not yet identified specific projects, Western's role 
in these projects is not known at this time.
 Q5b. Finally, you say in your testimony that, ``several major 
        transmission projects to deliver renewable resources to market 
        are in various stages of planning and development.''
 Is WAPA willing to enter into joint ownership of transmission projects 
        to leverage the funding authority that it has been given, or 
        will WAPA participate in constructing only transmission that it 
        will own?
    Answer 5b. One of Western's objectives in implementing the 
Transmission Infrastructure Program is to encourage non-Federal 
participation so as to leverage Western's borrowing authority. 
Therefore, Western would consider entering into joint ventures for the 
development of transmission projects to meet this objective to the 
extent allowed under Western's legal authorities.
 Q5c. Finally, you say in your testimony that, ``several major 
        transmission projects to deliver renewable resources to market 
        are in various stages of planning and development.''
 Is WAPA willing to partner with transmission project developers, or is 
        WAPA only willing to work with renewable energy developers in 
        the development of transmission?
    Answer 5c. Entities referred to in the Federal Register notice (74 
FR 9391) include transmission project developers and renewable energy 
developers.
                                 ______
                                 
    Mrs. Napolitano. We will move on to Mr. Steve Wright.

  STATEMENT OF STEVE WRIGHT, ADMINISTRATOR, BONNEVILLE POWER 
                ADMINISTRATION, PORTLAND, OREGON

    Mr. Wright. Madam Chairman, Members of the Subcommittee, 
thank you for the opportunity to appear here today.
    Bonneville Power Administration is a self-financed Federal 
agency. We are not for profit. We market power and transmission 
in the Pacific Northwest. We became self-financed in 1974. We 
have received no appropriations since that time. All of our 
expenses are covered by the revenues generated from selling 
power and transmission services.
    But any business, particularly one in the electric utility 
industry, has to have access to capital. The 1974 Act gave BPA 
the ability to borrow from the United States Treasury without 
getting further appropriations.
    Bonneville is statutorily authorized to borrow for four 
purposes: to build and maintain transmission within the Pacific 
Northwest, to invest in maintenance and upgrades of the low-
cost Federal hydroelectric assets in the Northwest, to invest 
in fish and wildlife restoration activities that mitigate for 
damage caused by Federal hydroelectric system, and to invest in 
cost-effective energy efficiency measures.
    To date, Bonneville has borrowed over $8 billion using that 
authority and has repaid over $6 billion, three-quarters of the 
amount, with interest, which fully covers Treasury's cost.
    Because our customers pay our costs, Bonneville is 
committed to increasing transparency regarding its budgets. 
Last year, we began sharing 10-year capital budget forecasts. 
These forecasts project increases for all four of the 
statutorily authorized categories.
    There was fairly broad support for the planned capital 
spending within the Northwest. Essentially, these projects are 
lower cost than are available for the utilities. 
Simultaneously, in developing these budgets, Bonneville was 
developing a financial plan, and in that plan we displayed that 
using the capital expenditure forecast we were on a path to 
exceed our statutory borrowing authority of the $4.45 billion 
somewhere in the time frame of 2012 to 2016. So, that clearly 
was not a sustainable path. We can't run out of capital and 
maintain the system.
    In essence, this means that Bonneville could not have 
proceeded to fully implement the plan; and the result would 
have been higher rates, reduced reliability, and a less-healthy 
environment.
    Now, in particular, I will highlight the transmission 
program, because I know it is of interest to this Subcommittee.
    Bonneville has used the FERC Open Access Transmission 
Tariff to guide offering transmission in an open and 
nondiscriminatory manner. The FERC rules provide a first-come, 
first-served prioritization and requires that requesters of 
transmission pay for any necessary studies, including NEPA 
analysis. Most observers would agree that that process was 
generally not leading to either efficient or expedited 
transmission expansion due to its approach of sending 
transmission requests one by one.
    Bonneville initiated a new process, with FERC's blessing, 
that jointly study requests of all requesters who commit to pay 
for service if it is offered by Bonneville. Since the requests 
are studied in clusters, Bonneville is working jointly with its 
customers, agree to pay for the necessary studies and pass the 
costs along and its transmission rates, different from the way 
the things have been set up under the FERC tariff.
    Now, that process has proven to be extremely successful in 
the Northwest. Separating out transmission requests that were 
really ready to go, was able to identify 6,500 megawatts, 
three-quarters of which are wind. It is providing a more 
efficient study process that allows us to offer 1,700 megawatts 
of transmission without building anything at all.
    We have been able to develop a transmission build-out plan 
to serve the remaining 4,700 megawatts of request; and, 
following that, we have defined costs and rate impacts of 
implementing that build-out plan. Then, using that, we have 
been able to determine through a public process the interest 
particularly of transmission customers that will be responsible 
for the costs that Bonneville will incur proceeding with their 
interest in proceeding with those specified transmission 
projects.
    The result is that Bonneville is in a position to proceed 
with a substantial transmission construction program, expanding 
wind power access to the market that is defined by market 
requests and consistent with the desires of the customers who 
will pay for it. But this effort, along with the rest of our 
capital program, likely could not be fully implemented without 
an increase in our borrowing authority.
    That was the picture we were looking at last summer and 
fall. And then, from my perspective, a miracle occurred. The 
$3.25 billion included in the American Recovery and 
Reinvestment Act means Bonneville will not have to leave 
valuable projects on the cutting room floor.
    I am grateful to this Subcommittee and in particular to the 
Northwest Members who pushed and prodded to accomplish this 
change in the law. My commitment to you is we will use the new 
authority wisely. We will remain committed to using an internal 
asset management process that thoroughly evaluates with rigor 
all of the uses of capital across our agency. We will provide 
transparency such that the public will have the opportunity to 
understand our investments before they become fixed costs. We 
will structure out business at a rate such that BPA will 
continue its exemplary record of repaying the U.S. Treasury, as 
we have done for the last 25 years in a row.
    Madam Chairwoman, I am open to any questions this 
Subcommittee may have.
    [The prepared statement of Mr. Wright follows:]

            Statement of Stephen J. Wright, Administrator, 
       Bonneville Power Administration, U.S. Department of Energy

    Thank you Madame Chair.
    My name is Steve Wright, and I am the Administrator of the 
Bonneville Power Administration (BPA) which is headquartered in 
Portland, Oregon. I appreciate the opportunity to describe the 
significance of the $3.25 billion in additional Treasury borrowing 
authority provided BPA by the American Reinvestment and Recovery Act 
(ARRA) and how BPA plans and executes capital investments for its 
mission to serve the Pacific Northwest region.
    Created by Congress in 1937, BPA markets at wholesale the electric 
power generated from 31 Federal dams, one non-Federal nuclear power 
plant and several small non-Federal power plants. BPA serves about one-
third of the electric power used in the Pacific Northwest and its over 
15,000 circuit miles of transmission lines provide about three-quarters 
of the high voltage transmission in the region.
Introduction: BPA makes the best use of its Treasury borrowing to meet 
        regional environmental and energy efficiency goals.
    The ARRA raised the ceiling on the borrowing that BPA conducts 
under the Federal Columbia River Transmission System Act of 1974 
(Transmission System Act) by $3.25 billion. Prior to 1974, BPA received 
annual appropriations for all of its expenditures and the revenues BPA 
raised through its rates were deposited in the General Fund of the 
Treasury. BPA has always been required to set its rates to cover all of 
its costs, so this was essentially a zero-sum arrangement. Recognizing 
this, and seeking to increase the efficiency of government and enable 
BPA to enter into multi-year commitments with its business partners in 
the Pacific Northwest electric power system, Congress provided BPA with 
``self-financing'' authority in 1974 establishing a separate fund in 
Treasury--the Bonneville Fund--that BPA manages. Into the Bonneville 
Fund go BPA's revenues, and from it BPA pays all of its costs, 
eliminating the need for Congress to provide annual appropriations of 
taxpayer funds. The Transmission System Act also authorized BPA to 
borrow from Treasury, at Treasury's current cost of money plus an 
amount to be comparable to prevailing electric utility market 
determined borrowing costs, for its capital expenditures. BPA fully 
repays these loans with interest at market rates. There is no subsidy 
to BPA. BPA's borrowing authority has been increased several times 
since 1974 to now total $7.7 billion which I will describe in more 
detail.
    BPA is authorized to use its borrowing authority for multiple 
purposes; including to expand and upgrade its transmission system, 
including the facilitation of new renewable electricity resources while 
keeping electricity rates as low as possible; energy efficiency; and to 
meet its obligations under the Pacific Northwest Electric Power 
Planning and Conservation Act of 1980 (Northwest Power Act). The 
obligations under the Northwest Power Act include significant capital 
investments for fish and wildlife. Today, Bonneville's transmission, 
power and environmental programs are being called upon by the Pacific 
Northwest region and, in fact, much of the West Coast, to provide the 
backbone for supplying new renewable electric resources to reduce 
greenhouse gas emissions and to continue to restore the sustainability 
of Columbia Basin fish and wildlife.
    The capital financing required to meet these demands is significant 
as we look over the next two decades. BPA conducts extensive planning 
with public review for its capital program and manages the wisest 
allocation of its Treasury borrowing authority after weighing other 
alternatives to meet its needs. Last year BPA made its 25th consecutive 
annual Treasury payment in full and on schedule. BPA believes that its 
use of Treasury borrowing authority is a good deal for U.S. taxpayers.
BPA plans for its capital spending needs carefully.
    As I have mentioned, the current drivers of BPA's capital spending 
needs come from regional goals for clean electricity and environmental 
restoration and the need to maintain and upgrade an aging transmission 
and power system. BPA forecasts its capital spending with thoroughly 
transparent analysis, including regular public reviews with its 
customers, implementation partners and other interested parties in the 
Pacific Northwest. BPA initiated its most recent proposed capital 
spending review last summer.
    BPA has had considerable success in meeting some of the demands for 
its services through innovative non-capital means. Last year BPA 
conducted a first-of-its-kind Network Open Season to sort out a 
complicated queue of service requests from customers seeking access to 
BPA's transmission system. Many of these requests were for delivery of 
wind-generated electricity that has exploded in development in the 
Northwest. Constraints on the transmission system at critical transfer 
points prevented BPA from providing service without upgrade and 
expansion of the grid.
    BPA's Network Open Season obtained financial commitments and signed 
service agreements that allowed BPA to conduct system engineering 
studies to determine what service could be provided from the existing 
capacity of the transmission system. We found that we could provide 
service for 1,780 megawatts of new service without major construction, 
simply by withdrawing from the queue those not ready to commit to 
taking service. Just last week, we also began offering Conditional Firm 
transmission service to more of the service requests we processed in 
the Network Open Season. Conditional Firm service provides service with 
the potential for a small amount of interruption if transmission 
becomes congested, and it is a product that has appeal for some of our 
customers, including wind generators. We are currently making offers of 
approximately another 1,200 megawatts of service, and expect to make 
additional offers of Conditional Firm service on an interim basis in 
the future.
    After these system engineering studies we conducted financial 
analysis of the construction costs for the remaining service requests 
we evaluated in the Network Open Season. We are preparing to offer 
transmission service with four new transmission lines and one system 
upgrade for 3,700 megawatts, almost 2,800 of which will come from 
renewable, non-carbon-emitting generation. Three of these projects are 
about to undergo environmental analyses; but one is shovel-ready, the 
environmental review having been completed in 2002. That project is a 
500-kilovolt transmission line from McNary Dam to John Day Dam along 
the Columbia River in Washington and Oregon.
    With the added assurance of the additional borrowing authority 
Congress has just provided, we feel confident we can move forward with 
these projects, and last week we announced that we will begin 
construction this spring on the 79-mile, McNary-John Day line. We 
estimate that construction of this roughly $340 million line will 
create about 700 jobs at its peak. It will deliver more than 700 
megawatts of wind energy across BPA's transmission system.
    I am pleased with this approach that allowed BPA to find ways to 
first meet new service requests without needing to borrow for new 
construction and then make cost-effective decisions on the projects 
that do need to be built.
    It is important to note the planning processes for other proposed 
capital spending initiatives. Last year, BPA signed historic 10-year 
agreements with five Columbia Basin Indian tribes and two states. The 
agreements set a course of action for restoration of salmon and 
steelhead listed for protection under the Endangered Species Act and 
other populations important to these partners. The parties agree that 
these commitments meet BPA's obligations, and those of the U.S. Army 
Corps of Engineers (Corps) and the Bureau of Reclamation, under the 
Endangered Species Act and the Northwest Power Act. The agreements 
specify implementation of a sequence of scientifically-reviewed fish 
and wildlife projects, including investments that will bring BPA's 
capital spending for its fish and wildlife obligations to $50 million a 
year.
    BPA also has completed asset management studies of needed capital 
upgrades and replacements for its aging transmission system and the 
needs for the aging Federal hydro generation, which BPA finances 
through direct-funding agreements with the Corps and Bureau of 
Reclamation. We have a prioritized sequence of projects that are needed 
to maintain the quality and reliability of the Northwest power system 
and to optimize the output of this significant source of non-carbon-
emitting electrical generation. BPA's rates cover all of the costs of 
Corps and Bureau power facilities and operations in the Pacific 
Northwest.
    We review all of these schedules with regional stakeholders prior 
to our rate cases. We conduct public workshops that present and 
thoroughly discuss our costs and our proposed capital spending. The 
initial public process preceding our 2010-2011 rate case was initiated 
last summer. We intend to conduct these public processes every two 
years.
    We also completed a new Financial Plan for the agency that defines 
strategies and policies for guiding how BPA will manage risk and the 
variability of electricity markets and water years. Importantly, the 
Financial Plan describes how we will continue to manage to ensure that 
we meet our Treasury repayment requirements. As a follow-on to the 
Financial Plan we are scheduling further discussions with our customers 
and regional parties to refine our strategies for our access to 
capital.
BPA's capital investments help accomplish its mission to serve the 
        Pacific Northwest.
    The demand for our service to meet regional greenhouse gas 
reduction and environmental goals continues to increase. BPA's 
transmission system is a major component of the Western Interconnection 
which extends from Mexico to Canada and supports long distance transfer 
of electricity, including increasing amounts of renewable electricity. 
The growing volumes of renewable power help to meet expanding state 
goals for greenhouse gas reduction.
    In the Pacific Northwest, the new renewable electricity resource is 
wind. Just two years ago BPA and the Northwest Power and Conservation 
Council completed an Action Plan that confirmed that adding 6,000 
megawatts of wind generation in the Northwest by 2020 is technically 
feasible but assumed that about half of that would be located where BPA 
supplies transmission. Instead, wind generation is rapidly 
concentrating in BPA's system and we believe 6,000 megawatts of wind 
could be attached to our system by 2013.
    We're advantaged by a Federal hydrosystem that is a major source of 
carbon-free electricity for the Pacific Northwest. It is now being 
called upon to back up the intermittent supply of wind and, especially 
with fish constraints, is reaching the limits of its ability to meet 
that need. BPA continues to work with the region to meet the wind 
integration challenges and adequate access to capital is a key 
component to modernizing the system for that capability.
    BPA also helps the region meet its clean energy goals through its 
ability to capitalize major investments in energy efficiency. BPA 
currently budgets about $40 million for annual capital investments in 
energy efficiency. And, as I have previously mentioned, there is a 
significant capital component to BPA's commitments under the Columbia 
Basin Fish Accords.
The ARRA's addition of borrowing authority is a significant addition to 
        BPA's capital resources.
    BPA's Treasury borrowing authority originated in the 1974 
Transmission System Act when Congress made BPA self-financed and 
accorded BPA $1.25 billion in Treasury borrowing authority to finance 
capital investments in the transmission system. This was subsequently 
expanded to include all BPA functions under the Northwest Power Act.
    In the Northwest Power Act, Congress initially authorized an 
additional $1.25 billion in Treasury borrowing authority for 
conservation and renewable resource loans and grants. This borrowing 
authority was then provided in the Energy and Water Development 
Appropriations Act of 1982. A further $1.25 billion of Treasury 
borrowing authority was made available to BPA in Energy and Water 
Development Appropriations Act of 1984, for all of BPA's capital 
requirements.
    In the 2003 Energy and Water Development Appropriations Act, 
Congress increased BPA's Treasury borrowing authority by another $700 
million for BPA's general capital requirements. Before passage of the 
ARRA, then, BPA's total Treasury borrowing ceiling was at $4.45 
million.
    Before passage of the ARRA, BPA projected that it would exhaust its 
capital resources some time between 2013 and 2016, depending on 
financial market conditions. BPA estimates that the additional $3.25 
billion could potentially extend its ability to meet its capital needs, 
including the initiation of the transmission system expansions I 
described earlier, for about another ten years, depending on capitol 
spending.
Treasury borrowing authority is a good deal for U.S. taxpayers.
    All BPA costs, including repayments to the U.S. Treasury, are paid 
from the revenues BPA earns from selling Federal power and transmission 
services. As a self-financed agency, BPA receives no annual 
appropriations and is able to fund capital program expenditures through 
its Treasury borrowing in a business-like way. BPA repays the borrowing 
at interest rates slightly above Treasury's costs.
    BPA's Treasury borrowing authority is a revolving fund, replenished 
as BPA repays the principal on its borrowing. Since 1978, BPA has 
borrowed a total of $8.42 billion and repaid $6.17 billion--nearly 
three quarters of all it has borrowed from Treasury. For 25 years, BPA 
has made its annual payment to the U.S. Treasury in full and on time. 
In 2008, it repaid Treasury $963 million in principal, interest, and 
other payments.
    Throughout its 72 year history, BPA has repaid Federal investments 
within the period prescribed by law. This history is strong evidence of 
BPA's financial stability, since the payments have been made through 
good, bad and truly terrible times, including the West Coast energy 
crisis of 2000-2001. BPA maintains very high credit ratings of AA- by 
Standard and Poors and Aaa by Moody's. Recently on March 4, 2009, Fitch 
Ratings upgraded BPA's rating from AA- to AA positive outlook based on 
BPA's significant financial management control and risk mitigation 
tools. Overall these ratings reflect the importance of maintaining 
sound BPA financial management. Such ratings allow BPA to conduct its 
financial business at lower cost.
    BPA is grateful for a long and collaborative relationship with the 
Treasury Department that has allowed BPA to soundly and effectively 
manage the assets of the BPA fund.
    This concludes my testimony, Madame Chair, and I welcome any 
questions from the Subcommittee.
                                 ______
                                 

 Response to questions submitted for the record by Stephen J. Wright, 
  Administrator, Bonneville Power Administration, U.S. Department of 
                                 Energy

QUESTION FROM REPRESENTATIVE INSLEE
Q1.  Please provide a list of ongoing multi-stakeholder regional 
        transmission planning efforts that are focused on the 
        construction of new or upgraded transmission infrastructure 
        within your service area. Please describe which of these 
        planning efforts in which you are currently engaged and/or 
        working to help facilitate the construction of new or upgraded 
        transmission infrastructure, particularly transmission 
        infrastructure that is designed to deliver or facilitate the 
        delivery of power generated by renewable resources.
    Answer 1. Currently there are ten new multi-stakeholder regional 
transmission projects, with multiple components, proposed for the 
Pacific Northwest. All project sponsors are committed to an open and 
transparent planning process. The list of projects, with sponsors name 
listed in parenthesis, is as follows:
     1.  West of McNary Reinforcement (Bonneville Power Administration)
     2.  I-5 Corridor Reinforcement (Bonneville Power Administration)
     3.  Energy Gateway (PacifiCorp)
     4.  Canada-Northwest-California (British Columbia Transmission 
Corporation and Pacific Gas & Electric)
     5.  Boardman-Hemingway (Idaho Power)
     6.  Northern Lights (TransCanada)
     7.  Southern Crossing (Portland General Electric)
     8.  Montana-Alberta Tie Line (MATL, Calgary-based energy 
transmission company)
     9.  Juan de Fuca (SeaBreeze)
    10.  West Coast Cable (SeaBreeze)
    Several of the projects originate, connect or terminate in 
northeast Oregon (Figure 1). These projects will help facilitate the 
delivery of power generated by renewable resources (wind and new hydro) 
in British Columbia, Alberta, Oregon, Washington, and Wyoming to other 
parts of the Western Interconnection.

    Figure 1: Transmission Projects Being Planned: 2010--2015 follows:
    [GRAPHIC] [TIFF OMITTED] 47991.007
    
    .epsBPA is part of the Transmission Coordination Work Group (TCWG), 
which was formed to aid the project sponsors with coordinating the 
planning studies and project communications. The TCWG is a large work 
group with parties having different interests and objectives. This 
group will help project sponsors meet the Western Energy Coordinating 
Council's (WECC) path rating requirements.
    Besides being actively engaged in the TCWG process, BPA also has 
held its own public process for its projects identified above as part 
of BPA's 2008 Network Open Season (NOS). BPA's 2008 NOS resulted in 
6,410 MW requests for new long-term firm transmission service. Almost 
three-quarters of those requests are associated with wind generation, 
reflecting the region's momentum toward rapid development of renewable 
resources and the need to comply with state Renewable Portfolio 
Standards (RPS). BPA also completed its WECC Regional Planning Project 
Review process for the West of McNary and I-5 Corridor projects through 
ColumbiaGrid, a sub-regional transmission planning entity.
    These processes are designed to be open and transparent, and to 
meet FERC's requirements under Order 890.
Q2.  How is the Obama Administration's stated climate and renewable 
        energy policy goals factored into your planning and public 
        review processes for supporting energy efficiency and new 
        electric transmission to facilitate the increased use of 
        renewable energy resources? Are you considering any scenarios 
        in which there would be a price associated with carbon dioxide 
        emissions from fossil-powered electricity sources and the U.S. 
        achieves a 15 percent greenhouse gas emissions reduction below 
        currently levels by 2020? If so, what carbon prices are assumed 
        under such scenarios? Are you considering scenarios in which 
        U.S. utilities generate 25 percent of their electricity from 
        renewable sources by the year 2025?
Answer 2.
      Renewable Energy:
    Many of BPA's utility customers in the Northwest are already 
subject to state renewable portfolio standards of up to 25 percent by 
the year 2025. For that reason BPA is already engaged in understanding 
how we can support the climate and renewable energy goals of the 
Administration. We are, for example, engaged in a public resource 
program planning process wherein BPA is examining how it can use 
existing resources and support new renewables to help our customers 
meet their growing loads and their RPS requirements. It is our 
customers themselves who will be subject to the RPS requirement and 
will decide whether to purchase any renewables (beyond their current 
allocation of BPA's hydro resource) from BPA.
    BPA also supports renewables development through its transmission 
construction program which will allow BPA's customers, as well other 
regional entities, better access to wind generation. BPA recently 
announced its decision to move forward with four transmission projects 
and one network upgrade that will provide transmission service to more 
than 2800 megawatts of wind generation. BPA's cross-agency Wind 
Integration Team is actively exploring what the agency can do to 
eliminate barriers to the wind development that will be needed for the 
regional utilities to meet RPS requirements.
    Finally, it bears mentioning that the Federal Columbia River Power 
System (FCRPS) system that is the source of BPA's power supply is 
virtually entirely carbon-free as it consists of hydro and nuclear 
resources. Furthermore, BPA has integrated more wind than any other 
control area, on a percentage basis of peak load, in the nation.
      Climate Policy/Prices
    When it comes to power and energy efficiency planning, BPA is 
statutorily obliged to look to the recommendations of the Northwest 
Power and Conservation Council (Council) and the 20 year regional power 
plans it develops. The Council is currently developing its 6th Power 
Plan and is examining the effect of a range of carbon prices on the 
optimal mix of future regional resource additions.
    Consistent with the Council's Plan, BPA is also examining an 
average of carbon prices in its resource planning process, called the 
Resource Program. The Council is preliminarily using a range with 
central tendencies from $8 per ton in 2012 to $47 per ton in 2029.
    The Council uses these carbon prices and probabilities as one of 
the many determinants of its designation of cost effective energy 
efficiency supply. BPA sets its efficiency targets and budgets based on 
the Council's estimate of cost-effective regional supply of energy 
efficiency.
    For its transmission planning, BPA has and will continue to 
incorporate carbon prices in estimating regional benefits of proposed 
transmission construction projects. For its 2008 Network Open Season 
economic benefits study, a range of carbon prices were assumed from $20 
to $50 per ton.
Q3.  In your testimony, you stated that BPA currently budgets $40 
        million for annual capital investments in energy efficiency. In 
        light of the stated climate and renewable energy policy goals 
        of the Obama Administration (see previous question), do you 
        have any plans to increase that annual expenditure?
    Answer 3. The $40 million dollar capital projection is an estimate 
of capital spending that might be required for BPA to meet the program 
demand of our public power customer utilities in the region. The vast 
majority of the energy efficiency being achieved currently is being 
delivered by self-funding of utilities or the expense based funding 
offered through the BPA Conservation Rate Credit (CRC).
    BPA's capital funding is available for those utilities who wish to 
acquire additional conservation beyond that achieved through self-
funding or the CRC. For example, last year BPA set a regional target of 
52 average megawatts (aMW) of energy efficiency based on the cost 
effective energy efficiency available in the region, and exceeded that 
target by obtaining 75 aMW. To achieve that, BPA only used $8 million 
of capital funding. Thus, having budgeted $40 million in 2009 will 
allow BPA to meet any additional demands for funding that go beyond 
current planned energy efficiency program activities.
Q4.  Your testimony referred to the NW Wind Integration Plan, in which 
        Northwest regional stakeholders agreed to 16 action items that 
        would facilitate the integration of 6,000 MW of wind energy in 
        the region. As you know, that plan was issued in March, 2007. 
        BPA's commitment to help achieve several of these action items 
        was reiterated in the BPA Wind Integration Rate Settlement 
        Agreement. It is critical for BPA to implement these action 
        items to facilitate the reliable integration of renewable 
        energy projects. As of today, I understand that most of these 
        action items have not yet been completed. Could you please 
        explain how BPA intends to move forward with these action items 
        in the near future? How many of these items can we expect to be 
        completed this year? Please explain how can your expanded 
        borrowing authority may be used to help achieve these action 
        items more expeditiously.
    Answer 4. In 2007, BPA, the Northwest Power and Conservation 
Council and other interested organizations completed an Action Plan 
that confirmed that adding 6,000 megawatts of wind generation in the 
Northwest by 2020 is technically feasible. The action plan recommends 
16 actions the region should take to accommodate this level of wind 
development. The plan called for the formulation of a Northwest Wind 
Integration Forum to facilitate implementation of the action plan. The 
unexpected speed of wind's actual development has put a priority on 
resolving the technical issues the region identified.
    In the two years since completion of the Northwest Wind Integration 
Action Plan, BPA and other entities in the region together have made 
considerable progress on the Action Plan items:
      Through the Pacific Northwest Resource Adequacy Forum, 
the region analyzed the capacity value of NW wind resources.
      In the current 2010-2011 power and transmission services 
rate case, BPA refined its study methodology and estimates of wind 
integration costs.
      The region funded development of a higher resolution wind 
data set for Northwest wind resources.
      The Resource Adequacy Forum convened NW regulators to 
discuss regulatory barriers to greater use of conditional firm 
transmission service.
      BPA implemented a re-dispatch pilot project and is in the 
process of making offers totaling 1200 MW of Conditional Firm 
Transmission Service. This re-dispatch project used non-Federal and 
Federal generation to relieve congestion.
      BPA developed and implemented its first Network Open 
Season which may result in a billion dollars of new transmission 
investment and beginning of construction of the McNary-John Day 500 
kilovolt line, which will enable at least 700 MW of new wind generation 
and strengthen linkages to other renewable resource areas in Idaho and 
Montana. The added assurance of the additional Treasury Borrowing 
Authority gave us the confidence to move forward with this project and 
initiate planning and design for three others. In the process, we 
developed a new financing model for regional utilities to use.
      BPA is actively engaged in planning studies with Montana 
and other Northwest Parties on the Colstrip expansion which is geared 
towards tapping wind resources in Montana.
      BPA has joined a number of other Northwest utilities in 
implementing the Area Control Error Diversity Interchange, with the 
purpose of facilitating integration into the transmission system of 
more intermittent renewable resources.
      BPA, ColumbiaGrid, NTTG, and WestConnect--subregional 
transmission planning--entities--have initiated the Joint Initiative, 
which is addressing dynamic scheduling and intra-hour schedule changes 
to further facilitate renewable generation integration. BPA is now 
marshalling internal resources to help move this further towards 
implementation.
      BPA completed its WECC Regional Planning Project Review 
process for the West of McNary and I-5 Corridor projects through 
ColumbiaGrid, a sub-regional transmission planning entity.
      Finally, the Council is working hard to factor in the 
many different dimensions of the wind integration question into its 6th 
Power Plan.
    It is important to understand that the action items developed for 
the Wind Integration Action plan were developed by a broad group of 
regional participants. Most of these efforts require ongoing 
improvements and enhancements and therefore do not neatly fit into 
categories of being finished by particular date. As the above points 
demonstrate, BPA has made good progress on those items it can implement 
in its own system, and is working with the region as it moves forward 
on a number of the other action items. Completing all of the tasks in 
the Action Plan requires the continued cooperation with other regional 
transmission planning entities and system operators. BPA is looking to 
the joint Wind Integration Study Team (WIST) convened by ColumbiaGrid 
and NTTG to follow-up on the planning methodology recommendations of 
the Wind Integration Action Plan and to propose a study of the 
potential system constraints to greater use of dynamic scheduling. The 
WIST is also reviewing the remaining technical study recommendations of 
the Action Plan.
    In addition to the actions defined in the Action Plan, BPA launched 
an internal Wind integration Team to tackle the grid operation, 
business practice, and institutional arrangements needed to make the 
most of the wind resource. Among other actions, this team is 
implementing following tasks that were defined in last year's wind 
integration rate case settlement: 1. Refine estimates of reserve 
requirements for wind balancing; 2. assess FCRPS capacity and 
flexibility to supply wind balancing; 3. define the criteria and 
process for procuring generation inputs for wind balancing from non-
Federal entities; and, 4. clarify accountability and responsibility for 
wind generation forecasting and scheduling accuracy.
                                 ______
                                 
    Mrs. Napolitano. Mr. Steve Ellenbecker, sir.

STATEMENT OF STEVE ELLENBECKER, ENERGY POLICY ADVISOR, WYOMING, 
           OFFICE OF THE GOVERNOR, CHEYENNE, WYOMING

    Mr. Ellenbecker. Madam Chairwoman and distinguished 
Subcommittee Members, I am Steve Ellenbecker, Energy Policy 
Advisor to Governor Freudenthal in Wyoming.
    Governor Freudenthal has asked me to appear on his behalf 
to thank Congress for extending the Western Area Power 
Administration additional borrowing authority under the 
American Recovery and Reinvestment Act. I will explain the 
reasons that that is in the public interest, not only in the 
intermountain west but across the western U.S. And the rest of 
the service area served by Western Area Power Administration.
    This is all about Wyoming's wind resource in terms of our 
interest in this proceeding. Wyoming has a truly prolific wind 
resource, but it is entirely dependent upon a major build-out 
of the interstate transmission backbone if it is to be 
delivered to load centers across the country.
    Wyoming is home to more than two-thirds of the Class 7 wind 
resource in the United States. Wyoming is home to more than 
half of the Class 6 wind resource in the United States, and it 
is home to more of the Class 5, 6, and 7 composite wind 
resource than the other Western States combined in the western 
interconnect. We have an opportunity to be part of the solution 
to a national energy policy that focuses heavily on renewable 
energy and climate change initiatives.
    There are seven high-voltage transmission projects planned 
to originate in Wyoming at this time. They are a combination of 
load-serving entity and merchant project facilities. Together, 
they could have the capacity to move 10,000 to 18,000 megawatts 
of new electric energy in major metropolitan areas. Each of 
them is focused on Wyoming wind at its core.
    Several economic studies have shown that Wyoming wind can 
be delivered to major metropolitan areas at economic prices 
and, in some cases, at a lower cost than other available 
renewable energy resources.
    We have our own concerns in Wyoming about protecting our 
natural resources as well, even in the face of the economic 
opportunity tied to development. Governor Freudenthal believes 
it is in Wyoming's interest to minimize the number of 
transmission corridors that will be needed for those projects 
while maximizing the flow of electrons. This speaks to the 
opportunities and the need for larger projects within a 
corridor for partnership, and that is really where we come to 
this proceeding reaching out to Western Area Power 
Administration in partnership.
    I have mentioned seven projects sponsored by private 
industry. There is an opportunity, as Wyoming sees it, in each 
and every instance for there to be a partnership role, an 
opportunity, with Western. We see this as a critical link, just 
as critical as the grids are linked as they are operated 
between public and private entities.
    It has already been mentioned by the committee that there 
is an important understanding that must be had related to cost 
allocation. I agree with you completely. It is a critical 
matter that we get the cost allocation sorted out 
appropriately. It just may be that some of this development of 
the national backbone grid that is under consideration now by 
Congress is so important that it merits being spread across all 
consumers as a matter of public interest in this country and 
national security and to address climate change and to allow 
for the development of renewable energy resources.
    We see our partnership here with Western. Western should 
not view the stimulus money as just a resource to meet the 
backlog of deferred investments to its system needed to provide 
service to its existing customers. Wyoming envisions an 
opportunity here through the Federal stimulus funding to 
develop a strengthened public-private partnership with Western 
in support of high-voltage transmission systems. Western is in 
a key position to help ensure that the projects are right-
sized, that they are maximized, that they are built to deliver 
as much renewable energy as possible to major load centers.
    We believe that it is appropriate that Western States and 
the Federal Government share the goal of fostering 
collaboration among transmission developers to achieve the 
maximum transmission capacity with the least possible number of 
lines and thus minimizing the number of required corridors. It 
would be inappropriate for these actions to be borne on the 
backs of the consumers of Western unless and to the extent that 
they are direct beneficiaries of the associated projects.
    Thank you for this opportunity.
    [The prepared statement of Mr. Ellenbecker follows:]

   Statement of Steve Ellenbecker, Energy Policy Advisor to Wyoming 
 Governor Dave Freudenthal; Wyoming Infrastructure Authority--Director 
                  of Governmental & External Relations

Introduction
    Chairwoman, and distinguished members of the Subcommittee, thank 
you for this opportunity to provide testimony. I am here on behalf of 
Governor Freudenthal to thank the Congress for enacting legislation 
that provides the Western Area Power Administration (Western) with 
$3.25 billion in borrowing authority under the American Recovery and 
Reinvestment Act of 2009 (ARRA). Moreover, to urge that this authority 
be used to assist in the construction and modernization of electric 
transmission facilities that are necessary to deliver renewable energy 
resources that meet our Nation's global climate goals in an 
environmentally responsible manner.
    In recent years, I have had occasion to represent Wyoming and 
Western States in a wide range of public policy venues involving the 
energy and electricity industries. These include the representation of 
Governor Freudenthal in support of his recent tenure as Chairman of the 
Western Governors Association (WGA) as well as leadership roles in the 
Rocky Mountain Transmission Study (RMATS), the Committee on Regional 
Electric Power Cooperation (CREPC), the Frontier Transmission Line 
feasibility study, WGA's Clean and Diversified Energy Advisory 
Committee (CDEAC), and most recently, WGA's Western Renewable Energy 
Zone Initiative (WREZ). I also served as the Chairman of the Wyoming 
Public Service Commission, the state utility regulatory agency.
Wyoming in Context
    Wyoming is the largest energy exporting state in the U.S. We 
produce in excess of 10% of the Nation's energy supplies. Wyoming is 
the largest producer of coal, the 3rd largest producer of natural gas 
and the largest producer of uranium. The vast majority of our energy 
resources are exported as commodities, and converted into value-added 
usable energy forms in distant markets. Our wind energy resource is 
just as prolific, but must be converted to usable electric energy on 
site, entirely dependent on a new interstate transmission backbone 
system to move this vast and emission free energy resource to the 
markets where it can be utilized.
    According to National Renewable Energy Lab data, Wyoming is home to 
more than two-thirds of the Class 7 developable wind resource in the U. 
S., and over one-half of the developable Class 6 wind resource. Wyoming 
has more developable Class 5, 6 and 7 wind resource than all the other 
western states combined. These potential resources have a capacity 
factor in excess of 40%.
    While it's true that Wyoming has a vested interest in an 
environmentally compatible new high voltage transmission network, it 
should be equally true that the U.S. has a societal and national energy 
policy interest in the same grid, if we are to meet the collective 
renewable energy targets set by individual states and now envisioned in 
emerging federal energy policy.
    Six high voltage transmission projects originating in Wyoming are 
in various stages of development. Together, they could have the 
capacity to move 8,500 ``16,000 MW of new electric energy resources to 
load centers. Each of them is focused around wind energy in Wyoming at 
their core.
    Several economic studies have shown that Wyoming Wind can be 
delivered to Arizona Colorado, Utah, Nevada, Idaho and California at a 
competitive price and in most cases at the lowest price of any other 
renewable energy. The ARRA specifically directs the Western Area Power 
Administration (WAPA) to support remote solar and wind generation 
projects. Since the transmission grid in the west is essentially at 
capacity, new transmission would pave the way for remote abundant, 
economically developable wind generation from Wyoming to satisfy the 
renewable energy demands that are growing across much of the West.
    To protect natural resource values in our state, Governor 
Freudenthal believes it is in Wyoming's interest to minimize the number 
of transmission corridors that will be needed for these projects while 
maximizing the flow of electrons. This leads to an optimum use of 
corridor and line capacity.
    The Governor also believes it is necessary to reevaluate the 
regulatory process for approving transmission in western states. The 
current model is too cumbersome and time-consuming. In the Governor's 
opinion, it is unsatisfactory to many of the landowners affected by 
transmission construction. It favors protection of resources on public 
lands to the detriment of private lands. There shouldn't be a 
difference. As currently implemented, the regulatory process lacks 
``teeth'' to address and balance private land concerns. Governor 
Freudenthal believes it is time to consider a streamlined, regulatory 
model for transmission similar to that presently employed by FERC to 
approve natural gas pipelines. Landowners should not have their 
concerns unaddressed simply because the issue is associated with 
private lands.
Past Constraints on the Western Area Power Administration
    Western has struggled for several years without sufficient funds or 
borrowing authority to do much beyond maintaining its spider web of 
transmission lines that cross much of the West and Midwest. Many of 
these lines date from the Depression Era and were installed to deliver 
power from Federal hydroelectric plants to rural electric customers and 
municipalities. After decades of under funding, Western is now 
positioned to help tap some of the nation's best renewable resources to 
meet the needs of its existing customers and the needs of the nation, 
by helping to provide a transmission outlet for high quality renewable 
energy resources begging to be developed in the Rocky Mountain, 
Southwest and Great Plains states.
    Western's long-standing financial limitations have largely left it 
by the wayside in the expansion and modernization of the nation's 
transmission grid. While it has been a valuable partner to the utility 
industry by providing operating services for many of the industry's 
transmission lines, including several in Wyoming, it has not been a 
viable partner in grid expansion or modernization. Armed with financial 
resources from the stimulus package, Western is now positioned to play 
a leadership role in joining with other transmission companies to 
upgrade and expand the backbone transmission systems that are critical 
in order to connect remotely-located renewable resources with load 
centers.
New Era for Western and Private-Public Partnership
    Western should not view the stimulus money as just a resource to 
meet the backlog of deferred incremental transmission upgrades to its 
system needed to provide service to its existing customers. The 
stimulus package enables Western to partner with the sponsors of major 
proposed high voltage, long distance transmission projects within its 
footprint. These transmission projects are designed to deliver to major 
metropolitan areas the nation's highest quality wind resources (and 
therefore most efficient for the ratepayers and taxpayers), which are 
located in the Rocky Mountain and Great Plains states, and the highest 
quality solar resources located in the Southwest.
    As part of a comprehensive national energy strategy, Western must 
also have a responsibility to invest in transmission to meet national 
renewable energy and climate goals. Governor Freudenthal believes the 
role of the Federal Government is to stimulate private sector 
investment in transmission facilities, not to be the replacement for 
such investments. The Federal Government should be available as a 
partner to supplement and/or help finance the incremental cost of 
transmission that the private sector is either unable to provide or to 
obtain State regulatory commission approval to include in rates.
    Wyoming envisions an opportunity through the federal stimulus 
funding to develop a strengthened public-private partnership with 
Western in support of high voltage transmission projects. Western is in 
a key position to help ensure that projects are ``right sized'', that 
is, built with a minimum of natural resource conflicts and a maximum of 
renewable energy transfer capacity. We believe that it is appropriate 
that western states and the federal government share the goal of 
fostering collaboration among transmission developers to achieve the 
maximum transmission capacity with the least possible number of lines, 
and thus minimizing the number of required corridors.
    In the West, we have an unprecedented number of proposed major 
transmission projects. Not all of these projects will get built. 
Unfortunately, under a business-as-usual approach, the lines that do 
get built will be undersized and inadequate to meet the nation's long-
term demand for low carbon generation. As a result, the nation and 
electricity consumers will not benefit from the huge economies of scale 
in transmission construction. Equally important, building undersized 
lines to areas rich in renewable resources today will lead to future 
proposals for more lines to those same areas, creating an unnecessary 
increase in natural resource conflicts. Even in the wide-open spaces of 
the West we cannot afford to squander the limited number of potential 
transmission corridors by building undersized lines to rich renewable 
resource areas.
    Only the federal government is positioned to pay to right-size 
transmission to renewable areas. By doing so, a public-private 
partnership can be formed around increasing the societal value of major 
transmission projects. To this end, Western (and the Bonneville Power 
Administration) should seek opportunities to partner with major 
proposed transmission projects. Western (and BPA) should specifically 
use the stimulus authority to:
      Buy capacity on major proposed transmission projects that 
will enable the project sponsor to increase and/or appropriately 
``size'' its proposed line to renewable resource rich areas; and
      Pay the incremental cost to preserve the option to 
increase transfer capacity in a new transmission corridor to an area of 
large renewable resources. For example, Western could pay the 
incremental cost of the larger capacity transmission towers needed to 
accommodate additional conductors on the same towers in the future. 
This investment will capture the economies of scale in transmission 
construction, limit the proliferation of transmission corridors, and 
provide load-serving utilities an option to quickly access more 
renewable generation when demand increases.
      Leverage the deployment of private dollars by creating 
the mechanism whereby private companies will acquire the transfer 
capacity preserved above, then repay Western so that the original 
investment is recovered. Properly executed, these dollars will be 
recycled to the next project with similar leverage to attract private 
investment to build out the grid.
    There are several situations in Wyoming where this example would 
apply including the Wyoming-Colorado Intertie project (under 
development by the Wyoming Infrastructure Authority, Trans-Elect, and 
Western), PacifiCorp's Gateway projects, Anschutz's TransWest Express 
project, TransCanada's Zephyr project, and the High Plains Express 
project (an unprecedented collaboration of 7 utilities including 
Western, three state transmission authorities, and Trans-Elect). 
Equally compelling examples exist throughout the Rocky Mountain West 
and the Upper Great Plains states.
    The WGA's WREZ Initiative is a West-wide stakeholder effort to 
consider the benefits of multi-state transmission lines to tap the 
West's most prolific renewable resources areas including wind, solar, 
geothermal, biomass, and small hydro. We anticipate that WREZ will show 
that a West-wide expansion of transmission, much of it located within 
Western's footprint, will help to fully develop markets for renewables, 
reduce customer costs, and reduce the nation's dependence on carbon-
emitting resources.
Conclusion
    In closing, I would leave you with three points to consider:
      Through its role in marketing hydroelectric power and the 
new transmission borrowing authority in the stimulus package, Western 
is strategically positioned to make a significant contribution to the 
nation's renewable energy and climate goal; and
      Adequately sized transmission to access the nation's best 
renewable resources is less likely to be developed without the 
financial participation of Western.
      Making investments in a manner to leverage Western 
resources to attract private sector dollars will accelerate the 
construction of a more robust grid.
    With careful, but expeditious action in the Executive Branch and 
with Congressional oversight, the new borrowing authority granted to 
Federal Power Marketing Administrations will create jobs and contribute 
to meeting the nation's long-term renewable energy and climate goals.
    Thank you for this opportunity to provide testimony.
                                 ______
                                 
    Mrs. Napolitano. We will proceed to Ms. James.
    I would like to indicate that Leslie has a plane to catch, 
so if you have any questions, direct it to her so she can then 
meet her flight.
    She is Executive Director of Colorado River Energy 
Distributors Association, accompanied by Joel Bladow, Senior 
Vice President of Tri-State Generation and Transmission 
Association, Inc., of Westminster, Colorado. Thank you for 
being with us.

 STATEMENT OF LESLIE JAMES, EXECUTIVE DIRECTOR, COLORADO RIVER 
ENERGY DISTRIBUTORS ASSOCIATION, TEMPE, ARIZONA, ACCOMPANIED BY 
 JOEL BLADOW, SENIOR VICE PRESIDENT, TRANSMISSION OF TRI-STATE 
  GENERATION AND TRANSMISSION ASSOCIATION, INC., WESTMINSTER, 
                            COLORADO

    Ms. James. Thank you very much, Madam Chairwoman.
    I am Leslie James, Executive Director of CREDA. I will 
shorthand it here. I am pleased to have been asked to speak 
with you today regarding Western's borrowing authority 
provision contained in H.R. 1, the American Recovery and 
Reinvestment Act.
    CREDA is a nonprofit organization representing consumer-
owned electric utility systems that contracts for the delivery 
of Federal hydropower over the Federal transmission system of 
the Western Area Power Administration.
    CREDA members are all nonprofit organizations serving over 
four million electric consumers in the six Western States of 
Arizona, Colorado, Nevada, New Mexico, Utah, and Wyoming. CREDA 
members include political subdivisions, electric cooperatives, 
State agencies, municipalities and tribal utilities. CREDA 
members are also members of the American Public Power 
Association and the National Rural Cooperative Association.
    Western's customers have identified three general issues 
associated with this broad new authority:
    First, the importance of transparency and accountability. 
Policies, procedures, and rate setting need to ensure a very 
clear firewall between this program and the existing projects 
and customers. The customers have a long history of working 
with Western to ensure that these renewable resources provide 
benefits to millions of end-use customers. The 1992 memorandum 
of agreement between CREDA, the Bureau of Reclamation, and 
Western, for instance, could be a good model going forward to 
ensure transparency and accountability between the agency and 
the power customers.
    Second, the issue of cost allocation. Historically, as 
transmission and generation interconnections are planned, the 
issue of who pays for what is always present. Western must 
establish clear pricing and cost allocation policies adopted 
early in the program so that the customers, the renewable 
developers, and the taxpayers know the associated costs and 
benefits attributed to a new project. We applaud the provisions 
in Section 402 that set up this expectation.
    Last, electric reliability is key. It is imperative that 
Western's planning and participation in these new facilities 
and systems be open to participation by others, including CREDA 
members, in order to minimize the impact on the environment, 
the cost of to local consumers, and local siding conflicts.
    CREDA believes that this new borrowing authority that 
Congress has granted Western creates an opportunity to ensure 
integration of additional renewable resources and the 
development of required infrastructure. As implementation 
proceeds, we are confident that Western will work closely with 
the present customers to establish clear criteria on how the 
cost allocations will be treated.
    It is also important that Federal-nonFederal partnerships 
develop and evolve. This will ensure that nonFederal funding is 
used to leverage the Federal investment and to minimize the 
local citing, environmental, and cost impacts associated with 
these new facilities.
    Western customers have a long history of partnering with 
the agency, and we stand ready to be fully involved as the 
program unfolds and as Western meets the challenges it faces to 
succeed with this new authority while also ensuring that there 
are no adverse impacts to the existing project's rates and 
reliability.
    Thank you again very much, and I will entertain any 
questions.
    [The prepared statement of Ms. James follows:]

            Statement of Leslie James, Executive Director, 
         Colorado River Energy Distributors Association (CREDA)

    Madam Chairwoman, members of the Subcommittee, I am Leslie James, 
Executive Director of the Colorado River Energy Distributors 
Association (CREDA). I am pleased to have been asked to talk with you 
today regarding the Western Area Power Administration's Borrowing 
Authority provisions contained in H.R. 1, the American Recovery and 
Reinvestment Act (ARRA).
    CREDA is a non-profit organization representing consumer-owned 
electric systems that contract for the delivery of federal hydropower 
over the federal transmission system of the Western Area Power 
Administration (WAPA) from the Colorado River Storage Project (CRSP). 
CREDA members are all non-profit organizations, serving over four 
million electric consumers in the six western states of Arizona, 
Colorado, Nevada, New Mexico, Utah and Wyoming. CREDA members include 
political subdivisions, electric cooperatives, state agencies, 
municipalities and tribal utilities. CREDA members are members of the 
American Public Power Association (APPA), as well as the National Rural 
Electric Cooperative Association (NRECA). CREDA members (listing 
attached) purchase over 85 percent of the CRSP hydropower generation.
WESTERN AREA POWER ADMINISTRATION (WAPA) AND ITS CUSTOMERS
    WAPA is one of the four federal Power Marketing Administrations 
(PMAs) and it markets at wholesale over 10,000 MW of federal hydropower 
generated by the Bureau of Reclamation and Army Corps of Engineers 
facilities in a 15-state region, utilizing 17,000 miles of transmission 
facilities. WAPA's wholesale customers in turn provide electricity to 
approximately 50 million end-use customers. In accordance with federal 
law, WAPA rates are set at the levels needed to recover the costs of 
the initial federal investment (plus interest) in the hydropower and 
transmission facilities. WAPA annually reviews its project rates to 
ensure full-cost recovery. None of the costs are borne by taxpayers. If 
a deficit is projected, rates are adjusted to eliminate any deficit. 
There are no profits involved in the sale of this power from WAPA to 
its customers, or in the sale of this power by the customers to their 
end-use customers. Power rates also help to cover the costs of other 
activities authorized by these multipurpose projects such as 
navigation, flood control, water supply, environmental programs, and 
recreation.
    The federal resources were established under a multitude of 
authorizing legislative initiatives. WAPA markets the federal resources 
through 10 separate ``projects'', including but not limited to the 
CRSP, the Boulder Canyon Project, the Central Valley Project, the 
Parker-Davis Project, and the Pick-Sloan Missouri Basin Project. WAPA 
markets the federal hydropower resources in the following states: 
Arizona, California, Colorado, Iowa, Kansas, Minnesota, Montana, North 
Dakota, Nebraska, New Mexico, Nevada, South Dakota, Texas, Utah and 
Wyoming.
II. KEY ISSUES
    WAPA customer concerns with the provisions contained in Section 402 
of the ARRA may be categorized into three general areas:
    First, accountability and transparency. WAPA's customers have been 
ensuring repayment of the federal investment for over 50 years, by 
entering into long-term contracts to purchase the hydropower generation 
and transmission resources and by paying all of the federal investment 
in generation and transmission facilities (with interest), all power-
related operation and maintenance costs, and associated environmental 
costs. Each project's resources are marketed in accordance with 
individual marketing plans and contracts; ratemaking, accounting and 
repayment obligations and timetables are also different for each 
project. For example, the repayment obligation in the CRSP includes 
repayment by power customers of over 95% of the cost of the irrigation 
features--the costs that are determined to be beyond the irrigators' 
``ability to pay.''
    WAPA customers want to ensure that WAPA's original, core mission of 
delivering reliable, cost-based renewable hydropower resources remains 
intact. This new, congressionally authorized borrowing authority will 
stretch WAPA's human resources to the limit. It is important that WAPA 
and the preference customers work together to assure that resource 
conflicts are identified and mitigated. The customers have a long 
history of working with WAPA to ensure these critical energy resources 
provide benefits to millions of end-use customers. For example, since 
1992, CREDA members, WAPA and the Bureau of Reclamation have 
participated in a joint review of agency work programs to better 
understand the agencies' critical needs, and provide funding support 
when needed. This process has afforded the customers the ability to 
understand, comment on, and provide input on programs, capital 
investments, and operational issues facing the agencies. The 
transparency and accountability that the joint review provides has been 
proven to be an important aspect of agency/customer relationships.
    In addition, the customers, as U.S. taxpayers, strongly support 
transparency and accountability in the implementation of all aspects of 
the stimulus legislation, including the new WAPA borrowing authority 
program. The customers applaud the provisions in the WAPA provisions 
that require development of policies and procedures through a public 
process, to ensure the existing project rates are not increased through 
implementation of this program and that customers understand the 
criteria that will be applied to recruit, select and implement 
transmission projects.
    A second issue that may prove to be quite a challenge for the 
customers and WAPA going forward is that of cost allocation. Due to the 
integrated nature of the U.S. bulk transmission system, there will be 
circumstances requiring upgrades to the existing transmission 
facilities in order to interconnect new transmission facilities 
necessary to transmit renewable resources. There should be clear 
pricing and cost allocation policies adopted early in the program to 
ensure that the customers, the renewable developers, and taxpayers know 
the costs and benefits associated with a particular project. For 
example, if the facilities required are necessary solely for the 
transmission of new renewable resources, all costs (including 
associated overheads, operation, maintenance and rehabilitation) should 
be borne by the new project. If, however, the underlying project 
requires upgrades and there is a clear and direct benefit to the core 
mission of delivering federal hydropower to existing customers, then 
some cost-sharing may be appropriate.
    A third area could be generally categorized as electric 
reliability. This includes ensuring the current transmission system is 
not negatively impacted from a reliability or load-serving standpoint 
by implementation of the new borrowing authority. The federal 
transmission system was designed and constructed to transmit renewable 
federal hydropower resources from the powerplants to load centers. WAPA 
does not have ``load growth'' responsibilities (i.e., providing 
additional power as demand increases over time). As loads have grown 
since the construction of the federal system, the customers, who DO 
have load-serving responsibilities have either built additional 
transmission facilities or contracted for transmission service with 
local transmission provider(s) to provide reliable electric service to 
their end-use customers. Because the transmission system, by its 
nature, is an integrated system, it is imperative that new transmission 
projects provide for public/private partnerships and joint use 
opportunities to ensure that customers are able to meet load growth 
reliably. Without joint participation, new lines could be constructed 
with no provisions to serve the local customers, resulting in the need 
to build additional facilities. It is imperative that planning and 
participation in these new WAPA constructed facilities and systems be 
open to participation by others also in order to minimize the impact on 
the environment, costs to local consumers, and local siting impacts.
III. IMPLEMENTATION PROCESS
 The key to WAPA's successfully implementing the new authority is its 
        development of a process that identifies the issues, and then 
        establishes the criteria that will be used so all parties--
        public power customers, renewable developers, and the taxpayers 
        understand the benefits and costs associated with proposed 
        projects. To that end there are two program areas that 
        immediately come to mind and must be clearly defined:
      Cost Allocation Criteria: Presently NO criteria exist 
concerning how cost allocations will be determined between the existing 
federal system and the facilities that will be constructed under the 
new authority. WAPA must work closely with its customers to establish 
clear criteria on how the cost allocations will be treated. This will 
prevent significant problems and potential litigation as projects are 
constructed and repayment responsibilities established. In CREDA's 
case, not getting it right could mean unnecessary electricity cost 
increases to the over four million end-use customers my members serve.
      Partnerships: It is important that proposed projects 
under this authority include the opportunity for local, load-serving 
utilities to participate in the new facilities to serve local customer 
needs. The project proposal and selection process needs to be well 
defined so that local utilities will understand the time-lines and can 
evaluate the economics of participating as a partner with WAPA in the 
new facilities. This will also ensure that non-federal funding is used 
to leverage the federal investment, and to minimize the local siting, 
environmental, and cost impacts associated with the new facilities.
    There will undoubtedly be other issues raised as WAPA's public 
process is conducted and it is important that adequate time be 
allocated to fully explore this complex topic.
IV. CONCLUSION
    The new borrowing authority afforded WAPA creates an opportunity to 
ensure integration of renewable resources and the development of 
required infrastructure. WAPA customers have a long history of 
partnering with the agency and look forward to working with WAPA to 
make sure the critical role the federal system presently has is not 
compromised as WAPA meets the challenges it faces to succeed with this 
new authority.
                                 ______
                                 

   COLORADO RIVER ENERGY DISTRIBUTORS ASSOCIATION (CREDA) MEMBERSHIP

ARIZONA
    Arizona Municipal Power Users Association
    Arizona Power Authority
    Arizona Power Pooling Association
    Irrigation and Electrical Districts Association of Arizona, Inc.
    Navajo Tribal Utility Authority (also New Mexico, Utah)
    Salt River Project
COLORADO
    Colorado Springs Utilities
    Intermountain Rural Electric Association
    Platte River Power Authority
    Tri -State Generation & Transmission Cooperative (also Nebraska, 
Wyoming and New Mexico)
    Yampa Valley Electric Association, Inc.
NEVADA
    Colorado River Commission of Nevada
    Silver State Power Association
NEW MEXICO
    Farmington Electric Utility System
    Los Alamos County
    City of Truth or Consequences
UTAH
    City of Provo
    City of St. George
    South Utah Valley Electric Service District
    Utah Associated Municipal Power Systems
    Utah Municipal Power Agency
WYOMING
    Wyoming Municipal Power Agency
                                 ______
                                 
    Mrs. McMorris Rodgers. [presiding.] Next, Scott Corwin, 
Public Power Council, based in Portland, Oregon.

  STATEMENT OF SCOTT CORWIN, EXECUTIVE DIRECTOR, PUBLIC POWER 
                   COUNCIL, PORTLAND, OREGON

    Mr. Corwin. Good afternoon, Madam Chairwoman, Ranking 
Member. My name is Scott Corwin. I thank you for inviting me 
today.
    PPC is a trade association representing the consumer-owned 
utilities of the Pacific Northwest with statutory rights to the 
power marketed by the Bonneville Power Administration. Our 
members have service territories in portions of seven Western 
States. They are also members of the American Public Power 
Association and the National Electric Cooperative Association.
    Because our members are consumer-owned and answer directly 
to their rate payers, they are very sensitive to the rates they 
pay for wholesale power and transmission of electricity and 
thus to the levels of debt that are a portion of those rates. 
By law, funds borrowed from Treasury by BPA are paid back by 
its customers with interest. Nevertheless, we have been strong 
supporters of the $3-1/4 billion in additional borrowing 
authorities for BPA; and we believe that will meet key 
infrastructure needs, create jobs, and help integrate new 
sources of integration. And we appreciate Congress' steps in 
that direction, especially Members of the Northwest delegation.
    An important source of our support for that borrowing 
authority was this unique 35-year history that we have in this 
region with this arrangement with BPA. In fact, the 
Transmission System Act of 1974 states right within it that BPA 
should pursue its obligations at the lowest possible rates to 
consumers and consistent with sound business principles. So, 
PPC is grateful that Congress took a direction here where the 
actual language stayed with that current legal framework and 
with that 35-year history.
    We also supported this because we see key need for 
electricity infrastructure in the West, especially with respect 
to the need to maintain reliability of the electricity grid, 
especially in our region where generation sources tend to be 
located very far from the load centers.
    In addition, the authority complements BPA's role as the 
leader in integrating new sources of renewable generation 
capacity, especially wind power. It also further enables their 
historic investments in conservation, overhauling the existing 
generation assets, and fish and wildlife mitigation.
    But the amounts borrowed are repaid with interest through 
revenues collected mostly from consumer-owned utilities. So, a 
key point for us is this distinction between borrowing or 
financing and the actual payment or cost recovery. It is one 
thing to raise a credit limit. It is quite another to ensure 
that the credit gets used very well and that there is someone 
standing there to pay it back throughout time.
    Having just signed new 20-year power contracts with BPA, 
our members spend a lot of time and effort in the capital 
planning processes. They are run to determine the appropriate 
types and the location of investments for transmission and for 
the other statutory purposes that BPA uses its step for.
    Our goal has been to have significant impact up front so 
that we are not merely arguing in the rate cases later over the 
allocation of costs that have already been incurred. With major 
infrastructure projects costing in the hundreds of millions of 
dollars each, BPA will continue to need to be very prudent in 
its expenditures. These projects must make both economic and 
engineering sense, because transmission projects, by their 
nature, have large costs in common with the level of risk. 
Customers on the hook for repaying BPA's debt will need to 
continue to have that assurance that appropriate reviews remain 
in place so they will not be left holding the bag for 
investments that don't pencil out or whose economics change 
over time with evolving technologies and markets.
    For the most part, these capital planning and budgeting 
tools that have been in place at Bonneville have served the 
region and its customers well; and, recently, PPC has asked 
Bonneville to provide even more detail on its transmission 
capital programs: What is needed? What is planned? What is the 
status of projects in the pipeline? And they agreed to engage 
us even more and to provide additional information on a 
quarterly basis, and we appreciate that step.
    We will stay involved as we move forward to implement this 
authority, and we appreciate the efforts of all of those 
involved who have created this tool.
    Thank you very much. I appreciate the opportunity to 
testify today.
    [The prepared statement of Mr. Corwin follows:]

           Statement of R. Scott Corwin, Executive Director, 
                          Public Power Council

    Good afternoon, Chairwoman Napolitano, Ranking Member McMorris 
Rodgers, and Members of the Subcommittee. My name is Scott Corwin. I am 
the Executive Director of the Public Power Council. I thank you for the 
opportunity to testify today on this important topic.
    The Public Power Council (PPC) is a trade association representing 
the consumer-owned utilities of the Pacific Northwest with statutory 
rights to purchase power that is generated by the Federal Columbia 
River Power System and marketed by the Bonneville Power Administration 
(BPA). Member utilities have service territories in portions of seven 
western states and serve over 41% of the electricity consumers in the 
region.
    These utilities, some of the largest and some of the smallest in 
the Northwest, are committed to preserving the value of the Columbia 
River system in terms of its clean and reliable electricity for 
consumers. Because the utility members of PPC are owned by and answer 
directly to their ratepayers, they are very sensitive to the rates they 
pay for wholesale power and transmission of electricity and to the 
levels of debt service that are a portion of those rates.
    The Public Power Council has been a strong supporter of the $3.25 
billion in additional BPA borrowing authority provided in the American 
Reinvestment and Recovery Act. When the idea came up last fall that 
borrowing authority could be extended as part of the economic stimulus 
package, we took it under very careful consideration. Before supporting 
the idea, we sent information to our membership and raised it on the 
meeting agenda before our 21 member Executive Committee to make sure 
that there was consensus.
    Funds borrowed from Treasury by BPA are paid back by its customers 
with interest. So, decisions to support additional borrowing are taken 
very seriously by the customers. There were several aspects to the 
decision that bolstered support, including:
      There was a pre-existing construct for BPA borrowing 
authority under the Federal Columbia River Transmission System Act 
(that spells out the use and repayment of borrowed funds) that has 
worked well in the past to benefit the region.
      Customers have access to rigorous processes under the 
current construct to help ensure that capital spending is justified and 
ratepayer dollars are spent responsibly.
      While there is a strong public purpose focus, the law 
requires BPA to act in a business like manner and recover costs as 
appropriate.
      Without the additional borrowing authority, the array of 
infrastructure needs already identified--even for basic system 
reliability and maintenance--would have pushed BPA's authority to its 
limit in the near future.
      There will continue to be growing needs to facilitate new 
sources of generation in the region, especially renewable resources 
such as wind and geothermal.
      System stability and the economy of the region would 
benefit if work on these infrastructure projects moved more rapidly 
than it otherwise could.
    We appreciate the steps taken on this issue by Congress generally, 
and by members of the Northwest delegation in particular. Added 
borrowing authority for BPA presents a helpful combination of advancing 
key infrastructure needs, promoting job creation, facilitating 
alternative sources of energy, and insuring actual return of the 
dollars with interest to the U.S. Treasury.
The Case for Additional Borrowing Authority for BPA
    PPC is grateful that Congress chose to work within the current 
legal framework for BPA borrowing authority and not impose new 
requirements or limitations. With this in mind, PPC chose to support 
the proposed additional borrowing authority for the following reasons.
    First, despite the existing extensive BPA transmission system that 
enables movement of wholesale power from 31 carbon-free federal dams, 
one nuclear plant and other nonfederal hydroelectric and wind 
facilities, there is a critical need for electricity infrastructure in 
the West, especially with respect to capability needed to maintain 
reliability of the electrical grid. We have faced bottlenecks for years 
as population and electricity loads have out-grown an out-dated system. 
It was only a matter of time before this caught up with us.
    Second, enhancements to the electricity transmission system are 
required in order to add new sources of generation. BPA has been the 
leader in facilitating major additions to the region's renewable 
generation capacity from sources such as wind power. In light of the 
ever growing demand, accessing additional generation resources and 
moving electricity freely throughout the region becomes increasingly 
important.
    Third, in addition to transmission facilities, other key 
infrastructure pieces that fall within BPA's existing statutory 
responsibility and are in need of funding include investments in energy 
conservation, refurbishment of existing generation assets at the 
federal projects, and fish and wildlife mitigation projects. These 
investments will help the region meet its environmental and power 
supply needs, and maintain the federal hydro-electric system's 
capabilities to serve loads.
    Fourth, projects enabled with this authority have multiple economic 
benefits. For example, a single project like the John Day--McNary 500 
kV transmission line calls for vast materials and supplies along with 
hundreds of jobs associated with the necessary engineering and 
construction. In addition to new construction activity, this 
infrastructure provides economic benefit by ensuring a clean, low-cost, 
and reliable electricity supply to millions of residents and businesses 
in our region.
    Fifth, as noted above, any amounts borrowed from the U.S. Treasury 
by BPA are repaid with interest through revenues collected from 
electricity sales, mostly to consumer-owned utilities around the 
Northwest. So, aside from all of the benefits listed above, taxpayers 
receive a solid return on investment from a financial standpoint.
Ensuring Accountability and Defining Success
    In representing those who will repay the cost of debt taken on by 
BPA, the customer view of this issue makes an important distinction 
between borrowing/financing and actual payment or cost recovery. BPA 
has an excellent record of payment on its obligations to the Treasury 
because of the cautious approach taken in the rate cases that set the 
amounts added to power and transmission rates. As the customers paying 
those rates, our members spend a lot of time and effort in the capital 
planning processes run by BPA to determine appropriate types and 
locations of investments for transmission and for the other statutory 
purposes.
    In addition, customers are very active in the BPA budgeting 
processes. We have worked hard over the years to try to improve the 
timing and level of detail around information relating to BPA's 
budgets. Our goal has been to have significant input at the front end 
of these processes, so that we are not merely arguing in rate cases 
over the allocation of costs already incurred. Currently, an evolution 
of the budget process for BPA called the Integrated Business Review is 
further refining how and when customers get information on key spending 
decisions.
    While $3.25 billion is a lot of financing capability, major 
infrastructure projects cost in the hundreds of millions of dollars 
each. Therefore demand for these funds will continue to be high, and 
BPA will continue to need to be very prudent in its expenditures. It is 
critical that proposed projects pass rigorous review and that they make 
both economic and engineering sense. Transmission projects with large 
costs also come with a level of risk. Customers on the hook for 
repaying BPA's debt will need continued assurance that the appropriate 
reviews remain in place so that they will not be left holding the bag 
on investments that do not pencil out. This is an especially important 
point in light of the current economic situation facing the end users 
of electricity who pay the bills.
    For the most part, the capital planning and budgeting tools in 
place at BPA have served the region well in order to maintain an 
effective and reliable electricity system. At PPC, we intend to stay 
engaged as the region moves forward to implement use of this additional 
borrowing authority in a manner that will best benefit the citizens of 
the Northwest. Again, we appreciate the efforts of all of those 
involved who added this key element for the region's economic benefit.
    Thank you for the opportunity to testify today. I am pleased to 
answer any questions, and look forward to working with you on these 
issues in the future.
                                 ______
                                 
    Mrs. McMorris Rodgers. Next is Chris Crowley, President of 
Columbia Energy Partners.

    STATEMENT OF CHRIS CROWLEY, PRESIDENT, COLUMBIA ENERGY 
              PARTNERS, LLC, VANCOUVER, WASHINGTON

    Mr. Crowley. Thank you very much.
    My name is Chris Crowley, and I am the President of 
Columbia Energy Partners. Our company is an independent 
developer of renewable energy projects, primarily wind power 
and mostly located within the Bonneville service territory.
    We developed a 200-megawatt wind energy project in 
Arlington, Oregon, which is now interconnected to the market 
via BPA. We are also a major participant in Bonneville's recent 
network open season, which will be the focus of these remarks. 
We have some 1,800 megawatts of renewable energy in 
developments which we feel can play a vital role in bringing 
resource and geographic diversity to the Bonneville system and 
the regions's energy supply.
    The increase in BPA's borrowing authority under the 
American Recovery and Reinvestment Act is an important step in 
the overall plan to distribute much-needed capital investments 
in our country and build a vibrant, green economy. BPA's role 
in this effort harkens back to the 1930s when BPA's and its 
sister agencies, the Corps of Engineers and the Bureau of 
Reclamation, built the Columbia Snake hydro system and the 
region's transmission grid. BPA was a major player in 
dramatically changing the energy landscape and the economy of 
the Pacific Northwest at the time.
    Another historic moment is upon us now, and BPA can and 
should once again play a history making role in that effort.
    Recently, we feel BPA showed that it can balance competing 
interests successfully in its network open season. Our 
company's direct experience in that process provides a good 
example for how BPA addressed some challenges and can address 
others better in the future.
    In 2008, Bonneville launched a program to offer the 
customers an opportunity to articulate their service needs, 
signed precedent transmission service agreements and get 
service similar to the natural gas pipeline business model.
    A little color I can add to that process is that our 
company, like others, stepped up and signed a stack of 
precedent transmission service agreements about four inches 
thick to participate in that process. We paid cash deposits of 
$2 million and supplied letters of credit to back our PTSA's 
with $12.4 million. For a company of our size, that was a huge 
commitment, but we knew that the network open season was a pay-
to-play system, and we wanted to play.
    Part of what we brought to the table in the network open 
season was a complex of wind energy projects outside of the 
constraints of Bonneville's system around the Columbia River 
Gorge with the winter peaking resource profile of the gorge 
area. These diverse resources have attributes that BPA's 
administrator recognized when he testified before the Senate 
last summer. He said in part that sites that are at some 
distance from the Columbia River gorge would add value if the 
wind regime is different. Overall, the power system would seem 
a much more constant production which would be better able to 
meet consumer demands. To take advantage of these 
opportunities, it may reduce costs and enhance reliability to 
build transmission facilities to the more remote regions of the 
Northwest to capture their higher value and diversity.
    Under its tariff, BPA opted to study system impacts from 
these new projects in clusters. Our projects were in a remote 
portion of BPA's footprint, which made developing a plan of 
service for them challenging.
    In the interest of time, I will just say briefly that our 
projects did not advance in the process because of cost and 
complexity. However, we do hope that they are in a more 
collaborative problem-solving mode in the next network open 
season; and with increased borrowing authority we can work with 
Bonneville to achieve a result that works for both BPA and 
brings our diverse wind projects into the mix.
    So, looking ahead, in order to make the best use of BPA's 
borrowing authority, we believe that BPA must more efficiently 
engage with their private-sector customers in the early stages 
of analysis and planning. It is often challenging for any 
government agency to move on private-sector time frames, and we 
understand that, but the ambitious goal set by Congress and the 
Obama Administration deserves no less.
    We would like to see that BPA looks through to the local 
service providers that connect to the BPA network. Our projects 
will actually interconnect to a local co-op and then go out 
over BPA. Bonneville needs to provide guidance and leadership 
in that effort to help get the best results. Bonneville should 
also clear out its interconnection queue, as well as the 
transmission queue, in the next network open season, we hope.
    And, last, and this is an important point with any regional 
transmission agency, they should make every effort to optimize 
existing transmission rights of way and permitting work already 
done, such as the National Energy Corridors Act, part of the 
Energy Act of 2005. Bonneville needs clear direction from this 
Committee and the Obama Administration that we are in a new day 
of aggressively moving forward with these efforts.
    I want to be clear that we applaud Congress' work on the 
stimulus bill and the increase in BPA's borrowing authority, 
and we urge the Committee to stay active in their oversight and 
effective deployment of these efforts with WAPA and BPA and 
their partners in the public and private sector.
    Mrs. McMorris Rodgers. Thank you.
    [The prepared statement of Mr. Crowley follows:]

  Statement of Chris Crowley, President, Columbia Energy Partners LLC

`` Inaction is not an option that is acceptable to me and it's 
        certainly not acceptable to the American people--not on energy, 
        not on the economy, and not at this critical moment.''
    --President Obama, U.S. Department of Energy, Feb. 5, 2009
Introduction
    Good afternoon, my name is Chris Crowley, President of Columbia 
Energy Partners LLC (CEP). Our company is an independent developer of 
renewable energy projects, primarily wind power, mostly located within 
the Bonneville Power Administration's service territory. We have been 
in this business since 2000, which makes me a veteran and provides some 
experience I hope will be of interest to the Committee.
    Thank you for the opportunity to address the Water and Power 
Subcommittee today regarding the recent increase in the Bonneville 
Power Administration's (BPA) borrowing authority under the American 
Recovery and Reinvestment Act (Stimulus Bill). This aspect of the 
Stimulus Bill is an extremely important part of the overall plan to 
efficiently and transparently distribute much needed capital 
investments in our economy to build a vibrant ``green economy.'' 
Channeling public capital investment through the BPA toward real energy 
projects will provide the ``capital lubrication'' the economy needs to 
attract private sector investment and jump start the ``green economy.''
    BPA's role today is analogous to its role in 1937 when it was first 
formed to market the power from the system of hydroelectric dams and 
associated electric transmission built through a partnership between 
BPA and its sister agencies, the Corps of Engineers and Bureau of 
Reclamation. BPA was a major player in significantly changing the 
energy landscape in the Pacific Northwest at that time. Since then, BPA 
has effectively deployed public capital to further build out both the 
Federal Columbia River Power System (FCRPS) and Federal Columbia River 
Transmission System (FCRTS) meeting Pacific Northwest energy needs and 
strengthening our economy.
    A similarly historic moment is upon us now, but today's situation 
is also different on several levels. BPA has had the ability to deploy 
capital in the past, but the need is greater than ever today. Because 
the need is so great, Congress was wise to increase BPA's borrowing 
authority dramatically so the Administration can put more money to 
work. However, with the increased borrowing authority, BPA's actions 
will also be scrutinized more closely and, so, the question will be, 
``how will such capital be deployed and for what purposes?'' There are 
three key drivers in our economy to be balanced with BPA's public goals 
which are:
    1.  building energy diversity and independence through renewable 
energy development and ``green economy'' initiatives,
    2.  injecting public investment into the economy to ``unfreeze'' 
our capital markets and leverage public and private investment in 
energy infrastructure, and
    3.  creating American jobs through productive public-private 
partnerships.
    BPA's borrowing authority has been expanded; however, BPA has many 
interests to balance and many stakeholders to listen to who are 
concerned about where BPA invests its capital and how it does so.
    A key example of BPA balancing such interests successfully was in 
its recent Network Open Season. In that process, BPA managed to balance 
public and private interests to create a framework to finance and 
construct new transmission in spite of many challenges, including a 
changing load and resource topography, more complicated system 
operations and increased coordination with other electric systems 
across many states and systems. The recent Network Open Season (NOS) 
process provides an excellent model and platform for BPA and others to 
act in public-private partnerships, balance diverse interests with 
unique project attributes and implement creative and productive 
solutions.
A Unique Opportunity for BPA in Harney County, Oregon
    Our company--and our direct experience with BPA in the recent 
Network Open Season--provides a good example for how new challenges 
have been and can be addressed by BPA. BPA has efficiently integrated 
1500 MW of wind energy resources in a region east of Portland, Oregon 
known as the Columbia Gorge or ``Gorge.'' The Gorge wind regime is 
primarily a spring-summer resource, which coincides with BPA's high 
hydroelectric production and ``fish flush'' time frame, creating 
challenges for reliable management of BPA's power system.
    BPA Administrator Steve Wright has expressed interest in connecting 
wind resources to the grid which may be at some distance from the Gorge 
and that have a wind regime different from the Gorge. BPA believes that 
such new wind resources, which have not been exploited to date, would 
help to balance the Gorge wind resource area, provide more constant 
production and add efficiencies to the operation of its power system 
matching consumer demand more optimally. In order to take advantage of 
these higher value opportunities and diverse opportunities, 
transmission facilities must be built to reach the more remote regions 
of the Northwest. It is recognized that the higher cost of building 
transmission to these remote regions could be offset by the value of 
the diverse wind regime and enhanced reliability.
    We are in complete agreement with BPA on connecting diverse and 
remote wind resources to their grid and will be a key partner with BPA 
in this regard. On that point, CEP is developing a 600 MW wind energy 
complex composed of six separate projects in southeastern Oregon. CEP 
has a proven track record of developing wind resources and moving its 
power to market. There are several unique aspects of our wind project 
complex which make CEP an ideal partner for BPA to deploy public funds, 
including:
    1.  a ``winter-peaking'' wind regime, which is the exact inverse of 
the Gorge wind production profile;
    2.  the ability to optimize existing transmission and add 
significant new transmission, and
    3.  to bring public and private investment to hard hit rural 
communities where unemployment hovers at 20% and non-ranch jobs--
outside the government sector--are almost non-existent.
    In order to optimally integrate renewables into any electric grid, 
the unique attributes of each project's wind regime, location, 
interconnection and transmission service plan must be factored into the 
plan to finance and develop the project. The interaction between a wind 
project's production of energy on a variable basis and the transmission 
grid must be analyzed to capture all of the specific benefits and 
impacts.
How to Put BPA's Stimulus Bill Funds to Work and Ensure Proper 
        Oversight
    It sometimes seems as if everyone is in agreement on the need to 
fund infrastructure to facilitate development of new, renewable energy 
projects, but people are in a quandary over how to get it done. The 
broad agreement that we need new infrastructure must be refreshing for 
the members of this hearing panel, including the BPA and the Western 
Area Power Administration (WAPA). President Obama has certainly made it 
a highlight of his economic platform, and Congress acted decisively, as 
the increased BPA borrowing authority in the Stimulus Bill makes clear. 
During the 2008 presidential campaign, Candidate McCain also spoke 
glowingly of his desire to boost investment in the renewable energy 
sector. Even when Congress was in Republican control, the 2005 Energy 
Act mandated development of ``energy corridors'' for transmission to 
bring new renewable energy resources to market. In addition, the 
Western Governors Association is being very proactive and is making 
``renewable energy zones'' with transmission solutions a top priority.
    And yet, now that it is time for the rubber to meet the road, there 
are many views on how to get us to the next level in connecting 
renewable resources to the grid but not much clear direction. So, now 
is the time to focus our leadership, support and oversight efforts to 
remove barriers in some key areas, including:
    1.  The time and risk involved in permitting new transmission 
projects, which adds significantly to the cost and is a strong 
disincentive for private parties to attempt it;
    2.  The de-facto veto power of ``green mail'' groups adept in suing 
federal agencies, which places undue pressure on transmission providers 
to seek routes over private lands;
    3.  Decades-old agreements on existing shared transmission systems, 
such as the Southern Intertie in our area, with unclear impacts on 
planning for new projects; and
    4.  Challenges to planning across interconnected energy markets and 
systems to address seams issues and optimize joint and larger-scale 
solutions.
    Bonneville, to its credit, has overcome these obstacles with some 
notable success. In 2008, Bonneville launched a ``Network Open Season'' 
or NOS to offer customers the opportunity to articulate their service 
needs, sign Precedent Transmission Service Agreements (PTSA) and get 
service, similar to the natural gas pipeline business model. Since 
BPA's Administrator Steve Wright is also here today to testify, I will 
let him detail the response to the Network Open Season. The ``color'' I 
can add to that is that our company, like others, stepped up and signed 
a stack of PTSAs four inches thick to participate in the process. We 
paid cash deposits of $2 million and supplied letters of credit to back 
our PTSAs worth $12.4 million. For a company our size, that was a huge 
commitment, but we understood that the NOS was a ``pay to play'' system 
and we wanted to play.
    According to BPA's accounting of the Network Open Season response, 
our company's participation in the process was significant. Our 
transmission service requests accounted for:
      3.5% of customer participation (1 of 29 companies);
      18% of total PTSAs signed;
      12% of total MW participation (800 MW);
      16% of total wind transmission service requests;
      14% of total LC (security) required for signed PTSAs 
($12.4M of $90M);
      CEP was on the longer end of the contract term curve (30 
years).
    Under its Tariff, BPA opted to study system impacts from the new 
projects to its system as large scalable batches, or ``clusters,'' of 
transmission service requests. When the ``cluster studies'' were 
announced, our service requests were identified as the ``Harney County 
Reinforcement Project,'' in a remote portion of BPA's footprint, which 
made developing a Plan of Service challenging. However, with 50% of our 
energy production coming in the winter months and the stated interest 
in bringing new renewable energy resources to market from diverse 
areas, our projects were certainly of interest. We believe the 
diversity attributes our projects offer make them a natural fit, given 
the initiatives in the West, including renewable energy zones, BPA's 
expanded borrowing authority and the strong direction from Congress and 
the Administration to use such borrowing authority in a public-private 
manner to site and build new transmission infrastructure to reach new 
energy areas bringing diversity and efficiencies to the transmission 
grid.
Going forward--CEP Encourages Congressional Oversight and for BPA to 
        Act under a Public-Private Framework to Efficiently Deploy 
        Capital
    We encourage BPA to apply our experience in the next Network Open 
Season as well as for other regional transmission service providers 
hoping to mirror--and improve on--BPA's important first effort. In 
order to make the best use of BPA's new borrowing authority, we believe 
the BPA must be more efficiently engaged with the private entities who 
are their customers. It is often challenging for any government agency 
to move on private-sector timeframes, but the ambitious goals set by 
Congress and the Obama Administration demand no less.
    It is not only the BPA who must interact more closely with the 
private sector. The authority vested in public agencies with control 
over permitting and siting of energy projects, including the 
transmission lines to get the output to market, must be more action 
oriented, work on shorter time lines and coordinate more closely with 
private entities with the know-how to get the job done.
    Again, our projects offer a relevant example. We have obtained a 
land use permit to build a 100 MW wind project in southeastern Oregon, 
but the county where our project is located is 77% publicly-owned land. 
There is simply no way to interconnect our project to the local 
electric coop without crossing federally-owned land. Period. In fact, 
our project requires an easement of less than 200 acres, in a county 
with 6.5 million acres of publicly-owned land, but to obtain an EIS 
permit for that short distance will take 2-5 years before legal 
challenges are exhausted. Surely, regulations must be changed so that 
such simple easements can be granted at the local level on an 
administrative basis, not appealed endlessly to the 9th Circuit and 
beyond, to kill projects.
    In a similar vein, our project will eventually require an upgrade 
of an existing line through some 50 miles of mostly BLM-owned land. 
Where there is already a transmission line and the new line can be 
constructed in the same footprint, within one county (or state), that, 
too, should be something the local staff can do administratively or at 
least with a more reasonable period of review. We will not succeed in 
building a ``green economy'' if some we do not balance self-styled 
``green'' advocates exploitation of the permit and appeals process to 
effectively kill good projects.
    These points need to be taken into account in the efforts underway 
in various public and private forums to fund infrastructure to 
facilitate development of new, renewable energy projects.
    We want to encourage Congress to actively encourage BPA to 
capitalize on the work which has been done in the 2005 Energy Act, 
which mandated development of ``energy corridors'' for transmission to 
bring new renewable energy resources to market. The Western Governors 
Association has made ``renewable energy zones'' a priority and so 
Congress and BPA can and should act decisively to coordinate work plans 
for immediate action.
    We want to encourage closer coordination and action between public 
and private interests to achieve results for taxpayers and shareholders 
alike. We believe that BPA's role should be broader than just building 
infrastructure that benefits its existing customers. Transmission 
planning must be performed on a true ``one-utility'' basis, with proper 
oversight, controls and balanced public-private interaction to optimize 
the existing system and build new facilities. BPA must take a very 
active role in that effort, with support from Congress, to invest 
alongside private interests and to be the catalyst to provide 
investment when the balance is not always in true parity between public 
and private interests.
    BPA is strongly encouraged to utilize its creativeness and flexible 
oversight structure to allocate public funds and lead funding of 
infrastructure, even if private capital has to catch up. BPA's 
borrowing authority and capabilities must be allocated to all projects 
alike. BPA is encouraged to pursue joint venture investment options 
available with varying percentages of lower cost public dollars used to 
augment higher cost private dollars. BPA is encouraged to fully reform 
both transmission service and interconnection-wide processes as it has 
done in its recent Network Open Season and along the lines that the 
Federal Energy Regulatory Commission (FERC) has promoted in other parts 
of the country.
    Going forward, we hope that BPA and this Subcommittee work closely 
with its partners in the private sector on multiple fronts to bring new 
renewable energy sources into the grid and the market. Some of the 
overarching areas in which CEP wants to encourage further collaboration 
are:
    1.  Customized solutions to all funding and transmission project 
needs;
    2.  Transmission planning processes that plan for the holistic 
needs of the transmission grid and coordinate across multiple high and 
low voltage transmission provider systems;
    3.  Reformation of the interconnection and transmission service 
processes via more liberal use and implementation of open season 
process; and
    4.  Optimize the existing and future government environmental and 
permitting work to create ``energy corridors'' with derivative benefits 
on adjacent transmission rights of way.
    First and foremost, and in more detail in line with the overarching 
goals above, Bonneville should continue and increase their efforts to 
engage private sector customers in the early stages of analysis and 
planning. In order for that kind of collaboration to work, BPA must 
increase information sharing and transparency with its customers, so 
that customers can understand the basis for decisions, respond with 
suggestions and criticisms, and work together towards solutions. In our 
view, that means focused attention to unique customer needs factored 
into the transmission planning process.
    Second, Bonneville now has the expanded borrowing authority to 
revisit its calculation of the costs of projects and have the added 
experience to calculate the benefits to be factored into its rate 
making process. This is a key point for this committee: that 
Bonneville's long (and understandable) focus on protecting rate payers 
can now be balanced with private capital as well as this new and 
welcomed financial muscle. I hope the committee will make plain to 
Bonneville and any other agency, such as WAPA, who takes such federal 
funds that taking these dollars also means taking on the responsibility 
to do full due diligence on all project benefit and cost calculations 
on an equal basis for new and long standing projects. As the 
Administrator said last summer to the U.S. Senate, benefits such as 
regional and resource diversity should absolutely be weighed, in my 
view, all the more heavily now that the additional federal dollars have 
been added.
    Third, our projects, like many others, will interconnect with a 
local service provider and then go onto the BPA network. We can point 
to many projects (planned and operating) in Oregon and Washington in 
the same situation. In these instances, Bonneville should provide both 
guidance and leadership to work with the local provider and the 
customer to achieve optimal solutions for all parties.
    Fourth, while BPA did indeed clear out a great deal of ``dead 
wood'' in its transmission service queue, it left its interconnection 
queue intact. Effectively, that meant that presumably less than viable 
projects that did not ``pay to play,'' still preserved their 
interconnection rights without proof of project viability, despite 
avowed policies that separate those two functions. Interconnection 
should also figure in future Network Open Seasons. A lesson for both 
BPA and WAPA may be taken from California to test project viability as 
part of the interconnection and transmission process. An added level of 
due diligence should be added to the expanded borrowing authority for 
both BPA and WAPA to ``test'' project viability to ensure capital and 
human resources are used wisely.
    Fifth, BPA and any other regional transmission agency should make 
every effort to optimize existing transmission rights of way and 
permitting work already done, such as the Energy Corridors established 
as part of the Energy Act of 2005. BPA needs clear direction from this 
committee and the Obama Administration that we are in a new day of 
aggressively moving forward with these efforts, not defaulting to the 
same old approach in planning for and permitting vitally-important 
transmission infrastructure.
    In closing, I want to be very clear that we applaud Congress' work 
on the Stimulus Bill, increasing BPA's borrowing authority and BPA's 
first Network Open Season and look forward to working with them in 
their efforts to reform and provide oversight to get to productive 
results for the American people ensuring energy supply diversity and 
independence. BPA has shown leadership and a willingness to think 
outside the box that bodes well for a dramatic increase in activity in 
the next few years, particularly when coupled with its expanded 
borrowing authority.
    I thank the Committee for the opportunity to share these thoughts 
and experiences with you. I urge you to stay actively involved in the 
oversight and effective deployment of these new resources to help usher 
in a new era of economic prosperity spurred by our friends at the BPA 
and WAPA and their partners in the public and private sectors.
                                 ______
                                 

   Response to questions submitted for the record by Chris Crowley, 
                President, Columbia Energy Partners, LLC

Questions submitted by Chairwoman Grace Napolitano
Question 1: How would additional oversight of BPA help improve the 
        grid?
    Answer 1: Currently, oversight of BPA is formally split between the 
U.S. Congress and the U.S. Department of Energy with informal / 
voluntary oversight by the Federal Energy Regulatory Commission (FERC) 
on specific issues BPA feels it is willing to subject itself to FERC 
oversight and jurisdiction. Under each oversight relationship, each 
decision is a negotiation without clear and defined recourse avenues 
for interested parties. It is Columbia Energy Partner's (CEP) belief 
that having a single authority as the final stop or arbiter on BPA 
issues would be beneficial to streamline and make decision making more 
effective for BPA and its constituents and power and transmission 
customers, alike. In addition, appealing decisions to a single 
authority with jurisdiction over BPA issues, similar to FERC or state 
public utility commissions over investor-owned utilities, is essential 
to the decision making, implementation and appeal process to ensure the 
grid is improved and efficiently expanded for all willing and capable 
participants.
    While BPA does largely a good job in managing its affairs and being 
balanced in many of its decisions, it is primarily subject to 
political, constituent and key customer influences when making business 
decisions. The nature of BPA's business, recognizing the demographics 
of its constituent and customer base and organic statutes, means that 
decisions will likely never be divorced from such influences. However, 
BPA's footprint has changed dramatically with expanded and more diverse 
generation and transmission market entrants. Such change requires that 
BPA's governance structure be changed to balance BPA's statutory and 
non statutory obligations and obligations. For example, BPA must be 
required to explore a range of potential solutions in its transmission 
planning and cost allocation processes to connect all resources to the 
grid at various voltage levels on a reasonable cost and schedule basis 
providing the right fit for each customer and the BPA grid.
    In CEP's opinion, there are several options for the best oversight 
authority. The simplest oversight authority would be to pull all the 
Power Marketing Agencies under FERC. Another option would be a joint 
Congressional and U.S. DOE committee composed of a representative 
handful of Senators, Representatives and a U.S. DOE representative with 
authority to make decisions over BPA issues. A third option for an 
oversight authority would be a regional oversight body with 
representatives appointed by the governors of the same states that the 
Northwest Power Planning and Conservation Council covers with authority 
over BPA issues. Each of these oversight authority options would have 
final decision making authority to properly balance the diverse and 
changing set of power and transmission-related interests within BPA's 
footprint. As noted above, such oversight structure would have final 
decisionmaking authority on BPA issues similar to FERC or state public 
utility commissions have over investor-owned utilities.
    Changing BPA's underlying statutory authority and oversight 
structure to facilitate all viable and beneficial projects will create 
a more robust, efficient and open access grid preventing any potential 
discrimination. This will promote a larger amount of renewable energy 
resources to be provided access to the grid and drive America's energy 
portfolio diversity and independence. Any subsequent ``Cap & Trade'' 
legislation effects on the economic dispatch of the energy supply mix 
or ``resource stack'' would be muted through a more robust transmission 
grid to provide unfettered and open access for a more diverse set of 
energy resources than we currently enjoy. Concerns, whether real or 
not, of increased volatility in the power markets due to such 
legislation would be met through our robust energy and transmission 
system.
Question 2: How could the federal government do more to encourage the 
        development of renewable energy resources?
    Answer 2: The simplest answer is to institute a permanent national 
renewable portfolio standard (RPS) at a high enough percentage level to 
ensure promotion of renewable energy development and to enact 
legislation as contemplated in the Reid-Bingaman-Dorgan draft energy 
bills which clear the barriers in front of renewable energy development 
related to transmission planning, cost allocation and pricing and 
permitting / siting issues. Until RPS and transmission legislation is 
enacted, Congress must direct all governmental agencies to clear the 
hurdles and provide solutions for connecting renewables to the grid 
within commercially and environmentally reasonable parameters and on 
timelines to support President Obama's energy agenda.
    The U.S. Government must communicate to all entities interested in 
connecting renewables to the grid, with special emphasis to 
environmental groups opposing projects, that barriers and opposition 
will be met with clear solutions and deadlines that will move projects 
ahead on President Obama's three (3) year timeline to increase 
renewables in the United States. This assumes renewable projects have 
credible plans that have been vetted within clear, defined and 
reasonable parameters.
                                 ______
                                 
    Mrs. McMorris Rodgers. Next is Edward Rahill, Vice 
President of Finance, CFO of ITC Holdings, Transmission 
Company, based in Novi, Michigan.

 STATEMENT OF EDWARD M. RAHILL, VICE PRESIDENT OF FINANCE, CFO 
     OF ITC HOLDINGS, TRANSMISSION COMPANY, NOVI, MICHIGAN

    Mr. Rahill. Madam Chairwoman, Ranking Member of the 
Subcommittee, and Members of the Subcommittee, I am Ed Rahill. 
I am Senior Vice President of Finance and Chief Financial 
Officer of ITC Holdings.
    ITC is the Nation's largest independent transmission 
company. We operate in five States and own approximately 15,000 
circuit miles of transmission. ITC has no corporate affiliation 
with any generation owner, marketer or distributor of 
electricity. Our sole business is to provide energy services to 
our customers. I appreciate the opportunity to be invited here 
to testify today.
    I have two primary points to make.
    The first, investor-owned utilities like ITC have been 
making significant investments in the transmission system in 
recent years. Second, the Power Marketing Administrations have 
a valuable opportunity to use the new borrowing authorities 
provided to them by Congress to engage in partnerships with 
third parties that are willing to leverage private investments 
to ensure a most efficient expenditure of limited taxpayer 
dollars.
    With respect to investment levels, please refer to the 
chart on my left. As you can see from this chart, U.S. 
shareholder and owned utilities invested between 2004 and 2007 
nearly $7.8 billion transmission investments compared to $700 
million spent by all Federal utilities combined of which 75 to 
100 million was invested by WAPA.
    As the information provided by Edison Electrical Institute 
shows, shareholder-owned utilities have built far more 
transmission facilities than Federal entities have in that 
period. I should be willing to say that over that period ITC 
has invested over $1 billion of that transmission.
    The increase of borrowing authority granted to WAPA and BPA 
is intended to facilitate the construction of more transmission 
and delivered power generation from renewable resources which 
have often been located in remote locations far from population 
centers where the power is needed.
    ITC supports this objective and is already working to make 
this issue a reality. In 2008, ITC interconnected 810 megawatts 
of new wind generation, representing roughly 10 percent of all 
the wind generation connected that year. We are actually 
working on products today to connect renewable-rich resources 
in the areas of the upper Midwest to customer loads.
    ITC's projects are under way in Kansas to interconnect 
renewable generation and to prove for liability. And, recently, 
ITC announced the Green Power Express, a 3,000-mile state-of-
the-art 765 kv super highway that, when fully developed, will 
transmit up to 12,000 megawatts and other wind energy from 
North Dakota, South Dakota, Minnesota, Iowa to load centers in 
the Midwest region and the mid-Atlantic States.
    If I can draw your attention to a map, you can see the 
proposed Green Power Express in bright green in the upper left-
hand corner along with other existing high-voltage plants that 
are in existence today.
    The Green Power Express is a $10 to $12 billion project. 
Yet, even with the current economic environment, ITC has not 
found access to debt or equity markets to be difficult. I have 
attached in my testimony a letter from Credit Suisse Securities 
LLC informing ITC that it believes we have the financing 
necessary to finance all of the projects as we currently 
described.
    ITC believes that its transmission-only business model 
combined with regulatory certainty affords, by its regulatory 
operating series, plays a critical role enabling our access to 
capital markets and facilitating the ability of ITC and its 
regulated operating facilities to achieve the main issue of 
maintaining investment-grade ratings.
    Accordingly, ITC believes that financing is not the problem 
that needs to be overcome in order to build transmission and to 
connect to renewable resources. Rather, planning, citing, and 
costs for allocation issues present far larger obstacles.
    In closing, ITC, the Nation's only independent transmission 
company, is eager to work with WAPA and other PMAs to settle 
the electric transmission challenges facing our country today.
    Thank you for the opportunity to testify.
    Mrs. Napolitano. [presiding.] Thank you.
    [The prepared statement of Mr. Rahill follows:]

    Statement of Edward M. Rahill, Senior Vice President of Finance 
                         and CFO, ITC Holdings

    Chairwoman Napolitano, Ranking Member McMorris Rodgers, Members of 
the Subcommittee, I am Ed Rahill, Senior Vice President of Finance and 
Chief Financial Officer of ITC Holdings Corp. (``ITC''). ITC is the 
nation's largest independent transmission company, with transmission 
facilities in five states. ITC's transmission services an area 
comprised of nearly 80,000 square miles with 13 million people. Since 
its formation in 2003, ITC has invested over $1 billion in transmission 
improvements. ITC has no corporate affiliation with any generation 
owner, marketer or distributor of electricity. Our sole business is 
providing transmission services to our customers.
    I appreciate being invited to testify before you today regarding 
the increased borrowing authority recently provided the Bonneville 
Power Administration (``BPA'') and the Western Area Power 
Administration (``WAPA'') and our willingness to participate with the 
PMAs in the construction of new transmission facilities to enable the 
transmission of wind and other renewable generation to load centers. 
ITC is enthusiastic about the prospect of partnering with the PMAs to 
build the transmission needed to meet this nation's energy goals.
    H.R. 1, the American Recovery and Reinvestment Act (``ARRA'') 
recently enacted by Congress and signed into law contains two PMA 
borrowing authority provisions that will affect expansion of 
transmission infrastructure, especially in the West. Section 401 of 
ARRA provides $3.25 billion in additional borrowing authority for the 
BPA; Section 402 provides a similar amount, $3.25 billion, in new 
borrowing authority for the WAPA. The legislation also would permit 
WAPA to allow other entities to participate in the financing, 
construction and ownership of projects. Under the legislation, WAPA is 
required to seek Requests for Interest from entities interested in 
identifying potential projects. I am pleased to note that WAPA has 
already begun this process by publishing a Notice of Availability of 
Request for Interest in the March 4, 2009 Federal Register.
    The increased borrowing authority granted WAPA and BPA is intended 
to facilitate the construction of more transmission to deliver power 
generated from renewable resources, which often are located in remote 
locations far from population centers where the power is needed. ITC 
supports this objective and is already working to make it a reality. We 
are actively working on projects today to connect renewable rich 
resource areas in the upper Midwest to customer load centers. We have 
projects underway in Kansas to connect renewable generation and improve 
reliability and recently, ITC announced the Green Power Express, a 
3,000-mile, state-of-the-art 765-kV green power ``superhighway'' that, 
when fully developed, will transmit up to 12,000 MW of wind and other 
energy from North Dakota, South Dakota, Minnesota and Iowa to load 
centers in the Midwest region as well as in the Mid-Atlantic region. 
The Green Power Express will not only facilitate the development of 
wind resources but it also will help improve reliability and 
significantly reduce transmission congestion. Attached to my testimony 
is a map depicting the proposed project.
    ITC responded to a solicitation of interest for potential partners 
on transmission projects issued by WAPA last November and we remain 
very interested in working with WAPA to develop and construct 
transmission to support renewable generation. Despite the current and 
recent turmoil in the credit markets, ITC and its subsidiaries have 
been successful in every debt and equity financing related to ongoing 
operating company investments and acquisitions since ITC was founded in 
2003. Even in the current environment, ITC has not found access to the 
debt or equity markets to be difficult. As attachment 2 to my testimony 
indicates, we are confident in our ability to finance the Green Power 
Express. ITC believes that its transmission-only business model and the 
regulatory construct in place at its regulated operating subsidiaries 
enable transmission investment by providing the regulatory certainty 
necessary to access capital markets and allowing ITC and its regulated 
operating subsidiaries to achieve and maintain investment grade credit 
ratings. Financing new transmission is not the problem that needs to be 
overcome in order to build transmission to provide greater market 
access for renewable resources. Rather, planning, siting and cost 
allocation are the real obstacles to building this transmission.
    As you will note in attachment 3 to my testimony, shareholder-owned 
utility transmission investment has been steadily increasing since 
1999. ITC and other members of the Edison Electric Institute (``EEI'') 
are planning to invest more than $30 billion in transmission facilities 
in the three-year period from 2008 and 2010.
    We are dedicated to expanding and strengthening transmission 
infrastructure. U.S. shareholder-owned electric utilities in 2007 spent 
nearly $7.8 billion on transmission investments, compared to 
approximately $700 million spent by all federal utilities combined, of 
which approximately $75 to $100 million was invested by WAPA. Indeed, 
in recent years, shareholder-owned utilities have built far more 
transmission facilities than federal entities, as shown in attachment 
4.
    Despite the fact that BPA and WAPA each received an additional 
$3.25 billion in borrowing authority in the ARRA, this amount of money 
will not be enough to build all the transmission that is needed to link 
remotely located renewable resources with load centers, particularly 
within the WAPA service territory. Accordingly, ITC is advocating that 
the PMAs use this federal funding to leverage private sector financing 
and private expertise to maximize results. Federal transmission policy 
should support--not supplant--development of interstate transmission 
facilities through private enterprise, which has the construction and 
financial capability to build interstate transmission facilities for 
which siting approvals and permits can be obtained. Through creative 
partnerships with private transmission companies that have the 
expertise and financial capability to build and finance high voltage 
transmission lines, WAPA and BPA will be able to leverage the funding 
provided and move us closer to the day when we have a robust, reliable, 
high voltage grid connecting renewable rich resource areas with high 
population centers.
    To ensure the most efficient expenditure of limited taxpayer 
dollars, Congress should encourage WAPA to target its spending under 
the new ARRA borrowing authority on transmission projects that, but for 
this new funding, would not likely be constructed in a timely manner 
and to encourage WAPA and BPA to enter into partnerships to develop 
needed facilities.
    Specifically, we suggest WAPA should certify before committing 
funds to any project that: (1) no other entity is willing to 
participate in the financing, construction or ownership of the project 
in a timely manner; and (2) the project does not interfere with or 
duplicate an existing project being constructed by another transmission 
owner or operator.
    Legislative precedent exists for imposing similar preconditions on 
federal utility transmission projects to avoid duplication or 
preemption of private-sector infrastructure investment. The Energy 
Policy Act of 2005 contains language designed to avoid duplication of 
functions of existing or proposed transmission facilities by certain 
joint transmission projects in which WAPA was authorized to participate 
(Sec. 1222 of EPAct 2005).
    In addition, any transmission expansion projects that WAPA plans 
under its new borrowing authority should be consistent with ongoing 
Western Electricity Coordinating Council (``WECC'') planning processes, 
which identify a number of projects already being developed or on the 
way.
    Notwithstanding the private-sector transmission investment numbers 
outlined in the charts attached, building interstate transmission lines 
continues to be challenging due to the need to obtain approvals from 
every state that a transmission line traverses. Building interstate 
lines, especially in the West, is further complicated by the difficulty 
of obtaining authority to build across federal lands. In addition to 
providing incremental borrowing authority for federal utility 
transmission construction, Congress should also address important 
siting and cost allocation issues that are frustrating the planning and 
construction of transmission lines. Congress should strengthen Federal 
Energy Regulatory Commission (``FERC'') siting authority for interstate 
transmission lines and transfer to FERC the lead agency authority for 
permitting projects that cross federal lands.
    Thank you again for the opportunity to testify before the 
Subcommittee on this important issue.

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                                 .eps__
                                 
    Mrs. Napolitano. We will move on to the questioning portion 
of this meeting.
    As I said before, Ms. James, I believe you have a flight to 
catch. We will go straight to Mr. Coffman.
    Mr. Coffman. Thank you, Madam Chairman.
    To Mr. Meeks and Ms. James, Western's historic mission has 
been to serve approximately 700 of its wholesale customers. It 
is my understanding that the relationship between the agency 
and its customers has been good, but I see in testimony that 
customers are concerned that they could end up subsidizing 
construction carried out under this new borrowing authority.
    Mr. Meeks, can you assure the customers that they won't 
subsidize something they won't benefit from? And I would like 
Ms. James to follow that up from a customer perspective.
    Mr. Meeks. Thank you very much.
    Western is no stranger to allocating their costs. Western 
currently has 10 rate-setting projects as we speak without even 
this new authority. So, we have the ability to separate the 
cost for one project to another. And I mean system projects, 
not just a transmission project. So, we have that capability 
today.
    In the stimulus, we were given $10 million in 
nonreimbursable start-up money in order to protect our 
preference customers from paying for something that they do not 
benefit from. The law is clear that we are to allocate the 
costs to the projects that we build under this, and we will do 
so.
    Ms. James. As I stated, I have every confidence that 
Western will comply with the law. I think that the issue is 
going to be that the devil will be in the details in working 
out in advance these cost allocation policies and procedures, 
and I would expect that Western would be undertaking this 
through their recent Federal Register notice that was 
published. It is a fairly short fuse for comments. It is a 30-
day comment period.
    I would also expect that there would need to be a lot of 
follow-up discussion following the formal close of comments on 
that Federal Register notice and possibly even development of 
some type of a customer Western--I hate the use the word ``task 
force''--but some type of a working group that would help 
ensure the customers that the cost allocations are being done 
appropriately.
    And, again, we have no doubt that they will be, but I think 
it is very complex in today's arena with the existing projects. 
This just adds another level of complexity.
    Mr. Coffman. Let me follow that up with Mr. Meeks.
    It seems that this will require constant and consistent 
communication about how this new program will be carried out. 
Is there any opposition to Western setting up a task force or 
group of folks to ensure a dialogue?
    Mr. Meeks. I am not prepared to commit to that. I am 
prepared to commit to communication as we do today. We are in 
an open Federal Register notice process that helps. Where we 
are asking for comments on all parties involved on how we set 
up our policies and procedures, and any suggestion of that 
would be considered as parts of the process.
    Currently today, as you have mentioned sir, that we have 
outstanding relationships with our customers, good 
relationships, if you will. And that is being done without a 
standing committee today. And so the reason I think why it is 
able to be done is because we do believe in visibility. And we 
do provide the data and everything necessary to our customers 
so we can have a dialogue back and forth without having a 
formal standing committee on this new authority on our existing 
authority.
    Mr. Coffman. Thank you, Mr. Meeks. And I would certainly go 
on record to encourage you to set up that task force with those 
folks to encourage transparency and dialogue. Madame Chair, I 
yield the balance of my time.
    Mrs. Napolitano. Thank you Mr. Coffman. Mr. Grijalva.
    Mr. Grijalva. Thank you very much, Madam Chair.
    Ms. James, you mentioned wanting to preserve WAPA's core 
mission of the distribution of hydroelectric power. Let me ask 
the question, won't your customers need extra power that it 
will be able to get from new providers or renewable energy by 
increasing that transmission capacity. I think the two factors 
population and energy demand and use will continue to grow in 
the west and our region of the country. So, don't you see that 
some point that that increased capacity for renewables will be 
part and parcel of the overall mission of WAPA.
    Ms. James. Yes, I certainly do. In fact, my numbers are all 
the individual customers or contractors with Western 
individually. None of them are served solely by the Federal 
hydropower all of them have a broad mix of resources. And 
certainly they are all engaging in and encouraging the addition 
of renewable resources. To that end, no doubt some of the 
existing backbone transmission system facilities are going to 
need upgrades and need additional capacity in order to 
interconnect these renewable sources. We understand that and 
that is why I said that the devil will be in the details in 
ensuring that where there is a benefit to the existing system, 
that the beneficiaries pay their fair share of those costs.
    Mr. Grijalva. And on that point, I think the point that you 
reiterated on my colleague's question, I understand that the 
utilities that you represent there is a concern that there will 
be asked to subsidize infrastructure that WAPA will build for 
these new providers. I think our concern has to be the greater 
public good and public interest here. And I think the stimulus 
bill expands WAPA's core mission beyond hydropower to all 
possible sources of renewable energy.
    It's not hard to foresee where WAPA's mandate to provide 
transmission capacity for new sources will conflict with I 
think the basic desire you spoke of that has been mentioned 
today to keep customer rates as low as possible. But there has 
been a precedent. I think fish recovery programs at WAPA 
participated in my home State in the upper Colorado, the Swan 
River in the past sets a precedent for the involvement of WAPA 
and the rate payers in a greater good project. And so would you 
care to comment about that precedent?
    Ms. James. Yes, I would. And again, we do believe there is 
a greater good. And where there is a greater good, possibly 
then that would be where the taxpayers would be insuring 
repayment of those provisions. I think that is probably what 
Congress had in mind when they included the debt forgiveness 
potential or the debt forgiveness provision in the stimulus.
    You know, I think there is a role for the taxpayers, there 
is a role for the renewable developers, and then there is a 
role for the existing projects and customers. And those roles 
just need to be sorted out appropriately.
    Mr. Grijalva. And you don't see it as an either or?
    Ms. James. No, I do not.
    Mr. Grijalva. Thank you, Madam Chair. I yield back.
    Mrs. Napolitano. Ms. James, how would or could a rating or 
expanding the great compromise its reliability?
    Ms. James. It is pretty complicated. I think that that 
would depend on the type of resource, where it is cited, where 
it is interconnecting into the grid, and what the current 
operating restrictions on the grid are.
    You know, electrons don't flow like you would like to see 
them on a map. Electrons, however, across the grid. So, Western 
is very actively involved in the various planning 
organizations, the reliability councils. And that role needs to 
expand I believe in this new authority. In fact, it needs to be 
even a stronger role to ensure that the existing operations are 
not impaired. I think they can coexist, but it is way beyond my 
pay scale to be able to explain some of the reliability issues 
that these planning engineers face as they are planning the 
transmission facilities.
    Mrs. Napolitano. How do you propose to partner with WAPA to 
help identify and mitigate the potential resource conflicts you 
mentioned in your testimony.
    Ms. James. I think we will be thinking about that. As Tim 
mentioned, the Federal Register notice is out and it would be 
appropriate for us to comment through that process to come up 
with some suggestions on how we can partner. I mentioned we 
call it the memoranda of agreement that we have had in place 
since 1992 at these agencies. That agreement has precluded 
frankly any rate litigation that we have had in our region 
because it allows the customers and the agencies to work 
collaborative, as Scott mentioned, before decisions are finally 
made and through the planning process so that the customers are 
involved and are aware what is going in up front and before 
final decisions are made. So, we will be working with other 
customer groups and develop some comments to the Federal 
Register notice.
    Mrs. Napolitano. Thank you for sticking with us this long.
    Ms. James. Thank you very much.
    Mrs. Napolitano. Now we move to our regular order of 
questioning.
    I wanted to recognize Mr. DeFazio because he has to leave. 
Mr. DeFazio, do you have questions, sir?
    Mr. DeFazio. Thank you, Madam Chair. To Administrator 
Wright, in your testimony when you are talking about the 
network open season process, it would be expected to be the 
largest driver of the increased capital program. Can you sort 
of explain that? Does that mean we have sort of a net or a 
market based investment program, that is where people are 
anticipating development they will bid, or they will bid higher 
in your network open season process. And therefore, you then 
change the priorities to accommodate that area rather than sort 
of a more traditional planning process of transmission 
enhancement? Do you get that?
    Mr. Wright. I think so. So, network open season was trying 
to take--we had a huge number of requests in our transmission 
cube.
    Mr. DeFazio. How many, how much?
    Mr. Wright. I think we were over 20,000 megawatts, and we 
only had 20,000 megawatts of load in the northwest, so it is 
pretty clear that we had requested or exceeded the amount that 
would actually be sold.
    Mr. DeFazio. So, this is like the old days when I can't 
remember the organization used to solicit every utility in the 
northwest to give its projected load requirements. And then one 
city would think they were getting this big new plant and the 
city next door would think they were getting it, and it both 
added in and in the end that is what drove us toward--you might 
remember. What was that group that added things up that way? 
And there was no elasticity but go ahead. So, you similarly 
have 20,000 megawatts of request, which is an impossible number 
in the region.
    Mr. Wright. I think, the valuable thing about the network 
open season is that it separated the wheat from the chaff, and 
did so in the fashion that Mr. Crowley described.
    Mr. DeFazio. Because people have to put up something to 
bid.
    Mr. Wright. They had to put money on the table. And that I 
allowed us to move from the large number of transmission 
requests, the 6,400 megawatts. Once we were dealing with the 
6,400 megawatts, we could develop a plan of service and say, 
here is what it would take in order to be able to satisfy that 
amount of request. And then go back out to the region and say, 
OK, the folks who are going to pay for this are you willing to 
have us incur this kind of cost and embed it in our 
transmission rates. That public process gave us the opportunity 
not to just hear what the purchasers, that the folks who were 
interested in selling the resources, but also the buyers were 
interested in with the people who were serving loads.
    Mr. DeFazio. What is the risk to establish rate payers, are 
those who are bidding on this going to carry the incremental 
cost of them accessing the system and also carry the cost for 
balancing their loads or are we unloading some of that onto the 
region for power which may be destined outside the region under 
contract?
    Mr. Wright. If I could, I would like to separate that into 
two questions. On the transmission side, we think that we have 
identified what the costs are of building the transmission and 
there will be some rate increases associated with this cost, 
more than the embedded transmission system. But our customers 
have said these look like worthwhile investments, and it 
creates more options for them because transmission is a 
relatively low cost or low portion of the total cost delivered 
power bill. It is worth it to them to make those investments in 
transmission.
    The second piece of your question.
    Mr. DeFazio. But there are benefits beyond just say one 
developer and their contract.
    Mr. Wright. That's right.
    Mr. DeFazio. Because there are stability benefits for the 
system, et cetera.
    Mr. Wright. That's right, reliability. Plus if you are a 
customer you would like to have options in terms of where you 
can go to purchase resources, and it ultimately will lead to a 
lower price.
    The second part of your question is the balancing services 
which, when you operate a transmission system, you are 
responsible for making sure that loads and researches balance 
in real time within the hour. And if you have an intermittent 
resource-like wind that is moving up and down frequently in an 
unpredictable fashion, then you have to provide the backup 
services to make sure you maintain reliability. That means you 
have to have generation available and there are costs 
associated with that.
    This has been one of the most perplexing and difficult 
parts of this problem of the explosion of wind in the northwest 
is trying to make sure that we identify the cost effective 
solutions to provide balancing services and then the more 
difficult part is the cost allocation to make sure that the 
right people are paying in an equitable fashion.
    Mr. DeFazio. And you do that through rate case?
    Mr. Wright. Through rate case. So this year, 2009, for the 
first time, we charge a wind integration charge. And it is an 
issue in our 2010, 2011 rates which are in the midst of and I 
need to say we are in the next party process right now, so 
there is limit in terms of how much I can discuss.
    Mr. DeFazio. Well, we can talk about 2009. And did 2009 
make the system whole or was the system still carrying some 
burden from those who were generating?
    Mr. Wright. We have not done an after the fact evaluation.
    Mr. DeFazio. OK. It seems like a prudent thing to do.
    Mr. Wright. So, what we have been doing is a lot of 
evaluation of where the costs are going for 2010 and 2011. Our 
proposal for 2010 and 2011 is a substantial increase in cost 
recovery. Now that is in part because we have a lot more wind 
in our system this year. It is incredible the amount of wind 
coming into our system month by month, so a lot more wind.
    Mr. DeFazio. Right. And I assume as you add wind you have 
less flexibility and fewer options to balance that load.
    Mr. Wright. Yes. And there basically is a cost curve. The 
first megawatts of integrating wind are relatively inexpensive, 
and as you add more megawatts of wind you move up a cost curve.
    Mr. DeFazio. Thank you. My time seems to have expired. 
Thank you, Madam Chair.
    Mrs. Napolitano. Ms. McMorris Rodgers.
    Mrs. McMorris Rodgers. I have a question for Mr. Meeks and 
this is to give me a better sense as to the time line that you 
envision as far as when you will be able to make some things 
happen, because this borrowing authority was included in the 
stimulus bill, as we all know it is touted as a job creation 
bill. And yet it is my understanding that it takes at least 4 
to 6 years to begin construction on a major power line. And it 
is my understanding that you are still developing policies to 
carry out the new program and solicit comments on new 
transmission lines or upgrades to existing ones.
    And then you will have to get work through the 
environmental impact statements and other regulations before 
you begin construction. So, I just wanted to ask if you could 
give me a sense as to how much of the 3.25 billion will be used 
and where and how many jobs it will create in the next 2 years?
    Mr. Meeks. It was good up until the last of the questions 
there. Basically as you know, the law requires us to go through 
this public process. And we are in the balancing the need to 
expedite to get the stimulus authority out there, as well as 
doing it right. And so what we're waiting to get back is what 
projects are people interested in us participating in. I do 
know that there are various projects with various states of 
readiness that people have contacted us in some form or fashion 
who have an interest in us participating with them.
    Now you have laid out appropriately that transmission lines 
from inception to completion do run the gamut of time, there is 
a long lead time on that. But for example, if we receive a 
project where the WAPA work has been done or they are looking 
for partnership in the financing which is allowed by law, then 
we can turn it over quickly. If we receive projects that are at 
its beginning stage. The thing about Western is we would turn 
money over in the form of land acquisition, environmental 
contracting work that would be done that we would contract out 
in preparation for these projects, geology work, surveying type 
work. So, there are various types and various degrees of the 
type of jobs that will be created under this new authority.
    But again to say how much when and where, I cannot do that 
until the Federal Register process is closed and I am able to 
see who has responded to this.
    Mrs. McMorris Rodgers. I understand Majority Leader Reid 
has a new bill that is giving more responsibilities in the 
marketplace. I just wondered if you might comment on your 
thoughts to adding another mission. And if Mr. Bladow is here 
to answer that.
    Mr. Meeks. Basically my initial comments are we have a lot 
on our plate. My concern is insuring that what I call our core 
mission, that is the term we use for the Federal power program, 
the existing preference customers, that that is funded 
appropriately so that our existing infrastructure that we have 
today is kept up and running and in good repair. So, I have a 
concern about that to make sure that is, so we can continue to 
deliver low cost power to the consumers in the west.
    With that said, we have a new program placed upon us. And 
again, that is one that does allow flexibility so we can have 
resource to implement this program, but believe me, we are a 
busy organization and we are not seeking anything necessarily 
else to do so----
    Mr. Bladow. From our perspective as a large customer of 
Western Area Power Administrations and actually co-owner on 
many projects, additional authority. Again, Mr. Meeks, I think, 
addressed the issue of the concern of how much can an 
organization absorb and still keep the lights on with over 
17,000 miles of lines and dealing with lot of rural areas and a 
lot of the infrastructure is older. So, a concern we have is we 
can have the resources to continue the partnerships we have 
done in the past, jointly owned, jointly operated, jointly 
maintained. Kind of the responses that's needed to serve our 
real constituents in a lot of cases that we very much rely in 
Western to maintain their and us to maintain our system to make 
sure they have reliable service, so that would be a concern of 
ours is too much too fast.
    Mrs. McMorris Rodgers. Thank you.
    Mrs. Napolitano. Thank you, ma'am. Mr. Grijalva.
    Mr. Grijalva. Thank you very much, Madam Chair.
    Mr. Meeks, what has Western done given the new borrowing 
authority that is in the package that talks about 
transformative investments in renewable energy, what has been 
done to ensure that there will be specific transmission lines 
planned for, designed and cited to serve this renewable energy 
source and not just use the borrowing authority to supplement 
the existing general grid system? Are there precautions that 
are involved or how have you it set up? I know there is some 
ambiguity in the language and we can talk about that back and 
forth, but let's presume that I am right.
    Mr. Meeks. All right, sir.
    Basically, the law is ambiguous, as you have stated, and 
its delivery or facilitating the delivery of renewable energy. 
And that to me is one of the million-dollar questions that we 
have to answer. That is one of the things that I am looking for 
input in this Federal Register process as to at what part is it 
living up to that portion of the law?
    If we partner with someone, does that mean the whole line 
is subject to this, does it mean that only the Federal share is 
subject to this? Does it mean what portion of the Federal share 
is required of this? And on top of that, oh, by the way, you 
have to ensure that it is economically viable. And so these are 
the things that we have to struggle with, as you have pointed 
out, that we ensure we meet the spirit and intent of the law.
    Mr. Grijalva. One more question if I may. I have been 
concerned about the energy corridors that were designated under 
the authority of the Energy Policy Act. Many of them, in my 
opinion, were designed without regard to issues of tribal 
sovereignty, ecologically sensitive protective public lands or 
a potential location of renewable energy sources. Would you and 
Western support a redrawing of some of these corridors to 
address the shortcomings that I just talked of that were done 
in the past?
    Mr. Meeks. I would leave that to the wisdom of Congress, 
but I understand your concern. I understand that that is what 
you see in many of the proposed legislation--the citing and 
planning of transmission--and connecting the renewable 
resources to load. And that is why I believe that Congress gave 
us this authority. If you look at our transmission system, we 
cross 15 western United States. Nine out of the 10 windiest 
States reside in Western Area Power Administration's footprint. 
So, there was a reason why we were chosen to do this. And as 
far as we do have certain authorities that allow us to bill 
transmission that may be attractive to entities looking to 
build renewable resources, and that is why I believe we were 
given this authority.
    Mr. Grijalva. Thank you. Mr. Wright, your colleague next to 
you was asked by the Ranking Member about the impacts of the 
recovery package on job creation and projects. Mr. Wright, how 
does that translate for BPA? How many projects, job creation, 
do you have a response to that?
    Mr. Wright. So, we don't have a total at this point, 
because we also are trying to determine how we will best use 
the authority. We have initiated one transmission project, that 
is the McNary-John Day Project. We are using our existing 
borrowing authority to do that, but it would have been 
questionable as to whether we could have proceeded with that 
had we not had the new borrowing authority. That project we 
expect to produce about 700 jobs over the course of the next 3-
1/2 years.
    Mr. Grijalva. Mr. Ellenbecker, my last question, has the 
State of Wyoming made projections on its wind and other 
renewable energy industry growth? And if you have done that, 
when will the lack of transmission lines become a limiting 
factor in marketing renewable energy that Wyoming has? Do the 
think the current state of transmission infrastructure is 
discouraging or limiting the full development of wind energy 
that otherwise could be happening right now?
    Mr. Ellenbecker. The transmission grid that is used to 
export power out of Wyoming today is already at near capacity. 
There is already a major impediment for renewable energy growth 
in Wyoming via the existing grid. The existing grid is far 
short of supporting any new major projects. All the projects I 
described in my written testimony and in my summary testimony 
are needed in some combination, one or more of those to enable 
another major wind project built to be built with an exit path 
out of Wyoming.
    So, the circumstance is already dire. Here we are with a 
tremendous wind source opportunity to complement the other 
renewable resources being considered in the country. And by 
Western Governors in the Western renewable energy zone 
initiative, for example, a vast identification of resources, 
they are all in need, and acutely in Wyoming as well of new 
transmission projects to enable their development.
    Mr. Grijalva. Thank you. Madam Chair, I have other 
questions, but I will submit those in writing to the Committee 
staff so they can get them to the witness.
    Mrs. Napolitano. We may have another round because I know 
Mr. Smith----
    Mr. Grijalva. I might be departing.
    Mrs. Napolitano. Well, then we well take those into the 
record.
    Mr. Grijalva. Thank you.
    Mrs. Napolitano. Mr. Smith.
    Mr. Smith. Thank you, Madam Chairwoman. Mr. Ellenbecker, I 
know in your testimony you talked about when it comes to 
eminent domain and private land versus public land, you pointed 
out that there is favorite protection of resources on public 
lands compared to private lands, especially in light of the 
transmission citing process. How do you think the approval 
process on Federal lands could maybe be streamlined I guess?
    Mr. Ellenbecker. The Federal agencies all need to look in 
the same direction in terms of achieving a common objective, 
starting with national energy policy. From there down agencies 
need to realign their efficiency and effectiveness to achieve 
those national goals. That is why Governor Freudenthal believes 
that we have to reform the permitting and citing process as a 
country and to enable the major projects in the west to be 
developed effectively. And furthermore, if we are going to 
build projects similar to that testified to by ITC, the green 
power express or other projects closer to home for me in the 
west. If we are going to build a new backbone of extra high 
voltage grid in the country, it is such a daunting task that it 
implies I believe strongly that it can only be accomplished 
through a much more effective and efficient permitting and 
citing process.
    And I hope that is responsive. It is meant to be that it 
points toward a refinement and reforming the process, perhaps 
toward a model that has been proven to be effective for major 
interstate gas pipelines through the FERC. It seems to, in a 
much shorter time frame, a year, year and a half, deal with the 
difficult tasks related to permitting and citing. I don't mean 
to imply this isn't a huge issue, it certainly is. There are 
risks around our ability to build a new backbone, to promote 
the development of huge amounts of resources otherwise 
available if we don't find a more effective way to permit and 
cite the facilities.
    Mr. Smith. Mr. Meeks, if you wouldn't mind responding how 
WAPA would work with landowners to ensure that their rights are 
protected and certainly adequate compensation would also be 
offered and I guess a smooth process you can probably 
appreciate it is a rather controversial.
    Mr. Meeks. Sure, absolutely. Western is a good neighbor, we 
try our very best to be a good neighbor. In the right of 
condemnation that I believe you are pointing to we rarely 
condemn land, we condemn land about 3 percent of the time. And 
some of those condemnations are friendly condemnations. We do 
offer fair market value for the rights of way that we obtain.
    As I mentioned I used path 15 project earlier where we went 
through an orchard and what we did was we redesigned the 
structure that went through the orchard to have a smaller 
footprint than a normal tower. Basically a larger footprint 
allows less towers longer spans and therefore you create less 
towers and it is less expensive. But because of this situation, 
we felt the added cost was worth the benefit to us and the 
landowners. So, that is an example of how we tried to work with 
the landowner. We don't come in with a big hammer and say, give 
me your land or anything like that. We do try to provide market 
value.
    Mr. Smith. You said about 3 percent of the time?
    Mr. Meeks. Yes, sir.
    Mr. Smith. I certainly don't question that. I was wondering 
if you might have background information for the record on the 
incidence of condemnation authority on private lands.
    Mr. Meeks. Sure.
    Mr. Smith. Thank you very much. Thank you, Madam 
Chairwoman.
    Mrs. Napolitano. Doc Hastings.
    Mr. Hastings. Thank you, Madam Chairwoman. And this hearing 
is about transmission, specifically it was in the stimulus 
package, but inherent in all of this or I should say implicit 
in all of this is the type of energy that we are going to be 
transmitting and the conversation, of course, has been around 
green energy.
    For the record let me say that I am one that believes we 
should have as diverse an energy portfolio as we possibly can. 
Having said that let me qualify it by saying I think the best 
way to do it is to incentivize it rather than mandate it or 
subsidize it. So, that is the challenge you all face who are in 
that business.
    Let me ask Mr. Wright and Mr. Corwin again in the northwest 
because that is what I am familiar with, we all know that 
renewable energies like wind and solar we wouldn't have any 
energy today here in Washington D.C., obviously because the sun 
is not shining. I haven't been outside, but there is not much 
wind. So, we wouldn't have much going on here today if we got 
our energy there.
    So, what you have to have is a base resource. And we are 
lucky in the northwest because our base resource is hydro and 
nuclear specifically. I guess my question specifically because 
I alluded to this in my opening question, where would we be in 
the northwest if we didn't have the Lower Snake River Dams to 
supplement the intermitted wind which is predominant in the 
northwest? Mr. Wright or Mr. Corwin, either one.
    Mr. Wright. Well, the Snake River Dams and the entire 
Federal home river hydropower system were absolutely essential 
to maintaining reliability. If you had an all wind system, you 
wouldn't be able to maintain reliability, it is that simple. 
Just because of the intermittent and random nature of the wind 
resource.
    This is one of the great things that we are learning as we 
have the explosion of wind power in our system, how does it 
actually operate? It operates differently than we would have 
thought a couple years ago. We are trying to best figure out 
what resources we need in order to be able to handle all this 
wind. We actually are now reaching a point where the hydropower 
system is not big enough to handle the fluctuation of the wind 
power in our balancing authority. So, our challenge in addition 
to maintaining the existing output of the hydropower system is 
what resources will we need to add going forward in order to 
make sure that we do have reliable electrical power system.
    Mr. Corwin. Congressman Hastings, I would agree with that 
assessment, just the four Snake projects are about 3,300 
megawatts of capacity, about 1,200 average megawatts. And 
indeed all of the dams, and the one nuclear plant in the 
northwest right now, we are bumping up against the limits of 
the capacity needed on the Federal system. It is a concern to 
the customers. It is a critical issue in integrating wind and 
other resources that are more intermittent as you pointed out. 
And it is not just as the conversation was discussed earlier it 
is not just a rate issue at that point, how do you allocate the 
cost. It is an issue of where does the extra capacity come from 
for the base load or to balance the intermittent resources, and 
that is one the region needs to work through aggressively over 
the next couple of years.
    Mr. Hastings. Implicit also in that is the talk about the 
concept of cap and trade, huge concept, I know it is in the 
President's budget. So, I would like to ask all of you to 
comment on cap and trade and specifically how it would effect 
the operations that you have. I know my time is running out 
here, but I would like to ask all of you just to give me a 
brief summary of how cap and trade would effect your operation? 
Mr. Meeks, start with you and go down the line.
    Mr. Meeks. For us, as you know, our mission is different in 
the fact that we are not a load serving entity and that we are 
a transmission provider, we do serve wholesale, we market 
wholesale. So, I know it is an issue of concern to my customer 
group that they are worried about it, but I do not want to 
speak toward that at this point in time. I'll let Steve or some 
of the other ones with more expertise speak on that.
    Mr. Wright. Well, the Federal Columbia Power System starts 
out with a natural advantage. It is 90 percent hydro and one 
nuclear plant system. We are a non-CO2 emitting 
system, so the cap and trade proposals as it directly impacts 
our current operations would be minimal. I think the critical 
question going forward is we have set up a new regime with our 
customers where they are responsible for load growth, but we 
will provide the services to the extent that they want them, 
and to the extent they turn to us for those low growth services 
and we were purchasing resources then we would have to have the 
availability of being able to offset whatever carbon costs are 
associated with those new resources. So, it becomes part of the 
cost of the new resource. I think that will probably be the key 
place that we will be engaging in.
    Mr. Hastings. Let me get off on a bit of a tangent, when 
you have to purchase power, for whatever reason like, for 
example, when we had the spill in August, which you know my 
position on that, but when you buy power it is generally carbon 
power; is that correct?
    Mr. Wright. That is a really interesting question that we 
are struggling to deal with. Electrons are not carbon coated. 
There is no way to tell whether an electron you purchased is 
directly from a carbon resource unless you buy from a 
particular identified generating resource, and I think it is 
one of the great challenges going forward. This has come up a 
lot in discussions about the western climate initiative. To the 
extent that we have balancing purchases, how will we track them 
back to the source and be able to identify whether they have 
carbon? And, if so, what offsets will we need to come up with? 
Today, we don't have a system that will do that.
    Mr. Hastings. So, that could lead to another follow-on 
question. But why don't you briefly if you all would give my--
--
    Mr. Ellenbecker. One of the things I have admired about the 
Committee's questions is your concern for customer costs. As 
you know, huge changes are coming to the electric utility 
industry related to climate change implications. I would urge 
you to continue your focus on the implications in terms of what 
are the consequence in terms of costs for consumers on actions 
being considered. And with that maintaining the reliability of 
the grid.
    Your great question about how can all of this work with 
intermittent resources and there have to be additional 
resources in play to make it all work to keep these lights on 
in Washington, D.C. Or anywhere else in the country in terms of 
major parts of the grid. So, your focus, in a sense, is the 
right place--unless now it is complicated as it is going to be 
extended to the climate change debate.
    Mr. Bladow. Yes, Tri-State operates a system over almost 
over four States, we have 44 members. As Administrator Wright 
pointed out, when wind being integrated into the system they 
have a different perspective today than they had a couple years 
ago. I couldn't tell you we have a real clue what cap and trade 
system with kind of a market based costing system how that 
would impact our generation dispatch. We can put numbers on it, 
assume a carbon cost, but when you get down to actually 
dispatching what resources are up, how is the wind blowing, 
what is the market price on Wall Street, I think it would be 
very difficult to gauge that in any accuracy. I think you will 
jump into it and your models may all blow up when you find out 
what reality and what people are doing.
    I know from a customer perspective what we would prefer if 
you put some kind of carbon cost on there is some type of tax 
base system where you know the cost and you can factor that 
into what you are doing.
    Mr. Hastings. I am way over my time here. I apologize for 
that. Can I?
    Mr. DeFazio. You can have another round Doc, let me ask 
some questions.
    Mr. Hastings. That is fine. I appreciate that, I do have to 
go.
    Mrs. Napolitano. Yes, Peter, go ahead.
    Mr. DeFazio. Thank you, Madam Chair. Along that line I 
guess in the last gentleman who spoke pointed to a problem with 
the cap and trade system which is predictability. And the way I 
describe it to people is cap and trade as envisioned would 
instead of having a carbon tax set by the government would set 
a variable carbon tax set by hedge funds on Wall Street. That 
is probably not--given what happened with the high tech bubble 
and what happened with the financial bubble, we could look 
forward to the next new bubble, which would be the carbon 
bubble. A few people get rich, the rest of the people get 
screwed and then that one falls down and we go on to something 
else. I have been the pretty lone voice speaking against this 
from the side who does believe we have to deal very 
aggressively with our carbon emissions, but I now see some 
people, other like minded people are raising questions about 
this obsession with a market based tax.
    Let's go back to the subject at hand. Anybody can address 
this, but I want to know as a developer comes along they have a 
place with a lot of wind, they want to build the wind 
development there. It requires obviously investment, there is a 
certain price involved with that, although I guess the price 
has been coming down a little bit. And then we have access a 
transmission. And in building the transmission and in 
particular, you were addressing this question from the 
perspective of Wyoming, I guess, do we take into account a 
serious analysis of least cost planning? That is, it may be, in 
some cases, rather than transmitting power a long way to a 
certain area that is renewable, yes, but has a cost of, say, 
$0.10 delivered or $0.09 with transmission costs and generation 
costs versus what cost effective conservation you could capture 
in that area to avoid the need for the transmission? Are we 
taking that into account or are we saying just because it 
renewable we are going to build and serve it.
    Mr. Ellenbecker. In a competitive market, you are 
absolutely correct in what is referred to commonly as an 
integrated resource planning strategy, considering all 
resources, including conservation efficiency, demand side 
management to reduce power use. And in the spectrum of supply 
side resources. Resources should, as has been hinted at by some 
committee members, continue to compete with each other in the 
mix and at the same time, that can be compatible with more 
aggressive renewable energy goals as a country since 
renewables, non hydro renewables still contribute such a small 
proportion of our power supply in the country. But they still 
should be measured against alternatives, the full spectrum of 
alternatives and costs. The Western renewable energy's own 
initiative of the Western Governors, but those cover the 
western interconnect is analyzing delivered costs. And as it 
relates to transmission, Congressman, delivered costs of power 
to urban load centers compared to closer proximity and other 
resource options, and rightly so, as I believe you suggest 
should be in an appropriate marketplace.
    Mr. DeFazio. Is a comprehensive analysis of the western 
region being done that will sort of assess?
    Mr. Ellenbecker. I don't believe it has been done. It needs 
to be done, and I believe in early stages of groups, the 
Western Electric coordinating council is starting to focus on 
scenarios of how much CO2 reduction at what price, 
how much renewable energy can we build into the grid, at what 
price. So, it is in the early stages of work by the Western 
Governors' initiative in cooperation with a group called the 
Western Electric Industry Leaders Group. The work is too early 
stage, but at least we are starting, I believe, to look in the 
appropriate direction to get it done. It is far from a finished 
project, but it several is one that needs to be accomplished.
    Mr. DeFazio. Anybody else on that real quick before my time 
runs out?
    Mr. Wright. I would say I think the Northwest Power and 
Conservation Council is looking at that question as part of 
their 6 power plan, and that is an appropriate forum to have 
this discussion.
    Mr. Bladow. I would just add, part of the challenges 
without the rules of carbon what are they going to be is 
somewhat difficult. You can make certain assumptions, but is 
your model accurate because you really don't know the rules of 
game. I think that is slowing down some of these efforts.
    Mr. DeFazio. Thank you. Thank you, Madam Chair.
    Mrs. Napolitano. Thank you, Mr. DeFazio, now it is my turn.
    To Mr. Meeks and Mr. Wright, how are you working together 
or are you working together to translate BPA's success, its 
borrowing authority to WAPA?
    Mr. Meeks. I believe we are working good together. Actually 
our staffs have been talking at various levels as far as the 
arrangements that they have with Treasury trying to learn from 
that model. Steve and his senior staff was gracious enough to 
host me and a couple of my senior staff last week as we went 
over how they conduct business at utilizing their borrowing 
authority as was stated we are different in some ways, but 
bottom line is that I thank Steve for sharing his knowledge on 
this use of authority and we do hope to translate the lessons 
learned from them.
    Mr. Wright. I think Tim said it well. We are working 
together.
    Mrs. Napolitano. Great.
    To Mr. Ellenbecker, we appreciate your testimony today and 
would like to thank Governor Freudenthal for his leadership in 
the Bush renewable energy resources, but what is the view of 
the Western Governor's Association on this grid issue?
    Mr. Ellenbecker. The Western Governors Association has 
recently communicated with Congress and with the new 
Administration in terms of supporting the dire need to build a 
true transmission grid that is a sufficient backbone to enable 
the development of the Western renewable energy zone 
initiative. The underlying renewable resources, not just wind 
which has received so much attention today, but all is 
importantly, solar, geothermal, the full spectrum of renewable 
resources.
    That project, that initiative has a grand vision, which 
will fail unless it is accompanied by as grand a vision 
successfully implemented on new interstate transmission. These 
are all remote resources as you know. They have to be converted 
into an electric energy form on site to be usable by consumers, 
it is much different.
    There is no option but the transmission grid, can there be 
closer to load center renewable opportunities? Of course. 
Should they be developed? Of course. In some cases they will be 
the least cost openings. Should we stop there and avoid places 
like Wyoming where we have some of the world's richest wind 
resource in terms of its potential and capacity factor? We 
shouldn't stop there and avoid that if we truly have a national 
commitment to develop as much renewable resource as the grid 
can reliably handle. So, the WGA is supportive of the renewable 
energy development--and insistent upon it only succeeding with 
a rebuild of the grid.
    Mrs. Napolitano. And you did mention sufficient backbone. I 
would tend to agree with that because if you are not able to 
have sufficient capacity to be able to transfer that and you 
are right, there is more than just wind. Look at biomass and 
solar and the other forms of energy.
    The question brings up, I know Mr. T. Boone Pickens made a 
presentation to one of our caucuses not too long ago about the 
west part of the central belt that he was planning on 
rebuilding a huge infrastructure of wind energy. And my 
question at the time to him was whose going to pay for that 
infrastructure. Have you heard anything on what is going to 
happen? Because if somebody is thinking of setting up wind 
farms from the bottom of the State to the top and the west part 
of the central part of the country, is anything being taken 
into consideration of what he's planning on doing or has he 
been in touch with you to let you know that he's planning on 
doing that?
    Mr. Ellenbecker. This question implies, it goes right to 
the heart of who is going to pay. A massive investment that 
approaches so many billions of dollars to achieve its objective 
has to include a determination of who are the project 
developers, are they load serving entities or are they merchant 
power providers that have contracts with load serving entities, 
therefore would induce customers. If so it should be those 
consumers who pay the cost of the project.
    Is it part of a national interest backbone development that 
supports the reliability of an entire interconnection, whether 
it be the eastern interconnect or the Western interconnect. If 
so, it may be appropriate to devise a new cost allocation and 
cost recovery mechanism tied to all the work being done in 
Congress now and early stages on how are we going to get this 
permitted and sited. Who will do the interconnection wide 
planning?
    I believe, Chairwoman it goes to those questions of if we 
are moving toward interconnection wide planning, certainly 
larger regional scale planning, it implies we have to develop 
cost recovery mechanisms yet to be developed where there are 
not regional transmission organizations yet to be developed, 
like in the west where public private partnership has to work 
together and investor owned and public utilities. And merchant 
project developers and load serving entity developers together, 
all inclusive to sort out--it is achievable because these 
companies have been allocating costs to consumers through cost 
allocation principals for a long, long time. I was blessed with 
a 15-year career as a State utility regulator. They know the 
business, will this be more complicated than what they are 
accustomed to? Yes, can they accomplish it? Yes, but we are not 
there yet.
    Mrs. Napolitano. You are very, very right on point with my 
assessment that the taxpayer would probably end up paying for 
that infrastructure tie and that to me is not acceptable.
    Mr. Crowley, do you believe that BPA's barring authority 
will help to expand the private sector growth in the renewable 
energy area?
    Mr. Crowley. Yes, Madam Chairwoman, I do believe that will. 
I think that when BPA goes into the next round of the network 
open season, I think there will be an opportunity to sit down 
with the people who have been looking at the cluster studies 
and figure out a way to leverage the private investment that 
the long-term service contracts will drive. And so I believe 
that when BPA looks back to the resources of their customers to 
do these enhancements of the system, that they will see they 
have the ability to do more transmission building than they 
currently are doing.
    It is a matter also of for so long they needed to do so 
many things, so the things that are getting taken care of in 
the first round of the network open season it is absolutely 
logical and appropriate that they do that. We are hoping they 
will be able to expand their horizons and look at other things 
again with the borrowing authority to bring on a second tier of 
projects.
    Mrs. Napolitano. Thank you, I certainly hope that as we 
move forward in the job correction and your contracting and 
subcontracting that you pay close attention to assisting 
minorities, especially Native Americans that do need that 
economy. Mr. Smith.
    Mr. Smith. I just thought I might allow anyone else to 
respond to Mr. Hastings' question regarding the impact of a cap 
and trade proposal? Anyone else?
    Mr. Corwin. Sure, I guess we could head on down the line 
here. Again, Scott Corwin, Public Power Council. For us any 
carbon regulatory scenario that would come in the bottom line 
issue is cost to the end consumer, and so we go in to any of 
those proposals wanting to make sure the consumer is protected.
    The issue with markets that Congressman DeFazio mentioned 
has been one we have raised for a long time in the Western 
interconnection we had an experience with markets several years 
ago that we are not properly regulated and cost consumers a 
whole lot at that time.
    Having said that we come within a relatively clean 
portfolio in the northwest. We have members with carbon to 
start with, but we have more members that are concerned about 
how they meet their load growth in the future, and because of 
some of the issues we were just talking about of firming 
intermittent resources, even though we have a big emphasis on 
renewable energy in the northwest to meet load growth, you 
still have to balance that power out and the most natural 
resource right now looks like gas-based generation, and so you 
are going to have additional carbon exposure. So, we want to 
make sure, as we meet our loads, we are not hit with additional 
costs that hit the consumer.
    Mr. Smith. Right. So, the bottom line is cost to consumer?
    Mr. Corwin. Yes, absolutely.
    Mr. Smith. Mr. Crowley.
    Mr. Crowley. You are out of my pay grade here, Congressman. 
I am a lowly developer and we just try to make economical 
projects that fit into the markets.
    Mr. Smith. OK. Speak from a consumer standpoint then.
    Mr. Crowley. From a consumer standpoint, sir, I think it is 
fair to say, however, that there is pretty unanimous view that 
there has to be something done to address the issues of global 
warming and the challenges that we all face there.
    So, Congressman Hastings, I think was asked earlier about 
where the costs or added costs for renewable energy might be 
accounted for and whether you do that on the backs of the 
direct rate payers or you look at a more of a national model. 
My limited understanding of this effort is that it might be a 
way to broaden the costs over a wider base nationally, as 
opposed to looking at individual consumers like Scott's members 
or something like that. And maybe in that way, it might be more 
equitable to look at it. However, how you administer that, sir, 
is not something I can comment on.
    Mr. Smith. Would there be concern, however, that some 
volatility would be added to the whole market on top of what I 
would characterize as highly volume until already?
    Mr. Crowley. Again, not my area, I apologize. I don't mean 
to be evasive, but it truly is not my area.
    Mr. Smith. OK. Anyone else?
    Mr. Rahill. If I may, from ITC's perspective, because I 
just wanted to have the distinction in the sense there is a 
little bit of what Mr. Meeks said, from our perspective under 
our FERC charter, we are not allowed to participate in any or 
owning any marketing of energy at all, we are strictly a 
transportation company. So, from our company's perspective, we 
would not have a direct impact that we would notice at all. 
From a public policy perspective, we do have ramifications, and 
would I echo some of the comments made here by that. I just 
want to make the distinction ITC is strictly in the 
transportation of energy business, so that is a distinction.
    We did have an observation that I just would bring to the 
Committee's attention is that if we do focus in on developing 
the most energy intensive wind areas in the country, in this 
case, green powered express focusing on the North and South 
Dakota, and I think Wyoming may have the same situation, we 
find the total cost of that energy actually economically 
displaces a significant part of hydrocarbon-based generation so 
that you would have a mitigating effect on the cost of cap and 
trade to customers which will be real because you have to pay 
for something, but optimization of your transmission grid to 
access the most energy intensive wind zones in the country 
should have theoretically a mitigating effect.
    We employ the Battle Group to do that work for us. I think 
that study is available. So, that is the only other comment I 
would have from an observation perspective.
    Mr. Smith. Thank you. I yield back.
    Mrs. Napolitano. Thank you, sir. Mr. Meeks, how does WAPA 
intend use it its borrowing authority to partner with the 
private sector?
    Mr. Meeks. Thank you, as was mentioned, as I said in the 
early on that 3.25 billion is a lot of money. But again, as Mr. 
Grijalva has pointed out the one transmission line was, I 
believe, 12 billion for one transmission line. It is a big one 
and it is high voltage and high capacity. So, in order for us 
to make the best use of the authority given to us, we have to 
partner with other entities. And again, as I said, as we 
balance the need to get money out there to create jobs with the 
long-term maturity of this program I would like to see 
obviously on this front initial asking of projects against the 
goal would be shovel ready, renewable resource, intensive and 
economic, economically sound, electrical reliability.
    Those are things we know we have to have on the initial 
round. As the program matures, what I would like to see is the 
coalition of several entities together. And we will see it 
hopefully as we get the responses back where we can see some 
synergies being created by like projects, and that again goes 
to maximizing the resources, not only ours, but the resources 
of the country limiting corridors and things that were being 
brought up. I believe, again, using Steve and Bonneville as a 
model with the open season and what they did and the ability to 
again build synergy and design a system per the needs that are 
out there. That is an efficient way to do things. And as we 
mature in this program we will be able to get there.
    Mrs. Napolitano. Thank you for that. Mr. Corwin, does BPA's 
collaboration with the stakeholders help to keep power rates 
low and to ensure repayment of the borrowed funds?
    Mr. Corwin. It helps. Yes, Madam Chairwoman, it helps to 
keep rates lower than they otherwise would be. We have had a 
good collaboration and a lot of information back and forth 
between the Agency and its customers, it has been increasing 
all the time. And I think its going to be enhanced even more in 
light of this current authority. And so I am hopeful about 
that. We do have a rate increase coming at us in the next year, 
and that is for various other reasons, but it puts an 
exclamation on the need for customers to be able to review 
these costs that they are going to be accountable for in the 
future.
    Mrs. Napolitano. Thank you. Mr. Meeks, how nearly or 
broadly will WAPA define its new authority?
    Mr. Meeks. You said how broadly?
    Mrs. Napolitano. How narrowly or broadly?
    Mr. Meeks. Right. Again, that is something, as I stated, 
that the big questions are, you know, at what point is it 
facilitating the delivery of renewable energy. That is 
something I am looking for direction through this Federal 
process, the Federal Register notice and obtaining input from 
all the various entities that are interested in this program.
    Mrs. Napolitano. Please let us know if this Subcommittee 
can be of any assistance.
    If there are no further questions, this concludes the 
Subcommittee's oversight hearing on the Federal Power Marketing 
Administration Borrowing Authority: Defining Success.
    I would like to thank all of the witnesses for being so 
generous with your time and holding with us and also for 
appearing before the Subcommittee and testifying today. Your 
testimony and expertise have been very enlightening and very 
helpful, and your answers to your questions have been an 
additional insight into the workings of our authority and how 
this new stimulus is going to be able to help us address some 
of the concerns that we have had. And, later, we may end up 
having another hearing with regard to climate change and how it 
is going to affect your ability to do hydropower.
    Under Committee Rule 4(h), please submit any additional 
material for the record within the next 10 business days. The 
cooperation of all the witnesses in replying promptly to any 
questions submitted to you in writing will be very greatly 
appreciated.
    And I would like to add that Mr. Jay Inslee, Congressman 
Inslee, was supposed to be here. Somehow his schedule was 
unable to permit him to do so.
    There will be questions for the record, and they will be 
submitted--I am not sure to whom--and some material will be 
submitted.
    And, without any further ado, this meeting is now 
adjourned. Thank you.
    [Whereupon, at 4:32 p.m., the Subcommittee was adjourned.]


    [Additional material submitted for the record follows:]

    [A statement submitted for the record by the American 
Public Power Association follows:]

               Statement submitted for the record by the 
                   American Public Power Association

    The American Public Power Association (APPA) is the national 
service organization representing the interests of the nation's more 
than 2,000 state and community-owned electric utilities that serve over 
45 million Americans. These utilities include state public power 
agencies, municipal electric utilities, and special utility districts 
that provide electricity and other services to some of the nation's 
largest cities such as Los Angeles, Seattle, San Antonio, and 
Jacksonville, as well as some of its smallest towns. The vast majority 
of these public power systems serve small and medium-sized communities, 
in 49 states, all but Hawaii. In fact, 70 percent of publicly-owned 
electric utilities are located in communities with populations of 
10,000 people or less.
    APPA's membership not only own hydropower facilities, but also 
purchase and receive power from others in the industry who own/operate 
these facilities, including the federal Power Marketing Administrations 
(PMAs). Public power systems own approximately 10.1% of the total 
installed electric utility generating capacity in the United States. 
Hydroelectric projects comprise nearly 19% of public power's total 
generating capacity. However, in addition to their own hydropower 
facilities, approximately 580 public power systems in 33 states 
purchase all or some of their power supply from one of the four PMAs. 
The PMAs provide millions of Americans served by public power and rural 
cooperative electric systems with cost-based hydroelectric power 
produced at federal dams operated by the United States Army Corps of 
Engineers and the Bureau of Reclamation. The PMAs market federally-
generated hydropower to not-for-profit entities, including public power 
systems and rural electric cooperatives, at rates set to cover all of 
the costs of generating and transmitting the electricity as well as 
repayment with interest of the federal investment in these hydropower 
projects.
    APPA's concerns with implementing Section 402 of the American 
Recovery and Reinvestment Act (ARRA) relating to Western Area Power 
Administration's (WAPA) new borrowing authority are identical to those 
expressed in the testimony presented today by Colorado River Energy 
Distributors Association (CREDA), which also represents members of 
APPA. The crux of our concern is that, as WAPA implements this new 
authority, its core mission of providing clean, renewable, reliable, 
cost-based federal hydropower is maintained. One of the ways that this 
can be achieved is through the continuation of an open dialogue between 
WAPA and its existing customers. This can also be achieved through the 
public process envisioned by the new authority, whereby WAPA customers 
will be able to comment on WAPA's new role, the proper allocation of 
resources to achieve the goals laid out by Congress, and the procedures 
to be implemented by WAPA to balance its new role with its core 
mission, including clear guidance on cost allocation. Finally, the 
underlying mandate of load-serving electric utilities, including public 
power utilities, is to ``keep the lights on.'' As WAPA implements its 
new authority, therefore, it must constantly consider any ramifications 
that the use of intermittent resources might have on the reliability of 
the transmission system it operates and take the appropriate steps to 
mitigate any potential reliability concerns that occur.
    APPA's members have been leaders in the development of non-
hydropower renewable resources, and will undoubtedly seek to partner 
with WAPA as it uses this new authority to access those resources. We 
also urge WAPA to consider those partnership opportunities as they 
arise.
                                 ______
                                 
    [A statement submitted for the record by Mr. Grijalva 
follows:]

   Statement of The Honorable Raul M. Grijalva, a Representative in 
                   Congress from the State of Arizona

    Thank you, Madame Chairwoman, for holding this hearing today on the 
power marketing administrations and renewable energy in the West.
    This hearing is scheduled at an opportune time. With the recent 
passage of the American Recovery and Reinvestment Act of 2009 we can 
look to the power marketing administrations to play a critical role in 
increasing our country's supply of clean, renewable power and helping 
our economy recover. The bill provides power marketing administrations 
Bonneville Power Administration (BPA) and the Western Area Power 
Administration (WAPA) with $3.25 billion each in new borrowing 
authority to be used to upgrade or construct transmission to help 
increase the development of renewable energy resources. This 
expenditure of federal funds will help the country reduce greenhouse 
gas emissions, thereby protecting the global climate and ecosystems, 
create jobs, and decrease our dependence on fossil fuels.
    In coming years, large sums will be spent to build transmission 
infrastructure in energy corridors designated by the Department of 
Energy under the Energy Policy Act of 2005. Unfortunately, many of 
these corridors were designated without regard to tribal sovereignty, 
ecologically sensitive protected public lands, or access to regions of 
abundant renewable natural resources. This process needs to be 
revisited so that the specific mandate to increase the development of 
renewable energy sources contained in the stimulus provisions for BPA 
and WAPA will be fulfilled, and fulfilled in a manner respectful to one 
of our greatest national treasures, our public lands.
    The energy corridors designated by DOE in December have the 
following major problems, which must be addressed:
      Failure to support renewable energy development and 
transmission--The designated corridors do not prioritize supporting 
renewable energy development, even though many western states, 
counties, and other groups have made commitments to developing 
additional renewable energy production through Renewable Portfolio 
Standards and other efforts. For instance, the Western Governors' 
Association's (WGA) Western Renewable Energy Zones (WREZ) project is 
aimed at utilizing those areas in the West with vast renewable 
resources to expedite the development and delivery of clean and 
renewable energy. The goal of the WREZ is to generate: 1) reliable 
information for use by decision-makers that supports the cost-effective 
and environmentally sensitive development of renewable energy in 
specified zones, and 2) conceptual transmission plans for delivering 
that energy to load centers within the Western Interconnection. The WGA 
has continued to advocate for incorporation of this information into 
federal planning and draft zones are already available for use in 
improving the designation of West-wide Energy Corridors;
      The analysis of environmental impacts is limited to 
individual, separated segments on federal lands--the agencies have 
refused to analyze or even acknowledge the inevitable impacts to both 
federal and non-federal lands once the ``dots and dashes'' on maps of 
the current designations are connected (or to show the likely path of 
these corridors), which also limits their ability to develop ways to 
reduce or avoid impacts;
      Failure to avoid public lands with important conservation 
values and sensitive wildlife habitat--Places such as Grand Staircase 
Escalante National Monument, Snake River-Birds of Prey National 
Conservation Area, and the Desert and Sevilleta National Wildlife 
Refuges are crossed by corridors, and a large corridor (miles wide) was 
designated immediately adjacent to Arches National Park and the town of 
Moab, Utah, placing improper stresses on the values and experience of 
these places;
      Inadequate consultation with state, local and tribal 
governments--the outreach and opportunities for input were very 
limited, so that important information on local plans and priorities 
were not incorporated; and
      Failure to consult on impacts to threatened and 
endangered species--despite an official request from the National 
Marine Fisheries Service, the agencies have not engaged in the 
consultation required under the Endangered Species Act.
    I have stressed that meeting the requirements and goals of the 
Energy Policy Act of 2005, while also protecting America's treasured 
public lands, should not be mutually exclusive. As a model example, the 
Renewable Energy Transmission Initiative (RETI) convened by the State 
of California identified, with the input of all relevant stakeholder 
groups, siting for low-conflict corridors and renewable energy plants 
that can potentially provide 74,300 GWh/yr of green energy, more than 
enough to meet the state's needs. By including environmental 
stakeholders in the planning process, California has greatly reduced 
the likelihood of conflict and litigation, an outcome that all parties 
would prefer to avoid.
    Finally, I would like to provide my observations on the contrasting 
attitudes of BPA and WAPA. BPA and their customers are excited about 
the opportunities the additional borrowing authority brings them. The 
customers of BPA are seemingly forward-looking and are willing to bear 
some additional expense now to receive the inevitable benefits of 
building for the future. In stark contrast, it appears that WAPA would 
prefer not to even get the extra money, and its customers' main concern 
seems to be avoiding even the tiniest additional cost. However, WAPA is 
a Federal agency, and it is the obligation of the Federal government to 
act in the public interest. In fact, in the past, WAPA and its 
customers have borne part of the cost of projects enacted for the 
greater good. For instance, P.L. 106-392, Upper Colorado and San Juan 
River Basins Endangered Fish Recovery Programs, required WAPA to pay up 
to $17 million for fish recovery programs. WAPA likes to think of its 
``core mission'' as providing hydroelectric power from existing sources 
to its existing customers, but the economic recovery act specifically 
expands WAPA's mandate. Even WAPA's existing customers are going to 
need new sources of energy as the population of some areas in the West 
may come close to doubling their 2000 levels by 2050.
    Again, I appreciate the subcommittee holding this hearing to bring 
much needed attention to the role the power marketing administrations 
play in energy production and development. I look forward to continuing 
to work with my colleagues on the subcommittee and in Congress on the 
issues of transmission siting and renewable energy development as our 
country addresses global warming and economic recovery.

                                 
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