[Senate Hearing 111-15]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 111-15
 
                      TRANSMISSION INFRASTRUCTURE

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


                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                                   TO

 CONDUCT A LEGISLATIVE HEARING TO EXAMINE DRAFT LEGISLATION REGARDING 
 SITING OF ELECTRICITY TRANSMISSION LINES, INCLUDING INCREASED FEDERAL 
          SITING AUTHORITY AND REGIONAL TRANSMISSION PLANNING

                               __________

                             MARCH 12, 2009


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


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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

BYRON L. DORGAN, North Dakota        LISA MURKOWSKI, Alaska
RON WYDEN, Oregon                    RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey          JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas         ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
EVAN BAYH, Indiana                   JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan            BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel


                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Clark, Tony, Commissioner, North Dakota Public Service 
  Commission, on Behalf of the National Association of Regulatory 
  Utility Commissioners and the North Dakota Public Service 
  Commission.....................................................    14
Detchon, Reid, Executive Director, Energy Future Coalition.......    58
Dickenson, James A., Managing Director and Chief Executive 
  Officer, JEA...................................................    63
Edwards, Graham, Acting President and CEO, Midwest Independent 
  Transmission System Operator, Inc..............................    53
Morris, Michael G., Chairman, President and Chief Executive 
  Officer, American Electric Power...............................    41
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     3
Reid, Hon. Harry, U.S. Senator From Nevada.......................     3
Welch, Joseph L., Chairman, President and CEO, ITC Holdings 
  Corporation....................................................    46
Wellinghoff, Jon, Acting Chairman, Federal Energy Regulatory 
  Commission.....................................................     8

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    77

                              Appendix II

Additional material submitted for the record.....................   105


                      TRANSMISSION INFRASTRUCTURE

                              ----------                              


                        THURSDAY, MARCH 12, 2009

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:33 a.m. in room 
SD-366, Dirksen Senate Office Building, Hon. Jeff Bingaman, 
chairman, presiding.

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

    The Chairman. Why don't we go ahead and get started. 
Senator Murkowski is on her way and will be here very shortly.
    This morning we're to hear from witnesses on a proposal to 
change the way that we permit and plan the transmission system 
for the Nation. Over the last 120 years or so the system to 
supply electricity has grown in importance for our economy and 
our lives. In the early days there was not much in the way of 
what we call transmission today. There were just local 
distribution systems and they were not interconnected. As time 
passed, we came to understand the economies that were possible 
with broader sharing of electric resources and the transmission 
system became important.
    Still, the transmission system was built to serve the needs 
of individual utilities for the most part. There were 
exceptions, of course, like in New England and in the Mid-
Atlantic, where power-sharing pools grew up.
    We here in Congress have changed the laws to encourage cv 
competitive markets in electricity with both the Public Utility 
Regulatory Policy Act of 1978 and the Energy Policy Act of 
1992. Increases in the trade in electricity have followed these 
changes. Along with these increases, new problems have arisen. 
Congestion on the transmission system chokes off opportunities 
for trade in electricity that could benefit entire regions. 
More recently, we're becoming more aware of the opportunities 
for cleaner domestic energy supplies. We have become aware that 
a lack of transmission inhibits those opportunities.
    The transmission system has not kept up with these changes 
in the way that industry works. I think the North American 
Electric Reliability Corporation tells us that we will see 
twice the growth in generation that we see in transmission over 
the coming decade if we stay on the same course we're on today.
    In 2005 this committee tried to create a way to overcome 
the difficulties we had in siting transmission and getting it 
built. The Department of Energy was charged with examining 
congestion on the system and designating corridors of national 
interest. FERC could then site transmission in those corridors 
when States were unable or unwilling to do so.
    That system is widely seen as insufficient today. It does 
not apply to most of the country. It does not take into account 
future need. As a result, we've heard increasing calls for 
broadening Federal authority. Voices such as the Manhattan 
Institute, Governor Pitako, T. Boone Pickens, the Center for 
American Progress, the former Chairman of the FERC Joe 
Kelleher, Jim Hecker, the American Wind Energy Association, 
environmental organizations, they've all called for a greater 
Federal role.
    Senator Reid introduced a bill this last week to address 
these issues. He's here today to talk about that proposal. I 
have circulated a discussion draft that is similar in thrust, 
but has some differences. The proposals that we have before us 
today are attempts to take on what most commentators have 
identified as the three most difficult issues: the siting 
authority, the regional planning, and the allocation of costs. 
I hope that this hearing can help begin a discussion that will 
lead us to constructive legislation in this area.
    Senator Reid, we know your time is valuable. Why don't you 
go ahead with your testimony at this time and then when Senator 
Murkowski comes she will undoubtedly have a statement to give 
as well.
    Senator Reid. Here she comes.
    The Chairman. Oh, OK.
    Senator Murkowski. Good morning.
    The Chairman. Hi. How are you?
    Senator Murkowski. Doing wonderful today.
    The Chairman. Good, good.
    I just did a little opening statement here and we're glad 
to hear one from you if you'd like, and then Senator Reid is 
our first panel, and then we have two others.
    [The prepared statement of Senator Mark Udall follows:]
   Prepared Statement of Hon. Mark Udall, U.S. Senator From Colorado
    Mr. Chairman, thank you for holding today's hearing on electricity 
transmission.
    Our transmission grid is in trouble. It is overextended, 
inefficient, and vulnerable, and does not allow for the expansion into 
new energy sources, such as renewable energy.
    And that is a problem. We need to expand our use of sustainable and 
domestically produced energy. I have long been a promoter of renewable 
energy--I helped Colorado develop a renewable electricity standard 
(RES), which requires that our state produce 20 percent of our 
electricity by 2020. I also worked to get a 15 percent by 2015 
amendment passed through by the U.S. House of Representatives in 2007. 
Unfortunately, that effort failed in the Senate.
    I am very pleased to be working with Chairman Bingaman and others 
to bring a national RES to the President's desk this year.
    Expanding and strengthening our transmission infrastructure will be 
critical to implementing a national RES, but it will also help make our 
energy use more efficient, open up new areas to energy development, and 
make our grid system more secure.
    However, there are several issues that we in Congress must address 
to move this transmission work forward--specifically, how new 
transmission projects are planned, where and how the transmission 
infrastructure is sited, how to make it more secure, and how this new 
infrastructure is paid for.
    I'm looking forward to hearing from our witnesses on all of these 
issues today.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Wonderful. Thank you, Mr. Chairman. I 
appreciate you convening this hearing this morning. A really 
difficult issue before Congress as we discuss our Nation's 
transmission infrastructure. We know that we've got a problem. 
We've got aging transmission infrastructure that is simply not 
keeping pace with demand. By 2030 the EIA projects a 30 percent 
increase in U.S. electricity demand, but the transmission has 
only grown 6.5 percent since 1996.
    So it's understandable that our transmission isn't adequate 
to meet our future electricity needs. We all recognize that 
transmission projects face enormous costs as well as public 
opposition. In the 2005 Energy Policy Act we directed DOE to 
designate national transmission corridors in constrained areas, 
provided FERC with limited backstop siting authority. This 
EPAct provision was controversial in its inception and has yet 
to result in additional transmission capacity. So we know we've 
got to do better.
    Energy security is a national goal and transmission 
infrastructure is a backbone requirement. We know that we need 
to build the lines out to bring location-constrained renewable 
resources to load. But as far as I'm concerned en security 
means transmission must be an asset for all of our energy 
sources, and we must ensure the reliability and the cyber 
security of the grid while at the same time we make it smarter.
    It's a tall order, but I commend you and our Majority 
Leader Reid for crafting proposals aimed at addressing the many 
obstacles to constructing transmission.
    We've got a pretty good panel here this morning and I think 
we'll get right to the issues: With planning, should we 
establish interconnection-wide planning entities or are we 
going to make progress through ongoing collaborative regional 
efforts? Is additional Federal siting authority needed, and if 
so what about the States' role?
    Who pays? Who pays for the cost of the new transmission? 
Should the cost be allocated throughout the interconnection or 
should those who benefit pay for the costs?
    Then, should we direct or dedicate new transmission to 
renewable resources? I have to ask the question whether that's 
even possible. In reviewing some of the testimony today, I 
really had to smile when one of the witnesses cautioned us to 
remember that Congress has the power to change all laws except 
the laws of physics.
    So we've got a lot in front of us, Mr. Chairman. Again, 
Majority Leader Reid, I appreciate your leadership on this 
issue and look forward to the testimony from our witnesses.
    The Chairman. Senator Reid, why don't you go right ahead. 
Welcome to the committee.

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

    Senator Reid. Mr. Chairman, thank you very much. This is 
such an important committee. I'm happy to see such good 
attendance here today.
    I really do feel that I have to comment on the ranking 
member of this committee. When I first came to the Senate, we 
had Senator Mikulski. She was the woman on the Democratic side. 
You know, men are always very macho about overcoming injuries 
and putting up with stuff. Senator Murkowski flew all night 
after really tearing up her knee, to come back and participate 
in what we are doing here this week. It's admirable.
    But I do say, Senator Murkowski, the things that we've done 
to allow women--and I say ``allow women''--to participate in 
athletics is stunning. My 9-year-old granddaughter broke her 
arm Friday in a bicycle accident. She didn't know that. But she 
went and played in two basketball games on the weekend. She's 
left-handed. She broke her left arm, and was the star of the 
tournament. Her mother said that she would a lot of times grab 
her arm after playing.
    So I think we've established, at least in my mind, that 
women are tougher than men, or at least as tough as.
    Senator Murkowski. Thank you.
    Senator Reid. I say to John McCain--I want a chance to say 
this to you. Your daughter was on the Rachel Maddow Show last 
night and she was so good, stunningly good.
    Senator McCain. Thank you very much. I am not a regular 
viewer.
    [Laughter.]
    Senator Reid. One reason that I'm sure the show was watched 
so much last night, because frankly I would have turned it off 
too, but she said that your daughter was going to be on. So I 
kept watching it, rather than flipping to ESPN, which I usually 
do when I'm eating my dinner.
    Senator McCain. Thank you. Thank you for your kind words.
    Senator Stabenow. Just for the record, I watch her start to 
finish, just for the record.
    [Laughter.]
    Senator Reid. Mr. Chairman, members of the committee: Thank 
you very much for allowing me to testify here this morning. 
This is a critical, important issue.
    In 1931 the legendary inventory Thomas Edison had some 
advice that he gave to Henry Ford. Here's what he said--and off 
course you know Henry Ford's were driving up demand for 
gasoline. He told Ford, and I quote: ``I'd put my money on the 
sun and solar energy. What a source of power. I sure hope we 
don't have to wait until oil and coal run out before we tackle 
that.'' End of quote.
    It's been more than 7 decades since then and today we find 
ourselves facing a three-pronged energy crisis, threatening our 
economy, our environment, and our national security. Our 
national security we tend to just fluff over, but we cannot be 
a secure Nation when we import almost 70 percent of our oil 
from Chavez of Venezuela, the unstable Middle East, and on and 
on.
    The leadership of President Obama, members of this 
committee, especially under the leadership of Chairman 
Bingaman, and many elected officials, business leaders, and the 
American people, gives us reason for hope that the time for 
solutions has finally come. President Obama sent a strong 
message that renewable energy development will be a cornerstone 
of his Administration by placing major investments in clean 
energy at the center of his economic recovery plan.
    I'm confident that the President's plan will help create 
jobs and lay the groundwork for long-term economic growth in 
Nevada and across the entire country. We all realize that the 
President's recovery plan is just the first of a number of 
steps. Our energy crisis has been deepening for decades and 
we're not going to solve it overnight. But we know one thing 
for sure: Working together, in partnership with the White 
House, Federal, State, and local governments, community leaders 
and the private sector, we can and we must meet this moment 
with the action it requires.
    In addition to the innovation that has always carried our 
country forward, the private sector and State and local 
governments are already making great strides. They are 
laboratories of creative ideas that we hope to stimulate with 
recovery plans, with venture capital, and with reforms to our 
national energy policy. For instance, in Pennsylvania renewable 
energy has sparked more than $1 billion in private investment.
    Senator Udall, I've spoken to Governor Ritter and he said 
that the spur of jobs developed with renewable energy in 
Colorado has stopped the economic crisis in Colorado from 
deepening. In Iowa, shuttered factories are now re-opening to 
build parts for wind turbines. In Nevada, which some call the 
Saudi Arabia of renewable energy, we already have nearly 60 
operating renewable energy projects, producing enough power to 
heat and cool hundreds of thousands of homes.
    This is just the beginning. The solar power in Nevada and 
the desert Southwest alone could meet our entire energy needs 
seven times over. The wind energy in the Great Plains, the 
Midwest, and off both our coasts is similarly abundant. The 
potential for geothermal energy still largely untapped is 
simply staggering.
    There has been a massive increase in wind energy generation 
in recent years, creating 45,000 new jobs last year alone. 
Solar power is poised for similar growth over the next few 
years. NV Energy recently--that's the power company in Nevada--
announced plans for a 250-megawatt solar thermal plant in 
Nevada, with plans for molten salt storage to firm up the 
plant's capability.
    All these actions have been thriving without sustained 
Federal investment, at least until very, very recently. But 
absent a permanent long-term Federal commitment and major 
policy reforms, we're not close to reaching our national 
potential. Our landscape is dotted with renewable projects, but 
until now few have been connecting the dots. These renewable 
projects are mostly where there aren't people. We need to take 
it where there are people.
    Senator Murkowski, during the last 10 years, elaborating on 
what you said, we have developed 6,000 miles of natural gas 
pipeline; less than 600 miles of power lines in the same 10 
years. So we've got a problem.
    Remember, we had to do something drastic when we built our 
railroads to make sure that the trains could go where we wanted 
them to go, and we did the same with the national highway 
system; and we need to do the same with this energy that we're 
talking about, connecting these dots with this smart 
transmission grid, using new technologies developed and built 
here in America to connect the places we produce renewable 
energy with the places we use it.
    A smarter grid would make it possible for consumers to save 
money on their power bills by making energy efficiency more 
profitable and transparent and cost-effectively integrate 
affordably priced renewable power.
    With input from stakeholders on all sides of this important 
issue, I have introduced S. 539, and I appreciate the work this 
committee has already done. Part of this legislation is to 
break the logjam that's preventing access to incredible 
renewable energy potential that exists across the entire 
country, and in Nevada.
    The country needs a plan that will result in the 
construction of new transmission lines to these renewable 
energy-rich zones, where the sun, wind, and heat of the earth 
are super-abundant. At the other end of these lines, consumers 
will get affordable and reliable clean power, power that will 
help us meet our environmental and national security 
challenges. By connecting these remote locations to the 
population centers that consume the overwhelming majority of 
energy, we'll open up vast new markets for a clean home-grown 
product that creates American jobs that can never be 
outsourced.
    That's why this legislation requires the President 
designate quickly renewable energy zones. Then the bill starts 
a massive national planning effort to maximize the production 
of renewables, to connect these regions to population centers 
throughout the country.
    Building this national smart transmission grid, this 
superhighway, requires us to reform the current siting process. 
Now a developer who is willing to invest in new transmission 
lines must go through a long and painful process involving many 
different regulatory hurdles that can add years and tremendous 
cost to transmission projects. The L.A. Times wrote within the 
past 2 months the average time of taking electricity from one 
point to the other is 18 years. So that pretty well says it 
all.
    This legislation creates a Federal backstop transmission 
siting authority which gives the Federal Energy Regulatory 
Commission the authority to move renewable transmission 
projects if their progress is stalled.
    The next part of this legislation calls for States to make 
proposals for allocating the cost of building and upgrading 
these lines. We give States the opportunity to succeed in their 
own, but we also give the Federal Energy Regulatory Commission, 
FERC, the authority to step in if and when assistance is 
required to keep projects moving forward and funded equitably. 
If necessary, the FERC can use construction permits and the 
Federal power marketing agencies can use bonds to finance this 
construction.
    This legislation calls for most of the capacity of these 
new green transmission lines to be available for renewable 
energy generators. That can be handled easily through an 
interconnection agreement between a renewable generator and a 
transmission provider.
    Many of us here today strongly support a national renewable 
electricity standard and a carbon cap. I believe we are moving 
closer toward these critical goals. No one's been more out 
front on the global warming issue than Senator McCain. But 
until we achieve these--that is, the smart renewable 
electricity standard and a carbon cap--we should act now to set 
performance requirements for our new smart transmission grid 
both in terms of how it works and what we attach it to.
    I'm pleased to see that a lot of the bill that I introduced 
has been incorporated into our staff draft, Mr. Chairman. I 
appreciate that very much, especially the components that 
address regional transmission planning and cost allocation. So 
I look forward to continuing to work with the committee as we 
develop legislation that powers our States while ensuring that 
we achieve the necessary goal of integrating renewable energy 
into our electric grid.
    We have not arrived at a final product--I know that's the 
case--but rather an excellent framework. As this legislation 
moves forward, all sides will have an opportunity to take part 
in the debate. That's how this committee has worked for years 
and it will continue to work, I'm confident.
    In recent months support for steps I've outlined and the 
goal of ending our devastating addiction to oil have really 
started to gel. At the Clean Energy Summit that we held in Las 
Vegas last August and here in D.C. within the past month, we've 
seen an extraordinary level of bipartisan problem-solving. This 
committee will play a critical role in keeping us on that 
productive path.
    There will come a day when our children and grandchildren 
look back upon this moment in history. They'll see that we knew 
the scope of this multiple-pronged crisis, but, unlike any 
generation before us, we took action to solve it.
    Mr. Chairman, we can be here 10 years from now lamenting 
the fact that we built 600 miles of transmission lines for 
electricity, or we can really look back and say, you know, we 
really did something. I've said to a number of people, we can 
in the years to come give ourselves high-fives and cheer each 
other on and look at all the renewable energy we could created 
we have created, but if it can't move anyplace we've 
accomplished nothing. That's what this is all about, being able 
to move electricity from where it's created to where it's 
needed.
    I appreciate very much the long period of time. I'd like to 
apologize to the committee for taking so much time, but I 
appreciate the opportunity.
    The Chairman. Thank you very much for your strong 
leadership on this issue and for the bill that you put forward 
and the testimony here this morning as well.
    I did not have questions. Let me just ask if Senator 
Murkowski or any member wanted to ask Senator Reid a question. 
If not, we can dismiss him and proceed to to other two panels.
    [No response.]
    The Chairman. Thank you again. We appreciate it.
    Let me call forward panel one, which is made up of: the 
Honorable John Wellinghoff, who is the Acting Chairman of the 
Federal Energy Regulatory Commission; and also the Honorable 
Tony Clark, who is a Commissioner reporting NARUC, and he is 
out of Bismarck, North Dakota.
    Chairman Wellinghoff, why don't you go right ahead. Then 
after you testify we'll hear from Commissioner Clark, and then 
we'll have some questions.

 STATEMENT OF JON WELLINGHOFF, ACTING CHAIRMAN, FEDERAL ENERGY 
                     REGULATORY COMMISSION

    Mr. Wellinghoff. Thank you, Mr. Chairman, members of the 
committee. My name is Jon Wellinghoff and I'm the Acting 
Chairman of the Federal Energy Regulatory Commission. Thank you 
for the opportunity to appear before you today to discuss the 
issues related to electric transmission lines. I commend you, 
Mr. Chairman, and the committee for your decision to hold this 
hearing, and I also commend you and Senator Reid for the 
legislation that each of you has circulated and-or introduced 
on these important issues.
    I think the place to start is determining what problem are 
we trying to solve. Taking full advantage of our capacity to 
develop clean, renewable power is essential to meeting our 
national energy goals. These goals include reducing our 
greenhouse gas emission and reliance on carbon-emitting sources 
of electric energy and strengthening our national security, as 
well as revitalizing our economy.
    Thus the problem is how to construct the new electric 
transmission facilities that are essential to bringing new 
sources of renewable energy to market. I believe that we need a 
national policy commitment to develop an extra-high voltage, 
EHV, transmission infrastructure to bring renewable energy from 
remote areas where it's produced most efficiently to our large 
metropolitan areas, where most of this Nation's power is 
consumed. We must also commit to developing the feeder lines 
and network upgrades that will be necessary to interconnect and 
deliver large amounts of energy from those remote renewable 
resources.
    Developing local renewable energy and resources is 
important as we expand our capacity to generate clean power. 
But it should not be confused as a separate issue from, and 
it's not a substitute for, developing the EHV transmission 
infrastructure that I have described. The two should work hand 
in hand.
    A critical issue in constructing an EHV transmission 
infrastructure is transmission siting. I believe that without 
some level of broader Federal siting authority to accommodate 
high levels of renewable energy it's unlikely that the Nation 
will be able to achieve energy security and economic stability.
    The commission has the institutional structure, capacity, 
and experience to make important contributions to this national 
transmission grid-building effort. Should Congress decide to 
give the commission some form of enhanced transmission siting 
authority, I recommend that Congress base that authority on the 
principles of energy infrastructure development that have 
worked well in other areas of energy infrastructure siting 
under the commission's jurisdiction. Through decades of 
experience in siting natural gas pipelines and in siting hydro 
projects and associated transmission lines, the commission has 
established regulatory regimes that encourage timely 
development of appropriate energy projects. These regimes 
provide for extensive public participation, including 
participation by affected States, protecting the interests of 
consumers, and safeguarding the environment.
    We also have learned that a single Federal agency having 
the responsibility and authority to make siting decisions with 
regard to projects that affect the national interest is the 
most efficient way to site major energy projects.
    In addition to siting, we must address closely related 
issues of transmission planning, cost allocation, and 
reliability if we are to develop an effective national EHV 
electric transmission grid that can spur the production and 
movement to consumers of renewable energy. The commission has 
recognized that transmission planning increasingly must look 
beyond the needs of a single utility or even a single State to 
examine the transmission requirements of the entire region. 
Effective regional transmission planning will improve 
reliability, reduce congestion, increase the deliverability of 
existing power supplies, and identify investments necessary to 
integrate significant and potential sources of renewable energy 
that are constrained by lack of adequate transmission capacity 
or facilities.
    We would achieve greater benefits and efficiencies by 
developing interconnection-wide transmission plans focused on 
facilities that are needed to transport electric energy from 
areas rich in renewable energy resources to load centers.
    I recommend that any new transmission planning requirement 
be harmonized with, rather than supplant, planning efforts 
already taking place at the State and local level. Similarly, 
if Congress determines that there are broad public interest 
benefits in developing an EHV transmission system necessary to 
accommodate the Nation's renewable energy potential, and 
therefore the costs of transmission facilities needed to meet 
our renewable energy potential should be fairly spread to a 
broad group of energy users, then Congress should consider 
giving the commission clear authority to allocate such 
transmission costs on all load-serving entities within the 
interconnection or part of an interconnection.
    Even when delivered via an EHV transmission system, 
renewable energy resources must be integrated into the 
transmission system in a manner consistent with reliable 
operation of the grid. The commission has approved the first 
set of mandatory reliability standards for the bulk power 
transmission system and the commission will continue to approve 
reliability standards, including cyber security standards, to 
ensure transmission grid reliability.
    I would like to highlight two other factors that contribute 
to reliability. First, in addition to improving market 
transmission efficiency, demand resources, including demand 
response, are the glue necessary to reliably integrate large 
amounts of energy from renewable energy resources into the 
transmission system.
    Second, section 1305 of the Energy Independence Security 
Act of 2007 requires the commission to promulgate rules for the 
smart grid standards to govern interoperability. These 
standards will modernize the transmission grid, making it more 
efficient and more able to accommodate both additional 
renewable resources and demand resources as well.
    In summary, to achieve our national energy goals Congress 
and Federal and State regulators, including the commission, 
must address in a timely manner the issues of transmission 
siting, planning, and cost allocation while recognizing 
reliability issues. Congressional action in these related 
areas, particularly additional siting authority to build an EHV 
transmission line to accommodate high-quality location-
constrained renewable energy, would provide greater ability to 
achieve these important goals.
    Thank you again for giving me this opportunity to appear 
before you today. The commission stands ready to work with 
Congress, State and Federal agencies, and other stakeholders on 
these important issues, and I will be glad to answer any of 
your questions. Thank you.
    [The prepared statement of Mr. Wellinghoff follows:]
Prepared Statement of Jon Wellinghoff, Acting Chairman, Federal Energy 
                         Regulatory Commission
    Mr. Chairman, and members of the Committee: My name is Jon 
Wellinghoff, and I am Acting Chairman of the Federal Energy Regulatory 
Commission (Commission). Thank you for the opportunity to appear before 
you today to discuss the critical topic of the siting of electric 
transmission facilities. The timely siting of electric transmission 
facilities will be essential to meeting our Nation's goal of reducing 
reliance on carbon-emitting sources of electric energy and bringing new 
sources of renewable energy to market. To meet the challenges of 
building needed new transmission facilities we must address not only 
the role of Federal siting authority but also the closely related 
issues of transmission planning, cost allocation and reliability. The 
time has come to develop a regulatory framework that will allow us to 
successfully meet these challenges.
    I commend you, Mr. Chairman, and the Committee for your decision to 
hold a hearing on these important issues. I also commend you and 
Senator Reid for the legislation that each of you has circulated or 
introduced in this area.
                              introduction
    President Obama has stated that the country that harnesses the 
power of clean, renewable energy will lead the 21st century. As the 
President noted in his February 24 speech to Congress, the recovery 
plan developed by the White House and Congress calls for doubling our 
supply of renewable energy in the next three years, with historic 
investments in basic research funding that will spur new discoveries in 
energy. The President also stated that we will soon lay down thousands 
of miles of power lines that can carry new clean energy to cities and 
towns across this country.
    I believe that, to implement these goals, there must be a mechanism 
to invoke federal authority to site the transmission facilities 
necessary to interconnect renewable power to the electric transmission 
grid and move that power to customer load. We need a National policy 
commitment to develop the extra-high voltage (EHV) transmission 
infrastructure to bring renewable energy from remote areas where it is 
produced most efficiently into our large metropolitan areas where most 
of this Nation's power is consumed. Certainly, developing local 
renewable energy and distributed resources is also important as we 
expand our capacity to generate clean power, but that is a separate 
issue from, and is not a substitute for, developing the EHV 
transmission infrastructure that I describe above and the related 
feeder lines that will interconnect renewable energy resources to the 
transmission grid.
    Without this National commitment, we will not be able to take full 
advantage of our capacity to develop clean power. Clean power is 
essential to meeting our National energy goals, such as reducing 
greenhouse gas emissions, strengthening our National security, and 
revitalizing our economy.
    At a conference held by the Commission on March 2, a diverse group 
of commenters shared the view that broader federal transmission siting 
authority is necessary to promote the growth of renewable energy. 
Development of a structured regulatory framework will enable the United 
States to build the EHV transmission infrastructure necessary to 
deliver our Nation's high quality, location-constrained renewable 
resources to load centers. That framework must adequately address 
transmission siting and the related issues of transmission planning and 
cost allocation.
      the commission's experience in siting energy infrastructure
    The Commission has the institutional structure, capacity, and 
experience to make important contributions to this National 
transmission grid building effort. The Commission is well-versed in 
reviewing and authorizing critical energy infrastructure projects, and 
in establishing a regulatory regime that encourages the development of 
appropriate energy projects, while at the same time protecting the 
interests of consumers and safeguarding the environment.
    Since 1920, the Commission has been charged with licensing and 
overseeing the operation of the Nation's non-federal hydropower 
projects. Today, the Commission regulates over 1,600 projects with the 
capacity to produce over 54 gigawatts of clean, renewable electric 
energy. Further, under existing authority in the Federal Power Act, the 
Commission has sited thousands of miles of electric transmission lines 
related to these projects that have delivered this power to the 
Nation's consumers.
    Under the Natural Gas Act, the Commission has authorized the 
construction of natural gas pipelines for over 65 years. Under the 
Commission's oversight, the country has developed a robust, 
comprehensive pipeline grid that moves natural gas supplies from 
producing areas to consuming regions. Since 2000, the Commission has 
approved over 13,000 miles of new pipeline, with a capacity of nearly 
95 billion cubic feet per day of natural gas. In total, there are 
nearly 215,000 miles of interstate natural gas pipeline in service that 
cross multiple states.
    Based on its decades of experience in siting natural gas pipelines 
and in siting hydropower projects and associated transmission lines, 
the Commission has developed comprehensive, efficient processes that 
provide for public notice and extensive public participation, including 
participation by affected states. These processes ensure the early 
identification of issues (and where possible, consensual resolution of 
them), development of a thorough environmental analysis, and decisions 
based on a complete record and consideration of the public interest. We 
have also learned that a single federal agency having the 
responsibility and the authority to make siting decisions with regard 
to projects that affect the National interest is clearly the most 
efficient way to site major energy projects. In a typical 
infrastructure proceeding, the Commission involves, from the prefiling 
process forward, federal and state resource agencies (as well as other 
relevant federal agencies, such as the Department of Homeland Security 
and the Department of Transportation), Indian tribes, local government, 
and private citizens, to assist in the early identification of issues 
and the development of the record. After gathering input from these 
sources, the Commission crafts a decision that comports with all 
aspects of the public interest.
             the commission's transmission siting authority
    In 2005, Congress gave the Commission authority to site and permit 
interstate electric transmission facilities, under limited 
circumstances and only within geographic areas designated by the 
Secretary of Energy as National interest electric transmission 
corridors. The Commission issued regulations establishing procedures 
that involve extensive information-sharing and consultation with state 
and federal agencies, members of the public, and other stakeholders. 
The Commission staff is currently working with one potential applicant 
under these regulations, using the prefiling process to provide 
information regarding necessary data and analyses. As discussed later 
in this testimony, the prefiling process is the first step the 
Commission takes to involve all stakeholders in the siting of energy 
infrastructure.
    However, the United States Court of Appeals for the Fourth Circuit 
has recently held that the limited authority granted by Congress to the 
Commission to review and site facilities needed to transmit electric 
energy in interstate commerce is not available in situations where a 
state agency has timely denied an application for a proposed project, 
regardless of how important the project may be in relieving congestion 
on the interstate grid. The court's ruling is a significant constraint 
on the Commission's already-limited ability to approve appropriate 
projects to transmit energy in interstate commerce.
    Congress should consider the question of how best to exercise its 
authority over interstate commerce to ensure that necessary 
transmission is built in a timely manner to deliver location-
constrained renewable power to customers. Without broader Federal 
siting authority to accommodate high levels of renewable electric 
energy--authority similar to that which exists for interstate natural 
gas pipelines and most non-Federal hydropower projects--it is unlikely 
that the Nation will be able to achieve energy security and economic 
stability. Similarly, the development of new EHV interstate 
transmission facilities, bolstered by broader federal siting authority, 
would assist states in meeting their renewable portfolio standards.
             principles for siting transmission facilities
    Should Congress decide to give the Commission some form of enhanced 
transmission siting authority, I recommend that Congress consider 
basing it on the following principles of energy infrastructure 
development, which have worked well in the other licensing areas under 
the Commission's jurisdiction: 1) a pre-filing process that allows and 
encourages all affected stakeholders to identify issues early; requires 
working on environmental review and a project application 
simultaneously; and involves common efforts to resolve conflicts and to 
identify an acceptable environmental alternative; 2) designating a 
single agency to make the overall public interest determination, while 
respecting the roles of other federal and state agencies; 3) allowing 
that agency to establish a schedule for all actions related to a 
proposed project, thus ensuring that agencies act in parallel and that 
the public can rely on predictable milestones; 4) building one federal 
record, including one environmental document, on which decisions are 
made; 5) providing for expeditious judicial review in a single United 
States court of appeals (either in the circuit where the proposed 
facility is to be sited or in the District of Columbia Circuit), based 
on the record developed by the lead agency; and 6) once a federal 
decision has been made, authorizing the permittee to use federal 
eminent domain to acquire the property needed for a project that has 
been determined to be in the public interest.
                            related matters
    In addition to siting issues, the following are also crucial 
aspects of developing an effective National EHV electric transmission 
grid that can spur the production and movement to market of renewable 
energy.
Planning
    Effective regional transmission planning will improve reliability, 
reduce congestion, increase the deliverability of existing power 
supplies, and identify investments necessary to integrate significant 
potential sources of renewable energy that are constrained by a lack of 
adequate transmission capacity or facilities. Increasingly, such 
planning must look beyond the needs of a single utility or even a 
single state to examine the transmission requirements of the entire 
region.
    The Commission has recognized the need for improvements in 
transmission planning. To improve the coordination of transmission 
planning among utilities, it required all public utility transmission 
providers to establish and participate in open and transparent regional 
transmission planning processes (Order No. 890, February 2007). The 
Order No. 890 regional planning process is in its first year, and the 
Commission is reviewing how well those are working, is monitoring 
implementation, and will be looking for ways to improve the regional 
planning process.
    Meeting our National energy goals will require building on such 
regional planning initiatives and expanding their scope. For example, 
we would achieve greater benefits and efficiencies by developing 
interconnection-wide transmission plans focused on facilities that are 
needed to transport electric energy from areas rich in renewable energy 
resources to load centers. I recommend that any new transmission 
planning requirements be harmonized with, rather than supplant, 
planning efforts already taking place at the state and local levels.
Cost Allocation
    Renewable energy resources such as wind, solar, and geothermal are 
usually found in economically developable quantities at dispersed 
locations remote from load centers. For this reason, there are often 
high costs associated with developing transmission facilities needed to 
deliver power from such resources.
    Under FPA sections 205 and 206, the Commission ensures that public 
utilities' (investor-owned utilities) rates, terms and conditions of 
transmission service in interstate commerce are just, reasonable, and 
not unduly discriminatory or preferential. This responsibility includes 
allocating the costs of new transmission facilities built by public 
utilities. At present, the Commission has greater ability to assign 
such costs over broad geographic areas where there is a regional 
transmission organization (RTO) or independent system operator (ISO).
    If Congress determines that there are broad public interest 
benefits in developing the EHV transmission system necessary to 
accommodate the Nation's renewable energy potential, and therefore that 
the costs of transmission facilities needed to meet our renewable 
energy potential should be fairly spread to a broad group of energy 
users (for example across a region or an entire interconnection), then 
Congress should consider giving the Commission clear authority to 
allocate such transmission costs to all load-serving entities within an 
interconnection or part of an interconnection.
Reliability, Demand response, and Smart Grid
    Renewable energy resources, even delivered via an EHV transmission 
backbone system, must be integrated into the transmission system in a 
manner consistent with reliable operation of the grid. EPAct 2005 added 
a new section 215 to the FPA, pursuant to which the Commission has 
certified an Electric Reliability Organization, approved the first sets 
of mandatory reliability standards for the Bulk-Power System, and is 
enforcing compliance with approved standards. The Commission will 
continue to approve reliability standards, including cybersecurity 
standards, to ensure transmission grid reliability. Two additional 
factors are noteworthy with regard to the transmission grid. First, 
building on the Commission's existing authority with respect to demand 
response, section 529 of the Energy Independence and Security Act of 
2007 directs the Commission to complete a National Assessment of Demand 
Response and a National Action Plan on Demand Response. In addition to 
improving market and transmission efficiency, demand resources 
(including demand response) are the ``glue'' necessary to reliably 
integrate large amounts of energy from renewable energy resources into 
the transmission system. Second, section 1305 of the EISA requires the 
Commission to promulgate rules for ``smart grid'' standards to govern 
interoperability. These standards will modernize the transmission grid, 
making it more efficient and more able to accommodate both additional 
renewable resources and demand side resources.
      commission actions facilitating transmission for renewables
    The Commission has undertaken a number of initiatives, within the 
scope of its current FPA authority, to encourage the transmission of 
renewable power. These include:

   In June 2005, the Commission, in Order No. 661, required 
        standardized interconnection procedures that recognized the 
        operational characteristics of wind generation.
   In November 2006, the Commission issued a final rule 
        establishing procedures for implementing the limited 
        transmission siting authority provided by the Energy Policy Act 
        of 2005.
   In February 2007, the Commission issued Order No. 890, 
        implementing open-access transmission reforms, which, among 
        other things, required that public utilities offer conditional 
        firm service, which is of particular importance to wind 
        resources; required transmission providers to conduct studies 
        to evaluate transmission upgrades needed to connect major new 
        areas of wind generation; required, where appropriate, 
        comparable treatment in the transmission planning process of 
        advanced technologies and demand-side resources; exempted wind 
        and other intermittent resources from the highest tier of 
        energy and generator imbalance provisions; and found that sales 
        of ancillary services to support transmission systems by demand 
        response and other load resources shall be permitted, where 
        appropriate, on a basis comparable to service provided by 
        generation resources.
   In April 2007, the Commission approved an innovative 
        California Independent System Operator (CAISO) proposal to 
        allocate costs of facilities needed to interconnect location-
        constrained resources (such as wind and solar) to the electric 
        transmission grid.
   In March 2008, the Commission provided guidance to RTOs and 
        ISOs on processing interconnection queues, responding in part 
        to backlogs in regions that have attracted significant new 
        renewable energy resources.
   In October 2008, the Commission granted transmission rate 
        incentives for PacifiCorp's Energy Gateway lines to deliver 
        renewable energy in six Western States.
   In December 2008, the Commission granted transmission rate 
        incentives for the Prairie Wind and Tallgrass lines to access 
        wind power in Oklahoma and Kansas.
   In February 2009, the Commission approved rates for the 
        Chinook and Zephyr lines to move wind power from Montana and 
        Wyoming to the Southwest, adopting a more flexible approach to 
        securing financing for merchant transmission projects.

    Despite all of these actions, existing and future transmission will 
not be adequate to fully realize our potential for renewable energy 
development unless Congress provides additional tools. Foremost among 
these tools must be a way to facilitate the siting of new EHV 
transmission capacity.
                               conclusion
    In summary, to achieve the Nation's renewable energy goals, 
Congress and Federal and state regulators, including the Commission, 
must address in a timely manner the issues of transmission planning, 
transmission siting and transmission cost allocation. Congressional 
action to address all three of these related areas, particularly 
additional siting authority to build EHV transmission lines to 
accommodate high quality, location-constrained renewable energy, would 
provide greater ability to achieve these important goals. For example, 
both the bill that you, Mr. Chairman, have circulated and the bill 
introduced by Senator Reid last week address all three of these areas. 
I would be happy to work with the Congress as you consider legislation 
to provide a regulatory framework for tackling the challenging energy 
issues that we face, and to provide Commission staff technical 
assistance respecting any legislation the Committee may consider.
    Thank you again for giving me the opportunity to appear before you 
today. I stand ready to work with Congress, state and federal 
regulators, industry, and other stakeholders on these important issues. 
I would be happy to answer any questions you may have.

    The Chairman. Thank you very much.
    Commissioner Clark, why don't you go right ahead.

  STATEMENT OF TONY CLARK, COMMISSIONER, NORTH DAKOTA PUBLIC 
 SERVICE COMMISSION, ON BEHALF OF THE NATIONAL ASSOCIATION OF 
 REGULATORY UTILITY COMMISSIONERS AND THE NORTH DAKOTA PUBLIC 
                       SERVICE COMMISSION

    Mr. Clark. Thank you, Mr. Chairman, and good morning, and 
Ranking Member Murkowski and members of the committee. My name 
is Tony Clark and I'm a member of the North Dakota Public 
Service Commission. I also serve as Second Vice President for 
the National Association of Regulatory Utility Commissioners, 
or NARUC. Today I'll be testifying on behalf of NARUC and, 
where noted, the North Dakota PSC.
    I'm honored to have the opportunity to appear before you 
this morning and to offer a State perspective on transmission 
in general and specifically on legislative proposals on Federal 
siting and regional transmission planning. I'd like to have my 
testimony submitted into the record and will summarize my views 
here.
    The Chairman. We'll include all the testimony as if read.
    Mr. Clark. All right, thank you.
    There are many challenges to the development of much-needed 
growth in the transmission system that is vital to reliable 
electric service, our economic growth, and our national 
security. Without increased transmission capacity, our ability 
to develop the resources necessary to meet current and future 
demand may be jeopardized, particularly if we embark on a 
policy that limits greenhouse gas emissions and increases our 
reliance on renewable generation. In addition, it has been 
projected that the demand for electric energy in the United 
States will grow by more than 30 percent in the coming decades. 
Significant upgrades will be necessary in order to meet this 
demand. Solutions to the current transmission challenges facing 
us are not quick, simple, noncontentious, inexpensive, or in 
some cases obvious. Finding and implementing solutions will 
require cooperation by, not confrontation among, the various 
stakeholders.
    In my written testimony I mention that NARUC is debating a 
new policy on transmission. I'd like to update that and state 
for the record that NARUC did in fact update and adopt a new 
policy just this Tuesday afternoon, and I would request that 
this resolution* also be submitted into the record.
---------------------------------------------------------------------------
    * Document has been retained in Committee files.
---------------------------------------------------------------------------
    I'm going to stray a bit from what's in my written 
testimony, but I want to provide you details on the new policy 
and the context in which it was adopted. It should come as no 
surprise, and I'm sure it comes as no surprise to members of 
this committee, that as an association made up of State 
regulators, NARUC generally opposes further Federal authority 
over transmission siting and planning. We're barely 3 years 
removed from the passage of the Energy Policy Act of 2005 and 
we would prefer to see that process, which gave the Federal 
Energy Regulatory Commission backstop authority over certain 
national interest lines play out before we start over.
    That being said, the White House and Congressional 
leadership have both made clear that they intend to move 
forward with additional Federal oversight of transmission 
expansion. Our membership recognizes that this is reality and 
has been discussing since mid-February possible updates to our 
existing policy. Our membership held a spirited debate last 
month and earlier this week and the consensus reached was that, 
although we continue to believe that Congress should not expand 
Federal authority over transmission siting, we believe that we 
did come up with a set of principles that we believe Congress 
should incorporate should it decide to address this issue.
    These principles reflect the vitally important role State 
regulators play in siting and planning transmission and are 
geared to ensure that States and regions are more than just 
stakeholders, but key drivers in developing new energy 
infrastructure. The principles, which are available on our web 
site, are as follows.
    First of all, any additional authority granted to FERC by 
the legislation allow for primary jurisdiction first by the 
States and that FERC provide, as Senator Reid referenced, a 
backstop authority that be as limited in scope as possible. In 
no event should FERC be granted any additional authority over 
the siting and construction of new intrastate transmission 
lines. We hope that those very in-State lines, you would 
continue to see that the benefit rests in having those be at 
the State level rather than Federalized.
    In no event should FERC be granted any authority to approve 
or issue a certificate for new interstate transmission line 
that is not consistent with the regional transmission plan 
developed in coordination with affected State commissions or 
other designated State siting authorities and regional planning 
groups that covers the entire route of the proposed project. We 
do note that planning is an important part of the legislation.
    In no event should FERC be granted any additional authority 
to approve or issue a certificate for a new interstate 
transmission line unless there are already in place either cost 
allocation agreements among the States through which the 
proposed project will pass, that governs how the project will 
be financed and paid for, or a FERC-approved cost allocation 
rule or methodology that covers the entire route of the 
project.
    In no event should any legislation allow FERC to preempt 
State authority over retail ratemaking, the mitigation of local 
environmental impacts under State authority, the 
interconnection to distribution facilities, the siting of 
generation, or the participation of affected stakeholders in 
State and-or regional planning processes.
    Finally, in no event should any legislation preempt State 
authority to regulate bundled retail transmission services.
    Mr. Chairman and members of the committee, I want to 
reiterate the statement that NARUC President Fred Butler made 
when he was commenting on Senator Reid's transmission bill last 
week. He said that he appreciates Congress's attention to this 
issue and that we do look forward to working together.
    I thank you, Chairman Bingaman, for your leadership as well 
and for opening your doors to us as you crafted your draft 
proposal. I know you and Senator Reid recognize the important 
role States play in this and we all want the best possible 
result for the environment and, most of all, for our consumers.
    These issues are extremely sensitive within our 
organization precisely because they do not lend themselves to 
simple or consensus solutions. Siting and cost allocation 
issues are often controversial because in most situations 
someone's gain is someone else's loss. There are no easy fixes 
here, but if we work together and maximize the core 
competencies between the State and Federal Governments we 
believe we can make progress.
    Thank you. I look forward to any questions you may have.
    [The prepared statement of Mr. Clark follows:]
  Prepared Statement of Tony Clark, Commissioner, North Dakota Public 
Service Commission, on Behalf of the National Association of Regulatory 
  Utility Commissioners and the North Dakota Public Service Commission
    Good morning Chairman Bingaman, Ranking Member Murkowski, and 
Members of the Committee:
    My name is Tony Clark, and I am a member of the North Dakota Public 
Service Commission (NDPSC). I also serve as Second Vice President of 
the National Association of Regulatory Utility Commissioners (NARUC). 
Today I will be testifying on behalf of NARUC and where noted, the 
NDPSC. I am honored to have the opportunity to appear before you this 
morning and offer a State perspective on ``transmission'' in general 
and specifically on legislative proposals on federal siting and 
regional transmission planning.
    NARUC is a quasi-governmental, non-profit organization founded in 
1889. Our membership includes the State public utility commissions 
serving all States and territories. NARUC's mission is to serve the 
public interest by improving the quality and effectiveness of public 
utility regulation. Our members regulate the retail rates and services 
of electric, gas, water, and telephone utilities. We are obligated 
under the laws of our respective States to ensure the establishment and 
maintenance of such utility services as may be required by the public 
convenience and necessity and to ensure that such services are provided 
under rates and subject to terms and conditions of service that are 
just, reasonable, and non-discriminatory.
    There are many challenges to resolve prior to the development of 
the much-needed growth in the transmission system that is vital to 
reliable electric service, our economic growth, and our national 
security. Without increased capacity in the transmission grid, our 
ability to develop the energy resources necessary to meet current and 
future demand may be jeopardized, particularly if we embark on a policy 
that limits greenhouse gas emissions and increases our reliance on 
renewable generation. In addition, it has been projected that the 
demand for electric energy in the United States will grow by more than 
30 percent over the coming decades. Significant upgrades will be 
necessary in order to meet this demand. Solutions to the current 
transmission challenges facing us are not quick, simple, non-
contentious, inexpensive, nor, in some cases, obvious. Finding and 
implementing solutions will require cooperation by, not confrontation 
among, the various stakeholders.
    Currently, NARUC is debating a new policy position on transmission. 
These difficult discussions are ongoing and I bring this to your 
attention in an effort to illustrate that the nation's utility 
regulators are well aware of the issues and complications surrounding 
the transmission policy. These issues are extremely sensitive within 
our organization precisely because they do not lend themselves to the 
simple or even consensus solutions. Siting and cost allocation issues 
are often controversial because in most situations someone's gain comes 
at someone else's expense.
                               background
    The Energy Policy Act of 2005 (EPAct 2005) required the Department 
of Energy (DOE) to conduct a study of electric transmission congestion 
one year after the legislation was enacted, and every three years 
thereafter (language was included in the recently signed ``stimulus'' 
legislation modifying the DOE congestion study process). After 
considering alternatives and recommendations from interested parties, 
DOE must issue a report, based on the study, which may designate any 
geographic area experiencing electric energy transmission capacity 
constraints or congestion that adversely affects consumers as a 
national interest electric transmission corridor (NIETC).
    The first DOE Congestion Study was issued on August 8, 2006. On 
April 26, 2007, the DOE issued two draft NIETCs: the Mid-Atlantic Area 
National Corridor (some or all counties in Delaware, Ohio, Maryland, 
New Jersey, New York, Pennsylvania, Virginia, West Virginia, and the 
District of Columbia); and the Southwest Area National Corridor (seven 
counties in southern California, three counties in western Arizona, and 
one county in southern Nevada). On October 2, 2007, DOE finalized the 
designations of both NIETCs: the Mid-Atlantic Area National Interest 
Electric Transmission Corridor (Docket No. 2007-OE-01); and the 
Southwest Area National Interest Electric Transmission Corridor (Docket 
No. 2007-OE-02). DOE affirmed the NIETC designation orders on March 10, 
2008.
    EPAct 2005 gave federal backstop siting authority of certain 
electric transmission facilities, based upon the process outlined 
above, to the Federal Energy Regulatory Commission (FERC). Upon NIETC 
designation by DOE, FERC may issue permits to construct or modify 
electric transmission facilities if FERC finds that:

          (1) A State in which such facilities are located does not 
        have the authority to approve the siting of the facilities or 
        to consider the interstate benefits expected to be achieved by 
        the construction or modification of the facilities;
          (2) The applicant is a transmitting utility but does not 
        qualify to apply for siting approval in the State because the 
        applicant does not serve end-use customers in the State; and
          (3) The State with siting authority takes longer than one 
        year after the application is filed to act, or the State 
        imposes conditions on a proposal such that it will not 
        significantly reduce transmission congestion or it is not 
        economically feasible.

    To issue a permit, FERC must find that proposed facilities:

          (1) are used for interstate commerce;
          (2) are consistent with public interest;
          (3) significantly reduce transmission congestion in 
        interstate commerce;
          (4) are consistent with national energy policy; and
          (5) maximize the use of existing towers and structures.
                                 siting
    A major impediment to siting energy infrastructure, in general, and 
electric transmission, in particular, is the great difficulty in 
getting public acceptance for needed facilities. This tells us that no 
matter where siting responsibility falls--with State government, the 
Federal government, or both--as prescribed in the EPAct 2005, siting 
energy infrastructure will not be easy and there will be no ``quick 
fix'' to this situation.
    During the EPAct 2005 debate, NARUC opposed the ``backstop siting'' 
provision. NARUC's position prior to passage of EPAct 2005 was, and 
continues to be, that to have the greatest economical and environmental 
benefits transmission facilities should not be nationalized but 
encouraged to be regionalized. Just as States have a role in the siting 
of interstate highways, States need to continue having an active role 
in transmission decisions.
    As Congress considered EPAct 2005, NARUC expressed deep concern 
with the language that eventually became Section 1221. At that time, 
NARUC opined that the language could in essence overrule legitimate 
State agency concerns and laws with regard to how a State ruled on a 
transmission project. The language would then permit FERC to vacate the 
decision and preempt State law and actions. It appears as though our 
initial observations and fears were accurate and led to a federal court 
case. In Piedmont Environmental Council v. FERC, the Fourth Circuit 
overturned FERC's expansive interpretation of its backstop siting 
authority in NIETCs. The court followed Commissioner Kelly's dissent to 
Order 689, and held that section 216 of the Federal Power Act (which 
gives FERC backstop siting authority if a State ``withheld approval for 
more that one year'') clearly does not give FERC siting authority when 
a State affirmatively denies a siting permit application within the 
year.
    In its comments on the FERC rulemaking which inspired the court 
action, NARUC said it expected the backstop siting authority to have 
limited applicability because the majority of the State commissions 
have the authority to approve or deny proposed transmission projects 
within their jurisdictions and State commissions are frequently allowed 
to address the interstate benefits of proposed projects. Furthermore, 
many State statutes require a petitioner to obtain a certificate of 
public convenience and necessity, or some other similar certificate, 
from a State commission before constructing transmission facilities 
regardless of whether the applicant provides electric service to end-
use customers. In its comments, NARUC proposed that:

          1. FERC clarify that federal backstop siting authority under 
        FPA Section 216 is only triggered when the State Commission 
        fails to or cannot act in a timely manner;
          2. FERC clarify how it will apply the federal backstop 
        criteria;
          3.The proposed rule be revised to implement the due process 
        requirements of the statute; and
          4. The Final Rule adopted should incorporate a reference and 
        deference to extensive siting records developed at the State 
        level to prevent duplication and confusion.

    The Final Order gave the States one full year to consider a 
transmission line siting application before the federal pre-filing 
process begins. The intent is to avoid conducting ``parallel 
proceedings''--where a State commission and FERC would be considering a 
siting application at the same time. If such ``parallel proceedings'' 
were allowed, that process would create ex parte and prejudgment 
concerns under State law. Such a situation could potentially result in 
an applicant ``gaming'' the siting process by purposefully filing a 
deficient application to the State with the hopes of starting the one-
year federal clock and precluding adequate State consideration of the 
application. NARUC did not appeal the FERC backstop siting rule and our 
members have generally been attempting to work within the framework of 
the EPACT 05 backstop provision.
    With this as a backdrop, our membership is troubled, that Congress 
finds it necessary to begin consideration of changing the siting 
provision that was just established in EPAct 05. This provision has not 
been given an appropriate amount of time to ascertain whether or not it 
can, will or is working. We are pleased, however, to see that members 
of this body are also concerned with federal government involvement in 
the siting of electric transmission. For instance, there is currently a 
proposed transmission project in New York State, which is encountering 
intense local opposition. In the February 20, 2009, edition of the 
Utica Observer-Dispatch, Senator Charles Schumer (D-NY), was quoted 
``We will do everything we can to make sure that New York has final say 
on routing decisions, which is what the court intended.'' We suspect 
that many federal elected officials will reach a similar conclusion 
when confronted with angry and vocal constituents whose rates may go up 
in order to pay for a line which they believe will provide them no 
benefits while producing financial gain for generators and transmission 
owners.
    If Congress does anything on siting, it should affirm the Fourth 
Circuit decision by clarifying that if a State turns down a 
transmission line proposal for good reason and within a reasonable time 
frame; FERC should not be able to second guess the State. FERC 
Commissioner Suedeen Kelly correctly reasoned that it was 
incomprehensible that Congress intended FERC to override timely State 
decision. In addition, it only seems fair that the one-year clock for 
State action needs to be suspended whenever a federal agency is the 
cause for the State delay in a permitting decision.
                                planning
    State Commissions are acutely aware of the necessity and process of 
regionally planning transmission projects. In all sections of the 
country where there is a regional planning process, State Commissioners 
and their staffs are participants in the process. For example, the 
transmission planning effort currently taking place in the Upper 
Midwest is being led by the Governors and state commissions in the 
States of Minnesota, North Dakota, South Dakota, Iowa and Wisconsin. 
Our five States have formed the Upper Midwest Transmission Development 
Initiative (UMTDI) to coordinate sub-regional electric transmission 
planning and related cost allocation issues. I would like to speak to 
that now in my capacity as a member of the North Dakota PSC.
    With a geographically dispersed resource like wind, generation 
development may be impeded because the large transmissions lines needed 
are not available where the wind resource is best. But, the 
transmission lines do not get built because there is currently limited 
generation development there. We are attempting to break this ``chicken 
and egg'' cycle that can too often impede renewable projects. Rather, 
as a region, we believe wind will be a major player in meeting our 
electricity needs going forward. To encourage wind development, we plan 
to proactively choose a number of geographic zones for development and 
then model a transmission and cost allocation system from there. In 
many ways, it is an attempt to learn from the success of the Texas 
Competitive Renewable Energy Zones process, but over a region where 
there are five states, a regional transmission organization (RTO), and 
FERC, as opposed to just Texas and ERCOT.
    Over the last six months, utility regulators, governors' staff, 
utilities, transmission owners, non-governmental organizations and the 
Midwest ISO have been working to identify our States' optimum renewable 
energy resource zones and the regional transmission expansion needed to 
link those resources to load, both in our States and possibly beyond 
our region. In addition, we are working to develop a sub-regional cost 
allocation approach that is vetted among State stakeholders to help 
ensure that adequate transmission infrastructure gets built. Our plan 
is to have a sub-regional transmission upgrade plan ready for inclusion 
in RTO and regional planning processes by October 2009.
    We also recognize that modernizing and expanding the transmission 
system is essential to expanding renewable energy generation and 
reaching the renewable portfolio goals outlined by President Obama and 
many congressional leaders. In my region, we are encouraged by FERC 
openness to ensuring that States--and particularly, multi-state 
initiatives such as ours--can participate in developing national 
interest strategies that allow us to move forward with policies that 
provide equitable benefits to our citizens. We understand the 
challenges and have moved aggressively to address those that have 
seemed intractable in the past. Multi-state need and siting review 
requirements have been incorporated into the UMTDI planning 
considerations. Through the Organization of MISO States, the five 
States have reviewed opportunities to coordinate regulatory procedures.
    Current expansion efforts by the transmission owners in our sub-
region reflect progressive development practices that should facilitate 
predictable outcomes. In my opinion, the UMTDI effort and its openness 
in working with all stakeholders is exactly the kind of effort that is 
needed to develop efficient transmission infrastructure.
                            cost-allocation
    State regulators are concerned about transmission reliability, 
adequacy, and the costs required to support the development of robust 
competitive wholesale markets. The investment that is needed to upgrade 
the transmission grid in order to support expanded wholesale power 
markets will cost billions of dollars. Notwithstanding the general 
benefit to the wholesale electric marketplace of encouraging the 
construction of new generating capacity and its interconnection to the 
grid, it is also important to provide proper price signals to encourage 
optimal demand response and promote economic and efficient expansion of 
the grid and siting of generation. The FERC has in the past adopted 
transmission pricing policies that generally provide for the direct 
assignment of costs to the parties causing the costs.
    FERC Order No. 2000 stated the ``[m]arket designs that base prices 
on the average or socialization of costs may distort consumption, 
production and investment discussions and ultimately lead to 
economically inefficient outcomes.'' FERC has departed, in some 
instances, from a transmission pricing policy that provides for the 
assignment of costs to the cost-causative parties. In general, NARUC 
supports efficient pricing policies that result in the economic use and 
expansion of the transmission system to support a robust wholesale 
electricity market. We recognize that investments needed to maintain 
the reliability of the existing transmission systems should continue to 
be recovered through rates charged to all transmission users. We 
advocate that the cost of upgrades and expansions necessary to support 
incremental new loads or demands on the transmission system should be 
borne by those causing the upgrade or expansion to be undertaken, 
except that FERC should not preclude the assignment of interconnection 
cost to the general body of ratepayers within a State when that State's 
regulatory body determines that such allocation is in the public 
interest.
    A robust regional electric transmission system is an essential 
prerequisite to support both reliability and the market function 
allowing more generators to reach loads and compete directly for 
wholesale sales to such loads in order to increase competition among 
generation suppliers and meet national goals for renewable generation 
and energy independence. A new rate design is needed that will 
facilitate the construction of the strong transmission backbone 
required to support the nation's wholesale electric markets, future 
increases in renewable generation capacity, and reliability.
            majority leader reid's transmission legislation
    Last week, Majority Leader Reid introduced ``The Clean Renewable 
Energy and Economic Development Act.'' We want to thank Senate Majority 
Leader Reid and his staff for reaching out and consulting NARUC as he 
drafted this proposal. Sen. Reid is to be commended for bringing this 
issue to Congress' attention, and we are optimistic that our continued 
dialogue will produce a better outcome for consumers and the 
environment. However, we are very troubled by a number of the 
provisions included in this legislation. I would like to outline our 
concerns and comments here:

   Sec.402--How does the National Renewable Energy Zone 
        Designation relate to the 2009 Renewable Energy Transmission 
        Study required by Sec.  409 of the American Recovery and 
        Reinvestment Act? It seems logical that designation of a 
        Renewable Energy Zone be tied to the study.
   Sec. 403--It is unclear how subsequent National Renewable 
        Energy Zone designations become reflected in the plan. Is the 
        plan expected to be revised every year (as suggested by the 
        requirement that the plan be submitted to the Commission 
        annually Sec. 403(e)(8))? How does that fit with the 
        requirement that the plan cover at least 10 years into the 
        future (Sec. 403(e)(5))?
   Sec. 403(a)--The selection process for the regional planning 
        entities is somewhat obtuse. We would recommend that the States 
        and other stakeholders that must participate in the planning 
        process have a clearer role in selecting and shaping the 
        planning entity.
   Sec. 403(d)--The one-year time frame from the date of 
        designations is too short for a comprehensive planning process 
        with multiple stakeholders. Although we recognize the 
        importance of immediate action, realistically it seems like at 
        least two years will be necessary for an initial plan.
   Sec. 403(j)((B)(ii)(I) requiring Governor certification that 
        all load-serving entities ``offer a fairly priced renewable 
        power purchase option to all the customers of the entities.''--
        It is unclear what this section means. It seems that it may 
        begin to mandate consumer choice, and we would suggest striking 
        it. We believe it is inappropriate for Congress to mandate 
        retail rate-design on a one-size-fits-all basis. For example, 
        in North Dakota the Commission rejected a proposed ``green 
        tariff'' at the urging of many in the environmental community 
        because it treated wind as a boutique fuel as opposed to an 
        integral component of the integrated system.
   NARUC opposes Sec. 404. Further, we think that the section 
        preserving State siting authority Sec (404(n)) creates 
        potential for forum shopping.
   Sec. 404(a)(1)(B) which allows federal siting for a project 
        that is not included in the Interconnection-wide transmission 
        plan (if the developer assumes all of the risk and cost of the 
        proposed facility) may undermine the planning process and cause 
        organizations to circumvent the planning process. This also 
        will allow for siting of a line without ANY State input. We 
        suggest that this section either (a) be removed or (b) require 
        State consultation before the siting of a line outside of the 
        Interconnection wide transmission plan, even if the developer 
        assumes all of the risk.
   Sec 404(c)(2)--This section should include language that 
        would require the Commission to consult with the States in 
        promulgating regulations regarding the permit applications.
   Sec 404(g)--the provisions providing for State consultation 
        allow the States to offer recommendations in only a very 
        limited number of areas and allow the Commission to easily 
        override the State recommendations. These provisions should be 
        changed to strengthen the States' role in identifying siting 
        constraints and mitigation measures.
   We appreciate Section 406(b) for acknowledging that if the 
        States submit a joint cost allocation plan, the Commission 
        should approve the cost allocation unless the plan violates the 
        conditions of just and reasonableness or unduly inhibits 
        renewable energy.

    We look forward to conversations with the Majority Leader's office 
and the members and staff of this committee so we can bring about a 
mutually acceptable outcome.
    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. These solutions will require the cooperation of all 
stakeholders, including State and federal government, and must not 
require ratepayers to bare the financial burden with the reward 
allocated to the owners of generation and/or transmission. Thank you 
and I look forward to your questions.

    The Chairman. Thank you both very much for your testimony.
    I'll start with 5 minutes of questions. Chairman 
Wellinghoff, let me ask you first. I don't know if you've had a 
chance to look at this discussion draft that we've circulated 
in the last couple of days.
    Mr. Wellinghoff. Briefly, Mr. Chairman, briefly.
    The Chairman. Do you have any thoughts, initial thoughts as 
to how it comports with the recommendations that you have made 
about expansion of the commission's authority? Do you believe 
that there are ways in which it differs from what you are 
proposing, or do you consider it be consistent?
    Mr. Wellinghoff. I believe that Senator Reid's bill and the 
draft that the committee staff has circulated are very similar, 
and certainly to the extent that there are a designation of 
regional planning authorities I believe in both bills, and 
those are regional planning authorities that as I understand it 
could primarily be composed of State entities, then to that 
extent they would decide on planning and could decide on cost 
allocation, in fact could even be involved in the siting to 
some degree. I think that's very consistent with what I am 
proposing.
    Really, I do not have a concrete proposal here today. I'm 
simply here today to indicate that I believe that there does 
need to be more Federal involvement in an interstate system if 
we are to put in place a system that can effectively deliver 
location-constrained remote renewable resources to load 
centers.
    But I think, with that said, I think the positions that are 
in the two bills are very consistent with that overall approach 
that I'm proposing and I think not all that inconsistent with 
what we're hearing from NARUC today, from my fellow colleague.
    The Chairman. Let me just bear down a little on this issue 
of planning. Clearly that's one of the most difficult things to 
figure out, is how to accomplish the planning that needs to be 
accomplished. We've suggested--I believe Senator Reid's bill 
does as well--that there should be a regional planning entity 
in each interconnection, that should undertake this role, that 
it should be approved by the commission, by FERC, and that the 
plan should be approved by the commission as well. Further, 
that if a body should not emerge as this planning group, then 
FERC itself would undertake this role.
    I guess one obvious question is is it practical to suggest 
that planning bodies such as this should be interconnection-
wide? That's one question. Second, is it practical to think 
that FERC could undertake this task if a group did not come 
forward to do that planning?
    So let me ask both of you those couple of questions. Maybe 
we should start with Commissioner Clark.
    Mr. Clark. Thank you, Mr. Chairman. With regard to regional 
planning, one of the things that I think most NARUC 
commissioners would certainly rally around is the idea that 
there should be an allowance for a bottom-up type process and, 
while there certainly can be a role for interconnection-wide 
planning, we also realize that as regions and sub-regions many 
of us have been working together for some time.
    For example, in my own region of the upper Midwest, the 
States of North and South Dakota, Wisconsin, Iowa, and 
Minnesota have been working on just these very ideas regarding 
working up renewable energy zones and figuring a system to get 
it to load.
    We would hope that any system that Congress comes up for 
allows for those sub-regions to continue to operate and really 
allow that interconnection-wide process to be a compilation of 
those parts, as opposed to starting from a top-down type 
mechanism.
    The Chairman. Chairman Wellinghoff.
    Mr. Wellinghoff. Yes. I think it is feasible to do 
interconnection-wide planning. In fact, the western Governors 
are doing that right now. So we have an example of an entity 
that could be designated in the western interconnect to do 
interconnect-wide planning, that is taking into account, as 
Commissioner Clark indicated, the sub-regional activities--
there's sub-regional activities in many of the States--that is 
then going to be put into that interconnect-wide plan, that 
will look at location-constrained renewable resources and 
determine how to deliver those through an extra high voltage 
transmission system.
    So I think it is feasible on an interconnect-wide basis and 
as a backstop I believe that if, for whatever reason, an 
interconnect entity was not successful, I believe FERC could 
carry that out. We could carry it out with our national 
reliability organization, NERC, which we already engage in 
planning with respect to reliability. So I think it certainly 
could be done by FERC if necessary, but I think it would be 
preferable to have it done by the regions on an interconnect-
wide basis.
    The Chairman. Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    I want to follow up on the planning side of it. There's 
certainly a lot of transmission planning that is happening 
right now. We've got DOE that's looking at the transmission 
needs. We've got WGA that's taking on a renewable energy zone 
effort. The RTOs are planning. We're going to hear from some 
today. FERC has directed utilities to do a regional planning 
approach. In the stimulus bill there was $80 million to FERC 
and DOE for transmission planning. Then just yesterday the FERC 
of Interior established renewable energy zones on public lands.
    So there's a lot going on within the planning, and I would 
agree with the chairman that this is a very important area 
here. But at some point in time does this, the creation of new 
planning entities--do we get to a choke point where we may 
disrupt ongoing collaborative planning efforts and possibly 
slow the growth of transmission? Should I be worried about this 
or not, chairman?
    Mr. Wellinghoff. I don't think so, Senator, in the sense 
what we're looking at here I think is as I see it anyway, a 
very focused purpose. The focused purpose again is to plan for 
these location-constrained renewables and moving them to load 
centers. That's the transmission planning I'm discussing. I 
think it's the core of Senator Reid's bill and in part what is 
in the draft circulated by the committee Staff as well.
    So that planning process doesn't in any way supplant or 
substitute for or interfere with all the other transmission 
planning that should continue for all the other purposes, for 
reliability, for reduction of congestion, etcetera. In fact, 
Senator Reid's bill doesn't remove the section 216 provisions 
of the 2005 EPAct for congestion corridors that DOE designated.
    So I see it as a separate process that I don't think would 
interfere with what's ongoing for general transmission 
planning. I see it as very focused.
    Senator Murkowski. Would you agree, commissioner, that 
these are not duplicative, but that you've got focuses in 
different areas that allow for greater collaboration, as 
opposed to creating a choke point?
    Mr. Clark. Mr. Chairman and Senator Murkowski, I do worry a 
bit about that, which is I think one of the reasons that NARUC 
has argued that whatever comes about needs to be very narrowly 
tailored, so that what Chairman Wellinghoff is talking about is 
in fact what happens. I think that we have perhaps a bit of a 
concern that if there's mission creep beyond the sort of 
renewable energy zone type concept, hooking up a national grid 
to meet potentially a national portfolio standard, that we 
could have some of those choke points occur.
    For example, in my own State I know we would hate to think 
of the 70-mile line that we've just sited between Belfield and 
Rhame, which is purely in State, be held up because of an 
interconnection process that has to take into consideration 
theoretically something that could happen in Florida due to the 
fact that we're both in the same interconnect.
    So I think your concern is valid, which in our mind argues 
for a specific and tailored role in the legislation.
    Senator Murkowski. Let me ask you, Chairman Wellinghoff, 
about the announcement from Secretary Salazar, his secretarial 
order yesterday that called for Interior to not only establish 
these renewable energy zones, but to handle the permitting and 
the environmental review on Federal lands. Do you think that we 
need one Federal authority with the authority to coordinate and 
oversee the environmental review of the transmission projects 
on the Federal lands? If so, is FERC the best entity to do 
that?
    Mr. Wellinghoff. I actually met with Secretary Salazar 
yesterday. I'm meeting with him again this afternoon. I don't 
think his vision is incompatible with mine. Certainly the BLM 
and other Federal agencies must permit the siting of the actual 
renewable facilities and I think that is what he is referring 
to. But with respect to the transmission lines that would 
connect those facilities, I think you do need one Federal 
entity and I think FERC would be an appropriate one to do that, 
to the extent that it is this system that we're talking about 
of an interstate system to deliver remotely located renewable 
energy to the load centers.
    So I don't think what Secretary Salazar is proposing is 
inconsistent with what I'm saying. I think they are compatible.
    The Chairman. A question for you, Commissioner Clark, on 
the cost allocation. You mentioned in your resolution coming 
out of NARUC, you speak to that. What is your opinion on the 
possible interconnection-wide allocation of the transmission 
costs? Your resolution provides that no additional authority to 
issue a certificate unless there is already in place a cost 
allocation agreement among all the States through which the 
proposed project will pass.
    Is this one of the most difficult aspects that we're going 
to be dealing with, is how we resolve this cost allocation 
issue?
    Mr. Clark. Senator Murkowski, I think you're exactly right. 
One thing you probably will not see from NARUC is a very 
specific point, is a consensus point on what that cost 
allocation should be, because very much within our 
organization, just as within Congress, where you're at on that 
is very much related to where you sit.
    So this is one of those times that I get to separate myself 
a bit from NARUC and say that as an organization we don't have 
a specific formula on what the cost allocation should be. As a 
North Dakota commissioner, coming from a State that has huge 
renewable energy potential for export, and looking at how 
sometimes the cost allocation process can attempt to determine 
a very finite value to costs and benefits and really gets 
bogged down in that entire process, I could potentially for 
some certain types of projects that serve a national need see 
more of a postage stamp type pricing mechanism, simply because 
it can facilitate the building of those lines. It's been 
successful where tried within ERCOT in Texas. There are 
economists who would probably quibble with me whether that's 
the appropriate way to do it, but I think that there are a lot 
of benefits to a fairly clean and simple way to fund it. But 
again, that's speaking from my own perspective and not 
necessarily the association.
    Senator Murkowski. Thank you, Mr. Chairman.
    The Chairman. Senator Udall.
    Senator Udall. Thank you, Mr. Chairman.
    I want to welcome the panel this morning. This is a very 
important topic, obviously. We just passed in the last few 
weeks the economic recovery package and in that package there 
were $14 billion, if I have the number right, for transmission 
grid infrastructure development and energy storage development. 
I wonder if both of you would be willing to comment on where 
those dollars are being spent, and do we have a chicken and egg 
dynamic here, given what we're discussing today, especially 
with transmission siting?
    In other words, are those dollars sidelined until we answer 
some of the questions that are being raised today? Chairman, if 
we could start with you and then move to Commissioner Clark.
    Mr. Wellinghoff. Thank you, Senator.
    As I understand it, and again this is primarily under the 
purview of the Department of Energy with respect to the 
expenditure of those dollars, but as I understand it those 
dollars will largely not be spent for transmission lines per 
se, but for upgrades, things like phase monitoring units. In 
fact, the meeting I was in with Secretary Salazar yesterday, 
Secretary Chu was in that meeting as well. One of the things 
that Secretary Chu directed his staff to do was to put some of 
those dollars into things like sensing units on transmission 
lines so we can gain more data about how those transmission 
lines are operating, so we can plan better overall.
    So it's my understanding that a good part of those dollars 
is going into that kind of an effort. I don't think what we're 
doing here today will in any way inhibit those dollars being 
spent. We're talking about a lot larger amounts of money for 
these types of systems, potentially hundreds of billions of 
dollars. That would primarily come from the private sector and 
is coming from the private sector now. So I don't think there 
is a conflict there.
    Senator Udall. Mr. Clark.
    Mr. Clark. I'll apologize in advance because I'm afraid I 
probably don't have a very good answer for you. I think 
Chairman Wellinghoff did a good job of explaining the 
waterfront. I think States are still trying to get their hands 
around exactly what the potential for those dollars are. I know 
that DOE has been working hard to promulgate regulations and 
gather information on how that money should be spent, but I am 
afraid I probably can't offer much more specific answer than 
that. I think we're still struggling to figure out exactly how 
all these new mechanisms and levers will work.
    Senator Udall. Commissioner Clark, to move to another 
subject, you both touched on eminent domain and the use of it 
in your testimony. It's a sensitive issue. It certainly I 
believe will come to the fore in certain areas and certain 
projects. Would you care to comment in any further detail on 
eminent domain and how you see the use of it and how we can 
best manage it?
    Mr. Clark. Senator Udall, I would just comment that I note 
that at least one of the drafts, I think Chairman Bingaman's, 
allows for either a Federal or State court venue for eminent 
domain. I know in North Dakota the commission itself does not 
have eminent domain authority. It's strictly the purview of the 
courts.
    You're right, it is always a contentious issue when it gets 
to that point. We work very hard in our commission to try to 
encourage utilities to, when they file applications before us, 
not be in the position where they feel like it may be going to 
eminent domain; that it's far easier to get those things worked 
out in advance. Unfortunately, sometimes that can't be done and 
those times there are the courts that are available.
    We would, of course, urge that there continue to be 
potential State relief for eminent domain and not just a 
Federal eminent domain provision.
    Senator Udall. Chairman Wellinghoff, do you care to 
comment?
    Mr. Wellinghoff. I certainly think that eminent domain 
should be used very sparingly, and I think the history of 
siting natural gas pipelines in fact demonstrates that. I have 
some statistics here. For example, for the Rex West Pipeline, 
approximately 700 miles of 42-inch pipeline in Wyoming, 
Nebraska, Kansas, and Missouri, there was only 18 reported 
eminent domain actions taken out of 1746 parcels, less than 1 
percent. That's replicated in a number of other instances: Gulf 
South, 110 miles of 36-inch pipeline with 336 affected 
landowners there was no contested eminent domain proceedings 
whatsoever.
    So we're at least seeing in the gas pipeline area that 
eminent domain is used very, very sparingly, if at all.
    Senator Udall. Perhaps those lessons could be applied in 
this challenge we have to expand our transmission system, and 
we can look to you and other experts to understand how we can 
bring those same lessons to bear.
    Mr. Wellinghoff. I think it's part of the process, by 
having one Federal agency coordinating with the landowners and 
with the other affected entities to ensure that the process can 
work smoothly and that there is a limited exercise of eminent 
domain.
    Senator Udall. Thank you.
    The Chairman. Senator McCain.
    Senator McCain. So if I understand your answer to Senator 
Udall's question, Mr. Wellinghoff, there are occasions where 
eminent domain is appropriate after all other avenues have been 
explored?
    Mr. Wellinghoff. In very limited instances, that's correct. 
There have been some instances with respect to siting 
pipelines, for example, where eminent domain proceedings have 
been appropriate.
    Senator McCain. Do you agree with that, Commissioner Clark?
    Mr. Clark. In some cases I think it's true they may be 
appropriate because there is a greater need. At the same time, 
I think it perhaps illustrates a point that, at least for an 
initial crack at siting, States are an appropriate venue to be 
because it's frankly much easier for landowners and utilities 
to work together in Bismarck or Phoenix or in their local State 
capitals, as opposed to expecting landowners to interact at the 
Federal level, which is much more difficult to do so.
    So I think to the degree that it argues anything, perhaps 
it does argue for, again, that more narrowly tailored Federal 
role.
    Senator McCain. Chairman Wellinghoff, in 2005 one of the 
major goals of the legislation was to give your commission the 
authority to site and permit interstate electric transmission 
facilities under limited circumstances and, as you well know, 
within geographic areas designated as national interest 
electric transmission corridors.
    The U.S. Circuit Court of Appeal, Fourth Circuit Court, has 
basically negated that, wouldn't you say?
    Mr. Wellinghoff. I think they certainly have limited it to 
the extent that they've indicated that if a State in fact 
denies an application then there is no backstop authority for 
FERC. I think that will substantially limit it. We are 
currently considering whether or not to appeal that particular 
case, but I do think it does limit the effect of that 
particular piece of legislation.
    Senator McCain. Even with that legislation in effect, 
before the Fourth Circuit Court held as they did there really 
wasn't any applications for implementation of that legislation, 
was there?
    Mr. Wellinghoff. That's correct.
    Senator McCain. So we really have not seen the expansion of 
facilities that we would have liked to have seen?
    Mr. Wellinghoff. We certainly haven't seen developers 
proposing to expand facilities in corridors that were 
designated by DOE.
    Senator McCain. So that whole aspect of this issue needs to 
be reviewed in pending legislation?
    Mr. Wellinghoff. To the extent that that continues to be a 
goal of Congress, that would be correct.
    Senator McCain. You agree with that goal?
    Mr. Wellinghoff. I certainly agree that we need to do 
what's necessary to reduce congestion in the transmission 
system, and I think that was the intent of that particular 
piece of legislation, which is much different from Senator 
Reid's legislation. As I indicated, as I say, Senator Reid's 
legislation left in place that legislation and then added on 
this piece, which has a different purpose, the purpose is to 
take location-constrained renewable resources and delivering 
them to load centers. That's different than looking at 
congestive corridors as the 2005 legislation did.
    We certainly need to do what we can do to relieve 
congestion in corridors. We have issues there and problems. I'm 
not sure that the way that the legislation was structured in 
2005 is the most effective way to do that. I don't have a 
recommendation today as to the most effective way. But I 
certainly would be happy to get back to you in writing on that 
issue.
    Senator McCain. Thank you.
    The legislation that Senator Reid discussed requires that 
75 percent of the generating capacity connected to a new line 
must be renewable, and under his proposal and others they 
define ``renewable'' as solar, wind, biomass, landfill gas, 
renewable biogas, geothermal energy, new hydro capacity at 
existing sites.
    I notice by its absence that nuclear power is not part of 
that, quote, ``renewable energy.'' Do you believe that nuclear 
power is renewable energy?
    Mr. Wellinghoff. Currently, Senator, where we have the 
problem today is with respect to renewables, the ones you've 
enumerated.
    Senator McCain. My question is do you believe that nuclear 
power is renewable energy? My time is expiring.
    Mr. Wellinghoff. No, I do not believe nuclear power is 
renewable energy.
    Senator McCain. Remarkable.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Shaheen.
    Senator Shaheen. Thank you, and thank you to our panelists 
for being here.
    In New England we have some different challenges than I 
think you do in the West, Commissioner Clark. But this is 
really a question for both of you. Municipal and cooperative 
utilities in New England have told us that, at least in New 
Hampshire, that they would like the opportunity to jointly 
plan, finance, and own new transmission facilities. They think 
their participation will bring additional capital, will bring 
more political support, and will make cost allocation decisions 
easier.
    Do you support joint ownership by these utilities? Is this 
a partnership that you think could make sense going forward?
    Mr. Clark. Senator Shaheen, I think it's worth exploring. 
Coming from a State like North Dakota, cooperative power is a 
big player in our State's electric system and electric grid and 
the economy, as well as Federal power, the Western Area Power 
Administration. We have seen where utilities have very 
effectively jointly coordinated their systems with those 
entities.
    So I see the point, concede it, and think it's something 
that's certainly worth exploring.
    Senator Shaheen. Chairman Wellinghoff.
    Mr. Wellinghoff. Yes, Senator, absolutely I believe that we 
need to look at multiple ways to own, finance, and develop 
transmission lines, and that would include cooperatives and 
municipal entities being co-owners of those lines. I would very 
much support that.
    Senator Shaheen. In the Energy Policy Act of 2005, load-
serving entities were granted long-term transmission rights. 
Does your view of Federal transmission policy going forward 
recognize those rights?
    Mr. Wellinghoff. Yes, it absolutely does.
    Mr. Clark. I would concur.
    Senator Shaheen. To go to the two bills in front of us 
today, do you think it's more cost-efficient and effective to 
design a transmission grid that only delivers for renewable 
resources or does it make more sense as we're looking at the 
resources we have for the future to look at all of the 
challenges affecting us on the grid as we're thinking about how 
to design and spend resources for new transmission?
    Mr. Wellinghoff. Senator, we certainly need to look at all 
the challenges, and I think what these two bills suggest is 
that we're not excluding anything. Again, all the transmission 
planning that would be underneath this overlay of an extra-high 
voltage line that's intended, again, to address a specific 
problem. As I indicated in my testimony, over 300 gigawatts of 
renewable energy currently in the queue that can't get onto 
transmission lines, that can't be developed, is the target of 
the draft bills. In addition, however, we can continue to plan 
for all the other resources, both the distributed resources at 
the local level, local renewables in your State and New England 
as well, offshore, all that can be planned as well.
    I don't think the two are mutually exclusive in any way. I 
think they in fact can be made consistent and harmonious.
    Senator Shaheen. But let me ask, because I understand the 
setting up the grid so that it provides for those renewable 
connections. As I looked at it, it presented sort of a 
challenge for us in New England because we don't have enough 
resources or enough potential energy in the queue to qualify 
for the amount of energy that would be needed to have one of 
those new load centers.
    So I'm not sure how we would then be affected by this. 
Also, as I look at the design of that grid, there are 
significant resources on both coasts with respect to wind and 
potentially tidal energy that would not be included at all in 
that design.
    Mr. Clark. Senator, I appreciate the concern. I think that 
perhaps the reason that renewables take on a particular role in 
this is under the discussion of a Federal RPS. If there's going 
to be a Federal mandate, then you at least have some rationale 
for a Federal role in the siting of these EHV lines that could 
help meet that Federal mandate without impacting the underlying 
system.
    The concern I think that State commissioners might have is 
if you get beyond that and start incorporating everything into 
it, then there can be, as I spoke about before that, mission 
creep into areas that we think probably are not needed and 
could be perhaps harmful, by moving some of these steps from a 
more local level up to the Federal level.
    Mr. Wellinghoff. Senator, it was never my view or vision 
that this extra-high voltage system delivering renewables 
primarily out of the Midwest, for example, to the East Coast, 
would not be able to take advantage of that same system to 
deliver the wind energy off the coasts and the ocean 
hydrokinetic energy that may be available to not only load 
centers on the East, but back into the Midwest, Chicago and 
those areas as well.
    So it could potentially go both ways. I don't see that as a 
barrier either. I think we can develop our offshore wind as 
well as develop our onshore wind. But what we ought to do is 
develop the cheapest things first, and as I understand it the 
wind in the Midwest, is much less expensive to develop than, 
offshore wind.
    Senator Shaheen. Thank you.
    The Chairman. Senator Corker.
    Senator Corker. Thank you, Mr. Chairman, and thank both of 
you for your testimony.
    I'm curious as to just an order of magnitude, not 
necessarily dollars, but what kind of investment would be 
necessary to deal with congestion and reliability issues that 
really strongly affect our energy security in this country, 
versus the investment, if you will, to deal with renewables 
that is being so discussed here, as far as causing our country 
to deal with those basic needs that are so important for us to 
function versus adding on renewables? Give me an order of 
magnitude of what needs to be invested in our transmission 
lines?
    Mr. Clark. Senator, I think there's going to be a speaker 
who probably can detail those costs very well, perhaps better 
than I or Mr. Chairman. But I think the JCSP, which is the 
Joint Coordinated System Plan, for at least the interconnect 
had for renewables a cost of about $80 billion to meet a 20 
percent mandate. Their baseline study not including that, just 
using existing resources, I think was $50 billion.
    Senator Corker. Baseline?
    Mr. Clark. If you didn't consider a national 20 percent 
RPS.
    Senator Corker. So $50 billion for the basic needs, $30 
billion for the renewable needs?
    Mr. Clark. I believe so, subject to check.
    Mr. Wellinghoff. Senator, I would agree with those numbers. 
But again, I think you've got a better witness coming up in the 
next panel on that.
    Senator Corker. How will the reliability of the grid be 
affected with the addition of so much intermittent type of 
energy, energy that cannot be used in any way for baseload 
power?
    Mr. Wellinghoff. Senator, that's one of the keystones I 
think of this entire planning process. It shouldn't be affected 
at all. In other words, we need to ensure that by putting on 
variable resources, which would include wind and solar, that 
there is no degradation in the reliability of the grid.
    There are multiple ways to ensure that. One is through 
additional storage. Another is through things like demand 
response and other load-modifying means. Another wayis through 
combined cycle combustion turbine units. So there's multiple 
ways to ensure the reliability of the grid. Another way, of 
course, is better sensing on the grid, better communications on 
the grid so we can actually know what's happening and be able 
to control it in a much better, efficient, effective way.
    Under the 2005 Energy Policy Act, FERC was given the 
responsibility to ensure reliability on the grid and we've 
taken that responsibility and enacted a series of requirements. 
We have a national reliability organization, NERC, that in fact 
oversees reliability on the grid, and so we will continue to 
ensure that the grid is reliable, would ensure that, even with 
putting these additional resources on the grid, the 
interconnect-wide plan was set forth in such a way that 
reliability was maintained.
    Senator Corker. One of the avenues that you didn't mention 
is the need for redundance also. That's the other way you 
ensure reliability. I'd like to understand from your 
perspective how much redundance would be necessary to ensure 
reliability, just percentagewise?
    Mr. Wellinghoff. With respect to redundance, you need a lot 
more redundance with large central station plants, a nuclear 
facility for example. A 1,000 megawatt nuclear facility, you're 
going to need redundance there. In the West, for example, the 
Palo Verde unit is the largest contingency on the western 
interconnection.
    If you have multiple wind systems or multiple solar 
systems, there's not as much need for redundancy because 
ultimately you're not going to have all those systems fail at 
once. You're going to have, some of them may go out. But if you 
have one single large contingency, you have a much higher 
redundancy requirement.
    Senator Corker. So no percentage?
    Mr. Wellinghoff. I don't have a specific percentage for 
you. That would take a very large study to determine 
percentages for a particular plan.
    Senator Corker. But it would be interesting to know because 
as we talk about costs, as you mentioned, with the nuclear 
component that is figured into the cost, whereas as we look at 
the cost here, the overall cost to the public, the fact is that 
that redundance is at a cost that's probably not going to be 
calculated in as we move ahead; is that correct?
    Mr. Clark. Senator, what you raise are excellent points. 
It's actually the type of planning that has to take place from 
an engineering standpoint to make sure that it is sound. I 
would agree with you, all of the costs need to be considered as 
we move forward. We talk about the cost of deliverable power to 
consumers. You need to consider the fact that there are 
intermittent resources.
    I would concur with what Chairman Wellinghoff said and 
would only add that in the case of wind it does argue for much 
more geographically dispersed wind. Wind does not tend to work 
particularly well if it's just located in one specific spot, 
because even in a State like North Dakota there are days in the 
summer with very high load and the wind doesn't blow. So you 
need those geographically dispersed resources to be able to 
even out the peaks and valleys.
    Senator Corker. I know my time is up. Just No. 1 or two, 
would you say that taking care of our needs to deal with 
reliability and congestion, if you have priorities, is one or 
two as it relates to dealing with the renewable component? 
Which of the two is of highest priority for our country's 
energy security?
    Mr. Clark. Senator, just speaking from my own perspective 
as a State commissioner who deals with some of these issues in 
cases, reliability paired with cost are always the things that 
come to the top of the list.
    Senator Corker. So the basic need would be of highest 
priority.
    Mr. Wellinghoff. Certainly, Senator, we've been given the 
direction by Congress that reliability is the top priority.
    Senator Corker. Thank you.
    The Chairman. Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman, and I thank both 
of our witnesses.
    Mr. Wellinghoff, in the Northwest we're pretty blessed with 
already a centralized planning organization, the Bonneville 
Power Administration, and we've done quite well on renewables. 
We've been able to, using the open season process for 
electricity, basically getting rid of the queue and allowing 
people who put the resources in to be evaluated up front as a 
way to get the best projects on line.
    But we have gone from a little more than 25 megawatts of 
wind 10 years ago to more than 1500 megawatts of wind today, 
and we expect those figures to double by the end of 2009. 
That's how much we're doing, that wind generation will equal 
about 30 percent of BPA's peak load. That's quite significant 
given our hydro history.
    So one of the questions I have is how do you think that--
I'm concerned about the western interconnection process, 
disrupting what is already I think kind of a model planning 
process for the country with what we already have in the 
Northwest. So what are your concerns about the legislative 
proposal before us and how that would affect the system?
    Mr. Wellinghoff. I think Senator Reid's proposal certainly 
allows for consideration of what Bonneville has already done 
and the successes that you have there. Again, designating a 
western interconnect-wide entity that would include the 
regional entities as part of it, would include Bonneville. So 
their interests would be considered and those interests would 
be folded into the overall plan that would be developed. That 
would be my expectation, and it would be folded in in such a 
way that it would be consistent with, compatible with, and 
continue to be beneficial for the Northwest. I would hope and 
expect that it would in fact do that.
    Senator Cantwell. But with our planning process already 
working well and the thought of some maybe $80 million 
surcharge, people I think are thinking about the improvements 
within our region, not necessarily improvements--I mean, how 
would that be affected? That would be a very big concern, to 
think that Northwest ratepayers would be paying some sort of 
surcharge for improvements in another planning system.
    Mr. Wellinghoff. Some part of that $80 million ultimately 
is what you're saying, to improvements that you're saying you 
may not need, given how successful you are.
    Senator Cantwell. I'm actually saying that open season 
process has been pretty good and the planning has been very 
good. I mean, it's working. So I think we need to think about 
what's working about that and apply that, is I guess what I'm 
saying.
    Mr. Wellinghoff. Right. I do see that.
    I think what's missing in the Northwest, and I think you've 
hit on it actually. I had a visit from Steve Wright. What's 
missing in the Northwest is you expect almost 30 percent wind 
in your system, and when you reach 30 percent wind you're going 
to have some difficulties with stability and reliability of the 
system. I think an interconnect-wide planning process could 
help you there, help you in a way to do things like dynamic 
scheduling and other things that will ultimately help you 
integrate more renewables into your system.
    So I think there is some value that could be added by this 
process, and that value I think could certainly be sufficient 
to offset any costs that might come to the Northwest.
    Senator Cantwell. We'll be very mindful of that, because we 
think it's working well for us already. So I think we need in 
the Northwest more analysis on that, because wind and hydro go 
very well together. They very well tradeoff. When the wind's 
not blowing you can use the hydro system, or you can diversify. 
So we think it's working pretty well, so we'll have concerns.
    But I have another question about distributed generation as 
we're looking at the build-out of the transmission system. 
Obviously, distributed generation gives us the ability to do 
things more efficiently. I think it's something like you can 
eliminate 8 percent of the energy loss of long distance 
transmission by just having the distribution focus on a more 
regional basis.
    So do you think that the process that FERC would undertake 
should actually include a thorough analysis of relative life 
cycle costs and energy efficiency in making these decisions, so 
that you really are looking at distributed generation as an 
alternative?
    Mr. Wellinghoff. I think absolutely, and I would again 
expect that the interconnect-wide planning processes that were 
done by these regional entities that were designated would have 
to include distributed generation. Because I think again 
addressing Senator Corker's question with respect to 
reliability, these distributed resources can enhance 
reliability for the location-constrained renewables that are 
brought in.
    So we need to do all we can with distributed resources, 
which would include the types of things that you're talking 
about.
    Senator Cantwell. What greater authority would FERC need 
for that, if any?
    Mr. Wellinghoff. No greater authority than suggested in 
Senator Reid's bill or suggested in the bill circulated by 
Committee Staff. I don't think we need any more than that. In 
fact, now under our current planning process under Rule 890, 
where transmission owner operators are required to do regional 
transmission planning, we have specifically directed that those 
transmission planners look at not only the supply side, but 
they look at and consider the demand side in that planning 
process.
    So we're already doing that today, in essence requiring 
that transmission planners look at both sides and fully 
consider what are all the demand side options, like distributed 
resources that you're discussing should be included in the 
plan.
    Mr. Clark. Senator, I would only add that I think that your 
question does argue again for a very much bottom-up process, 
because just as you're concerned about potentially some Federal 
interaction with a process that seems to be working well in the 
West, we would be concerned that when you do talk about 
distributed generation it's hard to get much further down into 
the distribution network than that, and it would really require 
the significant input of States to help provide that kind of 
data.
    Senator Cantwell. Thank you. I would just say, Mr. 
Chairman, technology is changing so rapidly, that's why I think 
that we have to have an open mind about that aspect of it.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Barrasso.
    Senator Barrasso. Thank you very much, Mr. Chairman.
    Thank you for being here. If I could just ask you, 
Commissioner Clark. I think one of the things you had said a 
little earlier was where you are is where you sit, and in North 
Dakota, Wyoming is the largest net exporter of energy in 
America. We have it all. We have the coal, the oil, the gas, 
the wind, the hydro. We have it all.
    There is a specific opportunity, a significant opportunity 
in Wyoming, for the growth in the wind industry. I want to make 
sure that my State's energy resources can serve the needs of 
others. We want to make sure that we make American energy as 
clean as we can, as fast as we can, without driving up the 
price to consumers.
    I want to make sure that my constituents receive fair 
treatment in the process. This gets to the issue we were 
talking about with cost allocation. The question that I hear 
from people around Wyoming is, why should they pay for 
transmission lines across their property if the energy is just 
being shipped to a population center elsewhere, whether it's 
California, whether it's Nevada?
    What are your thoughts on that and how can we make sure 
that it's fair for the consumers who are not utilizing, the 
people who actually are not consuming the electricity, but are 
the areas where the transmission lines are going in terms of 
how that payment works?
    Mr. Clark. Senator, that's the heart of some very difficult 
questions. Now, North Dakota--and I hear from similar 
constituents to the ones that you do, who have those questions. 
At the same time, there are undeniably some reliability 
benefits that accrue to the whole system when there are large-
scale transmission projects that are built. From an economic 
development standpoint, the State certainly has an interest in, 
as I'm sure much as yours does, in having these transmission 
lines built. So there is a bit of a cost-benefit tradeoff that 
folks need to consider.
    I also keep in mind that on some of these cost allocation 
issues that, while they're important and while we need to get 
the best answer that we can, at the same time transmission 
continues to be a relatively small portion of a consumer's 
bill. It's about 10 percent of the bill compared with 
everything else about 90 percent.
    I do worry that if, as a State and a Nation, we get too 
hung up on the cost allocation issues we can hold captive the 
90 percent of the bill that could drive down costs to try to 
really chase pennies in the 10 percent of the bill.
    So your concern is very valid and, as I said, there are no 
easy answers because each State has a little bit different 
interest in these lines.
    Senator Barrasso. The other issue is that, your State, 
strong private property rights, as is Wyoming and so many of 
our western States. Do you believe that private property owners 
have a right to say no to transmission lines on their land, and 
how do you work with that?
    Mr. Clark. Senator, as we both indicated earlier, at times 
there are appropriate times for eminent domain to be exercised 
because there is a greater good that's needed, whether it's for 
roads or transmission lines or so on and so forth. I think 
again the thing that we want to have as much as possible of is 
that early public input, and I think that that argues for 
potentially transmission corridors, so that there's not 
duplicate lines being built across the landscape. It provides 
some certainty and hopefully provides early on in the process 
public input so that a landowner who just wants to have a tower 
footing moved a few hundred feet away from a windrow or 
whatever they want to have that moved, has the ability to 
access that in a meaningful way and doesn't feel like they have 
to trek to Washington to get that done.
    Senator Barrasso. I guess that goes to the question of the 
chairman, then. Do you agree that using public land in lieu of 
using eminent domain should always be the top priority?
    Mr. Wellinghoff. It certainly is preferable. I can cite for 
you, for example, one transmission project that came to FERC 
that is going to go from Montana to Mead in southern Nevada, 
which is near Las Vegas. I think it's over 1200 miles. They 
told me in that 1200 miles there were only 17 landowners. So in 
the West it's certainly very doable and I think it usually is 
preferable to use the public lands if possible.
    Senator Barrasso. I think, Mr. Clark, you talked about 
duplicate lines and parallel lines. My question is, if we're 
talking in some of these proposals about a certain percentage, 
75 percent of the new generating capacity needed to be 
renewable--I don't know how you can tell where the electrons 
are coming from, but would it be wise to include a percentage 
of what has to go through the line, because that may cause to 
have several lines needing to be built when otherwise you could 
just move it all through a single line.
    Mr. Clark. Senator, I don't know if percentage is the right 
way to go about this or not. But I think that NARUC would 
certainly argue that the more narrow and tailored that you can 
make the Federal siting authority is better, because it does 
then delineate that there may be some national needs that the 
Federal Government is seeking to address, but reserving for 
State and local authorities those much more sub-regional and 
local needs.
    Senator Barrasso. Thank you, Mr. Chairman. My time has 
expired.
    The Chairman. Senator Dorgan.
    Senator Dorgan. Mr. Chairman, thank you very much.
    Commissioner Clark, I was chairing another hearing, so I 
was unable to be here for your testimony. But I've read your 
testimony and I appreciate very much your work and your being 
with the committee today.
    Mr. Clark. Thank you.
    Senator Dorgan. If I might make just a couple of comments 
and then ask a question. No. 1, it seems to me electrons are 
color-blind, so you read and hear about people that want to 
build a green transmission line that would host only renewable 
energy or green energy. The fact is a transmission line and 
electrons it seems to me will carry whatever is put on the 
line, and electrons are color-blind.
    No. 2, it is almost certain that a renewable portfolio 
standard or a renewable energy standard will pass this 
Congress. We'll have a heavy debate about that, I say to some 
of my colleagues, but almost certainly we will pass a renewable 
energy standard. If so, we must have additional transmission 
capability and connectivity in this country so that in areas 
where we produce renewable energy in particular, we are able to 
maximize that production and move it. Otherwise we'll have 
stranded renewable energy, and we're going to need that 
renewable energy to meet a renewable energy standard or a 
renewable portfolio standard.
    In the past 9 years we've built 11,000 miles of natural gas 
pipeline and 668 miles of interstate high voltage transmission. 
That just describes the dilemma.
    So the question to me is not whether we decide to embark on 
building additional transmission. The question is how do we do 
it, and that brings us to this issue of planning, pricing, and 
citing. Chairman Wellinghoff, you're involved in that from the 
standpoint of the Federal Energy Regulatory Commission, and the 
question of how much authority you should have or you feel you 
should have, and how much authority we should give you. 
Commissioner Clark, you're involved with the National 
Association of Regulatory Utility Commissioners and from the 
State authority.
    So let me see if I can drill in just a bit on these 
questions of citing especially. It seems to me citing is one of 
the very significant issues. Commissioner Clark, you've 
described to us the NARUC proposition with respect to citing. 
Does that reflect generally the view of all of the States or 
most of the States, or does it reflect your view? Tell me where 
you are on these issues?
    Mr. Clark. Thank you, Senator. I appreciate the opportunity 
to comment.
    Certainly each State has its own views and, as I indicated 
before, it's often where you're situated. North Dakota, 
speaking just from our perspective, is perhaps a case study in 
exactly the types of problems that have occurred with renewable 
energy development, in that tremendous wind resource potential, 
also about as far from most major metropolitan centers and load 
as you can get. So North Dakota has at times been more 
supportive of a robust Federal role to help break some of those 
logjams because, while we're able to site lines quite well in 
North Dakota--in fact, our average siting process at the 
commission is probably something like 4 months, 5 months--once 
it gets to our borders it's not always as easy. So we've been 
at times frustrated.
    So strictly speaking from a North Dakota perspective, we 
can see some value in having a Federal role with regard to 
those renewables. But I would say, even from a North Dakota 
perspective, we would have a few guiding principles. One is 
we'd like to have the first crack at siting those lines, at 
least within our State. We don't believe that primary 
jurisdiction should rest with the Federal Government, that 
people should still have an avenue of relief available in 
Bismarck with a local hearing in the county that it's going, 
and so on and so forth.
    Even in North Dakota, we would argue that there needs to be 
sub-regional planning, that it can't be a top-down process. So 
while I certainly accede to the point that there are different 
views and within a State like ours we may wish for a little bit 
more Federal action to help break some of those logjams, at the 
same time we do see very much a need for this to be a process 
that starts at the local level, and then only as a backstop 
authority goes to Federal Government.
    Senator Dorgan. I'm a very strong supporter of renewable 
energy. North Dakota is called the Saudi Arabia of wind, and 
you said there are times the wind doesn't blow. I'm not 
familiar with that, but----
    [Laughter.]
    Senator Dorgan. It is also the case that if we build lines 
principally to unlock stranded energy in, for example, wind 
energy corridors or solar and so on, because that's going to be 
produced in many cases far from where it's needed, it's also 
the case that those same lines will carry and can carry energy 
that is now locked from a coal-fired generating plant. Isn't 
that the case?
    Mr. Clark. Senator, that's absolutely true, and in North 
Dakota we have a confluence of a number of things that could 
potentially be beneficial to the entire country, including not 
only the wind portfolio that we've talked about, but the fact 
the twe have a large coal reserve and it happens to sit 
geologically in a very favorable location for carbon capture 
and sequestration.
    Senator Dorgan. Mr. Wellinghoff, you participated in a 
roundtable meeting I had a while back with all of the 
stakeholders, including NARUC, which was very helpful to me in 
trying to think through and plan through this notion of how to 
address the transmission issue, because we don't have a choice. 
We've got to address that.
    Senator Corker talked about reliability. All these things 
are a part of the need to address it. We might have different 
ways to address it, but I think this committee would probably 
agree that this is not whether any longer--it's how.
    I think the testimony and the judgments that you have 
offered are helpful. The same is true with NARUC and 
Commissioner Clark.
    Most of us would agree, I think, that if you try to unlock 
this so that you have the opportunity to proceed, we want the 
Federal role to be as narrow as possible while still allowing 
the progress that we know is necessary for the country, because 
there is a national interest here. So eminent domain, we agree 
with I think both of you that we want all these things to be 
narrowly constructed, but constructed in a way that provides us 
certainty that we're going to proceed.
    So let me thank both of you for your testimony and the work 
that you've done.
    The Chairman. Senator Brownback.
    Senator Brownback. Thank you, Mr. Chairman.
    Panelists, I appreciate your comments and your thoughts. It 
seems to me that at the core of all this we've got to figure 
out how we hold the cost down of electricity to the consumer. 
At the end of the day, Commissioner Clark, I think you're 
probably well aware of the sensitivity of price of the consumer 
to all of this. You start messing with people's rates, they get 
real interested real fast, and real mad.
    That's why I would hope, Chairman Wellinghoff, that we look 
at these issues from the standpoint of what it is and how it is 
that we do these things in a mixed ratio to the point where we 
can hold the costs down the most that we possibly can.
    Mr. Clark, you mentioned about your coal reserves in North 
Dakota. You believe you're the Saudi Arabia of wind. We have 
claimed that title in Kansas as well, and we believe we're 
closer to market, too, than you are, and we have as many wind 
resources.
    But the need to mix the ratios of electric generation from 
a coal, say, fired power plant and wind to hold your overall 
costs down so that this is a sustainable national policy is 
something I presume you've looked at and are fairly sensitive 
to. Is that something you've been considering, on how you mix 
the renewables with the non-renewables to hold your costs down 
and to have the reliability which is central to the electric 
grid?
    Mr. Clark. Senator, I think you raise an excellent point. I 
think each State commission probably takes those twin goals 
that I mentioned earlier of reliability and cost most seriously 
of any of the duties that we have. You're exactly right, when 
rates go up we do hear from consumers.
    In the upper Midwest, we find ourselves, much as I'm sure 
Kansas does, in the situation where, because our wind resource 
is so good, it is quickly becoming a very competitive source of 
energy. So we have in the five States that I mentioned earlier 
where we're doing this planning, have assumed that wind will be 
an important part of that portfolio.
    The thing about wind that differs from other baseload----
    Senator Brownback. Because my time is going to run out--but 
coal isn't part of the mix, too, for you?
    Mr. Clark. Oh, in our region coal absolutely is.
    Senator Brownback. Because of the price that coal can do 
and the reliability that you can mix it?
    Mr. Clark. Absolutely. We are the second most coal 
dependent State in the country.
    Senator Brownback. We're I think 60 percent coal-fired, 
from in many cases depreciated coal-fired power plants. So the 
electric rates are very competitive within that. Yet we're 
bringing wind in when we can be competitive with it.
    My point in saying that is we've got a situation now in my 
State where there's a big debate about building two coal-fired 
power plants for electric generation in State and then to 
market that into the Front Range in Colorado and on down into 
Texas at a cheap rate, that then can build the lines, the power 
lines into those regions, that I can hook the wind into. 
Because our problem, like yours, is getting our wind to market. 
We've got a lot of it. We've got to get it to market and the 
markets are a little bit of a distance away. To do that you've 
got to have the power grid to do it.
    I just think we've got to think a lot smarter about these 
things, about how you mix these in so that you have a long-term 
sustainable policy that's low cost, so that the consumer is 
seeing those benefits to that. I would hope that's being 
considered, Chairman Wellinghoff, as you look at these mixes on 
it, because this is how we can do this in a sustainable, smart 
basis over the longer term.
    My other point. Chairman Wellinghoff, I had one of my 
utilities in the other day and they said, you know, we have 
enough trouble getting lines planned through a regional entity, 
let alone a nationwide transmission grid. They don't see this 
getting simpler. They see it getting harder for them if we 
bring a national entity in. So you're going to have that, that 
to overcome, I think as well as we look forward on how we're 
going to be able to get this done, because they just don't see 
the FERC as being able to make this a simpler process on 
getting the wind and other renewables to market.
    But a final thought here on it is that in some States it's 
going to be cheaper to do renewables than other States. Has 
there been given consideration to any sort of offset or trading 
system within States, just as some way that you can say, you 
know, this is going to be simpler for one State and cheaper for 
one State than another, that you could then trade some of those 
credits back and forth to help people and not make it so 
expensive?
    Chairman Wellinghoff.
    Mr. Wellinghoff. I think that argues for a national RPS, 
what you're suggesting. Certainly if we had a national RPS then 
you could trade the credits back and forth. Right now you 
can't, but if you had a national RPS you could. So that could 
solve the problem.
    Mr. Clark. Senator, from a North Dakota perspective, we 
have been participating with other Midwestern States in 
developing that type of green credit trading system.
    Senator Brownback. The point, though, would be that you 
can't do it as a way that just raises costs to somebody else, 
because if it does then why should they be for it. You're just 
going to raise their electric rates and they get nothing 
different, and I don't think that's sustainable long-term.
    The Chairman. Senator Risch.
    Senator Risch. On these, one of the issues we have in the 
West is the environmental issues with environmental groups. No 
matter what happens, no matter what kind of an application is 
made for use of the land, it is immediately filed by a NEPA 
lawsuit or one of those. We have a number of species right now, 
particularly high desert species--high desert, of course, in 
Idaho is where we use a lot of these corridors for our 
electrical siting.
    Is there any thought about--and these things go on forever. 
I mean, we've got environmental suits that go on--5 years is 
not unheard of at all. You can expect when the prairie chicken 
or what have you is involved, you're going to wind up in a 5-
year lawsuit.
    Both of you, briefly, what are your thoughts on how we 
wander through this with Federal legislation?
    Mr. Wellinghoff. Senator, going back to the experience FERC 
has with respect to gas pipeline projects. Through a 
coordinated Federal agency approach where you ultimately have 
an agency that coordinates with the other appropriate agencies, 
whether it be the Forest Service or the BLM or the Fish and 
Wildlife Service, and with the environmental groups and the 
other stakeholders, we've had a great deal of success siting 
natural gas pipelines, as Senator Reid indicated in his opening 
remarks.
    So I think these issues can be overcome as long as there is 
a coordinated approach to looking at the issues and addressing 
them through mitigation. We have in most of our proceedings a 
long list of mitigation measures that we specify that must be 
done before that particular project can move forward, and many 
of those mitigation measures are for the purpose of addressing 
environmental issues.
    Senator Risch. Mr. Chairman, I would, with all due respect, 
and I understand you work in a different area than I do, but 
when I was Governor and other times our impression in our State 
is that the term ``Federal coordinated approach'' is an 
oxymoron.
    Thank you.
    Mr. Clark. Senator, I would only add that I know in talking 
with some of my colleagues from the West they have expressed 
concern similar to yours, that when there's discussion about 
Federal siting they'll often state, within our State if the 
feds would site quicker then there wouldn't be any issue, 
because the State sites far more quickly than crossing Federal 
lands.
    I know in North Dakota's case we don't have nearly as much 
Federal land as many other western States, but when I have 
sited those cases typically utilities will go to great pains to 
avoid any sort of Federal interaction because they don't want 
to trip just those processes that you had mentioned.
    Senator Risch. Mr. Clark, I agree with you. When I was 
Governor I signed a memorandum of understanding for the 
Northern Lights Line, which I'm sure you're familiar with, and 
they were doing just that. They were trying to identify 
corridors where they could avoid Federal properties. So I think 
that needs to be addressed when we get to the end of the line 
here.
    Thank you, Mr. Chairman.
    The Chairman. Senator Wyden.
    Senator Wyden. Thank you, Mr. Chairman. I'm late and I 
apologize to our witnesses.
    But as far as I can tell, what we're doing here is 
discussing electric transmission siting and somehow other 
considerations, like liquefied natural gas and natural gas 
pipeline siting, are just going to be worked out. That is not 
happening. I think, Mr. Wellinghoff, you know in our part of 
the country the natural gas siting process has just been a 
disaster. We've got the landowners up in arms about how they've 
been treated. The State of Oregon doesn't have a good thing to 
say about their participation in the State process.
    For the first major project, the Bradwood Landing project, 
basically every major participant is now filing to reconsider 
the decision. Even NOAA, another Federal agency, has filed to 
have the decision reconsidered. It's not just Bradwood. We are 
seeing this on other projects. The Palomar one, that I think 
you're aware about as well, that's supposed to connect to 
Bradwood by cutting through the Mount Hood National Forest.
    So my sense is we've got to come up with a way to fix this, 
and I'm trying to figure out why somebody ought to take comfort 
in making electric transmission siting more like natural gas 
project siting, because certainly if you ask people about that 
in Oregon you wouldn't get a lot of support for that.
    Mr. Wellinghoff.
    Mr. Wellinghoff. Thank you, Senator Wyden. I'm not 
suggesting that transmission siting be more like natural gas 
siting, in the sense that the two bills that are being 
considered here, one by Senator Reid and the one that the 
committee staff has circulated, primarily give the planning, 
siting, and cost allocation decision to two interconnect 
entities, Eastern Interconnect and Western Interconnect. I 
think that's the appropriate way to do it.
    I think Senator Dorgan put his finger on it. What we're 
trying to do here, as I understand it at least, is advance the 
process of developing remote renewable energy resources to load 
centers in the least intrusive way, in the least way of having 
some Federal intervention or Federal oversight in that. I think 
the two bills that have been put forward do that. They're 
different from natural gas.
    I hope that we are trying to address your issues with 
natural gas in Oregon and I do understand those issues and I am 
very concerned about them, Senator Wyden, and we are trying to 
do everything we can to address those issues as best we can.
    Senator Wyden. I know you haven't been in your current 
position but a couple weeks. I will tell you, I'm still 
troubled about the Federal Energy Regulatory Commission having 
the final say here. I think that we have not had an experience 
that has bred a lot of confidence, and I want this understood 
that you've really been reaching out to our State. The problem 
has been virtually nobody else has been, and now we're talking 
about whether we ought to transfer a process that has been 
dysfunctional to Oregonians--and I could go on through these 
kind of horror stories. I just have a minute or so left and I'm 
going to spare you. But we're going to need to work with you a 
lot more before I can approve something like this, because we 
have had so many problems.
    You can't get all of these parties in agreement very often. 
They are all in agreement that the process with respect to 
liquefied natural gas has been a disaster. I'm going to do 
everything I can to get this straightened out with respect to 
liquefied natural gas before we then leap to say this is the 
model that we ought to be using elsewhere.
    Again, I want to commend you because I think you have been 
reaching out, and you've been just about the only person who 
has, and we look forward to working with you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Stabenow.
    Senator Stabenow. Mr. Chairman, I will pass on questions at 
this point in the interest of time. I apologize for coming in 
and out. I have three committee meetings I'm trying to be at. 
I'm looking forward to the technology that says ``Beam me up, 
Scotty'' so I can be at all three. But I have reviewed the 
testimony and I appreciate the witnesses coming in today.
    The Chairman. Senator Murkowski, did you have any other 
questions of this panel?
    Senator Murkowski. No, thank you.
    The Chairman. Thank you both very much. As you can tell 
from the attendance of Senators, there is great interest in 
your testimony. So thank you for being here.
    Mr. Clark. Thank you.
    Mr. Wellinghoff. Thank you.
    The Chairman. Why don't we invite the second panel to come 
forward. Let me introduce them as they are coming forward. We 
have Michael Morris, who is CEO of American Electric Power in 
Columbus, Ohio; Graham Edwards, who is with the Midwest ISO in 
Carmel, Indiana; James Dickenson with JEA in Jacksonville, 
Florida; Reid Detchon, who is with Energy Future Coalition here 
in Washington; and also Joseph Welch, and I believe Senator 
Stabenow is going to make an introduction of Mr. Welch since he 
hails from her home State of Michigan.
    Senator Stabenow. Thank you, Mr. Chairman.
    I'm so pleased to have Joe Welch here as a part of this 
panel, hailing from Michigan. He's the Director, the President, 
CEO, Treasurer, and Founder of ITC, which is the first 
independently owned and operated electricity transmission 
company in the United States. It's the only publicly traded 
company of its kind.
    Before launching ITC, Mr. Welch worked at Detroit Edison 
from 1971 to 2003 and he knows the ins and the outs of the 
electricity business and understands well the challenges that 
the industry faces in bringing renewable energy to market.
    So I welcome you, and I apologize again that I will be 
running in and out. But I am so pleased that you're here and 
that all of the witnesses are here.
    Mr. Welch. Thank you for those kind words.
    The Chairman. Thank you all for being here. Why don't we 
just follow the same procedure: ask each of you to take about 5 
minutes or so and give us the main points we need to understand 
about this issue or about the proposed pieces of legislation, 
and then we will, after we hear from all of you, we'll have a 
few questions.
    Mr. Morris, why don't you start. Thank you for being here.

 STATEMENT OF MICHAEL G. MORRIS, CHAIRMAN, PRESIDENT AND CHIEF 
           EXECUTIVE OFFICER, AMERICAN ELECTRIC POWER

    Mr. Morris. Thank you, Chairman Bingaman, and Minority 
Leader Murkowski and Senators. Thanks for being here.
    Senator Stabenow, I know you know that we serve the 
southwest corner of Michigan with our Indiana-Michigan, and 
proud to serve Kingsport, Tennessee, one of the few non-TVA-
regulated utilities in the great State of Tennessee.
    American Electric Power is among the largest utilities in 
this country. Most importantly as it comes to this point, we 
have 300,000 miles of transmission and distribution, 39,000 
miles of extra-high voltage transmission, in fact 2100 miles of 
EHV transmission 765,000 volt--the largest transmission system 
in the country. We serve 10 percent of all the energy that 
flows in the Eastern Interconnect, 10 percent of all the energy 
that flows in ERCOT.
    So we feel very happy to be here. We're pleased that the 
Senate is finally taking up this most important piece of 
legislation. Senator Bingaman, your leadership here is surely 
welcomed and we thank you for that.
    The grid was built in a different time for different 
purposes, and our company, along with some of our colleagues, 
have constantly pushed the concept of making it more reliable, 
making it more cost effective, and continuing to add intellect 
to the grid so that we can be a self-curing energy delivery 
system.
    Reliability was talked about with the other panel. It's 
essential that we build this system out not only for 
reliability, but also for the rationalization of generation 
across the country. If there's a need going forward--and I 
never have agreed with the EIA numbers of 30 percent growth in 
30 years; that almost seems impossible. But let's presume that 
you need to build 20 power plants in the United States over the 
next 20 years. If we truly build an interstate highway-like 
system for the electric transmission, you could probably build 
about half of those stations. If they come in at $3 billion a 
copy, the transmission cost not to build half of them would be 
much, much less than the price we would have incurred by 
building those systems out.
    The concept of bringing renewables into the system, it's 
essential to have this grid. Senator Dorgan, the State utility 
representative from North Dakota made it crystal-clear. 
Tremendous load center, and we always hear people say, well, 
that will go all the way to New Jersey. I doubt that. It might 
make it as far as the Twin Cities. But if the grid were built 
out, demand on the East Coast would be served by a much less 
congested system. Customers on the great eastern seaboard would 
save more money by a developed grid than they pay for 
electricity today or that they would pay for incurring the 
costs associated with that.
    Your bill and Senator Reid's bill touch on these issues 
quite pointedly. Three issues that you laid out are critical: 
Planning, it needs to be more regionalized. It may well be the 
entire eastern interface. I worry about how we do that without 
another layer of bureaucracy that will get in the way rather 
than help get this done.
    Siting is essential. You heard the numbers of natural gas. 
I spent the first 12 years of my life at American Natural 
Resources. You can build an interstate natural gas transmission 
system, because the permitting and the cost allocation is done 
at the FERC. It isn't State by State battling over how do we 
allocate this out. In fact, your cost allocation concept if we 
go to regional planning for a national surcharge, it's not a 
bad idea.
    We heard numbers this morning of 50 to $80 billion. When 
you take that down to a per kilowatt hour cost, it's a mill on 
the per kilowatt hour basis. A $1 billion transmission project 
yields an annual cost of about $130 million to be recovered 
from our customers. If you take the capacity that that could 
handle, it is in fact less than one mill added to the overall 
cost of the utility rate. You're talking about maybe a quarter 
a month for the customer's bill.
    The ability of this grid to allow the expansion of the 
United States' ability to serve its own needs, not only in 
energy security, reliability, is simply a time that is at hand. 
The technology's at hand. The private equity's at hand, the 
willing participants at hand. We need just the simplest change 
to give FERC the authority to site and allocate once the 
planning is done.
    Thank you very much for the opportunity to be here.
    [The prepared statement of Mr. Morris follows:]
Prepared Statement of Michael G. Morris, Chairman, President and Chief 
               Executive Officer, American Electric Power
    Good morning Mr. Chairman and distinguished members of the Senate 
Committee on Energy and Natural Resources.
    Thank you for holding this hearing and allowing me an opportunity 
to offer the views of American Electric Power (AEP) regarding the 
need'for federal transmission legislation to facilitate expansion and 
updating of the nation's electric transmission grid to support our 
nation's economic, environmental and energy goals.
    My name is Mike Morris, and I am the Chairman, President, and Chief 
Executive Officer of American Electric Power (AEP). Headquartered in 
Columbus, Ohio, we are one of the nation's largest electricity 
utilities--with over 38,000 megawatts of generating capacity--and we 
serve more than five million retail consumers in 11 states in the 
Midwest and south central regions of our nation. AEP also owns the 
nation's largest electric transmission system with three Regional 
Reliability Organizations overseeing our vast system, and we are 
members of three Regional Transmission Organizations.
    The AEP transmission system is a 39,000-mile network, integrating 
power delivery across 11 states. Our network includes more than 8,000 
miles of extra-highvoltage (EHV) lines, including a network of 2,100 
miles of 765-kilovolt (kV) transmission lines, which today serves as 
the backbone of the PJM Interconnection (PJM) EHV system in the eastern 
United States, facilitating efficient power flow within that region. 
765 kV is the most efficient voltage class in commercial use within the 
United States. While initially designed to provide service to AEP's 
native customers, today it is the foundation of the NM system and, 
enables PJM to link to neighboring systems in all geographic 
directions.
     summary of aep's position on federal transmission legislation
    I want to thank you for putting before this Committee the issue of 
federal authorization of interstate transmission facilities. This is 
one of the most important challenges that must be resolved if we are 
going to make meaningful progress in addressing the nation's future 
electric energy needs. The President and Congress are clearly committed 
to charting a path for our energy future that seeks much greater energy 
independence and reliance on renewables, greater economic and energy 
efficiency, and the integration of constantly evolving new 
technologies. Critical to ensuring that future, as you have recognized, 
Mr. Chairman, is a modem transmission grid that meets both our near 
term requirements and our future ambitions for a cleaner, more reliable 
and secure energy future.
    AEP strongly supports development of an EHV interstate backbone 
transmission system. Such a system can significantly improve the 
reliability and security of the current grid, permit rapid integration 
of new energy sources, including renewables, and support the 
electrification of the transportation sector with plug-in hybrid 
vehicles.
    Today, the development of interstate transmission lines is slowed 
by a fragmented regulatory system that discourages investment in major 
interstate transmission projects. We believe that the best solution is 
to empower the Federal Energy Regulatory Commission (FERC) to authorize 
interstate transmission projects and to convene all interested parties 
in siting proceedings to ensure that all voices are heard and that a 
timely, final decision is made. We also believe that FERC should have 
meaningful authority to oversee and ensure the development of an 
interconnection-wide plan for EHV transmission and ancillary facilities 
and that cost allocation principles should be established that spread 
these costs broadly, so that no single customer bears a 
disproportionate share of costs that will clearly benefit multiple 
regions over long periods of time.
    With these objectives in mind, I commend the Chairman for his 
leadership. Your draft legislation includes the critical elements 
required to get our modem grid built. We believe it is exactly the 
right starting point for fashioning a comprehensive and workable plan 
for promoting transmission investment, protecting the rights of 
interested parties, and setting us on the path to meeting our nation's 
long term energy goals. I also wish to thank Senator Reid for his 
leadership and interest in this important issue. We are confident that 
the legislative process will get us to a common end.
    We very much look forward to working with the Committee and the 
Congress to refine these proposals. We also strongly urge you to act 
quickly, so that we can get about the business of building the modem 
transmission system that will ensure the better energy future that we 
all desire.
   meeting future needs by expanding our current transmission system
    The economic prosperity of the United States relies on the 
efficient production, transmission and use of electric energy, today 
and into the future. The nation's transmission grid should enhance 
reliability and operational efficiency; and support energy independence 
and environmental goals, including expanded use of renewable resources. 
Unfortunately, our existing system is ill equipped to meet these needs.
    Originally designed to connect local generation resources to 
distribution systems over small geographic areas (primarily in one 
state), the grid now integrates resources on a more regional level, 
over larger areas and among numerous utilities with a high degree of 
reliability. The current transmission grid has supported dramatic 
changes in use and demand growth, including the development of 
wholesale power markets, without significant investment over the last 
few decades. But, the existing grid now is being pushed to its limits; 
it is frequently overloaded with congestion losses growing dramatically 
throughout the country, and reliability degraded during certain times. 
This both increases the cost of electricity to consumers and threatens 
an economy that is increasingly dependent upon reliable electricity 
service. While sound, today's grid is in need of significant investment 
if it is going to play a role in meeting our long term policy 
objectives.
    There is no question that a primary goal in expanding the 
transmission system is to enable broad scale integration of 
renewables--a critical first step on the path to addressing climate 
change. In 2008, the United States added 8,358 megawatts of new 
renewable wind generating capacity and surpassed Germany, one of the 
countries with the highest wind utilization in the world. Yet, our 
nation has only begun to harvest the available wind and solar resources 
within our borders. All agree that new transmission is the key to 
unlocking this important resource. But our current system for 
permitting new transmission projects just isn't up to the task. It 
takes, on average, only two years to develop a wind project, but many 
years to site, permit and build the transmission lines to deliver the 
wind power to consumers. If we want renewables soon, we need 
transmission sooner.
    While I know there is great excitement around transmission for 
renewables, I strongly caution this Committee to remember that our 
future economic and energy security requires a commitment to a robust 
system that meets a number of important objectives. Within the past 24 
months, our nation has witnessed unprecedented price volatility in oil 
and other commodities, major economic turmoil and growing concern about 
climate change. Our current situation has increased demands for energy 
independence, development of renewable energy resources, and growth for 
our economy, all as we seek to produce, transport and consume energy 
more efficiently. Through the strategic expansion of the transmission 
grid, we can address the limitations of our current system, permit the 
rapid integration of new energy resources, including renewables, and 
support the electrification of the transportation sector, with plug-in 
hybrid vehicles. In essence, we must build the system that we need for 
our future today.
    For that reason, we strongly support the development of an EHV 
interstate backbone transmission system. That system would overlay and 
build upon the existing EHV and lower voltage infrastructure, relieving 
major congestion and reduce electricity costs, improve reliability and 
provide maximum flexibility for interconnecting new resources and load, 
particularly renewables. Accomplishing this goal will require 
legislation that clearly supports and facilitates the timely planning, 
construction, and equitable sharing of costs for a transmission system 
that meets these multiple purposes.
             elements of effective transmission legislation
    Today's need for a bold, national commitment to upgrade and expand 
the electricity grid is no less compelling than the circumstances that 
drove the development of the interstate highway system in the last 
century. To achieve that goal we need to create a new federal process 
that dramatically changes the way we plan, site and pay for EHV 
transmission systems. Legislation implementing this federal process 
requires three critical components:

   Interconnection-wide Planning--FERC must have the authority 
        to bring together experts in the field with the representatives 
        of affected states, regional planners and others to determine 
        what facilities are needed and resolve competing concerns, so 
        that those implementing the plan know what to build and where.
   Transmission Siting--FERC must have the authority to approve 
        and site projects proposed by private companies that are 
        consistent with the interconnection-wide plan.
   Cost Allocation--FERC must have the authority to allocate 
        the cost to consumers throughout an interconnection for those 
        projects approved by FERC as consistent with the 
        interconnection-wide plans.

Interconnection-wide Planning
    Currently, transmission is planned using a fragmented approach that 
is unworkable for expanding EHV transmission beyond the borders of an 
existing planning region. Today, we plan transmission using rigid and 
often narrow reliability and economic criteria that vary significantly 
by region. The result is a line-by-line approach to transmission 
development rather than a ``system based'' approach. To develop an 
interstate transmission system, we need an open, transparent and widely 
participatory planning process that applies broad and strategic views 
to transmission development.
Transmission Siting
    The second piece is a single federal siting process for new EHV 
transmission. Today, siting EHV transmission across several states is a 
difficult and time-consuming process that involves affected states, 
federal land agencies, and local regulators, each with individual 
authority to disapprove a project. Many state processes do not 
recognize or consider regional and inter-regional transmission needs or 
benefits and may disapprove projects that do not directly benefit their 
state. With federal siting authority for EHV projects, FERC would 
assume responsibility for environmental reviews and would solicit state 
participation to ensure state input and involvement to resolve the ``on 
the ground'' concerns as FERC designates the transmission route. The 
point is not to exclude the many voices that need to be heard but to 
convene them in a single proceeding that will produce a final decision 
in a reasonable amount of time.
Cost Allocation
    Similar to siting, current methods of allocating the cost of EHV 
transmission projects by identifying specific beneficiaries is 
difficult, contentious and often includes vigorous attempts to shift 
and re-shift costs among groups of customers. Interconnection-wide 
planning will address national policy objectives and result in an 
interstate transmission system that provides benefits across broad 
regions and anticipates future needs. Therefore, legislation should 
include simple and predictable cost allocation policies, which ensure 
that everyone who benefits from the system shares in the cost of its 
development. Wide allocation of cost also will mitigate the individual 
rate impact of significant transmission investnents.
    Companies like AEP are ready to step up and build a transmission 
system that enhances our economy, supports renewable energy investment 
and enhances energy security. Today, we are hindered by the outdated 
patchwork of policies that currently constrain the development of an 
interstate grid. Only Congress can address this predicament.
                               conclusion
    As our country faces unprecedented economic, environmental and 
national security challenges, I urge this Committee and the Congress to 
seize the opportunity before them and, using the Chairman's draft as 
the framework, to enact the legislation necessary to build the future 
transmission system our country requires. I am confident that AEP and 
our industry stand ready to commit the necessary resources and talent 
to plan, site and construct an interstate transmission system necessary 
to support our nation's economic, environmental and energy goals. We 
strongly urge you to join Chairman Bingaman to provide the leadership 
and tools necessary to complete this undertaking in a timely and 
coordinated manner.
    Again, Chairman Bingaman, thank you for holding these hearings and 
thank you for proposing your draft transmission legislation. We look 
forward to working with you and your Committee to address the 
transmission needs of our country--
    I am happy to answer questions.

    The Chairman. Thank you very much for your testimony.
    Mr. Welch.

STATEMENT OF JOSEPH L. WELCH, CHAIRMAN, PRESIDENT AND CEO, ITC 
                      HOLDINGS CORPORATION

    Mr. Welch. Good morning, Chairman Bingaman and Ranking 
Member Murkowski and members of the committee. As you know, my 
name is Joseph Welch and I'm the Chairman and President of ITC 
Holdings, the Nation's first and only independent transmission 
company.
    As an independent transmission company, ITC is singularly 
focused on ownership, operation, maintenance, and construction 
of transmission. ITC has been able to maintain its focus on 
improving transmission, making it more reliable, more 
efficient, lowering the delivered cost of energy and ensuring 
nondiscriminatory access. ITC has invested more than $1.1 
billion in transmission upgrades over the last 5 years.
    Right now the outdated laws that govern our electricity 
grid are standing in the way of America's energy goals. If 
Congress is serious about making renewable resources available, 
reducing our dependence on foreign oil, meeting renewable 
energy standards and addressing climate change and other 
environmental challenges, we need to start by modernizing the 
rules that govern the grid.
    Congress must develop a cost allocation methodology for 
regional transmission projects that would allow the costs to be 
allocated based on the benefits realized by individual entities 
within regions.
    Many of the issues set forth today in the hearings are the 
symptoms of one fundamental issue, the lack of a national 
energy policy to guide planning. To plan properly, we need to 
set forth the goals, such as a national RPS, so we can 
effectively and efficiently meet them.
    Regional transmission planning. ITC is a member of the 
Midwest Independent System Operator, MISO. In ITC's estimation 
MISO has established a first-rate technical staff and done a 
very good job within the confines of the existing system that 
has been thrust upon them to develop consensus around the MISO 
transmission expansion plan.
    However, the MISO and its peers face significant challenges 
in their ability to develop truly regional transmission 
improvement plans under the current regulatory framework. It is 
the endeavor for the transparent planning process that has 
ultimately led to the undue influence of market participants 
and the subsequent derailment of true regional transmission 
plans.
    There are many challenges of regional planning--voluntary 
membership, conflicts of energy markets and transmission 
planning, influence of market participants, parochialism of 
States and incumbent utilities--which result in sub-optimal and 
inefficient solutions. We need your help and guidance to change 
these rules so we can move to an efficient and effective 
process.
    In order to fix this regional planning issue, we must 
transform our current planning process to be independent. Where 
RTOs do exist, FERC's existing authority under Order 890 should 
be strengthened. As such, all transmission owners would be 
required to pay an assessment to cover the costs of planning 
that would be the same regardless of which RTO the utility 
participates in or if they are outside of an RTO they would be 
assigned to the one for regional transmission planning 
purposes.
    These new planning-only RTOs would be responsible to 
devleop regional transmission plans with an interconnection-
wide scope. We have spent tens of millions of dollars on our 
current planning process. We don't need to throw it away. We 
just need to make it independent so that they can do their job.
    Federal siting. The FERC should be given a significant role 
in transmission siting so that the infrastructure development 
that is needed for the good of the entire country can go 
forward expeditiously. I'm only proposing that the expansion of 
that authority to address those regional projects and the 
systems that are needed to support them, that they be developed 
in the regional plan.
    For transmission that supports only local needs, that 
authority should rightfully stay with the State. FERC can 
assume responsibility to issue a certificate of need for 
projects that come through the more robust planning process. 
Then the State would be given an opportunity to site these 
certified lines and if after 1 year they fail to do so then 
FERC should be given that backstop siting authority, so these 
transmission lines can move forward and be built.
    Once the regional planning and siting processes are 
resolved, the implementation phase would begin, whereby an 
independent transmission company would be given responsibility 
for the overall coordination, development, and operation of the 
super-regional high voltage system. All incumbent utilities 
should be given the opportunity to be investors in any regional 
project that passes through their service territories, but in 
the end, to ensure no bias in any operational issues, an 
independent company needs to be responsible for the overall 
coordination.
    One of the projects that we have put forth is our Green 
Power Express transmission line, which would facilitate 
development of 12,000 megawatts of power from the wind-abundant 
regions of the Upper Midwest to Midwestern and Eastern States 
that need clean renewable energy. According to independent 
studies by CRA International and the Brattle Group, it shows 
efficient movement of wind through the Green Power Express 
would result in reductions of 34 million metric tons in annual 
carbon emissions, which is equivalent to the annual emissions 
of about 7 to 9 600-megawatt coal plants or 9 to 11 million 
automobiles.
    The Green Power Express provides access to high-capacity 
wind, which has the result of making wind economically 
competitive with all other fuel sources such as coal and 
nuclear, a fact that is again supported by independent studies.
    We have submitted this plan to MISO for their full 
evaluation. However, cost allocation is the major issue that 
needs to be addressed for this project.
    I would like to thank you very much for my opportunity to 
be here today and I'll be willing to take any questions you 
might have.
    [The prepared statement of Mr. Welch follows:]
Prepared Statement of Joseph L. Welch, Chairman, President and CEO, ITC 
                          Holdings Corporation
    Good morning Chairman Bingaman, Ranking Member Murkowski, and 
Members of the Committee. My name is Joseph L. Welch, and I am 
chairman, president and CEO of ITC Holdings Corp. (``ITC''), the 
nation's first--and only--independent electric transmission company. I 
am honored by the opportunity to speak before you this morning to offer 
my perspective on legislation regarding transmission regulation.
                          role of independence
    Before I begin I would like to provide some background as to the 
significance of the independent transmission company business model as 
I believe it is relevant to today's discussion. As an independent 
transmission company, ITC is singularly focused on ownership, 
operation, maintenance and construction of transmission facilities as 
its single line of business. ITC has never invested in generation. All 
of ITC's revenue is directed back to transmission rather than in any 
market activities. ITC is now the eighth largest transmission-owning 
company in the U.S., in terms of load served.
    ``Independence'' means that there is de minimis or truly passive 
ownership by market participants and that there is minimal operating 
dependence on, and ongoing relationships or affiliation with, any 
market participant. To safeguard ITC's independence, the company and 
its employees do not hold any market participant investments.
    Through its independence, ITC has been able to maintain its focus 
on improving transmission: making it more reliable, more efficient, 
lowering the cost and ensuring nondiscriminatory access. To that end, 
in its five or so years in existence, ITC has invested more than $1.1 
billion in transmission system upgrades. In essence, the independent 
model aligns the interests of the company and its shareholders with 
those of electricity consumers.
    This is markedly different than a vertically integrated utility 
that owns generation and distribution in addition to transmission. In 
fact, this vertically integrated utility business model is at the very 
center for why there has been a 30-year trend of underinvestment in the 
grid. That is not to say, however, that lack of independence will 
always result in underinvestment. It is more accurate to say that the 
lack of independence of a vertically integrated utility may result in 
transmission being used as leverage to manipulate markets. As 
previously alluded to, this can be done by minimizing transmission 
system investment in order to maintain levels of congestion needed to 
protect high-cost generation.
    Conversely, a vertically integrated utility with significant 
generation resources may want to build transmission as a means to bring 
its generation to market while perhaps not providing the same 
opportunity to other generators. It is for these very same reasons that 
the Federal Energy Regulatory Commission (``FERC'') decided to form 
independent transmission companies in order to promote the provision of 
non-discriminatory access to the grid.
    This independence is of particular importance as it relates to 
decision-making for field and control room operations, generator 
interconnections and both local and regional planning. A non-
independent transmission owner faces competing interests. As such, 
independence from the energy market influence is critical in 
consideration to the electric transmission grid; however, the concept 
of independence should not be limited to the electric transmission 
companies. Equally essential is the independence of any regional 
planning organization with supporting governance and decision-making 
processes established in a manner that do not provide undue opportunity 
to thwart transmission development by stakeholders.
                     overview of legislative issues
    Today's full committee hearing gets at the very heart of the issues 
facing the electric utility industry, and specifically to the 
challenges impeding the construction of regional transmission. Right 
now, the outdated laws that govern our electricity grid are standing in 
the way of America's energy goals. If Congress is serious about making 
renewable resources available, reducing our dependence on foreign oil, 
meeting renewable energy standards, and addressing climate change and 
other environmental challenges, they need to start by modernizing the 
rules that govern the grid. In other words, due to the historical 
underinvestment in the nation's grid, transmission, which should be the 
enabler, today is the roadblock to renewable resources.
    However, I would be remiss if I did not also stress the importance 
of developing a cost allocation methodology for regional transmission 
projects that would allow the costs to be allocated based on the 
benefits realized by individual entities within the region. In fact, 
cost allocation goes hand in hand with regional planning because 
without one, you cannot have the other. ITC believes that the costs for 
a regional transmission project should be harmonized across a broad 
geography in recognition of the multitude of benefits as well as 
increased system optionality provided by having a robust and 
highlyinterconnected transmission grid.
    Many of the issues set forth in today's hearing are the symptoms of 
one fundamental problem: the lack of a national energy policy to guide 
planning. This national energy policy should clearly define national 
energy priorities such as the establishment of a federal renewable 
portfolio standard and federal regulation of greenhouse gas emissions. 
Having this information codified would greatly enhance our ability to 
plan for the regional transmission network that this country needs.
         regional planning under today's regulatory constructs
    ITC's operating companies (Michigan Electric Transmission Company, 
LLC, ITC Midwest LLC and International Transmission Company 
(``ITCTransmission'') are members of the Midwest Independent 
Transmission System Operator, Inc. (``Midwest ISO''), and in ITC's 
estimation the Midwest ISO has established a first rate technical staff 
and done a noble job working within the confines of the existing system 
that was thrust upon them to develop consensus around the Midwest ISO 
Transmission Expansion Plans. However, the Midwest ISO and its peers 
face significant challenges in their ability to develop truly regional 
transmission improvement plans under the current regulatory stakeholder 
framework. It is the endeavor for a transparent planning process that 
has ultimately led to the undue influence of market participants driven 
by voluntary membership and the subsequent derailment of true regional 
transmission plans.
    The problems that prevent the development of truly regional 
transmission plans, however, can be solved by Congress or by the FERC. 
You may ask: how can it be said that there is no independent regional 
transmission planning given all the attention that the FERC has devoted 
to the creation and governance of Regional Transmission Organizations 
(``RTO'') and Independent System Operators (``ISO'')?
Voluntary Membership
    The largest challenge that independent planning faces under the 
current model is that membership in RTOs, and thus participation in 
regional planning and cost sharing, is voluntary. If the regional/
public interest and the interest of an individual member diverge, 
market participant stakeholders may endorse solutions that are not 
optimal for the region but rather satisfy the stakeholders' individual 
interests. If the RTO attempts to impose a solution that is in the 
regional interest, the stakeholder may threaten to leave the RTO 
potentially using membership fees as leverage. Additionally, individual 
states have the potential to leverage the voluntary membership to 
pressure its local utilities to leave the RTO if the state does not 
support a planned project and its associated cost. Another form of 
leverage that has been used by state regulators is the threat of not 
passing through the cost of a particular transmission project or the 
RTO membership fee.
Conflicts of Energy Markets and Transmission Planning
    Additionally, another challenge faced by RTOs is related to their 
respective governance structures. Owning responsibility for both 
planning transmission and running the energy market may present 
competing interests. While a utility may want to join an RTO as a means 
to participate in the energy market, it will seek ways to avoid having 
its transmission system encumbered by any regional planning efforts as 
shown in the recent FERC order in which the Midwest ISO had requested 
that FERC approve the ability of utilities neighboring the Midwest ISO 
to become a part of the Midwest ISO energy market without having to 
join the RTO as a full member. Ultimately and wisely, FERC denied this 
request, but the request in itself is a demonstration of the conflict 
of interest of having the RTO responsible for both transmission 
planning and energy markets.
    This conflict of interest often results in RTOs relying on re-
dispatch solutions instead of re-enforcing the transmission system. 
Indeed, one inadvertent byproduct of LMP markets is that the ability to 
purchase rights to ``buy through'' congestion effectively prevents 
building the transmission that would avoid the congestion in the first 
place. The consequences of doing business this way are evident. To 
begin, transmission and distribution losses nearly doubled between 1970 
and 2001 (from 5 percent to 9.5 percent) due to heavier utilization and 
congestion. This is exacerbated by the belief that modeling can be done 
to such a level that all of the benefits of transmission additions can 
be accurately calculated.
Influence of Market Participants
    The challenges inherent with the existing governance structure and 
stakeholder driven planning processes have one notable result--little 
to no true regional transmission has been planned or built. As alluded 
to earlier in the discussion of the voluntary nature of RTOs, the 
existing governance structures and stakeholder processes compromise the 
RTOs' ability to independently plan the transmission system due to the 
influence of market participants. The regulatory framework permitting 
voluntary membership and the ability of market participants to play 
critical roles in RTO decision-making, RTOs cannot plan the 
transmission system from a truly independent perspective.
    The stakeholder processes to which RTOs are bound, and to which the 
Commission continues to defer in Order No. 890, for example, can never 
be independent because the ``stakeholders,'' by definition are 
operating on behalf of their own needs and can ``vote with their 
feet''. In fact, several Midwest ISO TOs have submitted letters of 
potential withdrawal ostensibly as a means to keep pressure on the RTO 
to protect their interests. A truly independent planning entity, under 
which membership would be mandatory, would be able to effectively 
identify needed regional transmission infrastructure without the threat 
of incumbent transmission owners threatening to withdraw from the 
organization.
    The existing stakeholder processes result in transmission planning 
and related cost allocation protocols focused on the least common 
denominator rather than on developing a robust regional plan with a 
well-developed regional cost allocation mechanism. As a result, 
transmission plans have a narrow scope rather than having a regional 
focus, and the corresponding cost allocation protocols are complex and 
generally do not promote development of regional transmission.
    In addition to categorizing transmission investments in a somewhat 
arbitrary fashion (e.g., economic, reliability, transmission service 
request, generator interconnection, etc., each transmission upgrade is 
viewed as having winners and losers. Even stakeholders from the same 
sectors have varying interests. For example, generators in high cost 
areas have an incentive to frustrate transmission plans as a means to 
maintain existing constraints whereas generators in low cost areas want 
to remove existing constraints as a means to broaden their access to 
markets. Conversely, load regions with high costs want to remove the 
constraints in order to access more economic sources of energy while 
load regions with low costs are incented to maintain existing 
constraints as a means to insulate their area from market prices.
    In these cases, some individual state regulators have had a 
parochial view and attempted to exert influence over the planning 
process as a means to optimize conditions for their individual state. 
This presents a case of competing interests because national policy 
issues such as climate change and a focus on environmental stewardship, 
energy security, regional reliability and market competitiveness cannot 
be addressed state-by-state.
    Another example in which individual interests come directly in 
conflict with regional planning is as it relates to how costs are 
allocated for a particular project. As I mentioned earlier in my 
testimony, regional planning goes hand in hand with cost allocation. 
The lack of a cost allocation mechanism can drive sub-optimal regional 
planning. Direct current (``DC'') is a good technology solution if used 
in the proper allocation; however, to some extent it has been applied 
inappropriately due to the lack of a cost allocation methodology. DC is 
generally used to deliver energy from point A to point B with little 
opportunity for intermediate on-ramps and off-ramps. A DC line's single 
purpose is to bring power from one location and therefore, it does not 
unload the underlying system through the reduction of system congestion 
or reduce losses, nor does it not provide network flexibility. This 
limitation makes it such that the cost allocation issue is easily 
answered in this case because there are only two beneficiaries--the 
generator and the load. As a result, a difficult question is averted at 
the cost of a sub-optimal plan.
Generator Interconnection Queue
    As the demand for the integration of wind and other renewable 
resources grows, the ability to effectively develop regional plans to 
interconnect these resources where the best source of wind is located 
is stifled. As shown in the map below,* the current planning processes 
within the Midwest ISO do not support the level of demand for the 
integration of the wind resources in the Upper Midwest, a region with 
some of the most efficient wind resources in the United States. 
According to some estimates, a new generator would potentially have to 
wait up to 46 years in the generation interconnection queue before its 
project can be studied by the Midwest ISO. Clearly, reactive planning 
under the current configuration will not work as a means to build 
regional transmission.\1\
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    * Graphics have been retained in committee files.
    \1\ The Midwest ISO has attempted to address this problem with its 
proposed Forward Looking Interconnection Project (FLIP) process. The 
link to the related Midwest ISO whitepaper can be found at http://
www.midwestmarket.org/publish/Document/
20b78d_11ef44fc9c0_-7bfb0a48324a/Midwest%20ISO%20Draft%20FLIP%20
Whitepaper%20v2%20020609%20clean.pdf?action=download&_property=Attachmen
t
---------------------------------------------------------------------------
    Midwest ISO Generator Interconnection Queue\2\.
---------------------------------------------------------------------------
    \2\ http://www.midwestmarket.org/publish/Document/
735a38_109988af51a_-7f5e0a48324a/
MISO_Queue_Map.pdf?action=download&_property=Attachment
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    In sum the fundamental issues facing transmission planning under 
the current RTO configuration are directly related to the voluntary 
nature of RTO membership and the stakeholder-driven planning process 
that promotes an undue influence of market participants in the 
development of regional plans.
Moving Forward on Regional Planning
    The purpose of today's technical conference is to address regional 
system planning as a means to integrate renewable energy. 
Unfortunately, where we stand today will not serve as an effective 
enabler to get the necessary regional transmission built in support of 
the nation's vision of renewable energy.
    ITC's experience as an independent transmission company has given 
us unique insight into the value of independence in transmission 
operations and planning. This independence should not be limited to the 
transmission owning entity but should be extended to regional planning 
by the RTOs. ITC is not calling for general mandatory RTO membership; 
we are calling for mandatory planning. Where RTOs exist, RTO membership 
should be mandatory for purposes of transmission planning and cost 
allocation. Where RTOs do not exist, FERC's existing authority under 
Order 890 should be strengthened. As such, all transmission owners 
would then be required to pay an assessment to cover the costs of 
planning that would be the same regardless of which RTO the utility 
participates in, or if they are outside an RTO, thereby mitigating the 
risk of utilities voting with their feet.
    The regional planning conducted by RTOs is dictated by the scope of 
the market while it should be performed more broadly based on system 
considerations. RTOs should have the ability to plan a contiguous 
region. A broader planning region will facilitate the kinds of multi-
state projects that are needed to deliver renewable resources to load 
centers and to establish a strong backbone system for the grid. Only 
then when we have a robust and flexible regional electric transmission 
grid that does not provide discriminatory access to any one party will 
the U.S. be able to benefit from the vast energy resources available 
and achieve energy independence.
                        federal siting authority
    Currently, transmission rates are regulated on a federal level by 
the FERC, but siting is regulated by individual states that naturally 
are focused on benefits to their respective state, not the region or 
the nation. For this reason, the building of significant regional 
transmission lines is virtually impossible. In many cases, transmission 
projects are delayed for years through cumbersome state siting 
processes. The FERC should be given a more significant role in 
transmission siting so that infrastructure development that is needed 
for the good of the entire country can go forward expeditiously.
    This can be accomplished in one of two ways. FERC can assume 
responsibility for issues a Certification of Need for projects that 
come through the new, robust planning process. Under this approach, 
states would continue to have authority to route project as they are 
best informed on zoning, land use and other local concerns. Such an 
approach also avoids potential delays in creating the federal staff 
needed to undertake routing decisions across the country. There would 
need to be a reasonable federal back stop in should a state fail to 
assume its responsibility to route the project.
    The same result could be accomplished through expanding and 
strengthening FERC's existing backstop siting authority. Therefore, 
regional transmission projects approved by the regional planning entity 
would continue to subject to state review, but if a state fails to act 
on, or rejects, a project within a year, the federal government can 
step-in. This option has the potential of being more complex, could 
result in delays in siting, and will no doubt be subject to litigation.
 impact of right of first refusal / competitive bidding on construction
    ITC believes that incumbent transmission owners should have the 
right of first refusal, meaning the right to build the needed 
transmission within their respective service territories provided they 
are willing to make timely commitments to build the approved 
construction. Right of first refusal without any limitation can impede 
needed development. In fact, such a ``Right of First Refusal'' as 
included in the SPP tariff, for example, is a formidable barrier to new 
entrants. Stakeholder processes on which RTOs depend, and to which the 
Commission continues to defer in Order No. 890, for example, can never 
be independent because the ``stakeholders,'' by definition are 
operating under parochial constraints. ITC feels strongly that 
incumbent transmission owners should have a reasonable period of time 
during which to submit an application to construct and site new 
facilities. However, to the extent an incumbent fails to act within 
that timeframe, and then the project should be open for other parties 
to undertake. To this end, FERC would be in the position of resolving 
any conflict arising from competing projects/developers. FERC should 
look at a variety of criteria to determine who is best suited to build 
a project including incumbent participation, public power, the ability 
to maintain facilities going forward, etc.
    Some have expanded this concept to argue for competitive bidding 
for the construction of regional transmission projects. The typical 
American utility does not have a construction department, and as such, 
for each individual capital project, it must send the project out to 
bid based on detail engineering design. The two key components to 
determining the cost that the consumers will ultimately pay: 1) return 
on equity (``ROE'') and 2) level of ongoing maintenance. As it relates 
to competitive bidding, ROE is the only area in which utilities may 
complete. This, in effect, creates negative incentive for utilities to 
reduce maintenance and operations costs in an effort to recapture 
profits, which ultimately results in the degradation of system 
reliability. This is the system we have today and has led us to 
underinvestment in transmission.
    To address these inherent issues, the regional planning issue must 
first be resolved, and then, in the implementation phase, an 
independent transmission company should be responsible for the overall 
coordination with the affected utilities that would have the right of 
first refusal to build or participate in the building. This would allow 
the incumbent utility to participate in construction if so desired 
while ensuring that the independent transmission company takes 
responsibility for coordinating construction and ongoing maintenance 
across broad regions thereby ensuring that inventory requirements are 
met, that maintenance crews are trained and that the necessary capital 
is available with appropriate ownership so as to prevent the 
transmission system from being manipulated by market participants.
     itc's green power express as forcing function on policy issues
    A more tangible example of the value of independent regional 
planning can be found in ITC's recently announced ``Green Power 
Express''. While this project is still in its very early stages, the 
question of DC has already arisen. The Green Power Express is a broad 
network of 765 kV transmission facilities that has been designed to 
efficiently move vast amounts of renewable energy in wind-rich areas to 
major Midwest load centers. The Green Power Express is consistent with 
the vision outlined by President Obama in his national energy agenda. 
President Obama specifically mentioned his desire ``to get wind power 
from North Dakota to population centers, like Chicago.''\3\
---------------------------------------------------------------------------
    \3\ Transcript from appearance on Rachael Maddow Show of October 
28, 2008: http://www.msnbc.msn.com/id/27464980/.
---------------------------------------------------------------------------
    The Green Power Express will allow this goal to be met as well as 
set the stage for the integration of off-shore wind in the Great Lakes 
in the future. By having a robust extra high voltage (``EHV'') grid 
that serves as a transmission backbone in various regions, the 
geographically diverse wind becomes readily accessible and more 
economic thereby mitigating two of the major challenges with this 
naturally intermittent resource.
    We recently received the results of an independent study conducted 
by the Brattle Group, entitled ``Transmission Super Highway: Benefits 
of Extra High Voltage Transmission Overlays,'' which demonstrates that 
wind power becomes economically competitive when it is generated from 
areas with the highest capacity levels. The study uses ITC's proposed 
Green Power Express development project as a model for examining the 
potential benefits of adding a high voltage overlay to our existing 
transmission system. It concludes that between 2010 and 2030, the Green 
Power Express alone could deliver up to approximately 12,000 MW of new 
wind energy, avoiding significant amount of carbon emissions.
    The Green Power Express was designed to be an EHV backbone that 
would gather the wind from the disparate wind abundant areas and 
transport it eastward. In other words the Green Power Express as an 
alternating current (``AC'') solution provides many onand off-ramps to 
gather and distribute the wind power across a broad region. With DC 
there would be less flexibility for how wind would be integrated into 
the network. Additionally, DC presents some reliability concerns if 
used as the initial phase of an EHV backbone. Because it does not allow 
for easy redirection of power in the case of a line outage, at this 
point a DC solution would make the system reliability vulnerable.
    In effect, through the development of the Green Power Express, ITC 
filled a gap that exists within the industry due the existing RTO 
governance that does not currently give the RTOs direction to do 
regional planning without undue influence of market participants. The 
absence of market participant influence and ITC's independence from 
undue market participant influence was critical in developing the right 
solution that improves electric reliability, effectively and 
efficiently integrates high capacity renewable energy to promote a 
cleaner environment, protects national security, and the environment. 
However, it should be recognized that while ITC was able to develop 
this plan free from undue market participant influence, the project 
will likely face the same challenges related to pressure from 
stakeholders related to individual interests as ITC shepherds the Green 
Power Express through an Order No. 890 compliant process.
    As envisioned the Green Power Express will touch seven states, or 
seven distinct siting jurisdictions. Under the current siting system, 
this could mean that the project could get held up in court siting 
procedures for an indefinite amount of time. In order to realize the 
vast economic, environmental and reliability benefits of the Green 
Power Express in a timely manner, it is imperative that there is some 
form of backstop siting authority to compel the project forward.
    It is widely recognized that the Upper Midwest is a region that has 
great potential to develop wind energy facilities. There are other 
regions that have similar opportunities such as wind in the Great 
Plains region or solar energy in the Southwest. Generation from these 
potential resources is intermittent due to the variable nature of wind 
and solar ``fuel''. As such, regional diversity will provide 
significant benefits as a means to dampen the impact of this resource 
intermittency. Consequently, independent regional transmission planning 
is essential as a means to identify and capitalize on the vast amount 
of renewable resources economically while protecting the overall 
reliability of the grid.
                               conclusion
    Our country is trying to tackle 21st Century energy challenges with 
an electric transmission grid largely built more than 30 years ago 
while operating under an outdated regulatory system. To put it simply, 
we will not meet our goals if we don't change how we do business. We 
urgently need to reform how we plan, locate and pay for new 
transmission. This requires moving beyond the parochial interests and 
fractured regulatory structure that has led to decades of 
underinvestment in our electricity grid. Congress and federal 
regulators have the ability to modernize the rules to allow private 
companies such as ITC and others to make much-needed investments. These 
are solutions that don't require an infusion of taxpayer dollars, but 
will create new jobs and help address our looming energy and 
environmental crises.
    A modern grid will solve our environmental and renewable energy 
challenges and improve reliability and associated costs to the economy. 
Now is the time for Congress to encourage private investment in 
America's energy infrastructure.
    Again, thank you, Chairman Bingaman, Ranking Member Murkowski, and 
Members of the Committee. I sincerely appreciate the focus that you are 
providing to the critical issue of the impediments to building regional 
transmission as the facilitator of an energy policy vision for a 
brighter, cleaner tomorrow.

    The Chairman. Thank you very much.
    Mr. Edwards, please go right ahead.

STATEMENT OF GRAHAM EDWARDS, ACTING PRESIDENT AND CEO, MIDWEST 
         INDEPENDENT TRANSMISSION SYSTEM OPERATOR, INC.

    Mr. Edwards. Mr. Chairman, Senator Murkowski, members of 
the committee: I appreciate very much you allowing me to be 
here with you today. I'm Graham Edwards and I am with the 
Midwest Independent System Operator.
    We think that the legislation that is being reviewed today 
is critical for the country going forward. At the Midwest ISO 
we were the first independent transmission organization in the 
country. We serve all or parts of 14 States, about 97,000 miles 
of high voltage transmission lines. We have several functions 
and services that we provide for our market participants and 
our transmission owners: reliability coordination, transmission 
administration, congestion management, and as important as 
anything and probably more important today is regional 
transmission planning services. That is critical in what we're 
talking about today.
    As we look at this legislation, this is a national problem 
and we need a national solution and a process to handle the 
national problems that we're facing. If it's done correctly and 
right, I really believe we can end up with a plan that meets 
our needs and has the right answers.
    The interconnection systemwide planning process we think is 
very appropriate, and also we think it's achievable. I say that 
because we have just recently at the Midwest ISO over the last 
15 to 18 months gone through an interconnection-wide study. 
Albeit it was a very high level study and a first scenario, 
Midwest ISO along with several other RTOs--PJM, Southwest Power 
Pool--as well as MAP Region, TVA, some southeastern utilities, 
as well as information from New York and New England.
    We pulled all this together, built the model for the entire 
eastern interconnect in order to look at what it would take for 
a high voltage overlay. We worked also in conjunction with the 
Department of Energy to develop a scenario that, from the 
reference case, that if there were a 20 percent renewable 
mandate, what will the impacts be. We did this process very 
open and transparent. We had 12 different meetings in 12 
different cities, over 300 participants, individuals and 
entities.
    So the process can be done, it's appropriate, and it is 
doable. However, we strongly recommend that for it to be 
successful several things need to be considered.
    First, clear policy goals and objectives need to be 
understood and set forth at the outset. Before any plans are 
started, we need to know what renewable mandates are, we need 
to know what carbon implications are going to be for the 
future, what cost expectations are. Those need to be understood 
up front before the process starts.
    Second, we need to develop a very open, transparent, 
robust, and inclusive process. Collaboration with the States is 
very critical. It's got to be done in that manner because if 
not I don't care what the answers are, people will not accept 
them.
    Third, we think that the designated planning authority 
needs to be one independent both from commercial relationships 
and from regulatory pressures. They need to be planning from a 
perspective of independence. They also need to be experienced 
and very sophisticated systemwide planning experience will be 
critical to be successful.
    In addition, we think that, similar to Senator Reid's bill, 
we think it needs to be refreshed periodically. Technology 
changes. Demographics change. We need to make sure we revisit 
the plans periodically to make sure we're still going down the 
right road.
    Last and probably the most critical is, to be successful in 
building transmission, the two things that others have talked 
about, siting and cost allocation, are the most controversial 
and contentious issues that we've all got to deal with. There's 
got to be some political will at either the Federal or the 
State level for those issues to be resolved and for us to move 
forward. I think that your legislation is on the right road in 
the role for the States in working cooperatively, so we think 
that's an appropriate way.
    In summary, we think systemwide, interconnection-wide 
planning is good. We think clear policies are critical. It 
needs to be transparent, open, independent planner, as well as 
siting and allocation issues need to be in force and effect.
    Finally, Mr. Chairman, I will take credit for the comment 
made by Senator Murkowski at the onset. Congress has the 
ability to change laws, to make new laws. I really don't think 
we can change the laws of physics. What I hope is that the 
planners don't get into a situation with goals and objectives 
that go against the laws of physics.
    With that, I will conclude my remarks and I appreciate the 
opportunity and would be glad and look forward to your 
questions.
    [The prepared statement of Mr. Edwards follows:]
Prepared Statement of Graham Edwards, Acting President and CEO, Midwest 
             Independent Transmission System Operator, Inc.
    Good morning, Chairman Bingaman, Ranking Member Murkowski, and 
members of the Committee; thank you for inviting me to speak to you 
today. I am Graham Edwards, Acting President and CEO of the Midwest 
Independent Transmission System Operator, Inc. The Midwest ISO is a 
non-profit, independent, member organization serving members in all or 
parts of 14 states and one Canadian province, from western Pennsylvania 
to eastern Montana and Missouri to Manitoba. In 2001, we were the first 
Regional Transmission Organization approved by the Federal Energy 
Regulatory Commission. The Midwest ISO operates day-ahead and real-time 
energy markets and an ancillary services market. In addition, we 
provide transmission scheduling and reliability services. Relevant to 
this hearing, the Midwest ISO performs a regional planning function for 
the members in its footprint.
                transmission planning at the midwest iso
    The Midwest ISO performs transmission planning at several different 
levels--from individual generator interconnections to smaller sub-
regional transmission plans, to an annual expansion plan for the entire 
Midwest ISO footprint. We are also part of a coordinated effort to look 
at transmission planning on an Eastern interconnection-wide basis. Last 
month, the first report from this effort was issued: the Joint 
Coordinated System Plan or JCSP. The JCSP looked at two future energy 
scenarios for the Eastern interconnection: a reference future 
reflecting existing laws and about 5% wind penetration, and a wind 
future in which 20% of the energy in the Eastern interconnection was 
provided by wind. Another goal of both scenarios was to bring the 
lowest delivered cost of power to consumers. Other participants in the 
study included PJM, the Southwest Power Pool (SPP), TVA, the 
MidAmerican Power Pool (MAPP), entities in the southeast and input from 
the New York and New England regions. All of the work was done in 
collaboration and coordination with the Department of Energy. The JCSP 
was a first step, and more work needs to be done.
    I look at the JCSP as a great success. It was the first joint 
transmission process that looked at the entire Eastern interconnection 
and it used new planning tools and techniques to perform its 
engineering analysis. The results reflect the fact that it was an open 
process to gather stakeholder input, visiting a dozen cities in all 
regions of the Eastern interconnection with over 300 entities attending 
the open meetings. Briefly, the JCSP found that for a 20% wind future, 
about 15,000 miles of an extra high voltage transmission overlay would 
be needed for the Eastern interconnection. The cost of this new 
transmission would be about $80 billion, but the early estimates show 
that benefits of the system exceed the costs.
    Congress is now discussing how to promote new transmission for 
various goals such as improved renewables access, carbon reduction, 
national security/energy independence, and improved reliability. All of 
these are important goals and new intelligent transmission can help to 
achieve them all. Having just completed the JCSP, I would like to 
discuss some of the lessons learned from that 15-month open process 
that Congress should consider in the legislation being reviewed today, 
and in any related legislation.
    I wish to offer five points today:

   Interconnection-wide planning is appropriate and achievable.
   Interconnection-wide planning is best accomplished with 
        policy goals and expectations stated up front and important 1st 
        level questions already assessed.
   The best and most useful plans come from open, inclusive, 
        robust sessions to develop and vet key assumptions.
   Plans, once developed, must be revisited to keep them 
        relevant.
   To build projects that will fulfill the plan, siting and 
        cost issues must be addressed.
      interconnection-wide planning is appropriate and achievable
    Because the issues being addressed in our nation's energy debate 
involve topics of at least regional and often national scope, it is 
crucial that they be addressed on the right level. Renewable resources 
such as wind, solar and geothermal are most often at their peak 
capacity in areas remote from the nation's major load centers. The 
electrical grid for the lower 48 states operates in three 
``interconnections.'' In the Eastern and Western interconnections, 
harvesting the most vibrant renewables will mean moving energy over 
distances of hundreds of miles through an intelligent extra-high 
voltage grid overlay. To ensure that overlay can integrate renewables 
with an end goal of the lowest delivered cost of energy, the planning 
must be over comparably large regions. In our region, moving large 
amounts of wind energy from the Great Plains to population centers 
cannot be done with the existing transmission system, or even a 
slightly improved system--it will require an intelligent extra high 
voltage grid overlay.
    In the West, the folks at WECC have shown that such plans can be 
produced. In the East, we in cooperation with other entities like TVA, 
SPP and PJM, among others, have shown an interconnection-wide plan can 
be accomplished through the JCSP. This plan evaluated what would be 
necessary for a 20% wind integration by the year 2024. The plan is a 
good start. Additional efforts are underway to run more scenarios and 
to consider off-shore wind resources and Canadian resources in the 
plan. Moreover, we believe that an intelligent EHV overlay could be 
self-healing and not significantly affect the existing transmission 
planning processes of utilities, RTOs and ISOs used for transmission 
that is not part of the overlay. The important news is that 
interconnection-wide planning can be done in the Eastern 
interconnection. The draft legislation appropriately requires that 
planning for an intelligent extra high voltage grid be done on an 
interconnection-wide basis.
 interconnection-wide planning is best accomplished with policy goals 
  and expectations stated up front and important 1st level questions 
                            already assessed
    What policy goals one wishes to serve will be reflected in an 
intelligent grid-overlay plan. It is not enough to say the goal is to 
integrate renewables. The more Congress can inform the planners in 
advance, the less they have to make up or decide for themselves and 
risk frustrating the policy makers who gave them the job in the first 
place. For instance, what other factors are to be considered--maximum 
CO2 reduction, lowest cost of wholesale electricity, 
national security/energy independence through plug-in electric 
vehicles, or others? The answers to these questions are likely to 
result in different grid overlay plans. I am not saying that these 
goals are mutually exclusive, but the planners need to know what the 
goals for the grid are so those goals can be reflected in the plan. The 
draft legislation attempts to provide this clarity to the planners. 
Further clarity regarding levels of renewables requirements and details 
of carbon policy would be helpful, but those issues may be addressed in 
other legislation.
    It is also especially valuable if the determination of where the 
renewable resource zones are located is already made or if the criteria 
for choosing the zones are set. Planners know generally where the load 
centers are (the cities); however, identification of the areas where 
the renewables will come from is just as important in planning the 
intelligent transmission grid overlay. A process needs to be in place 
to identify where the renewable resources will be located. This could 
be done through either a state or federal process or a combination of 
both; but a process should be identified. The draft legislation does 
not provide a framework for the process to identify the renewable 
energy zones. I believe that a collaborative state and federal process 
could quickly identify those regions where large quantities of 
renewables are present. DOE has already done much of this work on a 
national level. The states of the upper Midwest (North and South 
Dakota, Minnesota, Wisconsin and Iowa) are working together with the 
Midwest ISO to identify those particular regions in their states (based 
on the broader DOE work), where wind development is most appropriate. 
We understand that California, New York and the New England regions are 
engaged in a similar process. Congress should allow those processes to 
come to fruition and then allow that work to be incorporated into a 
national plan. Incorporation of state plans into a national plan will 
give greater credibility to the national plan.
     the best and most useful plans come from an open, inclusive, 
transparent, nondiscriminatory, robust process used to develop and vet 
 key assumptions and explain the tools and processes that will be used 
                            by the modelers
    Because siting and cost issues will arise from the implementation 
of any plan, it is crucial that the plan be credible and respected by 
not just policy makers and investors, but by the people and state 
authorities whose land will be crossed by the projects that implement 
the plan. When assumptions are arrived at out of sight, they become 
secrets and the motivation of the planners is questioned. The draft 
legislation appropriately requires an open stakeholder process to 
develop the interconnection-wide transmission plan.
    The interconnection-wide planning you are considering will be 
valuable because it will produce an answer; not justify a predetermined 
path of action. The JCSP was conducted in such a manner. Our experience 
shows that the values of openness, transparency and inclusion do not 
have to paralyze a process. Willing people can produce valuable work 
that is thoughtful and respectful of others within time frames still 
suited to action.
    Another important consideration is the choice of the planner. It 
should be an independent entity (which could be a joint venture of 
entities) with experience in large scale transmission planning. These 
requirements should be added to the draft legislation. Independence is 
critical so that the planner is not beholden to any party interested in 
the outcome and persons can have confidence that the planning process 
was fairly run. Experience is critical because Congress appears to want 
this process to begin soon. Transmission planning is a very arcane 
subject and it could take an entity without experience too long to gain 
the experience and produce a credible plan. Independence and experience 
will provide greater credibility to the planning entity and its work 
product.
     plans, once developed, must be revisited to keep them relevant
    Planning is an ongoing process. At its best, it is flexible enough 
to adapt to new developments, like evaluating out of sequence projects, 
and prudent enough to reconsider assumptions and incorporate new 
developments on a periodic basis. The Midwest ISO's own regional plan 
is a biennial plan. From our experience with the JCSP and our own 
transmission expansion plans, we have found that no matter what 
``future'' is looked at in the plan, there tends to be a ``core'' of 
transmission projects that will be required no matter what. Identifying 
the core projects allows plan flexibility in the future and helps 
prevent building a system (or parts of it), that could become obsolete. 
Flexibility in the plan will build public and stakeholder confidence in 
the plan and the planning process. This confidence may also aid in the 
eventual siting and cost allocation issues that will arise. You should 
consider adding requirements that the plan be updated on a regular 
basis. This will allow the plan to be updated as conditions change and 
new technologies are developed.
 to build projects that will fulfill the plan siting and cost must be 
                               dealt with
    The Committee will be considering various siting and cost recovery 
proposals. It is critical, in my view, that they be addressed; for 
without their consideration, the state-by-state review of regional 
projects will be fraught with difficulty. That is not to say that the 
state role should be eliminated--states have important knowledge that 
will be valuable to the siting process.
    It is also important that the cost recovery mechanisms for the 
projects not be based on membership by companies in voluntary 
organizations like RTOs. Recovery should be pursuant to rules that 
cannot be sidestepped by withdrawing from an organization. The Midwest 
ISO has its own costs allocation and recovery rules, but those rules 
are not the same across different RTOs or ISOs or various utilities. It 
would be very difficult to try and apply different cost allocation and 
recovery rules for different areas to an intelligent extra high voltage 
grid overlay that seeks to achieve national goals. However, in our 
footprint, the states in the upper Midwest are also working 
collaboratively to reach consensus on cost allocation principles for 
transmission for renewables. The draft legislation appears to allow 
this process to continue and be incorporated into a proposal to the 
Federal Energy Regulatory Commission. We believe that this flexibility 
and recognition of state efforts in the draft legislation is good. If 
these state efforts do not succeed, then perhaps a federal solution 
would be required.
                             in conclusion
   Interconnection-wide planning is appropriate and achievable.
   Interconnection-wide planning is best accomplished with 
        policy goals and expectations stated up front.
   The best and most useful plans come from an open, inclusive, 
        transparent, nondiscriminatory, robust process used to develop 
        and vet key assumptions and explain the tools and processes 
        that will be used by the modelers.
   Plans, once developed, must be revisited to keep them 
        relevant.
   To build projects that will fulfill the interconnection-wide 
        plan siting and cost must be dealt with.

    Finally, recall that Congress has the power to change all laws, 
except the laws of physics. I do not see that problem in this draft 
legislation, but as the bill moves through the legislative process, 
please do not forget this. Thank you very much for this opportunity to 
speak to you today. I look forward to your questions.

    The Chairman. Thank you very much.
    Mr. Detcheon, go right ahead.

 STATEMENT OF REID DETCHON, EXECUTIVE DIRECTOR, ENERGY FUTURE 
                           COALITION

    Mr. Detchon. Thank you, Mr. Chairman, and thank you for 
inviting us to testify. I'm the Executive Director of the 
Energy Future Coalition, which is a nonpartisan public policy 
group here in Washington. We have been concerned about the 
state of the electric power grid in this country since we were 
formed 7 years ago.
    Last fall, in partnership with the Center for American 
Progress and later the Energy Foundation, we undertook a series 
of listening sessions with a wide range of stakeholder groups, 
including all the gentlemen, the groups who spoke before me on 
this panel. We found remarkably broad support for a new network 
of extra-high voltage lines to bring high-quality renewable 
energy resources, whether it's wind from North Dakota or solar 
from Nevada, to market.
    As you know, if we're going to have a renewable energy 
standard we're going to have to have the transmission lines to 
get it to market. Our chairman and head of our steering 
committee Ted Turner wants to put wind and solar on his ranches 
in New Mexico and Montana, but he has no way to get them to 
market. There is some 300,000 megawatts identified of wind 
projects available in this country that are awaiting access to 
transmission.
    In terms of cost, study after study have shown that a 
renewable energy standard saves consumers money, doesn't cost 
consumers money, in part because by displacing natural gas in 
the electric power generation system it brings down the price 
of gas and saves consumers net-net a lot of money.
    But our concern has not just been about renewable energy. 
It's also been about the efficiency of the system, the ability 
to manage the system, to deliver power with the least loss, and 
also security issues. I think that these are important to bring 
up. As we take on the grid issues, we need to continue to 
modernize the grid. The vulnerability of the grid to security 
threats is hair-raising, and I think that as we look forward to 
ways to get ourselves off our dependence on oil, clearly plug-
in electric hybrids are going to be a central part of that 
answer, and again it puts us back onto the need for a secure 
and modern digital grid.
    The vision statement that we brought forward for the 
national clean energy smart grid has been endorsed by some 55 
organizations. These include the AFL-CIO, the Council on 
Competitiveness, the Digital Energy Solutions Campaign, along 
with many renewable energy groups and environmental group who 
are not usually prominent supporters of new transmission lines. 
We have appended both our statement and the white paper 
produced by the Center for American Progress on this subject to 
our statement.
    What brought these environmental groups to the table, which 
may, if Senator Risch were still here, be of interest to him, 
and ultimately to an agreement on this statement was the 
imperative of action to deal with the climate crisis. These 
groups could accept the need for additional authority for new 
transmission lines, but only if those lines were transporting 
low-carbon energy. Building new lines to deliver electricity 
from new conventional coal-fired power plants was unacceptable 
to them and inconsistent with the transition that we see coming 
at us.
    So as part of the package that we recommended, we suggested 
for the issue of access to these lines a greenhouse gas 
standard that would reach up to the level of a single cycle gas 
turbine, in order to make sure that the supply of energy was 
reliable, but in effect that would exclude new conventional 
coal-fired power plants without CCS.
    As you said, Mr. Chairman, the three most important issues 
are planning, siting, and cost allocation. Siting is seen as 
the most pressing issue, but in fact I think that planning 
turns out to be the most important issue. We've concluded that 
better planning could reduce the difficulty of siting new lines 
and would provide the basis for equitable allocation of costs.
    We've been gratified by the inclusion of many of our 
recommendations or similar recommendations in both Senator 
Reid's bill and in the majority staff draft that you 
circulated, especially as has been discussed today, 
interconnection-wide transmission planning under strict 
timetables, with FERC empowered to act if the States do not, 
supported by broad-based cost allocation and underpinned by 
Federal siting authority. I would emphasize the need to build 
on the existing State and regional planning processes, as we 
heard today from NARUC, a bottom-up process taking advantage of 
the good work that's already been done, particularly by the 
Western Governors Association, and the process just described 
that MISO participated in. We believe that that early public 
input and the designation of transmission corridors will do a 
lot to make the siting process easier.
    Finally, I just want to mention that the bills that have 
been circulated so far do not yet include provisions dealing 
with security of the grid, especially cyber security threats. 
The Defense Science Board's report last year, ``More Fight, 
Less Fuel,'' found that critical national security and homeland 
defense missions are at unacceptably high risk of extended 
outage from failure of the grid. I urge you to incorporate 
provisions to ensure the protection of the grid from external 
threat. It's vital to both our economy and to our security.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Detchon follows:]
    Prepared Statement of Reid Detchon, Executive Director, Energy 
                            Future Coalition
    Mr. Chairman, thank you for inviting me to testify and for your 
conciliatory leadership of this Committee. My name is Reid Detchon, and 
I am the Executive Director of the Energy Future Coalition, a non-
partisan public policy group, supported by foundations, that works to 
bring together business, labor, and environmental groups around common 
energy policy objectives.
    The Energy Future Coalition was formed seven years ago, in the wake 
of the 9/11 attack, because of concerns that U.S. energy policy was not 
adequately addressing issues of national security and climate change. 
The condition of the nation's electric power grid was an immediate 
topic of concern and the focus of one of our initial working groups. 
Since that time, we have advocated for and applauded action by this 
Committee and Congress as a whole to support advanced transmission and 
smart grid technologies in the Energy Policy Act of 2005, the Energy 
Independence and Security Act of 2007, and the American Recovery and 
Reinvestment Act of 2009.
    Several months ago, it became apparent that, thanks in part to the 
advocacy of T. Boone Pickens, a new groundswell of support was emerging 
for modernizing the nation's transmission grid and expanding it to 
serve stranded large-scale renewable energy resources. Without such 
steps, it would be challenging to meet a national renewable energy 
standard, including the 25x'25 target that we have long supported.
    Accordingly, the Energy Future Coalition, in partnership with the 
Center for American Progress and later the Energy Foundation, began a 
series of listening sessions with a wide range of stakeholder groups to 
determine where the areas of agreement and disagreement were. We found 
remarkably broad support for a new network of extra high-voltage lines 
(345 kilovolts or above) to bring high-quality renewable energy 
resources--wind in the Great Plains, solar in the desert Southwest--to 
market.
    With a smaller group of stakeholders, notably including the 
American Wind Energy Association and the Solar Energy Industries 
Association (whose joint white paper last summer, ``Green Power 
Superhighways,'' was an important outline of the challenge and 
opportunity--http://seia.org/galleries/pdf/
GreenPowerSuperhighways.pdf), Mesa Power, and the Sierra Club, we then 
collaboratively crafted a vision statement for the National Clean 
Energy Smart Grid, which I will describe in some detail. The full 
statement appears at the end of this testimony, along with a list of 
some 55 endorsing organizations.* These include the AFL-CIO, the 
Council on Competitiveness, and the Digital Energy Solutions Campaign, 
along with many renewable energy advocates and environmental groups, 
such as the National Audubon Society, the National Wildlife Federation, 
the Natural Resources Defense Council, Union of Concerned Scientists, 
and the Wilderness Society. I mention them because they are not usually 
prominent supporters of new transmission lines.
---------------------------------------------------------------------------
    * Documents have been retained in committee files.
---------------------------------------------------------------------------
    What brought these environmental groups to the table and ultimately 
to agreement was the imperative of action to address with urgency the 
growing global climate crisis. The Sierra Club's Carl Zichella, who 
ably represented the environmental participants, repeatedly noted that 
his constituency could accept the construction of new transmission 
lines if and only if they transported low-carbon energy. Building new 
lines to deliver electricity more efficiently from conventional coal-
fired power plants was unacceptable.
    The group agreed that a national Clean Energy Smart Grid is an 
economic, environmental, and national security imperative--vital to 
renewing America's economic growth, strengthening national security, 
and addressing the threat of global climate change. Investments are 
needed in both interstate transmission and in smart grid technologies 
to make the system more reliable, resilient, and secure, to accommodate 
renewable power and enable more energy efficiency by individuals and 
businesses.
    These same conclusions were reflected in a white paper entitled 
``Wired for Progress,'' prepared by our partner in this project, 
Bracken Hendricks of the Center for American Progress, and available on 
the Internet at: http://www.americanprogress.org/issues/2009/02/
wired_for_progress.html.
    They were also the subject of a remarkable one-day forum on 
February 23, chaired by Senator Reid with the Center for American 
Progress, on the ``National Clean Energy Project: Building the New 
Economy.'' Participants included Senators Bingaman and Dorgan, Speaker 
Pelosi, former President Clinton and Vice President Gore, Energy 
Secretary Steven Chu, Interior Secretary Ken Salazar, former New York 
Governor George Pataki, T. Boone Pickens of BP Capital, Lee Scott of 
Wal-Mart, John Sweeney of the AFL-CIO, Andy Stern of the SEIU, and Carl 
Pope of the Sierra Club.
    What are some of the benefits of a modernized grid?

   According to the Department of Energy, obtaining 20% of U.S. 
        electricity from wind in 2030 would reduce electric sector 
        CO2 emissions by 25%--the equivalent of taking 140 
        million cars off the road--while creating 500,000 jobs and $450 
        billion in economic impact.
   Almost 300,000 MW of proposed wind projects, more than 
        enough to meet 20% of our electricity needs, are waiting to 
        connect to the grid because there is inadequate transmission 
        capacity to carry the electricity they would produce. 
        California alone has over 18,000 MW of wind plants and almost 
        30,000 MW of solar plants waiting to connect to the grid.
   The Electric Power Research Institute estimates that making 
        the grid smarter with modern control technology could reduce 
        electricity consumption by 5-10%, carbon dioxide emissions by 
        13-25%, and the cost of power-related disturbances to business 
        (estimated to be more than $100 billion per year) by 87%.

    In our discussions, the three most important issues standing in the 
way of new longdistance transmission lines for renewable energy were 
planning, siting, and cost allocation. Siting was seen as the most 
pressing issue, because opposition to new lines makes siting extremely 
time-consuming, difficult, and expensive. However, planning turned out 
to be the more important issue, as the group concluded that better 
planning could reduce the difficulty of siting new lines and provide 
the basis for equitable allocation of costs.
    For these reasons, more than 55 stakeholder groups came forward to 
endorse the following policies:

          1. Interconnection-wide planning for transmission networks to 
        move renewable power from remote areas to population centers 
        while ensuring the efficiency and reliability of the 
        transmission grid, using a participatory and analytically 
        robust process designed to engage all interested parties early 
        and avoid later conflicts, minimize environmental impacts, and 
        overcome the geographic and procedural limitations of current 
        planning approaches.
          2. A simple mechanism to pay for transmission investments and 
        smart grid transmission upgrades identified in the 
        interconnection-wide plans, which would minimize individual 
        economic impacts by allocating costs broadly among ratepayers.
          3. Consolidated certification and siting authority to 
        expedite transmission projects identified in the 
        interconnection-wide plans to serve urgently needed renewable 
        energy resources while ensuring the efficiency and reliability 
        of the transmission grid.
          4. New policies to make electric grid security a priority, 
        and to coordinate and pay for investments that will rapidly 
        reduce the grid's vulnerability to cyber and physical attacks 
        and natural disasters.
          5. Strong financial incentives for rapid deployment of smart 
        grid distribution and metering technologies.
          6. Education and training to create the workforce we will 
        need to build, manage and maintain the National Clean Energy 
        Smart Grid.

    Recognizing the complex nature of the electric grid, its importance 
to the future of our economy, and its impact on our environment, these 
new policies and authorities should be developed and implemented in 
accordance with several key principles:

          1. Interconnection-wide grid planning should not duplicate or 
        supplant already ongoing planning efforts at the utility and 
        regional level, but rather should build on them.
          2. The interconnection-wide planning process should take into 
        account: opportunities for improved end-use energy efficiency, 
        customer demand response, clean distributed generation, and 
        energy storage; opportunities to improve the efficiency of the 
        grid; and opportunities to diversify and transform the Nation's 
        power supply resources.
          3. New transmission plans should dramatically enhance our 
        capacity to meet steep greenhouse gas emission reduction goals 
        by targeting new clean renewable energy resources and limiting 
        interconnection for new high-emitting generation (while still 
        ensuring reliability).

    We have been gratified to see many of these recommendations 
reflected in S. 539, introduced last week by Senator Reid, and in the 
Majority Staff draft circulated prior to this hearing--notably, a 
system of interconnection-wide transmission planning under strict 
timetables, with the Federal Energy Regulatory Commission empowered to 
act if the states do not, supported by broad-based cost allocation and 
underpinned by federal siting authority. The two bills give preference 
to renewable energy in different ways; the approach chosen by our group 
was to limit access to new transmission lines built with these special 
authorities to energy generators whose greenhouse gas emissions are no 
greater than that of a single-cycle natural gas-fired combustion 
turbine--on the basis that gas will be needed on the lines to 
compensate for the variability of renewable resources. The Majority 
Staff draft does not appear to provide that same level of assurance.
    Neither of these bills, however, yet includes provisions dealing 
with the security of the grid, especially against cybersecurity 
threats, the importance of which was recognized in Title XIII of EISA. 
It is vitally important that the electricity grid be capable of real-
time management and instant correction, in order to minimize the risk 
of disruption and the time for recovery, if a terrorist attack on the 
system does occur. This will require the ability to monitor the status 
of the grid on a real-time basis, to instantly recognize and diagnose 
any unusual events on the system, and to respond intelligently with 
adaptive changes in power flows, generating unit operations, and load 
management.
    For those of you unfamiliar with the Defense Science Board's 2008 
report on energy, ``More Fight--Less Fuel,'' it found that ``critical 
national security and homeland defense missions are at an unacceptably 
high risk of extended outage from failure of the grid.''
    The report warns: ``Informed and capable saboteurs can inflict 
damage that would take down significant portions of the grid and other 
critical infrastructure for long periods and make restoration, even 
work-around measures, difficult, costly, time consuming and marginally 
effective . . . .
    ``Grid control systems are continuously probed electronically, and 
there have been numerous attempted attacks on the Supervisory Control 
and Data Acquisition (SCADA) systems that operate the grid. None have 
yet resulted in major problems in the U.S., but the potential exists 
for major outages . . . .
    ``The grid is a relatively easy target for a terrorist. It is 
brittle, increasingly centralized, capacity-strained, and largely 
unprotected from physical attack, with little stockpiling of critical 
hardware. Although the system is designed to survive single points of 
failure, increasing demand on the system and increasing network 
constraints make multiple points of failure more likely. These are 
difficult to anticipate and more likely to result in cascading outages 
and catastrophic outages that cover large areas for long periods of 
time. Network Single Points of Failure (NSPF) are abundant. High 
voltage transformers, breakers, and other long-lead time items are 
particularly critical system elements. They can be easily targeted and 
destroyed. Grid sections could be taken down for months even if 
replacement transformers and breakers could be found; or for years if 
certain components need to be newly manufactured and transported. There 
are only limited backups located around the country--generally co-
located with operating equipment. For some of the largest equipment, 
there is no domestic supply and only limited overseas production 
capacity which is fully booked years ahead. For example, 765 kV 
transformers are manufactured only by one company in Canada. Armed with 
the right knowledge, a small number of people could shut down 
electricity over significant areas for an extended period of time, 
including power to critical DoD missions. The grid is not designed to 
withstand a coordinated multi-pronged or wide-area attack.''
    This situation represents an unacceptable threat to our national 
security. Addressing it by modernizing the grid with smarter technology 
to serve a digital economy would pay immediate dividends. In the last 
Congress, the House Energy and Commerce Committee prepared draft 
legislation to address the cybersecurity threat in particular; that is 
a good place to start.
    Mr. Chairman, you and your colleagues are well on your way to 
writing legislation that will enhance our transmission system in 
important ways. I urge you to take the next step and incorporate 
measures to ensure the protection of that system from external threats. 
Our economy and security deserve no less. Thank you for inviting me to 
participate in this hearing.

    The Chairman. Thank you very much.
    Mr. Dickenson.

 STATEMENT OF JAMES A. DICKENSON, MANAGING DIRECTOR AND CHIEF 
                     EXECUTIVE OFFICER, JEA

    Mr. Dickenson. Thank you, Mr. Chairman and Senators. I do 
thank you for this opportunity to address the committee on 
behalf of our consumers. My name is James A. Dickenson and I am 
CEO of JEA, Jacksonville, Florida's municipally owned electric, 
water, and sewage utility. JEA's electric system serves more 
than 400,000 customers in Jacksonville and adjacent counties.
    I'm testifying today on behalf of JEA and the Large Public 
Power Council. LPPC is an association of 23 of the Nation's 
largest municipal and State-owned utilities located throughout 
the Nation, which also includes a number of States well 
represented on this committee. Together, LPPC members own 
nearly 90 percent of the non-Federal public power transmission 
in the United States. LPPC members are also industry leaders in 
the development of renewable generation and energy efficiency.
    On a personal note, I spent the first 20 years of my 36-
year career in the electric utility industry designing and 
building transmission lines.
    My testimony today addresses the need for Federal 
legislation to spur the development of transmission facilities 
to bring new renewable resources to market, and I will address 
three issues, that of siting, planning, and cost allocation.
    LPPC members believe that enhanced Federal siting authority 
would be very usful in developing needed transmission. State 
commissions focus primarily on the interests of their States 
when deciding whether to issue a permit or certificate for a 
project. Current Federal authority is not adequate to overcome 
this barrier since the authority given to FERC under the Energy 
Policy Act of 2005 is limited to identified corridors and may 
be even more limited by recent court rulings.
    On the subject of siting on Federal lands, LPPC's western 
members report that Federal agencies lack adequate resources 
and have difficulty coordinating with each other. Congress 
should also address this issue.
    Finally, LPPC believes it would be a mistake for 
legislation expanding Federal siting authority to restrict the 
use of new transmission capacity simply to renewable resources. 
Such a restriction would raise difficult issues regarding open 
access policy and feasibility. Transmission lines available to 
meet multiple needs are vastly more valuable to the grid than 
those dedicated to a single use.
    Planning. With respect to transmission planning, while we 
believe there may be room for improvement, we do not think that 
it would be productive to add a whole new planning bureaucracy. 
Only last year, in Order 890 FERC directed the implementation 
of a new region-wide planning process that called for an 
unprecedented level of regional coordination, transparency, and 
Federal oversight. All major utilities, including JEA, are 
actively participating in a new region-wide planning process 
designed to consider inter-regional planning challenges and 
proposals. Congress should be wary of turning the industry's 
planning process upside down at the very time we most need a 
prompt and well-considered response to the new stresses that 
will be placed on the grid.
    On cost allocation, LPPC believes that the users of 
proposed new transmission facilities should pay for them. I 
would make several points on the proposals for interconnection-
wide cost allocation. First, building transmission to access 
remote renewable resources is only one of the many ways for 
utilities to respond to requirements to reduce greenhouse 
gases. Other options include energy efficiency, demand 
response, local renewable resources, which include distributed 
solar, upgrading efficiency of existing generation, new nuclear 
capability, and plug-in hybrid vehicles. Many of these options 
will not require major transmission investments.
    Second, interconnection-wide cost allocation for new 
transmission may tilt the field in favor of distant renewables 
and against development of more economical local alternatives 
for reducing greenhouse gas emissions, such as energy 
efficiency and nearby renewables. As Congress establishes new 
environmental goals for our industry, utilities should have the 
opportunity to respond in the most cost-effective manner 
possible in view of the resources available to them. Subsidized 
transmission for distant renewables should not be allowed to 
crowd out more economical energy efficiency and local 
renewables to the detriment of our customers.
    Third, while the costs of proposed transmission build-out 
is unknown at this time, it could be very high. One 
transmission study estimates that the investment in 
transmission in the Eastern interconect alone to meet DOE's 20 
percent wind energy scenario would be $80 billion. Allocating 
costs of new transmission projects to their users enforces a 
cost discipline on the project that may be lost if 
interconnection-wide cost allocation is implemented.
    LPPC's view is that Congress should focus on clearing away 
obstacles to transmission development. These steps include 
implementing further Federal transmission siting authority that 
is respectful to State and local concerns.
    What Congress should not do in LPPS's view is create an 
additional bureaucracy to oversee system planning or provide 
for interconnection-wide allocation of new transmission 
investment.
    I would like to close with a comment on the draft 
legislation released earlier this week on Chairman Bingaman's 
behalf by the committee staff. I was pleased to see that it 
takes a comprehensive, thoughtful look at these important 
issues and includes provisions which address some of the 
concerns I've articulated today. First, as I noted, we agree 
with the premise that new Federal siting authority is called 
for and that it should not be limited solely to transmission 
lines for renewable resources. However, we think that the 
exercise of this new authority need not be premised on the 
creation of new planning institutions, but should instead be 
vetted through the regional planning processes recently 
implemented by FERC Order No. 890.
    With respect to the allocation of costs for facilities, we 
think that Congress should rely on existing law to determine 
just and reasonable rates for the use of these facilities, 
rather than trying to sort it out in legislation.
    Thank you once again for the opportunity to address the 
committee.
    [The prepared statement of Mr. Dickenson follows:]
 Prepared Statement of James A. Dickenson, Managing Director and Chief 
                         Executive Officer, JEA
    My name is James A. Dickenson and I am Managing Director & CEO of 
JEA, a municipally owned electric, water and sewer utility system 
located in Jacksonville, Florida. JEA's electric system serves more 
than 400,000 customers in Jacksonville and parts of three adjacent 
counties. I am testifying today on behalf of JEA and the Large Public 
Power Council (``LPPC'').\1\ LPPC is an association of 23 of the 
nation's largest municipal and state-owned utilities. Together, its 
members own approximately 34,000 miles of transmission, representing 
nearly 90% of the transmission investment owned by non-Federal public 
power entities in the United States. LPPC members are located in states 
and territories representing every region of the country. Our members 
are not-for-profit entities that are directly accountable to our 
customers--the citizens in our communities. Our commitment is to 
provide highly reliable, low cost and environmentally responsible 
electric service to our citizen-customers.
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    \1\ LPPC's members are Austin Energy, Chelan County Public Utility 
District No. 1, Clark Public Utilities, Colorado Springs Utilities, CPS 
Energy (San Antonio), IID Energy (Imperial Irrigation District), JEA 
(Jacksonville, FL), Long Island Power Authority, Los Angeles Department 
of Water and Power, Lower Colorado River Authority, MEAG Power, 
Nebraska Public Power District, New York Power Authority, Omaha Public 
Power District, Orlando Utilities Commission, Platte River Power 
Authority, Puerto Rico Electric Power Authority, Sacramento Municipal 
Utility District, Salt River Project, Santee Cooper, Seattle City 
Light, Snohomish County Public Utility District No. 1, and Tacoma 
Public Utilities.
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    LPPC members are among the industry's leaders in development of 
renewable generation and energy efficiency, having invested, on 
average, in renewable generation at a level above the industry average. 
For example, Seattle City Light made its first wind purchase in 2000, 
far before most utilities. Austin Energy now receives about 12% of its 
energy from new wind resources, and will more than double this in the 
next few years. Los Angeles Department of Water and Power (LADWP) plans 
to receive 35% of its power from new renewables by 2020, perhaps the 
most aggressive renewable goal in the nation. The Sacramento Municipal 
Utility District will have 20% of its energy resources in renewables in 
2010, with a goal of having 33% in renewables by 2020. Snohomish County 
Public Utility District leads the country in FERC-approved tidal 
applications. Our members in Florida and the Southeast, however, have 
significant challenges when it comes to renewables, with biomass and 
landfill gas resources as our best options.
    On Monday, March 9 LPPC received proposed legislative language 
entitled Siting of Interstate Electric Transmission Facilities, which 
proposes to amend.Section 216 of the Federal Act (16 U.S.C. 824p). LPPC 
has not yet had the opportunity to fully review and discuss this 
proposal. However, we will comment on it in a supplemental submission 
for the record and I will be prepared to discuss the proposal during 
the hearing on March 12.
    My testimony today addresses the need for federal legislation to 
spur the development of transmission facilities to bring new renewable 
resources to market. I address four policy issues relating to new 
transmission: siting, planning, cost allocation and proposals for 
dedicating new transmission exclusively or predominantly to use by 
renewable resources. LPPC members support transmission development 
needed to deliver renewable and other generation resources, and believe 
that enhanced federal siting authority would be particularly useful. 
With respect to system planning, while we recognize that there may be 
room for improvement in existing planning institutions and processes, 
much is now being done at FERC's recent behest. We believe it would not 
be productive to layer a new planning bureaucracy on top of the current 
regime.
    As to cost allocation, LPPC believes that the users of the proposed 
new transmission facilities should pay for them. Some current policy 
proposals provide for interconnection-wide cost allocation for new 
transmission facilities--that is, spreading the costs of new 
transmission facilities constructed in the Eastern or Western 
Interconnection to all consumers in the Interconnection.\1\ This cost 
allocation policy is not necessary to encourage needed new facilities, 
and may well discourage the development of more economical alternatives 
for reducing greenhouse gas (``GHG'') emissions, such as energy 
efficiency and local renewables. I am particularly concerned, from the 
standpoint of JEA and its customers, that the large subsidies for 
construction of transmission contemplated by some current proposals 
would provide little benefit to Florida, and would prove to be a costly 
burden. If Congress establishes environmental goals for our industry 
through implementation of an RES or carbon control measures, or both, 
Congress should let utilities, state regulators, and regional 
transmission organizations determine how to meet those goals most 
effectively by making economic choices among an array of available 
options.
---------------------------------------------------------------------------
    \1\ The Eastern and Western Interconnections are the separate 
interconnected transmission systems in the Eastern and Western United 
States. A separate Interconnection operates in Texas.
---------------------------------------------------------------------------
                 options for reducing carbon emissions
    Building transmission to access remotely located renewable 
resources is only one of many means by which utilities may respond to 
requirements to reduce greenhouse gases (GHGs). The Electric Power 
Research Institute (``EPRI'') through its ``Full Portfolio'' analysis 
and McKinsey and Company in its 2007 ``U.S. Greenhouse Abatement 
Mapping Initiative'' show a wide variety of options that we may employ, 
including: energy efficiency initiatives (many calling for capital 
investment); conversion of existing generation to more efficient 
operations; the development of additional nuclear capability; advanced 
coal generation and carbon capture and storage; distributed renewable 
resources (including distributed solar); plug-in hybrid vehicles and 
the development of large-scale remotely located renewable 
generation.\2\ Many of these options are also useful in meeting a 
Renewable Electricity Standard (``RES'').
---------------------------------------------------------------------------
    \2\ See mydocs.epri.com/docs/public/DiscussionPaper2007.pdf; and 
http://www.mckinsey.com/clientservice/ccsi/greenhousegas.asp.
---------------------------------------------------------------------------
    The EPRI and McKinsey studies demonstrate that we should take 
advantage of the full range of alternatives available to us to reduce 
carbon emissions. When considering these options from Florida's 
standpoint, or the entire Southeast for that matter, we must also 
remember that the available options depend very much on geography. It 
is clear that in the Southeast, unlike the West, Pacific Northwest and 
Mid-West, we are not blessed with substantial wind resources. The 
Department of Energy's nation-wide study of wind resources shows 
plainly that there are no significant on-shore wind resources in the 
Southeast, and limited off-shore capability.\3\ It is telling that even 
American Electric Power's ambitious proposal for a nation-wide 
transmission build-out does not propose facilities in the Southeast.\4\
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    \3\ See http://www.windpoweringamerica.gov/wind_maps.asp.
    \4\ See: http://www.aep.com/about/i765project/docs/
WindTransmissionVisionWhitePaper.pdf. The map at p. 8 of that proposal 
shows no facilities planned for the Southeastern United States.
---------------------------------------------------------------------------
    What we do have in the Southeast is biomass capability, some 
limited solar capability, the potential for nuclear development and the 
opportunity to consume energy more efficiently. These options do not 
call for an extensive transmission build-out, and it does not seem 
reasonable or fair to me to call upon electric customers in the 
Southeast to pay for transmission they cannot use. Certainly, I would 
not expect others to fund the options we will choose for addressing RES 
or GHG reduction requirements, including, potentially, new transmission 
to reach off-shore wind resources. I believe that it makes a lot more 
sense to permit utilities to make intelligent choices from among the 
realistic alternatives they have available to them to meet RES and GHG 
control requirements, without burdening them with costs of transmission 
facilities useful only in distant regions.
                          transmission siting
    LPPC believes that where transmission to remotely located renewable 
resources is sensible, there are measures Congress should take to 
facilitate that development. LPPC agrees that state siting authority is 
not sufficient to address interstate transmission to benefit renewable 
resources. State authorities are generally restricted to considering 
the best interests of their jurisdictions in isolation when deciding 
whether to issue a Certificate of Public Convenience and Necessity or 
make state eminent domain powers available for a project, leaving any 
state in a proposed interstate transmission pathway in a position to 
exercise an effective veto. Nor is current federal authority adequate 
to overcome this barrier. While the Energy Policy Act of 2005 (``EPAct 
2005'') did amend the Federal Power Act by creating a new Section 216, 
authorizing the Federal Energy Regulatory Commission (``FERC'') to 
exercise ``backstop'' siting authority, the authority is of limited 
utility for renewable resources. New Section 216 authorizes FERC to 
issue certificates in instances in which states delay siting facilities 
that would address transmission constraints in so-called ``national 
interest corridors'' previously designated by the Department of Energy. 
However, it is my understanding that these designations are generally 
not intended to address transmission for renewable resources. I also 
understand that the scope of federal authority was recently narrowed by 
the Fourth Circuit Court of Appeals' decision in Piedmont Environmental 
Council v. Federal Energy Regulatory Commission (Case No. 07-1651, 4th 
Cir., February 18, 2009), where the court held that a state order 
directly denying a certificate application did not serve as a predicate 
for the exercise of federal backstop authority.
    I also believe that any additional federal siting and eminent 
domain authority that Congress creates should be respectful, to the 
maximum extent feasible, of state and local concerns regarding siting 
options and land use. State agencies historically responsible for 
siting transmission facilities are well-equipped to consider 
environmental and land use issues, the impact on local economies and 
rates. These agencies have an important role to play in determining 
routes subject to federal siting authority.
    LPPC's Western members have experienced significant obstacles to 
the development of interstate renewable transmission projects from such 
federal agencies as the Department of the Interior's Bureau of Land 
Management, the Forest Service and the Department of Defense, to the 
extent they are responsible for the administration of federal lands 
that may be crossed by transmission for renewable resources. Federal 
land is often traversed by large-scale transmission projects, and 
LPPC's Western members report that lengthy review processes, and 
difficulty in valuing benefits of renewable goals can be problems for 
these agencies. Here, empowering a single federal agency, preferably 
FERC, to facilitate the federal siting process would be very helpful.
    Finally, I note that LPPC believes it would be a mistake for new 
legislation extending federal siting authority to include restrictions 
on the use of this new capacity. Some of the current policy proposals 
would restrict the use of new transmission to renewable resources. 
These proposals raise difficult issues regarding compliance with open 
access requirements, verification and equity. In addition, dispatching 
power into the grid under such a system would be tremendously complex. 
Such requirements simply may not work when one considers the physics of 
the electric grid and the intermittent nature of renewable resources.
                                planning
    Coordinated interregional planning will be important in the 
development of new transmission to interconnect renewable resources. 
There may be room for improvement in the existing planning institutions 
and processes--but with the changes mandated by FERC in Order No. 890, 
I think they are up to the task. In Order 890, issued last year, FERC 
directed the implementation of new, region-wide planning processes that 
call for an unprecedented level of regional coordination, transparency, 
and federal oversight.\5\ Compliance filings by all utilities 
reflecting these principles were accepted by FERC only a few months 
ago, and the implementation process is now under way. Utilities in the 
Southeastern United States, including JEA, are actively participating 
in a new, region-wide planning process designed to address pan-regional 
planning challenges and proposals.
---------------------------------------------------------------------------
    \5\ Preventing Undue Discrimination and Preference in Transmission 
Service, Order No. 890, 72 Fed. Reg. 12,266 (March 15, 2007), FERC 
Statutes and Regulations  31,241, order on reh'g, Order No. 890-A, 121 
FERC  61,297 (2007
---------------------------------------------------------------------------
    Layering a new planning bureaucracy on top of what we are currently 
developing is likely to be time-consuming and costly, and may delay 
rather than expedite transmission development. As the industry moves 
toward a more open, transparent and coordinated process under the Order 
No. 890 framework, we have been careful to preserve the ``bottom up'' 
nature of the planning function, since doing otherwise would risk 
system reliability. There is no doubt that the focus of this process 
will change as an RES or other measures governing GHG emissions are 
implemented. But I believe Congress should be wary of turning the 
industry's planning process upside-down at the very time we most need a 
careful, considered response to the new stresses that will be placed on 
the grid.
                            cost allocation
    The cost of the proposed transmission build-out is unknown at this 
time. However, a recent transmission study undertaken by the Midwest 
ISO, SPP, PJM, TVA and MAPP in the Joint Coordinated System Plan 2008 
(``JCSP'') estimates that the investment in transmission in the Eastern 
Interconnection alone to meet the 20% wind energy scenario studied by 
the Department of Energy in its Eastern Wind Integration and 
Transmission Study would be $80 billion. I think it is reasonable to 
assume that a nationwide program may cost as much as twice that amount.
    If Congress adopts an RES, and with the potential for other carbon 
control measures, utilities will have every incentive to respond in the 
most cost-effective manner possible, in view of the resources available 
to them. Utilities will do what they need to do to meet these goals, 
and if building transmission to access remote renewable resources is 
the most economical alternative, that is what they will do. However, 
allocating the cost of that transmission on an interconnection-wide 
basis will tilt the playing field dramatically away from any 
alternatives that do not depend heavily, or at all, on transmission. If 
the cost of transmission to remote resources is essentially free from a 
system planner's standpoint, other alternatives to meeting carbon 
control requirements will be significantly less economical by 
comparison. Low cost, subsidized transmission for distant renewables 
should not be allowed to crowd out energy efficiency and local 
renewables.
    At such time as a Federal RES and some form of carbon control 
regime is in place, utilities will have a powerful incentive to employ 
all available options for GHG emission reductions. Of course, many 
utilities will make plans to build new transmission facilities to 
access remotely located renewable resources, while project developers 
will have reason to invest in such facilities in order to access newly 
motivated markets.
    A good deal of work on transmission for renewables is already being 
undertaken, particularly where state RES requirements are already in 
place. According to the North American Electric Reliability 
Corporation's (NERC) 2009 Long-Term Reliability Assessment, 
approximately 11,000 more transmission miles are planned between now 
and 2012, a substantial addition to the existing network of 164,000 
miles, and more than the system has experienced for many years. Much of 
this is specifically aimed at integrating new wind resources into the 
electric grid. For example, there are two major transmission projects 
in the West planned for completion in 2014 to integrate renewable 
resources. Each of these 1,000-plus mile lines will facilitate the 
delivery of 3,000 MW of primarily wind generation from the northern 
plains to load centers in the Southwest.
    Some argue that without an interconnection-wide funding mechanism, 
needed transmission would not be built. This seems incorrect to me, and 
it ignores the unavoidable incentive that an RES or carbon control 
framework will establish. Faced with a direct mandate, or a substantial 
financial incentive, utilities will respond in full compliance with the 
law. Where economical, they will build or fund new transmission 
systems. Whether the investment compelled by these new requirements 
will support all of the high voltage facilities contemplated by some 
project developers is an open question. But it doesn't make sense to 
judge the economics of these lines in a vacuum. If it makes economic 
sense to build new transmission facilities, when one looks at the 
available resources and demand and compares the cost of construction to 
all of the available alternatives, they should be built. Project 
developers should be making these judgments based on projected 
generating capacity, anticipated demand and the cost and efficiencies 
of the facilities. There is no need for legislation addressing cost 
allocation that would effectively prejudge those decisions.
    what interconnection-wide cost allocation would mean for florida
    The options for renewable generation to meet the RES in the 
Southeast include further reliance on biomass resources, the 
development of additional solar facilities, a substantial investment in 
efficiency and demand response initiatives, and the potential 
development of off-shore wind resources. These options do not depend on 
a large scale transmission build-out, and no one has made a good case 
for facilities that would cross half a continent in order to supply 
Florida with additional wind resources. As I noted above, the 
transmission build-out proposals I have seen leave Florida and the 
Southeast out of the mix.\6\
---------------------------------------------------------------------------
    \6\ See AEP's proposal for building the new green grid at http://
www.aep.com/about/i765project/docs/
WindTransmissionVisionWhitePaper.pdf. The map at p. 8 of that proposal 
shows no facilities planned for the Southeastern United States.
---------------------------------------------------------------------------
    The effect of this, from the standpoint of JEA's customers, would 
be to call for what amounts to a substantial tax, with no practical 
benefit from an environmental standpoint. JEA will do what it must to 
meet RES requirements, generate renewables or purchase renewable energy 
credits, but adding an interconnection-wide fee for transmission 
facilities we cannot use makes no sense.
                        what congress should do
    LPPC's view is that Congress should focus on clearing away 
obstacles to transmission development where they exist. These steps 
include implementing further federal transmission siting authority that 
is respectful of state and local concerns. Further, a full review of 
existing statutes and federal agencies involved in authorizing 
transmission across federal lands should be undertaken, in order to 
respond to what I am told is the substantial need for coordination 
among all federal permitting processes.
    What Congress should not do, in LPPC's view, is create an 
additional bureaucracy to oversee system planning, or require the 
interconnection-wide cost allocation of new transmission investment. 
The need to respond to an RES will drive transmission investment where 
that makes sense. The ``socialization'' of transmission costs would be 
a costly subsidy that would suppress other, potentially more 
economical, alternatives to meeting renewable energy and GHG control 
goals.

    The Chairman. Thank you very much.
    Thank you all for your excellent testimony.
    Let me ask a couple of questions. Let me ask Mr. Morris--I 
think you made reference to your concern about the way we've 
got the planning provisions for the entire interconnect, as I 
understand it. I gather that that's what Mr. Dickenson was 
referring to as well when he was saying that we should defer to 
the regional planning processes that are already in place as a 
result of this FERC Order No. 890.
    Could you elaborate as to your thoughts on this? We're 
trying to figure out how to accomplish the planning in a way 
that doesn't create new bureaucracy, but still has it take into 
account all it should.
    Mr. Morris. I offered that comment only as a caution 
because of my fear for that. I think you've done an excellent 
job of laying out a concept that would allow for a more 
interconnected planning concept. As you know, and your 
legislation addresses the issue, we really have two major 
electric grids. The Eastern and Western Interconnect, ERCOT, 
chose some years ago to take care of themselves. I guess today 
they wish they hadn't, but we'll leave that for another day.
    I think you've laid over that a concept that addresses--
some of those areas do have RTOs or ISOs. Some of them don't. 
So you've blended that in when they do have those available, 
taking advantage of that. Allowing the States to participate is 
essential. But at the end of the day one of my fellow 
panelists, I think Graham said it: Someone has to get over the 
notion of we need to build some things, we need a Federal 
authority to build them.
    When you understand the statistics that obth Senator Dorgan 
and Senator Reid shared with us, we've built thousands of miles 
of natural gas pipelines and hundreds of miles of electric 
transmission line. So I think you've really addressed that 
issue. My caution only was I hope we don't create another 
intervening slowing down.
    You may remember, and I know you know this, in 2005 EAct, 
it took the DOE forever just to designate three corridors in 
this entire country. Yours is a much broader concept of 
addressing it in a much more rational way for the entirety of 
the two interconnects. So I just worry about the time line, but 
I champion you for what you're trying to do. I think you've 
done as well as one could hope in in the planning cycle in that 
sense.
    The Chairman. Let me just see if anybody else has a 
comment. Your reference, Mr. Dickenson, to the concern about us 
creating additional bureaucracies to oversee the system 
planning--your thought is that this Order 890 is adequate to 
get the planning done that's needed to be done; is that what I 
understand?
    Mr. Dickenson. Senator, I think part of my comment is is 
that FERC Order 890 is relatively new in terms of really 
encouraging regional planning, and I think my comment is just 
to simply give that time to work itself out. As one of the 
other panelists mentioned, the Eastern Interconnect is a very, 
very wide geographic area with very diverse regional issues, 
and to allow the regional issues to continue to work through 
themselves I think is very important.
    The Chairman. Mr. Edwards, let me ask your view of, if 
you're modeling to determine the transmission system that will 
reduce greenhouse gas emissions the most, I assume that means 
you would come up with a different model than if you were 
modeling to maximize the use of renewables?
    Mr. Edwards. Yes, sir, but I think the two can go hand in 
glove. In the coordinated joint system plan that was previously 
mentioned, that was done at a high level for the Eastern 
Interconnect. We saw that from the reference case to the 20 
percent renewable case actually carbon basically reduced by 
about 8 percent. So one does complement the other.
    To me, the policy issues that need to be identified on 
renewables are: how much renewables are going to be mandated; 
and then how much carbon tax or cap and trade or whatever it 
is, because those two have got to work together and there are 
economic tradeoffs that we've got to look at.
    So I think that you've got to look at both of them, Mr. 
Chairman, but I think they both go hand in glove.
    The Chairman. Let me defer to Senator Murkowski for her 
questions.
    Senator Murkowski. Thank you, Mr. Chairman.
    I believe that both Mr. Edwards and Mr. Dickenson commented 
on the renewable-only mandate for transmission. But I'd like to 
ask the others: Do you believe that Congress should mandate 
that we have a preference for renewable-only transmission? If 
you do believe so--Mr. Edwards, you commented on the laws of 
physics and I think we heard it from Senator Dorgan as well: 
These electrons are color-blind there. How do you determine 
whether you've got 75 percent of the power flowing in a 
particular line coming from renewable?
    Mr. Morris. We should absolutely not do that, for that very 
reason, Senator. There's not a chance in the world that you'd 
understand. Remember, electricity moves at the speed of light. 
There is no way to know that it would be strictly for 
renewables.
    Besides that, you'd have an asset and utilizing it at a 
substandard capacity factor, which just makes the economics 
worse. If part of the goal here is to make sure that we 
rationalize the system not only for the environmental benefits 
and retiring old or unnecessary fossil-based power production 
facilities, bringing renewables in is logical in that sense. 
But limiting it would be like taking the highway system and 
saying only front wheel drive vehicles can be out here. How 
silly would that be?
    So politically it may sound cute, but practically it won't 
happen, and it's really ill thought through.
    Senator Murkowski. I appreciate those comments.
    Any other comments on that?
    Mr. Detchon.
    Mr. Detchon. If I might speak to that, Senator. I think 
that this is a difficult issue, and you've raised some of the 
reasons for it. But at the same time, I think that the reason 
that we're talking about these transmission upgrades is a 
special purpose, which is how are we going to move large-scale 
renewables to market. I think we should restrict the special 
authorities that we're creating to that purpose.
    I think that I'm not in a position to argue one way or the 
other about Senator Reid's bill, but my understanding of the 
intent of that bill is that 75 percent of the capacity should 
be available for renewable energy, not an actual measurement of 
electrons, which of course is impossible.
    Senator Murkowski. But just if I could understand your 
comments, then, if it's made available. But you've got a 
situation where you may be underutilizing this very, very, very 
necessary transmission system, is that not correct?
    Mr. Detchon. I think that the concept is that you use the 
renewable energy when it's available and when it's consistent 
with the reliability needs of the system. But what we don't 
want to do is build a lot of new transmission lines under the 
guise of bringing renewable energy to market and then have 
those renewable energy lines dominated by coal-fired power 
plants.
    Mr. Welch. I'd like to comment to that. I agree 
wholeheartedly with what Mike had to say here, that when we 
design this grid--and I tried to address this in my prepared 
remarks--we have to have an objective in mind. What is our 
objective, and if it is to integrate renewable resources into 
the grid then what we want to do is make sure that we get the 
most cost-effective renewable resources into the grid.
    When we're operating the grid, which is a totally different 
issue, we go back to our fundamental principles. Reliability is 
our No. 1 reason why we're here, to keep power flowing to the 
customers in industry and everything that's out there. So we're 
not going to limit these lines as to what they can do. We have 
the design principles to get us to where we want to be. Then we 
operate them for the conditions that exist moment by moment on 
the grid every day.
    If the wind's not blowing, you are certainly not going to 
want us to prohibit that line from flowing coal energy or any 
other energy, because we have people depending on that for 
life, for business, and just for pleasure. On the other side of 
the coin, you can't limit this. When you build one of these 
high voltage grids, it actually unloads the underlying grid and 
makes the underlying grid more efficient, which is exactly the 
reason you want it. We actually achieve energy efficiency by 
building a high-voltage overlay grid.
    I would like to get to the point one of these days before I 
die where somebody complains that we've built too much 
transmission. I've been trying to build one big line for about 
10 years, and the process is daunting. We need to streamline 
this.
    Senator Murkowski. Thank you.
    Mr. Edwards, the question was raised earlier about, when we 
were talking about reliability--and I think it was you, Senator 
Corker, that brought up the issue of redundance. The study that 
you undertook, the joint coordinated system plan, looking at 
the future energy scenarios with wind, 5 percent wind energy, 
and how much that might cost to bring on the transmission; 20 
percent wind, a cost of $80 billion. How much backup generation 
is needed in these scenarios to allow for this level of 
reliability that we're all talking about.
    Mr. Edwards. Senator, as I heard the question previously, I 
asked my transmission technical expert behind me, and included 
in the JCSP study wind was given about a 15 percent credit. So 
that means that basically you would need about an 85 percent 
reserve margin for it to effectively operate on parity within 
the system. So wind will require--again, let me caveat it. 
Depending on the diversity of the wind, where it's located, all 
those issues, you will need additional resources. Is it 85 
percent, is it 50 percent? We don't know exactly, but you will 
need significant reserves for the wind.
    Senator Murkowski. Are you studying that?
    Mr. Edwards. We have not studied it at this point in time. 
We made an assumption in the current study. That is something 
we need to get our arms around, just like we need to continue 
exploring wind forecasting, which is a critical issue to all of 
us in this room.
    Senator Murkowski. Thank you, Mr. Chairman.
    Mr. Morris. I might add to that concept. There isn't really 
a need for a redundancy. What they need is a requirement for 
the interconnectedness. Chairman Wellinghoff mentioned the 
tremendous nuclear station, Palo Verde. Palo Verde is connected 
to the grid in three or four different ways. When it goes down, 
as long as the grid is interconnected the Phoenix area lights 
will not go out. So it isn't a redundancy. It's just an 
interconnectedness. That's really what you're after here. 
That's why you want to do the planning on the basis that you 
spoke to, so when the wind does blow, it will move into the 
system.
    To Joe's point, when the wind doesn't blow the grid will 
fill itself, because the physics of electricity is that it 
loves a vacuum and it'll fill it.
    Senator Murkowski. Thank you.
    The Chairman. Senator Corker.
    Senator Corker. Thank you, Mr. Chairman.
    I really appreciate your responses regarding limiting the 
grid only to renewable. It's hard to imagine that one would 
consider that, and I hope that certainly common sense will make 
its way into this legislation in that regard.
    Let me ask you a question, because I can tell there's 
division based on the panel members. At the end of the day 
we're going to be debating a renewable electricity standard 
down the road again, I'm sure, and very soon, it looks like. 
The fact is that some people regionally benefit far more from 
that than others in a system like that because there is in 
fact, no matter how you cut it, a transferrence of wealth that 
takes place when people in certain parts of the country don't 
have the ability for certain defined renewables, especially 
when important things, very important things like nuclear, are 
left out of that provision. You have a transference of wealth 
that takes place.
    So just in listening to you, I'd love for you to respond as 
to, then you have people in our country that greatly benefit 
from a renewable electric standard financially. So why would it 
be practical then to share the expense of that transmission 
throughout an entire region when you have a few people who are 
benefiting from the entire proposition of renewable electricity 
standard, and a lot of people the tare losing in that 
proposition? Why would you spread the costs of a system that's 
designed basically for renewable electricity around the whole 
mass of people?
    Mr. Morris. Senator, that surely is one of the reasons I 
answered Senator Murkowski's question the way that I did. It 
would be illogical to do that.
    Senator Corker. Illogical?
    Mr. Morris. Illogical, yes. I'm sorry. I do hope common 
sense prevails. In that regard, it's always been that way, that 
certain areas will get more advantages than others. The 
renewable energy standard, to me the definition should be as 
broad as we can make it. I think that allows many, many people 
to come in.
    Senator Corker. Including nuclear and that kind of thing?
    Mr. Morris. New nuclear, clean coal. In many Midwest 
States, the Governors have chosen ``advanced energy'' as the 
definition, ``energy efficiency'' as the definition,`` and that 
allows all of us to get there. Our company, that serves 5.2 
million customers and 11 States, some States have wind like 
Texas; other States have wind maybe offshore like Ohio. We 
don't have sun in the upper Midwest. But we continue to add 
renewables to our system. This year alone, 2008, American 
Electric Power added over 1,000 megawatts of wind to its 
system, not a megawatt of coal to its system.
    So even though our history is a coal-based utility, we're 
not against renewables at all. I do believe that if States want 
to have more than the Federal standard they ought to be allowed 
to do that. If they'd like to have less, they ought to petition 
someone, some Federal agencies, to seek less than that. But no 
one should be able tnot to have renewables.
    If you build the grid, as I said earlier on, you will get a 
rationalization of power production facilities. Renewables, 
when the sun is shining it'll get to market; when the wind is 
blowing, it'll get to market; when it isn't, clean coal will 
get to market, existing coal will get to market, and nuclear 
will get to market, hydro will get to market.
    Again, the obligation here is to see to it that in the most 
cost-effective way we rationalize the power production and the 
energy delivery system of this country. Again, the time is ripe 
and the leadership is--this is impressive. I really believe 
I've been after this since 1988 and I really believe that its 
time is now.
    Senator Corker. What was the term you used again to 
describe not renewable, but----
    Mr. Morris. Advanced energy.
    Senator Corker. Advanced energy. So maybe we can have an 
''AE`` standards instead of an RES standard.
    Yes, sir, Mr. Welch.
    Mr. Welch. I'd like to comment to that, too. One of the 
things that frustrates me--and of course, I'm only in the 
transmission business and I'm not on the production side--is 
when we start to talk about the benefits that are brought to 
the table, if you will, by transmission. I have not found a 
transmission project of any sort that fits into any one nice 
neat category.
    For instance, we know that had we built a proposed line 
that would looked at 3 years ago the blackout of 2003 wouldn't 
have happened. Yet, the way the system is paid for today is 
that the people in Michigan would have to pay for that line, 
and yet the 50 million customers that went out were across the 
spectrum.
    Mike said all the generation that's available and yet it's 
captured, cannot get to a market. We will see a rationalization 
and a cost equalization of costs across the grid, as long as we 
realize that we're designing the grid and the grid will flow.
    The renewable resources, like we look at in the Upper 
Midwest, while we are talking about renewable resources as 
though they are all high cost, they are not high cost compared 
to any technology, including coal-based generation on new to 
new, if you take it out of the Dakotas. That's what our studies 
have shown. It is cost competitive and actually costs less.
    So if you're getting to the point where you're going to 
start to replace generation, it's time that we start to look at 
renewables, and we look at them in a cost-effective way. If 
we're going to add them, let's do it in a cost-effective way. 
So if you set a standard, let's be rational about it and set a 
standard so we can get the most cost effective things into the 
system the quickest and the easier.
    Senator Corker. So that would be a broader standard, is 
that correct?
    Mr. Welch. Absolutely. I think that the rationalization for 
the cost of it has to be on a very, very broad, regional basis, 
because those benefits flow regardless.
    Senator Corker. Those costs would be prior to all the 
production tax credits and everything and would be the true 
costs?
    Mr. Welch. When we did our study it was true cost, true 
cost to true cost. No tax incentives for the renewables and no 
penalty on the fossil side for carbon tax. Just plain, 
straight-up cost, and it included the cost of the transmission 
to get it to markets.
    Mr. Edwards. Just one last comment, Senator. Let's don't 
lose sight. Renewable energy is just a part of the portfolio. 
As others have said, we need to have a mix of new generation, 
but the bulk transmission system, the overlay, will allow a lot 
of things to be accomplished, for wind energy to be integrated, 
for cheaper energy to be moved from various parts of the 
country.
    So the bottom line is that our studies show that through 
the entire Eastern Interconnect, with the 20 percent renewable 
there was about a 1.7 to 1 ratio of benefit to cost. So we 
think that renewables integration is good for the consumer as 
long as it's done in a coordinated and well planned way, so 
that it's, say, part of a mix and not the sole answer to our 
questions.
    Senator Corker. But you wouldn't make the Southeast or some 
parts of the country, you wouldn't make them use wind. You 
would do it in a coordinated way to use the best assets we have 
all the way around the country, and not transfer wealth; 
correct?
    Mr. Edwards. Yes, sir.
    Mr. Detchon. Senator, I think that the renewable energy 
standard is being considered because it's a national benefit to 
the country, as the witnesses have just pointed out, in terms 
of economic cost, in terms of our environmental benefits, 
etcetera. So you have some unique barriers in the way of long 
distance transmission of renewables. These projects tend to be 
much smaller than, for example, a 1,000 megawatt nuclear plant. 
So creating the backbone that can bring North Dakota wind to 
market is a unique challenge, and I think that that's the 
reason why these special authorities are focused particularly 
on renewables.
    Senator Corker. I witnessed that in our chairman's State of 
New Mexico with the long runs out to what I saw were very 
sophisticated wind turbines, and certainly I understand that 
point and appreciate your bringing it up.
    Mr. Dickenson. Senator, also I'd like to comment. On the 
original question on allocation, many of our members in Large 
Public Power Council have already moved forward very 
aggressively to have renewable energy, and a lot of them in 
their own areas. For instance, the city of Austin in Texas 
already has 12 percent renewable based on wind. So those that 
have moved forward aggressively may not need to participate in 
large transmission lines or pay for large transmission lines to 
bring renewables in because they're already moving forward and 
doing that, so it would hit them twice.
    I get a little concerned on, just because if you spread it 
over everybody it's a little amount of money, that when you do 
too many projects like that it ends up adding up to a lot of 
money. So I'm just concerned about that type of an allocation.
    Senator Corker. Thank you all.
    Thank you, Mr. Chairman.
    The Chairman. Senator Murkowski, do you have additional 
questions?
    Senator Murkowski. No, Mr. Chairman. A very, very good 
hearing. Thank you.
    The Chairman. Thank you all very much. This was very useful 
testimony. We conclude our hearing.
    [Whereupon, at 12:05 p.m., the hearing was adjourned.]
                               APPENDIXES

                              ----------                              


                               Appendix I

                   Responses to Additional Questions

                              ----------                              

   Responses of James A. Dickenson to Questions From Senator Bingaman
    Question 1. You indicate that there is significant difficulty in 
the West in getting federal approvals for siting on Federal lands. In 
2005 we required agencies to create an expedited process for approval 
of corridors for energy facilities on Federal lands. Has this process 
relieved any of the difficulty? Is it working?
    Answer. Section 368 of the Energy Policy Act of 2005 required 
agencies to designate energy corridors on federal lands and to expedite 
applications to construct or modify transmission and distribution 
facilities in such corridors. While federal actions have been taken to 
pre-identify corridors, there were a fairly limited number of corridors 
addressed in the Programmatic EIS (PEIS) that was finalized along with 
a concurrent amendment to resource management plans for federal lands. 
In addition, many intrastate and interstate projects that are underway 
or being contemplated are not addressed by the Western Energy Corridor 
process.
    Unfortunately significant challenges remain related to receiving 
timely review and approval. The existing guidance documents for the 
development of environmental assessments (EA) and environmental impact 
statements (EIS) should contain defined timeframes for the completion 
of the processes on federal lands. After the guidelines are 
established, federal agencies must have adequately trained staff to 
complete the required work within those timeframes. For example, a 
federal agency is generally expected to complete an EA within 12 
months. Our western members report that this process often takes 2 to 3 
years. Similarly, while most expect that an EIS can be completed within 
24 to 30 months, utilities in the west report that the EIS process 
often takes 3 to 4 years to accomplish. We believe that firm process 
deadlines, additional resources and focused leadership will help ensure 
schedules are met and improve the processes.
    Ultimately, the most important criteria for completing siting and 
environmental processes in a timely and efficient manner is to have 
federal agency coordinators/project managers with sufficient direction, 
authority and skilled resources to handle major infrastructure 
projects. There is a need for improvements in staffing at the ground 
level (real estate specialists, biologists, cultural resource 
specialists, etc.). While entities seeking siting approval help to 
facilitate the process by funding the use of third party specialists, 
the work of the third parties still need to be reviewed by the federal 
staff. In addition, more direct involvement from high level policy and 
technical people will provide the needed support and direction to local 
offices to bring projects to completion.
    Question 2. We have provided for a process to allow regional 
planning entities to propose a cost allocation plan, and for FERC to 
allocate costs at a sub-regional basis if that is necessary. Does this 
relieve some of your concern about interconnection-wide cost 
allocation?
    Answer. The draft legislation circulated by Chairman Bingaman's 
staff is a meaningful improvement over proposals that would simply 
allocate costs to all load serving entities, without respect to the 
ability to use the facilities or the choice not to due to the 
availability of more economical alternatives to meeting environmental 
goals. However, it is still problematic because it provides that the 
Commission may allocate costs (in the absence of an acceptable RPE 
proposal) to all load-serving entities, or to all load-serving entities 
within a part of the Interconnection served by the high priority 
transmission projects, whether they use the new facilities or not.
    As I indicated in my testimony (p. 3--5, 10), it would be terribly 
inequitable to assess the cost of a transmission build-out to customers 
that cannot make use of the facilities, or who elect not to because 
more cost effective options that do not rely on large new transmission 
are selected to meet their environmental mandates (like building local 
solar and demand side measures for instance),. Further, I believe that 
allocating the cost of transmission on an interconnection-wide basis 
will provide an enormous inappropriate subsidy to one market segment 
(remote large scale renewable generation). When LSEs determine that 
access to remote renewables is the most cost effective way to meet 
their carbon or renewable targets, that will drive the construction of 
new transmission and ensure that a large investment in this technology 
choice is well spent.
    The importance of these decisions is underscored by my concern that 
the estimates I have seen of the overall cost of a nation-wide 
transmission build-out of the type contemplated in the proposed 
legislation appear to be meaningfully understated. While the Joint 
Coordinated System Plan I reference in my testimony (p. 8) shows an 
estimated $80 billion investment aimed at resolving congestion and 
meeting a 20% wind scenario, when all costs associated with integrating 
these facilities into the grid and attaching wind resources are added, 
there is reason to believe the cost may actually range between $100 
billion and $200 billion for the Eastern Interconnection alone. 
Nationwide costs, including the Western Interconnection may range 
between $135 billion and $325 billion, equating to a monthly per 
customer cost of between $14 and $35. These numbers are gross 
estimates, but they suggest an order of magnitude that makes it clear 
to me that Congress should have reliable data on these costs before 
concluding that nation-wide cost allocation is a sensible approach.
    I also believe that the proposal to create new planning entities 
charged with undertaking interconnection-wide planning and cost 
allocation filings, is unnecessary and may be counter-productive. As I 
noted in my testimony (p. 7--8), in Order No. 890,\1\ FERC only 
recently directed the implementation of new, region-wide planning 
processes that call for an unprecedented level of regional 
coordination, transparency and federal oversight. Compliance filings by 
all utilities were accepted only months ago, and the planning processes 
these filings contemplate are just now underway. Certainly, it is to be 
expected that these processes, and FERC's oversight of them, will 
evolve to meet new renewable requirements. Adding a new planning 
bureaucracy to this mix, particularly at this time, is very likely to 
be time consuming and appears likely to delay rather than expedite 
transmission development.
---------------------------------------------------------------------------
    \1\ Preventing Undue Discrimination and Preference in Transmission 
Service, Order No. 890, 72 Fed. Reg. 12,266 (March 15, 2007), FERC 
Statutes and Regulations  31,241, order on reh'g, Order No. 890-A, 121 
FERC  61,297 (2007).
---------------------------------------------------------------------------
  Responses of James A. Dickenson to Questions From Senator Murkowski
    Question 1. In your opinion, will the imposition of a new 
interconnection-wide planning process become a new ``choke point'' by 
pre-empting ongoing planning efforts or delaying projects that could go 
forward now?
    Answer. Yes, as I indicate above in response to Chairman Bingaman's 
second question, I am quite concerned that adding a new level of 
planning bureaucracy will be counterproductive to efforts now underway.
    Question 2. What is your position on the issue of siting? Can 
federal and state regulators make progress on a collaborative basis or 
is increased federal siting authority needed?
    Answer. As I indicated in my filed testimony (pp. 5--7), I and LPPC 
believe that additional federal siting authority is called for in order 
to overcome the limited ability of individual states to address 
multistate transmission projects designed to meet regional needs. 
Having said that, I am also confident that such new authority can be 
undertaken in consultation with existing state siting authorities in a 
manner that capitalizes on existing expertise and ensures that states 
and local concerns are addressed in the siting process.
    Question 3. As you know, so often energy issues are regional and 
not partisan. What is your opinion on the possible interconnection-wide 
allocation of transmission costs? Does such a widespread approach 
unfairly socialize costs across regions that may not be directly 
benefiting from the particular transmission line?
    Answer. Yes it is unfair and economically inefficient. As I 
indicated above in response to Senator Bingaman's second question, I 
believe that cost socialization unfairly discriminates against those 
who cannot use the proposed facilities, and will discourage the 
development of what may be more economical alternatives for reducing 
greenhouse gas emissions, such as energy efficiency and local renewable 
resources. I am particularly concerned that my company's customers, 
located in Florida, will be called upon to provide large subsidies for 
the construction of transmission they will be unable to use. If 
Congress establishes environmental goals for our industry through 
implementation of an RES or carbon control measures, it should let 
utilities, state regulators, and regional transmission organizations 
determine how to meet those goals most effectively by making economic 
choices among the array of available options, without subsidy.
    Question 4. You note that LPPC's Western members have experienced 
significant obstacles to the development of interstate renewable 
transmission projects from federal land management agencies. Please 
explain. Can you comment on Secretary Salazar's recent ``Secretarial 
Order'' calling for DOI to not only establish renewable energy zones on 
public lands, but also to handle the permitting and environmental 
review? Should FERC be given the coordinator role? Should we expedite 
environmental or judicial reviews?
    Answer. The challenges have been related to receiving timely review 
and approval. The existing guidance documents for the development of 
environmental assessments (EA) and environmental impact statements 
(EIS) should contain defined timeframes for the completion of the 
processes on federal lands. After the guidelines are established, 
federal agencies must have adequately trained staff to complete the 
required work within those timeframes. For example, a federal agency is 
generally expected to complete an EA within 12 months. Our western 
members report that this process often takes 2 to 3 years. Similarly, 
while most expect that an EIS can be completed within 24 to 30 months, 
utilities in the west report that the EIS process often takes 3 to 4 
years to accomplish. We believe that firm process deadlines, additional 
resources and focused leadership will help ensure schedules are met and 
improve the processes.
    Ultimately, the most important criteria for completing siting and 
environmental processes in a timely and efficient manner is to have 
federal agency coordinators/project managers with sufficient direction, 
authority and skilled resources to handle major infrastructure 
projects. There is a need for improvements in staffing at the ground 
level (real estate specialists, biologists, cultural resource 
specialists, etc). While entities seeking siting approval help to 
facilitate the process by funding the use of third party specialists, 
the work of the third parties still need to be reviewed by the federal 
staff. In addition, more direct involvement from high level policy and 
technical people will provide the needed support and direction to local 
offices to bring projects to completion.
    We are hopeful that Secretary Salazar's recent Order establishing 
the development of renewable energy as a priority for the Department of 
the Interior will help to coordinate federal efforts in this area. We 
are also encouraged by the Order's call to create joint, single point 
of contact offices to improve coordination and efficiency, and to 
expedite the permitting process. The identification of renewable energy 
zones by the Department of the Interior can lead to the identification 
of transmission corridors from these zones to load centers. We are 
pleased to see the Order's focus on identifying electric transmission 
corridors for renewable resources in cooperation with other state and 
federal agencies and its requirement to prioritize the permitting and 
environmental reviews for transmission rights-of-way. To the extent 
preliminary environmental review can be performed on these corridors, 
the siting process may be expedited for related transmission 
development. However, siting challenges exist for transmission 
development beyond transmission for renewable resources. In any case, 
we believe the challenges and delays ultimately relate to adequate 
project management and staffing levels as noted above.
                                 ______
                                 
     Responses of Graham Edwards to Questions From Senator Bingaman
    Question 1. You all have undertaken an interesting exercise with 
your modeling efforts. Do you think that the kind of planning entities 
that we have envisioned in our draft allow for the kind of engineering 
expertise that you have applied to your program?
    Answer. Yes. Your draft legislation contemplates a FERC-approved 
planning entity or entities that would plan for the entire 
interconnection. This planning entity could be an ISO/RTO or a 
combination of ISO/RTOs or utilities with independence, and experience 
and expertise in this area. In any event, the planning entity 
contemplated is supposed to work with others in the interconnection 
when preparing the plan. The Midwest ISO would cooperate with this 
entity and make its engineering expertise available to the planning 
entity.
    Question 2. The Midwest ISO plans for transmission on a fairly 
large regional scale. Do you still find that you run into difficulties 
when you try to figure out how to coordinate with planning entities 
beyond your geographic scope?
    Answer. Yes. In the Joint Coordinated System Plan (JCSP) process, 
we found that we could work with other planning entities in the eastern 
interconnection. The JCSP was able to complete its work in a timely 
manner and produce a conceptual plan. However, all entities in the 
eastern interconnection did not participate in the process. In order to 
produce a plan for the entire eastern interconnection, all entities 
must participate and provide data in order to produce a high quality 
plan.
    Responses of Graham Edwards to Questions From Senator Murkowski
    Question 1. In your opinion, will the imposition of a new 
interconnection-wide planning process become a new ``choke point'' by 
pre-empting ongoing planning efforts or delaying projects that could go 
forward now?
    Answer. No. We believe that existing planning processes can provide 
valuable input into the grid overlay planning process. Also, existing 
projects would be incorporated into any plan and should not be delayed. 
The planning for a grid overlay should not interfere with or delay 
current transmission planning processes. The grid overlay sits on top 
of the existing transmission network. The JCSP has shown that willing 
people working together can produce a plan in a timely manner. However, 
someone must be in charge of the process and everyone must participate 
in order to develop the best plan.
    Question 2. What is your position on the issue of siting? Can 
federal and state regulators to make progress on a collaborative basis 
or is increased federal siting authority needed?
    Answer. State regulators have valuable knowledge concerning State 
and local issues concerning siting. This extensive body of knowledge 
should be relied upon in making siting issues. State regulators should 
not be entirely preempted in the siting process. I believe that Federal 
and State entities can work together for the common good.
    Question 3. As you know, so often energy issues are regional and 
not partisan. What is your opinion on the possible interconnection-wide 
allocation of transmission costs? Does such a widespread approach 
unfairly socialize costs across regions that may not be directly 
benefiting from the particular transmission line?
    Answer. The draft legislation allows the planning entity first to 
propose a cost allocation methodology for Federal Energy Regulatory 
Commission (FERC) approval, and if an acceptable plan is not proposed, 
then the issue goes to the FERC. Allowing for the proposal of a cost 
allocation methodology permits the parties that will eventually pay for 
the system to create an acceptable method to allocate those costs. An 
open stakeholder process will allow these regional concerns to be 
heard. Also, please recall that one of the objectives for the JCSP was 
to provide the lowest cost energy to consumers. Thus, in theory, the 
entire interconnection would see a benefit, which is in addition to 
both the environmental benefits that would accrue and the fact that an 
overlay would produce a more robust transmission system that is less 
prone to blackouts.
    Question 4. What is the future of the JCSP process? Are you 
advocating that the transmission identified in the JCSP be built?
    Answer. The entities that participated in the JCSP are continuing 
their work looking at more scenarios using new data such as off shore 
wind data that was not available before and incorporating resources 
from Canada. In addition, the entities are considering formalizing the 
JCSP process and creating a separate entity, with its own charter, to 
continue the planning work begun in the JCSP.
    Question 5. If Congress directed the designation of new planning 
entities, would MISO apply to be the planning entity for the Eastern 
Interconnection? Why or why not?
    Answer. I do not know at this time if the Midwest ISO would apply 
to be the sole planner for the eastern interconnection. There are 
several considerations. First, we would have to look at the 
requirements actually placed on the planner by the final legislation. 
We would also have to discuss such an application with our board of 
directors and our stakeholders. Finally, we would have to discuss such 
an application with our partners in the JCSP process; there may the 
potential for a joint application of entities that may or may not 
include the Midwest ISO. In any event, we would cooperate with and make 
our experience and expertise available to such a planning entity.
    Question 6. Why hasn't there been interconnection-wide transmission 
planning before? How does this work internationally, with Canada and 
Mexico?
    Answer. There hasn't been interconnection-wide planning before 
because there haven't been interconnection-wide questions before. 
Issues such as a national renewable portfolio standard and a price of 
carbon are now coming to the fore. To address big questions like these, 
a big solution is required. In addressing large questions like these, 
it is more efficient to look at the whole picture to produce a plan 
that can produce benefits to everyone and meet these big national 
goals. We have had good experience working with our Canadian neighbors. 
I assume that these planning issues could be coordinated with Canadian 
and Mexican entities. Of course, Canada and Mexico would have to site 
any lines in their countries.
      Response of Graham Edwards to Question From Senator Menendez
    Question 1. Mr. Edwards, this proposal is designed to streamline 
the process of building new transmission lines, but I worry it will 
actually create a whole new bureaucratic process that could slow down 
development. The proposal creates a new interconnection wide planning 
entity to site all projects above a certain voltage. Examples of 
projects that would have to be sited by this central board include:

   In my state, installing a new transformer at the East 
        Windsor substation
   In Michigan, replacing breakers at the Cook Power Plant 
        substation
   In Indiana, upgrades at the Dumont substation near Fort 
        Wayne;

    How will a small board responsible for siting power lines over 30 
states be able to effectively site lines in Michigan, Indiana, or in my 
state? Do we have to create a whole new bureaucracy in this case or 
couldn't there be a less bureaucratic means to accomplish this result?
    Answer. In the draft legislation, my understanding is that the 
planning entity does not site the lines. The actual siting is left to 
the FERC. The planning entity would be designated to plan for an extra 
high voltage grid overlay. This planning function should not delay 
transmission projects that ISO/RTOs or utilities find are needed in 
their footprints and would be sited pursuant to existing law. These 
regional plans would be ``rolled-up'' and input into the grid overlay 
plan. There should be not a problem of an extra layer of bureaucracy 
slowing down needed transmission upgrades.
                                 ______
                                 
       Responses of Tony Clark to Questions From Senator Bingaman
    Question 1. You suggest that the decision making for transmission 
should be regional and not federal. We have attempted to include the 
states at the most important level in our proposal, that is, in the 
planning process. In fact, the states could form the planning entity to 
be approved by FERC. Does this help to ensure that state resource plans 
and other concerns will be included and addressed in the planning 
process? Are there suggestions that you could make to make more sure 
that they are?
    Answer. The proposed planning processes requires that a FERC 
approved regional planning entity consult with the affected States and 
build on planning undertaken by States, RTOs, ISOs, federal 
transmitting utilities, regional reliability entities, and other 
entities. Although this provides a valuable participatory role for the 
States, they are only one of many stakeholders at the table. Further, 
``consultation'' is a weak term that does not guarantee that State 
concerns will be taken into account. It would be better to require the 
planning entities to work in coordination with the States and to have 
the States participate in selecting the regional planning entities. The 
process could better ensure that State concerns were represented if any 
FERC certificates of public convenience and necessity included any 
mitigation conditions recommended by the States. This process would be 
similar to the State certification process under the Clean Water Act 
Sec. 401 where States' conditions to a certification automatically 
become conditions on any federal permit that is issued under that 
section.
    Question 2. I think that the cost allocation scheme, where the 
planning entity, with direct input from the states, proposes an initial 
that FERC has to approve if it meets certain criteria gives states a 
new and more potent role in these decisions. Do you believe that to be 
the case?
    Answer. It is essential that cost allocation be determined prior to 
the certification of any transmission line. Although it is valuable for 
the planning entity, in consultation with the States, to have the first 
crack at setting a cost allocation scheme, no matter who undertakes the 
cost allocation, it will be challenging and contentious because it is 
difficult to identify and define the beneficiaries of a transmission 
line, and often times someone's gain comes at another's expense.
       Response of Tony Clark to Question From Senator Murkowski
    Question 1. As you know, so often energy issues are regional and 
not partisan. What is your opinion on the possible interconnection-wide 
allocation of transmission costs? Does such a widespread approach 
unfairly socialize costs across regions that may not be directly 
benefiting from the particular transmission line?
    Answer. In my own opinion, an interconnection-wide ``postage 
stamp'' allocation would be a straight forward and simple solution to a 
multitude of cost allocation problems that have proved increasingly 
difficult to solve. Perhaps we may one day get to such an allocation, 
but so far there has been resistance among stakeholders because of the 
cost shifts that would result. Those whose transmission rates would 
increase feel that they would pay for transmission they do not need nor 
benefit from.
    However, there has been recognition that larger transmission lines 
tend to transmit electricity regionally. For example, the Midwest ISO's 
Regional Expansion Criteria and Benefits Task Force negotiated cost 
allocation formulas for new transmission within the Midwest ISO that 
include a Midwest ISO-wide allocation of 20% of the costs for new 
transmission lines with voltages of 345 kV or higher. The feeling among 
the task force was that these larger lines provide some regional 
benefit and therefore some region-wide allocation was appropriate.
       Responses of Tony Clark to Questions From Senator Shaheen
    Question 1. How do we evaluate renewable energy projects, like 
North Dakota Wind, including the cost of transmission, against 
renewable alternatives closer to New England, like we have in New 
Hampshire?
    Answer. For wind energy, there is a trade-off between the cost of 
installing fewer turbines and more transmission to bring energy from 
areas with better wind resources versus the cost of more turbines and 
less transmission to bring energy from local areas with lesser 
resources. Evaluation involves studying the alternatives to arrive at 
an estimated cost per kWh delivered for each alternative that can then 
be compared and evaluated against regional needs to determine which 
alternative or how much of each alternative to pursue. The difficulty 
comes in maximizing the value of the transmission build out needed to 
transmit large amounts of low-cost power from remote areas. There is 
currently such a transmission study in progress, referred to as the 
Joint Coordinated System Plan (JCSP). The New York ISO and ISO New 
England have recently withdrawn from that study process before it has 
been determined whether States such as New Hampshire can benefit from 
low-cost Midwestern energy.
    Question 2. With regard to interconnection-wide planning, how do we 
ensure that local and smaller state concerns are represented?
    Answer. Local officials and smaller States can best ensure that 
their concerns are represented by participating fully in regional and 
sub-regional planning processes, including the existing JCSP process, 
while continuing to work towards increased coordination between regions 
and across RTO borders. It is essential that the planning process build 
on existing State and local planning processes and that States and 
local governments have a place at the table during the planning 
process.
    Many local concerns will arise specifically in the context of 
siting when the lines actually cross people's property and affect 
people's neighborhoods. The Commission should incorporate all 
reasonable mitigation measures and constraints recommended by the 
States in order to address these local concerns.
    Question 3. As we look at national planning of transmission, to 
what degree should local planning (especially zones that are working, 
like New England) be included?
    Answer. Planning should come more from the ground up rather than 
the top down. If an interconnection-wide planning process is 
implemented, it must build upon and not interfere with the effective 
plans currently generated within States and regions across the country. 
The MAPP Sub-regional Planning Groups and Midwest ISO Sub-regional 
Planning Meetings are examples of best practices for incorporating 
local planning into regional plans.
    Perhaps effective planning entities such as ISO New England could 
be certified as regional planning entities. These regional plans could 
then be integrated into the larger interconnect wide plan. This 
iterative process may maintain the effective regional process while 
still ensuring that the regional plans take into consideration the 
whole interconnect.
        Response of Tony Clark to Question From Senator Sessions
    Question 1. I understand that the movement of electricity through 
power lines over long distances results in some loss of power. Would an 
improved grid and improved transmission lines reduce the amount lost? 
If so, how much? And would the savings be sufficient over time to pay 
for the cost?
    Answer. All transmission of electricity results in some power being 
lost to line resistance. In general, improvements to the grid that 
reduce existing line loadings also reduce existing system line-losses. 
To what degree varies by project, but losses can have an impact in 
deciding what transmission facilities to build.
    There is a trade-off between the capital costs of new transmission 
projects and the amount of resulting line losses. Generally, higher 
line voltages and larger conductor diameters equate to reduced line 
losses. Energy efficient transformers can further reduce losses. High 
voltage direct current (HVDC) transmission lines are more efficient 
than alternating current lines, but are more expensive and have limited 
applications. Studies are conducted during project design to optimize 
the tradeoff between cost and efficiency so that total costs are 
minimized over the expected lifetime of a project.
    It is very difficult to quantify an example that would produce a 
``typical'' result. Each project is very specific and would have very 
different characteristics based on the grid in that region. As one 
example, here in our region, we are aware of a case in which a double 
circuit 345 kV line costing $460 million could have an expected 
lifetime loss savings benefit of up to $152 million. Yet again, I 
hasten to add this is but one example and may not be typical or able to 
be generalized.
                                 ______
                                 
      Responses of Reid Detchon to Questions From Senator Bingaman
    Question 1. The Energy Future Coalition has been engaged in quite 
an endeavor. Except for the cybersecurity recommendations, which we are 
going to try to address in our broader energy bill, do you think that 
our proposal is consistent with the principles that you have laid out?
    Answer. The Energy Future Coalition and the stakeholder group we 
assembled in support of a National Clean Energy Smart Grid, especially 
our principal partner, the Center for American Progress, found a very 
broad consensus that the three most important issues needing attention 
were planning, siting and cost allocation. In each of those areas, the 
Majority Staff draft is generally consistent with our recommendations. 
The differences are related to choices about how to most effectively 
tackle these three key issues. For instance, we believe that giving 
states a special role in the consolidated FERC siting and certification 
process, as was done in S. 539 (adding Sec.  404(g) to the Federal 
Power Act), strikes the right balance between providing an expedited 
regulatory process and empowering states on the local routing and 
mitigation issues on which they have special expertise.
    The Coalition also sought to ensure that the transmission build-out 
serves the cause of promoting a transformation of our generation sector 
to renewable and other clean energy resources. In our deliberations, 
the need for federal legislation was driven principally by a desire to 
facilitate long-distance transmission of renewable energy, from areas 
of the country where it is most abundant to markets that could use it. 
Our environmental partners supported increased federal authority for 
siting transmission only if it enabled greater use of renewable energy; 
they concluded that an expedited process was needed because of the need 
to make a rapid transition to low-carbon energy systems.
    Our approach was to limit interconnection to the transmission lines 
that are built with this new authority to energy generators with 
greenhouse gas emission rates no greater than that of a simple-cycle 
natural gas-fired combustion turbine--on the basis that gas generation 
may be needed, given the variability of renewable resources. The 
Majority Staff draft includes a number of provisions favoring renewable 
energy, but we remain concerned that the draft provides no safeguard 
against the interconnection of conventional coal-fired plants to these 
new transmission lines once they are constructed.
    Question 2. Does the planning process that we have proposed give 
sufficient scope for involvement of stakeholders at the appropriate 
point in the process?
    Answer. Yes, we believe that it does. The most extensive 
stakeholder engagement should occur during the interconnection-wide 
planning process, involving states, generation developers, transmission 
owners and developers, environmental groups, consumer groups, and 
labor.
     Responses of Reid Detchon to Questions From Senator Murkowski
    Question 1. In your opinion, will the imposition of a new 
interconnection-wide planning process become a new ``choke point'' by 
pre-empting ongoing planning efforts or delaying projects that could go 
forward now?
    Answer. The intent of the interconnection-wide planning process is 
to allow for a consolidated evaluation of system needs within a strict 
time limit and thereby to streamline, not delay, approval of individual 
projects. In particular, the Energy Future Coalition stakeholder group 
did not want to duplicate utility or regional level planning, or slow 
infrastructure development already resulting from those planning 
efforts. Rather, the goal of interconnection-wide planning is to enable 
a broad perspective on what transmission infrastructure capability is 
needed to meet the Nation's renewable energy goals, look at what grid 
infrastructure already exists and is under development, and then 
determine what more is needed to meet our goals. The Majority Staff 
draft is appropriately clear in requiring this planning process to 
build on--not supplant--planning undertaken by States, Federal 
transmitting utilities, regional transmission organizations, 
independent system operators, utilities, regional reliability entities, 
and other parties.
    Question 2. What is your position on the issue of siting? Can 
federal and state regulators make progress on a collaborative basis or 
is increased federal siting authority needed?
    Answer. Siting multi-state transmission facilities is a long and 
contentious process, often involving numerous state and local 
regulators and Federal lands agencies, each with the power to block an 
entire project. Certainly, progress is always possible, but recent 
experience indicates that consolidated siting authority is needed to 
expedite construction of a National Clean Energy Smart Grid.
    The Coalition's stakeholder group concluded that a consolidated 
Federal certification and siting process is needed in order to expedite 
the process, but that each affected state should have a special role in 
that process because of its special interest and expertise on local 
matters of routing and environmental mitigation. A critical element of 
the Coalition's proposal directs FERC to accept specific siting 
recommendations from state natural resource agencies, provided those 
recommendations do not prevent the construction of a transmission 
resources identified in the interconnection-wide plan. This concept is 
incorporated in S. 539 (adding Sec.  404(g) to the Federal Power Act).
    Question 3. As you know, so often energy issues are regional and 
not partisan. What is your opinion on the possible interconnection-wide 
allocation of transmission costs? Does such a widespread approach 
unfairly socialize costs across regions that may not be directly 
benefiting from the particular transmission line?
    Answer. In our view, the biggest risk with respect to cost 
allocation is that project-by-project administrative litigation about 
who benefits from a particular investment will threaten to stall 
development of the desperately needed transmission infrastructure. The 
interconnection-wide planning process will identify a package of 
projects that will benefit the whole interconnection. Moreover, the 
indirect benefits of renewable energy development are national in 
scope--reducing the risk to American security of excessive dependence 
on foreign sources of energy, creating new jobs for American workers 
and new business opportunities for U.S. firms, and providing public 
health and environmental benefits to the American people. For these 
reasons, the costs of developing a National Clean Energy Smart Grid 
should be allocated broadly.
    Question 4. Your organization calls for any new power generation to 
adhere to some kind of greenhouse gas emissions standards before 
hooking up to the grid. I understand that, under your proposal, such a 
standard would allow single-turbine natural gas plants to connect. What 
about clean sources of energy that provide baseload power, such as 
nuclear or hydropower?
    Answer. Our group specifically recommended that interconnection to 
the transmission facilities developed under this new regime should be 
limited to generators that have a greenhouse gas emission rate no 
higher than that of a simple cycle gas-fired generator. Clean resources 
such as nuclear energy and hydropower would clearly meet that standard.
    Our environmental partners were concerned about the possibility 
that increased transmission capacity might increase the use of 
conventional coal-fired power plants instead of renewable resources and 
thus worsen global warming--an unacceptable outcome. For that reason, 
we recommended an emission rate cap--because the variability of 
renewable resources will require balancing from other power supplies, 
and natural gas generation in many cases will be the preferred choice. 
Hydropower would be an even more attractive balancing resource where it 
is available.
    Question 5. Certain renewables, such as wind resources, may have a 
capacity factor of only 25-30%. Does it make sense as an economic 
matter to have a transmission facility that is only utilized 25-30% of 
the time? What are the reliability concerns with such low capacity 
factors?
    Answer. New transmission lines built under this new authority will 
be planned for optimal utilization in order to minimize their cost to 
consumers. Drawing on wind resources from a broad geographic region 
will help reduce the variability of supply. It is further expected that 
other resources, such as hydropower and gas-fired generation, will be 
used to balance intermittent renewable resources. One important 
criterion in the planning process is assuring that transmission 
upgrades will maintain or enhance the reliability of the grid, and 
deployment of smart grid technologies will improve the technology 
platform for assuring reliable grid operation.
    Question 6. Should we specifically require the new interconnection-
wide planning agency or FERC to examine alternatives to long-distance 
transmission facilities, such as distributed renewable resources, 
energy efficiency and demand-side management?
    Answer. Yes, planners should first assess the availability of 
demand-side resources and local distributed resources in order to 
determine how much additional supply is needed and in what areas. The 
Majority Staff draft is appropriately clear in requiring that the 
interconnection-wide plans take into consideration ``existing and 
potential demand response and energy efficiency programs.''
                                 ______
                                 
   Responses of Michael G. Morris to Questions From Senator Bingaman
    Question 1. Our discussion draft, like an earlier proposal 
circulated by your company, cuts off federal jurisdiction at 345 
kilovolts. We also provide that jurisdiction stems from the planning 
process. Are we missing opportunities to relieve congestion and reduce 
regional emissions if we do not go below that number, or is that a good 
level for the federal system to begin at?
    Answer. AEP believes that 345-kV transmission is the appropriate 
floor for federal siting jurisdiction. The reason for this is that this 
class of facilities provides benefits that are regional/inter-regional 
in nature and can cross large geographic areas, including state 
boundaries. Generally speaking, lower voltage lines serve more local 
needs and as such are appropriate for siting to be conducted at the 
state level. As a practical matter, because these lower voltage lines 
serve local needs and are substantially shorter than 345 kV and higher 
voltage lines, most of these lower voltage projects will fall entirely 
within a single state. There is inherently a difficult balance in 
determining the exact line where jurisdiction between state and federal 
authorities should be drawn. Since EHV lines serve more regional needs, 
we believe it is appropriate for federal jurisdiction to apply to these 
facilities.
    One exception to this bright line test could be for transmission 
facilities that are used to harness renewables. For facilities that are 
predominately used to serve as a collector system for renewable energy 
that then feed into an interstate EHV grid, we believe these lower-
voltage feeder lines should be under federal jurisdiction.
    Question 2. Do you think that the planning structure here works? Is 
it feasible to try to plan on an interconnection-wide basis?
    Answer. We believe that interconnection-wide planning is the most 
efficient approach to planning the EHV interstate backbone grid. While 
regional planning may continue to be an efficient approach to planning 
the underlying lower voltage transmission system and ensuring 
consistency with the new EHV transmission, our experience has shown 
that cross-border issues (between RTOs or regions) related to project 
selection and cost allocation are significant obstacles to the approval 
and construction of the large scale, critical EHV projects. If as a 
nation we seek to make large scale changes in the diversity of our 
energy portfolio, we need a robust EHV backbone that will facilitate 
this fundamental shift and secure our country's energy future. Today's 
planning processes at the RTO level tend to be ``reliability based'', 
using new transmission as a solution of last resort rather than looking 
at transmission as a vehicle for advancing our national goals. Despite 
pressure from many stakeholders to minimize the issues stemming from 
the seams between the RTOs and other planning authorities, these issues 
still exist. We believe that an interconnection-wide planning process 
is feasible, necessary and can be achieved in a reasonable period of 
time. We support FERC's role in overseeing the implementation of an 
interconnection-wide planning process and believe that RTOs can play a 
significant role within the context of the interconnection-wide plan.
   Responses of Michael G. Morris to Questions From Senator Murkowski
    Question 1. In your opinion, will the imposition of a new 
interconnection-wide planning process become a new ``choke point'' by 
pre-empting ongoing planning efforts or delaying projects that could go 
forward now?
    Answer. Not if it is done correctly. To be successful, the 
interconnection wide planning process must be structured to avoid 
delays. FERC needs to establish time frames for action, opportunities 
for public input and clearly defined procedures to ensure the planning 
process moves expeditiously. We believe that adoption of a well-
structured interconnection-wide planning process will ensure that the 
EHV interstate backbone grid is planned, engineered and constructed in 
a timely and efficient manner. First we believe that regional planning 
efforts which identify EHV needs based on regional objectives should 
continue in much the same way that they do today. To date these 
planning processes have been very effective in identifying local and 
regional reliability needs to address the need of the local and 
regional systems. Any new planning efforts should take maximum 
advantage of the knowledge base and expertise of RTOs and build upon 
the existing system, so long as it does not result in a deferral to 
regional planning efforts.
    Our experience has shown that cross-border issues (between RTOs or 
regions) related to project selection and cost allocation are 
significant obstacles to the approval and construction of large scale, 
critical EHV projects that will serve as the backbone of our country's 
energy future. Today, planning assumptions, criteria and cost 
allocation rules vary significantly among regions. This creates an 
enormous roadblock to developing optimal interconnection-wide 
transmission solutions. As we move forward, we believe that an 
interconnection-wide planning process for all EHV transmission could be 
efficiently implemented to complement today's existing planning 
processes. RTOs would continue to support the needs of the systems 
under their planning authority and ensure the reliable integration of 
new EHV transmission that is developed pursuant to an interconnection 
wide plan. In order to ensure the timely development of needed EHV 
facilities, we believe it is important for FERC to be able to authorize 
individual multi-state projects while the interconnection-wide plan is 
under development, to ensure we are able to move quickly to get steal 
in the ground.
    Question 2. What is your position on the issue of siting? Can 
federal and state regulators make progress on a collaborative basis or 
is increased federal siting authority needed?
    Answer. If we are to fulfill our emerging national vision of a more 
secure, environmentally sound electric power supply system; we need a 
workable and timely federal process that ensures that we can build a 
transmission system to meet the needs of our energy future. For AEP, 
this means that the Federal Energy Regulatory Commission (FERC) should 
be able to authorize extra-high voltage transmission. With respect to 
line siting and determining where it is routed, FERC has substantial 
experience conveying parties through a comprehensive open process to 
establish a route with minimal impact to the environment and private 
landowners.
    In the early days of the electric industry, transmission was built 
and planned locally to serve local needs--typically bringing power from 
the closest power plant to a community. It grew to broader uses, but 
remained fairly limited in geographic scope. Today, the transmission 
grid has evolved to serve far more people with far more power than was 
imagined possible when the technology was in its infancy. As 
transmission technology was evolving, the state regulatory commissions 
were the appropriate place for siting authority to reside. But as the 
grid has grown, both in geographic scope and in purpose, federal 
authority for this portion of the nation's electric system makes more 
sense.
    The challenge for state regulators is not a lack of competence to 
make these decisions. The challenge today is that the need for 
transmission is driven by national energy policy objectives with a goal 
to regionalize power supply, maximize the integration of renewables, 
and achieve regional efficiency and reliability objectives. States 
responsibilities traditionally have not extended to advancing national 
energy policy; as a consequence the tendency may be to reject larger 
projects in favor of smaller scale, more limited solutions. As a 
result, the need for federal jurisdiction goes hand in hand with a 
national electricity policy.
    Question 3a. As you know, so often energy issues are regional and 
not partisan. What is your opinion on the possible interconnection-wide 
allocation of transmission costs?
    Answer. AEP strongly supports allocating the cost of EHV 
transmission broadly given the nature of the benefit provided. The 
development of an interconnection-wide EHV overlay plan will by 
definition provide benefits to many regions, if not the entire 
interconnection. As such, we support spreading the costs of such an 
overlay throughout the interconnection for several reasons. It is 
important that benefits are not evaluated on a line-by-line basis. 
Rather, the benefits of the EHV overlay, in the aggregate, justify an 
interconnection-wide allocation. It is important to remember that the 
cost of transmission for delivered energy is small when compared to the 
cost of the energy commodity, and allocating these costs to the entire 
interconnection avoids contentious and vigorous attempts to shift and 
re-shift transmission costs among groups of customers.
    Question 3b. Does such a widespread approach unfairly socialize 
costs across regions that may not be directly benefiting from the 
particular transmission line?
    Answer. No, I don't believe it does. It is true that today many 
energy issues are regional in nature. What we are proposing is that 
interconnection wide plans be developed under a consistent set of 
planning assumptions, rules and criteria so that the planning process 
itself ensures that the overlay does not result in unfair socialization 
of costs. We believe that much of the regional energy issues, whether 
they be economic issues such as congestion, reliability issues, or a 
need to transport renewable energy to or from an area, have a common 
solution--an integrated, broadly planned EHV transmission grid that 
spans the nation. While all areas may not share the same issues, one 
solution addresses them all.
    Whether addressing congestion issues in the Mid-Atlantic or 
Northeast, lack of renewable energy in the Southeast, or a need to move 
renewables to market from the Southwest or Northern Plains--the result 
is diversification in our generation portfolio, and improved 
flexibility, reliability and system efficiency. Much like the 
interstate highway system, we cannot predict today how the system will 
be used in the future. What we do know is that the system will provide 
opportunities for promoting national objectives through a robust 
national grid.
    We had a perfect example of how one region can impact another on 
Aug. 14, 2003. When a tree faulted a transmission line in northeast 
Ohio, 50 million people in eight U.S. states and one Canadian province 
paid the price in the form of a blackout that lasted the better part of 
a week in some places--locations hundreds of miles away from the source 
of the problem. The blackout stopped at AEP's EHV system due to the 
nature of EHV transmission.
    Today, our system is tightly integrated in some areas and loosely 
integrated, if at all, in others. While there is some reliance between 
regions, the lack of a robust EHV grid limits the support each region 
can give to another. By overlaying the existing system with a robust 
and reliable EHV overlay, we can not only strengthen what we have to 
ensure such problems don't happen again, but we can use the system to 
promote energy policies and ensure that we prosper together. Typically, 
the transmission component of an electric bill constitutes 10% or less 
of a retail consumer's bill. EHV transmission-at least at AEP--
constitutes about 20% of our total transmission miles but provides 
benefits to the entire PJM region. Broad based cost support for EHV 
would add pennies to the average residential consumer's monthly bill. 
However, a narrower approach that attempts to identify specific 
beneficiaries for individual EHV projects inappropriately burdens those 
direct beneficiaries with the costs of societal benefits enumerated 
above and will continue to delay projects, as cost allocations decision 
are litigated and appealed.
    Question 4. I understand that AEP supports allocating costs on an 
interconnection-wide basis. But what about for DC lines? With a DC 
line, which is essentially like a straw that takes power from Point A 
and delivers it to Point B, it's clear who the project beneficiaries 
are.
    Answer. In our definition of EHV we include DC lines that operate 
at 400kV and above. Again, the application of cost allocation and 
federal siting for these facilities would depend on whether they are 
developed pursuant to an interconnection wide planning process. DC 
lines that are recommended as part of an interconnection-wide planning 
effort should be allocated on an interconnection-wide basis. These 
lines would typically be high-voltage/high-capacity lines that span 
significant distances or link non-compatible AC grids. While they would 
operate on a point-to-point basis, they serve to move bulk amounts of 
power that would otherwise tax the underlying transmission system. As 
such, they support the overall network. This could also be done using 
comparable AC lines, but the determination of using DC versus AC is 
part of the planning process that considers cost, efficiency, and 
overall system needs. Some DC lines are not designed to support the 
overall network, and those should be allocated to the beneficiary. The 
planning authority can make this determination.
    Question 5. I understand that your company is evaluating the 
feasibility of building a multi-state, extra-high voltage transmission 
project across the Upper Midwest to support the development of 
renewable energy--consisting of about 1,000 miles of line, costing 
between $5-10 billion, and taking approximately 10 years to complete 
the construction. If Congress adds an additional layer of planning, how 
will that impact your project? Also, could AEP go forward without the 
costs being spread interconnection-wide?
    Answer. We believe that the development of an interstate EHV grid 
is vital to US energy independence. Any action taken by Congress to 
address planning associated with EHV backbone transmission 
infrastructure, rather than acting as an ``additional layer,'' should 
be designed to remove the roadblocks that are inherent in today's 
regional planning processes to ensure that the EHV interstate backbone 
grid can be planned, engineered and constructed in a timely manner.
    It would be very difficult for AEP, or any entity, to invest 
significant capital in a large scale EHV transmission infrastructure 
project without an approved cost allocation methodology. While we 
firmly believe that an interconnection-wide allocation is appropriate 
and is the most economically efficient approach to paying for 
transmission, there may be other solutions, such as an allocation of 
the project cost between existing RTOs with an approved method for each 
RTO to further allocate those costs within the respective region that 
may be acceptable. The critical nexus for being able to move forward 
with such a project and make significant investment is that there must 
be an approved methodology that ensures that the project costs will be 
recoverable from a defined customer base.
    Question 6. If FERC has new authority for permitting transmission, 
how should it decide between competing developers?
    Answer. First, Congress should grant FERC sufficient discretion to 
design a broad set of criteria, both quantitative and qualitative, to 
evaluate competing projects. FERC should apply these base criteria as a 
foundation for evaluating competing projects, but must also have a 
process for considering more subtle, qualitative factors such as 
efficiencies or economies of scale (e.g. one provider's existing 
presence in a given region; limits on the availability of resources to 
a single provider; etc) which may factor into the selection of the 
optimal candidate. In essence, FERC must adopt and apply a set of 
defined, consistent criteria to properly evaluate projects, but must 
also have the latitude to consider other relevant, qualitative factors.
   Responses of Michael G. Morris to Questions From Senator Menendez
    Question 1. Two years ago, you told investors that new transmission 
represented a $9 billion opportunity for American Electric Power, and 
compared a potential 765 kV line from your Amos Coal Plant in West 
Virginia to suburban Middlesex County in New Jersey to a super highway 
capable of ``5000 Mega Watts of improved transfer capability'' between 
West Virginia and New Jersey. Mr. Morris, isn't that 5000 megawatts of 
coal electricity? And aren't you supportive of this proposal precisely 
because it will allow you to reach Eastern markets with electricity 
generated from coal?
    Wouldn't a significant build-out of transmission from the Midwest 
allow you to build new coal plants to take advantage of the new 
opportunity to export power from your home region? Can you rule that 
out?
    Answer. Would the line we proposed in 2006 carry coal-generated 
electrons if it were in place today? Yes it probably would. Would it 
carry coal exclusively? No. Would a transmission line in the 
Southeast--where generation is typically natural gas or nuclear--carry 
coal-generated electrons? Yes, it probably would.
    The PJM northeast regions operate increasingly as an integrated 
market. Power generated at any given time is largely based on the price 
of fuel and its availability. In today's PJM market we are seeing 
production from coal plants being displaced by generation from natural 
gas plants. If natural gas prices were high we would see more coal 
generation. That is the nature of an open and competitive market, which 
has developed under FERC direction and guidance. It is important to 
remember, however, that the EHV lines currently under construction 
within the PJM region are much less ambitious than those to which you 
are referring. In addition, the line that AEP is participating in 
constructing is one that will not be completed until 2014. By that time 
the generation mix in the region is likely to be significantly 
different, driven by environmental regulatory requirements, economics, 
load consideration and the availability of new resources. So while it 
is possible that additional coal generation will be available, it is 
also very possible that it will not be. This is why it is critically 
important for new transmission investment, as a long-term investment in 
supplying future electricity needs from whatever sources that we as a 
nation choose to utilize.
    Currently the AEP 765 system stands between some of the richest 
wind regions that our country has to offer and its most populated load 
centers. It would be painfully shortsighted if we were to sacrifice the 
opportunity of maximizing our ability to integrate renewables because 
of near term concerns that may or may not ever be realized. By 
extending the reach of the interstate EHV grid, we can extend the reach 
of renewable integration. Because it will take years to complete 
construction of this interstate transmission grid, it is critically 
important that we start today so that we can evolve to meet the 
nation's changing needs.
    Question 2. Would you support a policy requiring any new 
transmission line built with the power of federal eminent domain and 
expedited permitting to be limited only to the use of renewable energy? 
Yes or No? Why or Why Not?
    Answer. No. As discussed above, AEP is a strong supporter of an 
efficient, robust interstate EHV grid that will enable the country to 
meet a series of national objectives. While ``green transmission 
highways'' for renewable resources only and transmission projects 
restricted to renewable generation are widely discussed, they are 
inefficient and limiting if not totally unworkable in practice. 
Transmission lines that are only used to harness renewable energy and 
are not tied to the development of an efficient and robust backbone 
system create unnecessary redundancy and result ultimately in less 
renewable energy being harnessed and the cost of energy being 
unnecessarily costly. Efficiently generated, cost effective electrical 
energy is fundamental to the economy of the country. We believe that as 
a nation, we can dramatically increase the availability of renewable 
energy, diversify our generation portfolio and reduce our carbon 
footprint through an efficient, robust interstate EHV grid. It is 
important to realize that what we build today will carry us into the 
next century. If the system is robust and efficient, it will allow us 
to integrate new generation technology that we cannot even begin to 
contemplate. The lines we are considering today are vital for the 
future of this nation's economy today and into the future.
                                 ______
                                 
    Responses of Joseph L. Welch to Questions From Senator Bingaman
    Question 1. We have tried, in our draft, to provide for significant 
input from subregional planning entities like the one currently active 
in the upper midwest. Have we done a good enough job at this?
    Answer. Yes.
    Question 2. Do you think that the cost allocation scheme--allowing 
regional entities to propose a plan, but providing a FERC backstop--
works?
    Answer. While the proposed process is workable, it will result in 
delays to the construction of regional projects. Regional entities have 
had almost a decade to develop equitable cost allocation methodologies 
to facilitate transmission expansion and have failed. Providing an 
additional year will not likely break the log-jam of parochial 
interests that have stifled progress to date without doing anything to 
change the fundamental political dynamics. To the extent a backstop 
approach is adopted, clear guidance should be provided to FERC on 
broadly allocating costs for extra-high voltage (EHV) facilities.
    Responses of Joseph L. Welch to Questions From Senator Murkowski
    Question 1. In your opinion, will the imposition of a new 
interconnection-wide planning process become a new ``choke point'' by 
pre-empting ongoing planning efforts or delaying projects that could go 
forward now?
    Answer. No, it is a ``choke point'' now with no interconnection-
wide or regional transmission plan. Before any interconnection-wide 
planning process is established, Congress should provide clear 
direction on a national energy vision that establishes guidance on 
issues such as efficiency standards and renewable portfolio standards. 
Prepared with that guidance, an entity focused on interconnection-wide 
plan that has the appropriate mandate and long-term regional focus will 
deliver this plan. Our approach of using ongoing planning organizations 
and efforts will enable the interconnection-wide plan.
    Question 2. What is your position on the issue of siting? Can 
federal and state regulators to make progress on a collaborative basis 
or is increased federal siting authority needed?
    Answer. Currently, transmission rates are regulated on a federal 
level by the FERC, but siting is regulated by individual states that 
naturally are focused on benefits to their respective state, not the 
region or the nation. For this reason, the building of significant 
regional transmission lines is virtually impossible. In many cases, 
transmission projects are delayed for years through cumbersome state 
siting processes. The FERC should be given a more significant role in 
transmission siting so that infrastructure development that is needed 
for the good of the entire country can go forward expeditiously.
    Our preferred path would be to have FERC assume responsibility for 
issues a Certification of Need for projects that come through the new, 
robust planning process. Under this approach, states would continue to 
have authority to route project as they are best informed on zoning, 
land use and other local concerns. Such an approach also avoids 
potential delays in creating the federal staff needed to undertake 
routing decisions across the country. There would need to be a 
reasonable federal back stop in should a state fail to assume its 
responsibility to route the project within one year.
    Question 3. As you know, so often energy issues are regional and 
not partisan. What is your opinion on the possible interconnection-wide 
allocation of transmission costs? Does such a widespread approach 
unfairly socialize costs across regions that may not be directly 
benefiting from the particular transmission line?
    Answer. In order to address the significant electric reliability 
challenges coupled with the energy needs of tomorrow that incorporate 
renewable resources, efficiency and demand response programs as well as 
the changing use of the grid overall, the nation needs an extra-high 
voltage (EHV) transmission overlay. This overlay would provide 
significant benefits in the form of higher levels of reliability, 
increased flexibility of the use of the grid and enhanced access to all 
generation forms including wind and other renewable resources.
    The benefits of an EHV overlay can be quantified using reliability 
and economic metrics; however, the current system falls woefully short 
of incorporating all of the direct and indirect benefits of a regional 
EHV overlay. How do you measure the benefits of avoiding a repeat of 
the 2003 Blackout? How do you measure the benefits of reduced carbon 
emissions? How do you measure the benefits of indirect economic 
development caused by the creation of construction and maintenance jobs 
needed to support an EHV overlay? Any cost allocation method should 
look at both the direct and indirect benefits.
    ITC is supports the concept that the costs of transmission 
facilities that comprise the EHV overlay and are developed through an 
new interconnection-wide planning process to facilitate the connection 
of renewable resources and provide a robust regional electric backbone 
be spread broadly to all end users in that interconnection. Regional 
transmission benefits the region, and as such, those costs should be 
allocated accordingly.
    Question 4. You have proposed to build the Green Power Express 
project to bring renewable power from the upper Plains States to 
Chicago. What hurdles must you jump through under the current planning 
process for this project? What kind of time-line are we talking about 
here? Also, how important will it be for your company to receive 
incentive-based rates from FERC?
    Answer. The issues with the current planning process are not so 
much hurdles as they are problems with the criteria applied to evaluate 
transmission projects and the corresponding cost allocation mechanisms. 
They are focused solely on short term reliability or economic benefits 
(looking at only a 10 year planning horizon), are often narrowly 
tailored in geographic terms, and do not recognize the need for 
forward-looking projects built primarily to support public policy, even 
though in the long term (the average transmission asset has a useful 
life of over 40 years), the same project will also provide reliability 
and economic benefits.
    Further, the current planning results essentially provide two basic 
pieces of information; what impact the project will have on the rest of 
the transmission system and a benefit cost ratio based on adjusted 
project cost. Reductions in carbon and other emissions, support for 
state renewable energy requirements, reduced need for operating 
reserves, and impact on national security or energy independence 
through providing access to more diverse fuel sources, just to name a 
few, are not considered when evaluating the benefits of a project. The 
process typically takes about a year but the results fail to account 
for numerous other impacts of a project
    Next, it is important to understand the integral relationship 
between planning and cost allocation. Once the planning results are 
available, a set of cost allocation criteria are applied. Cost 
allocation policies currently place the majority of the cost for any 
project strictly in the bills of the local customers and do not 
recognize the broad reaching benefits of projects like large, 
transmission backbone projects. In MISO, for example, a project that 
has no adverse impact on the system must have a benefit cost ratio of 
at least 3:1 in order to qualify for cost sharing. Even if this 
threshold is met showing that the benefits are three times greater than 
the costs, 80% of the total project costs are borne by the local 
utility customers and 20% will be shared across the region. Under this 
type of construct, local utilities will find it difficult to support 
important projects because their customers will have to bear so much of 
the cost which in turn works against the development of transmission 
that will support the nation's future energy needs.
    Finally, significant incentives are not necessary to motivate the 
construction of regional transmission. For example, in ITC's recent 205 
application for the Green Power Express, we requested a rate construct 
that included a return on equity that was commensurate with other 
Midwest ISO members and did not include incentives that were above and 
beyond what were received by other members. The Green Power Express 
consists of 3,000 miles of high voltage transmission traversing 7 
states, 20 utility service territories, with a cost of $10-12 billion 
dollars. As such, a rate construct with a competitive return on equity 
provides the needed certainty needed to attract potential partners.
    Question 5. As you know, the Stimulus bill provided brand new 
borrowing authority for the Western Area Power Administration (WAPA) in 
the amount of $3.25 billion, to plan and construct transmission lines 
for renewable energy projects. The Reid bill would go even further by 
directing WAPA and Bonneville to construct a transmission line 
identified in the new planning process if no private financing 
materializes within three years.
    What are your thoughts on the new WAPA borrowing authority in the 
Stimulus and the possible expansion in the Reid bill? What will such 
federal authority mean for private transmission efforts and existing 
regional grid planning?
    Answer. Shareholder-owned utility transmission investment has been 
steadily increasing since 1999. ITC and other members of the Edison 
Electric Institute (``EEI'') are planning to invest more than $30 
billion in transmission facilities in the three-year period from 2008 
and 2010. Since 2003, ITC alone has already invested more than $1 
billion in its transmission systems in an effort to improve electric 
reliability, reduce costly system inefficiencies and interconnect all 
forms of generation including wind and other renewable resources.
    Despite the fact that WAPA has received an additional $3.25 billion 
in borrowing authority in the recently-enacted American Recovery and 
Reinvestment Act, this amount of money will not be enough to build all 
the transmission that is needed to link remotely located renewable 
resources with load centers, particularly within the WAPA service 
territory. Accordingly, ITC is advocating that the PMAs use this 
federal funding to leverage private sector financing and private 
expertise to maximize results. Federal transmission policy should 
support--not supplant--development of interstate transmission 
facilities through private enterprise, which has the construction and 
financial capability to build interstate transmission facilities for 
which siting approvals and permits can be obtained. Through creative 
partnerships with private transmission companies that have the 
expertise and financial capability to build and finance high voltage 
transmission lines, WAPA will be able to leverage the funding provided 
and move us closer to the day when we have a robust, reliable, high 
voltage grid connecting renewable rich resource areas with high 
population centers.
    To ensure the most efficient expenditure of limited taxpayer 
dollars, Congress should encourage WAPA to target its spending under 
the new ARRA borrowing authority on transmission projects that, but for 
this new funding, would not likely be constructed in a timely manner 
and to encourage WAPA to enter into partnerships to develop needed 
facilities. Specifically, we suggest WAPA should certify before 
committing funds to any project that: (1) no other entity is willing to 
participate in the financing, construction or ownership of the project 
in a timely manner; and (2) the project does not interfere with or 
duplicate an existing project being constructed by another transmission 
owner or operator. Legislative precedent exists for imposing similar 
preconditions on federal utility transmission projects to avoid 
duplication or preemption of private-sector infrastructure investment. 
The Energy Policy Act of 2005 contains language designed to avoid 
duplication of functions of existing or proposed transmission 
facilities by certain joint transmission projects in which WAPA was 
authorized to participate (Sec. 1222 of EPAct 2005).
    In addition, any transmission expansion projects that WAPA plans 
under its new borrowing authority should be consistent with ongoing 
Western Electricity Coordinating Council (``WECC'') planning processes, 
which identify a number of projects already being developed or on the 
way. Notwithstanding the private-sector transmission investment numbers 
outlined in the charts attached, building interstate transmission lines 
continues to be challenging due to the need to obtain approvals from 
every state that a transmission line traverses. Building interstate 
lines, especially in the West, is further complicated by the difficulty 
of obtaining authority to build across federal lands. In addition to 
providing incremental borrowing authority for federal utility 
transmission construction, Congress should also address important 
siting and cost allocation issues that are frustrating the planning and 
construction of transmission lines. Congress should strengthen Federal 
Energy Regulatory Commission (``FERC'') siting authority for interstate 
transmission lines and transfer to FERC the lead agency authority for 
permitting projects that cross federal lands.
    Question 6. Some consumers are concerned that giving FERC greater 
authority to site transmission and allocate its costs will result in 
more transmission than what is needed, and larger lines than are 
strictly necessary. How do we assure customers that the system they get 
is what they need?
    Answer. Following a 30-year period of significant under investment, 
the country is not in a situation where too much transmission will be 
built anytime soon. Time and time again, study after study, is showing 
the exact opposite. The lack of a robust transmission grid is 
preventing the wide spread integration of a variety of different types 
of renewable, and other traditional forms of generation, making it all 
the more difficult to achieve goals of energy independence and the 
maximization of the efficient use of our resources. Through an 
interconnection-wide planning process that reflects a national energy 
vision and includes ample feedback from stakeholders, a determination 
of project need will be given, and this will provide the necessary 
check and balance to prevent overbuild. ITC believes that 
interconnection-wide planning, increased federal siting authority and 
regional cost allocation will go far to remove the obstacles to 
developing and implementing what customers want and need from our 
energy supply system.
    Question 7. I understand that AEP supports allocating costs on an 
interconnection-wide basis. But what about for DC lines? With a DC 
line, which is essentially like a straw that takes power from Point A 
and delivers it to Point B, it's clear who the project beneficiaries 
are.
    Answer. While it is true that with DC, it is relatively easy to 
determine the beneficiaries of a project, this solution is short-
sighted and can drive sub-optimal regional planning. DC a good 
technology solution if used in the proper application; however, to some 
extent it has been applied inappropriately due to the lack of a cost 
allocation methodology.
    As you say, DC is generally used to deliver energy from point A to 
point B; however, it is does little to support the overall reliability 
of the grid. DC lines have little opportunity for intermediate on-ramps 
and off-ramps and therefore do not provide the benefits of a networked 
AC solution. A DC line's single purpose is to bring power from one 
location and therefore, it does not unload the underlying system 
through the reduction of system congestion or reduce losses, nor does 
it not provide network flexibility.
    DC is only part of the solution; our nation needs an AC EHV 
transmission overlay that will serve as the electric infrastructure 
backbone. DC's limitations make it such that the cost allocation issue 
is easily answered; however, we should not implement sub-optimal 
solutions as a means to avoid addressing a tougher policy question. 
That being said, to the extent that DC is part of a regional solution, 
it may be eligible for a cost recovery approval process.
    Question 8. If FERC has new authority for permitting transmission, 
how should it decide between competing developers?
    Answer. Through in interconnection-wide planning process, the risk 
of having competing regional projects is mitigated. Once a project has 
been identified, incumbent transmission owners should have the right of 
first refusal, meaning the right to build the needed transmission 
within their respective service territories provided they are willing 
to make timely commitments to build the approved construction. However, 
right of first refusal without any limitation can impede needed 
development. ITC feels strongly that incumbent transmission owners 
should have a reasonable period of time during which to submit an 
application to construct and site new facilities.
    However, to the extent an incumbent fails to act within that 
timeframe, the project should be open for other parties to undertake. 
To this end, FERC would be in the position of resolving any conflict 
arising from competing projects/developers. FERC should look at a 
variety of criteria to determine who is best suited to build a project 
including: incumbent participation, independence from the market, 
public power, the ability to maintain facilities going forward, total 
cost to build and maintain the assets and technical capability, etc.
     Response of Joseph L. Welch to Question From Senator Menendez
    Question 1. As you know NJ is investing a great deal in solar, 
offshore wind, and energy conservation. Does it make economic sense for 
New Jersey to help pay for a giant transmission line to deliver wind 
from the Midwest? Or is it more efficient to develop our own green 
power closer to load?
    From the standpoint of economic efficiency, don't we want 
generators to consider the true costs of a project when deciding where 
to build? If we hide transmission costs, doesn't that mean home-grown 
renewable projects would gain no advantage from the fact that their 
transmission costs are much lower? What is the economic logic behind 
that?
    Answer. The answer to the energy issues we face is not one 
dimensional; the answer lies in many approaches to reduce carbon 
emissions, improve reliability and efficiency, encourage conservation, 
reduce our dependence on foreign oil and create economic development 
here at home.
    Where it is economical, local renewable energy should and will be 
developed, but the efficiency of the local renewable resources also 
must be considered. At one extreme, one could consider the construction 
of a local wind farm in an area with little to no consistent wind.
    In the example of ITC's Green Power Express, we envision 
constructing approximately 3,000 miles of EHV transmission in a network 
formation. Once constructed, this network would not only significantly 
improve electric reliability and interconnect 12,000 MW of power from 
the wind abundant regions to be transported to the major population 
centers such as Chicago, Minneapolis, Detroit and points east, but it 
would do so in an economic manner as found in two independent studies.
    The Brattle Group concluded that the Green Power Express would make 
wind power actually cost competitive with coal and other carbon-based 
generation sources. The CRA International study was able to determine 
that the construction costs to build the Green Power Express were 
literally offset by the economic benefits of connecting wind from this 
highly efficient wind region.
    While it may appear intuitively obvious that building renewable 
resources closer to the load is more economic, the Green Power Express 
is one example of many where it makes more sense economically, 
technically and environmentally to focus on building the EHV overlay 
that would allow the most efficient and economic renewable resources to 
be interconnected where it makes most sense.
    Responses of Joseph L. Welch to Questions From Senator Stabenow
    Question 1. As soon as we see the types of costs that a new grid 
would cost--billions of dollars nationwide--we automatically have to 
ask ourselves what this means to households and businesses, and 
particularly our manufacturers. On one hand we can get more clean 
energy into use and additional jobs manufacturing and installing wind 
turbines and grid infrastructure for example. On the other hand we have 
to assure our constituents that this investment will not unreasonably 
increase their costs.
    Can legislation promote the grid infrastructure we need and diffuse 
costs in a way that is de minimus over time?
    Answer. To the extent that legislation can resolve the challenge of 
how to allocate costs for EHV transmission overlay infrastructure in a 
way that recognizes the broad benefits of regional transmission and 
allocates cost accordingly, then yes, legislation can indeed promote 
the necessary grid infrastructure in a cost effective manner. For 
example, significant levels of system congestion are literally costing 
customers hundreds of millions of dollars per year. In 2004 ITC 
completed the Jewell-Spokane project, which was a $10 million effort 
that resulted in over $90 million in reduced system congestion on an 
annual basis. This was a prime example where investment in transmission 
had a leveraging effect on the total cost of delivered energy. Further, 
it must be recognized that transmission only represents approximately 
seven percent of the end-use consumer's bill and can have a leveraging 
effect on the overall cost of delivered energy by providing reliable 
access to more economic sources of generation.
    Question 2. Can transmission grid policy protect manufacturers from 
the potential price increases of a Renewable Energy Standard?
    Answer. Renewable energy does not have to be uncompetitive in terms 
of cost to other existing forms of generation. In fact, according to an 
independent study by The Brattle Group of ITC's Green Power Express, 
with a robust grid in place, wind energy can actually become cost 
competitive with coal and other carbon-emitting forms of generation.
    ITC believes that with the construction of an EHV overlay that is 
planned on an interconnection-wide basis, access to renewable resources 
that are not only environmentally-friendly but economic as well will be 
made possible. The Green Power Express helps to integrate the most 
abundant sources of wind generation in the country. Through the 
networked configuration of the Green Power Express, geographic 
diversity is realized, which provides both operating and economic 
benefits. Moving forward, the Green Power Express could potentially be 
later integrated with an EHV overlay in Michigan that would enhance 
Michigan's ability to integrate its own renewable resources found off-
shore thereby allowing Michigan to enter the renewable energy market in 
a meaningful way. Without a regional grid in place, generation 
solutions may be constructed as a means to meet a mandated standard in 
a manner that is sub-optimal.
    Further, the challenge before us is a national issue that requires 
a national solution. What will be the price to Michigan and the U.S. 
economically, environmentally and from an energy independence 
standpoint if we continue to import oil and do not maximize the use of 
our existing efficient renewable resources available to use and 
distributed effectively through an EHV system. Energy policies should 
be developed on the national level rather than by taking a state-by-
state approach. We will not be able to build the necessary grid 
infrastructure at the level needed with the existing policy barriers in 
place.
    Question 3. I would like your comments on the job opportunities 
surrounding a new grid.
    Who will design and make these systems? Is this an opportunity for 
more green jobs?
    Answer. Yes, a new grid would certainly enable the creation of more 
green jobs. Without a robust regional grid, these green jobs will be 
challenged to materialize in a meaningful way, and further, any 
renewable energy that is integrated will not be done so in the most 
efficient and effective manner. To understand this, we must first 
consider how the grid should be planned and built.
    ITC's experience as an independent transmission company has given 
us unique insight into the value of independence in transmission 
operations and planning. This independence should not be limited to the 
transmission owning entity but should be extended to mandatory regional 
planning by the regional transmission organizations (RTOs).
    Once the regional plans are developed by independent entities, ITC 
believes that incumbent transmission owners should have the right of 
first refusal, meaning the right to build the needed transmission 
within their respective service territories provided they are willing 
to make timely commitments to build the approved construction.
    However, to the extent an incumbent fails to act within that 
timeframe, the project should be open for other parties to undertake. 
To this end, FERC would be in the position of resolving any conflict 
arising from competing projects/developers. FERC should look at a 
variety of criteria to determine who is best suited to build a project 
including: incumbent participation, independence from the market, 
public power, the ability to maintain facilities going forward, total 
cost to build and maintain the assets and technical capability, etc. 
Once built, this regional grid should be independently operated, and 
ongoing maintenance should be done on an independent basis.
    Implementing these policies would go a long way toward removing 
existing barriers to new transmission infrastructure. It is this same 
transmission infrastructure that will assist in the facilitation of 
wind and other renewable resources. If we consider ITC's Green Power 
Express, for example, this project includes the construction of 3,000 
miles of EHV lines and stations that will serve to integrate 12,000 MW 
of power from the wind abundant regions of the U.S.
    Consequently, we can expect that there will be a great opportunity 
for the creation of jobs to construct the Green Power Express as well 
as the many wind turbines that will be needed to generate the power. 
Once constructed, we can then anticipate more jobs to operate and 
maintain the Green Power Express and the wind farms. In fact, since 
opening its doors, ITC's capital and maintenance efforts have resulted 
in the creation of more than a thousand new jobs for Michigan alone. 
These are but a few examples of a regional transmission solution, and 
there are countless others including some very fine concepts to address 
the reliability needs and opportunities in Michigan.
    In short, the construction of this needed infrastructure 
facilitated by the implementation of critically needed policy changes 
will indeed lead to the creation of more green jobs.
    Question 4. There is a lot of focus is on harnessing major wind 
resources from the great plains and solar in the arid Southwest.
    How can the wind and other renewable energy potential in Michigan 
benefit from major transmission projects such as the Green Power 
Express?
    Answer. We should take best advantage of the most efficient 
resources that we have. In this instance, the best advantage would 
likely be to have renewable projects in places like Michigan complement 
renewable projects in other locales. In that way, we can take advantage 
of the geographic diversity and mitigate the risk of a local weather 
event suddenly and dramatically reducing renewable output while still 
taking advantage of the strongest wind resources available.
    Question 5. How do we plan a system that can accommodate more 
expensive wind, or wind resources in Michigan's ``thumb?''
    Answer. As the company that owns the transmission system in 
Michigan's thumb region, ITC is well aware of the opportunity to 
integrate the wind from that region. Due to the intermittent nature of 
wind and other renewable resources, geographic diversity is one factor 
of consideration, and because Michigan's thumb region does have an 
abundance of wind, it is reasonable to assume that Michigan wind will 
be a part of the regional generation portfolio. Through pumping and 
storage, wind from the Michigan thumb can become all the more economic. 
Further, Michigan has significant off-shore wind that is available, and 
we must begin working now to understand how that resource can be 
integrated into the grid in a reliable and economic manner.
    ITC believes that we need a regional transmission EHV overlay that 
would provide the needed reliability and flexibility to interconnect 
local abundant renewable resources, such as those found in the Michigan 
thumb region, to the demand centers. A key component to making this 
happen would be to establish a national energy vision that answers 
important questions such as interconnection-wide planning, cost 
allocation and regional transmission siting.
    Question 6. You are in the transmission business. ITC does business 
in multiple states. I assume this means you build transmission under a 
number of cost allocation methodologies.
    Which cost allocation methodology works best, and how do we make 
that methodology agreeable to various stakeholders involved in the 
planning?
    Answer. While often connected, the issues of regional planning and 
cost allocation are actually two very separate issues. In order to plan 
and develop optimal regional transmission that has the appropriate size 
and scope to address today and tomorrow's energy needs, 
interconnection-wide transmission planning is a must.
    Once planned it becomes clear that regional transmission benefits 
the region, and as such, those costs should be allocated accordingly. 
The lack of a regional cost allocation mechanism is the primary barrier 
to the construction of regional transmission. Without understanding who 
will pay, it is virtually impossible to construct these needed regional 
facilities. Due to parochial interests, finding a cost allocation 
methodology that is agreeable to all stakeholders is also virtually 
impossible. Regional entities have had almost a decade to develop 
equitable cost allocation methodologies to facilitate transmission 
expansion and have failed. This is due in large part to the parochial 
interests of the stakeholders involved in the development of a cost 
allocation methodology. It is for this reason that Congress and the 
FERC must provide the policy vision and leadership on this issue so 
that we can break the logjam and implement and move forward in 
resolving the cost allocation issue.
    ITC supports the concept that the costs of transmission facilities 
that comprise the EHV overlay and are developed through an new 
interconnection-wide planning process to facilitate the connection of 
renewable resources and provide a robust regional electric backbone be 
spread broadly to all end users in that interconnection. This is a 
method commonly known as the ``postage stamp'' allocation method.
                                 ______
                                 
    Responses of Jon Wellinghoff to Questions From Senator Bingaman
    Question 1. You have made a number of recommendations as to how the 
Commission's authority should be administered. If you have been able to 
look at our discussion draft, how do you think it comports with those 
recommendations? How similar is it to the structure under the Natural 
Gas Act?
    Answer. The draft legislation bears similarities to the provisions 
of the Natural Gas Act, especially sections 7 and 15, and the 
recommendations on energy infrastructure siting articulated in my 
testimony. The draft legislation clearly defines the tools and 
authorities available to the Commission for expediting the siting of 
``high-priority national transmission projects.''
    Designating FERC as the lead agency with exclusive authority for 
siting certain transmission facilities would establish a consistent 
review process and assign clear responsibility for making public 
interest determinations that are in the public convenience and 
necessity. The legislation also recognizes the importance of having 
FERC as the lead agency for environmental review, a fundamental part of 
the siting process. Having a lead agency with the duty to perform the 
environmental review and make the ultimate siting determination firmly 
establishes responsibility for ensuring that issues identified in the 
permit review process are considered in a timely manner. The lead 
agency would also develop the schedule for all related federal 
authorizations, thus bringing certainty and accountability into the 
overall siting process. Further, the lead agency would have clearly 
defined responsibilities for developing a single, comprehensive federal 
record upon which judicial review would be based. Also, the right to 
exercise eminent domain authority, which is used sparingly in the 
siting of natural gas facilities, is a necessary tool to guarantee that 
the greater public interest is served.
    The draft legislation strikes a balance between federal and 
traditional state roles for siting transmission line projects. 
Exclusive state transmission siting authority would be preserved for 
projects less than 345 kV (except renewable feeder lines). In addition, 
projects not accorded high-priority status would remain under exclusive 
state siting authority. For ``high-priority national transmission 
projects,'' states are provided with a venue to voice interests and 
concerns during interconnection-wide transmission planning and FERC's 
transmission siting process.
    Question 2. It seems to me that the most difficult thing to figure 
out here is how the planning structure should work. We have suggested, 
along with Senator Reid, that there should be a regional planning 
entity in each interconnection to undertake this role, that it should 
be approved by the Commission, and that the plan should be approved by 
the Commission. Further, that if such a body should not emerge, the 
Commission should undertake this role. Is it practical to suggest that 
the planning bodies should be interconnection-wide? Is it practical to 
suggest that FERC can undertake this role?
    Answer. Transmission planning was historically done on a utility-
by-utility basis and focused primarily on serving local electricity 
needs out of local generation. This is no longer adequate for the way 
the grid is used today and will be used in the future if we are to take 
full advantage of our Nation's renewable energy potential. Our power 
supplies are often transmitted across multiple utility systems and, 
thus, transmission planning needs to look at the reliability and 
economic needs across a much larger area. To address this need, FERC 
has required public utilities subject to its jurisdiction to engage in 
regional transmission planning. Developing significant quantities of 
renewable resources will require the scope of transmission planning to 
be even broader, ideally looking at an entire interconnection. You have 
asked whether this is practical. While expanding regional planning 
efforts to encompass an entire interconnection will not be easy, it is 
the right target. FERC is capable of performing this role if called 
upon to do so, but it would be better to build on the planning efforts 
of existing regional institutions, in which states and other interested 
entities already provide significant input. It is vital that we combine 
local and regional planning efforts with a broader perspective of the 
kind of extra-high voltage overlay needed to make remote renewable 
resources located in one portion of the interconnection deliverable to 
population centers elsewhere in the interconnection.
    Question 3. The Commission issued Order No. 890 to establish 
voluntary regional transmission planning in 2007. Is it working to 
accomplish the goals that we are trying to reach here?
    Answer. In Order No. 890, the Commission directed all public 
utility transmission providers to develop a transmission planning 
process that, among other things, provides for coordination of 
interconnected systems to: (i) share system plans to ensure that they 
are simultaneously feasible and otherwise use consistent assumptions 
and data; and, (ii) identify system enhancements that could relieve 
congestion or integrate new resources. These processes are in tariffs 
on file with the Commission, and the transmission providers are 
required to comply with these tariffs. However, the Commission allowed 
the utilities flexibility in defining the scope of each planning 
process to reflect the integrated nature of the regional power grid and 
the particular reliability and resource issues affecting individual 
regions and sub-regions.
    A number of regional and subregional transmission planning 
processes have been developed or enhanced in response to Order No. 890. 
For example, thirteen transmission providers in the Southeastern United 
States have formed the Southeast Inter-Regional Participation Process 
to coordinate on a regional level the evaluation of potential upgrades 
or other investments that could reduce congestion or integrate new 
resources or loads. Transmission providers in the West have formed 
ColumbiaGrid, WestConnect and Northern Tier Transmission Group to 
coordinate the development of transmission plans in western subregions. 
And transmission owners in California, the Midwest, and the Northeast 
continue to plan their systems on a coordinated basis through their 
participation in regional transmission organizations.
    Although these planning processes have resulted in increased 
coordination among transmission providers within these regions, 
currently none are designed to produce an Interconnection-wide 
transmission plan. Similarly, cost allocation proposals tied to these 
planning processes currently do not include Interconnection-wide cost 
allocation mechanisms. In Order No. 890, the Commission directed 
transmission providers to identify a method for allocating costs for 
new projects that are not covered by existing cost allocation rules. In 
the initial round of compliance filings, most transmission providers 
did not address this issue completely and the Commission directed them 
to supplement their planning processes to identify with particularity 
the cost allocation rules for new projects. A second round of 
compliance filings addressing this issue (and others) is currently 
pending before the Commission and will be addressed in future orders.
    Finally, Order No. 890 and the transmission planning processes 
implemented in response do not address the issue of siting, which is 
addressed in the proposed bills.
     Response of Jon Wellinghoff to Question From Senator Murkowski
    Question 1. In the 2005 Energy Policy Act, Congress directed FERC 
to establish incentive-based rate treatments for transmission. However, 
you have not supported the use of these incentives to spur the 
construction of new transmission facilities. In your opinion, what role 
does incentive-based ratemaking have in this debate?
    Answer. I have supported granting incentive-based rate treatments 
in many, though not all, cases in which they have been proposed since I 
joined the Commission. Incentive-based ratemaking is an important tool 
for the Commission to use in appropriate circumstances to spur 
construction of needed transmission facilities, including new 
transmission facilities that will carry substantial amounts of power 
from renewable energy resources.
    In evaluating requests for an incentive return on equity (ROE) 
adder, the Commission should focus on encouraging investments beyond 
those projects that are required to meet a utility's service 
obligations or the minimum standard for good utility practice. In my 
view, incentive ROE adders should be targeted to non-routine 
investments that provide incremental benefits, such as those associated 
with new transmission construction needed to accelerate the integration 
of renewable energy resources into our Nation's energy portfolio, and 
benefits that result from the deployment of best available technologies 
that increase efficiency, enhance grid operations, and allow greater 
grid flexibility.
    These considerations are consistent with the Commission's Order No. 
679, which implements new section 219 of the Federal Power Act (created 
by section 1241 of the Energy Policy Act of 2005 and requiring a rule 
providing incentive-based rate treatments for transmission). They are 
also consistent with section 1223 of the Energy Policy Act of 2005, 
which requires the Commission to encourage, as appropriate, the 
deployment of advanced transmission technologies.
    Responses of Jon Wellinghoff to Questions From Senator Menendez
    Question 1. Mr. Wellinghoff, I'm told that the Energy Committee 
proposal will allow more wind energy to be placed on the grid, but as I 
read it, the proposal is more likely to create a superhighway for 
Midwest coal electricity to reach eastern markets. Is there a 
requirement that transmission built as the result of this bill contain 
renewable electricity? On the first page of the bill this proposal says 
it applies to any transmission ``at or above a voltage of 345 
kilovolts.'' Doesn't that, by definition, mean there is no real 
renewable electricity requirement in the proposal?
    Answer. At the outset, I should note that I do not know what is 
intended by each provision in the discussion draft and I do not wish to 
prejudge how the Commission might address any new responsibilities that 
might be given to it under new legislation. The Commission will need to 
interpret any new legislation in light of the language that is 
ultimately chosen and the legislative record.
    With respect to your first question, the Energy Committee 
discussion draft defines high-priority national transmission projects 
to include three general categories of transmission and ancillary 
facilities: those that operate at or above a voltage of 345 kilovolts 
alternating current; those that operate at or above a voltage of 400 
kilovolts direct current; and, renewable feeder lines that transmit 
electricity directly or indirectly to a transmission facility that 
operates at or above a voltage of 345 kilovolts alternating current or 
400 kilovolts direct current. A renewable feeder line is defined as a 
transmission line operating at 100 kilovolts or greater that is 
identified in a high-priority national transmission plan or by the 
Commission as a facility to be developed substantially to facilitate 
collection or delivery to one or more load-serving entities or end-use 
customers of energy produced by certain identified renewable energy 
sources. The regional planning entities and the Commission are required 
to develop plans for the development and improvement of such renewable 
feeder lines. Thus, there appears to be a renewable energy requirement 
with respect to those lines. Moreover, in developing the plans, 
subparagraph (i)(5)(B) requires the regional planning entities and the 
Commission to be guided by the goal of maximizing the net benefits of 
the electricity system, taking into consideration ``support for the 
development of new renewable generation capacity, including renewable 
generation located distant from load centers.''
    To the extent that concerns like those raised in your question 
remain, Congress can address this issue expressly in transmission 
legislation. For example, the legislation proposed by Senator Reid 
includes additional safeguards to ensure that new transmission lines 
serve clean renewable generation.
    Question 2. I've heard significant concerns from the environmental 
community that the Energy Committee proposal does not help wind 
generation as much as it benefits coal generators. Please see the 
attached memo from the Sierra Club and explain why you disagree with 
their arguments. Also see an attached letter from 26 environmental 
groups listing their priorities for a transmission plan.* Does the 
proposal meet these principles?
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    * See Appendix II.
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    Answer. I support many of the goals outlined in the attached memo 
from the Sierra Club, including an RES standard and limitations on 
carbon emissions. I also believe Congress should consider legislation 
to facilitate the transmission expansion needed to enable greater use 
of renewable resources. The immediate environmental benefits of using 
renewable resources should not be delayed pending further Congressional 
action to address these other important aspects regarding U.S. carbon 
policy.
    I agree with many of the basic principles included in the 
attachment, including comprehensive super-regional planning, 
environmentally responsible siting, and more efficient use of existing 
infrastructure. I see the Energy Committee proposal as generally 
consistent with those principles. The legislation proposed by Senator 
Reid may adhere more closely to the principle of having safeguards to 
ensure that new transmission lines serve clean renewable generation.
    Question 3a. Mr. Wellinghoff, the bill strikes Federal Power Act 
subsections 216(a) through (c), eliminating the provisions allowing the 
Department of Energy to designate National Interest Electric 
Transmission Corridors, and for the Federal Energy Regulatory 
Commission to issue construction permits for transmission projects in 
those corridors. Will the repeal of these provisions nullify existing 
designations of national corridors?
    Answer. The Department of Energy's designations of National 
Interest Electric Transmission Corridors are currently under appeal. If 
the designations are upheld by the courts, my sense is that deletion of 
those provisions would not nullify the existing designations, because 
they would have been lawful when made. The significance of such a 
designation, however, would be unclear.
    Question 3b. Will the repeal of these provisions eliminate FERC's 
authority to issue construction permits for projects in national 
corridors that are already being considered by state and local siting 
authorities?
    Answer. My sense is that the repeal of those provisions would 
eliminate the Commission's authority to issue construction permits for 
projects in national corridors unless: (1) the projects in question 
otherwise met the requirements of the new legislation; and (2) the 
Commission had already issued a permit in a particular case.
    Question 4. When a public utility proposes to build a new 
transmission line in NJ, it must undergo environmental reviews if the 
line is proposed to be built in an environmentally sensitive area. The 
proposed Energy Committee bill provides that the FERC or the Secretary 
of Interior will be the ``lead agency'' for coordinating environmental 
reviews, including NEPA reviews. What role is envisioned for the States 
to preserve their authority to conduct thorough and meaningful 
environmental reviews of transmission projects in environmentally 
sensitive areas deemed to be ``high-priority national transmission 
projects''?
    Answer. The designation of FERC as lead agency for ``high-priority 
national transmission projects'' would preserve a key role for the 
states in the environmental review process. State agencies would 
continue to be responsible for reviewing a proposed project to ensure 
compliance with state regulations, as well as any federal authority 
that has been delegated to the state (e.g., coastal zone consistency 
determinations).
    As stated in my testimony, a typical FERC infrastructure proceeding 
allows and encourages participation of all stakeholders, including 
federal and state agencies. FERC attempts to actively involve all 
stakeholders in its National Environmental Policy Act (NEPA) review 
process to identify potential impacts and develop alternatives. FERC's 
pre-filing process begins the NEPA review and encourages the early 
identification and resolution of issues and concerns.
    Under NEPA, coordination and cooperation among federal and state 
agencies is an important aspect of the environmental review process. 
While FERC as lead agency would have primary responsibility for 
preparing environmental documents, FERC encourages states to 
participate in the NEPA process by becoming ``cooperating agencies.'' 
As a cooperating agency, a state would assist FERC in determining the 
scope of issues to be addressed in the NEPA process, identifying the 
significant issues related to the proposed project, and reviewing and 
providing comment on environmental documents. In addition, applicants 
seeking to construct transmission facilities are mandated by NEPA to 
consult with appropriate federal, regional, state, and local agencies 
during the planning stages of the proposed action to ensure that all 
potential environmental impacts are identified. These procedures are 
designed to preserve the rights of stakeholders--especially the 
states--in an infrastructure review process.
    Question 5a. In creating plans for the development and improvement 
of high-priority national transmission projects under subparagraph 
(i)(5)(A), the regional planning entity for an Interconnection area 
would be required to undertake centralized Interconnection-wide 
transmission planning with respect to high-priority national 
transmission projects.
    Will the responsibilities of the regional planning entity for the 
Interconnection overlap with those of the existing RTOs and ISOs? For 
example, a project does not become a ``high-priority national 
transmission project'' until after the regional planning entity 
incorporates it into a plan; does that mean that there can be two 
separate planning processes one after the other, with the RTO first 
planning a project, and the regional planning entity subsequently and 
separately planning a similar or identical project as a high-priority 
national project?
    Answer. Similar to the legislation proposed by Senator Reid, the 
Energy Committee discussion draft requires the planning activities of 
the regional planning entities to build on the planning conducted by 
states and by existing organizations, such as RTOs and ISOs, utilities, 
and regional reliability entities. I believe that stakeholders 
participating in existing planning processes should continue to work 
with each other to develop the best transmission plan for each region; 
the interconnection-wide planning entity should harmonize those plans 
and, if necessary, overlay on those plans additional transmission 
projects necessary to meet the goals of the legislation. For example, 
there may be significant savings from building one large inter-regional 
line instead of multiple, lower voltage, intra-regional lines. 
Conversely, as large extra-high-voltage lines are considered as part of 
any interconnection-wide planning process, necessary transmission 
system upgrades to adjoining utility systems will need to be taken into 
consideration and those results will need to feed back into local and 
regional planning efforts. Planning at different levels must be 
coordinated adequately to ensure the best results.
    Question 5b. To preserve the reliability of the existing 
transmission systems while integrating high-priority national 
transmission projects into those systems, additional improvements 
beyond the high-priority project itself are likely to be needed. Who 
will be responsible for planning those additional improvements? Will it 
be the regional planning entity for the entire Interconnection area, 
the regional transmission organization or independent system operator 
for each part of the Interconnection area affected by the high-priority 
project, or someone else?
    Answer. The Energy Committee discussion draft appears to recognize 
that upgrades to the transmission system will be necessary to integrate 
new high-voltage transmission facilities into the grid. ``Ancillary 
facilities and equipment necessary for the proper operation'' are 
included within the definition of a high-priority national transmission 
project and, therefore, within the new authority given to regional 
planning entities and the Commission. This is similar to the bill 
introduced by Senator Reid, which includes network upgrades associated 
with underlying transmission networks among the facilities to be 
planned for by the regional planning entities. Again, transmission 
planning at the local, regional, and interconnection-wide level all 
start from the premise of preserving (or enhancing) the reliability of 
the existing system. There is a clear need to coordinate these efforts 
to account for additional improvements which may be necessary beyond 
any particular high-priority project.
    Question 5c. Will it be the RTO/ISO or the regional planning entity 
that is held accountable for ensuring reliability?
    Answer. Responsibility for compliance with the mandatory 
reliability standards approved by the Commission rests with the users, 
owners and operators of the bulk power system, as registered by the 
Commission-certified Electric Reliability Organization. Several of 
these standards relate to planning for the reliable operation of the 
transmission system. RTOs and ISOs are among the entities registered as 
responsible for meeting these standards. If regional planning entities 
are also registered as responsible for compliance with the planning 
standards, they would share that responsibility with RTOs, ISOs and 
others.
    Question 6. Mr. Wellinghoff, under subparagraph (i)(2)(A), 
applicants seeking to become the regional planning entity must propose 
an open, inclusive, transparent, and nondiscriminatory planning process 
that includes consultation with affected states. However, nothing in 
the bill holds the regional planning entity responsible for satisfying 
those requirements when it actually undertakes the planning process. 
How will the regional planning entity be required to satisfy those 
requirements? What will be the consequences if the regional planning 
entity fails to satisfy those requirements?
    Answer. The legislation requires the Commission to act on 
applications to become a regional planning entity (RPE), and to 
determine whether the specific procedures contained in such 
applications comply with the statute. This includes the specific 
procedures needed to meet the requirement for consultation with 
affected states. The scope of the Commission's jurisdiction over an RPE 
is unclear under the legislation. If the RPE is jurisdictional to the 
Commission for purposes of complying with the procedures contained in 
an approved RPE application, and if the RPE failed to satisfy the 
requirements, then the Commission would have a range of enforcement 
mechanisms, including civil penalties, and would decide the appropriate 
enforcement response based on all of the relevant circumstances. It 
would be helpful if Congress made clear in any legislation enacted the 
scope of Commission authority over an RPE.
    Question 7a. Under subparagraph (i)(5)(B), planning is required to 
take into consideration support for the development of new renewable 
generation capacity distant from load centers.
    Why shouldn't planning take into account support for the 
development of new renewable generation capacity close to load 
centers--such as offshore wind generation capacity located within a few 
dozen miles of coastal load centers?
    Answer. It should. Transmission planning conducted by each 
transmission provider should and already does take into account the 
integration of resources and loads on that transmission provider's 
system. Transmission planning to support the development of new 
renewable generation capacity should take into account both remote 
renewable generation located far away from load centers and renewable 
generation capacity close to load centers, such as offshore wind 
generation capacity located within close proximity to coastal load 
centers. The idea is to have a planning process that explores all 
renewable options--both remote and local. However, greater emphasis on 
facilitating regional and interregional planning is necessary for 
consideration of renewable generation located far away from load 
centers because planning for transmission that crosses the systems of 
multiple transmission owners is far more difficult to accomplish.
    Question 7b. How can we ensure that ``high-priority national 
transmission projects'' include projects that link offshore wind 
generation capacity to coastal load centers?
    Answer. It would be appropriate for Congress to provide direction 
to regional planning entities and the Commission regarding the 
importance of developing transmission facilities necessary to integrate 
renewable resources. With that direction, the Commission would be able 
to develop rules to ensure that plans include appropriate projects that 
link offshore wind generation capacity to coastal load centers.
    Question 7c. Will long-distance transmission projects intended to 
support the development of new renewable generation capacity distant 
from load centers also be available to carry electricity from non-
renewable projects that would increase pollutant emissions from 
regional power production? How can we ensure that transmission linking 
wind or solar resources to distant load centers do not also promote the 
expansion of high-emitting conventional generation?
    Answer. It is unlikely that new transmission lines linking areas of 
the country that have significant renewable capacity will be used to 
carry significant fossil generation capacity. The capacity factor of 
most of the Nation's coal-fired generation, for example, is very high. 
This means that the coal-fired plants currently used to produce 
electricity cannot materially expand their production to take advantage 
of new transmission capacity. As such, I do not believe there would be 
a significant risk of increased pollutants as a result of such 
legislation. To the extent Congress remains concerned, however, it can 
address this issue expressly in transmission legislation. For example, 
the legislation proposed by Senator Reid includes additional safeguards 
to ensure that new transmission lines serve clean renewable generation.
    Question 8. Mr. Wellinghoff, states have worked to expand demand 
response, energy efficiency, and clean local electric generation. Under 
(i)(5)(A)(2), the regional planning entity will develop plans that take 
these efforts into consideration. However, large transmission projects 
can send market signals that undermine these efforts--a problem that is 
exacerbated by the regional planning entity's lack of tools to support 
the states' efforts. How can we ensure that the Interconnection-wide 
planning of high-priority projects will not undermine states' local 
low-carbon solutions to energy challenges?
    Answer. Local low-carbon efforts are certainly part of the 
solution. But the Nation also needs to facilitate transmission planning 
on an inter-regional basis to allow the addition of extra-high-voltage 
transmission needed to interconnect renewable generation located 
remotely from population centers. I do not see a conflict between local 
low-carbon efforts and more distant renewables; both are critical to 
meeting our nation's energy needs and the increasing demand for clean, 
secure renewable resources. Moreover, local resources such as demand 
response are vital ``dance partners'' that will enable large amounts of 
energy from renewable energy resources to be integrated into the 
transmission system in a reliable and efficient manner. Thus, the 
development of extrahigh-voltage transmission to deliver energy from 
remotely located renewable generation will likely stimulate accelerated 
development of local demand response and make that demand response 
resource more valuable. It will be critical to coordinate local 
planning efforts, regional planning efforts, and interconnection-wide 
planning efforts to ensure that all cost-effective solutions work in 
concert to optimize system efficiencies for the benefit of consumers.
    Question 9. According to the Joint Coordinated System Plan (JCSP) 
put together by Midwest ISO, SPP, PJM, TVA, and MAPP, our transmission 
future might look something like the map below. They project this will 
cost at least $80 billion. Do you believe such a transmission plan 
makes economic or environmental sense? Would transmission lines for 
wind actually bypass coal plants on their way east as this map seems to 
indicate?
    Answer. The above Figure* refers to the ``The 20% Wind Energy 
Scenario'' studied by JCSP, which assumes that the Eastern 
Interconnection will meet 20 percent of its energy needs using wind 
generation by 2024. In this scenario, the bulk of the wind production 
capacity is assumed to be located in those areas with the highest 
quality (best annual capacity factor) wind resources. These resources 
are located in the western part of the Eastern Interconnection, i.e., 
the Texas Panhandle, Oklahoma, Kansas, Nebraska, North Dakota, South 
Dakota and Minnesota.
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
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    JCSP claims that this extra-high-voltage transmission network 
overlay of the existing interconnected power grid should achieve the 
following three objectives: (1) reduce the Nation's carbon footprint by 
facilitating the development and reliable integration of renewable and 
supporting resources to the power grid; (2) ensure and even improve 
system reliability and resiliency to withstand and/or contain severe 
contingencies due to deliberate threats or natural disasters to 
safeguard national security; and (3) increase system capabilities to 
ensure the supply and deliver ability of renewable resources while 
lowering dependency on non-US energy sources. The Commission has not 
performed the extensive analytical work needed to determine the 
economic or environmental impacts of any such overlay design. 
Additional research as to implementation of those objectives would be 
beneficial.
    As to possible bypass of coal plants, the transmission lines shown 
by solid black lines (in the Figure above) that extend from the central 
plains to major load centers utilize high voltage DC (HVDC) technology. 
Two-terminal HVDC technology does not interconnect with the existing 
underlying AC transmission system on which the coal plants are located. 
As envisioned by JCSP, the power is collected from the generation 
resources located on the western end of the HVDC line and then 
transmitted to the load centers on the eastern end. However, the 
proposed JCSP design utilizes a multi-terminal HVDC technology that 
includes a mid-point tap to allow the load and resources in the middle 
to use the facilities. With a multi-terminal HVDC design, it is 
possible to collect power from other resources, such as wind resources 
in Michigan, as well as power from other generation such as coal 
plants. Again, however, it should be noted that the introduction of 
substantial additional energy on to such a grid system from existing 
coal-fired generators is unlikely given their current high capacity 
factors. Further, new coal-fired generation is unlikely to be 
constructed in the midst of existing uncertainty regarding carbon 
regulation and potential future carbon trading prices.
     Response of Jon Wellinghoff to Question From Senator Sessions
    Question 1. I understand that the movement of electricity through 
power lines over long distances results in some loss of power. Would an 
improved grid and improved transmission lines reduce the amount lost? 
If so, how much? And would the savings be sufficient over time to pay 
for the cost?
    Answer. All transmission lines experience real power losses. 
Developing a more efficient transmission grid is likely to reduce those 
losses. The extent of the reductions would depend on several factors, 
such as the design of the transmission lines under examination, 
including their voltage and conductor type, and the distance over which 
those transmission lines would carry energy.
    Rather than focus solely on changes in real power losses, it is 
useful in evaluating the benefits associated with an enhanced 
transmission grid to consider a broader metric: total savings that 
result from changes in system losses and the reduction in total system 
production costs. The calculation of those total savings also depends 
on several factors, such as the power flow pattern, the transmission 
configuration, the system load, the generators that are running, and 
the above-noted considerations related to real power losses. A 
transmission system planner must perform a series of transmission 
studies, including a production cost study, to quantify the system 
benefits associated with a proposed transmission system addition. 
Without performing these studies, it is not possible to accurately 
quantify the total benefits of an improved grid.
    Responses of Jon Wellinghoff to Questions From Senator Stabenow
    A group of regional transmission organizations released a plan 
(Joint Coordinated System Plan (JCSP) in 2008, which provides a view of 
new transmission necessary to interconnect generation resources. The 
plan illustrates approximate locations for new transmission facilities 
necessary to link wind resources in the western portion of the Eastern 
Interconnect to customers. Both American Electric Power (AEP) and ITC 
have proposed building Extra High Voltage (EHV) lines to accommodate 
wind. Both projects of AEP and ITC appear to lie within the conceptual 
framework of the transmission line recommended in the Report. The cost 
of such a major undertaking will have a significant impact in Michigan.
    Question 1. How would competing projects, such as these--be 
selected for construction? Would the projects identified by the FERC-
appointed Regional Planning Entity be subject to competitive bids--with 
those presenting the least cost bid--being selected to develop 
projects?
    Answer. Historically, the incumbent public utility, municipal or 
cooperative transmission system, or power marketing administration 
would often undertake such construction--either individually or through 
some form of joint project. More recently, merchant transmission 
developers have demonstrated willingness to undertake the risk of 
building transmission projects without guarantee of cost recovery from 
any particular set of ratepayers. As a general matter, a formal 
competitive bidding process administered by a government agency has not 
been necessary with regard to selecting a particular project developer 
(whether incumbent utilities or merchant developers). Rather, 
competitive forces and input from entities with either or both of 
planning and siting authority over particular projects have been 
important to resolving situations where competing projects are 
proposed. The Regional Planning Entity and the corresponding rules of 
the planning process also could make important contributions to 
resolving such situations efficiently.
    Question 2. Formula rates are currently granted by the FERC for 
transmission owners operating in the major RTOs. Formula rates offer 
the transmission owner just and reasonable cost recovery through annual 
rate adjustments that do not require FERC rate review. Would the cost 
of new transmission facilities built to interconnect renewable 
resources (estimated at $80 billion), be recovered through formula 
rates or will there be a formal review and approval of costs and rates 
through a more traditional rate setting process by FERC? If not through 
a traditional rate setting process, what assurances will there be to 
local utilities bearing the cost--which the costs incurred in building 
a high voltage transmission system to interconnect renewable resources 
will be--prudently incurred?
    Answer. Cost recovery for new transmission facilities to 
interconnect renewable resources could be recovered through a formula 
rate structure or through individual rate filings as individual 
transmission projects are built. The Commission's review of an initial 
formula rate (which can automatically adjust to reflect additional 
costs associated with a new project) is as rigorous as the rate review 
that occurs with regard to individual, project-specific rate filings. 
Both are ``traditional'' rate-setting mechanisms that fully protect 
customers. It would be the decision of the applicant whether it wished 
to propose a formula rate that could adjust automatically or a stated 
rate that would require a new filing each time additional transmission 
facilities are added. In either event, only prudently incurred costs 
would be recoverable through a FERC-jurisdictional transmission rate.
    Question 3. Senator Reid's proposed legislation provides that the 
Regional Planning Entity (RPE) will solicit input from regional 
transmission organizations, independent system operators, States, 
generator owners, prospective developers and other interested parties. 
The proposed legislation also provides that the RPE may recover 
prudently incurred costs to carry out interconnect-wide planning 
studies from a Federal transmission surcharge that will be assessed to 
all load-serving entities. Should local utilities such as Michigan 
utilities Wisconsin Electric, Detroit Edison and Consumers' Energy be 
entitled to provide input to the planning process? If not, why not?
    Answer. Yes.
    Question 4. Section 404e of Senator Reid's proposed bill provides 
that the Commission may grant construction permits for service in an 
area already served by another transmission provider. This provision 
allows multiple entities that are involved in transmission to come into 
the same jurisdiction. If there are multiple entities interested in 
developing transmission, how will those conflicting desires be 
addressed? Will there be competitive bidding processes instituted by 
the Federal Government that will determine which entity will be 
selected to develop projects? If projects aren't selected via a 
competitive bidding process, which agency of the government will 
provide oversight to ensure projects are being built in a cost 
effective manner?
    Answer. Please see my answer to your first and second questions, 
above.
     Responses of Jon Wellinghoff to Questions From Senator Shaheen
    Question 1. How do we evaluate renewable energy projects, like 
North Dakota Wind, including the cost of transmission, against 
renewable alternatives closer to New England, like we have in New 
Hampshire?
    Answer. Developing local renewable energy and distributed resources 
is important as we expand our capacity to generate clean power. 
However, such development is not a substitute for developing the extra-
high-voltage transmission infrastructure needed to bring renewable 
energy from remote areas where it can be produced most efficiently into 
our large metropolitan areas where most of this Nation's power is 
consumed. Both local renewable resources and more remote renewable 
resources will be necessary if this Nation is to reduce its carbon 
emissions and respond effectively to the challenge of climate change.
    Consistent with those goals, transmission planning to support the 
development of new renewable generation capacity should take into 
account both remote renewable generation located far away from load 
centers and renewable generation capacity close to load centers. The 
idea is to have a planning process that explores all renewable 
options--both remote and local.
    Question 2. With regard to interconnection-wide planning, how do we 
ensure that local and smaller state concerns are represented?
    Answer. With regard to interconnection-wide planning, it is vitally 
important that local and state concerns are fully represented. There 
will be a need for close coordination between transmission plans 
originating at the local utility level, transmission plans developed at 
an RTO or ISO level, and ultimately any interconnection-wide planning 
efforts. Interconnection-wide planning will necessarily build upon the 
plans developed on a sub-regional basis. Moreover, there may be 
significant savings from building, for example, one large inter-
regional line instead of multiple, lower voltage, intra-regional lines. 
Conversely, as large extra-high-voltage lines are considered as part of 
any interconnection-wide planning process, necessary transmission 
system upgrades to adjoining utility systems will need to be taken into 
consideration and those results will need to feed back into local and 
regional planning efforts. It will be critical to coordinate local 
planning efforts, regional planning efforts, and interconnection-wide 
planning efforts to ensure that all cost-effective solutions (including 
demand response and other local low-carbon efforts) work in concert to 
optimize system efficiencies for the benefit of consumers.
    Question 3. As we look at national planning of transmission, to 
what degree should local planning (especially zones that are working, 
like New England) be included?
    Answer. Please see my answer to your second question, above.
                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

  Statement of Paul J. Hibbard, Chairman, Massachusetts Department of 
    Public Utilities, on behalf of the Commonwealth of Massachusetts
    Thank you for the opportunity to comment. We are heartened that 
Congress is taking up critical energy issues, with the goal of 
improving energy policy and instituting a greenhouse gas control 
regime. In particular, we support the move to a more rational policy 
governing the electricity sector, one that supports the development of 
renewable electricity while supplying ratepayers with reliable, fairly 
priced energy.
    But we are concerned about current efforts to expand the 
transmission authority of the Federal Energy Regulatory Commission, as 
provided for in the draft legislation proposed by Senators Reid and 
Bingaman, and related efforts to rapidly deploy interconnection-wide 
transmission highways. In our view, these efforts are unwarranted from 
energy or environmental policy perspectives, strip states of authority 
over energy resource planning, and could diminish or eliminate benefits 
of competition in electricity markets.
    At the outset, we need to recognize the appropriate level of 
jurisdiction that FERC does and should have over transmission in 
interstate commerce. The siting of transmission infrastructure is 
critical to supporting competitive markets and ensuring the safe and 
reliable operation of our interconnected transmission networks. FERC 
currently has, and should have, backstop authority for siting 
interstate transmission projects that are needed to meet federally 
enforceable reliability standards, or to address major transmission 
system bottlenecks. When it comes to challenges to system reliability 
or significant transmission system inefficiencies, the federal 
government needs to step in when states do not act in a reasonable 
timeframe.
    But key to this authority is its limitation to projects needed to 
maintain bulk power system reliability. This is fundamentally different 
from what is proposed in both pieces of draft legislation, which would 
dramatically expand FERC's siting authority to include transmission 
that is not needed for reliability, but instead is only needed to 
interconnect new generating resources to the transmission network. 
While on its face this seems like a laudable goal, especially when 
linked to bringing distant renewables to market, the practical impact 
is likely to lead to costly and inefficient results. Federal decisions 
that serve to pick the generation that will be used to meet electricity 
demands on a national basis from among all possible sources will 
override the operation of competitive electricity markets, and squash 
state and regional efforts to promote demand response, energy 
efficiency and local renewable resource development.
    In contrast, we believe that renewable resources steered to market 
should be those that are lowest cost, as determined by testing all 
options within a competitive market framework.
    In the world of electricity, this means:

   The continuing evolution of FERC's oversight of wholesale 
        electricity rates across the country in a way that increases 
        reliance on regional competitive market structures to capture 
        system efficiencies and fairly allocates risks and rewards 
        among market participants and consumers. This includes 
        expansion of short-and long-term markets for energy, capacity, 
        transmission rights, and ancillary services;
   Meeting environmental policies through cap-and-trade 
        emission control programs that rely on allowance trading to 
        meet established annual emission caps through market-driven 
        mechanisms that achieves lowest costs; and
   Meeting renewable policies through standards that place a 
        minimum purchase requirement on load-serving entities and 
        thereby establish a monetary value (through tradable renewable 
        energy credits) in regional markets; this added value improves 
        the competitiveness and viability of emerging renewable 
        resources within each state or region's competitive electricity 
        market.

    In every instance, this approach sets the requirement, leaving it 
to the creativity of the energy marketplace to produce the most 
efficient--and least cost--compliance path.
    Our energy and climate challenges are pressing, but meeting those 
challenges does not mean we give up the ability to keep energy costs to 
a minimum. But this is exactly what might result from the proposed 
legislation.
    One way to view this is in comparison to current markets. In New 
England, new resource developers of all types compete in a competitive 
capacity market to meet growing demand. The response has been 
overwhelming, with active and successful participation by demand 
response and renewable resources. Well over 10,000 megawatts of demand 
response and supply resources, including renewables, have responded to 
competitive market auctions. All of these resources compete to meet 
future demand (1) with full internalization of the cost of 
NOX, SO2, and CO2 as a result of 
national and regional cap and trade programs--increasing the price 
offered by fossil-based resources, (2) with full internalization of the 
value of renewable resources through the issuance and trading of 
renewable energy credits generated by state renewable portfolio 
standards--decreasing the price offered by renewable resources, and (3) 
with full internalization of development costs, including the cost to 
transmit power reliably to load. In this way, evolution of our region's 
power system happens in a manner that meets our states' energy and 
environmental policy goals, but does so at delivered prices to 
ratepayers that are driven to their lowest possible levels by 
competition.
    By contrast, the proposed legislation enables, and in effect 
requires, that FERC approve, site, and allocate the costs associated 
with transmission to connect generation, without consideration of what 
this means to the prices consumers pay at the end of the line. This 
provides a direct subsidy for distant resources only, on a 
discriminatory basis, thus eliminating the level playing field that 
exists in regional markets. This will increase electricity prices to 
consumers, and undercut demand response and local renewable resource 
alternatives. This is a bad outcome for consumers, and for meeting 
long-term environmental objectives alike.
    In many respects, the transmission discussion nationally appears to 
be proceeding along the line that 1) since everyone accepts that we 
need transmission to provide the renewables that we need then 2) prima 
fascia reasoning is that it doesn't matter who pays for the 
transmission. Therefore we should charge transmission to everybody 
because we need it. This will unintentionally disfavor more expensive 
local renewables which are near load centers (even thought their total 
all-in delivered cost might well be lower) because we will effectively 
give a free ride to the distant renewables since they won't have to 
bear the cost of their transmission investments in their delivered 
costs.
    We recognize that support is building for transmission from wind 
projects in Texas and the Dakotas to load centers thousands of miles 
away. Bringing renewable energy to market from remote sources should 
certainly be one option for meeting our clean energy needs. But if we 
are to meet those needs in the most economic and responsible way, such 
resources must compete on a fair and equal basis with demand-side and 
renewable resource alternatives within each region--based on the price 
of power at the point of consumption, including all transmission and 
other development costs.
    In that context, the proposed legislation is not simply about 
transmission siting, but something more. It will effectively strip 
states and regions of their resource planning functions, eliminate them 
as laboratories for the development of innovative low-carbon 
alternatives, seriously damage the function of competition in regional 
electricity markets--and, in so doing, drive up electricity prices 
unnecessarily.
    The very best wind resource in our country--from the perspectives 
of resource size, distribution, capacity factor, reliability, proximity 
to population centers, and minimization of environmental impact--is 
located a short distance off the major load centers of the East Coast. 
Offshore wind turbine installation may currently cost more than on-
shore wind development, but better wind resource economics, decreasing 
unit costs with increased development opportunities, and the absence of 
the need for cross-country transmission could make offshore wind 
competitive with remote wind farms. The higher cost of construction may 
well be more than offset by the markedly lower cost of transmission. In 
short, offshore wind should and must have that opportunity to compete 
on a delivered energy cost basis--and not be disadvantaged by 
transmission subsidies for other forms of renewable power generation.
    We urge you to focus not on an expansion of FERC's authority over 
resource planning, or the buildout of a massive transmission system 
focused on one set of pre-determined renewable generation resources, 
but rather on how to direct funding and assistance in a way that brings 
the best and most economic renewable resources to market, in a context 
of local resource availability and regional system planning.
    This will lead to the most effective use of government research and 
development assistance dollars, preserve the competitive market 
foundation for electricity resource additions, minimize the cost of 
electricity to consumers, and leave in place an appropriate level of 
state and regional review of electricity infrastructure development.
    Any bill related to regional planning and transmission development 
should at a minimum contain the following:

   Create new federal energy efficiency and renewable energy 
        mandates on load serving entities that are simple, transparent 
        and technology neutral--and capitalize on the more than a 
        decade of successful direct experience by many states in 
        developing strong efficiency and renewable mandates and 
        markets;
   Consider new and additional market mechanisms such as 
        regional procurements for renewable energy in the form of long 
        term power purchase agreements--again, allowing all renewable 
        generation interests to compete on the basis of all-in costs of 
        delivered power to load centers;
   A requirement that regional system planners with load 
        centers along the coasts specifically develop a plan within and 
        across regions for establishing an offshore wind development 
        transmission regime; a mandate to FERC to identify a 
        transmission access and capacity rights policy for 
        interconnection to major offshore transmission projects 
        dedicated for offshore wind development; and, establish an 
        expedited siting review for offshore lines in federal waters 
        and their interconnection to coastal load centers.

    Thank you for this opportunity to comment. I would be happy to 
follow up with the Committee in whatever manner is most helpful.
                                 ______
                                 
 Statement of Edward N. Krapels, President of Anbaric Transmission LLC
    Chairman Bingaman, Senator Murkowsi, and members of the committee, 
I thank you for the opportunity to present testimony on the VERY 
important subject of our Nation's electric transmission infrastructure. 
My name is Edward N. Krapels and I am the President of Anbaric 
Transmission LLC, which is an incubator of electric transmission 
projects. I am a Principal of the Neptune Regional Transmission System 
and the Hudson Transmission Project. Neptune is a 660MW, high voltage 
direct current underwater transmission line which connects New Jersey 
and Long Island and was built on-schedule and on-budget between 2004 
and 2007. Neptune, now run by my partner, Ed Stern, provides between 10 
and 20 percent of the energy used on Long Island. Hudson Transmission, 
which connects New Jersey and Manhattan, is similar in size and scope, 
and is scheduled to go into construction this summer. Both Neptune and 
Hudson were selected in highly competitive procurement processes 
conducted by New York State Authorities. As an electric transmission 
developer entirely without any affiliation with a public utility 
company, we were not without our critics and skeptics who said there 
was no need for nor value in independent transmission providers. The 
success of Neptune and Hudson serves, however, as a compelling 
rejoinder to these skeptics and these two projects now serve as an 
ideal illustration of the feasibility and value of regulated 
competition in transmission development.
    Anbaric is also leading the development of a number of other 
innovative projects in the United States. We believe we can efficiently 
develop several thousand megawatts of additional, renewables-enabling 
transmission lines and have them ready for construction by 2011. We 
have excellent relationships with financiers willing and eager to 
invest in transmission infrastructure. Capital availability--debt and 
equity--while challenging, is not a major constraint on our activities. 
We are ready, willing, and able to develop additional projects under 
careful regulation and under the strict disciplines of project finance, 
properly executed.
    We also do not consider siting to be among the top challenges to 
the development of our kind of transmission. By and large, we take the 
difficulty of siting terrestrial, overhead lines as a given, and seek 
alternative ways to install our cables. As a result, we have focused on 
sub-sea, sub-river projects. Even under intense environmental scrutiny, 
the installation methods we use are minimally disruptive and--because 
we will typically seek to access renewables--present a strong and 
compelling net environmental benefit. We have not needed eminent domain 
in our projects, nor have we sought to invoke the designation as a 
``National Interest Transmission Corridor'' under the 2005 Energy 
Policy Act.
    All that said, Mr. Chairman, our successful development efforts 
have not been without obstacles. The top challenges, and our proposed 
solutions, to building modern and environmentally responsive 
transmission, are as follows:

          1. Out-dated planning objectives.--The regional organizations 
        that conduct electric system planning do so with the single-
        minded purpose of meeting specified reliability criteria. 
        Nowhere are they empowered, let alone mandated, to explicitly 
        incorporate state and federal environmental policies to advance 
        the construction, development, and integration of transmission 
        to support new renewable energy generation resources. As a 
        result, despite the best efforts to date by FERC to broaden the 
        range of reasons for which system planners choose transmission 
        projects, there have been no major ``environmental projects'' 
        approved in the Eastern Intertie. Indeed, Anbaric and others 
        have encountered this problem first hand in New England with 
        our ``Green Line'' and competing projects. Despite an express 
        finding by FERC in February 2007 that we were ``independent and 
        capable,'' this regulated transmission line has been mired in 
        an outdated planning process that does not properly assess the 
        value of bringing new renewable resources into the grid. 
        Similar proposals by other developers and utilities have been 
        similarly thwarted by the ``reliability-only'' criteria used by 
        regional planning processes to determine which transmission 
        projects are needed. Today, Texas, with its Competitive 
        Renewable Energy Zones, provides the best example of how to 
        develop renewable resources as well as the transmission to 
        support them in an effective and competitive manner. Texas's 
        ``CREZ'' approach opens up transmission development and has 
        made Texas the leading area in our country for renewable energy 
        development. We urge Congress to empower and direct FERC to 
        require that regional transmission planning efforts explicitly 
        include environmental policies and requirements and identify 
        and incorporate access to renewable energy resources within 
        approved regional plans.
          2. Lack of inter-regional planning cooperation.--In our 
        experience, most transmission planning can and should be done 
        at the regional level. Regional planning organizations have 
        attempted, and should be encouraged, to work cooperatively to 
        identify and facilitate projects that meet inter-regional 
        needs. At times, however, cooperation can, and will, break 
        down, as regional organizations focus on their regional 
        interests. When this occurs, FERC must be given the necessary 
        tools to intervene in the national interest and remove the 
        planning impediments to sensible, inter-regional projects. We 
        urge Congress to empower FERC to approve inter-regional 
        transmission projects on their merits when a lack of inter-
        regional cooperation or agreement becomes an obstacle to 
        development.
          3. Disagreement over cost allocation.--The inability of state 
        governments to agree upon a fair and equitable allocation of 
        transmission infrastructure expenses is impeding the 
        development of needed and desirable projects. The interstate 
        nature of our electric transmission grid makes it difficult, 
        indeed impossible, to track with precision each beneficiary and 
        the benefit they receive over time from the addition of new 
        transmission infrastructure. The perfect has become the enemy 
        of the good. Today, the need for a clear, national policy on 
        transmission cost recovery has never been greater, now that our 
        Nation is poised for a major build-out of transmission 
        facilities to support a smart-grid concept and to deliver new 
        supplies of renewable power to the customers that need them. We 
        urge Congress to expressly empower and direct FERC to impose 
        cost allocation solutions on ISO or RTO regions (and possibly 
        across an entire interconnect) that allow the cost to be borne 
        equally across a market area when the regions are unable to 
        agree upon another cost allocation solution, and especially 
        when those costs are associated with the delivery of new 
        renewable resources.
          4.--The need for competition in transmission. Independent 
        transmission companies, like Anbaric and its competitors, have 
        already demonstrated their ability to provide the cost-
        effective development, construction, and operation of new 
        transmission facilities. We respect the obligations electric 
        utilities have to build transmission under certain 
        circumstances. The development of renewable and economically-
        oriented transmission, however, will benefit from competition 
        from independents, who typically bring innovation and financial 
        discipline to their proposed projects. Indeed, at a recent FERC 
        hearing, we were encouraged when we heard one of the Nation's 
        foremost electric companies, Exelon, endorse the notion of a 
        competitive process for the development of new transmission 
        facilities to deliver renewable power. We believe competition 
        in transmission is viable, valuable and should be the norm, not 
        the exception. We urge Congress to expressly provide for the 
        right of independent transmission providers to compete with 
        incumbents and to make explicit the presumption of competition 
        for the development of all new transmission resources.

    In closing, let me thank the Committee once again. We hope that our 
views are helpful to your deliberations and we stand ready to assist 
the Committee in any way we can.
                                 ______
                                 
        Statement of Rhone Resch, President & CEO, Solar Energy 
                         Industries Association
     ``We will build the roads and bridges, the electric grids and 
       digital lines that feed our commerce and bind us together.''
                                    President Barack Obama,
                                          January 20, 2009.

    Mr. Chairman and Members of the Committee, Thank you for the 
opportunity to submit this written testimony on reforming the way in 
which electric transmission lines are planned, paid for, and sited in 
the United States. We are grateful that the Committee recognizes the 
important role the transmission grid plays in shaping our clean energy 
future.
                            i. introduction
    The Solar Energy Industries Association (SEIA) is the national 
trade association for the solar energy industry. Established in 1974, 
SEIA works to expand the use of solar technologies, strengthen research 
and development, remove market barriers and improve education and 
outreach for solar.
    SEIA is collaborating with many other organizations committed to 
expanding access to and development of the grid. In particular, SEIA 
and the American Wind Energy Association (AWEA) recently released a 
white paper, Green Power Superhighways: Building a Path to America's 
Clean Energy Future, and we recommend this reading to you.\1\ We 
recognize and appreciate the ongoing work by our associates at AWEA; 
the Energy Foundation; the Energy Future Coalition; T. Boone Pickens 
and others involved in the Pickens Plan; the WIRES Group and Jim 
Hoecker; national environmental organizations--NRDC, the National 
Wildlife Federation, the Sierra Club, the Wilderness Society--and many 
others.
---------------------------------------------------------------------------
    \1\ http://www.seia.org/galleries/pdf/GreenPowerSuperhighways.pdf
---------------------------------------------------------------------------
A. Transmission is Important to Solar Energy Development
    SEIA is grateful for the proactive leadership Chairman Bingaman and 
Majority Leader Reid have brought to the issue of our out-dated 
transmission grid. We are happy to see that our longneglected 
electricity infrastructure will be a priority in the 111th Congress. 
While many think of solar energy as a distributed generation resource, 
deployment of utility-scale solar power plants is increasingly common. 
Last July this Committee held a field hearing in Albuquerque, New 
Mexico, on Concentrating Solar Power (CSP) technologies where this 
trend was discussed.
    In addition to the CSP plants already operating in the Southwest, 
several announced projects intend to use photovoltaic (PV) arrays to 
generate hundreds of megawatts of electricity.\2\ Regardless of the 
solar technology employed, sellers of wholesale electricity will 
invariably require access to the transmission grid. A study conducted 
by the Department of Energy for the Western Governors' Association 
determined that the seven states in the Southwest (Arizona, California, 
Colorado, Nevada, New Mexico, Texas and Utah) have the combination of 
solar resources and available suitable land to generate up to 6,800 
gigawatts (GW) of electricity.\3\ Compares this to today's nameplate 
capacity for all electricity generation in the U.S.: 1,000 GW.\4\
---------------------------------------------------------------------------
    \2\ See Utility-Scale Solar Projects List at Attachment 1. (Note: 
Attachment has been retained in committee files.)
    \3\ ``Analysis of Concentrating Solar Power Plant Siting 
Opportunities: Discussion Paper for WGA Central Station Solar Working 
Group,'' M. Mehos, NREL, July 2005, Page 2.
    \4\ http://www.eia.doe.gov/cneaf/electricity/epa/epat2p2.html
---------------------------------------------------------------------------
    President Obama is committed to producing 25 percent of U.S. energy 
from renewable sources by 2025. This will not be achieved without 
reinvesting in our national grid infrastructure. Investment in the 
transmission grid will stimulate economic development, reduce 
electricity costs for consumers, and improve grid reliability. 
Legislation introduced by Chairman Bingaman, Senator Reid, and others 
provides a solid framework for new transmission infrastructure that 
will allow vast quantities of solar power to be delivered to consumers 
across the country.
    It should be noted that SEIA does not view transmission development 
as an alternative to energy efficiency measures, nor deployment of 
distributed generation technologies. Indeed, all of these strategies 
should be pursued to promote a clean energy economy in this country.
    We need a dramatic shift in where and how transmission is planned 
and built. A robust electric transmission grid will allow limitless 
sources of renewable energy to power our homes, businesses, and 
communities. It will also cultivate economic development and new, 
goodpaying jobs in the areas where power plants and transmission 
infrastructure are developed. Investment in the transmission grid will 
reduce costs to consumers, improve grid reliability, and link solar-
rich regions to high-demand population centers.
B. Transmission Policy Reform is an Urgent Need
    Our nation is in peril. We face the highest unemployment since 1981 
and our President is pointing to renewable energy development as a 
driver for creating millions of new jobs. Construction and operation of 
utility-scale solar power plants will be responsible for creating tens 
of thousands of these jobs.
    Moreover, provisions in the recent American Recovery and 
Reinvestment Act of 2009\5\ make available guaranteed loans for 
renewable energy and transmission projects and grants from the Treasury 
department for renewable energy development. Recipients of either 
program are required to commence construction of their project before 
September 30, 2011 (loan guarantees) or December 31, 2010 (grant 
program). Unless critical transmission reforms are put in place to 
enable the development of renewable energy generating resources, we 
will lose the opportunity to create tens of thousands of new, green-
collar jobs from these projects.
---------------------------------------------------------------------------
    \5\ See Section 406--Temporary Loan Guarantee Program for Rapid 
Deployment of Certain Renewable Energy, Electric Power Transmission, 
and Biofuel Projects.
---------------------------------------------------------------------------
    The need for a more integrated and extensive transmission network 
is real. The U.S. is home to the greatest amount of renewable resources 
in the world, yet today renewable energy comprises less than 2% of our 
electricity generation. As we transition to a low-carbon energy future, 
renewable resources will provide the vast majority of our new 
generation. A recent report from the North American Electric 
Reliability Corporation (NERC), urges the electric industry to focus on 
solutions to integrating renewable resources. NERC CEO Rick Sergel 
added, ``The need to reliably integrate renewable resources is no 
longer a question, it is a priority.''\6\ Unfortunately, policy 
barriers--not technological or economical barriers--are the primary 
reason why modernizing the grid has been, at best, slow going.
---------------------------------------------------------------------------
    \6\ Keynote speech delivered by Rick Sergel to the Federal Energy 
Regulatory Commission, March 2, 2009, in Docket No. AD09-4-000.
---------------------------------------------------------------------------
      ii. policies required for creating green power superhighways
    While SEIA continues to study the various legislative proposals put 
forth, we focus our testimony here on a three major principles that 
need to be carefully addressed in any transmission legislation: (1) 
interconnection-wide transmission planning; (2) interconnectionwide 
cost allocation; and (3) streamlined siting processes. Certain 
proposals suggest changes that would apply to all transmission built in 
the U.S. However, our recommended policy reforms are focused on only 
those facilities that are necessary for creating Green Power 
Superhighways. These superhighways would be designed with the specific 
goal of interconnecting renewable generation resources, while 
maintaining system reliability.
A. Interconnection-Wide Transmission Planning
    A key to achieving our national clean energy goals is to 
effectively plan new transmission and existing grid upgrades, with the 
goal of connecting to the grid location-constrained renewable 
resources. Both the Western and Eastern interconnections should develop 
a comprehensive, regional transmission plan that identifies where new 
transmission lines, or increased capacity on existing lines, are 
necessary to connect renewable energy resources to the grid. Such plans 
should include both extra-high-voltage transmission lines and lower-
voltage feeder lines that are necessary to facilitate the development 
of green power superhighways.
    Planning these grid enhancements must focus on national goals while 
accommodating local and regional concerns. To that end, the planning 
process should be informed by governors, public utility commissions, 
and other regulatory bodies in the interconnection. These entities can 
provide expert insight and advice on how an interconnection-wide plan 
will help their states meet their environmental, energy, and economic 
development goals. In addition, the planning process should be open and 
transparent, allowing all affected stakeholders to express their views.
    Reaching location-constrained renewable resources is the primary 
goal of this interconnectionwide transmission planning exercise. 
However, these plans should also promote reliability, reduce 
transmission congestion, and integrate other resources that are 
necessary to support the grid. Plans should expressly take into account 
established state and federal renewable energy requirements, as well as 
anticipated changes in generation and demand pattern shifts resulting 
from greenhouse gas emission policies and the commercialization of 
plug-in electric vehicles.
    Creating transmission plans that are designed to safeguard 
sensitive lands and protect the environment is of great importance. To 
minimize environmental impact, plans should utilize existing 
transmission corridors whenever possible, and new lines should be 
designed to their optimal size.
B. Interconnection-Wide Cost Allocation
    Just as the transmission grid should be planned to meet broad 
regional and national energy goals, so too should the costs of meeting 
these goals be shared on an interconnection-wide basis. Ratemaking and 
certainty of cost recovery should address one of the most important 
barriers to transmission development--the question of who should pay. 
The current process of assigning costs to specific users who volunteer 
to pay does not work; it only exacerbates the free rider problem where 
transmission grid users attempt to shift costs onto others. All users 
benefit from a reliable and robust transmission grid, pollution 
reductions, and greater access to low-cost renewable generation, and 
our regulatory policies must reflect these realities. Facilities 
identified in the interconnection-wide plan as necessary for the 
development of green power superhighways should be eligible for broad, 
regional cost allocation. Specifically, the Federal Energy Regulatory 
Commission (FERC) should allocate, based on electricity usage, the 
capital and operating costs of these transmission lines across all 
load-serving entities on an interconnection-wide basis.
C. Streamlined Siting Processes
    Following the robust planning process, and guarantees of cost 
recovery, policies to ensure siting of transmission are necessary. Many 
a transmission line has been proposed and financed without ultimately 
being constructed and delivering electricity. To achieve dramatic 
increases in renewable electricity production, substantial reform of 
the transmission siting process is required. The most effective model 
for streamlined siting is the full authority given to FERC for siting 
interstate natural gas pipelines.
    For green power superhighways, the facilities identified in the 
interconnection-wide plans would be subject to FERC approval for siting 
and permitting. Separate siting approval at the state level would not 
be required. FERC should act as the lead agency for purposes of 
coordinating all applicable federal authorizations and environmental 
reviews with other affected agencies. As is the case for natural gas 
pipeline and hydroelectric facility permitting, FERC would be required 
to consider siting constraints based on habitat protection, 
environmental considerations, and cultural site protections identified 
by state and federal agencies.
    While the concept of federal siting authority for electric 
transmission has been controversial in the past, laws governing the 
siting of transmission date from an era when utilities were generally 
not interconnected and the modern network of interstate lines and 
multi-state interconnections did not exist. The need to connect 
location-constrained renewable generation resources to growing load 
centers requires a new regulatory approach and justifies giving FERC 
exclusive authority for siting green power superhighways.
                            iii. conclusion
    The U.S. has enormous economic, energy, and climate challenges to 
face in the months and years to come. None can be solved without new, 
innovative ways of carrying renewable electricity across a robust 
transmission grid. If we want to improve our energy independence, 
tackle global warming, and expand our use of electricity for electric 
cars and other emerging technologies that make our lives better, then 
we can no longer wait. The time for Congress to act on this is now.
    Again, thank you for allowing SEIA to submit this testimony. We 
look forward to working with the Committee to cultivate solar energy 
development in this country and spur investment in the infrastructure 
needed for green power superhighways.
                                 ______
                                 
  Statement of Daniel F. Caruso, Chairman, Connecticut Siting Council
    Thank you for this opportunity to comment with respect to S. 539, 
the proposed Clean Renewable Energy and Economic Development Act. While 
I am supportive of the overall goals of this legislation, especially 
with respect to its efforts to spur the development of a robust 
transmission system that will bring renewable sources of energy to 
market, I am nevertheless troubled by certain aspects of the proposed 
bill. Specifically, I respectfully hope that you will reconsider the 
dramatic changes which would occur relative to jurisdiction involving 
the siting of electric transmission infrastructure.
    A review of the measures related to the proposed shift in electric 
transmission siting authority demonstrates that the proposed changes 
will provide for both an unwarranted and unwise move from local 
decision making and citizen input.
    Under Section 216 of the Federal Power Act (FPA), the Federal 
Energy Regulatory Commission (FERC) already has backstop authority for 
siting interstate transmission projects that are needed to meet 
federally enforceable reliability standards, or to address major 
transmission system bottlenecks. This is appropriate; few would argue 
that the federal government must be empowered to step in when states do 
not act in a reasonable timeframe in matters involving system 
reliability or significant transmission system inefficiencies.
    The draft legislation proposed by Senator Bingaman, however, grants 
FERC exclusive siting authority for all ``high priority national 
transmission projects,'' thereby usurping state authority to review, 
site and certificate projects within their jurisdiction, and most 
importantly preempts those voices of reason in all localities whose 
knowledge of their communities is invaluable.
    States have extensive expertise in the siting and construction of 
electric transmission facilities. Mere consultation with the states on 
strictly local matters such as habitat protection, environmental 
considerations or cultural site protection is inadequate to address the 
true concerns of our communities and our citizens, especially when, as 
proposed, recommendations on these matters can be preempted by FERC to 
the detriment of the state's welfare.
    Resource planning and availability has been traditionally and 
appropriately, a local matter. For a multitude of reasons, states are 
better equipped to address, and should retain, primary siting 
authority. Accordingly, I recommend that any expansion of FERC's 
jurisdiction be strictly limited to interstate transmission for the 
purpose of interconnecting new renewable energy generation where the 
state siting authority has rejected the transmission proposal, failed 
to act on it within eighteen months, or approved it with conditions 
that will frustrate the interconnection.
    After all, experience demonstrates that our nation, economy, and 
ecology are best served when all stakeholders are accorded appropriate 
time, consideration, and respect. Such a collaborative system is more 
likely to produce results than lawsuits.
                                 ______
                                 
MEMORANDUM

TO: Energy and Natural Resources Committee Majority Staff
FR: Carl Zichella and John Coequyt, Sierra Club
Date: March 12, 2009
RE: Concerns regarding discussion draft

    We are writing to express concern that the committee's discussion 
draft bill as currently formulated could result in substantial 
backsliding regarding Carbon Dioxide emissions reductions in both the 
Eastern and Western interconnections.
    This bill, if enacted without a cap on carbon, a RES standard and 
other policy tools would facilitate increased carbon emissions from new 
coal interconnections in the western US and would allow expanded 
emissions from existing sources in the eastern interconnection. 
Improvements ostensibly made to facilitate renewable development could 
backfire and instead increase CO2 emissions just as the 
nation takes needed actions to curtail them.
    For example, recent projects proposed in Pennsylvania and Virginia 
billed as renewable lines would ultimately result in significant new or 
expanded remote coal generation. To ensure that new transmission moves 
the nation toward a clean renewable energy future, robust safeguards 
must be put in place to ensure that new lines are designed, sited, 
built, and operated to serve clean renewable electric generation while 
taking into account the considerable contributions that distributed 
generation, untapped energy efficiency and demand response can make for 
reducing the need for new facilities.
    The proposed bill would prioritize general grid upgrades that 
create advantages for existing emitters to increase emissions. 
Safeguards such as provisions to limit renewable lines to low carbon 
interconnections are needed, especially if the bill moves forward prior 
to a cap on carbon being adopted where meaningful price on carbon is 
established. This is especially true for the situation in the eastern 
interconnection where artificially low coal prices and economic 
dispatch rules would actually incentivize increased operations and 
emissions at existing coal facilities to take advantage of more 
lucrative electricity pricing in neighboring markets using capacity 
improvements to the grid justified as being needed to wheel renewable 
energy.
    We and our colleagues are committed to working with you and the 
committee staff to address these issues and report energy and 
transmission bills the nation needs.
    Thanks for your consideration. Attached is a letter many of us sent 
today to the Obama administration that details these concerns further.
                               attachment
                                                    March 11, 2009.

Carol Browner,
Assistant to the President for Energy and Climate Change, Executive 
        Office of the President, Washington, DC.
    Dear Ms. Browner: We support significant reforms in how electrical 
transmission lines in this country are planned, sited, built, and 
managed as part of a comprehensive effort to transition to a clean 
energy economy. The centerpiece of a national strategy must be an 
economy-wide cap on global warming pollution that results in rapid and 
dramatic emissions reductions. Additional, complementary measures must 
also be undertaken that promote deployment of renewable energy 
resources, energy efficiency measures, and environmentally-beneficial 
demand response policies. Meeting our country's energy needs with clean 
renewable energy will require significant investments that must be 
undertaken immediately, but these investments must not exacerbate 
global warming emissions or air pollution that harms human health and 
ecosystems.
    In this context, we believe it imperative that legislation 
reforming federal electric transmission policy contain the following 
elements:
Coherence with Clean Energy Priorities
    Transmission policy reform must result in new lines that serve 
clean renewable resources, rather than expanding the carbon-intensive 
power generation that currently accounts for more than 40 percent of 
U.S. greenhouse gas emissions and contributes to the continued 
deterioration of air quality in the country's most vulnerable 
communities. Piecemeal energy policy-especially electric transmission 
policy reform-in advance of a comprehensive national climate regime can 
have the real but unintended effect of facilitating more, not less, 
greenhouse gas pollution. For example, recent projects proposed in 
Pennsylvania and Virginia billed as renewable lines would ultimately 
result in significant new or expanded remote coal generation. To ensure 
that new transmission moves the nation toward a clean renewable energy 
future, robust safeguards must be put in place to ensure that new lines 
are designed, sited, built, and operated to serve clean renewable 
electric generation while taking into account the considerable 
contributions that distributed generation, untapped energy efficiency 
and demand response can make for reducing the need for new facilities.
Comprehensive Super-Regional Planning
    Resource planning for the western and eastern interconnections is 
crucial to an economically and environmentally sound electric grid. The 
planning processes for our national grid must be fair, unbiased, 
science-based, broadly participatory, and transparent. In designing 
these processes, the traditional role of states, regional authorities 
and the federal government must be reappraised. Transmission is only 
one piece of our clean energy future; energy efficiency, demand 
response, energy storage, and distributed generation technologies are 
all resources that must be considered along with traditional central 
power stations that require interstate transmission. These alternative 
resources must be evaluated as part of a region-wide integrated 
resource plan, evaluated and weighed equally with new generation in 
making a determination of need. New transmission lines should only be 
built if they are truly needed, and demand for low-carbon generation 
cannot be satisfied otherwise. In particular, broad deployment of 
small-scale scale renewable and low carbon distributed generation is a 
critical component to reducing carbon emissions, as it decreases the 
need for expensive new transmission lines by facilitating energy 
production and consumption in the same location and reduce line 
loadings on existing facilities.
Environmentally Responsible Siting
    Some of the richest renewable energy resources are far from major 
population centers. Under the current transmission planning process, 
some state and regional siting decisions have missed opportunities to 
cooperatively identify zones and corridors for development of renewable 
resources that protect unique and sensitive natural systems, wildlife 
habitats, and cultural resources, as well as national park units and 
other protected public lands. Future transmission siting must use the 
best practices developed via processes such as California's Renewable 
Energy Transmission Initiative and similar protocols. These efforts 
apply screening criteria to prioritize areas for development based on 
their suitability, and ensure that critical habitat, environmentally 
and culturally sensitive lands, or protected areas are excluded. Such 
an approach benefits all parties by clearly delineating which areas of 
most potential for renewable energy generation and transmission have 
the least conflicts, and are therefore less likely to result in 
conflict or litigation, an outcome that all parties would prefer to 
avoid. It is also imperative that the social and ecological impacts of 
transmission lines be assessed in full compliance with our nation's 
environmental laws-including the National Environmental Policy Act-and 
must provide the public with ample opportunities for meaningful 
involvement. Regional, state, and federal wildlife, lands, and resource 
agencies must be full partners in future transmission planning 
processes.
Smarter Use of Existing Infrastructure
    Before building any new transmission, we need to make every effort 
to improve efficiency to negate the need for new supply, and also to 
better utilize existing transmission infrastructure. With this in mind, 
we believe foremost that the nation needs to pass additional energy 
conservation measures and implement more efficient technologies at all 
levels of supply, delivery, and end-use. Future energy demand cannot be 
met without ambitious efficiency gains in our buildings, appliances, 
industries, and transportation. We need to provide incentives for 
deployment of energy storage and innovative smart grid technologies. 
Much cost-effective and carbon-free demand reduction and conservation 
potential remains untapped in these areas. We must also be sure to 
maximize the use of the existing power grid by way of voltage and 
service upgrades and by making use of existing transmission 
infrastructure and other rights-of-way including existing pipelines, 
roads, and rails. Damages to private and public values from development 
of existing and new rights of way should be minimized and appropriately 
addressed.
    With these principles in mind, we fully support and promote the 
deployment of clean, renewable energy across the nation and the new 
transmission infrastructure that will be necessary for much of that 
power to access electricity markets. However, although new transmission 
is an important and perhaps imperative option, it must be carried out 
properly in order to ensure that we do not overlook other superior 
energy opportunities, sacrifice our nation's precious lands and 
wildlife, or undermine critical efforts to rid the nation of dangerous 
dirty air and global warming pollution.
    Thank you for your time, and we look forward to discussing these 
ideas with you further.
            Sincerely,

                    Appalachian Mountain Club; Biodiversity 
                            Conservation Alliance; Center for Native 
                            Ecosystems; Earthjustice; Energy 
                            Conservation Council of 
                            PennsylvaniaEnvironmental Defense Fund; 
                            League of Conservation Voters; National 
                            Audubon Society; National Parks 
                            Conservation Association; National Wildlife 
                            FederationNatural Resources Defense 
                            Council; Nevada Conservation League; Nevada 
                            Wilderness Project; Oregon Natural Desert 
                            Association; Pennsylvania Land Trust 
                            Association; Piedmont Environmental 
                            Council; San Luis Valley Ecosystem Council; 
                            Sierra Club; Southern Alliance for Clean 
                            Energy; Southern Environmental Law Center; 
                            Southern Utah Wilderness Alliance; 
                            Southwest Environmental Center; Union of 
                            Concerned Scientists; Western Resource 
                            Advocates; Western Environmental Law 
                            Center; The Wilderness Society.

                                    

      
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