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


 
 THE FUTURE OF THE GRID: PROPOSALS FOR REFORMING NATIONAL TRANSMISSION 
                                 POLICY

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 12, 2009

                               __________

                           Serial No. 111-48


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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                    COMMITTEE ON ENERGY AND COMMERCE

                 HENRY A. WAXMAN, California, Chairman

JOHN D. DINGELL, Michigan            JOE BARTON, Texas
  Chairman Emeritus                    Ranking Member
EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
RICK BOUCHER, Virginia               FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
BART GORDON, Tennessee               NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
GENE GREEN, Texas                    STEVE BUYER, Indiana
DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
  Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California               MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
JANE HARMAN, California              LEE TERRY, Nebraska
TOM ALLEN, Maine                     MIKE ROGERS, Michigan
JANICE D. SCHAKOWSKY, Illinois       SUE WILKINS MYRICK, North Carolina
CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA CHRISTENSEN, Virgin Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE BRALEY, Iowa
PETER WELCH, Vermont

                                  (ii)
                 Subcommittee on Energy and Environment

               EDWARD J. MARKEY, Massachusetts, Chairman
MICHAEL F. DOYLE, Pennsylvania       DENNIS HASTERT, Illinois
G.K. BUTTERFIELD, North Carolina          Ranking Member
CHARLIE MELANCON, Louisiana          RALPH M. HALL, Texas
BARON HILL, Indiana                  FRED UPTON, Michigan
DORIS O. MATSUI, California          ED WHITFIELD, Kentucky
JERRY McNERNEY, California           JOHN SHIMKUS, Illinois
PETER WELCH, Vermont                 HEATHER WILSON, New Mexico
JOHN D. DINGELL, Michigan            JOHN B. SHADEGG, Arizona
RICK BOUCHER, Virginia               CHARLES W. ``CHIP'' PICKERING, 
FRANK PALLONE, New Jersey                Mississippi
ELIOT ENGEL, New York                STEVE BUYER, Indiana
GENE GREEN, Texas                    GREG WALDEN, Oregon
LOIS CAPPS, California               SUE WILKINS MYRICK, North Carolina
JANE HARMAN, California              JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas           MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin
MIKE ROSS, Arkansas
JIM MATHESON, Utah
JOHN BARROW, Georgia


  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Edward J. Markey, a Representative in Congress from the 
  Commonwealth of Massachussetts, opening statement..............     1
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     3
Hon. Jay Inslee, a Representative in Congress from the State of 
  Washington, opening statement..................................     6
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     7
Hon. Tammy Baldwin, a Representative in Congress from the State 
  of Wisconsin, opening statement................................     9
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................    10
Hon. Steve Scalise, a Representative in Congress from the State 
  of Louisiana, opening statement................................    11
Hon. G.K. Butterfield, a Representative in Congress from the 
  State of North Carolina, opening statement.....................    12
Hon. Jane Harman, a Representative in Congress from the State of 
  California, opening statement..................................    13
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................    13
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................    14

                               Witnesses

Jon Wellinghoff, Chairman, Federal Energy Regulatory Commission..    15
    Prepared statement...........................................    18
David C. Coen, First Vice President, National Association of 
  Regulatory Utility Commissioners on Behalf of NARUC............    26
    Prepared statement...........................................    28
Lauren L. Azar, Commissioner, Wisconsin Public Service Commission    47
    Prepared statement...........................................    50
Paul J. Hibbard, Chairman, Massachusetts Department of Public 
  Utilities......................................................    63
    Prepared statement...........................................    65
Richard Halvey, Energy Program Director, Western Governors' 
  Association....................................................    73
    Prepared statement...........................................    75
Ralph Izzo, Chairman and CEO, Public Service Enterprise Group....   118
    Prepared statement...........................................   121
James Nipper, Senior Vice President, American Public Power 
  Association....................................................   123
    Prepared statement...........................................   126
Glenn English, CEO, National Rural Electric Cooperative 
  Association....................................................   144
    Prepared statement...........................................   147
Reid Detchon, Executive Director, Energy Future Coalition........   155
    Prepared statement...........................................   157
Joseph Welch, President and CEO, ITC Holdings Corporation........   173
    Prepared statement...........................................   175
Chris Miller, President, Piedmont Environmental Council..........   212
    Prepared statement...........................................   214
David Joos, CEO, CMS Energy Corporation..........................   229
    Prepared statement...........................................   231

                           Submitted Material

Letters of June 11, 2009 from FERC to Mr. Markey, submitted by 
  Ms. Baldwin....................................................   251


 THE FUTURE OF THE GRID: PROPOSALS FOR REFORMING NATIONAL TRANSMISSION 
                                 POLICY

                         FRIDAY, JUNE 12, 2009

                  House of Representatives,
            Subcommittee on Energy and Environment,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:24 a.m., in 
Room 2123, Rayburn House Office Building, Hon. Edward J. Markey 
[chairman of the subcommittee] presiding.
    Present: Representatives Markey, Inslee, Butterfield, 
McNerney, Welch, Pallone, Green, Capps, Harman, Baldwin, 
Matheson, Barrow, Waxman (ex officio), Upton, Whitfield, Pitts, 
Scalise and Barton (ex officio).
    Staff Present: Matt Weiner, Legislative Clerk; John 
Jimison, Senior Counsel, Energy; John Beauvais, Counsel; Jeff 
Baran, Counsel; Melissa Bez, Professional Staff Member; 
Mtichell Smiley, Special Assistant; Caren Auchman, 
Communications Associate; Andrea Spring, Minority Professional 
Staff; Mary Neumayr, Minority Counsel; Peter Kielty, Minority 
Legislative Analyst; and Amanda Mertens Campbell, Minority 
Counsel.

OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN 
        CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS

    Mr. Markey. Welcome, ladies and gentlemen, to the 
subcommittee on energy and environment on this very, very 
important hearing on the future of the grid and the proposals 
for reforming the National Transmission Policy. There is no 
more central issue to resolve here than this question.
    Three weeks ago, the Energy and Commerce Committee passed 
the American Clean Energy and Security Act of 2009. This 
landmark legislation on which the House will soon vote will 
revolutionize our Nation's energy policy, creating millions of 
clean energy jobs, saving consumers billions of dollars in 
energy costs, and unleashing trillions in new investment.
    The 21st Century grid will play a central role in this 
revolution. Wheeling the country's vast wind solar and 
geothermal resources to market. Enabling the electrification of 
our transportation system and multiplying energy productivity 
through smart-grid technologies.
    The Waxman-Markey bill recognizes this role by establishing 
a new framework to plan the grid of the future. We task the 
Federal Energy Regulatory Commission with establishing national 
grid planning principles which it will use to support and 
coordinate regional planning processes across the country.
    Within 3 years, the commission must report back to Congress 
on the results of this effort together with recommendations for 
further congressional action if necessary. Some believe we 
should go further by substantially expanding Federal authority 
to plan and site new transmission lines. That includes 
overriding State decisions to reject proposed lines and using 
Federal eminent domain authority if necessary. I think we need 
to look closely and skeptically whether such a step is 
warranted at this juncture.
    I urge caution for three reasons. First, if it ain't broke, 
don't fix it. As several of our witness emphasize, there are a 
number of innovative and promising bottom-up planning processes 
now underway from New England to the Midwest to the West. We 
should give those processes time to succeed.
    Moreover, as Commissioner Azar's testimony emphasizes, one 
of the greatest obstacles to developing the grid of the future 
is not a lack of Federal authority but rather uncertainty as to 
what energy policy that grid must serve. By establishing a 
national renewable electricity standard, a firm cap on carbon 
pollution, and efficiency programs that will dramatically curb 
growth in electricity demand, the Waxman-Markey bill will 
provide this certainty needed to guide private, State and 
regional development of the transmission system of tomorrow.
    Second, look before you leap. Transmission is amongst the 
most complex and controversial aspect of energy policy. Today's 
hearing is literally the first hearing in this committee in 
this Congress or the last Congress on transmission. We cannot 
afford to take a ready-fire-aim approach in this area.
    Further there appears to be little common grounds amongst 
core stakeholders. To give just one example, we invited the 
Edison Electric Institute, which represents investor-owned 
utilities that own most of the Nation's transmission system, to 
testify today. EEI cordially declined, in part because it was 
unable to agree on a witness that could represent the disparate 
views of its membership. The testimony before us confirms that 
it is very tough to find agreement in this area.
    And third, to a man with a hammer, everything looks like a 
nail. Precipitous action could result in a policy that is ill-
suited to address the problems at hand and could lead to 
perverse consequences. For example, the Western Governors' 
Association will testify today that, ``Western Governors see 
little benefit in preempting State transmission line permitting 
processes,'' because, ``the major hurdle for permitting 
transmission in the West has been securing permits from Federal 
agencies.''
    In other words, it is the Federal Government, not the 
States that is the problem from the perspective of the Western 
Governors.
    Several witnesses in the East emphasize that Federal 
planning or siting authority could actually undermine regional 
efforts to developing renewable resources and encourage 
expansion of high carbon generation in the Midwest.
    We need to take time, take a careful look at this and see 
what really makes sense. Today's hearing is an excellent 
beginning to this process. We have a great line up of witness, 
and I look forward to their testimony.
    I would like now to turn to a matter related to the subject 
of today's hearing which has been brought to my attention. 
After I agreed last month to hold an oversight hearing on the 
subject of electricity transmission and the question of whether 
to adopt additional new legislation in this area in addition to 
the regional transmission planning language that is already in 
the Waxman-Markey bill, I directed my staff to obtain 
additional information about two important provisions of the 
2005 Energy Policy Act that also dealt with transmission and 
which are directly relevant to today's hearing.
    As part of that effort, the subcommittee sent two letters 
to the Federal Energy Regulatory Commission. The first letter, 
dated June 3rd, dealt with the impact of the 2005 bill's 
incentive rate provisions on the construction of new 
transmission around the country. That letter was sent out last 
week.
    The second letter, dated June 9th, dealt with the impact of 
2005 bill's repeal of the Public Utility Holding Company Act on 
the construction of new transmission. That letter was sent out 
Tuesday.
    Neither of these letters were related in any way to the 
allocation hearing that the subcommittee held on Tuesday on 
MidAmerican Holding CEO David Sokol's testimony before the 
subcommittee. They were being drafted prior to our even being 
aware that Mr. Sokol would be invited by the minority to be a 
witness at the Tuesday hearing. Both letters were aimed at 
helping the subcommittee better understand the impact of 
previously adopted transmission legislation.
    The PUHCA letter contained 8 questions, two of which 
reference Mr. Sokol's earlier testimony before Congress in 
support of PUHCA repeal. Mr. Sokol was one of the leading 
proponents of repealing PUHCA, which is why his prior testimony 
was relevant to the issue.
    However, these questions were in no way seeking to target 
Mr. Sokol or to intimidate him in any way for his appearance 
before the subcommittee earlier this week.
    The day following the release of the PUHCA letter, I heard 
from Representative Barton that minority members of the 
subcommittee had concerns about the questions relating to Mr. 
Sokol and the timing of the letter's release. In response to 
those concerns, I made it clear that there was no attempt or 
intent to intimidate any witness.
    In addition, to make it absolutely clear that this was the 
case, I sent a second letter to FERC clarifying that the FERC 
should respond to the subcommittee's questions generically and 
not just look at MidAmerican specifically.
    I shared a draft of that letter with Mr. Barton's staff and 
Mr. Terry's staff on Wednesday night immediately after they 
brought this issue to my attention. I responded immediately to 
their concerns.
    And finally, I reached out to Mr. Sokol to inform him of 
what my intent was, to clear up the misunderstanding, and to 
make it absolutely clear that neither he nor his company are 
the focus of the subcommittee's inquiry.
    So I want to say to Mr. Barton, to Mr. Upton and to the 
members on the other side of the aisle publicly what I have 
already said to them privately, that I would never seek to 
intimidate or retaliate against a person from having to come in 
and testify before this subcommittee. I value hearing the 
perspectives that all of our witnesses bring to the issues that 
we are considering.
    I regret any misunderstanding or misimpressions that the 
contents of the letter or its timing may have raised. That is 
why I immediately after learning of the minority's concerns 
prepared a second letter to the FERC to direct them to respond 
generically to the questions rather than focusing on 
MidAmerican. That is also why I contacted Mr. Sokol directly, 
to let him know of my intentions and to express my apologies, 
which I have done.
    Joe and Fred and the other members, I just want to let you 
know that I have the personal greatest regard for you and that 
in no way do I want to leave any impression at any time that we 
would conduct hearings that were not fair and open to all of 
the members of this subcommittee or to the witnesses who appear 
before this committee. And I just want to make that very clear, 
very publicly at this hearing.
    I now turn to recognize the ranking member of the 
subcommittee the gentleman from Michigan, Mr. Upton.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Thank you, Mr. Chairman.
    And I, like many members on this side, do value your 
friendship.
    I realize we are adversaries, good adversaries, on a number 
of fronts, and we have been together on a number of fronts.
    And I know, as we have talked about this privately that it 
is very important that there is no intention to intimidate or 
pressure witnesses to testify in something that they perhaps 
don't believe in. And I for one appreciate your statement this 
morning.
    I also appreciate you calling for the hearing today on 
National Transmission Policy. The electricity grid is of vital 
importance to our Nation. We all know that.
    However, it is an area that is often overlooked, as 
evidenced by the fact that there were only minor mention of 
transmission in the Waxman-Markey climate bill and the fact 
that today, weeks after the climate bill has been passed out of 
committee, we are having our first really big transmission 
hearing.
    We do have a long and distinguished panel today. I would 
like to thank all of our witness for joining us.
    I would like to give special recognition to the heads of 
two Michigan-based companies, Dave Joos and Joe Welch. I know 
that ITC and CMS do not exactly see eye to eye on this issue, 
but I know that they have Michigan's interest at heart. And I 
would hope that we could all work together on this issue as we 
move forward.
    This committee passed a sizable renewable electricity 
mandate without any consideration to the question of getting 
the renewable electricity to population centers. The strongest 
winds are concentrated in low population areas. The strongest 
sun exposure is found in low population areas as well. Existing 
transmission lines are centered in areas of high population, 
and there are inadequate high voltage lines to the areas with 
the most abundant sources of renewable power.
    If we are going to be serious about renewable power, we 
have to revamp the grid. And to properly do so, we will have to 
block the lawsuits from environmental groups that have 
increased costs and blocked much-needed transparency lines.
    But let's put it in perspective. According to DOE, it would 
cost $60 billion, yes B as in big, in new transmission lines to 
reach the 20 percent mark for wind power. Al Gore's lofty goal 
of fossil fuel electricity would cost perhaps as much as $400 
billion in transmission lines. And if we are serious, we must 
block the lawsuits and make real investments in the needed 
infrastructure.
    A good example of these lawsuits is found in California. 
The proposed Sunrise Powerlink in southern California will 
connect the region to existing and proposed renewable energy 
sources, whether they be wind, solar or geothermal, located 
east of San Diego. Energy experts estimate that there is 
perhaps as much as 2000 megawatts of geothermal power and tens 
of thousands of megawatts in solar available in the area. 
However, without new power lines, the clean, green energy could 
not be delivered to its customers.
    Studies show that the line will reduce greenhouse gas 
emissions by as much as 1.3 million tons. Yet various 
environmental groups, like the Sierra Club, are fighting it, 
well documented in publications like the Wall Street Journal. 
The areas that are best for wind, power and solar are often in 
these very remote areas, away from population centers.
    Transmission lines are needed to get electricity from wind 
and solar farms to consumers. And I feel it is a mistake to 
legislate a costly renewable mandate without addressing the 
transmission issue.
    With all of that said, we must also recognize that many 
renewable energy sources are unreliable and can bring 
instability to the grid. Transmission lines cannot distinguish 
between the green electrons or the brown ones. So we just can't 
be planning a transmission system for renewables. We have to 
take all sources into account, wind solar, nuclear, hydro, 
coal, clean coal and everything else. Changes need to be made 
to the current regulatory system. FERC can provide a backstop, 
but we not completely abandon the State and local process.
    We must also be mindful of the cost. Renewable power is not 
free. Transmission lines are not free.
    Consumers deserve to know what the real costs are of any 
policy and understand exactly what they are going to pay for 
and what they are getting for their hard-earned money. 
Consumers will already be saddled with rate increases, and 
these costs will only go up under the Waxman-Markey bill. 
Transmission policy shouldn't add to those burdens.
    I yield back.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Washington State, 
Mr. Inslee.

   OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mr. Inslee. Thank you, Mr. Chair, and thanks both for 
holding this hearing and your great work in assembling the 
Waxman-Markey bill.
    I think that bill is tremendous mosaic of using multiple 
tools to solve our energy problems. But it really is missing 
one critical piece, and that is the piece that will help us 
spur the development truly of a 21st Century national grid. And 
I think we have to recognize that today, despite tremendous 
efforts of people in this field, we have a grid fit for the 
19th or 20th Century, but not for the new challenges of the new 
American energy policy.
    And the way I would categorize that new challenge is that 
we used to be able to move our energy components around by 
truck and rail. We could move coal to the site we wanted to 
generate electricity. We could move natural gas to the site 
where we wanted to generate electricity or heat, but we cannot 
ship photons on rail cars, nor can we ship wind by packages by 
truck. They have to be generated--the electricity has to be 
generated in fact where they are located.
    Our existing policy on the grid is satisfactory for the 
first scenario but not the second. So I have now been at this 
for some time hoping to advance our ability to plan, site and 
finance a new grid system that is fit for the 21st Century. I 
have introduced H.R. 4059 and made some progress in the bill 
and hope to make further progress in the hopes to achieve this 
goal in this energy bill.
    I want to make note of several things. Number one, our grid 
system is doing good work today. I am not sure you could say 
the grid is broken, but you can have a horse-and-buggy system 
that is working but not fit for today's new world. And we know 
that it will not be fit for the challenges of tomorrow. So 
while it may not be broken, it is certainly not fit for what we 
are now asking it to do. And it is my belief that if we are 
going to meet our appropriate and necessary 15 percent 
renewable energy goal, we will need to allow transmission to 
move forward.
    Second, I would point out that the reason we are here today 
and the reason we need to act today is that this is the only 
vehicle moving out of town, and it will be the last chance and 
only chance to really move forward on this effort, and we can't 
move forward with a renewable electrical standard without a 
transmission piece.
    So I think Lincoln's old quote fits, as our case is new, so 
should we think anew. And thinking anew means Federal backstop 
authority in the event that regional governments are unable to 
site these necessary facilities. And the reason national 
backstop authority is necessary is twofold.
    Number one, our grid has always been designed to respond to 
local and regional interests, but with the challenges of global 
warming and national security needs, we have a national need 
for a national grid.
    And second, we know that, while all of our constituents 
love electricity, virtually none of them love electrical lines. 
There is a time and a place where Uncle Sam needs to step in to 
overcome at times the reluctance of all of us to bear with some 
of the onerous aspects of moving electricity. It is simply 
necessary, and we know we cannot wait decades to move these 
electrons.
    I am excited about hearing the testimony.
    Mr. Chair, thank you, and I hope we get this job done in 
this bill. Thank you.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Kentucky, Mr. 
Whitfield--I am sorry, the ranking member of the full committee 
the gentleman from Texas, Mr. Barton.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Chairman.
    Since we have an oversight hearing on upstairs, it helps me 
if I could give my statement.
    I am going to give a double statement, kind of a bifurcated 
statement. I will talk a little bit about this hearing and then 
I want to comment on your personal comments, because I think we 
need to elaborate on that a little bit.
    But first, on the hearing before us, it is a scary thing 
when I agree with Jay Inslee, but I do agree with Congressman 
Inslee. His amendment in the committee on the climate change 
bill was directed, as I recall, towards green energy or clean 
energy for transmission. But once you have generated that 
electricity, whether it is by wind, solar or even coal power, 
electricity is electricity, and it is going to go on the same 
wires. And the wires don't know what the source of the 
generation was.
    So we do need to update our transmission grid. We started 
that in the Energy Policy Act of 2005. And I thought we had 
bipartisan support, and it became law. The Fourth Circuit has 
ruled recently that parts of EPAct are not as they should be. I 
disagree with that court ruling, and I hope that the Supreme 
Court will overturn it.
    But in any event, I agree with Congressman Inslee that we 
do need to modernize our grid. We do need to give FERC more 
authority, in my opinion, to make decisions in interstate 
commerce when the States can't do it themselves. We tried to do 
that in EPAct. If that is not the right way to do it, perhaps 
we can try it a little bit different way.
    In the Natural Gas Act, we give the right of eminent domain 
to the FERC. Now, I don't know that we need to go that far for 
electricity transmission. There is, in all probability, a 
middle ground where the States and the FERC can work together.
    But in any event, Mr. Chairman, this is a good hearing, and 
hopefully out of this will come some consensus on both sides of 
the aisle about what to do legislatively.
    Now let me comment on what you said, Mr. Chairman Markey, 
when you were talking about the letter of June the 9th and the 
comments towards the CEO of MidAmerican, David Sokol.
    First of all, I am very appreciative of what you have said, 
that it was not intended to intimidate Mr. Sokol and that you 
have called him and taken steps to make sure that to correct 
what you say was a misunderstanding. To say that publicly means 
a lot, and I appreciate you doing that.
    But let me elaborate on why people like myself have 
expressed concerns. You can't make the best public policy if 
you don't have witnesses come before this committee and give 
their full honest assessment of whatever the issue is that is 
before this committee.
    If we adopt a standard that the only witnesses that are 
going to be received are witnesses that testify to the side of 
the question that the majority is supporting, you don't really 
have a full and fair debate on the issue.
    And in the instance that you alluded to, David Sokol 
represented a point of view that was contrary to the majority's 
position on the climate change legislation and the allocation 
system that is a part of that, the allowance system. That is a 
side that needs to be presented to the American people.
    Now it may be serendipity, and it may be inadvertent, but 
within 2 hours of him giving that testimony, a letter was sent 
under your signature to the chairman of the Federal Energy 
Regulatory Commission, who is sitting before us today, asking 
six generic questions and two specific questions about David 
Sokol and his company.
    And the chairman of the FERC was asked to respond in 
writing to you by close of business yesterday. How can that not 
be perceived as an attempt to intimidate? Testified in the 
morning adverse to the position of the majority, received a 
letter that was sent in the afternoon to the chairman of the 
regulatory commission with jurisdiction over your industry and 
your company asking probing questions about the conduct and 
business decisions of your company.
    Now, I take you at your word when you say that that was not 
intended and you are beginning to take steps to correct it, but 
what upsets myself and the others on the minority is that we do 
not accept that we can develop the mechanism where we allow any 
Member, majority or minority, to threaten, to intimidate, to 
abuse the power of the office that we are given by the people 
of our congressional districts on behalf of the people of the 
United States of America.
    Now you are already taking steps to correct the perception 
that perhaps intimidation was being attempted, and I commend 
you for that. You are going to get a letter from myself and Mr. 
Upton and other members on the minority later today asking that 
we consider those discussions to make sure that we make it 
absolutely clear that any citizen of this country that comes 
before this committee can testify to whatever they believe is 
the truth as they know it without fear of intimidation or 
retribution.
    And I think Members on both sides of the aisle will share 
that goal. If we are absolutely certain that that is the way it 
is going to be, then nothing else will be said.
    But again, you and I have been friends for 25 years, and I 
hope we are going to be friends for another 25 if we both live 
that long. I have nothing but the upmost personal and 
professional respect for you and your conduct. And I am honored 
to sit on the same committee as you. I have sat in that chair 
as chairman of this subcommittee, so I think we can get this 
worked out. But it is a serious issue, and it deserves serious 
consideration. And to your credit, you are giving it that 
serious consideration.
    With that, Mr. Chairman, I yield back.
    Mr. Markey. I thank the gentleman very much. And I thank 
the gentleman for his words.
    The Chair now turns and recognizes the gentleman from 
California, Mr. McNerney.
    Mr. McNerney. Thank you, Mr. Chairman.
    I want to thank you for holding this hearing. This is a 
complex and difficult issue. I want to thank the panel for 
appearing this morning, in particular the chairman of the FERC. 
I had the opportunity to visit the FERC this week, and it was a 
good, worthwhile use of my time.
    This issue is complex and difficult, as I just said. It has 
economic challenges, technical challenges and political 
challenges. And I believe the outcome will be best if we do our 
homework, consider the challenges and devise a rational and 
bipartisan plan. So thank you for appearing, and I look forward 
to your testimony. I hope I can stay most of the time this 
morning.
    And with that, I yield back.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognize the gentleman from Kentucky, Mr. 
Whitfield.
    Mr. Whitfield. Thank you, Mr. Chairman.
    We look forward to this hearing today and welcome the 
witnesses, and we look forward to their testimony.
    I just want to make a couple of points. If the advocates 
for a renewable energy mandate are successful, there is going 
to be large portions of the Midwest that do not have solar, do 
not have wind power sufficient to meet their needs. It is going 
to be extremely difficult for them to meet this 20 percent 
renewable mandate without some Federal involvement regarding 
the siting, financing and the building of additional 
transmission lines.
    And particularly when you consider the Department of 
Energy's 20 percent wind energy by 2030, saying that they are 
going to have to build at least 12,000 miles of new 
transmission lines to meet that need and then on top of that, 
when you consider this recent Fourth Circuit Court of Appeals 
decision that Ranking Member Barton mentioned which does make 
it more difficult for FERC to operate in this area, I do think 
we have some significant issues. And I hope this hearing can 
help us resolve those.
    I yield back the balance of my time.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentlelady from Wisconsin, Ms. 
Baldwin for an opening statement.

 OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF WISCONSIN

    Ms. Baldwin. Thank you, Mr. Chairman.
    Transmission is critical to our Nation's electrical system. 
And I certainly support grid expansion.
    I have significant concerns however about many of the 
recent Federal proposals that jeopardize State and regional 
efforts to develop the transmission grid. Specifically these 
efforts ignore progress and may actually slow investments being 
made in States like Wisconsin and other in the Midwest.
    Over the last 7 years my home State of Wisconsin, the 
Wisconsin ratepayers have supported more than $2 billion in 
investments in our transmission system. These actions have and 
will continue to improve reliability and increase the flow of 
renewable energy in Wisconsin and our neighboring States.
    Congress must ensure that we are not undermining the 
existing processes if we are going to venture into the 
transmission arena, especially when sensitivities already exist 
to State authority, cost allocation, safety and eminent domain 
issues.
    As we examine these issues there are some questions and 
challenges that we must keep in mind. Who is going to pay for 
this? Will those not receiving the benefits of transmission 
have to pay for cost of lines traversing this country?
    I am hearing strong concerns about the designing our 
transmission system for one specific purpose. It is not the 
just of transmission planners or transmission companies to 
choose the types of generation that may interconnect with the 
transmission system. Transmission is needed, plain and simple, 
regardless of the type of generation.
    Where I come from, transmission is a sensitive subject. It 
will be very difficult to convince Wisconsinites and other 
Americans that in the name of national interest, the Federal 
Government is taking their property to essentially stretch an 
extension cord across it to power a larger urban area many, 
many miles away. So what will this process be like for public 
input if it is a Federally directed process?
    While the siting of underground transmission lines may be 
easier than that of above-ground lines, the costs are 
significantly increased, perhaps as much as $3 million per 
mile. So mandating technologies on States and regions has 
significant ramifications.
    Again I share the goal of ensuring that critical new 
investments are made in our transmission system, but we must 
proceed with caution, not undermining existing efforts that are 
already working in this process.
    Thank you, Mr. Chairman. I yield back.
    Mr. Markey. The gentlelady's time has expired.
    The Chair recognizes the gentleman from Pennsylvania, Mr. 
Pitts.

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Pitts. Thank you, Mr. Chairman.
    Thank you for holding this hearing on our National 
Transmission Policy.
    The official report on the 2003 Northeastern Blackout 
concluded that, ``As evidenced by the absence of major 
transmission projects undertaken in North America over the past 
10 to 15 years, utilities have found ways to increase the 
utilization of their existing facilities to meet increasing 
demands without adding significant high-voltage equipment.''
    Clearly there is a significant need for an increase in 
transmission capacity. This need is amplified as we consider 
adding more and more renewable energy to the grid. And while I 
am fully supportive of adding more transmission capacity, I 
believe we do need to keep in mind legitimate desires of 
localities to preserve green spaces and historic sites.
    My district includes some of the most pristine historic 
landscapes in the Mid-Atlantic. My district also has some of 
the most productive farm land in the United States. Chester 
County, the home of Valley Forge and the Brandywine Valley 
where I come from is one of William Penn's original three 
counties.
    The tradition of preserving land and being good stewards of 
the earth have been passed down from generation to generation. 
We are not against progress, but we want to protect our 
heritage and be wise about how we use and develop the land we 
have.
    Having the needed energy to turn on lights and heat water 
is critically important to the quality of life of every 
American. However, the preservation of our historic resources 
and natural environment of people's communities contributes to 
our quality of life as well. We need to ensure that all 
stakeholders are included in deciding where and when 
transmission lines are sited.
    Dialogue and compromise are key in this issue. Indeed, it 
is critical to strike a delicate balance between the crucial 
electricity needs of the country while at the same time 
maintaining the historic open space areas that make our country 
beautiful and unique. As this committee continues to consider 
this issue, I hope that we hear from all affected parties and 
work towards viable solutions.
    Mr. Chairman, I am grateful for the opportunity to discuss 
this issue. And it is my hope that today's hearing is only one 
in a series of hearings on this issue to ensure a robust and 
well rounded approach to our National Transmission Policy.
    And I look forward to hearing from our witnesses, and I 
yield back.
    Mr. Markey. Great, I thank the gentleman.
    The Chair recognizes the gentleman from Vermont, Mr. Welch.
    Mr. Welch. Thank you, Mr. Chairman.
    I actually want to get my microphone to work here.
    I am proud that we have here today as one of our witnesses, 
David Coen. David is a member of the Public Service Board in 
Vermont, serving on his third term. And he has been appointed 
by Republican and Democratic Governors alike. He has done a 
tremendous job. He is now the vice president of the National 
Association of Regulatory Utility Commissioners.
    David is acutely sensitive to the particular needs of rural 
utilities. We are a small State, but this issue of transmission 
is incredibly important to us as it is all around.
    So I want to welcome him and thank you, Mr. Chairman for 
inviting David to be here and add to the testimony. Thank you.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from Louisiana, Mr. 
Scalise.

 OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF LOUISIANA

    Mr. Scalise. Thank you, Mr. Chairman.
    Renewable energies will play an important role in the 
future of our national energy policy, and I support the 
development of renewable sources of energy. As a matter of 
fact, Republicans have drafted legislation, the American Energy 
Act, which will invest heavily in the development of renewable 
sources of energy.
    As we explore the advancement and promotion of energy 
sources like wind similar and hydro, and as the Congress and 
this administration discuss the future of our national grid and 
its capacity, we must not neglect that many of these renewable 
sources of energy are intermittent and need to be backed up by 
other sources of energy. And we would be remiss if we do not 
emphasize diverse the importance of diversifying our energy 
portfolio in ensuring that nuclear power is part of any 
comprehensive policy we discuss.
    Wind and solar power still need to overcome fundamental 
obstacles and we cannot today exclusively rely on these sources 
of energy alone to power our Nation. When the wind stops 
blowing and the sun stops shining, our hospitals that care for 
our families and schools that teach our children must continue 
to have reliable sources of energy that ensure that the life-
saving equipment and the lights stay on.
    Transmission infrastructure, planning, and siting policies 
are all important to this conversation as is the regulatory 
framework that will surround these policies. I believe it is 
also important for the Congress to carefully weigh regional 
considerations as we further discuss this issue.
    I look forward to today's hearing, and I yield back.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from North Carolina, Mr. 
Butterfield.

OPENING STATEMENT OF HON. G.K. BUTTERFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE STATE OF NORTH CAROLINA

    Mr. Butterfield. Thank you very much, Mr. Chairman.
    I will move one seat down so I can have the benefit of this 
microphone.
    Thank you for convening this hearing. I particularly want 
to thank the five witnesses who have come forward today to make 
their testimonies available.
    It goes without saying, Mr. Chairman, that I support the 
expanding of the grid using 21st Century technology. We 
certainly must do that.
    Waxman-Markey takes dramatic steps to further the growth of 
renewable electric generation. The nationwide RES standard 
demands use of those sources, and the price signals sent from a 
carbon cap will further the use of clean fuels.
    As we move forward, Mr. Chairman, we must focus on 
developing policies that ensure electricity generated from 
these new sources gets to the load centers that demand them. 
And this means we must address the deficiencies in our 
transmission grid that will delay us from reaching our full, 
renewable generation potential or hamper grid efficiency.
    There are a number of challenges to improving transmission, 
but siting will be particularly difficult to overcome. 
Balancing the Federal and State and regional and regional and 
local stakeholder needs and interests will be difficult but 
critical to the completion of a modernized grid. Comprehensive 
planning, cost allocation and ownership will also present 
challenges, as we have heard today. I applaud the collaborative 
nature of this subcommittee and look forward to discussing the 
issue further.
    I yield back.
    Mr. Markey. I thank the gentleman.
    The Chair recognizes the gentlelady from California, Ms. 
Harman.

  OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Harman. Thank you, Mr. Chairman, we are debating on the 
floor a bill to have the FDA regulate tobacco, and I have to 
say it is a long time in coming, and I am absolutely thrilled 
that we will finally, I believe, pass it, and it will become 
law very soon.
    So while I am celebrating about that, I am thinking about 
another hard issue, this one, which require all of us to step 
up and think about some risky strategies to make certain that 
the promise of renewable energy and the absolute need for 
transmission of electricity throughout the country can be 
accomplished. I think anything we do in this committee will 
make us a few friends and make us a few enemies. And that 
applies to us regardless of which party we are in and which 
region we are from.
    But I think we have to step up, as many people finally have 
stepped up in both parties to the need to regulate tobacco.
    I just want to point out some of the obstacles. The U.S. 
electric transmission system encompasses about 167,000 miles of 
high voltage transmission lines and another 300,000 miles of 
lower voltage lines. The grid is operated by approximately 130 
balancing authorities, which are typically utilities that own 
transition systems and operate control centers to monitor and 
control the grid.
    Those transmission systems are owned by several hundred 
private and public entities, so let's just start with that. It 
is incredibly complex. And if we don't get a handle on that and 
don't step up to the tough decisions, we won't solve the 
problem.
    But I would close by saying that if we really want 
renewable energy in this country, we really have to fix the 
grid.
    Thank you, Mr. Chairman.
    Mr. Markey. The gentlelady's time has expired.
    The Chair recognizes the gentleman from Texas, Mr. Green.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman, and I have a full 
statement I would like to place into the record.
    And just a little history, in the 2005 Energy Act, we 
actually provided for the Federal transmission corridors that 
are so needed. And like my colleagues, some of my colleagues, 
have said, we disagree with the court decision.
    Hopefully it will be overturned by the Supreme Court, but 
there are things that we can do that may help, Mr. Chairman.
    I appreciate both Mr. Inslee's legislation and to expand 
and have a national grid. We know that, and it can't be just 
limited to renewables because those electricity protons don't 
decide where they come from; they just go down those lines, so 
that is why I am happy to be part of the hearing. And, again, I 
would like my full statement to be placed in the record, and 
again, I support our effort to expand the national grid.
    I have a huge transmission corridor right behind my 
neighborhood, and I guess, in Texas, we don't have any problem 
with pipelines or transmission grids because our PUC just 
approved $5 billion for the renewable fuel electricity to come 
from west Texas to our urban market.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Mr. Markey. The gentleman's time has expired.
    The Chair recognizes the gentleman from New Jersey, Mr. 
Pallone.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Mr. Chairman.
    I want to first thank you for all that you have done on 
this issue. I mean, I know it has been so many years, and we 
finally passed a bill out of committee, and I know that we will 
pass it on the floor and send it to the President eventually.
    I wanted to point out that Ralph Izzo, chairman and CEO of 
the Public Service Enterprise Group, a New Jersey based energy 
company will be testifying on today's second panel. And under 
Ralph's leadership, PSE&G has been a leader in renewable energy 
investments throughout the State of New Jersey.
    Today the committee will address policy proposals for 
transmission planning, cost allocation and siting authority. A 
strong transmission grid is essential to ensure energy 
reliability and to move clean, renewable energy from remote 
locations to population centers.
    I think we can all agree that planning and investing in a 
reliable grid is a national priority. With that said, we need 
to be very careful how we craft any National Transmission 
Policy. Too main areas of concern for the northeast and 
specifically for New Jersey are how to site new transmission 
lines and how to pay for those new lines.
    It is critical that States like New Jersey have authority 
over the siting of new transmission lines that would run 
through the State. Giving FERC greater authority to site high-
voltage electric transmission lines will generate widespread 
local opposition. Any new transmission legislation must give 
States adequate authority over siting to ensure that States can 
protect properly the environment and cultural and historical 
sites.
    Another issue that will affect my State is cost 
allocations, specifically how do we craft legislation that 
encourages investment in new transmission lines to move 
renewable energy, such as wind, to population centers? I 
believe we should think regionally. New Jersey has tremendous 
potential to meet our renewable energy goals through solar and 
offshore wind. It does not make sense for New Jersey ratepayers 
to subsidize the cost of moving wind from the Midwest to the 
East Coast, a cost of $10 million per mile. This could slow 
development of alternatives closer to home.
    I believe the transmission provisions passed in the 
American Clean Energy and Security Act provide a balanced 
approach that respects regional differences and local concerns. 
Before we pass comprehensive transmission legislation, we must 
consider how it will affect the economies of local renewable 
energy projects and whether it provides adequate siting 
authority for the States.
    Again thank you, again, Mr. Chairman.
    Mr. Markey. I thank the gentleman very much.
    The Chair recognizes the gentleman from Georgia, Mr. 
Barrow.
    Mr. Barrow. I waive.
    Mr. Markey. The gentleman's waives his opening statement.
    All time for opening statements has been completed.
    We will now turn to our very distinguished panel.

    STATEMENTS OF JON WELLINGHOFF, CHAIRMAN, FEDERAL ENERGY 
  REGULATORY COMMISSION; DAVID C. COEN, FIRST VICE PRESIDENT, 
  NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS ON 
BEHALF OF NARUC; LAUREN L. AZAR, COMMISSIONER, WISCONSIN PUBLIC 
 SERVICE COMMISSION; PAUL J. HIBBARD, CHAIRMAN, MASSACHUSETTS 
  DEPARTMENT OF PUBLIC UTILITIES; AND RICHARD HALVEY, ENERGY 
        PROGRAM DIRECTOR, WESTERN GOVERNORS' ASSOCIATION

    Mr. Markey. And our first witness, who is John Wellinghoff. 
He is the chairman of the Federal Energy Regulatory Commission, 
which oversees wholesale electric transactions and interstate 
electric transmission and gas transportation in the United 
States. He is also cochair of the Demand Response Collaborative 
launched jointly by FERC and the National Association of 
Regulatory Utility Commissioners.
    We thank you so much for being here in your first 
appearance before our committee.
    We welcome you, sir. Whenever you are ready, please begin.

                  STATEMENT OF JON WELLINGHOFF

    Mr. Wellinghoff. Good morning, Mr. Chairman.
    Mr. Markey. Could you push the mike a little closer and 
turn it on?
    Mr. Wellinghoff. Thank you Mr. Chairman, Ranking Member 
Upton, and members of the subcommittee.
    First, I have two quick preliminary issues. One is I would 
like to recognize and thank my colleague, commissioner Phil 
Moeller who is here with me today, and I would also like to 
request that my full pre-file testimony be placed in the 
record.
    Mr. Markey. Without objection, so ordered.
    Mr. Wellinghoff. The following is a summary of that 
testimony.
    I appreciate the opportunity to appear before you today to 
discuss our Nation's electric transmission grid.
    Mr. Chairman, your invitation for this hearing envisions, 
``A transmission system that will serve the goals of 
substantially reducing greenhouse gas emissions, developing 
renewable energy resources and improving energy efficiency 
while preserving or enhancing reliability.''
    A transmission system that meets the goals you have 
articulated will result from a strong and smart electric grid 
that can assist in promoting field diversity, reducing 
greenhouse gas emissions, strengthening our national security, 
revitalizing our economy, enhancing competition and ensuring 
reliability. Such a reliable and robust transmission grid is 
essential to allows regions, States and our Nation to meet 
these goals.
    The commission has taken a number of important steps in 
recent years to promote the development of such a transmission 
system. For example, in February of 2007, the commission issued 
Order 890, which among other things required open, transparent, 
and coordinated regional planning; required evaluation in that 
planning of demand resources on a comparable basis to other 
resources.
    The commission also approved an initiative proposal from 
the California independent system operator to better allocate 
costs of facilities needed to interconnect location constrain 
resources, such as wind and solar, to the transmission grid.
    Nonetheless, I believe there are gaps in the commission's 
statutory authority. The absence of an adequate regulatory 
framework is the principal obstacle to developing the 
transmission system to support the goals have you outlined.
    If we are to overcome that obstacle, we need a national 
policy commitment to develop such a transmission system. In 
developing that policy, Congress should consider three closely 
related issues: planning, siting and cost allocation.
    First, the scope of existing regional planning initiatives 
needs to be expanded. To achieve greater benefits and 
efficiencies, we must create a structure that includes 
coordination on an interregional basis. Such coordination will 
facilitate, for example, the development of facilities, 
transport power from areas rich in renewable energy resources 
to load centers, as well as the deployment of distributed 
resources and key smart-grid equipment and systems.
    Second, States should continue to have the opportunity to 
site transmission facilities, but transmission developers 
should have recourse to the commission as a Federal siting 
authority under appropriate circumstances. Federal siting 
authority would be helpful, even if limited only to 
transmission facilities needed to reliably meet renewable 
energy goals.
    Third, if Congress determines there are broad public-
interest benefits in developing the transmission system 
necessary to meet the goals discussed, then Congress should 
consider clarifying the commission's authority to allocate 
costs of such infrastructure to the load-serving entities 
within an interconnection or part of an interconnection where 
it is appropriate to do so. Of course, the commission would 
need to ensure, as it does today, that these costs are 
allocated fairly to the appropriate entities and that due 
deference is accorded regions that work together to develop 
cost-allocation mechanisms that garner broad support.
    Finally, it is important to recognize the issue is not how 
to choose between nearby renewable or more distant renewable 
resources. Both should be part of the mix of energy resources 
to achieve our national goals. And appropriately allocating the 
costs of transmission facilities needed to connect remote 
resources should not disrupt the implementation of State 
policies or disadvantage local renewable or other distributed 
resources.
    Rather, full planning analysis that reveals respective 
costs of alternative resource scenarios and a fair cost 
allocation of necessary transmission to reliably deliver those 
resources to loads will eliminate a barrier to the development 
of new clean resources and thus will facilitate competition. 
Such a measured approach should inform consumers of the least-
cost sustainable resources options to meet State and national 
environmental, economic and security objectives. And enacting a 
regulatory structure that enables such an approach to be 
implemented will ensure our national energy goals can be 
achieved.
    Thank you, again, for the opportunity to appear before you, 
and I would be happy to answer questions that you may have.
    [The prepared statement of Mr. Wellinghoff follows:]

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    Mr. Markey. Thank you, Mr. Wellinghoff, very much.
    Our next witness is David Coen. He is the first vice 
president of the National Association of Regulatory Utility 
Commissioners. Mr. Coen has also served as a member of the 
Vermont Public Service Board since 1995 and has continued. He 
has served in a variety of regional and national leadership 
positions, including the Chair of the Consumer Affairs 
Committee of the New England Conference of Public Utility 
Commissioners.
    We welcome you, sir. Whenever you are ready, please begin.

                   STATEMENT OF DAVID C. COEN

    Mr. Coen. Good morning, Chairman Markey, Ranking Member 
Upton and members of the subcommittee. My name is David Coen. I 
am a member of the Vermont Public Service Board. I also serve 
as the first Vice President of the National Association of 
Regulatory Utility Commissioners, also known as NARUC.
    I am honored to have this opportunity to appear before you 
this morning and offer a State perspective on transmission. In 
addition, I would like to thank Representative Welch for his 
kind introduction and his service to our State. He is certainly 
my favorite Congressman from Vermont.
    At the State level, we deal with transmission planning and 
siting requests regularly. And I can tell you that the issues 
and concerns are not policy or procedural, but multifaceted and 
do not lend themselves to a one-size-fits-all solution.
    State commissioners are obligated to act deliberately to 
ensure that any new projects will benefit the public. This 
means regulators must determine whether a demand response, 
energy efficiency or perhaps a local renewable energy source is 
more appropriate than putting steel transmission towers in the 
ground.
    A major impediment to siting energy infrastructure is the 
great difficulty in getting public acceptance. As a country, we 
want our electricity to be affordable, reliable and 
increasingly clean. But we also want to ensure that 
transmission infrastructure does not impact our quality of 
life.
    Public hearings on transmission lines are always packed 
with concerned ratepayers and landowners with nearly all of 
them in opposition to the project. I can assure you that no 
level of Federal involvement will make this go away. Still, the 
State and local level provides an important venue for all 
parties to be heard. State regulators know the geography and 
citizenry better than any Federal agency can. Our processes are 
transparent and give all parties a voice. What some interests 
may consider roadblocks or impediments we consider due process.
    Let me say a few words about what we are doing in Vermont. 
Vermont has a transmission planning process that analyzes 
potential transmission constraints over a 20-year horizon and 
considers various alternatives, including distributor 
generation and targeted energy efficiency programs that would 
address any identified reliability issues. The process ensures 
that solutions to transmission constraints serve the long-term 
needs of consumers at the lowest cost.
    After decades without any major transmission investment, 
the public service board has approved three major transmission 
projects from 2005 through 2008, with total projected capital 
investment over half a billion dollars. At the regional level, 
these decades without any major transmission investment, nearly 
$4 billion of transmission infrastructure has been placed in 
servicing New England since 2002.
    Despite the activity on the State and regional level, there 
is momentum in Congress to provide the Federal Government with 
broader transmission authority, although we are just 4 years 
removed from the enactment of the Energy Policy Act of 2005. 
EPAct gave the Federal Energy Regulatory Commission 
``backstop'' siting authority in specific areas designated by 
the Department of Energy. Not enough time has passed to 
determine whether this law needs to be revisited, but the 
Congress is addressing this issue nevertheless.
    NARUC recently updated our transmission policy in 
anticipation of Federal action. We believe that a bottom-up 
State- and regional-driven approach is the most appropriate 
model going forward, while we are not convinced that the case 
has been made for expanded Federal authority.
    If Congress chooses to act, we recommend the following 
principles:
    Any such additional authority granted to FERC by the 
legislation allow for primary siting jurisdiction by the States 
and provide the FERC's backstop siting authority be as limited 
as possible;
    In no event should FERC be granted any additional authority 
over the siting or construction of new interstate transmission 
lines;
    In no event should FERC be granted any additional authority 
to approve a new interstate transmission line that is not 
consistent with a regional transmission plan developed in 
coordination with affected State commissions or other siting 
authorities or regional planning groups;
    In no event should FERC be granted any additional authority 
to approve a new interstate transmission line unless there is 
already in place either a cost allocation agreement among all 
the States through which the proposed project will pass 
governing how the project will be financed and paid for, or a 
FERC-approved cost allocation rule that covers the entire route 
of the proposed project;
    In no event should any legislation allow FERC to preempt 
State authority over retail rate-making, the mitigation of 
local environmental impacts under State authority, the 
interconnections to distribution facilities, the siting of 
generation or the participation by affected stakeholders in 
State and/or regional planning processes; and
    In no event should any legislation preempt existing State 
authority to regulate bundled retail transmission services.
    In conclusion, the electric transmission system must have 
the capacity to meet the growing energy needs of the Nation 
regardless of the generation source. The solutions to the 
challenges will not come quickly or easily and will require the 
cooperation of all stakeholders including State and Federal 
governments.
    Thank you and I look forward to your questioning.
    Mr. Markey. We thank you very much.
    [The prepared statement of Mr. Coen follows:]

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    Mr. Markey. I am now going to turn to Congresswoman Baldwin 
to introduce our next witness.
    Ms. Baldwin. Thank you, Mr. Chairman.
    I am pleased to welcome a very special constituent to our 
hearing today. In 2007, Governor Jim Doyle appointed Lauren 
Azar to the Wisconsin Public Service Commission. As a 
commissioner, she has played a leading role in confronting the 
challenges associated with transmission development. Just 
yesterday the Wisconsin PSC sited a very significant 
transmission line.
    Lauren also serves as President of the organization of MISO 
States where she is leading a regional planning and cost 
allocation effort for developing electrical transmission over 
the Midwest ISO region, which includes 13 States and one 
Canadian Province.
    Prior to her appointment to the Wisconsin PSC, Commissioner 
Azar worked as an attorney and practiced extensively in the 
areas of electric and water utilities representing both 
ratepayers and utilities. She helped create the Nation's first 
stand-alone transmission company, American Transmission 
Company, otherwise known as ATC, and helped to site a 210-mile 
extra-high-voltage line in Wisconsin and Minnesota.
    In addition to all of these credentials, I can also tell 
you that I know what she eats for breakfast and what she grows 
in her vegetable garden because for those of you who don't 
know, Lauren is also my partner. And it is a thrill and a very 
proud moment to have her here to testify based on her 
significant expertise on the issues before us.
    I welcome her to our subcommittee.
    Ms. Azar. Thank you, Congresswoman.
    Mr. Markey. We welcome you. Whenever you are ready please 
begin.

                  STATEMENT OF LAUREN L. AZAR

    Ms. Azar. Thank you, Mr. Chairman, Ranking Member Upton, 
and the members of the subcommittee. Thanks for inviting me to 
appear at this hearing on the future of the grid. And my 
primary messages for today are, number one, before a 
transmission grid can be cost effectively planned, Congress 
must define the goals for that grid; number two, States with 
technical assistance from the regional and utility transmission 
engineers should plan the grid and site transmission lines; 
three, Congress should define the framework through which the 
States will design and site the grid--if the States fail, then 
it is appropriate for the Federal Government to step in; and 
four, Congress should agree to do no harm by not selecting a 
specific grid design or technology and by not selecting a 
specific cost allocation.
    As to point number one, Congress should define the goals. 
The renewable energy standards and carbon limits that Congress 
may set will define the generation portfolio that our Nation 
will need to develop. With clear identification of RES and the 
carbon mandates, the States can begin designing the 
transmission grid that is necessary for that generation 
portfolio.
    Point number two, States should develop the plan and site 
the lines. There are a variety of reasons why a State-led 
process will lead to better results than a federally led 
process, and these reasons include, first, State commissions 
have the ultimate responsibility for retail electric rates; 
second, planning must accommodate State choices for generation 
in demand side programs, the distribution decisions that they 
have made; third, planning must incorporate the designs for the 
existing State transmission and distribution systems; and 
lastly, State decision-making allows more complete public 
information, participation, and acceptance.
    Point number three, Congress should define the process. 
Congress could define the parameters for a State-led process. 
Such parameters could include the following:
    Essentially, require the States to participate in regional 
planning initiatives to design a grid that will meet the 
congressional mandates;
    Set strict but reasonable deadlines for the planning 
product and the siting of lines in that plan;
    Ensure that parties who will profit from this grid build-
out do not make the decisions for that build-out; and
    Lastly, if States do not complete the plan or the siting of 
the lines in that plan, then the Federal Government should 
intervene.
    Point number 4, Congress should do not harm. I ask you to 
take a Hippocratic oath today, and such an oath would require 
you not to do two things. Number one, do not pick technologies 
or plans. While the moniker ``transmission superhighway'' 
sounds good, depending on the goals of Congress it may not be 
what we need. I suspect one-size-fits-all solutions such as the 
765 grid overlay will not be cost effective, will likely be 
oversized and will harm some areas.
    As an aside, the parties who are advocating for a 765 grid 
overlay are the very parties that will make a lot of money off 
of that plan.
    And the second point about not doing harm is, do not select 
a specific cost allocation for the grid. Because cost 
allocation should be tailored to the plan developed, Congress 
should not preselect such an option. If Congress mandates a 
specific cost allocation, it will be indirectly endorsing a 
specific type of design. For instance, endorsing a so-called 
``postage stamp'' which allocates the costs evenly over a very 
large area is more appropriate for an alternating current 
solution than a direct current solution.
    In conclusion, I ask Congress to promptly set renewable 
standards and carbon limits so that the problem is defined. I 
also ask that Congress essentially lock the States in a room 
and instruct them to solve the problem within a specified time 
period.
    The $80 million already appropriated under the ARRA will 
provide the funding necessary to conduct this endeavor. After 
being locked in the proverbial room for a reasonable period of 
time, if the States are unable to design a transmission grid 
meeting the congressional mandates, then the Federal Government 
should step in. The same framework should also be applied to 
transmission siting.
    I see I still have 43 seconds, so I will quickly provide a 
quick summary of some of the efforts that are currently 
happening within the States as far as regional planning and 
siting. The chairman and Congresswoman Baldwin already 
referenced one of them, which is namely the organization of 
MISO States, and that is the Midwest Independent System 
Operator. The States within that 13-State region and one 
Canadian Province are currently developing a regional plan and 
cost allocation process, and we expect to have that done by the 
end of the year.
    More, I think, importantly to this committee's work, in the 
ARRA, Congress identified they wanted to have interconnection-
wide plans. And on May 15, leaders from the eight different 
regions within the eastern interconnection met to begin the 
process of planning on a interconnection-wide basis. At the end 
of this month, we expect to have all 40 States present at a 
meeting in which we will begin to discuss just how we expect to 
go forward in that process and what the States' role should be 
in that process.
    Thank you very much, Mr. Chairman.
    Mr. Markey. We thank you very much for being here today and 
for your testimony.
    [The prepared statement of Ms. Azar follows:]

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    Mr. Markey. Our next witness is Paul Hibbard. He is the 
Chairman of the Massachusetts Department of Public Utilities. 
Chairman Hibbard previously worked for the Massachusetts 
Department of Environmental Protection.
    We welcome you, sir. Whenever you are ready, please begin.

                  STATEMENT OF PAUL J. HIBBARD

    Mr. Hibbard. Thank you, Mr. Chairman. I also want to thank 
the members of the subcommittee for inviting me here today to 
talk to you about this critical topic.
    On behalf of Governor Deval Patrick and the Commonwealth of 
Massachusetts, I want to thank you all for your leadership in 
addressing our energy challenges and global climate change, and 
for your wisdom in addressing both at the same time in the ACES 
legislation. We support your efforts and encourage Congress to 
move forward with the ACES legislation expeditiously.
    On transmission, we think that ACES has got the 
transmission planning and siting question exactly right. In its 
current form, it presents a measured and sensible approach that 
supports the continued and vital primary role of State and 
regional resource planning in siting efforts and expands the 
role of FERC to coordinate regional planning across a broader 
geographical footprint and with an added focus on national 
energy policy. But most importantly, it does so without 
jeopardizing the critically important role of competition in 
wholesale energy markets.
    In contrast, I have serious concerns with the more 
aggressive proposals that have been put forward to expand 
Federal authority in transmission planning and siting. At their 
core, these proposals appear to put FERC in three roles:
    First, in the role of requiring the development in a short 
period of time of interconnection-wide plans like the JCSP, 
ostensibly to access renewable resources;
    Second, it puts FERC in the role of deeming transmission 
included in such plans as needed for the public convenience and 
welfare triggering the siting override and eminent domain 
authorities; and
    Third, it puts FERC in the role of approving or imposing 
the allocation of associated costs on a broad basis across all 
load.
    Under these proposals, FERC's traditional authority is 
expanded to where it becomes a de facto central planning 
authority to select and direct the build-out of renewable 
generating resources across the Nation, potentially diminishing 
the development of the abundant level of demand reduction and 
renewable resources that are available at the local level in 
all of our regions.
    Developing renewable resources locally is a top priority 
for the Commonwealth, as I am sure it is for States across the 
country. We believe that renewable resources in our State and 
along the eastern seaboard, both onshore and offshore, 
represent one of our Nation's most promising yet underdeveloped 
renewable resources, sources of energy.
    While offshore wind installation costs currently exceed 
those of onshore installations, these resources are much closer 
to our load centers. And research and development efforts that 
are focused on reducing costs and improving reliability promise 
to make offshore wind competitive with distant but onshore wind 
farms on a delivered cost of power basis.
    As regional onshore projects move forward and offshore wind 
moves into commercialization in the United States, they all 
must have the opportunity to compete on an even playing field 
with the onshore and more remote sources of renewable power and 
not be disadvantaged by upfront transmission subsidies.
    The threat that unsubsidized local renewables would be 
unable to compete in fact has been taken very seriously in our 
region and beyond. A bipartisan group of 11 Governors 
representing every coastal State from Maine to Virginia, as 
well as Vermont, recently joined together to raise these 
concerns in a letter to the committee chairman.
    A top-down central planning process is in stark contrast to 
how free markets are supposed to operate. In our region and at 
the direction of FERC, to ensure fair competition, all 
generating resources, renewable or otherwise, are responsible 
for all development costs, including the costs of environmental 
compliance and the costs of delivering their power reliably to 
load. In this competitive market context, it is the lowest-cost 
provider, based upon the price at retail, that prevails 
ensuring that society's electric reliability and environmental 
goals are met at the lowest possible cost.
    Notably, this is the design principle under ACES, where the 
prices offered by fossil fuel resources will be higher and less 
competitive due to the additional marginal costs associated 
with purchasing carbon allowances, and the price offered by 
renewable resources will be lower and more competitive due to 
the additional marginal revenues associated with the generation 
of renewable energy credits andother incentives. In this 
framework there is no need for a central planning decision to 
force development or to pick the winning resources because, by 
definition, the cost of carbon allowances and the value of 
renewable energy credits will rise to levels that are needed to 
support the resources that must come on line in order for our 
Nation to meet our carbon cap and our renewable resource floor.
    This is the way it is supposed to work and indeed has 
worked in emission markets over the past couple of decades. By 
suggesting that FERC needs to engage in resource planning to 
build transmission to preselected renewable resources is to 
concede at the outset that the free market structure for 
emission control and renewable control contained in ACES will 
fail.
    In my view, the more aggressive proposals for transmission 
legislation, thus, are about much more than siting. They force 
the Federal Government into an administrative role of central 
renewable resource planning, a role that I believe in the long 
run will damage the operation of competitive markets, suppress 
the technological innovation and creativity that come from the 
operation of competition, and ultimately will result in our 
meeting our climate objectives at prices to retail consumers of 
electricity that are higher than they otherwise would need to 
be.
    So I want to, again, thank the members of the committee for 
this opportunity and look forward to questions
    Mr. Markey. Thank you Mr. Hibbard.
    [The prepared statement of Mr. Hibbard follows:]

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    Mr. Markey. Now we have one final, very important witness 
representing the Western State Governors, who I think we should 
all hear from before we cast our vote on the floor on the last 
vote of the day. Then we will reassemble after that roll call. 
But I think since we are all here right now that we will hear 
from Rich Halvey, who is the Energy Program Director for the 
Western Governors' Association and representing those Western 
Governors before this subcommittee today.
    We welcome you, sir. Whenever you are ready, please begin.

                  STATEMENT OF RICHARD HALVEY

    Mr. Halvey. Thank you, Mr. Chairman, members of the 
committee; thank you for the invitation to testify here today.
    Over the last 8 years, the Western Governors' Association 
has assumed a strong leadership role in defining policies for 
transmission planning, cost allocation and regional 
cooperation. In 2002, a protocol governing cooperation among 
State and Federal agencies in the siting and permitting of 
interstate transmission lines in the Western United States was 
developed and signed by the WGA, the Departments of Energy, 
Interior and Agriculture, and the Council on Environmental 
Quality.
    In June 2006, the Western Governors' Association published 
a report that explained that while vast resources, renewable 
resources, exist throughout the West, many reside in remote 
areas without ready or cost-effective access to transmission. 
Lack of transmission access was and remains the greatest 
impediment to the rapid development of utility-scale, 
renewable, rich resource areas.
    In April 2008, the Western Governors partnered with the 
United States Departments of Energy, Interior and Agriculture 
and the Federal Energy Regulatory Commission to create the 
Western Renewable Energy Zones project. This project will 
ultimately identify those areas with the highest potential for 
large-scale, cost-effective, renewable energy development 
across the Western region and the high-voltage transmission 
that would ensure this electricity can be delivered to demand 
centers.
    This coming Monday, the Western Governors' Association will 
be releasing the project phase one report quantifying the 
potential of the richest renewable resource areas.
    WGA will continue to work on the project over the next 2 
years. We are partnering with utilities and the Western 
Electricity Coordinating Council to evaluate transmission needs 
to move power from preferred renewable energy zones. We will be 
working to improve the integration of wildlife and 
environmental values in decisions on the development of 
generation and transmission associated with these renewable 
energy zones.
    Ultimately, we will propose conceptual transmission plans 
to move electricity from the most desirable zones to markets. 
We will work with load-serving entities to coordinate 
purchasing for the desirable renewable energy zones and to 
foment interstate cooperation for renewable energy generation 
and transmission.
    The Western Governors support the development of 
interconnection-wide transmission plans. However, if the 
Federal Energy Regulatory Commission is given the authority to 
approve such plans, Congress needs to set explicit criteria by 
which FERC evaluates these plans. At a minimum, statutory 
criteria should require that the States approve electricity 
future scenarios to be studied and approve interconnection-wide 
plans corresponding to the future scenarios.
    Even with the success of our past efforts, the Western 
Governors recognize that we need help from the Congress. I will 
mention four positions the Governors have consistently 
emphasized as necessary elements of transmission planning, cost 
allocation and regional cooperation where legislation will be 
critical:
    First, the Federal Government should be responsible for 
ensuring that near-term projects proposed to serve large 
geographically constrained low-carbon resource areas are 
adequately sized to meet long-term needs. When we know future 
demand will materialize, action by the Federal Government to 
correctly size lines will help projects capture economies of 
scale in building transmission and avoid environmental impacts 
from the construction of multiple lines to the same area. We 
propose that the Federal Government pay for the incremental 
cost of building higher capacity lines to these areas.
    Second, Congress should redirect the implementation of 
sections 1221 and 368 of the Energy Policy Act of 2005 to 
preserve important transmission corridors and ensure the timely 
siting and permitting of large transmission lines to move 
geographically constrained low-carbon generation. Specifically, 
once higher priority zones and associated conceptual 
transmission have been identified, Congress should direct 
Federal land management agencies to use those results when 
evaluating and designating corridors.
    Third, the Western Governors see little benefit in FERC 
preempting State transmission line permitting processes. The 
major hurdle for permitting transmission in the West has been 
securing permits from Federal agencies. The implementation of 
Federal law has resulted in lengthy and inflexible Federal 
permitting processes. Enabling FERC to preempt State siting 
processes will not fix the underlying problem.
    I would like to mention the limited instances in which the 
Governors could agree with FERC backstop siting authority.
    It must be demonstrated that the transmission line is 
needed to meet national carbon and renewable generation 
requirements; comports with an interconnection-wide 
transmission plan; is right sized to meet the long-term needs 
for geographically constrained low-carbon generation; is the 
lowest cost option to meet long-term needs and where the State 
has failed to make a decision within a reasonably set statutory 
period.
    Finally, the Western Governors believe the current system 
for cost allocation in the West has worked well, and we believe 
it will continue to be adequate for the future. The exception, 
of course, would be the cost allocation as it applies to the 
kind of right sizing we described.
    We are attaching two letters to our testimony and we ask 
that they be included, two letters that the Western Governors 
have sent to the Congress in 2009 regarding transmission 
issues.
    Thank you for the opportunity to talk with you today.Mr. 
Markey. Thank you, Mr. Halvey, very much.
    [The prepared statement of Mr. Halvey follows:]

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    Mr. Markey. I think this is about as important a hearing as 
we are going to have this year. We appreciate the opening 
statements from the witnesses.
    There are 5 minutes left on the House floor for us to cast 
our vote. And so what I will recommend is that we reconvene 
this hearing in 15 minutes and then we will begin with 
questioning of the witnesses by the subcommittee members.
    The subcommittee stands in recess.
    [Recess.]
    Mr. Markey. Welcome back, ladies and gentlemen, and we 
would ask all of the witnesses to please be reseated. And I 
would ask that the rear door be closed so that we can have the 
attention of all of our audience on the witnesses. Thank you.
    So the Chair will recognize himself. And I will ask you, 
Mr. Halvey, to please elaborate on your testimony that 
permitting on Federal lands is the major obstacle to siting 
transmission in the West.
    That issue is not generally within this committee's 
jurisdiction, but rather within the jurisdiction of the 
Committee on Natural Resources. But I don't think this is a 
widely understood kind of political reverse takedown that it is 
not the problem that the Federal Government has with the 
States, but the problem the States have with the Federal 
Government as represented by the management of the Federal 
lands, especially across the West.
    Could you elaborate on that and perhaps give us some 
specific examples?
    Mr. Halvey. Sure. Thank you, Mr. Chairman.
    Let me mention a couple of things. At a meeting of the 
Western Governors in February, Governor Otter from Idaho made 
the statement very clearly that in those instances where we 
have the opportunity to site transmission lines and not go 
through Federal lands, we are often going to want to exercise 
that.
    There are a couple of issues, I think, that come to mind in 
terms of permitting with Federal lands. One, if you live in the 
West, it is difficult to avoid Federal lands. Many of the 
States are covered with lands under Federal jurisdiction, both 
the Department of Interior and the Department of Agriculture. 
So that is certainly an issue.
    Second, there is no priority system for dealing with lease 
applications. It is on a first-come, first-served basis.
    One of the things they are doing with the Western Renewable 
Energy Zones is really pointing out what we think is a critical 
issue, which is that there are places that are really better 
for not only locating renewable energy, but there are also 
transmission corridors that are going to be more important in 
moving that renewable energy. We believe that there ought to be 
some kind of a way to recognize that priority and to do the 
transmission work, the permitting work that is necessary to get 
those facilities located.
    We think, in many cases, it is not unusual to see 5, 7 or 
even 10 years to locate transmission lines when they go through 
Federal land.
    Mr. Markey. Would you repeat that fact?
    Mr. Halvey. Yes. That it is not unusual to see 5-, 7-, 10-
year time periods in terms of getting lines approved through 
Federal lands.
    Mr. Markey. So when the States go to Federal agencies, it 
takes 5 to 7 to 10 years?
    Mr. Halvey. There are certainly instances where it has 
taken that long.
    Many of the applications that we see now, that are going 
through that process--in fact, Governor Rounds from South 
Dakota was talking about a line to run from South Dakota to 
Minnesota. At one of our meetings he mentioned that they have 
been working on it for 2 years, and they have had very little 
success in moving it through the Federal permitting process; 
and he sort of got the response of a chuckle from people in the 
audience, essentially suggesting, 2 years, you have barely 
started.
    And so I think there is a great frustration on the part----
    Mr. Markey. So what you are saying is that the States were 
working together cooperatively to try to find a solution to 
that regional, North Dakota-Minnesota issue, but because of the 
Federal Government, there was a multiyear delay in getting to a 
point where the issue could be resolved.
    Mr. Halvey. That I think is the sense of the Western States 
that the Federal permitting process is difficult, it is 
onerous, it is time consuming, and in many cases there are 
requirements that don't add any value to the permitting 
process.
    We would hope to see something that one would recognize 
those areas that have a priority because of the richness of 
their renewable resources, but more than that, recognize that 
if we are going to meet any requirements for renewable 
portfolio standards or carbon reduction, we have got to do a 
much better job of matching up how long it takes to do 
renewable development with how long it takes to get the 
transmission to those developments.
    Mr. Markey. So again, not to make too fine of a point of 
this, but you are saying that out West it is very difficult, if 
you are dealing with the remote areas where the wind and the 
sun might be strongest--geothermal, as well--to create any kind 
of a transmission system without at some point confronting this 
Federal issue.
    Mr. Halvey. That is absolutely true.
    Mr. Markey. And no matter how cooperative the States are--
and your testimony is that in most instances when States are 
trying to resolve these issues, the Federal Government serves 
as an impediment sometimes of such a nature as to just paralyze 
the process?
    Mr. Halvey. That is correct.
    Mr. Markey. That is very helpful to us. Thank you.
    Let me now turn and recognize the gentleman from Kentucky, 
Mr. Whitfield.
    Mr. Whitfield. Thank you, Mr. Chairman.
    And thank you all for your testimony.
    Mr. Wellinghoff, back in April of 2009, the New York Times 
quoted you in an article saying that new coal and nuclear 
plants may be unnecessary. And I know that Chairman Barton and 
Mr. Walden and some others have sent you a letter about that. 
And I have not had an opportunity to read your response, but 
you are certainly not opposed to coal and nuclear power, I am 
sure of that.
    Mr. Wellinghoff. That is correct. I am not opposed to coal 
and nuclear power.
    Mr. Whitfield. Since I didn't even read the New York Times 
article, would you basically explain what you were referring to 
when you made that statement?
    Mr. Wellinghoff. I would be happy to. Thank you for the 
question.
    I was referring basically to a scenario where, if we look 
at the diversity of the number of renewable resources, which 
would include, potentially, Midwest wind, that may have a 
diversity of delivery from offshore wind and include solar and 
geothermal, biomass; and also include the demand side, looking 
at demand response, energy efficiency, distributive generation, 
combining these things together with a smart grid.
    And the whole answer was--in the response was, in the 
context of the smart grid, if you combine these things together 
it may, in fact, be possible with a smart enough grid to 
effectively provide these renewables as if they are base load, 
displacing base load; and that was the context of my statement.
    Mr. Whitfield. When you talk about a ``smart grid,'' do you 
have any idea or thoughts, or have you seen any studies about 
what the cost would be to complete transformation to a smart 
grid?
    Mr. Wellinghoff. I have seen cost estimates anywhere from 
$50 to $60 billion up to $200 billion.
    Mr. Whitfield. And to reach the scenario that you referred 
to in the New York Times article that you just explained, in 
what sort of time frame would you view this transformation 
taking place?
    Mr. Wellinghoff. At least a 10-to-15-year time frame.
    Mr. Whitfield. Now on the Fourth Circuit Court of Appeals 
decision, have you all appealed that decision? Has FERC 
appealed the decision?
    Mr. Wellinghoff. Let me check with my counsel.
    It is due in July. We haven't yet made a decision. We are 
looking at it now.
    I will tell you, though, I personally disagree with the 
Fourth Circuit decision.
    Mr. Whitfield. Well, I know there are many of us that hope 
you will appeal, but that is a decision that you all make, of 
course.
    Mr. Coen, Ms. Azar, Mr. Hibbard, can you tell me the last--
when the last new transmission line was built in each of your 
States?
    Mr. Coen. We are actually, in Vermont, in the process of 
upgrading most of our transmission systems. So we actually have 
ongoing projects as we speak.
    The most major transmission line that has ever been sited 
in Vermont, the docket ended 2 years ago, and the line is 
currently almost complete today.
    Mr. Whitfield. And how many miles is that line?
    Mr. Coen. Well, this is Vermont. The line was 60 miles.
    Mr. Whitfield. And what about you, Ms. Azar?
    Ms. Azar. Just yesterday, we approved a 32-mile, 345kV line 
that costs about $220 million through the city of Madison. So, 
in other words, the three commissioners essentially sited a 
transmission line through their backyards.
    Over the last 8 years, we have spent $2.5 billion upgrading 
or creating about 1,700 new miles of transmission in the State 
of Wisconsin. We have construction going on all over the State. 
A line was just energized, I believe last week, which was over 
100 miles long.
    And as Congresswoman Baldwin indicated, before I became 
Commissioner I was on the other side. I was getting permits for 
a 210-mile line between Minnesota and Wisconsin, and that line 
has been energized.
    Mr. Hibbard. In Massachusetts, our most populous area, of 
course, is the Boston region and it is where our heaviest 
electrical load is. And over the past 10 years we have sited 
and had constructed a number of transmission enhancements to 
support the flow of power into Boston, including two major 
345kV lines to eliminate the constraints between Boston load 
pockets and the remainder of Massachusetts.
    Mr. Whitfield. One other question to you three: With the 
anticipated increase in demand of electricity needs over the 
next 15 or 20 years, do you think the existing system is 
adequate in your State?
    Ms. Azar. With regards to the increase in demand, we 
continually update our systems. So we are going to continue to 
do updates. We have been doing updates all along. I don't think 
that process ever stops.
    Mr. Coen. In Vermont, we have actually been able to 
mitigate any increase in our load over the last 5 years with 
energy efficiency. So I would say, offhand, that with the 
completion of what is called the Southern Loop in a couple of 
years, I think our transmission grid will be adequate for the 
next 10 to 15 years.
    Mr. Whitfield. Mr. Hibbard?
    Mr. Hibbard. I would give a similar answer. The answer to 
your question is ``yes.'' When we look at potential scenarios 
for load growth over time within Massachusetts, and indeed 
within the New England region, we see that the transmission 
system, including what is existing today and what is in the 
process of going through the regional planning process in 
siting, will be more than adequate to support the movement of 
power throughout our region for a decade or two.
    Mr. Whitfield. Mr. Chairman, I see I have gone 1 minute 25 
seconds over.
    Mr. Markey. I thank the gentleman.
    By the way, we will be having a second round and perhaps a 
third round of questions of the witnesses if the gentleman is 
interested.
    Let me turn and recognize the gentleman from Washington 
State, Mr. Inslee.
    Mr. Inslee. Thank you. I would like to put in the record, 
with no objection, a letter from the University of California, 
Berkeley, from Dr. Dan Kamen, a letter describing the reason 
and appropriateness of expanding new transition lines--if I can 
put that in the record.
    Mr. Markey. Without objection, it will be included in the 
record.
    [The information was unavailable at the time of printing.]
    Mr. Inslee. Chairman Wellinghoff, I wanted to ask you to 
expand on your thoughts on how FERC could implement--if it does 
receive backstop siting approval, how it could implement a 
greenhouse gas performance interconnection standard for new 
transmission and/or some criteria associated with compliance or 
fulfillment of the Nation's renewable energy goals.
    Several of the other witnesses made reference to something 
of that nature. Could you tell us how you think that could 
work? Even though we have heard the physical explanation and 
that an electron is an electron is an electron, how could this 
function?
    Mr. Wellinghoff. Thank you, Congressman Inslee.
    First of all, we have initiated a rule-making, and 
certainly as part of that, all stakeholders would have an 
opportunity to provide any proposals as to how to implement 
such a greenhouse gas performance standard. But in doing so, 
there are a couple ways it could be done.
    Certainly, in looking at the current emission permits from 
the generation stations--from those, it is based on known items 
such as model and configuration of the generator and its 
mission control equipment and composition of fuel and the 
approximate run time of the generator.
    You could take from that also the annual emissions are 
typically capped by a permit that can be used as the baseline 
to determine compliance.
    So we could take compliance, I think, from their current 
permit applications, or new permit applications from generating 
stations, and take that data, put it into a database and 
ultimately from that use it to determine a greenhouse gas 
performance standard for particular plants that were into the 
interconnect.
    Mr. Inslee. So you can obviously do that for particular 
plants, but could you effectively reference that to particular 
lines? In other words, are the plants specific enough to the 
line that this type of standard could be applicable to lines?
    Mr. Wellinghoff. I think you would have to do that by 
regions, because it is all a matter of sort of displacement. 
You are not really delivering electron A to point B necessarily 
over an AC line. It is really pushing one electron down the 
road.
    So I think you would have to do it basically on a regional 
basis, but I feel that we can do it, yes.
    Mr. Inslee. Thank you.
    Commissioner Azar, I appreciated your comments, first off, 
about the appropriateness of Federal backstop authority and its 
general view, that I share, that it is appropriate. And I 
appreciate your views on that because of your incredible 
background in this area.
    But I also appreciate you making reference to the necessity 
of considering demand-side issues when you do siting and 
planning. And I want to make sure you are aware that in the 
ACES bill, we do have a very specific policy that is a policy 
of the United States and regional electrogrid planning to meet 
these objectives should take into account all significant 
demand-side and supply-side options.
    Do you want to comment on that? Is it a good idea? Is there 
anything we should do to expand on that to make sure we 
consider that is part of our planning process?
    Ms. Azar. It is a very good idea. And my point in raising 
it is that those kinds of solutions are oftentimes best made at 
the State level because the States are going to understand how 
they are going to be setting up their distributed generation, 
how they are going to be setting up their energy efficiency and 
conservation measures, better than the Federal Government.
    So that was the point I was trying to make with regards to 
why I thought a State-led process would be better with regards 
to those specific items.
    Mr. Inslee. Thank you.
    Chairman Hibbard, I wanted to ask you about cost 
allocations. I am told that recently there has been a 345kV end 
star reliability project in transmission in the Boston area, 
and I am told that the total cost of that was $334 million and 
325 of that was spread across New England in a cost allocation 
system; only 3 percent was assigned directly to the Boston area 
ratepayers. So regional cost allocation seems to work at least 
in your area.
    If cost allocation in general of that nature seems to be 
acceptable, should we not be able to fashion some other cost 
allocation more widely?
    Mr. Hibbard. Certainly.
    Thank you, Congressman. I think it is instructive when 
thinking about the cost allocation issue to draw a very clear 
line between transmission projects that are needed to maintain 
grid reliability and transmission projects that are essentially 
for the benefit of generation developers.
    In the New England system, we have exactly that split. If, 
through the regional planning process, lines are identified 
that are needed to maintain reliability on a regional basis--
and the end star line in Boston was exactly one such line--then 
we support the socialization of costs across the entire region, 
because it benefits everyone within the region to maintain the 
reliability of the grid.
    So the cost of the end star line is shared by everyone in 
New England. In Massachusetts, we are about half of the load; 
we pay about half of the bill. Similarly, the project that 
Commissioner Coen referred to in Vermont, other projects that 
are on the books in New Hampshire and Maine and Connecticut, 
all focused on reliability of the grid, projects for which even 
though they are not within Massachusetts, Massachusetts 
consumers will pay half of.
    It is a vitally important component of cost allocation that 
when looking at reliability there be a willingness within an 
integrated power grid to share that cost across load.
    The distinction I want to make here is that the issue of 
cost allocation for building lines to interconnect generation 
resources departs from that. We want--in order for our 
consumers to be protected, we want the cost of developing 
generation, including the cost of meeting compliance measures, 
the cost of delivering power reliably to load and making sure 
you don't adversely impact the reliability of the system to be 
borne by the generation developer and included in the price 
that they are charging customers.
    Mr. Inslee. I just want to comment, I think this is a new 
approach that some of us are suggesting, because there is a new 
national need just as important for reliability and that is to 
prevent the Earth from turning into toast. So that is the 
reason for our thinking.
    Thank you very much.
    Mr. Markey. The gentleman time's has expired.
    Again, there will be a second round of questions for all 
members who are interested.
    The Chair recognizes the gentlelady from the State of 
Wisconsin.
    Ms. Baldwin. Thank you, Mr. Chairman. And I want to direct 
this question to Commissioner Azar.
    One of the proposals that we hear a lot about on Capitol 
Hill is the possibility of a 760kV line, often known as the 
``transmission super highway.'' And I would like to hear your 
insights on how a 765kV overlay might affect a State profile 
like a State of Wisconsin, and if you could, describe any 
concerns that you might have that it would be detrimental to 
Wisconsin or others.
    Ms. Azar. Thank you, Congresswoman.
    When you add a high voltage overlay into a State, you have 
got to make sure that the underlying system is built up to 
accept that. In Wisconsin, as both you and I have noted, we 
have spent billions of dollars at this point in time designing 
a specific kind of system. The American Transmission Company 
has designed a 345kV system. If there is a 765 overlay built 
into Wisconsin, it is essentially going to mess up our very 
deliberate 345kV design. So we are going to have to build up 
our underlying grid.
    That being said, ultimately, if Congress gives us the 
mandates and the group of States decide that the best thing to 
do would be a 765 grid overlay, then we are going to need to 
accommodate that. But I think there are better ways to do it.
    The one-size-fits-all will likely be, in my estimation, 
probably oversized and not cost effective. The one way in which 
I think about a 765 grid overlay is, you have got somebody with 
a hose on one side of the swimming pool and he has to get the 
water to the other side of the swimming pool, there is a drain 
at the other side of the swimming pool. There are two options 
he has got. One, he can extend a hose, or the second option is, 
he fills up the swimming pool. And the 765 grid overlay is more 
akin to filling up the swimming pool than extending the hose.
    I think there are better ways to do it than one-size-fits-
all. The bottom line is--the primary message is, we need to do 
the calculus. We can figure this out. A tailor-made answer is 
better than a sort of a generic answer.
    Ms. Baldwin. Another proposal that we hear a lot about that 
has been floated is making RTOs the final decision-makers with 
regard to transmission decisions. And I wonder how you would 
analyze this as an option. Do you think that RTOs have all the 
correct interests in mind when they would approach these sort 
of decisions?
    Ms. Azar. You know the decision-maker, in selecting the 
plan for the grid, needs to be beholden to only one interest 
and that is the public interest. The RTOs have got a lot of 
different stakeholders. And they are very adept, and I 
compliment them on trying to balance the competing needs of the 
stakeholders.
    But I can speak for the Midwest Independent System 
Operator. They actually have a contractual obligation to their 
transmission owners to maximize the revenues of the 
transmission owners. And when you have got those kind of 
interests, they will not be thinking about the public interest 
when they are making their decisions; they will be thinking 
about their contractual obligation to the transmission owner.
    So, no, I do not believe the RTOs should be the ultimate 
decision-maker in this. That being said, their expertise with 
regard to planning and their planning engineers absolutely 
needs to be involved in this process.
    Ms. Baldwin. I don't know if Mr. Coen or Mr. Hibbard have 
any comments on that same question.
    Mr. Coen. I would concur with Commissioner Azar's comments 
as well.
    Mr. Hibbard. As would I.
    Ms. Baldwin. Mr. Chairman, I don't have any other questions 
at this time.
    Mr. Markey. Great. I thank the gentlelady.
    The Chair will recognize himself for another round of 
questions. Let me move to you, Mr. Hibbard, so that we can put 
this out on the table.
    A lot of people, when they think of the solar revolution, 
they think, well, we are going to bring it in from the deserts 
of the United States and bring it into the cities of our 
country. And that is true. And they also think that when we 
consider wind, we are going to go out to the prairies of the 
United States and we are going to bring it into the cities in 
order to provide the electricity.
    But people don't really think about the oceans as much a 
source, in the future, of renewable electricity. And you made a 
reference to all of the Eastern States' Governors from Maine 
down to Virginia, who are very concerned that their plans for 
bringing in wind off of the coastline or other renewable 
sources might be undermined by this kind of a proposal.
    Could you talk about that and talk about what your vision 
is--that is, all of these Governors'--in terms of what the 
long-term renewable prospects are for the East Coast?
    Mr. Hibbard. Certainly. And thank you, Mr. Chairman.
    In Massachusetts and I think throughout the New England 
region, we are strongly supportive of the climate goals that 
are inherent in the ACES legislation and the renewable goals--
certainly, in Massachusetts we are--and we want to find the 
best way to meet them.
    We see offshore wind as being an enormous renewable 
potential for the coastlines of our country, a potential that 
is very close to load centers and can interconnect in multiple 
locations on the lower-voltage-type networks that Commissioner 
Azar mentioned in a way that will strengthen the reliability of 
the grid; and that it represents--there is also a huge amount 
of onshore renewable potential up and down the East Coast.
    The concern that we have is that by--if you take, for 
example, what is included in the Joint Coordinated System Plan, 
it would essentially dump----
    Mr. Markey. Could you expand on what that is?
    Mr. Hibbard. Sure it is a multiregional plan that was 
done--I think, coordinated by MISO.
    Mr. Markey. Can you explain what MISO is?
    As you all continue your testimony, we have C-SPAN watching 
this, and I think it would be a very interesting subject if it 
was actually communicated in English to the watching audience. 
So we are going to be on acronym alert for the rest of this 
hearing, and I am going to stop every time you use an acronym 
and every time you make an assumption that everyone in the room 
knows what you are talking about.
    This is a very important issue that has very profound 
impact on families, so please explain what you are talking 
about.
    Mr. Hibbard. Thank you, Mr. Chairman. I will try not to use 
a lot of acronyms. I hope my Boston accent is OK.
    Mr. Markey. You sound very eloquent. All of the other 
people in the room have such funny accents, don't they?
    Mr. Hibbard. I agree.
    Mr. Markey. How about those Red Sox and Yankees last night?
    Mr. Hibbard. I was going to, on a personal note, commend 
you for your astute observation about the link between our 
national economy and baseball because we are seeing signs that 
our economy is improving, and it occurred to me that at the 
same time, as you watch the Red Sox once again sweep the 
Yankees over the past few days, Ortiz is hitting home runs 
again.
    Mr. Markey. I will give you 1 extra minute, so everyone--
again, people won't know what you are talking about.
    I gave a speech in Boston on Monday, and I said that--I 
said in Boston that the economy was in a David-Ortiz-like 
slump, but that I had faith that our economy and David Ortiz 
would be hitting home runs again. Now, unfortunately, the 
Boston Globe ran a little editorial the next day questioning my 
judgment in linking David Ortiz's recovery to the American 
recovery. That night David Ortiz hit a home run. Last night 
David Ortiz hit a home run.
    Today and yesterday we received all this new, positive 
commentary about the American economy. I am not saying it is 
directly related to my speech on Monday. However, I do believe 
that, and I thank you for pointing this out, that my comments 
were accurate.
    So please continue, and we will add back the time onto your 
statement.
    Mr. Hibbard. I will see if I can remember the original 
question.
    There was what I think has gone hand in hand with the 
efforts to push for expanded Federal oversight over 
transmission, there have been a couple of major studies done 
recently by DOE and also done by a group of regional planning 
entities across the country to look at this idea about how do 
we actually expand the development of renewable generation in 
the parts of the country where it exists and move that across 
the multiple regions and deliver it into subregions.
    So the Joint Coordinated System Plan was a very large 
technical analysis of how to go about doing that, what the 
transmission network would look like, a super-high-voltage 
transmission network would look like, to accomplish that 
result.
    As part of that plan, when you look at it, one of the 
things it does is, it would dump on extra-high-voltage lines on 
the order of severalthousand megawatts of power into New 
England at a very high voltage.
    Now, in addition to that--issues that Commissioner Azar has 
mentioned--that would require a lot of building out of the 
transmission network within New England.
    The concern I have is that we have a competitive market 
framework in New England that is absolutely essential to keep 
commodity prices low for our consumers. We have a need in the 
region over the next couple of decades only on the order of 
several hundred to 1,500 megawatts for new power. If we were to 
administratively put in a large high-voltage transmission line 
that put that quantity of power into our region, it would 
eliminate the market signals that our local renewable resources 
require in order to move forward with financing and 
development. That is the threat.
    Our position is, we absolutely have to meet the carbon 
goals that the country is now warming up to and that we need to 
meet in the coming years. But the way to do that is to do it 
through ensuring that the resources that are brought on line 
are those that make the most sense to the customers from the 
standpoint of the delivered price of electricity; and we think 
we can do that without this level of Federal oversight.
    Mr. Markey. So--if I may, so one of your concerns and New 
England's concerns generally, those six States, would be that 
as you put together regional plans to generate renewable 
electricity within the region, offshore or onshore--there is a 
huge project up in Aroostook County in Maine that could be, 
ultimately, in the thousands of megawatts if it is built out 
completely; but there will be an issue there of getting that 
electricity down into the population areas. But nonetheless it 
is contained within New England that has had historic 
relationships and worked through all of the reliability, cost 
allocation and siting issues over the years.
    But you would be concerned that if there was some 
superimposed decision made to build transmission lines in from 
other parts of the country, that that would then change the 
economics of developing the renewables that are indigenous to 
Massachusetts and New England whether it be in Aroostook 
County, Maine, or off the coastline of New England.
    I think--and I will add this as well--one of the things 
that is not well understood about the East Coast of the United 
States is that when you go out 10 miles, 20 miles, 30 miles, 40 
miles, you are still only in 200 feet of water. When you go out 
that far on the West Coast, you are out--you are miles deep in 
the ocean. And so in terms of the siting issues along the East 
Coast, for wind especially, you can go out miles and miles and 
still be just hundreds of feet from having to site these wind 
facilities; and then with superconducting technologies, just 
bring them in to the shore and hook them into the preexisting 
grid that already is there in New England--with the States 
having to work out, of course, what the cost allocation is, but 
knowing that all of New England, for example--and New York, for 
that matter, and New Jersey and Maryland are all committed to 
resolving and cooperating in the production of new, renewable 
energy resources.
    So just opening up this whole question of the remote areas 
of Maine, for example, most people don't know that 95 percent 
of Maine is forest. It is woods. It is rural. So there is a lot 
of opportunity there as well, and it is a huge State as well. 
So I just raise that issue because we have to strike a balance 
here, because we do want each region's indigenous resources to 
be developed as well.
    Let me just stop there and recognize the gentleman from 
California, Mr. McNerney, for his questions.
    Mr. McNerney. Thank you. I was expecting you to recognize 
Mr. Inslee first.
    Mr. Markey. He has already been recognized for his first 
run. So I think it is appropriate for you to be recognized.
    Mr. McNerney. Thank you.
    First of all, I want to thank Chairman Wellinghoff for his 
hospitality this week. And I think your testimony was rational. 
I noticed one thing though. You were seeming to advocate that 
the Fed has a significant, large role and the State regulators 
were all saying, Well, the States should have a larger role and 
the Fed should have a littler role. So I guess that is not too 
surprising.
    I wanted to ask you, though, do you think that the U.S. 
faces significant technical hurdles, or do you think it is 
mostly political hurdles to improving our national grid?
    Mr. Wellinghoff. Thank you, Congressman McNerney.
    First, on the issue of the Federal role, I really believe 
that we should primarily defer to the States. I think what we 
need is to have Federal pressure to ensure that the States can 
move forward with interconnection-wide regional planning, 
siting, cost allocation.
    But I largely agree with Commissioner Azar and her 
testimony. I think really it needs to be primarily informed by 
the States.
    We certainly, though, have to have some entity who would 
overlook that State activity to ensure that the national goals 
are also incorporated into what the States----
    Mr. McNerney. And I like Ms. Azar's suggestion that we lock 
all the State people in one room until some decisions are made. 
But I don't think that that is really going to happen.
    Mr. Wellinghoff. But on your second question with respect 
to whether it is technical or political, it is a good mix of 
both. And on the technical side, I think it is important to 
understand--and I know that New England and the eastern 
seaboard States are very interested in offshore wind, and I 
support offshore wind; that is a great resource.
    What we have to understand is, they are not an island 
either; they are interconnected to the entire eastern 
interconnect. So, for example, if we had offshore wind from 
Rhode Island, New Jersey, New York all the way up through New 
England put in place, developed, say, 10 gigawatts, 10,000 
megawatts of wind put into the East Coast, we could not simply, 
as I understand it from my reliability engineers, simply 
interconnect that into the existing grid. We--in fact, if we 
had that happen, and we had as little as perhaps 2,500 or 3,000 
megawatts of that go off line, we could black out Florida.
    So we ultimately need to look at how to strengthen the 
entire interconnect so that all the regions, in fact, can meet 
the renewable goals and can do it with their local renewable 
resources and with distance-renewable resources, if necessary.
    Mr. McNerney. Thank you, Mr. Chairman.
    Mr. Halvey, I certainly appreciate your work toward the 
Western region. I understand your desire to streamline the 
permitting process. Do you have any specific recommendations 
along those lines?
    Mr. Halvey. Yes, I think a couple of recommendations, one 
because of the work that we are doing with regard to the 
Western Renewable Energy Zones project. We think it will became 
clear very quickly which areas represent the most desirable, 
the richest and the most developable renewable resource zones. 
Given that identification, we think there is the opportunity to 
prioritize those areas. Where they exist in concert with 
federal lands, we believe there should be a priority given to 
the permitting on those areas.
    Same thing with the transmission lines that would be 
necessary to move that power from those renewable energy zones 
to the market centers where it is needed.
    One of the other aspects of the project is that we will 
identify, conceptually at least, where the transmission lines 
need to be in order to use that power.
    Mr. McNerney. So you are really addressing the 
prioritization, not the actual process of permitting?
    Mr. Halvey. We think it is both. One recommendation is the 
prioritization. The second is to look at the requirements and 
certainly limit the number of requirements that agencies have 
to go through that have no value added in terms of that 
permitting process, that there is a way to protect wildlife, 
that there is a way to address environmental values, that there 
is a way to go through these processes and not take the kind of 
time that we are seeing with many of these applications.
    Mr. McNerney. I agree. And I just want to remark on Mr. 
Hibbard's optimism that offshore wind can be as significant as 
it can. And the fact that it is proximate to load centers, that 
is an important consideration as opposed to putting in a lot of 
transmission. So I appreciate that.
    And also the observation about just putting in large 
transmission capacity can have a negative impact on renewables. 
So those are appreciated, those comments are appreciated.
    And with that, I will yield back.
    Mr. Markey. Gentleman's time has expired.
    The Chair recognizes the gentleman from Washington State, 
Mr. Inslee.
    Mr. Inslee. Thank you. I wanted to read just a little 
portion of Commissioner Azar's testimony and ask a couple of 
questions to the three of you about it. Commissioner Azar said 
Congress can and should play an important role in bolstering 
and catalyzing State efforts by setting clear mandates and 
guidelines as well as strict deadlines for State and regional 
transmission planning efforts. If these planning efforts fail 
to meet these mandates or deadlines, Congress can set up 
additional backstop authority for Federal agencies to take 
action and ensure that projects identified in the regional 
planning efforts move forward. I am paraphrasing now. Examples 
of the type of leadership that would be helpful include the 
following, and the commissioner lists four things. But the 
fifth thing is clear and powerful backstop authority for 
Federal action to plan for, approve and site transmission lines 
that are identified as vital in the State-led transmission 
planning process.
    I agree essentially with that statement. And I think a bill 
I have introduced heads in that direction. The question I would 
like to ask Mr. Hibbard, Commissioner Azar and Chairman 
Wellinghoff is, Mr. Hibbard has identified this issue that he 
doesn't want to see offshore wind intruded upon by, say, coal 
coming in from Ohio or somewhere else. And I believe if we do 
have this backstop authority, we can and should build something 
in that would make sure that we preserve our goal of enhancing 
low carbon-based fuels as part of what you might think of as 
bonus backstop Federal authority.
    Is there a way to do that? And if you could give us your 
thoughts on the best way to do that. I will just start with Mr. 
Hibbard. If we were going to adopt this backstop Federal 
authority, what would you encourage us to do to prevent the 
scenario that you fear?
    Mr. Hibbard. Well, let me start by saying I think that the 
legislation as it stands contains that backstop authority. By 
setting a cap on carbon and by setting a floor on renewable 
resource development, you are providing competitive markets the 
market signal they need to spur the development.
    The question you are posing is what if that is not enough? 
What if at some point we look and we see that, for whatever 
reason, we are not getting the level of development of 
renewable and low-carbon resources to meet our clear caps and 
our clear floors?
    What I would urge all of you to consider is to try to come 
up with a framework that does so while maintaining the 
importance of competitive market solutions.
    Again, under FERC's leadership, our wholesale competitive 
markets in New England are critical to keeping prices low to 
consumers, and not violating that is extremely important. Now, 
are there ways to do that? The one example I can give you is 
that in Massachusetts we recently enacted legislation that 
requires our distribution utilities to enter into long-term 
delivered-price contracts with renewable power sources so that 
the utilities themselves would issue solicitations and would 
select the lowest-cost option for meeting that goal of the 
Massachusetts State Legislature.
    You could consider something along the same lines where at 
some point you could evaluate whether or not the country is 
heading towards meeting its carbon cap and its renewable power 
floor, and if there is a deficiency identified, have FERC step 
in in essentially a backstop planning mode and require that 
regions, RTOs, utilities or interconnecting transmission owners 
issue solicitations for long-term contracts for renewables on a 
delivered-price basis.
    Mr. Inslee. I want to make sure, if you could kind of wrap 
up, I want to make sure we get to the other two witnesses.
    Ms. Azar. Thank you, Congressman. I am optimistic that if 
Congress sets the goals and sets the process and has a strong 
backstop authority, that we will be able to get this done. If 
we don't get it done, again, I think that is when the role of 
FERC steps in. So if FERC for instance--if the States came up 
with a specific plan and the plan did not meet the objectives 
of Congress that Congress set, I think there needs to be 
essentially an overseer. And I personally would be fine with 
that being the Federal Government saying, yes, this plan 
actually meets those objectives. But the plan itself has to be 
designed by the States.
    Mr. Inslee. Mr. Chairman.
    Mr. Wellinghoff. Thank you, Congressman Inslee. Just to 
respond to Mr. Hibbard, I want to make very clear that FERC is 
very committed to competitive market solutions. We wouldn't 
choose to do anything that would be counter to that. But I 
think when we look at transmission, there are some nonmarket 
barriers, and those include the issues of siting and cost 
allocation. And, again, agreeing with Commissioner Azar, I 
think it is necessary to allow the States to move forward in 
those areas to see if they in fact can do some interconnect-
wide planning collectively, that they are moving forward to do 
that both in the eastern and western interconnects, and then 
see from that if the siting and cost allocation can be agreed 
upon. But if not, we have to I think have that pressure, that 
Federal pressure behind it to inform that process, to make sure 
that it moves forward to ensure that we meet our national 
goals.
    Mr. Inslee. Thank you.
    Mr. Markey. The gentleman's time has expired. The Chair 
recognizes the gentlelady from Wisconsin.
    Ms. Baldwin. Thank you, Mr. Chairman. When I hear the 
discussions about connecting Dakota wind generation through 
transmission to load centers on the east coast, I sort of feel 
like Wisconsin could become a State that has an extension cord 
just running through it. Maybe I should use the swimming pool 
analogy instead. But that is the image that it conjures up for 
me. And I worry that it disincentivizes distributed generation.
    And as I pondered in my opening statement earlier this 
morning, how we propose to pay for the transmission upgrades 
that are coming down the pike is a critical question. Will 
those who do not receive the extensive benefits of this 
transmission have to pay for the cost of traversing lines 
across the country?
    The ratepayers that I represent, as you have already heard, 
have supported their share of more than $2 billion of new 
investments in the Wisconsin transmission system. Clearly there 
are transmission technology decisions that need to be made, and 
there are cost allocation decisions that need to be made. But I 
guess I would ask the whole panel and anyone who wants to 
comment, how we best protect those ratepayers, how we set up 
the system in a way to best protect those ratepayers who will 
not be receiving the huge benefits of this transmission 
buildup.
    Mr. Hibbard. If I may jump in, Congressman. I think the 
model that I have been discussing here this morning of 
requiring that the cost of transmission associated with moving 
generation from the generation source to market be included in 
the price that is offered to consumers that will be purchasing 
it is our first line defense on that. So that if transmission 
were coming from the Dakotas and being put into New England, 
the price of that would include not just the cost of developing 
the generation but also the cost of the transmission. We can 
then compare that price to other generation prices available to 
us within the New England market for local renewables, for 
demand resources, or for more traditional generation, and that 
ultimately the projects that will go forward will be the ones 
that benefit ratepayers.
    Ms. Azar. As far as cost allocation I don't think we can 
actually speak to what would be the best cost allocation at 
this point in time. It should be tailor-made to the grid that 
is essentially planned. As I mentioned in my initial comments, 
if you pick a specific cost allocation right now, it is likely 
to steer the plan in a specific direction. And I would rather 
have the physics drive--the physics and the economics drive the 
plan, and then we can figure out how to pay for it after the 
plan is designed. So that is my recommendation.
    Mr. Coen. As a Vermont commissioner I would concur with my 
colleague from Massachusetts. For the naval perspective, we 
would be looking to take a position case by case as it comes 
forward.
    Mr. Wellinghoff. And, again, I would agree with 
Commissioner Azar. We should not dictate a particular method, 
number one. But number two, my preference would be to have the 
States try to work it out ultimately. And if those States that 
were involved in the line, the line went across the State, but 
that State could make a case if there wasn't real benefits to 
that State. So hopefully that solution could be worked out and 
ultimately resolved in a collaborative way.
    But ultimately, at the end of the day, if the decision had 
to be made and it couldn't be made by the States and the region 
collectively, I think it would be appropriate for FERC to 
determine that allocation; and the allocation, in fact, may 
decide that a particular State like Wisconsin did not benefit, 
depending upon the definition and breadth of the term 
``benefit'' from a particular line, and, as such, may not be 
allocated costs.
    But, again, you have to provide the flexibility for that 
kind of a decision to be made. You can't restrict specifically 
or dictate in a rule how that has to be done. It has to be in a 
very broad, in a broad way that allows FERC to meet its mandate 
to ensure that rates are just and reasonable.
    Mr. Markey. OK. Let me now turn and recognize once again 
the gentleman from California for another round of questions.
    Mr. McNerney. Thank you, Mr. Chairman.
    I had a question for Commissioner Azar. You had some 
recommendations for congressional action to facilitate 
projects, transmission projects. Do you feel that those 
recommendations are widely shared across the country by State 
commissioners.
    Ms. Azar. I have not had the opportunity to float that idea 
by my colleagues, so I can't speak to that.
    Mr. McNerney. Well, that is my only question and I yield 
back.
    Mr. Markey. I thank the gentleman.
    The Chair will recognize himself just to pursue a few 
questions here. Mr. Hibbard, perhaps you could deal. Mr. 
Wellinghoff said that if there was 3,000, 5,000 megawatts of 
wind brought in from offshore up in New England, that it could 
cause reliability problems down in Florida. But the converse 
could also be true with what Florida Power and Light and, 
hopefully someday, the Southern Company is doing in Florida to 
generate renewable electricity could cause reliability problems 
up in New England. How do we resolve that issue?
    Mr. Hibbard. Thank you, Mr. Chairman. The issue, the 
engineering issue that the Chairman refers to is really one of 
the size of the transmission and the associated capacity being 
put onto the transmission network in the region. So for 
example, if as Commissioner Azar was referring to you have a 
765 kv line and it is----
    Mr. Markey. You know, can you imagine the audience right 
now? OK, what is that? What is that?
    Mr. Hibbard. If you have a really extra high-voltage line--
--
    Mr. Markey. What does that mean? What does that mean? 
``Dropping,'' what does that mean?
    Mr. Hibbard. Think of it this way.
    Mr. Markey. OK. Try again.
    Mr. Hibbard. When a transmission line interconnects or it 
hooks up with the transmission system in New England, it looks 
like a generating facility. So if you have a really high-
voltage line it looks like a really big power plant.
    Mr. Markey. So when people are riding down the street or 
out on the highway, and they look off and they see something, 
explain it in those terms just so they can understand why 
people's sensibilities might be affected by what it is that is 
constructed, so that you can put it in those terms, because 765 
kilovolts doesn't really mean anything to people.
    Mr. Hibbard. What they would actually see is a really big 
tower. But from the standpoint of how it affects the grid it 
just puts a lot of electricity onto the grid in a single 
location. And if that were suddenly to disappear, then there 
could be problems if the transmission system can't withstand 
it, and cause the type of widespread outage that he was 
referring to.
    The value I see in offshore wind technology along the 
eastern seaboard is it completely overcomes that problem, 
because it can be built out incrementally at lower voltages 
that hook on individual lines into the major load centers along 
the east coast so that we can build it out without the need for 
increasing the reliability, the potential reliability risk on 
the underlying transmission system.
    So that, while I think if we were to take the path of 
interconnecting 3,000 megawatts in a single point--that would 
be the problem that the Chairman is referring to-- but that 
offshore wind has the potential to be dispersed on a much more 
widespread geographic basis and actually enhance the 
reliability of the grid.
    Mr. Markey. Mr. Wellinghoff, would that solve your Florida 
problem, or, from our perspective, our New England problem?
    Mr. Wellinghoff. I am not sure that it would, Mr. Chairman.
    Mr. Markey. Can you explain why?
    Mr. Wellinghoff. I am not sure that it would, Mr. Chairman. 
Ultimately, even though you may disperse the 3,000 megawatts 
over a number of locations, the issue is going to be the 
variability of that wind and the effect of that variability on 
reliability across the interconnect with respect to frequency. 
And I have actually directed our reliability division to 
commence a study that will look at this issue and determine how 
that incursions infrequency can affect reliability across both 
the eastern and/or western interconnects.
    Mr. Markey. Mr. Hibbard, you are back at a FERC hearing 
right now; what are you going to say to Mr. Wellinghoff when 
they raise that issue?
    Mr. Hibbard. First I will commend the Chair and FERC for 
looking into reliability.
    Mr. Markey. Good.
    Mr. Hibbard. And I would encourage them to consider in that 
study the difference between variability of 3,000 or 4,000 or 
5,000 megawatts being connected at a single point to the 
variability, and the impact of it being spread over a very wide 
geographic region. And whatever the outcome is I am certain it 
will be the right answer.
    Mr. Markey. And would you agree that there could be a 
distinction made between a concentrated renewable source and 
something that is dispersed over hundreds or thousands of 
miles?
    Mr. Wellinghoff. Mr. Chairman I try to not practice 
electrical engineering without a license, but I would agree 
there may be a difference between the two.
    Mr. Markey. Thank you. And by the way, would those same 
issues exist in a Western State, for example, that might want 
to produce 3,000 or 4,000 or 10,000 megawatts of renewable in 
their State and try to move that, for example, into a 
metropolitan area in another State or several other States? 
Would it create the very same issue?
    Mr. Wellinghoff. Yes, it could be applicable in either 
interconnect.
    Mr. Markey. So it is an issue that we ultimately have to 
resolve here. I think that going back to this 765 kilovolt 
issue is an important thing to understand. Because in my 
experience, at least on this committee for 33 years, there are 
corporate entities that really think big; the bigger the 
facility, the bigger the plan, the better it is. And then there 
are others that think, well, maybe we can disperse the way in 
which we generate electricity. Maybe we can do this in a way--
and here it is going to be increasingly important--to generate 
solar and wind and other renewables from more dispersed 
sources. And that is to a certain extent where the smart grid 
comes in so that we are doing it. We not only need a smart 
grid, but we need smart people planning a smart grid so we 
don't overbuild it and put those burdens back on to the 
consumer.
    And we saw all of that happen back in the 1970s and early 
1980s where all of these nuclear power plants that were 
guaranteed to be needed by the year--if we didn't build 500 new 
nuclear power plants, they told us, by the year 2000, we would 
have blackouts all over America.
    So we need to think big and put all these costs on the 
shoulders of ratepayers all across America. In the New England 
region we really suffered from the overenthusiasm, I will say, 
of these big central planners. And so we have to be careful 
here that those types of--we will call it planners--don't 
control this process, because it is just the opposite era that 
we hope we are entering in terms of the development.
    And I can just feel the hoofbeats of the large central 
planners moving towards this whole concept. And after 33 years, 
I am kind of aware of what can happen. There is an old saying 
that a smart man learns from his own mistakes and a wise person 
learns from other people's mistakes. But at my age and service 
in Congress, I am an expert in both areas of mistakes, and so I 
just don't want to see that happen again. And that overbuilding 
issue is really something that is quite important to me.
    So if you could, Ms. Azar, could you go to the question of 
AC/DC. And first of all, explain to our viewing audience what 
that is and why different results occur depending upon the 
decision which is made.
    Ms. Azar. Yes. The alternating current system is the 
primary transmission grid we have right now, and it is 
completely interconnected. So when you put an electron on that 
AC grid it is going to go to the path of least resistance. With 
models, you can predict where it is going to go but you can't 
direct it. The electron goes where it wants to go. On a DC line 
it is actually very directed. It has one direction.
    Mr. Markey. So DC means direct current.
    Ms. Azar. Direct current, thank you. The direct current 
line. You have a lot of control over it. The electron goes in 
one direction. You know, for instance, when you drop an 
electron on one end of a DC line, you know where it is going to 
end up. It is going to end up on the other side of the DC line. 
Whereas in an AC grid, if you drop an electron at the same 
point, you are not sure what path it is going to take. The only 
thing you know is you are pulling power off at certain 
locations. So there are two very different models.
    Mr. Markey. And for the purposes of our discussion today, 
how does that instruct this discussion in terms of the goals 
that we are seeking to achieve.
    Ms. Azar. I can give two answers to that. One is we need to 
know what the goals are from Congress. And then we are going to 
be able to decide which of those, or the combination of the 
both of them, will solve the problems that you are going to put 
forth to us.
    I can tell you from a personal perspective that the DC 
lines, if your problem is trying to get power from a fairly 
localized location, let's just say in the Dakotas, and you are 
trying to get it far east, as long as you are over 400 miles 
long, DC lines will likely be a very good solution to that 
problem.
    Mr. Markey. Are they more or less expensive?
    Ms. Azar. That is a good question. As a general rule I 
would say they are less expensive, but it depends on what kind 
you are building.
    Mr. Markey. And that should be a decision, in your opinion, 
made by the regions.
    Ms. Azar. That is correct.
    Mr. Markey. And that could actually turn on how much burden 
is placed upon consumers in terms of their electricity bill 
each month.
    Ms. Azar. That is correct.
    Mr. Markey. Mr. Wellinghoff, if I may, you heard Mr. 
Hibbard and others talk about what the impact would be of the 
Waxman-Markey bill on the marketplace. The signal will be sent 
to move away from carbon-producing electrical generation; there 
will be a national renewable electricity standard now as a 
result encompassing an additional 20 States. And he largely 
believes that that is going to now force States on a regional 
basis, because of these national goals, to reach a combination 
on these new lines, and that the Federal Government is actually 
going to be less needed in the future, perhaps with the 
exception of the Federal lands issue, to resolve these issues.
    What is your response to that in terms of--because we are 
trying to create a market-based response. And I will just give 
you an analogy and perhaps you could--or an analogous situation 
and perhaps you could reflect upon it.
    After we passed the 1996 Telecommunications Act, all of a 
sudden there was an explosion of broadband deployment across 
the country. Telephone companies, cable companies, others who 
had been telling the local PUCs, oh, it is not in fact cost-
effective to be deploying fiber optic or broadband technology. 
We are now in a mad race to do so because there is now a new 
Federal law which is placing a premium upon it, and by the time 
we reached 2000 we actually had a dot-com bubble because of the 
vast and very rapid deployment of broadband across our Nation.
    Now, we created thousands of new companies. Some survived, 
some didn't. But it was great for our country in the long run. 
Is there any reason to believe that the legislation, as it is 
now drafted, won't unleash a similar and very, very significant 
deployment of renewables across the country and kind of press 
regions and individual utilities to finally resolve their 
longstanding, call it--no, I won't call it opposition, I will 
call it skepticism. Because I saw it in the telephone sector, I 
saw it in the cable sector. They moved overnight to challenging 
their perspective.
    Do you think the legislation will do that, and, as a 
result, perhaps this Federal role isn't going to be as needed, 
with the exception of the Federal lands issue?
    Mr. Wellinghoff. Well, certainly as you are aware, Chairman 
Markey, there are approximately 29 States now that have 
renewable portfolio standards. In fact, my State of Nevada is 
one of those. We have a standard that is 20 percent by 2015, so 
it is far ahead of most State standards. And those standards 
have in fact created markets, created markets for renewable 
energy, and moved renewable energy into those markets very 
effectively. So I think that is happening already on the one 
hand.
    But on the other hand, I have people coming into my office 
who tell me that wind is being curtailed in the Midwest because 
we don't have adequate transmission. So that tells me we have a 
problem. It is not simply the markets are creating these new 
markets for renewables, it is the need to somehow ensure that 
this transmission gets built to make a deliverable. We need to 
make a deliverable.
    Mr. Markey. You are saying that the States are not 
cooperating in the Midwest in the transmission of wind.
    Mr. Wellinghoff. No, I am not saying necessarily the States 
or the Federal Government. I think it is a combination of the 
fact that we have certain barriers, which include issues of 
planning, siting, and cost allocation that need to be relooked 
at in ways that we can facilitate more transmission for 
renewables.
    Mr. Markey. You are basically saying the Federal Government 
needs more authority because the States aren't doing the job in 
moving that wind around in the Midwest.
    Mr. Wellinghoff. I am saying that ultimately what we need 
to do is ensure that the States understand----
    Mr. Markey. And I appreciate that.
    Mr. Wellinghoff [continuing]. Those priorities, and that in 
fact----
    Mr. Markey. But you are saying they will need that,--in 
addition to the new law which we are passing, which will create 
all those incentives for utilities to move and for states to 
move, you are saying that that is not going to be sufficient; 
that you believe that the States themselves have some built-in 
inertia, and some of those utilities do as well, and that 
because they don't move, even though we passed this new law and 
created these high goals that have to be met by national 
mandate, that we will still need the Federal Government to come 
in as a club. Is that what you are saying?
    Mr. Wellinghoff. I am saying that I am not blaming the 
States, nor am I saying the Federal Government is the panacea. 
I am ultimately saying----
    Mr. Markey. Right. But here is the problem. In terms of--
and I appreciate what you are saying, and you are engaging in a 
bit of terminological inexactitude which is necessary for to 
you maintain good relationships with the States, and I 
appreciate the position that I am putting you in. But at the 
same time, we are going to create a brand new law here that is 
going to affect all these States.
    Mr. Wellinghoff. That is correct.
    Mr. Markey. So we need some evidentiary basis for 
preempting the States that is based upon a Federal perception 
of the problem that exists in these States. So while we won't 
use the word ``blame,'' we need to find some way in which we 
pinpoint what it is that is occurring that is the problem, and 
then we can tailor a solution to it. But we can't deal with it 
in kind of broad generalities. We need to have the specifics, 
and then even in the report language of the legislation we can 
ensure that we are explaining the problem as it exists, let's 
say, in a particular region. And here we are talking about the 
Midwest and the fact that wind is not moving around, even 
though it is readily available. So pinpointing what that 
problem is helps us then to tailor the language to reflect that 
problem.
    So maybe you can elaborate a little bit on that Midwestern 
problem where the bottlenecks are, what causes it; and then we 
can kind of contemplate, cogitate, on what might be necessary.
    Mr. Wellinghoff. And I am suggesting part of the 
bottlenecks are the fact that, number one, FERC really doesn't 
have the authority to allocate across boundaries. So between 
Misol and PGM, for example, we don't have the ability to 
allocate costs of transmission across these boundaries, and, as 
such, we are not really getting the types of transmission 
built.
    And I think you are going to hear from Mr. Welch from ITC 
in the next panel, and he has a very interesting transmission 
project that I would commend you to explore this with him 
further, because he is in the Midwest trying to get large 
amounts of wind out of the Dakotas into the Chicago area. And I 
think one of his issues he is talking about is cost allocation 
across two regions.
    So what I am suggesting ultimately is that Congress needs 
to look at an entire structure of planning, siting and cost 
allocation that is initially deferred to the States, and I 
would say that the States should in fact ultimately solve that 
problem. But if they can't, then the pressure should be there 
to allow the Federal Government to step in if necessary.
    Mr. Markey. Thank you. Mr. Wellinghoff. I was the author in 
1992 of the wholesale transmission access provisions in the 
Energy Policy Act that, for the very first time, gave the FERC 
the ability to force utilities to stop blocking requests for 
open and nondiscriminatory access to wholesale transmission 
lines so that there could be more competition in that area.
    The FERC then built upon that new law that I created and 
issued a generic order 888 on transmission access, which is an 
historic order, and that is based upon my 1992 law.
    So I am very sensitive to this issue, but, again, I don't 
think we should tailor something that goes beyond what is 
needed. And I say this to you, Chairman Wellinghoff, that part 
of the problem we have up in Massachusetts, and New England as 
well, is the--and it is not you, it is your predecessor of FERC 
that has just left office--but preempting our State and local 
governments from granting FERC siting authority on wholesale 
electric transmission lines, that issue is illuminated by the 
fact that the FERC has seemed to be completely unresponsive to 
our local concerns when it comes to the siting of the liquefied 
natural gas facility in Fall River, Massachusetts. I have an 
LNG facility in my district in Everett, Massachusetts.
    Massachusetts, working with the Federal Government, has 
licensed two LNG facilities about ten miles off of our 
coastline to bring LNG into our market and into the New England 
market. It is upwards now of 30 percent of the natural gas that 
we use in New England, and we support LNG and we have licensed 
two facilities.
    But notwithstanding Massachusetts saying to the FERC, we 
don't need another one on land, we are doing it offshore and we 
have licensed them, the FERC--not your FERC--but the FERC up 
until this point has been saying, no, you are going to have 
another one in Massachusetts. And even that decision itself 
could affect the amount of renewables that we need. 
Notwithstanding the fact that natural gas may be half of the 
carbon in its use as coal, it is not nearly as good as 
renewables will be, but it is going to affect our marketplace 
by having that be forced upon us.
    And the FERC has been pressing that now for the last 4 or 5 
years. So that kind of calls into question kind of this Federal 
one-size-fits-all process, where, even when the State is saying 
back off, the FERC continues to come in and say, no, this is 
what you are going to have for New England. So how do we 
reconcile that, Mr. Wellinghoff?
    Mr. Wellinghoff. Well, Mr. Chairman, I am not suggesting a 
one-size-fits-all process. Again I am suggesting, unlike the 
LNG process, where FERC has the primary and initial 
responsibility with respect to siting and permitting, that in 
fact States be given the initial opportunity in this regard. 
And that opportunity I think should be given all the tools 
necessary for it to succeed.
    Mr. Markey. Thank you, Mr. Wellinghoff.
    Are there other members who wish to ask questions of this 
panel? Let me recognize the gentlelady from Wisconsin.
    Ms. Baldwin. Thank you. Just one more rather big question. 
But I appreciate the Chairman for asking our witnesses to make 
this understandable for a viewing audience.
    We had a discussion recently of follow the electrons. And I 
actually would like to pose a question about following the 
money. I ask anyone who wants to give just a very brief primer 
on the economics of transmission, is there a guaranteed rate of 
return; how is that determined; who decides; and, if so, what 
is that guaranteed rate of return for transmission?
    Mr. Wellinghoff. Congresswoman Baldwin, I will attempt 
that. I like to believe in rate-based regulation and 
transmission is not--first of all, you have to understand 
transmission is not a market item, it is an item that we have a 
limited number of entities who are putting in transmission, and 
it is under a rate-based cost service scheme.
    So they are authorized a return on their investment and 
they have an opportunity to earn a return. But to earn that 
return they have to manage their expenses and they have to 
manage their operations in an efficient way to ensure that 
their expenses match what their projections are, so that their 
return comes out to the level that they hope to achieve. The 
regulators, whether it be a State regulator or a Federal 
regulator, would authorize a level of return on equity that 
would be authorized. But, again, that is only an opportunity to 
earn that level of return.
    Ms. Baldwin. Do you have any averages of what that rate of 
return might look like?
    Mr. Wellinghoff. I am sorry; what it might look like?
    Ms. Baldwin. What is the average rate of return? I know 
there are variables. A ballpark.
    Mr. Wellinghoff. I can submit that to you in writing but I 
don't have an average today for you.
    Ms. Baldwin. OK. Thank you.
    Mr. Markey. I thank the gentlelady. And I thank all of our 
witnesses. You have been absolutely fantastic.
    And you, Mr. Wellinghoff, I want to tell you how much we 
appreciate your willingness to take on this job. This is one of 
the toughest jobs we are going to have in America. You have an 
outstanding record. And I have already had an extensive 
conversation with you privately, and I really am very very glad 
you have this job. I think you are going to do a tremendous, 
tremendous service to our country there in that position. It is 
very sensitive. It is going to require people like you who are 
willing to spend the time to get this right so we have a long-
term solution. And as we are going forward, especially over the 
next week or so, we are going to need some specifics to help us 
to think through this issue in terms of where the problems have 
been, what has caused the problems, and what would be needed in 
order to correct those problems.
    We will need some examples and some specifics with regard 
to what has been used as a blocking mechanism to the resolution 
of these regional issues, because we want to get at that issue. 
We want to have real competition out there in the marketplace. 
So for you especially, Mr. Chairman, we hope that we can work 
with you in the next week. You have an outstanding staff and 
you are an outstanding individual and I think we can accomplish 
that.
    Mr. Wellinghoff. We would be happy to do that Mr. Chairman, 
and thank you very much for your kind words.
    Mr. Markey. I thank you. What I am going to do now is to 
work now in reverse and I am going to give each one of you 1 
minute to tell us what you want us to remember as we consider 
this issue over the next week.
    And we will begin down on this end with you, Mr. Halvey. 
You each have 1 minute apiece.
    Mr. Halvey. Thank you, Mr. Chairman. I think the two things 
that we would emphasize are the issue of supersizing, which 
relates directly to the cost allocation issue that we spoke 
about. It doesn't make a lot of sense for us to use up whatever 
goodwill we might have trying to locate a line--or, excuse me, 
locate a line that is undersized.
    The second thing is I think the Federal lands issue, the 
permitting issue, I have elaborated some on that. But this we 
see as a very large impediment. Those would be the two things 
that I think we would like you to bear in mind.
    Mr. Markey. Thank you, sir. Mr. Hibbard.
    Mr. Hibbard. Thank you, Mr. Chairman. I would just say that 
certainly from our perspective in the Commonwealth, we 
completely agree with the goals of the ACES legislation. We 
absolutely have to address the carbon issue and we have to 
address it now.
    What I would urge you to consider from the standpoint of 
transmission is to try to retain the competitive market 
structure that delivers benefits to our ratepayers in the 
designs that you implement going forward. the carbon cap that 
provides a value or cost, additional marginal costs associated 
with allowance purchase for fossil generating resources, and a 
renewable portfolio floor that provides additional revenues to 
renewable resources should provide the financial incentives 
needed to get the renewables and the associated transmission 
built. And that we want to maintain the distinction between who 
is responsible for paying for transmission if it is a 
generating facility, and who is responsible if it is needed for 
reliability.
    Mr. Markey. Thank you. Commissioner Azar.
    Ms. Azar. Thank you. Number one, define the goals that we 
need to be with the transmission grid.
    Number two, define a State-led process by which we can meet 
those goals. One of the primary aspects of that needs to be 
that the decision maker must be beholden only to the public 
interest.
    Number three, ensure there is Federal backstop authority so 
that we get our job done,
    Umber four, don't do harm. And with regard to that don't 
define a specific technology and please don't define a cost 
allocation process.
    Mr. Markey. Thank you. Mr. Coen.
    Mr. Coen. Thank you, Mr. Chairman. Very, very briefly, I 
just want to reiterate that the States are here to help. We 
would like to work closely with your committee in developing 
some transmission planning, and that Federal preemption of 
transmission siting should only be used as a last resort.
    Mr. Markey. Thank you. And, Mr. Wellinghoff.
    Mr. Wellinghoff. Mr. Chairman, thank you. I would suggest 
that hopefully you come away with this, number one, that we are 
not as far apart as we initially seemed to be, I think, when we 
started out in our testimony. But we all have the same goals: 
to reduce carbon and to ultimately develop as much renewables 
as possible to do that.
    But I think we need to remember that there are nonmarket 
barriers that we need to look at how to get that development 
done. And as part of those nonmarket barriers I think we need 
to do, put a construct together that would allow the States to 
initiate the processes of planning, siting and cost allocation, 
to have the transmission developed to deliver renewables. We 
also have to have that back pressure of the Federal Government 
standing there, being able to step in if necessary to make it 
happen and get it done.
    Mr. Markey. Thank you, Mr. Wellinghoff, very much.
    And in the spirit of what Mr. Wellinghoff said, we may not 
be as far apart as the initial statements indicated. Let's work 
towards that goal. Time is of the essence, so all of these 
conversations now continued outside of this hearing room over 
the next week or so would be very helpful to us. With the 
thanks of the committee, this panel is dismissed, and we will 
ask the next panel to come up to the table.
    Mr. Markey. We thank you all for being here and we 
apologize for the delay. This is obviously a very important 
issue. We may be writing the transmission rules for the next 
generation of electricity generation in our country. Over the 
next couple of weeks we will see if that can be accomplished, 
perhaps it can, perhaps we can't. But your testimony is going 
to be central to accomplishing that goal. We could not do it 
without your participation.
    We apologize to you for the delay in your panel being 
recognized and for it being Friday afternoon, getting later as 
the minutes transpire.

  STATEMENTS OF RALPH IZZO, CHAIRMAN AND CEO, PUBLIC SERVICE 
ENTERPRISE GROUP; JAMES NIPPER, SENIOR VICE PRESIDENT, AMERICAN 
 PUBLIC POWER ASSOCIATION; GLENN ENGLISH, CEO, NATIONAL RURAL 
   ELECTRIC COOPERATIVE ASSOCIATION; REID DETCHON, EXECUTIVE 
DIRECTOR, ENERGY FUTURE COALITION; JOSEPH WELCH, PRESIDENT AND 
    CEO, ITC HOLDINGS CORPORATION; CHRIS MILLER, PRESIDENT, 
PIEDMONT ENVIRONMENTAL COUNCIL; AND DAVID JOOS, CEO, CMS ENERGY 
                          CORPORATION

    Mr. Markey. We will begin with Ralph Izzo. He is Chairman, 
President and Chief Executive Officer of the Public Service 
Enterprise Group, Incorporated. He is a leader within the 
utility industry in the public policy area. We thank you once 
again for being here. Mr. Izzo, whenever you are ready please 
begin.

                    STATEMENT OF RALPH IZZO

    Mr. Izzo. Mr. Chairman, members of the subcommittee, thank 
you for this opportunity to appear before you today to testify. 
PSEG distributes electricity and natural gas to more than 2 
million customers in New Jersey, and owns and operates electric 
generating capacity in the Northeast, Mid-Atlantic and Texas. 
PSEG has long supported policies to promote renewable 
generation.
    We are planning major investments in solar, offshore wind 
generation, and in energy storage technology that will make 
renewable energy more competitive.
    The question today is not whether we should vigorously 
promote renewable generation, but how. Specifically, how should 
we use transmission policy to promote renewable generation at 
the lowest possible cost? This would include not just Federal 
siting authority, but decisions about transmission planning and 
cost allocation that are fundamental to determining how much 
transmission is built and where.
    There are two competing views on this. One view which I 
strongly favor is that government should establish prices for 
externalities such as the cost of emitting greenhouse gases, 
and let market forces determine which technologies and which 
locations are most promising for investment. This is the 
approach taken in the landmark ACES legislation. It establishes 
a price for carbon through a cap-and-trade program and a 
market-based subsidy for renewable generation through the 
Renewable Electricity Standard. With these price signals 
developers can compare the cost of renewable generation in 
different locations, including the associated transmission 
cost.
    The alternative view is that some central entity should 
plan and site transmission that will connect the areas with 
strong renewable resources to areas of high electric demand via 
some grand superhighway, paid for by a broad group of 
taxpayers. Under this model government would essentially pick 
winning renewable technologies and locations, and build 
transmission to facilitate them.
    I have several concerns about this approach. First, it 
could lead to unnecessarily expensive outcomes. All business 
owners know that if they establish their factory at a distant 
location to keep production costs down, they have to weigh that 
against shipping costs. But if we socialize shipping costs of 
renewable generation, we skew decisions away from locally based 
options that may have a lower total cost.
    That is why a bipartisan coalition of ten Northeastern 
Governors wrote to Congress warning that this policy would 
undermine their efforts to grow renewable industries. Moreover, 
building thousands of miles of transmission lines in 
anticipation of the arrival of renewable generation may lead to 
an expensive excess of transmission capacity.
    Transmission planning is a delivered process meant to 
respond to long-term reliability and economic concerns. It is 
not intended to predict and facilitate dynamic markets.
    Second, as has been said so many times already, there is no 
such thing as a green transmission line. Transmission lines 
carry all electrons without regard to the carbon footprint of 
the generator. In fact, the dispatchability of renewable 
resources would suggest you would have a significant 
underutilization of the transmission line unless you filled it 
with other forms of generation. So a green transmission line 
will give market advantage to any power plant fortunate enough 
to be close to the new line.
    Third, creating a new planning process across regions is 
unnecessary. We already have regional planning processes that 
are effective and sensitive to local concerns. Cross-regional 
issues should be addressed through improved coordination 
between regional planning bodies, which is exactly the approach 
taken in the committee-passed bill.
    Finally, existing tools can help renewable projects connect 
to the grid without distorting locational price signals and 
without potentially burdening consumers with an excess of 
expensive transmission.
    For example, if the costs of connecting to the grid and 
getting power to market are too much for one developer to bear, 
multiple developers can share costs among their projects. Or 
FERC can require that ratepayers initially bear these costs, 
provided they are reimbursed by developers after the projects 
become operational.
    In closing I believe we will meet our long-term carbon 
reduction goals. But sitting here today, I cannot tell you what 
renewable technologies, and, more importantly, in what 
locations, it will take to get us there to serve our customers 
at the lowest possible cost, and neither can government.
    That is why I strongly support policies such as an RES and 
carbon pricing that send price signals to the market and 
unleash the creativity and entrepreneurial spirit of the 
American people. Thank you.
    Mr. Markey. Thank you, Mr. Izzo, very much.
    [The prepared statement of Mr. Izzo follows:]

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    Mr. Markey. Our next witness is Joe Nipper who is the 
Senior Vice President for Governmental Affairs of the American 
Public Power Association, representing the Nation's more than 
2,000 community-owned electric utilities. We thank you for 
being here. Whenever you are ready, please begin.

                   STATEMENT OF JAMES NIPPER

    Mr. Nipper. Thank you, Mr. Chairman, and members of the 
subcommittee. I appreciate the opportunity to be here today.
    APPA, as you mentioned, represents the interests of 2,000 
publicly owned State and locally owned utilities across the 
country, collectively serving 45 million Americans; 110 public 
power utilities collectively own about 8 percent of the 
Nation's transmission lines of 138 kilovolts or greater.
    However, the great majority of APPA's members are 
transmission-dependent; that is, dependent on facilities owned 
by others, in order to acquire the electricity they need for 
redistribution of their retail customers.
    Our members report that more transmission is needed in 
almost every area of the country to serve a variety of 
purposes, including increased use of renewable energy, 
reliability and to enhance competition.
    In our view, the single most significant impediment to 
getting a new transmission built continues to be siting, and we 
urge Congress to clarify and continue to support the Federal 
backstop siting authority included in EPAct05. EPAct05 siting 
authorities were a major step forward but have been called into 
question by the recent court decision in the Fourth Circuit 
Court of Appeals.
    As an intervener the side of FERC in this case, APPA 
believes that legislation should clarify the original 
congressional intent in EPAct05 by expressly providing FERC 
with the authority to consider backstop transmission siting 
applications when a State denies an application.
    It is important to note for us that as units of local and 
State government, public power utilities are not typically 
supportive of Federal policy that diminishes State authority, 
and we certainly have had concerns about Congress' and FERC's 
attempt to expand authority in other areas. However, e 
importance of siting new interstate transmission lines cannot 
be understated, and thus our continued support of the 
compromise crafted in EPAct05.
    There is some misconception, though, that higher voltage 
lines are always better. In actuality, the interconnected 
nature of the grid is such that a lower voltage line, located 
strategically, could have a greater ability to relieve 
congestion and to enhance reliability than a higher voltage 
line, d could experience less local resistance to the siting 
and cost less than a higher voltage line.
    Of course there are situations where higher voltage lines 
is preferable and necessary, but we want to make it clear that 
bigger is not always better when it comes to the grid. This is 
one reason why regional planning is so important.
    The impact of proposed new higher voltage facilities on an 
existing transmission network needs to be fully considered so 
that the optimal mix of facilities can be determined. 
Encouraging proportional joint ownership of transmission 
facilities by load-serving entities, including public power 
utilities in a given region, another way to get more 
transmission built.
    If the responsibility for building and owning the 
transmission grid is spread more broadly among the entity 
serving customers in a region, en joint transmission planning 
will be facilitated simply because there are more participants 
at the planning table supporting the immediate projects.
    If network customers of a dominant regional transmission 
provider are encouraged to own their load ratio share of the 
transmission system, transmission usage and ownership will be 
more closely aligned, d the friction between transmission-
dependent utilities and transmission owners can be reduced. 
There are many examples, Mr. Chairman, where that is the case.
    With respect to planning, APPA supports the transmission 
planning provisions, including the committee-passed version of 
the American Clean Energy and Security Act, as we believe they 
will bolster rather than duplicate or further complicate the 
existing and extensive transmission planning process under FERC 
Order 890 occurring at the regional and subregional levels 
across the country.
    The manner in which transmission facilities' costs are 
allocated among generators, transmission owners, transmission-
dependent utilities and other stakeholders is one of the most 
controversial topics related to transmission.
    APPA strongly supported the language included in EPAct that 
underscores FERC's flexibility in determining the appropriate 
transmission pricing methodology. We don't always agree with 
the decisions made by FERC on cost allocation. We continue to 
believe that Congress had it right in leaving these decisions 
with appropriate stakeholder input and administrative due 
process to FERC to determine under sections 205 and 206 of the 
Federal Power Act.
    The issue of who pays for transmission facilities to 
provide regional benefits is a difficult one. Such facilities 
can provide Presidents future system benefits that extend well 
beyond the specific entities wherein the facilities are 
constructed. Therefore APPA urges FERC to provide greater 
guidance on cost allocation for new major transmission 
facilities that afford regional benefits.
    APPA does not support the allocation of costs of facilities 
to regions, subregions or entities that will receive little or 
no benefit from the facilities, and therefore opposes a Federal 
statutory requirement to allocate such costs on an 
interconnection-wide basis.
    And lastly, Mr. Chairman, APPA has concerns with respect to 
FERC's application of its incentive rate authority provided 
under EPAct05, for it seems to regard section 219 as a 
statutory requirement to offer a variety of different 
transmission incentives to applicants. It appears that these 
entities have been helping themselves to those incentives and 
that the Commission has not taken a sufficiently disciplined 
approach to awarding rate incentives.
    We appreciate your long-held concern in this area and your 
recent letter to FERC asking for an explanation of their use of 
their incentives, and we look forward to their response and to 
working with the Chairman on that issue. Thank you very much.
    Mr. Markey. Thank you, Mr. Nipper, very much. And I 
appreciate the very diplomatic way in which you used the word 
``entity'' in your testimony.
    [The prepared statement of Mr. Nipper follows:]

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    Mr. Markey. Our next witness is Glenn English. He is the 
Chief Executive Officer of the National Rural Electric 
Cooperative Association. But more significantly, he served in 
the United States Congress for ten terms as one of our most 
distinguished members. And it is our honor to have you back 
before the subcommittee. Glenn, whenever you are ready please 
begin.

                   STATEMENT OF GLENN ENGLISH

    Mr. English. Thank you very much, Mr. Chairman. I 
appreciate that. I am not sure my board of directors would 
agree with the ``more significantly,'' but I appreciate that 
and understand where you are coming from on that.
    Mr. Markey. I think the one thing that the board and I can 
share in comment is that we will each reserve to ourselves 
which of us believes that you had a more important job.
    Mr. English. Well, I appreciate both of you thinking I have 
an important job.
    Mr. Markey. The fact that you are so important to both of 
us.
    Mr. English. You are very kind Mr. Chairman. I appreciate 
that.
    As I think the members of the committee know, electrical 
cooperatives are consumer-owned. We are in 47 States across the 
country and we serve, however, 7 percent of the population 
through about three-quarters of the land mass of the United 
States. So when we talk about transmission and when we talk 
about the fact that you are talking about generating renewable 
energy in this country, it is most likely going to come from 
areas that are served by electric cooperatives. So we have a 
big stake in that. We plan to have a big part of the future as 
we move forward in that general direction.
    Mr. Markey. Can you just repeat that number again; 7 
percent of the customers, but----
    Mr. English. We have got three-quarters of the land mass.
    Mr. Markey. OK. Thank you.
    Mr. English. And it is all owned by those individual 
consumers throughout those 47 States, Mr. Chairman.
    Also I think we can all agree that the signing of the 
American Clean Energy and Security Act of 2009 is going to 
bring about a profound change in the way that not only energy 
is generated in this country, but the way that we use energy in 
this country. It is going to change our lives.
    And with that understanding, I hope that we can also 
recognize that we have got to be prepared for that kind of a 
dramatic change. The transmission system as it he exists today 
was certainly not designed for this kind of change. In fact, it 
wasn't designed for the 1992 Energy Act with the deregulation 
on the wholesale level, so we are still trying to adjust to 
that.
    What we would suggest, Mr. Chairman, is that we need a 
sense of urgency here. And certainly we need transmission as a 
part of this act. It needs to be addressed in this act. And as 
a result of that, we think there are some very basic principles 
that need to be incorporated as you move forward with any kind 
of legislative language as it applies to this new transmission 
system, new transmission policy, that the country is going to 
be following.
    As I think you know, Mr. Chairman, we have established now 
a National Renewable Cooperative so each cooperative in every 
one of those 47 States can participate in any renewable project 
in any part of that three-quarters of land mass of the United 
States. So a wind project in South Dakota,for instance, may be 
invested by people from Wisconsin, co-ops from Wisconsin, or 
they may be from Alabama or Georgia or wherever. They can own a 
piece of that.
    And what we are looking for is a way in which we can 
generate that power through renewables in the most efficient 
way possible, no matter where it is located. We should be 
looking for the most cost-effective way in which we can do 
that. And just as we know that certain wind corridors exist 
that will provide us with a great amount of production of wind 
energy throughout the Great Plains, not every farm is the same, 
not every State is the same, that we also then have got to make 
sure that when we locate that kind of generation in those areas 
that we can move that power out of those regions. So we need an 
efficient and effective transmission system to do it.
    But we also, I think, have to be very aware of the fact 
that--and it has been our experience that bottom-up planning 
works the best. So you need local regional planning, you need 
local folks putting this plan together to determine what is the 
best way to move forward on this. And so that is a principle I 
think we need to adhere to, a bottom-up rather than top-down as 
far as planning the transmission system of this country.
    I would also suggest that under these conditions, and given 
the fact that we are going to have to move in a more efficient 
transmission system, we are going to have to move that 
transmission across State lines, that we may run into 
difficulties and encumbrances, we may run into delays that, 
quite frankly, the national best interest is not being served.
    So I think we have got to, while we are having that local 
planning, we have got to also make sure that we don't have 
impediments put in the way that are going to prevent that local 
planning from being implement. We have got to make sure that 
the overall national policy of moving across State lines is 
dealt with. And for that reason we do think that there is going 
to have to be some authority on the Federal level as far as 
siting is concerned. But, again, it should be focused on 
certain qualifiers as we look at that siting authority.
    First of all, it should be facilities that are only 
identified on regional planning. It should be facilities that 
are interstate projects. In fact, the owners of those 
facilities should not be eligible for enhanced rates or any 
other financial incentives as far as where they are building 
that transmission. And the cost of facilities should be fairly 
and broadly allocated, along with the use of the facilities, 
should not be limited to just one kind of power.
    It should not just be renewables only. And that is mainly 
because of the fact that the law of physics, as we have heard 
expressed here today, doesn't distinguish between electrons. 
They are all the same once they get into that transmission 
system.
    And we would also suggest that the law which we are 
proposing this become a part of, would in fact itself dictate 
the direction that we would be manufacturing or generating 
those particular electrons.
    Also we would suggest there needs to be broad fair-cost 
allocation. We think that is a very important point. Obviously 
those of us who are electric cooperatives are very sensitive 
about that. We would have a few people. And all the costs being 
dumped on those few people would be unbearable, so it should be 
allocated on the basis of who is getting the benefit, who are 
the folks that are receiving the benefits of that energy that 
is being generated and produced.
    Also, we would suggest, Mr. Chairman, that we move forward 
and recognize the fact that there are more benefits to building 
such a transmission system across this country in different 
areas of this country than just the movement of that power. The 
right-of-ways for any kind of transmission like that would 
become extremely valuable. And it would also be a way in which 
it would in fact. Become a new technologies right-of-way; ways 
in which you could move new technologies. And I know you are 
particularly interested in the smart grid. And obviously there 
are many uses that could be incorporated into any new 
transmission system along those lines. Fiber between the towers 
is obviously another way in which we can make good use of that 
transmission system.
    So, Mr. Chairman, I would suggest to you that we need a new 
transmission system to go along with the legislation that is 
being proposed.
    Mr. Markey. Thank you, Glenn, very much.
    [The prepared statement of Mr. English follows.]

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    Mr. Markey. Our next witness is Reid Detchon. He is 
Executive Director of the Energy Future Coalition, a nonprofit 
organization that seeks to reform U.S. energy policy. We 
welcome you, sir. Whenever you are ready, please begin.

                   STATEMENT OF REID DETCHON

    Mr. Detchon. Mr. Chairman, thank you for inviting me to 
testify today on this important and timely topic. I find a 
great deal of agreement across the table, and particularly with 
Congressman English.
    Last year, in partnership with the Center for American 
Progress and the Energy Foundation, the Energy Future Coalition 
undertook a series of listening sessions with a diverse group 
of stakeholders including Federal agencies, grid operators, 
transmission companies, utilities and environmental groups, and 
we found broad support for changes in Federal law to facilitate 
the transmission needed to bring stranded renewable resources 
to market.
    Wind in the great plains; solar in the desert Southwest; 
and yes, offshore wind in the East.
    Our vision statement for the national clean energy smart 
grid, which is attached to my full statement, was endorsed by 
some 55 organizations, including the AFL-CIO, the Council on 
Competitiveness and the Digital Energy Solutions Campaign, 
along with many renewable energy advocates and environmental 
groups, including the Sierra Club, who are not usually prone to 
supporting new transmission capacity.
    What brought these environmental groups to the table and 
ultimately to agreement was the imperative of action to address 
with urgency the growing climate crisis. Time is running out 
for the world to avoid serious harm from climate change.
    Mr. Chairman, you understand this challenge very well, and 
we owe a great debt of gratitude to you and Chairman Waxman for 
your leadership and acumen in advancing H.R. 2454, the American 
Clean Energy and Security Act. You have set the appropriate 
long-term target for emissions reductions, more than 80 percent 
by 2050.
    The changes in our energy system needed to reach this goal 
are profound. We need to begin planning today to reach those 
reductions by 2050. And one thing is clear, we cannot deliver 
that much low-carbon energy without changes to the grid. Low 
carbon electricity will be expected to power not only our homes 
and businesses but also an increasing portion of our vehicle 
fleet.
    The system we have today for planning, permitting and 
financing transmission lines was not designed to respond 
quickly to a challenge of this magnitude, moving many thousands 
of megawatts of renewable energy from remote areas to load 
centers.
    Our discussions with those who must deliver on this 
promise, renewable energy developers and transmission 
companies, quickly focused on the obstacles of planning, 
siting, and cost allocation that we have heard repeatedly 
today. Of these, planning turned out to be the linchpin, as our 
group concluded the better planning could reduce the difficulty 
of siting and financing new lines.
    We recommended enlarging the scale of the planning process 
to the two principal power grids in the United States, the 
Eastern and Western Interconnections, for two reasons. First, 
long-distance transmission is needed to support development of 
some major renewable energy resources and necessarily will 
cross State and regional boundaries. For example, almost 
300,000 megawatts, an enormous amount of wind, 300,000 
megawatts of proposed wind projects, which is more than enough 
to meet 20 percent of our electricity needs, are waiting to 
connect to the grid because there is inadequate transmission 
capacity to carry the electricity they would produce.
    Second, planning for transmission to support the renewable 
energy standards of State and Federal legislation must occur on 
a broad regional basis, just as the benefits of such 
investments will be shared on a broad regional basis. Your 
discussion of the impact of wind resources and ease is a good 
illustration of the need for planning across the entire 
interconnection.
    An enhanced regional planning process of this kind should 
build on, not replace, the current engagement of stakeholders, 
including States, grid operators, utilities, consumer and 
environmental interests and landowner groups.
    This will remain a State not a Federal process. Siting 
authority would rest with FERC, but the States collectively 
would have more power not less than they do now, because their 
plans would govern the exercise of that Federal authority. Only 
if planning process breaks down would FERC have the ability to 
resolve disputes and get transmission built to bring renewable 
energy to market.
    We have been gratified to see many of our recommendations 
reflected in H.R. 2211, introduced by Congressman Inslee, a 
system of interconnection wire transmission planning supported 
by broadbased cost allocation and underpinned by Federal siting 
authority. We would be pleased to work with the committee on 
further legislative language if you think that would be 
helpful.
    Mr. Chairman, you and your colleagues have taken an 
enormous step forward by reporting legislation that will begin 
the process of transforming our Nation's energy system to deal 
with the threat of global climate change. Expanding and 
modernizing our transmission grid is essential to that 
transformation. By addressing transmission directly and 
comprehensively, you can help our common goal of a clean-energy 
future become a reality and not be left stranded by regulatory 
impediments. Our economy, environment and national security 
deserve no less. Thank you very much.
    [The prepared statement of Mr. Detchon follows:]

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    Mr. Markey. Thank you so much for your testimony.
    Our next witness is Joseph Welch, chairman and president 
and chief executive officer of ITC Holdings. That is the 
Nation's first independent transmission company.
    We welcome you sir, please begin.

                   STATEMENT OF JOSEPH WELCH

    Mr. Welch. Thank you and good afternoon.
    Mr. Markey. Could you move the microphone in a little 
closer and turn it on?
    Mr. Welch. Thank you and good afternoon, Chairman Markey, 
and members of the subcommittee.
    As the Chairman said, my name is Joseph Welch. I am 
chairman, CEO and president of ITC holdings, the Nation's first 
and only independent transmission company in the United States.
    Being independent means that we are not affiliated with any 
market participant. We have no ownership or have any dealings 
in energy transactions. Our job is to facilitate the market, to 
facilitate the interconnection of any sources of generation 
that are put before us, and to make sure that we connect the 
loads and reliably do so.
    We own and operate about 15,000 miles of high-voltage lines 
in Iowa, Minnesota, Illinois, Missouri, Michigan and our 
developing regional transmission projects in Kansas and 
Oklahoma. As we have worked through these various States, each 
time we come to the point where we need to build transmission, 
for whatever reason, we have come up against a set of 
obstacles, each one different in every State.
    Probably that is as it as should be, but when we get to the 
outcome of where we want to go in this country, this is going 
to become a major impediment for us to move forward as a 
country who dearly and necessarily needs to seek energy 
independence.
    I brought with me today a report from the Council on 
Competitiveness and Energy Sustainability which I believe is a 
good framework, and I will leave it with you all for you to 
read. I think it offers a lot of information which is very 
consistent with the very principles and items that you are 
considering here.
    But going to the fundamental principles that we need, and 
at the top of the list, and I want to go to right to the top of 
the list, we need a policy for energy in this country. We have 
talked about all the things underneath, and we debate about 
whether it is right or wrong, but the fundamental issue is that 
we need a policy and something to plan to.
    With that policy in place, the rest of the items become a 
lot clearer and a lot more succinct. And a lot of the debates 
that we hear from all of us who really are closer than further 
apart really start to come together. For instance, with a 
policy, then the planners, and when I say the planners, and we 
have talked about this in the item I support and my company 
supports, is that we need independent planning authority. We 
need to take the policy and get the policy implemented in a 
very clear and succinct way.
    Secondly, if you have the policy, then the cost allocation 
can be dictated by the policy itself, meaning that from that 
policy, we now know where we want to go. We now know who are 
the benefactors and what those benefactor issues are. And so 
that policy sits at the top and we need that.
    And last but not least, when we get down to the very bones, 
I always tell people being in the transmission business it is a 
great business until I do one of two things, and the first item 
is build new transmission lines. The minute we start to build 
them, it becomes a nightmare. And the process a hard, and it is 
long. And what we need is true Federal backstop siding 
authority. That is not meant to cut the States out of the 
process. The States should be involved in the process. They are 
the most knowledgeable about local issues. But at the end of 
the day, we have to get a regional transmission grid built.
    As you have heard here, there are literally thousands upon 
thousands of megawatts of renewable energy that this country 
needs to deploy, and we need to deploy it now. And if we start 
now, we are years and years away from our goal line. So please 
let's have this conclusion and bring it to an end, and I thank 
you very much for my opportunity to speak here today.
    [The prepared statement of Mr. Welch follows:]

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    Mr. Markey. Thank you, Mr. Welch.
    Our next witness is Christopher Miller. He is president of 
the Piedmont Environmental Council, an environmental 
organization focused on conservation issues in the Piedmont 
region of Virginia.
    We thank you for being here, sir.

                   STATEMENT OF CHRIS MILLER

    Mr. Miller. Thank you, Congressman Markey. Thank you for 
the opportunity to testify on behalf of the Piedmont 
Environmental Council, also for land trusts and land 
conservation organizations across the country. We are a very 
active member of the Land Trust Alliance and are working hard 
on this issue with them. And they have asked us to express some 
of their concerns.
    I have a couple of maps which I hope the staff can put up, 
because I think they will help instruct this conversation.
    We appreciate the time and attention that this committee is 
taking to consider the complex issues associated with the 
transmission. We appreciate the willingness of the committee to 
deal with transmission as part of a broader energy policy and 
not as an end in itself.
    From our perspective, transmission is only a tool for 
moving electricity from the source of generation to the end 
user, but much more important are the policies that will reduce 
demand for electricity, modify peak demand so that the need for 
generation and transmission infrastructure is minimized. And 
encourage clean generation close to load centers, which will 
reduce the losses of energy caused by long-distance 
transmission.
    For in the end, the high-voltage transmission lines with 
towers that can exceed 180 feet in height and wide rights of 
way are part of the energy system with the largest footprint 
and often the most dramatic impacts on communities that lie 
along them. The transmission system has the potential for 
substantial land-use impacts, including impacts that directly 
conflict with Federal, State and local policies to protect and 
enhance important natural and cultural resources.
    In the brief amount of time I have, I want to focus on a 
couple of issues that have not been raised yet. The first is 
the assertion that the only way to meet national and State 
goals to reduce greenhouse gas emissions and to increase the 
role of renewable sources of energy is to build a national 
transmission grid. One example of this grid is up here. This is 
the grid proposed AEP for the 765 KV system that would link 
resources.
    It was originally overlaid over wind resources, but in 
fact, the correspondence with coal resources is actually higher 
when you actually go see where those lines are laid out. That 
is one of the causes of concern that in fact what you would be 
doing by doing a transmission-loaded set of incentives is in 
fact encouraging greater transmission of coal-fired generation 
than in fact of renewables.
    The reason for that is that no where in the legislation do 
we recommend a change in the economic dispatch rules that 
govern which generation is brought on line first. All the 
renewable goals notwithstanding, we dispatch energy by price, 
and the auctions are by price. We have heard lots of calls for 
competitive pricing, but the potential that that will in fact 
increase the amount of transmission that is carrying coal-fired 
emissions, and in fact from the dirtiest and oldest plants, is 
very real.
    Unless this committee can also ensure that, before that 
transmission is made available, we are in fact putting in the 
carbon cuts through the carbon cap-and-trade and otherwise 
governing the emissions of grandfathered coal plants who have 
never reduced their emissions, there is a very real possibility 
in the Eastern Interconnect that the gains that have been made 
by RGGI, the 45 million tons or so of carbon emissions 
reductions, could be offset.
    Second, an issue that has not been addressed so far is the 
issue of peak versus average demand. The transmission and 
generation system is being designed to meet peak loads, and the 
more we can do to reduce peak loading, the less we have to 
build across our landscape. And so it is very important that 
this committee address the fact that transmission planning that 
has been done to this point really hasn't addressed the full 
incorporation of some of the policies that are in the ACES 
legislation. They did not take into account the amount of 
demand-side management that is recommended and in fact assumed 
a level of per capita electricity used that steadily increases 
over time rather than is reduced.
    The final thought is this, to the extent the transmission 
is necessary, and obviously connecting some renewables will 
require transmission, it is very important to respect the other 
public policy values that are out there, and particularly 
related to the lands that have to be crossed by transmission. 
We should be seeking to avoid wherever possible the natural 
resources, the historic resources, the cultural resources and, 
yes, even the landscapes that America values so much.
    Current legislation draws a distinction between publicly-
owned lands and privately-owned lands. And that is something 
that I think this committee needs to look at hard. East of the 
Mississippi, most natural resource lands, most historic lands 
are privately-owned but protected through public-private 
partnerships, whether it is the designation of historic 
districts or the donation of conservation and historic 
easements. Those easements are often approved by State 
government.
    In the case of Massachusetts, hundreds of thousands of 
acres are actually individually approved each time by the 
attorney general. The same is true in the State of Virginia. 
And they are due all of the respect that a national park or 
national wildlife refuge or State park would. So as you think 
forward on those transmission lines that have to be built, make 
sure we are avoiding the resources, the private resources as 
well as the public resources. And make sure we mitigate and 
compensate for the impacts on those resources.
    [The prepared statement of Mr. Miller follows:]

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    Mr. Markey. Thank you, Mr. Miller, very much.
    And other final witness is David Joos. He is the president 
and chief executive officer of CMS Energy, and chief executive 
officer of its principal subsidiary, Consumers Energy.
    We welcome you, sir.

                    STATEMENT OF DAVID JOOS

    Mr. Joos. Thank you, Mr. Chairman.
    And thank you also for pronouncing my name properly. I 
appreciate that.
    I appreciate the opportunity to address the subcommittee 
this afternoon. Consumers Energy, our principal subsidiary, 
serves 1.8 million electric customer; 1.7 natural gas customers 
in lower peninsula of Michigan.
    I would suggest that we have a bit of a unique opportunity. 
Having developed, owned, and operated transmission assets along 
with distribution and generation assets for a century, 
Consumers Energy now no longer owns transmission assets. We 
sold our transmission system in 2002, and it is now 
independently operated.
    We therefore appreciate the difficulty in siting new 
transmission and support Federal backstop authority for new 
interstate lines as a last resort. We also see a need for new 
transmission in Michigan to interconnect new wind resources 
that are being developed in the Thumb in particular and along 
the Lake Michigan shoreline as part of the renewable portfolio 
standard compliance effort in the State of Michigan.
    We believe new transmission development should meet three 
key commonsense principles. Number one, benefits of proposed 
projects should exceed the cost by a reasonable margin. Number 
two, proposed projects should be similar or should be superior 
to other alternatives, which would include other transmission 
solutions, distribution solutions, perhaps lower-voltage 
transmission solutions and generation solutions. And finally, 
costs ought to be fairly allocated to the beneficiaries of the 
project as determined through the planning process.
    I would concede that these principals are complex to apply 
and therefore need an independent planning authority of some 
sort to apply them, a regional transmission organization or a 
group of RTOs, for example, to conduct the evaluation.
    They cannot be objectively performed by market 
participants, including independent transmission owners that 
have a vested interest in new transmission. In our view, overly 
generous FERC incentive policies have created a rush to invest 
in transmission, often not justified on a cost-benefit basis. I 
provide some specific Michigan examples within my written 
testimony and won't go over those now.
    Fortunately for new intrastate projects in Michigan, we 
have a certificate-of-need process that fully vets these 
projects before allowing condemnation. I suggest that might be 
a model that is appropriate at the Federal level as a Federal 
backstop.
    Now there are proposals to build massive new high-voltage 
infrastructure over the entire Eastern Interconnect, the so-
called overlays. Part of that, a $3.2 billion 765 KV project 
largely in Michigan has already been evaluated by the Midwest 
Independent System Operator and determined not to meet a cost-
benefit test for the State of Michigan.
    A number of independent system operators and planning 
authorities in the Eastern Interconnect recently studied a 
joint coordinated system plan that was referred to earlier 
involving $56 billion high voltage overlay. Some have referred 
to it as the equivalent of constructing an interstate highway 
system. That study concluded that Michigan would receive 
virtually no benefit at fairly large cost. Looking just at 
consumers customers, if cost were spread a ``postage stamp 
basis'' to all our customers, we would pay about $159 million a 
year of increased cost for roughly a $2 million annual benefit. 
I would submit that Michigan simply can't afford that.
    Another $10 billion to $12 billion project that has been 
proposed to bring wind power from the Dakotas to as far east as 
Chicago, of course, does not reach Michigan, but further, when 
the cost of that transmission is included in the equation, 
Michigan-based generation is less expensive to develop. On that 
score, we agree with the 10 Northeast and Mid-Atlantic 
Governors with regard to the potential implications on 
developing renewable resources locally.
    Let me be clear, we don't object to such projects if the 
benefits exceed the cost by a reasonable margin; reasonable 
alternatives have been considered; and the costs are spread 
appropriately to the beneficiaries. That might be, for example, 
Dakota wind developers or purchasers of that power who need it 
meet their own standards.
    Finally, Michigan transmission rates today are four times 
what they were in 2002 when we sold the system. Even without 
these overlay projects, we are forecasting they will increase 
by another 50 percent from today's rates over the next 6 years. 
Transmission investment is occurring in the State of Michigan.
    We don't feel that FERC rate making oversight currently is 
sufficient in States where transmission is independently owned 
and therefore not subject to State regulatory oversight. That 
situation, along with overly rich incentives, are causing in 
our view transmission development that is sometimes not in the 
best interest of our customers.
    In summary, we think targeted transmission investment is 
needed both in Michigan and nationally. We believe that 
planning and evaluation by our RTOs or groups of RTOs that are 
independent from market participants is an appropriate way to 
pursue that. And we think three key principals need to be 
followed: One, benefits exceed cost by reasonable margin; two, 
reasonable alternatives have been considered; and three, the 
costs are appropriately allocated to the beneficiaries.
    Thank you again.
    [The prepared statement of Mr. Joos follows:]

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    Mr. Markey. Thank you, and we thank our entire panel.
    I turn and recognize the gentleman from Washington State, 
Mr. Inslee.
    Mr. Inslee. Thank you.
    First, I would like to put on the record a white paper 
which is quite instructive. It is entitled ``Green Power Super 
Highways,'' provided by the American Wind Energy Association 
and the Solar Energy Industries Association.
    Mr. Chair, if I may.
    Mr. Markey. Without objection.
    [The information was unavailable at the time of printing.]
    Mr. Inslee. I appreciate that, Mr. Chair.
    This does confirm what the witnesses talked about, which is 
that we have got 300,000 megawatts of wind projects waiting in 
line essentially to connect to the grid. And they point out 
that the lack of transmission capacity is also hindering 
States' ability to meet multiple renewable energy goals, and it 
just confirms what several the witnesses have testified today.
    I want to ask Mr. Detchon about the greenhouse gas 
interconnection standard that your proposal has incorporated 
that basically would essentially allow Federal backstop 
authority. It would encourage it in relationship to those 
sources that are low and zero greenhouse-gas-emitting 
generators. Can you tell us how you envision that working?
    And by the way, would it help in at least some sense some 
of the concern of the Northeast States who don't want to see 
their offshore wind projects intruded upon by, say, if we can 
call it dirty sources from far away intruding on their 
corridor.
    Mr. Detchon. Thank you for the question.
    I think there is confusion how a greenhouse gas 
interconnection standard would work. In the first place, it is 
an interconnection standard. It doesn't govern what electrons 
are on the line because, as everybody has pointed out, you 
can't distinguish between green and brown electrons.
    But if we are going to provide some additional authority to 
site and pay for special new transmission lines to benefit 
renewable energy, let's make sure that the generation that is 
hooked up to it is not conventional coal. And so what we have 
suggested is that, since you are going to need probably gas to 
balance renewable energy on these lines, that up to a single-
cycle gas turbine, emission level would be acceptable to 
connect to these lines, but above that would not. And that 
seems like a fairly straightforward way to approach that.
    With regard to the question of competition with local 
resources, I think what should be important and I think 
inevitably would happened if the States are driving this 
planning process even on an interconnection-wide basis is that 
they take into consideration State policies considering local 
resources and use delivered prices, as was mentioned in the 
last panel, as the basis for comparing different resources. I 
think that is a very straightforward way to make sure that the 
competition is fair.
    Mr. Inslee. I will ask you what I hope is a rhetorical 
question, but in the bill that I have introduced, we have tried 
to preserve the bottom-up planning, so that the States and 
regions really do the planning rather than a cramdown from the 
Federal Government. Do you think that is a fair 
characterization of the proposals that we have made?
    Mr. Detchon. No, absolutely. And I think that there has 
been a lot of talk about top-down or Federal intervention here, 
but I think the legislation that you have proposed, 
Congressman, establishes mechanisms for States to work 
collaboratively addressing these regional issues. And those 
decisions will be executed with the assistance of FERC, but 
FERC would only be able to step in if the States are unable to 
reach a plan.
    Mr. Inslee. And could you suggest any other solutions to 
the concern that the gentleman from Massachusetts expressed 
about this offshore wind being crowded out, if you will? I 
perceive that greenhouse gas interconnection standard would 
help solve that problem, because it would essentially allow the 
use of the Federal backstop authority for clean source, green 
sources of energy. I think that would help solve that problem. 
Do you agree with that, and is there anything else you could 
suggest that would help solve that concern?
    Mr. Detchon. Well, I think a stronger step which Mr. Miller 
suggested, which would be to have Federal intervention on the 
loading orders for the use of different kinds of resources, I 
doubt that that would be politically saleable right now. So I 
think, within the context of what is doable, I think the 
approach you outlined is about as strong as it could be.
    I might add the greenhouse gas standard to a certain extent 
over time gets overtaken by the requirements of the cap-and-
trade legislation, assuming that that is enacted, but I think 
your legislation reflects that as well as.
    Mr. Inslee. Thank you.
    Thank you, Mr. Chair, for your cooperation.
    Mr. Markey. The gentleman's time has expired.
    The Chair will recognize himself for a round of questions.
    Let's go down the line and each of you could answer yes or 
no. Do you support giving FERC the authority to modify any 
transmission plans that are established through bottom-up 
regional planning processes?
    Mr. Izzo.
    Mr. Izzo. I would not.
    Mr. Markey. Mr. Joos.
    Mr. Joos. Nor would I.
    Mr. Markey. Mr. Nipper.
    Mr. Nipper. No.
    Mr. English. No.
    Mr. Detchon. I think that if the plans are developed by a 
broad array of States in the way we are describing, I would 
agree no.
    Mr. Markey. No.
    Mr. Welch.
    Mr. Welch. Bottoms-up is each State brings it up, or how do 
you envision that?
    Mr. Markey. Regional planning that is agreed to by the 
State. Should the FERC be able to modify a regionally agreed-
upon plan?
    Mr. Welch. If the planning process is independent, no. If 
the planning process is not independent, yes.
    Mr. Markey. ``Not independent'' meaning?
    Mr. Welch. That it is influenced by market participants and 
other political entities. The planning process to me----
    Mr. Markey. Even if the State governments agree to it?
    Mr. Welch. I believe that all the transmission within the 
State that is not regional in nature should--the State should 
have as much authority over it as they want when we develop 
regional transmission, which is for the good of the region or 
the good of the country.
    Mr. Markey. Should the FERC be able to override that 
original plan agreed-upon by those States?
    Mr. Welch. I stand by what I said. If it is done by an 
independent planning authority, yes. I am saying no. And if it 
is not, yes.
    Mr. Markey. Mr. Miller.
    Mr. Miller. I think one of the concerns we would have if 
FERC were involved, that the right of appeal ought to be not 
only limited to the transmission proposers but also those with 
other perspectives. Right now----
    Mr. Markey. Under those circumstances, you would give FERC 
the authority to modify a transmission plan?
    Mr. Miller. Well, there are legitimate Federal issues with 
anything involving interstate transmissions, but if you are 
going to create that, it ought to be equally available to both 
the proponents and those that have concerns.
    Mr. Markey. OK. Let me go down the line again, how many of 
you would support a greenhouse gas interconnection standard of 
the type proposed by Mr. Inslee?
    Can we go down and ask how many of you would support that?
    Mr. Izzo. I would not for the simple reason that a 
greenhouse gas interconnection standard does not speak to 
existing carbon-intensive generation being able to piggyback.
    Mr. Markey. Thank you.
    Mr. Joos.
    Mr. Joos. I will have to qualify my answer, I am not 100 
percent sure the specifics of the standard. I haven't read 
them.
    I would say we have, of course, standards for 
interconnecting all kinds of renewable capacity already. I 
would not be supportive of something that limited the use of 
the transmission line to certain types of technology simply 
because I agree with what has been said earlier, that you can't 
label the electrons.
    Mr. Markey. Thank you.
    Mr. Nipper.
    Mr. Nipper. No, sir, we would not.
    Mr. Markey. You would not.
    Mr. English.
    Mr. English. I believe that the bill in itself, since this 
is going to be part of the legislation, the bill in itself 
takes care of that issue, so no.
    Mr. Markey. No.
    Mr. Welch, I know you do support it. Mr. Welch.
    Mr. Welch. With my company, we are an independent 
transmission company. You make the policy, we are going to 
support the policy.
    Mr. Markey. Mr. Miller.
    Mr. Miller. I think it is an interesting concept would 
apply to lines that feed into the grid, but unfortunately, the 
authorities that are being discussed would apply to 
transmission that is not simply for bringing new generation on 
to the grid but for expansion of the grid as a whole. So I 
would have to say no.
    Mr. Markey. And I will let you answer for the record, Mr. 
Detchon.
    Mr. Detchon. Just to touch on these two points, we are 
talking about specially authorized renewable energy 
transmission lines that would be feeding into the larger grid, 
not to the larger grid. And I agree with Glenn that if this is 
attached to H.R. 2454 and enacted, then some of the reason for 
it goes away. But there is always the possible that this will 
become disconnected from that bill, and as a free-standing 
measure on transmission, we think that a greenhouse gas 
standard would be important.
    Mr. Markey. How many of you would limit Federal authority 
to only lines that affect renewable electricity that is 
generated? How many would limit Federal authority just to that?
    Mr. Izzo. I would do quite the opposite, Mr. Chairman. I 
would limit Federal siting authority to lines that affect 
reliability.
    Mr. Markey. Reliability, ok, thank you.
    Mr. Joos?
    Mr. Joos. I would limit Federal authority as only a 
backstop provision and rely on local and regional planning as 
the primary mechanism.
    Mr. Markey. Mr. Nipper.
    Mr. Nipper. Assuming the backstop authority, no, we 
wouldn't limit that.
    Mr. Markey. You would not limit.
    Mr. English, would you limit?
    Mr. English. And again, backstop.
    Mr. Markey. Mr. Detchon, would you limit it just to 
renewables?
    Mr. Detchon. What I would say is that, if we are going to 
create special new authorities, they ought to be targeted at 
the problem, which is renewables.
    Mr. Markey. Mr. Welch.
    Mr. Welch. I would not limit the Federal backstop siting 
authority.
    Mr. Markey. Mr. Miller.
    Mr. Miller. I think we would support limiting it and also 
respecting the Fourth Circuit opinion that we were involved in.
    Mr. Markey. Mr. Izzo, do you support Federal back-up siting 
authority for lines for any reason other than reliability?
    Mr. Izzo. No, I would not.
    Could you talk a little bit about that first map which Mr. 
Miller put up that showed very rich wind resources along the 
East Coast of the United States. With the exception of some 
portions of the Great Lakes and out on the West Coast, it looks 
like it has the greatest potential for renewable electricity 
generation in our country.
    Mr. Izzo. You are absolutely right, Mr. Chairman.
    And as I may have mentioned, we pursuing 150 megawatt wind 
farm. And as you mentioned, we can do that 20 miles out and 
still be within 140 feet of water. That is not to underestimate 
the challenges of construction and operations and maintenance 
cost. We expect to fully bear the cost of the short-haul 
transmission and would be opposed to having a nationwide 
support for a long-haul transmission and be unfairly 
disadvantaged.
    Mr. Markey. Well, what could happen if we take Mr. Miller's 
charts--I guess they are not Mr. Miller's charts. They are 
AEP's maps that have been put together. Is that right, Mr. 
Miller?
    Mr. Miller. The transmission map is AEP's. We overlaid it 
on wind and then the coal resource maps.
    Mr. Markey. If that transmission plan was implemented, it 
would bring a transmission line in from the Midwest very close 
to the East Coast. What impact might that have on your planning 
for renewable electricity off of the coastline or other parts 
of New Jersey?
    Mr. Izzo. We would stop planning for that.
    Mr. Markey. Why would you stop?
    Mr. Izzo. Well, because we would not be able to be 
competitive with the cost of the wind if it is not burdened by 
the cost of transmission. So the wind from the Midwest if it 
does not face the transmission charge would be cheaper in that 
case.
    Mr. Markey. Now you are up in the Great Lakes, Mr. Joos.
    Could you talk about that as well in terms of the potential 
renewables coming in off the Great Lakes and what impact that 
could have for Michigan and what could happen if, instead, 
power is wheeled in from other parts the country through 
Federal preemption and Federal eminent domain takings?
    Mr. Joos. It is a bit similar but maybe two aspects to what 
Mr. Izzo said.
    First of all, it is clearly windier in the Dakotas for 
example that it is Michigan. Michigan has wind resource even on 
land, but it is not as windy in the Dakotas. So instead of 42 
percent roughly capacity factors, you might see in the range of 
30 percent capacity factor.
    However, once the cost of transmission to get the power 
from the Dakotas to Michigan is taken into account, it is 
cheaper to develop it in Michigan.
    Now you mentioned offshore, Michigan does have a very 
strong offshore wind resource. Unfortunately, offshore is still 
about twice as expensive to develop than onshore resources. So 
when that calculus is taken into account, we think it makes 
more senses to develop the onshore resources in Michigan first.
    Mr. Markey. Now you heard the earlier testimony about the 
problem getting renewable energy resources from Dakotas over to 
Minnesota and the blame being laid at the feet of the Federal 
Government. In that region, do you believe that is one of the 
main problems that otherwise the regions have been able to 
harmonize their electricity transmission policies in a way that 
is viewed as fair to all States?
    Mr. Joos. I am not familiar with specific Federal 
Government problems that may have come up in Minnesota. My 
observation is that the regional planning process has been 
effective and is a good solution to the problem.
    I think as many of us are pointing out, you warp the 
economics when you start putting effectively free transmission 
or postage-stamp transmission across broad regions, and then 
you change the economics dramatically rather than having them 
compete on a stand-alone basis.
    Mr. Markey. Now for our audience, when we say ``postage 
stamp,'' what are you referring to? Why is the phrase ``postage 
stamp'' used?
    Mr. Joos. Effectively what a postage-stamp rate is, and it 
is used an analogy to the Federal postal system, where you put 
a stamp on a letter, and you can send it anywhere for the same 
price.
    Mr. Markey. You could send it from the Dakotas to New 
Jersey for the same price.
    Mr. Joos. The reality, of course, is the costs are not the 
same. And when we look at the cost of transmission to move 
power from West to East, there is a significant cost involved. 
However, if that cost is ignored and everybody pays the same 
price regardless of how far it moves, it changes the economics, 
and yes, Dakota wind would then be more economic on that basis, 
once the cost of transmission is ignored, than Michigan or the 
East Coast. We don't think that is the right way to look at it.
    Mr. Markey. And one of the things that we are really trying 
to accomplish obviously in the Waxman-Markey bill is to 
generate renewable electricity and renewable energy jobs 
generally in all 50 States.
    So Mr. Izzo here has a plan to, along with many other 
people in New Jersey, to generate new renewable energy jobs 
that help with the employment in his company, but in the State 
of New Jersey as well. And we don't want to invoke the law of 
unintended consequences here and have a great revolution, have 
a standard imposed upon New Jersey and not have the jobs 
created in New Jersey, especially if they have the richest 
renewable energy resource right off their shore.
    Mr. English.
    Mr. English. Mr. Chairman, I think you make a good point, 
but I also suggest one other thing, that it might make more 
sense, in light of the objective of the legislation and in 
light of the fact that we are entering into a little different 
world than we have in the past, that really what we are trying 
to do here is maximize the amount of renewable energy that we 
get produced all over this country.
    Now the fact of whether it is produced in one State versus 
another State, as long as it is the most cost-effective way in 
which we produce it and we can in fact make use of it all 
across this Nation, I would think would be the ultimate 
objective.
    Now I can understand why some folks may want to look at 
this very localized, and it may be a very parochial thing, but 
this is a national piece of legislation. And we are trying to 
achieve a national objective, and the thing that is limiting us 
to being efficient is this transmission system.
    Mr. Markey. Absolutely, and by the way, we couldn't agree 
more on this.
    Mr. English. So if you are looking at this map and the fact 
that we are talking about along the coast, and they may have 
more wind there, then obviously we ought to be looking, that is 
where we ought to produce it, and we should use that most cost-
effectively. And that should be the driver in where we go. If 
we can't do that and have to do it out in the Dakotas, then 
fine, do it in the Dakotas.
    But it shouldn't matter whether it is off the coast of 
Massachusetts or in the Dakotas, as long as we are meeting the 
Nation's needs, and we are going to have a huge amount of power 
that is going to be necessary to come from renewable energy if 
we are going to meet the objectives as outlined in the 
legislation.
    One quick point, I know, I have a home down in South 
Carolina. It is up on a mountain top. We have a huge amount of 
wind up there, but I can assure you, if you try to build a wind 
generator on that mountain, you are going to have a lot of 
people that are going to be objecting to it, unlike what you 
will find in the Dakotas.
    Mr. Markey. Absolutely.
    I think the point that Mr. Izzo is making and Mr. Joos as 
well is that, using this postage stamp analogy, it doesn't cost 
$0.47 to really move a letter from New Jersey to New York City. 
It probably costs less, but the average is $0.47, so that 
someone from South Dakota can mail a letter to New York City, 
and we have communications across the country. That is great, 
and we accept that. It is the way it should be.
    But what Mr. Izzo is saying is that if you do the same 
thing for electricity and you make it the same price to 
transmit electricity in from the middle of America to New 
Jersey as it would be to bring it in off the coastline of New 
Jersey, then that is going to undermine the economics of all 
the projects along the East Coast because it hasn't factored in 
how much it costs to transmit that electricity 1,500 miles all 
the way into the East Coast market. And so the question then 
becomes, how many new jobs will be created along the East Coast 
of the United States if there is no incentive any longer for 
Mr. Izzo because he is almost bound by his obligation to his 
shareholders to take all of this very inexpensive but 
subsidized electricity coming in from the Midwest?
    So how do we square this circle, Glenn, so that Mr. Izzo 
and Mr. Joos and others are not disincentivized to produce 
renewable electricity within their own service area?
    Mr. English. Broadbased fair rates, that is basically what 
you are talking about. The people that are receiving the power, 
that are using the power, are paying the cost. That is what it 
really comes down to. If you are not talking about mailing that 
letter from the Dakotas to some other region of the country, 
and you are talking about, instead, what it costs to actually 
mail that letter to that location, that is the real issue that 
you are coming down to.
    Mr. Markey. Mr. Izzo, what would you respond to that?
    Mr. Izzo. So I would say that, if I looked at just this 
last year alone, the price difference associated with 
transmitting power from the plains States to New Jersey, 
depending upon how busy the transmission lines were, range from 
$20 to $80 a kilowatt hour. Typically, it was $30 to $40 a 
kilowatt hour. That means it would be cheaper for a customer in 
New Jersey to use a wind farm operating 25 percent of the time 
than to use a wind farm operating in the plains 40 percent of 
the time, because it is the total cost that matters.
    If you eliminate transmission, then suddenly the 40 percent 
time of the Dakota farm looks cheaper, but you have put a 
burden on the American taxpayer, and you have ended our 
economic development in that region.
    Mr. Markey. Well, we want to be fair here, though, right? I 
mean, that is our goal of the bill. We want to incentivize 
renewable--this green energy revolution should be everywhere, 
not just in certain parts of the country. So we need to find a 
way then to make sure that we don't invoke this kind of 
consequence that undermines economic development in States that 
have incredible resources indigenous to them, and that is a 
real difficult problem here and something we that we have to 
work through.
    I apologize to everyone. I really could spend a whole 
afternoon with you, and next week I might spend an afternoon 
with each one of you in working out this issue, because we have 
to be fair. We have to be fair. We have a big vision, but 
everyone, every State can actually play a role here. There is 
actually a role for everyone, and we have to make sure that we 
render to the East Coast the things that are theirs; the things 
to the South that are theirs; and the Midwest that are theirs; 
and the West that is theirs. The prairie, the desert.
    And, Glenn, even as you were saying you represent 75 
percent of the land mass of the United States, there is an 
ocean mass, too, that is also out there. And we have to----
    Mr. English. We do have coastal co-ops, Mr. Chairman.
    Mr. Markey. That is what I am saying to you, and so I want 
to make sure those coastal co-ops are able to go out into the 
ocean and have the incentive----
    Mr. English. I am with you.
    Mr. Markey. So we have to work out a fair formula.
    So I thank each of you. And we are going to have to stick 
close together over the next couple of weeks so we can have 
this conversation and reflect what our national goals are, but 
with each State, each region, and the history of each State and 
region; States that are not even States, commonwealths, whether 
it be Virginia or Massachusetts, have their own traditions in 
terms of what lands are sacred that might not follow the 
traditional Federal Lands Act but have just the same impact in 
terms of the relationship with the history our States.
    So I thank each of you, and I am going to turn over the 
remainder of the hearing to Congresswoman Baldwin who will 
bring it to a conclusion. Thank you so much.
    Ms. Baldwin [presiding]. I don't get to sit in this chair 
very often, but I won't make you stay long just because I am 
enjoying it.
    First, a quick comment, and I am construing or interpreting 
from some of Mr. Welch's testimony that there is a frustration 
with some of the planning that is occurring at the State-level 
process. And one of the things that I would just point out, and 
certainly we have heard some testimony in the first panel about 
very successful State-level planning, but if you look at Order 
890 and this process, it is really relatively new and I think I 
would argue hasn't yet been given the chance to play out.
    If you look at the area that I am most familiar with, the 
first time MISO Order 890 planning processes were approved by 
FERC and then subject to additional compliance requirements was 
on May 15th, 2008. And thereafter, they had to do a filing in 
August of 2008, where it was just approved on May 20th, 2009. 
So you could make an argument that really just 3 weeks ago this 
is getting underway, and it is a process to be given 12 to 24 
months to occur.
    So it certainly concerns me to have a characterization of 
this State and regional planning processes as not being--as 
being broken or not working when really much of the new focus 
that is subject to Order 890 is just underway.
    I have one question for the panel with regard to, it goes 
without saying that construction of a transmission super 
highway will be a money maker for certain parties involved, and 
we heard the chairman of FERC testify about the economics of 
transmission siting, and construction as well as the guaranteed 
rate of return.
    And so I guess I would like to ask you all what role, if 
any, should these entities with profit interest play in the 
transmission siting and decision-making process? How should we 
appropriately limit or not the role that they play?
    And why don't we go from left to right this time and start 
with Mr. Miller.
    Mr. Miller. I appreciate that question, that has been one 
of the most troubling aspects of the planning process in the 
PJM region. The PJM is essentially, from our perspective, a 
trade association of utilities who are proposing projects and 
then ratifying the proposal amongst themselves. They do not, 
until very recently, have a process that complies with the FERC 
Order 890. They were looking only at transmission solutions and 
not at alternatives. And they do not do the kind of balancing 
of impacts, you know, other issues of the public interest that 
State utility commissions more clearly have authority to do.
    So the current way we do regional transmission planning is 
very disturbing. The owners of the transmission lines propose 
projects. There is a reactive approval process, and there is no 
balancing of other considerations, even within the alternative 
energy solutions like energy efficiency DSM. They are starting 
to incorporate those things, but the process is very 
conservative and very oriented towards producing transmission 
solutions.
    Ms. Baldwin. Mr. Welch.
    Mr. Welch. Well, to go to your question, first, the 
frustration that I feel with the planning process is that I 
would agree with you that Order 890 went a long way, but the 
one thing that we don't have in MISO or any of the other RTOs, 
we don't have full participation from all of the affected 
people. As a result of that, when you are trying to do regional 
planning, you are not going to get to the solution set that you 
need, number one.
    Number two, like when we had problems in 2003 with the 
largest blackout that affected this country, we finally came to 
the conclusion that NERC was funded improperly and wasn't 
independent in their decision-making for setting reliability 
standards. As a result of that, we changed the way NERC was 
funded. It reports to FERC. It is funded through an assessment 
through all the utilities, and that assessment is paid to FERC, 
who then pays NERC, and we have taken the financial incentives 
of the market participants out of the RTO or, in this case, the 
reliability council.
    So when we talk about independent planning, it is not about 
some kind of closed-door deal here. It is about getting the 
financial impacts off the back of the RTO so that they can do 
the job that they are supposed to do.
    Then when we get to that point, you have the question that 
says, who should participate and which of the rates of return 
that these companies should earn? I think that the fair thing 
to say, when you start to build regional projects, that 
everyone is affected by it; they should be all participating in 
as financial investors. This shouldn't be just a one-stop, one-
person place, but those people should be part of that 
investment proposition because they are all there to make the 
grid work and work in a concert way.
    When you build a regional grid, you have to have yourself 
in a position where you can also maintain it. No one company 
could ever go across thousands of miles, have linemen and line 
crews, warehouse facilities and everything that we need. So it 
is going to take the participation of all of those people on 
the route, but without everyone being there at the table, this 
gets tough to do. So when you get to that point, whatever the 
FERC says is just and reasonable; that is what it will be.Ms. 
Baldwin. Mr. Detchon?
    Mr. Detchon. I thank you for the question, let me suggest a 
way to think about cost allocation and rate of return together. 
Under the current system, private companies enter into 
agreements to provide transmission, and they go out, and they 
raise the capital on the markets to do that. So as our 
regulators consider that, they have to provide the cost of that 
at the high cost of raising that capital and then a rate of 
return on top of that.
    If the costs are more broadly shared, first of all, you 
have a guaranteed revenue flow which will reduce the cost of 
capital to raise the money in the first place. And in the 
second, and therefore a reduced rate of return to the companies 
would be justified. So there would be two ways by sharing the 
cost that you would reduce the cost of building out this 
transmission, sharing it across a broader range of customers.
    Ms. Baldwin. Mr. English.
    Mr. English. We have had many complaints about the fact 
that it is difficult for electric cooperatives to participate 
in this process both because of the size and the complexity and 
the type of expertise that is required to participate 
independently, but also I think a lot of it does come down to 
the situation that the big entities of the region, quite 
frankly, are the ones that seem to have the control and the 
influence or at least feel that they should.
    And many of those--so that basically does not have an all-
inclusive broad participation locally in designing many of the 
systems that come forward.
    Mr. English. So, I think there is much work that needs to 
be done in the improvements in that, and hopefully we are going 
to see that in the future, but we need a broad-based planning 
system in place.
    Ms. Baldwin. Mr. Nipper.
    Mr. Nipper. Yes, ma'am. We would agree with the comments 
that have been made that it really requires a participation by 
everyone involved, all the stakeholders, it is varied in our 
members' views among regions, some a bit better than others, 
but it really is necessary that everyone be at the table and be 
participating and their input be counted.
    I will say that, following up the comment on the RTO and 
ISO regions--and they vary a bit, as well, among them; but the 
opportunities to participate, equally participate in the 
stakeholder process with some of the other stakeholders, for 
our members leaves a lot to be desired. I will say that.
    And then I will lastly mention the benefits that I 
mentioned in my testimony about joint ownership, and if there 
are opportunities, equal opportunities for folks, and yet 
American transmission company is a good example of this, where 
an opportunity for broad and joint ownership by multiple 
entities provides planning and other benefits as well.
    Ms. Baldwin. Mr. Joos.
    Mr. Joos. Well, I might just pick up on something Mr. 
Miller said.
    I think that FERC's incentive policies have created a 
situation where not only independent transmission companies but 
integrated utilities that hold distribution, transmission and 
generation favor investment and transmission for solutions to 
the problems, even if they are not the most optimum solution. 
Because frankly the rates of return are higher and the levels 
of risk are significantly lower than other kinds of investments 
that might be under State regulatory policy vis-a-vis, for 
example, what the FERC has put in place. So our concern is you 
see a rush to invest in transmission.
    Now, I want to clarify again there are transmission 
projects that make sense, and if they make good economic sense, 
they ought to be supported. I think we have to be careful not 
to incent investment because of the low-risk, high-return 
environment vis-a-vis public interest; and therefore, I do 
think broad public planning of some nature is necessary with 
broad participation.
    Ms. Baldwin. And Mr. Izzo.
    Mr. Izzo. We operate both a regulated transmission and 
distribution business and an unregulated generation business. 
And the regulated transmission business provides reliability 
99.99 percent of the times through a regional planning process. 
It works and it works well. And that is regulated and rates are 
based upon our cost of service.
    Our unregulated generation business always has to consider 
the cost of connecting to the grid as part of its investment 
strategy and fully bears that cost.
    We need to dispel the notion that renewables are not being 
built because of the transmission system. Renewables are not 
being built because we are not sending clear price signals. 
This committee deserves congratulations on doing that through 
cap-and-trade and through setting an RES.
    And now, at the risk of being a little slip, the next thing 
I expect to hear from people is that if only we had 
refrigerated freight trains running free of charge from the 
North Pole, our local supermarket would get its ice cubes 
through there. It just doesn't make sense to ignore the 
transportation charges.
    Ms. Baldwin. I want to thank all of you gentlemen again for 
your time and expertise and your patience.
    Before I adjourn, I need to ask unanimous consent that two 
letters from FERC to Chairman Markey are put in the record. 
Without objection so ordered.
    [The information appears at the conclusion of the hearing.]
    Ms. Baldwin. And with that, our hearing is adjourned.
    [Whereupon, at 2:40 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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