[Senate Hearing 111-527]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-527

                    MOELLER AND LAFLEUR NOMINATIONS

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                                   TO

CONSIDER THE NOMINATIONS OF PHILIP D. MOELLER AND CHERYL A. LAFLEUR, TO 
         BE MEMBERS OF THE FEDERAL ENERGY REGULATORY COMMISSION

                               __________

                             APRIL 27, 2010


                       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
Brown, Hon. Scott, U.S. Senator From Massachusetts...............     4
LaFleur, Cheryl A., Nominee to be a Member of the Federal Energy 
  Regulatory Commission..........................................    10
Moeller, Philip D., Nominee to be a Member of the Federal Energy 
  Regulatory Commission..........................................     6
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     1
Murray, Hon. Patty, U.S. Senator From Washington.................     2
Shaheen, Hon. Jeanne, U.S. Senator From New Hampshire............     3

                                APPENDIX

Responses to additional questions................................    19

 
                    MOELLER AND LAFLEUR NOMINATIONS

                              ----------                              


                        TUESDAY, APRIL 27, 2010

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:03 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. OK. Why don't we get started?
    The committee meets this morning to consider 2 nominations 
to the Federal Energy Regulatory Commission. Phil Moeller was 
previously nominated and confirmed to a seat on the commission 
in 2006. That term expires June 30 of this year. The President 
has nominated Mr. Moeller for a second term, which will expire 
June 30, 2015.
    Cheryl LaFleur has been nominated to the seat previously 
held by Suedeen Kelly, whose term expired last year. If 
confirmed, her term would expire in 2014.
    Mr. Moeller is well known to the committee for the years 
that he spent working for our former colleague Senator Slade 
Gorton and from his service on the commission over the past 4 
years.
    Ms. LaFleur has spent more than 20 years in the electric 
utility industry as an attorney and senior official at the New 
England Electric System and its successor, National Grid USA, 
from which she retired in 2007 as executive vice president and 
acting chief executive officer.
    Both nominees are extremely well qualified. I am pleased to 
welcome them to the committee today. Before calling on some of 
our colleagues to make introductions, let me defer to Senator 
Murkowski for her statement.

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

    Senator Murkowski. Thank you, Mr. Chairman.
    Very briefly, I, too, would like to welcome both nominees 
for the Federal Energy Regulatory Commission. I would like to 
welcome Commissioner Moeller back to the committee. He has been 
a real leader on hydropower, and I certainly appreciate that.
    I also appreciate your annual visits up to the State. They 
are greatly appreciated. I don't think a lot of people realize 
this, but Commissioner Moeller was actually a machinist up in 
the State of Alaska, working for a salmon plant at one point 
during his younger days in college.
    I would also like to welcome Ms. LaFleur to the committee. 
Ms. LaFleur is a native New Englander with over 20 years of 
electric industry experience so I am interested in the 
perspective and the geographic diversity that she will bring to 
the commission.
    I thank both of you for your willingness to serve, and I am 
hopeful, Mr. Chairman, that we can report out your nomination 
shortly so that the FERC can once again enjoy a full complement 
of commissioners.
    Thank you.
    The Chairman. Thank you very much.
    We have a couple of our colleagues here, wishing to make 
statements and endorse candidates.
    Senator Murray, why don't you go right ahead?

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

    Senator Murray. Thank you very much, Mr. Chairman, Senator 
Murkowski.
    It is my pleasure to be here today to introduce Phil 
Moeller, who has been nominated to serve a second term on the 
Federal Energy Regulatory Commission.
    Commissioner Moeller has spent his career in public service 
building a reputation as an energy expert who will work across 
party lines to solve problems. I am pleased to report that Phil 
has built on those skills during his tenure as a FERC 
commissioner.
    I first got to know Phil during his time working for my 
colleague Senator Slade Gorton, where he really stood out as an 
example of what an effective congressional staffer should be. 
He wanted to hear all sides of an issue. He would work with 
anyone, and he operated in a bipartisan manner while protecting 
the interests of his boss and Washington State.
    While Phil has traveled a long ways from his days growing 
up on a ranch outside of Spokane, Washington, he maintains a 
unique perspective on issues important to our Northwest. I can 
tell you, I am personally excited that Phil brings to the 
commission a working knowing of hydropower systems and the 
intricacies of the Pacific Northwest.
    Mr. Chairman, Phil has dedicated his life to public 
service. The knowledge, the perspective, and the expertise he 
has gained throughout his career have been a great benefit to 
the commission throughout his first term, which is why I am so 
proud to support his nomination to the Federal Energy 
Regulatory Commission for a second term.
    So I want to say I am very proud to be here today to 
request the committee again pass him on as FERC commissioner, 
and I especially want to thank his beautiful family, who is 
sitting behind me. His kids are so well behaved. I am just way 
impressed. His wife and, I believe, his sister.
    So thank you very much, Mr. Chairman. Phil, thank you for 
your willingness to be a public servant. We appreciate it.
    The Chairman. Thank you very much for that strong 
endorsement.
    We have 2 of our colleagues, Senator Shaheen, who is, of 
course, a member of our committee, and Senator Brown. I believe 
each of them wanted to make a statement on behalf of the 
nominee Cheryl LaFleur. So whatever order you would like. Go 
right ahead, Senator Shaheen.

    STATEMENT OF HON. JEANNE SHAHEEN, U.S. SENATOR FROM NEW 
                           HAMPSHIRE

    Senator Shaheen. Thank you very much, Mr. Chairman.
    I am delighted to be here to introduce Cheryl LaFleur. I 
want to welcome her family--Bill Kuncik and their children, 
Daniel and Allison. It is great that you can be here for your 
mom today and your wife.
    I know that Cheryl is technically from Massachusetts, but I 
had the good fortune of working with her when I was in the 
State senate and then Governor when she was president of 
Granite State Electric and then at New England Electric 
Systems. I am really excited about her nomination for 2 
reasons.
    First of all, I think it is very important to have someone 
on the FERC who understands the challenges facing our energy 
regulatory environment today. But I think it is particularly 
important for those of us in the Northeast to have someone who 
understands that the challenges we face in the Northeast are 
not exactly the same as those in the Midwest and the far West. 
So, I am particularly pleased to have someone who so clearly 
understands what some of those special challenges are.
    Second, and probably most important, is that I know how 
exceptionally qualified Cheryl is to be a commissioner on the 
Federal Energy Regulatory Commission. You know, she retired in 
2007 as executive vice president and acting CEO of National 
Grid. In her role there, she was responsible for the delivery 
of electricity to 3.4 million customers in the Northeast.
    As I said, I got to appreciate Cheryl's work when she was 
the president of Granite State Electric in New Hampshire. When 
she was at New England Electric Systems in the 1990s, she led 
energy efficiency programs in New Hampshire and across the 
region that became an award-winning national model because of 
their focus on residential efficiency. I think this is one of 
the real benefits that she is going to bring to the FERC.
    She understands how regulators' decisions affect real 
customers, and she has been committed to providing reliable 
energy to people in the Northeast and to Americans for a very 
long time. I think that special appreciation for the impact on 
consumers is something that she brings that is going to be very 
important going forward.
    So I am really delighted to be here to introduce Cheryl, to 
commend her to the committee. Certainly, I will be voting for 
her as a member of the committee. There is no doubt about that, 
and I am sorry that because I have to go preside, I am not 
going to be able to be here to give her some softballs that can 
point out just how very qualified and what an excellent job she 
is going to do on the committee.
    So thank you very much, Mr. Chairman.
    The Chairman. Thank you for your strong endorsement.
    Senator Brown, we welcome you to the committee. Go right 
ahead.

          STATEMENT OF HON. SCOTT BROWN, U.S. SENATOR 
                       FROM MASSACHUSETTS

    Senator Brown. Thank you, Mr. Chairman, and I am honored to 
be here with Senator Shaheen. I know she has duties to attend 
to. So I wanted to let her go first, certainly, and she 
deserves that opportunity.
    As you know, I am new here, relatively, compared to 
everybody else. This is the first opportunity I have had to 
speak on behalf of somebody that I felt and feel is most 
qualified to be in this position.
    Obviously, from Massachusetts, and Cheryl has been working 
very hard for our State and for, obviously, the region as per 
Senator Shaheen's statements. As you know, it is an 
independent--FERC is an independent commission charged with 
regulating our Nation's energy markets and preventing 
manipulation, maintaining a strong competitive marketplace, and 
improving and supporting the infrastructure. That is something 
that we have great concerns with in Massachusetts and in the 
New England area.
    Obviously, dealing with electricity, oil, and gas, natural 
gas's role as providing reliable energy services to our 
constituents in Massachusetts and the Northeast, and her 20 
years of experience in the electric and gas industry, executive 
VP and CEO of National Grid, she oversaw, as you know, 3.4 
million customers and the service and challenges associated 
with dealing with Boston and the surrounding areas and the 
politics involved there.
    I think that she will be a real leader and a great asset to 
FERC, and it takes a lot for me to come and testify for folks. 
I take my testimony and my endorsement very, very seriously. 
Through my independent research and review of her 
qualifications, I can think of no one better to be in this 
position, to represent the interests of Massachusetts, but more 
importantly, the Northeast, and obviously, the rest of the 
country. To have that balance and that knowledge that she can 
bring in her personal experiences, I think, is very, very 
important.
    So she has my overwhelming endorsement. I wanted to thank 
you for allowing me to come and speak on her behalf, and I am 
hopeful that you will also move her out favorably and give us 
an opportunity to vote on it.
    Thank you.
    The Chairman. Thank you for your strong endorsement as 
well. We appreciate it very much, and thank you for coming to 
our hearing.
    Senator Brown. Thank you, Mr. Chairman.
    The Chairman. The rules of the committee that apply to all 
nominees require that they be sworn in connection with their 
testimony.
    I would ask the 2 of you to each stand and raise your right 
hand. Do you solemnly swear that the testimony you are about to 
give to the Senate Committee on Energy and Natural Resources 
shall be the truth, the whole truth, and nothing but the truth?
    Mr. Moeller. I do.
    Ms. LaFleur. I do.
    The Chairman. Please be seated.
    Before you begin your statement, I will ask 3 questions 
addressed to each nominee before the committee. First question, 
will you be available to appear before this committee and other 
congressional committees to represent departmental positions 
and respond to issues of concern to the Congress?
    Mr. Moeller.
    Mr. Moeller. I will.
    The Chairman. Ms. LaFleur.
    Ms. LaFleur. I will.
    The Chairman. Second question, are you aware of any 
personal holdings, investments, or interests that could 
constitute a conflict of interest or create the appearance of 
such a conflict should you be confirmed and assume the office 
to which you have been nominated by the President?
    Mr. Moeller.
    Mr. Moeller. My investments, personal holdings, and other 
interests have been reviewed both by myself and the appropriate 
ethics counselors within the Federal Government. I have taken 
appropriate action to avoid any conflicts of interest. There 
are no conflicts of interest or appearances thereof to my 
knowledge.
    The Chairman. Ms. LaFleur.
    Ms. LaFleur. My investments, personal holdings, and other 
interests have been reviewed both by myself and by the 
appropriate ethics counselors within the Federal Government. I 
have taken appropriate action to avoid any conflicts of 
interest, and there are no conflicts of interest or appearances 
thereof to my knowledge.
    The Chairman. The final question, are you involved or do 
you have any assets that are held in a blind trust?
    Mr. Moeller.
    Mr. Moeller. No.
    The Chairman. Ms. LaFleur.
    Ms. LaFleur. No.
    The Chairman. All right. At this point, our tradition is to 
allow and invite nominees to introduce any family members that 
they brought with them today. Mr. Moeller, why don't you go 
right ahead?
    Mr. Moeller. Thank you, Mr. Chairman.
    It is my pleasure to introduce my wife, Elizabeth, and our 
children, Philip and Caroline, who just turned 3 a couple of 
weeks ago. Also is my sister Ann Marie and my team, Jennifer 
Quinlan, Jennifer Shipley, Robert Ivanauskas, Michelle Brown. 
Jason Stanek on our team, his appendix decided to go out last 
week. So we are missing him today.
    The Chairman. We welcome all of you to the hearing, and 
thank you for coming.
    Ms. LaFleur, if you have family members or visitors you 
want to introduce?
    Ms. LaFleur. Thank you, Senator.
    I do have my family behind me. I would like to introduce my 
husband, Bill Kuncik, and our children, Dan LaFleur Kuncik and 
Allison LaFleur Kuncik, who have--the kids both came in 
overnight to be here, and I really appreciate it.
    The Chairman. All right. We welcome them to the hearing as 
well.
    At this point, let me call on the 2 nominees to make any 
opening statement they would like.
    Mr. Moeller, why don't you start?

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

    Mr. Moeller. Thank you, Mr. Chairman, Senator Murkowski. It 
is a pleasure to be here.
    It is an honor to have served on the FERC, and I appreciate 
the heart-felt comments that Senator Murray made in my 
introduction. She introduced me nearly 4 years ago, and I am 
honored to continue to receive her support.
    I also thank President Obama for nominating me, and I also 
appreciate the support of Senator McConnell for nominating me 
to another term.
    I also extend special thanks to my wife, who supports my 
career in public service.
    In the nearly 4 years that I have spent on FERC, I have 
voted on over 4,500 orders. As with my first day of my service, 
I remain motivated to make decisions that benefit and protect 
consumers through the safe and efficient provision of the 
energy products and services we regulate.
    I have extensive written comments, but I thought I would 
summarize kind of eight areas that we have focused on and that 
I think, if I am confirmed, I would still continue to work on, 
and certainly, it will be in the commission's areas--areas 
where the commission will be spending a lot of time.
    As noted, I come from the Pacific Northwest, and as such, I 
have tried to be an advocate for hydropower. All energy sources 
have tradeoffs, but hydropower is kind of the quiet workhorse 
that provides about 10 percent of the Nation's electricity 
needs, and it is renewable energy. We regulate over 2,600 dams 
in this country. So it is a big part of what FERC does.
    The new hydrokinetic technologies, whether it be wave 
power, tidal power, ocean current, or in-stream current, all 
have enormous potential. But in order for them to develop and 
for the environment to be protected, the commission is going to 
have foster and nurture and watch these technologies, and we 
have tried to do our part to encourage them along the way.
    On electric reliability, during my term, we passed the 
first set of mandatory and enforceable reliability standards 
that came out of 2005 EPACT. This has been largely a successful 
framework that we have put together, and yet a lot of work 
still needs to be done.
    We need to make sure that these standards are enforceable, 
that they are effective and they are cost effective. I think we 
also need to look at the fact that taking a longer-term look at 
reliability, perhaps with a cybersecurity component, is 
something that at this point would serve consumers well.
    In terms of energy infrastructure in this country, it seems 
clear to me that we are going to be using more natural gas to 
generate electricity in this country, even though the most 
efficient use of it is direct usage. As such, it is our job, I 
believe, at the commission to develop the kind of policies that 
allow the adequate natural gas infrastructure to be deployed.
    We have deployed or at least we have approved significant 
natural gas pipelines in the last few years, significant new 
natural gas storage. We have approved some LNG terminals, and 
we have given significant support to 2 entities that are 
looking at building a pipe from Alaska to deliver domestic 
natural gas.
    Wholesale electric markets is something that we probably 
spend most of our time on at the commission, and they have 
evolved in different ways and at different paces throughout the 
country. Often, the policies related to electricity are really 
more based on regional differences than anything else.
    Yet there has been enormous progress in the wholesale 
markets, both in their expansion and the new services that they 
have delivered in just the last couple of years. Yet we need to 
work at the commission to make sure that we protect consumers, 
that they feel that the RTOs are responsive, and that we have 
adequate metrics that measure the success of these markets. In 
the next year, we will also be dealing a lot with demand 
response and the compensation for that product.
    Enforcement is an area that we have also spent a lot of 
time on in the last few years. You gave us major league 
enforcement powers in EPACT 2005, and we appreciate it. Yet we 
need to be cautious when we wield the Government sword of 
enforcement. I have worked to make sure that our process is 
transparent and that we are firm and fair. We have more work to 
do here, but we have made a lot of progress.
    A big part of the next year at the commission will be 
working on the integration of variable generation. The good 
news is that wind and solar power has been a significant part 
of our electric mix in the last few years, but there are 
challenges that are being delivered through that because the 
system wasn't designed for variable generation.
    These are not insurmountable problems, but they are 
difficult, and they will take an increasing amount of time in 
the next year and perhaps more than that. At the commission, we 
have a major notice of inquiry, where we have asked people to 
comment on, and the comments are voluminous.
    The smart grid is something that you have tasked us with 
dealing with through the 2007 legislation. Specifically, you 
asked us to adopt interoperability standards for the smart 
grid. We expect that NIST will be delivering us a package of 
those in the near future. Yet it is going to be something we 
have to make sure that consumers do not feel that they have 
been overpromised the benefits of the smart grid because 
although I believe that they are transformative and they will 
be widespread and benefit consumers, it will take longer than 
probably most people realize to fully utilize the smart grid 
and implement it throughout the country.
    Finally, you, as committee members, are well aware that we 
have a CFTC-FERC jurisdictional battle going on in terms of 
regulating certain components of the energy market. Regardless 
of what you direct us to do, where that bright line or not-so-
bright line goes jurisdictionally, I have worked to try and 
make sure the 2 agencies are working together better, both at 
the commissioner level and the staff level. So that, in 
essence, our main motivation is to protect consumers.
    With that, again, it is an honor to be here, and I look 
forward to answering any of your questions.
    [The prepared statement of Mr. Moeller follows:]

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

    Chairman Bingaman, Ranking Republican Murkowski, and 
members of the committee, thank you for considering my 
nomination today for another term on the Federal Energy 
Regulatory Commission (FERC). I send heartfelt thanks to 
Senator Murray from my home state of Washington for her kind 
words. She introduced me nearly four years ago and I am honored 
to continue to receive her support. I thank President Obama for 
nominating me, and I greatly appreciate both Senator McConnell 
and Senator Murkowski for supporting my nomination to another 
term. And I extend special thanks to my wife Elizabeth for 
supporting my career in public service.
    In the nearly four years that I have served on the FERC I 
have voted on over 4500 orders. As with my first day on the 
commission, I remain motivated to make decisions that benefit 
and protect consumers through the safe and efficient provision 
of the energy products and services we regulate.
    Working with my colleagues, current Chairman Wellinghoff, 
Commissioners Spitzer and Norris, former commissioner Kelly, 
former Chairman Kelliher along with the talented staff at FERC, 
I have been deeply involved in efforts to better protect 
consumers through economic and safety regulation, improve 
energy markets, encourage needed energy infrastructure, and 
ensure bulk-power system reliability. Much has been done, but 
more needs to be done. If confirmed for another term, I look 
forward to the opportunity to continue to serve. In my efforts 
to keep improving the areas in which we regulate, I have 
focused on several issues and I expect all of these areas to 
receive necessary and extensive attention in the next several 
years.


                               hydropower


    I hail from the Pacific Northwest, the region that most 
relies on hydropower to deliver needed energy to consumers. 
With that background, I have worked to assure that my 
colleagues have a thorough appreciation of hydropower and the 
benefits that this resource delivers. All energy sources--
including hydropower--exhibit inherent tradeoffs, but 
traditional hydropower is a mature renewable resource that 
provides enormous benefits through the over 1600 projects--
which includes approximately 2600 dams--that the Commission 
regulates. The new hydrokinetic technologies that make use of 
wave, tidal, ocean current, and in-stream current resources 
hold the promise of a new generation of benefits. The 
Commission has worked to enable these technologies to be 
deployed, but the hydrokinetic industry is still a nascent one 
that needs attention to develop in an orderly manner while 
assuring that citizens and the environment are protected.


                              reliability


    During my term FERC approved the first set of mandatory and 
enforceable standards intended to enhance the reliability of 
the nation's bulk-power system. Subsequently we have approved 
and proposed additional standards. This authority and 
responsibility emanates from the 2005 Energy Policy Act that 
this committee developed. Overseeing the implementation of this 
system of mandatory and enforceable reliability standards by 
the designated Electric Reliability Organization (NERC) has 
been a major undertaking. As with any new and comprehensive 
regulatory regime, there have been plenty of challenges 
highlighted by the complex nature of these standards. Our 
efforts have been largely successful in setting the framework 
for this new and transformative approach toward ensuring 
consumers have the reliable power they need delivered through 
the bulk power system. However, the Commission still has a lot 
to do in the realm of reliability policy--especially in regards 
to assuring that we focus on short term and long term 
reliability challenges and implementing cost effective 
standards that truly improve the reliability of the bulk power 
system. Cyber security is a major area of our attention, and we 
are likely to spend additional efforts to clarify the standards 
in this area, perhaps with more direction from Congress to FERC 
this session.


                             infrastructure


    Over the last several years, the nation has dramatically 
increased its use of natural gas to generate electricity. 
Because I see this trend continuing in the foreseeable future, 
a big part of FERC's responsibilities is to ensure that we 
promote policies that allow safe and sufficient natural gas 
infrastructure to meet this demand. Consumers have benefitted 
especially from the new sources of shale gas that have been 
developed in just the last few years. Domestic production of 
natural gas increased dramatically in 2007 (by some estimates 
an 8 percent increase) and again in 2008. The Commission has 
approved significant new capacity in new pipelines, new gas 
storage and liquefied natural gas terminals while also 
providing extensive guidance to entities interested in 
developing a natural gas pipeline from Alaska. In fact, two 
proposals to develop an Alaska pipeline are currently in the 
pre-filing process at the Commission.
    Expansion of the nation's electric transmission 
infrastructure has not been as robust as in the natural gas 
arena. Some of this is attributable to issues of uncertainty 
over transmission planning, transmission siting authority and 
transmission cost allocation. We need to assure that consumers 
who pay for transmission investments receive benefits from such 
investments. Our Order 890 (discussed below) is an effort to 
provide guidance so that additional cost-effective transmission 
investments can be made. I have made it a priority to promote 
policies that allow for additional qualified entrants in the 
transmission field (independent developers, merchant 
developers, and joint projects) along with more creative 
approaches such as the ``anchor shipper'' model often used in 
the natural gas industry.


                       wholesale electric markets


    Wholesale electricity markets are evolving in different 
ways and at different paces in various regions throughout the 
nation. In the last two years alone, most of the organized 
wholesale markets have expanded in either their membership and/
or the scope of products provided. Several examples include: 
the California market (through the California Independent 
System Operator) saw the implementation of the long-planned 
Market Redesign and Technology Update (MRTU) launched in March 
of last year; the Midwest market (through the Midwest 
Independent System Operator) saw significant new membership 
additions and the launch of its ancillary services market; and 
the Southwest market (through the Southwest Power Pool) 
expanded with new members from Nebraska, new product launches 
and SPP has recently proposed a major transmission expansion 
plan.
    During my term FERC implemented Order 890, a comprehensive 
review and reform of the nation's wholesale transmission 
markets. One of the major components of Order 890 included 
regional transmission planning requirements based on specific 
principles. As with the other issues, significant progress has 
been made but that progress needs to continue to assure that 
adequate infrastructure is developed to serve the nation's 
consumers.
    Although in the last year we have witnessed dramatic drops 
in the price of power--in many areas approximately a fifty 
percent decrease in price--the Commission still needs to be 
vigilant in assuring that the benefits of competitive markets 
flow through to consumers and that these regional market 
structures are responsive to customer concerns. We are 
currently undertaking efforts to improve the responsiveness of 
regional transmission organizations and developing the metrics 
necessary to evaluate wholesale markets. Another issue we will 
address in the next year is the best way to compensate demand-
side resources in the organized wholesale markets.


                              enforcement


    Early in my term the Commission first exercised its penalty 
authority that was authorized by the Energy Policy Act of 2005. 
To date we have approved 41 settlements, of which 40 involved 
civil penalties. FERC's enforcement process continues to 
mature, as our most recent annual enforcement report 
highlighted the agency's enforcement priorities and relevant 
case studies. Recently proposed penalty guidelines are an 
additional effort to provide context and clarity to the 
entities we regulate. However, FERC needs to continue these 
recent improvements in our enforcement process to assure that 
we are firm but fair in providing a transparent process that 
emphasizes compliance while maintaining the threat of 
substantial penalties for non-compliance and violations of our 
rules.


                   integration of variable generation


    Over the last several years the Commission has undertaken 
efforts to facilitate the integration of variable generation--
namely wind power and solar power---onto the electric 
transmission grid. We have done this by requiring 
jurisdictional transmission providers to better utilize 
existing transmission capacity to meet customer needs through 
``conditional firm'' access to the grid; expending considerable 
time and effort in reforming ``queue'' policies to hasten 
clearing the backlog of interconnection requests; and approving 
transmission cost allocation proposals designed by regions to 
address particular needs. And as the development of these 
resources has been quite significant and successful, it has led 
to new challenges precisely because of the amount of these 
resources now on the grid.
    The Commission will be spending a great deal of time and 
effort in the near term focusing on these challenges that are 
present in nearly every region of the nation (with the general 
exception of the Southeast.) Even in my home region of the 
Pacific Northwest, the Bonneville Power Administration is 
struggling with integrating these resources into a system that 
was not designed or developed with variable generation in mind. 
In response to this situation, in January we issued a Notice of 
Inquiry (NOI) on this issue, requesting comments on how the 
FERC should address a wide range of policy questions. Within 
the last month, the first round of comments has been submitted 
in response to our NOI. I am convinced that these challenges 
are not insurmountable but are extensive and growing in their 
complexity.


                               smart grid


    Congress tasked the Commission with implementing ``smart 
grid'' interoperability standards through the Energy 
Independence and Security Act of 2007. Last year FERC adopted a 
policy statement with core principles intended to provide 
guidance for jurisdictional entities pursuing smart grid 
investments and for those developing the standards through the 
process coordinated by the National Institute of Standards and 
Technology (NIST). We expect NIST to deliver a set of 
interoperability standards to FERC in the near future and to 
commence a rulemaking on the adoption of standards. When 
considering such a rulemaking, cyber security of the grid will 
be my paramount concern.
    Although the concept of the ``smart grid'' can be defined 
many different ways, its potential to allow two-way 
communication with consumers has revolutionary and 
transformative potential in ways that can bring greater 
efficiencies to our nation's electric system. However, the 
transformation will not be immediate and will occur at varying 
paces throughout the nation. And although many of the policies 
related to the actual implementation of the smart gird will 
occur at the state and local levels, we at FERC also need to be 
aware not to overpromise the benefits of the smart grid to 
consumers lest there be a backlash that slows the pace of its 
implementation.


                    cftc/ferc jurisdictional issues


    As this committee is well aware, there is an ongoing debate 
pertaining to the jurisdictional lines of regulation between 
the FERC and the Commodity Futures Trading Commission (CFTC) 
over certain energy-related trading products. As the committee 
works with the Senate Agriculture Committee to clarify our 
respective roles, it is my firm belief that consumers will 
benefit if the two agencies can forge a closer and more 
productive working relationship. I have worked to bring the 
staffs and the commissioners of the two agencies together for 
briefings and meetings to better appreciate the different sets 
of expertise that each agency can bring to this effort to 
better protect consumers.
    Thank you again for the opportunity to appear before the 
committee today and I look forward to answering your questions.

    The Chairman. Thank you very much.
    Ms. LaFleur, why don't you go ahead with your statement?

 STATEMENT OF CHERYL A. LAFLEUR NOMINEE TO BE A MEMBER OF THE 
              FEDERAL ENERGY REGULATORY COMMISSION

    Ms. LaFleur. Thank you, Chairman Bingaman, Senator 
Murkowski, members of the committee.
    I am deeply honored to be here today as a nominee for the 
Federal Energy Regulatory Commission. I would like to thank 
President Obama for nominating me, and thank the committee for 
your consideration and for scheduling this hearing so quickly.
    I would like to thank Senator Shaheen for her very generous 
introduction and everything she has done for the citizens of 
New Hampshire and New England, both as Governor and Senator.
    Also Senator Brown for being here today, for his very kind 
endorsement, and for his service, both as my State senator and 
now this year as the U.S. Senator for our entire State.
    Finally, thank you to my family for being here for me today 
and every day.
    I know that FERC is faced with substantial 
responsibilities, and Congress is considering adding even more 
as it takes up energy bills, including the one this committee 
reported out last year. Issues before FERC in the coming years 
will be critical to strengthening electric and gas 
infrastructure for greater reliability, security, and economic 
growth; facilitating environmental improvement through greater 
reliance on new sources of energy; and promoting fair and 
efficient markets to reduce costs to consumers. I would welcome 
the opportunity to apply myself diligently to these efforts.
    I believe my background is well suited to many of the 
challenges FERC will be facing should I be confirmed. I was 
fortunate to have a wonderful education through the sacrifices 
of my parents and the availability of public and private 
financial aid. I was trained as a lawyer and practiced law for 
several years, but have spent the last 20-plus years of my 
career in the electric and gas industry.
    I have leadership experience both in a vertically 
integrated electric company with a diverse fossil, hydro, and 
nuclear portfolio, and in a restructured electric and gas 
company that provided transmission and distribution services 
and bought power in a competitive wholesale market.
    Much of my career has been spent at the distribution 
customer level, and I understand that everything FERC does 
affects real customers. I was closely involved in the 
restructuring of the electric markets in the New England States 
and in helping customers to understand and benefit from the new 
marketplace. I also led a major effort to improve reliability 
and safety through infrastructure investment.
    Earlier in my career, as Senator Shaheen alluded to, I 
spent 4 years directly leading energy efficiency and demand 
response programs for business and residential customers in 
Massachusetts, New Hampshire, and Rhode Island. I know that 
demand-side efforts can save money for homes and businesses; 
help markets meet energy needs, especially peaks; and 
contribute to environmental improvement.
    I come from a part of the country that has been an early 
leader in the development of robust competitive markets, in 
sustainable demand-side programs, and in efforts to boost 
renewable energy, and I am proud to have been a part of those 
efforts. At the same time, the Northeast has struggled with a 
lack of indigenous energy resources and historically high 
energy prices.
    If confirmed as a FERC commissioner, I would work to 
understand and be sensitive to the unique situations and needs 
of different geographic regions and markets across the country 
and to approach all issues with an open mind. I would look 
forward to working closely with State utility commissions, 
whose work complements FERC's in many areas. I would also be 
honored to work with the members and staff of this committee.
    Thank you again for the opportunity to testify, and I would 
be happy to answer your questions.
    [The prepared statement of Ms. LaFleur follows:]
Prepared Statement of Cheryl A. Lafleur, Nominee to be a Member of the 
                  Federal Energy Regulatory Commission
    1Thank you, Chairman Bingaman, Ranking Member Murkowski, and 
members of the Committee. I am deeply honored to be here today as a 
nominee for the Federal Energy Regulatory Commission. I would like to 
thank President Obama for nominating me, and thank the Committee for 
their consideration and for scheduling this hearing so quickly. I would 
like to thank Senator Shaheen for her very generous introduction, and 
for all that she has done for the citizens of New Hampshire and New 
England as both Governor and Senator. Finally, thank you to my home 
state Senators, Senator Kerry and Senator Brown, for all that they do 
for the people of Massachusetts.
    I know that FERC is faced with substantial responsibilities, and 
Congress is considering adding even more as it takes up energy bills 
including the one this Committee reported out last year. Issues before 
FERC in the coming years will be critical to strengthening electric and 
gas infrastructure for greater reliability, security, and economic 
growth; facilitating environmental improvement through greater reliance 
on new sources of energy; and promoting fair and efficient markets to 
reduce costs to consumers. I would welcome the opportunity to apply 
myself diligently to these efforts.
    I believe my background is well-suited to meet many of the 
challenges FERC will be facing should I be confirmed. I was fortunate 
to have a wonderful education through the sacrifices of my parents and 
the availability of public and private financial aid. I was trained as 
a lawyer and practiced law for several years, but have spent the last 
twenty plus years of my career in the electric and gas industry. I have 
leadership experience both in a vertically integrated electric company 
with a diverse fossil, hydro and nuclear portfolio, and in a 
restructured electric and gas company that provided transmission and 
distribution services and bought power in a competitive wholesale 
market.
    Much of my career has been spent at the distribution customer 
level, and I understand that everything FERC and other regulators do 
affects real customers. I was closely involved in the restructuring of 
the electric markets by statute and regulation in the New England 
states, and in helping customers to understand and benefit from the 
competitive marketplace. I also led a major effort to improve 
distribution reliability and safety through infrastructure investment.
    Earlier in my career, I spent four years leading energy efficiency 
and demand response programs for business and residential customers in 
Massachusetts, New Hampshire and Rhode Island. I know that demand-side 
efforts can save money for homes and businesses, help markets meet 
energy needs, and contribute to environmental improvement.
    I come from a part of the country that has been an early leader in 
the development of robust competitive markets, in sustainable demand-
side programs, and in efforts to boost renewable energy, and I am proud 
to have been a part of those efforts. At the same time, the Northeast 
has struggled with a lack of indigenous energy resources and 
historically high energy prices. If confirmed as a FERC Commissioner, I 
would work to understand and be sensitive to the unique situations and 
needs of different geographic regions and markets across the country 
and to approach all issues with an open mind. I would look forward to 
working closely with state utility commissions, whose work complements 
FERC's in many areas. I would also be honored to work with the members 
and staff of this Committee.
    Thank you again for the opportunity to testify this morning, and I 
would be happy to answer any questions you have.

    The Chairman. Thank you both for your statements.
    As I indicated before, I think the President has chosen 
wisely in nominating both of you and re-nominating Phil Moeller 
for this position and in nominating Ms. LaFleur for the 
commission as well.
    So I will have no questions. Let me defer to Senator 
Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    I just have a couple of questions here this morning. 
Commissioner Moeller, I appreciate your comment about the role 
of natural gas, and hydro.
    But you mentioned natural gas, and of course, we are 
seeking to advance a project--actually, there are a couple that 
you are reviewing now, currently, to get Alaska's gas from the 
North Slope and to the consumer here in the lower 48. I want to 
thank you for your very open-door policy, the conversations 
that you have had, as members of the State administration and 
the legislature come and visit.
    I know they have a steady stream of them that come in 
February and March, and I hear very, very positive reports 
about the level of meetings that they have had with those of 
you at the FERC. I just want to thank you for that and just 
urge you, as a commissioner, and Ms. LaFleur, as I am assuming 
you will be an incoming commissioner, to just commit to working 
with the State of Alaska as we try to advance these very 
important projects for the country when it comes to our natural 
gas resources.
    Mr. Moeller. Senator, thank you for those comments.
    Of course, you have my commitment toward that, and I have 
spent considerable time with Alaskans and in the State. I think 
that it is not only critical, but it is something that I feel a 
little bit of a connection to because they have kind of adopted 
me as an honorary Alaskan, given that I have lived in the 
State. So you have my commitment.
    Senator Murkowski. I appreciate that.
    Ms. LaFleur, I am sure you will be spending plenty of time 
coming up to speed on it, but I appreciate your interest in it 
as well.
    Ms. LaFleur. Thank you.
    I certainly pledge my support, first of all, to learn 
quickly as much as I can about the project. I know it is 
something FERC has been working very hard to permit the 
pipelines, and I think they are critically important to bring a 
huge domestic resource to market.
    Senator Murkowski. Thank you.
    Let me ask a question to both of you about transmission 
cost allocation. The issue of who pays for the new 
transmission, I think we all agree, is a very difficult one. 
This committee has spent some significant time on it.
    Chairman Wellinghoff has recently told reporters that he 
believes that FERC already has the authority to broadly 
allocate the cost to pay for transmission lines, but he did 
acknowledge that this power could be derived only implicitly 
from FERC's existing Federal Power Act authority and stated his 
preference for congressional legislation that would make the 
authority more explicit.
    Now, in this committee, we have declined to socialize the 
transmission costs. Instead, we have adopted an amendment to 
ensure that the costs are more appropriately allocated to the 
beneficiaries of the new transmission. But it does appear that 
FERC is reviewing stakeholder comments on the issue. They have 
directed FERC staff to begin drafting a proposed transmission 
cost allocation rule.
    So the question that I have to you this morning is whether 
or not you think it is appropriate for FERC to basically get 
out in front of Congress on this issue? Then also whether you 
believe that the Federal Power Act does provide the explicit 
authority to FERC to broadly allocate these costs?
    If you can just speak to this as an issue because it is so 
important, as you recognize.
    Mr. Moeller. Thank you, Senator Murkowski.
    It is a critical issue, and I will associate my comments 
with those of the chairman, or Chairman Wellinghoff, that we 
believe we have authority, but it would be helpful if we had 
further direction from Congress. We are walking a little bit of 
a fine line because we have, for instance, States that are 
developing renewable portfolio standards, and they need the 
infrastructure to support those. We are dealing with proposals 
that come to us with regional differences, and I think that is 
appropriate, and we will continue to do so.
    I am very sympathetic to the home region of Ms. LaFleur, 
New England, who they will claim, rightfully so, that they have 
made significant investments in transmission, and they feel 
like their customers are paying for that, and they don't want 
to have something added on to that.
    We have allowed regional approaches to occur and have 
adopted them as they have come to us, largely supported through 
a stakeholder process. But something that could change the game 
is if you decide in Congress to perhaps have a national 
renewable portfolio standard or something along that line that 
will clearly require the additional transmission construction. 
If that is the case, perhaps our authority needs to be 
clarified as well.
    Senator Murkowski. Ms. LaFleur, do you have any comments?
    Ms. LaFleur. Thank you.
    I don't pretend to understand the Federal Power Act as well 
as Chairman Wellinghoff, but I do think it has a rather general 
standard of just reasonable and nondiscriminatory rates. So it 
gives FERC, by its terms, quite a bit of discretion. However, I 
think a more current and pointed statement of congressional 
intent would be extremely helpful, especially as FERC considers 
going into new areas.
    I think that transmission cost allocation, whether it is 
within a State, within a region, and certainly beyond regions, 
is inherently a very tricky business. Should Congress choose to 
give FERC more authority, it would have to be used very 
judiciously because new transmission infrastructure could cross 
between regions of the country that have very different 
internal mechanisms to allocate costs that affect customers 
differently and also have, as Commissioner Moeller alluded to, 
a lot of ongoing efforts to improve their own generation 
portfolio and improve their transmission planning within 
regions that the idea isn't to disrupt or set back things that 
are already going on.
    So I do think it would be useful, as you asked, to have 
Congress give FERC some guidance on this issue.
    Senator Murkowski. Thank you. I appreciate those comments.
    Then one final question here. FERC had contracted with the 
Lawrence Berkeley Laboratory to do this comprehensive study of 
the reliability of our grid system as we add in these 
intermittent renewable resources. It is my understanding that 
we anticipated that the results of this study would be out in 
December 2009, but to date, it has not yet been released.
    Can you give me an update, Commissioner Moeller? Do we know 
whether the study has been completed? Do we know where we are 
with the findings and when that study might be made available 
to the committee?
    Mr. Moeller. Senator Murkowski, I will get back to you with 
more of an update, but I checked on it last week. The word I 
received is that they are still working on it at Lawrence 
Berkeley. We did initially anticipate it within 6 months, but 
it is my understanding that perhaps the issues are a little 
more extensive and complicated than they realized so that they 
are still working on it.
    Senator Murkowski. Couldn't we have said we could tell you 
that they were going to be more complicated than that? We knew 
that. But it is still underway then?
    Mr. Moeller. Still underway. But it is a critical study, 
and I greatly anticipate it, and I think it is something that 
we will do our best to let the members and staff of this 
committee know what the results are because it is a very 
important issue.
    Senator Murkowski. I appreciate that.
    Mr. Chairman, those are all my questions, but I just did 
want to note for the record we talk about this committee being 
a very bipartisan committee. We get along pretty well. But it 
was interesting to note today that the Republican nominee was 
introduced by a Democrat Senator, and our Democrat nominee was 
introduced by a Republican Senator as well as a Democrat 
Senator. So it just continues that fine tradition of 
bipartisanship.
    The Chairman. All right. Senator Risch.
    Senator Risch. Thank you, Mr. Chairman.
    The President certainly has appointed a diverse pair, one 
from the Northeast and one from the Northwest. Mr. Moeller 
hails from part of the country we call ``the Palouse,'' which 
is an area that straddles the State line between Washington and 
Idaho. Although he was on the wrong side of that line, he had 
substantial experience in Washington, which speaks highly of 
him.
    I have advised Ms. LaFleur she is going to learn a lot more 
about anadromous fish than she wants to hear about on FERC. But 
certainly, 2 good appointees that we are going to be relying on 
as we head into the nuclear renaissance in this country, 
something we are going to be looking for support from FERC on 
that, as we move forward and hopefully move forward 
aggressively.
    So thank you, Mr. Chairman.
    The Chairman. Thank you.
    Senator Wyden.
    Senator Wyden. Thank you very much, and good to have a 
chance to spend a few minutes with both of these individuals.
    I want to walk through a situation--Ms. LaFleur, you and I 
have talked about it--that will help us address the question of 
how to get the States a bigger role in key parts of this 
debate, particularly involving liquefied natural gas.
    Now, on April 5, FERC approved construction of the Ruby 
pipeline. This was a project that will bring 1.5 billion cubic 
feet of natural gas to Oregon from the Rocky Mountains. This 
comes after FERC approved the Bradwood LNG project, which would 
bring another 1.3 billion cubic feet of gas to Oregon.
    It approved the Jordan Cove LNG project, bringing in 
another billion cubic feet of natural gas to Oregon, and FERC 
is working its way through the permitting process for the 
Oregon LNG project in Warrenton, Oregon, to bring another 1.5 
billion cubic feet of natural gas to the State.
    So, on top of these capacity issues, the agency is also 
about to issue a draft Environmental Impact Statement for the 
Palomar pipeline that would run throughout Mount Hood National 
Forest, with the capacity to bring another 1.3 billion cubic 
feet of gas a day to western Oregon.
    Now for all of these projects, FERC has or will issue the 
certificate of public convenience and necessity justifying 
their construction. So you say to yourself, how do we get in 
this situation where one project after another is just getting 
a green light to proceed apace without really thinking through 
what this is going to mean for a State where, traditionally, we 
have brought everybody together. We brought together economic 
development interests, environmental interests, and fishing 
families and land owners, and we were able to strike a balance.
    It seems, as a result of the change in policy, which I 
vehemently opposed that, in effect, cut the State's role, 
handed everything back to FERC, that States, and I am sure mine 
is the not the only one, feel that they are getting trampled in 
this debate. So I have introduced legislation in the past to 
return control to the States.
    A gentleman I am fond of now living at 1600 Pennsylvania, 
President Obama, when he was here, was a co-sponsor of this 
legislation. So the administration knows of my longstanding 
interest in this issue. I would like to get on the record from 
both of you, your view with respect to how the States can have 
an expanded voice in these decisions because I think if we are 
going to get balanced approaches to LNG and natural resources, 
running roughshod over the States is not the way to do it.
    Senator Risch, for example, has done great work as a State 
official trying to bring people together. That is what I am 
trying to make the hallmark of my approach to natural resources 
in my home State.
    Ms. LaFleur, I will start with you, since we have talked 
about it in the office. No. 1, what is your assessment of the 
description of events, and do you think that this is a 
legitimate concern?
    No. 2, if you do, if you think that this is a legitimate 
concern, what would be your thoughts from a policy standpoint 
about how, if confirmed, you could ensure that the States would 
have a bigger voice in these matters?
    Ms. LaFleur. Thank you, Senator for that question. Thank 
you for the time you spent educating me on the situation in 
Oregon.
    I am no stranger to LNG because I come from a part of the 
country that is heavily dependent on LNG to meet winter peaks, 
and I also know that LNG siting can cause great controversy. I 
have family in Fall River, Massachusetts, very close to a 
proposed LNG facility. If Tip O'Neill said all politics is 
local, all siting is very, very local.
    Obviously, I don't want to comment on the specific all the 
dockets you enumerated that are pending with respect to LNG 
certification and pipelines in Oregon because they could still 
be pending should I be confirmed as a commissioner. But I do 
understand that the process you describe has been really 
difficult for your constituents, and I would make it a high 
priority to learn more about that process.
    I think FERC and all agencies at the State or Federal level 
should always be committed to improving their processes and 
doing better, and I would be open to exploring whether there 
could be an expanded role for State regulators in cases where 
there are--particularly in cases where there are multiple 
projects within a State, multiple options being considered, 
whether the State regulators could help sort through that in a 
way that would improve the process.
    Senator Wyden. So, from a policy standpoint, I guess this 
is a yes or a no, I want to know from a nominee whether they 
think the States should have more of a say in this process?
    Ms. LaFleur. I think that----
    Senator Wyden. You got pretty close to saying yes. Don't 
unravel it.
    Ms. LaFleur. I mean, I do think that the States could 
usefully play a bigger role, and I think, should I be confirmed 
to FERC, cases will come before me. I know FERC has a lot of 
precedent in this area, and it is up to the commissioners to 
adapt that precedent, apply it, evolve it, based on the record 
before. I would have an open mind on that.
    Senator Wyden. Mr. Moeller, should States have more of a 
say in this process?
    Mr. Moeller. Senator, I think they should. I am not quite 
sure how we formalize that. I have a very good relationship 
with the Oregon commission, former Chairman Beyer, Commissioner 
Savage. You have a new commissioner there as well, and Ray Baum 
has been out here a lot.
    So I think I have reached out to the Oregon commission, but 
I think we can do a better job with the other State agencies 
because, as you outlined, you have constituents that feel that 
at times that their voice hasn't been heard, and we never like 
that. We want to make sure Government should be responsive to 
constituent concerns.
    I won't go into specifics as well, but I recognize that 
things can be improved.
    Senator Wyden. I think this has certainly been a step in 
the right direction. I just want to make clear. I think that 
multiple proceedings allow for multiple disruptions of people's 
lives, and that is what is going on in my home State.
    There are a whole host of issues that you all have 
correctly said today go to the question of how you deal with 
this. For example, it seems to me that there ought to be 
discussion about a threshold for combining proceedings, and 
that is something that would be a legitimate topic of debate. 
But when FERC insists that no 2 projects can ever be considered 
together, I just think that is a prescription for trouble, and 
I need you all to take a look at it.
    Mr. Chairman and Senator Murkowski, thank you for this 
extra time and look forward to working with both of you.
    The Chairman. Thank you.
    Senator Murkowski, did you have any other points we need to 
raise?
    Senator Murkowski. I do not, Mr. Chairman.
    The Chairman. We thank both nominees for being here. We 
will advise members and staff that they will have until 5 p.m. 
tomorrow to submit any written questions, if there are 
questions that someone would like to have a response to.
    With that, the committee will stand in adjournment.
    [Whereupon, at 10:44 a.m., the hearing was adjourned.]
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

   Responses of Philip D. Moeller to Questions From Senator Murkowski
    Question 1. Do you agree that one of the important aspects of the 
Commission's mission is to set clear policy and to provide clear 
guidance to the energy industry regarding the enforcement of your 
policies? Do you agree that market participants must be able to clearly 
understand what behavior is prohibited in order to avoid engaging in 
that conduct? For example, I understand that a number of trade 
associations have requested greater clarity with respect to affiliate 
bids in the same open season for interstate transportation or storage 
capacity.
    Answer. I fully agree that clear guidance on policies and 
enforcement is essential. My votes, including separate concurrences and 
dissents, have reflected my strong feelings on this subject.
    Question 2. Do you believe that transmission should be an asset for 
all generation resources? How do you view efforts to limit federal 
benefits like cost allocation and back-stop siting to new transmission 
for only renewable or low-carbon emitting resources?
    Answer. I believe that transmission policies should not be limited 
to any specific types of resources.
    Question 3. Do you believe federal siting authority in the area of 
transmission should be uniform in the Eastern and Western 
interconnection?
    Answer. Yes. While its authority should be the same, FERC can and 
should consider the specific circumstances in a region when it makes 
infrastructure decisions.
    Question 4. In your opinion, what is the appropriate standard or 
principle that governs who should be assessed the costs for new 
transmission lines?
    Answer. I favor policies that lead to additional cost-effective 
transmission getting constructed over policies that lead to lengthy 
litigation over cost allocation. With this as my guiding principle, I 
support the statement below that customers should not pay for 
transmission unless they benefit from transmission.
    Question 5. As a general matter, do you believe that the 
beneficiaries of a transmission project should bear the costs of that 
project?
    Answer. As noted above, yes.
    Question 6. Do you believe it is ever appropriate to allocate the 
costs of transmission infrastructure over an entire interconnection 
area?
    Answer. In the case of ERCOT, yes. Absent new federal legislation 
(such as mandatory renewable energy production levels) I do not 
envision a cost-allocation proposal that would apply to either the 
entire Eastern interconnection or the entire Western interconnection.
    Question 7. Last year, the Commission conducted a series of 
regional transmission planning conferences. What is your assessment of 
the existing transmission processes? Does FERC require additional 
statutory legislation in this area?
    Answer. I believe our Order 890 advanced the policy of better 
regional planning, but the progress needs to continue. I will be very 
interested in the results of the ongoing interconnection-wide planning 
efforts. I do not believe we need additional statutory direction to 
require more regional planning.
    Question 8. Do you believe that FERC's authority to provide 
incentive-based rate treatment to promote construction of new or 
upgraded transmission facilities to address reliability and 
accommodated the integration of renewable resources has had a positive 
impact in transmission investment?
    Answer. Yes.
    Question 9. In your opinion, has the Commission given appropriate 
incentives to promote investments in transmission? Additionally, what 
types of projects do you see as meriting incentive-based rate 
treatment?
    Answer. I believe FERC has awarded appropriate incentives for 
transmission incentives. In some orders I wrote separately urging 
greater use of incentives for newer technologies that provided 
significant reliability or environmental benefits in an effort to 
encourage greater deployment of these technologies.
    Question 10. FERC recently initiated an inquiry on the integration 
of variable energy resources. What actions will FERC take in this area? 
Will FERC recognize the regional differences that will impact such 
integration and support market-based innovation to facilitate 
integration?
    Answer. Examining the issues within this Notice of Inquiry will 
consume much of the next year, as the initial round of comments are 
extensive and voluminous. I am not certain which actions we will even 
consider at this point, but regional differences and market-based 
innovation will be extremely important to me as I consider our policy 
options.
    Question 11. The focus on interconnecting renewable resources to 
the transmission grid has created significant backlogs in some 
interconnection queues, resulting in additional congestion and 
reliability concerns. Does FERC's current interconnection policies 
adequately address these issues? How should FERC update its current 
interconnection policies to ensure that viable projects addressing the 
needs of all generating resources, including renewable resources, are 
not stuck in the interconnection queue?
    Answer. FERC is working to address queue backlog issues that are 
affecting most areas in the nation. Some matters pertaining to this 
issue are pending, but progress has been made in addressing ``phantom'' 
projects and new policies such as the ``cluster'' approach pioneered by 
BPA. This is an ongoing issue that requires continued oversight by 
FERC.
    Question 12. S. 1462, as reported by this Committee last year, 
provides DOE with the authority to deal with cybersecurity threats and 
FERC with the authority to deal with cybersecurity vulnerabilities. Do 
you support this shared responsibility?
    Answer. In general I support policies that give FERC more 
responsibility but I recognize that Congress may decide that the 
identification of national security threats should be done by the 
President or an agency such as DOE.
    Question 13. I understand that FERC is working with NERC on cyber 
security protection through the standards development process set forth 
in Section 215 of the Federal Power Act. Is this Section 215 process 
adequate to address cyber security threats and vulnerabilities? Absent 
Congressional legislation in this area, what actions can FERC take 
administratively to secure critical electrical infrastructure?
    Answer. I do not believe that the section 215 process is adequate 
to address cyber security threats and vulnerabilities on the grid. I 
support Congressional proposals to give FERC more authority in this 
area, in order to ensure that the grid will be protected while the 
section 215 standards development process proceeds. Absent additional 
authority, FERC will continue to make improving the cybersecurity of 
the electric grid a very high priority in its current work under 
section 215 by enforcing existing cyber security standards and ensuring 
that they are updated to reflect current conditions and risks.
    Question 14. On March 18, 2010, FERC issued a Notice of Proposed 
Rulemaking which directs the North American Electric Reliability 
Corporation to include electric transmission facilities of 100 
kilovolts (kV) or more in its ``bulk electric system'' definition.

          a. What is the status of this NOPR and how soon does FERC 
        intend to move forward on implementation?

    Answer. The Commission has sought comments on its proposal to 
direct NERC to include electric transmission facilities of 100kV or 
more in its ``bulk electric system'' definition. Those comments will be 
submitted by May 10, 2010. I expect that we will treat this matter with 
some urgency as the definition of ``bulk electric system'' determines 
which facilities are subject to the standards and therefore covered by 
their requirements.

          b. If the NOPR requires a case by case review by FERC for 
        each facility exemption, does the Commission have the capacity 
        to manage this workload?

    Answer. Only one of the eight Regional Entities currently uses a 
definition that sets a voltage baseline in excess of NERC's 100 kV 
threshold. Therefore, I believe we have the resources to manage this 
process.
    Question 15. There is growing concern that ``smart'' meters are 
vulnerable to hacking. At a recent House oversight hearing, Chairman 
Wellinghoff noted that because smart grid technology will introduce 
many potential access points, security must be addressed. Are these 
concerns being addressed at the federal level? Please respond.
    Answer. This issue is being considered by FERC, NIST, DOE, DHS and 
others. These concerns may be addressed specifically in our rulemaking 
on interoperability standards. The issue of cyber security as it is 
impacted through these standards will be my top priority as I consider 
a proposed rulemaking.
    Question 16. The 2007 Energy Independence and Security Act (EISA) 
directs the National Institute of Standards and Technology (NIST) to 
coordinate the development of standards to ensure the interoperability 
and functionality of Smart Grid. When sufficient consensus of NIST's 
work is reached, EISA directs FERC to initiate a rulemaking to adopt 
such standards and protocols. The FERC Policy Statement issued last 
July adopts key priorities for the interoperability and cyber security 
of standards. With respect to cyber security, how does FERC plan to 
determine whether the standards are cyber secure? Is there a 
coordination process between FERC and NIST or is FERC planning to wait 
for NIST to submit standards before making any determinations?
    Answer. FERC staff and NIST are coordinating closely regarding the 
smart grid standards development process, holding weekly meetings and 
sharing information about issues and new developments as they arise. In 
particular, NIST has organized a Smart Grid Interoperability Panel 
Cyber Security Working Group to analyze cyber security issues and 
assess individual smart grid standards to ensure that cyber security is 
properly addressed. The Commission's staff participates with this 
group. The Cyber Security Working Group is expected to issue a final 
NIST Interagency Report on Smart Grid Cyber Security Strategy and 
Requirements later this year. NIST has not yet completed work on its 
initial set of smart grid standards; I do not expect that FERC will 
take action on any standards until that process is completed.
    Question 17. Last year, the Commission conducted a technical 
conference on improving the licensing process for small hydropower 
development. The comment period closed last month and I understand FERC 
has already identified several common issues to address. Has the 
Commission identified any legislative actions Congress can take to help 
facilitate small hydropower?
    Answer. At the last Commission meeting, the Commission discussed an 
action plan, under its existing authority, for assisting developers of 
small hydropower projects in the licensing process. I have not 
identified any legislative actions that are needed to facilitate small 
hydropower, though I stand ready to assist if Congress determines that 
additional legislative action is appropriate in this area.
    Question 18. What are your thoughts on the issue of reliably 
integrating intermittent renewable resources onto the grid? What role 
can both conventional hydropower and pumped storage have to play in 
addressing these problems?
    Answer. Conventional hydropower and pumped storage are--where 
available--the ideal complementing technologies for firming or shaping 
intermittent renewable resources.
    Question 19. FERC recently released a policy statement on penalties 
for violation of reliability rules. There has been some concern by 
stakeholders regarding the substantial penalties for shedding load. 
What about a situation where there is a failure of critical facilities 
due to natural or manmade disasters and utilities must intentionally 
shed the load in order to preserve the reliability of the larger 
system? Is it FERC's intention to impose some of its highest penalty 
fees--which will ultimately be passed through to consumers--onto 
utilities when it might be more desirable for the overall grid to shed 
a portion of the load?
    Answer. The concerns raised in this question are legitimate, as the 
overall reliability of the grid can be enhanced in rare circumstances 
by shedding load. I believe the penalty guidelines--when better 
explained and understood, and perhaps modified--will help address this 
concern.
    Question 20. Are you concerned that substantial penalties could 
have a chilling effect on self-reporting?
    Answer. I believe our penalty guidelines, when finalized and 
implemented, will be better understood as the regulated community has 
the time to fully digest the policy statement. Self-reporting is 
actually rewarded--significantly--in our penalty guidelines. These 
guidelines provide transparency to a process that has been too 
mysterious until now.
    Question 21. How important is FERC action to recognize demand-side 
and efficiency measures in its efforts to support the grid integration 
of renewable and other energy resources?
    Answer. Demand-side and energy efficiency are important and growing 
resources in our electricity mix and will play a very important role in 
the effort to better integrate renewable resources.
    Question 22. FERC has issued a Notice of Proposed Rulemaking to 
require all RTOs to pay wholesale demand response providers in RTO 
markets the locational marginal price in all hours. There are some 
concerns that such pricing policies could result in perverse economic 
incentives that might overcompensate demand response providers. What 
are your thoughts on how best to compensate demand response measures?
    Answer. I am undecided on how to best compensate demand response. 
My partial concurrence and dissent in our proposed rule on this subject 
extensively outlined my concerns: although I strongly support cost-
effective demand response programs I also feel strongly that we do not 
know enough yet to decide on the best way to provide this compensation. 
I would have preferred a Notice of Inquiry instead of a proposed rule.
    Question 23. What is the appropriate path forward with respect to 
organized and bilateral wholesale markets? Can and should they co-exist 
or should all utilities ultimately be in organized markets?
    Answer. These markets can co-exist. Organized markets have 
generally been growing and offering more products in the last several 
years.
    Question 24. Is FERC's oversight of electricity markets sufficient 
to ensure that the wholesale electric rates meet the ``just and 
reasonable'' standard of the Federal Power Act?
    Answer. Yes. I believe we are satisfying our responsibilities under 
the Federal Power Act in this area. FERC devotes significant resources 
to reviewing market rules and proposed changes to them, as well as 
overseeing activities in the markets and investigating and litigating 
enforcement actions.
    Question 25. Do you believe that the wholesale electricity markets 
operated by regional transmission organizations are achieving net 
benefits for consumers as compared to those regions without RTOs?
    Answer. I believe that consumers are enjoying net benefits from 
RTOs but I recognize that conflicting studies can be cited by advocates 
on both sides of this argument. Prices in RTO markets fell nearly fifty 
percent last year and some consumers are already receiving the benefits 
of these price reductions. Several regions are not yet comfortable 
moving forward with organized markets.
    Question 26. Do you think that there is a sufficient level of 
transparency in the pricing and other relevant data from the 
electricity markets, particularly those operated by RTOs?
    Answer. I believe there is sufficient pricing transparency in RTOs 
that in many cases exceeds that available in non-RTO markets. FERC must 
continue its vigilance on this front, however. Also, FERC has proposed 
rules to elicit price data from non-public utilities.
    Question 27. What is your assessment of the success of pricing 
incentives in the RTO markets, such as Locational Marginal Pricing, to 
spur infrastructure development and address transmission congestion?
    Answer. Locational marginal pricing helps provide appropriate price 
signals in RTO markets for generators and load-serving utilities. While 
the market rules may need to be changed from time to time to ensure 
they operate effectively, I believe locational marginal pricing is a 
reasonable tool in these markets for eliciting appropriate investment.
    Question 28. Do you believe RTO-run locational capacity markets are 
providing adequate revenue and certain for new generation while 
avoiding excess payments to existing generation?
    Answer. I support existing capacity markets but recognize that they 
continue to evolve as conditions change; matters pertaining to specific 
markets are pending but our ongoing challenge is to best assure that 
the needed capacity is there for consumers balanced by the concern that 
payments are reasonable.
    Question 29. As the Senate works on Wall Street reform legislation, 
we can all agree that Congress must guard against systemic risk by 
improving the oversight, transparency, and stability of financial 
markets. The CFTC will certainly be provided with additional regulatory 
authority aimed at addressing systemic risk in the Over-the-Counter 
market. But we need to carefully tailor Congressional action to avoid 
sweeping in the physical energy markets that are regulated by FERC.
    How would CFTC jurisdiction over electricity market mechanisms like 
Financial Transmission Rights (FTRs) affect FERC's overall mission of 
ensuring just and reasonable rates?
    Answer. CFTC jurisdiction over FTRs could significantly impair 
FERC's ability to ensure just and reasonable rates. FTRs are an 
important tool for protecting customers against the risk of price 
increases for transmission services in RTOs/ISOs. Congress recognized 
the importance of FTRs when it enacted FPA section 217 as part of the 
Energy Policy Act of 2005, requiring FERC to use its authority in a way 
that enables load-serving entities to secure FTRs on a long-term basis 
for long-term power supply arrangements made to meet their customer 
needs. CFTC jurisdiction over FTRs could lead to, e.g., limits on the 
availability of FTRs for load-serving entities and thus less protection 
for their customers against increases in transmission costs.
    Question 30. How would CFTC jurisdiction over FTRs impair FERC's 
ability to protect against manipulation in the RTO markets?
    Answer. Under the Commodity Exchange Act, the CFTC asserts 
exclusive jurisdiction in the markets they regulate. Were the CFTC to 
acquire exclusive jurisdiction over the FTRs currently traded in RTO/
ISO markets subject to FERC regulation, FERC's authority to prevent and 
penalize market manipulation in the RTO markets could be restricted.
    Question 31. Are you concerned about potential CFTC jurisdiction 
over products that are available outside of RTO and ISO markets?
    Answer. Yes. For example, the definition of ``swaps'' in financial 
reform legislation passed by the House of Representatives last year 
(H.R. 4173) could be construed to include a number of contractual 
products outside of RTO and ISO markets, including bilateral capacity 
contracts.
    Question 32. The Tres Amigas project currently under development 
seeks to transmit renewable power out of the Southwest and into Texas. 
This project, then, raises a tough jurisdictional issue since it would 
create a historic linkage among the three separate power grids--ERCOT 
and the Eastern and Western grid interconnections. Because this is an 
ongoing case at the Commission, I won't ask you to comments on the 
specifics of the proposal. However, I am interested in your thoughts on 
the relationship between FERC and ERCOT and whether the jurisdictional 
bright lines will be able to be maintained in the future.
    Answer. ERCOT generally has guarded its jurisdictional boundaries. 
As markets evolve and (in general) become more interconnected and 
sophisticated, both FERC and ERCOT will be dealing with ongoing issues 
of balancing consumer benefits of interconnectedness with legitimate 
ERCOT concerns over being subject to FERC jurisdiction.
    Responses of Philip D. Moeller to Questions From Senator Shaheen
    Question 1. Traditionally, the planning, siting and cost allocation 
of new transmission has been left up to the states. However, given the 
importance of investing in our transmission system--especially for the 
connection of renewables, some have talked about the need for an 
increased federal role and sharing of costs.
    How do we balance the concerns expressed by the New England 
Governors, PUC Commissioners and others about protecting the 
competitive New England markets from potentially market-distorting 
subsidies for new transmission as a result of a broad cost allocation 
scheme with the need to overcome the barriers of connecting renewable 
resources that are often location constrained and distant from load?
    Answer. FERC needs to consider regional implications of its 
decisions. I am very sympathetic to the concerns of New England as it 
is clear to me that the region has already made significant and 
worthwhile investments in its transmission grid. To some extent we 
await direction from Congress on national renewable energy standards.
    Question 2. In New England, we share costs of new transmission 
projects needed for reliability rather broadly. In your view, could a 
similar structure work for the construction of transmission needed to 
connect renewable energy? Could such a policy be workable for new 
transmission, or upgrades to existing transmission infrastructure, 
solely to connect renewable resources?
    Answer. I believe a similar structure could work for transmission 
needed to connect renewable energy and it could work for both new 
transmission and upgrades. As noted above, if Congress mandates a 
national renewable energy standard then FERC would need to be open to 
all types of proposals that would result in the actual deployment of 
new transmission facilities.
    Question 3. How can we connect our renewable resources to the grid 
and allocate costs in a fair way that helps pay for transmission 
projects or upgrades?
    What role should the FERC play in helping to get renewable 
resources connected to the grid? What problems would be addressed with 
this new authority?
    Answer. We should allocate costs in a manner in which those that 
benefit from the transmission bear the costs of the transmission. FERC 
has undertaken a number of policies that encourage the gird 
interconnection of renewable resources, including our ``conditional 
firm'' requirement in Order 890 and our focus on clearing the ``queue'' 
backlog in many markets. Going forward, our Notice of Inquiry on 
Intermittent Generation is addressing a range of challenges that 
pertain to allowing more renewable generation to be interconnected to 
the grid; this NOI is extensive and the process of addressing these 
challenges will probably consume us for the next year.
    Question 4. Municipal and cooperative utilities in New England have 
told me that they would like the opportunity to jointly plan, finance 
and own new transmission facilities. They believe their participation 
will bring additional capital and political support to needed projects 
and will make cost allocation decisions easier. Do you support joint 
ownership by these utilities?
    Answer. I support joint transmission projects and have encouraged 
these types of projects throughout the nation.
    Question 5. One issue that has come up in the context of 
transmission incentives is whether their availability should be 
conditioned on the applicant taking steps to allow financial 
participation and investment by other entities, including public power 
and cooperative utilities. The FERC has stated that it seeks to 
encourage diversity of ownership of the nation's transmission grid, 
which is an essential set of facilities. My understanding is that, 
encouragement aside, little is happening in terms of ownership 
diversity.
    Why has the Commission refused to link incentive compensation to 
affording public power and cooperative entities an opportunity to 
participate in new investment?
    Answer. I consider strictly linking incentives to joint projects as 
too stringent an approach to incentive policy. However, I have 
explicitly encouraged entities to reconsider the benefits of joint 
projects and my sense is that there is growing momentum to do so. 
Generally speaking there are many more joint projects in the Western 
United States and I hope to see more of these projects in the East as 
well.
    Question 6. There is great concern about the substantial increase 
in transmission charges, including in New England. The transmission 
investment base is growing by leaps and bounds. The transmission 
investment base (the basis for rates) was roughly $3.5 billion in mid-
2009. By 2013, it is forecast to be $8.5 billion. I am concerned that 
ladling incentive return on equity adders on top of the existing rate 
of return will exacerbate the cost impact on consumers.
    In your view, what are the risks that would justify additional 
incentives for owners of new transmission facilities?
    Answer. In my view transmission projects inherently entail great 
risk due to the challenges of siting and in some cases cost allocation. 
Transmission is a relatively small part of a consumer's final bill 
(usually less than fifteen percent) yet the lack of transmission can 
result in much more expensive generation charges. The risks that 
justify additional incentives include siting challenges (including 
physical challenges and public perception challenges) and technological 
challenges.
   Responses of Philip D. Moeller to Questions From Senator Menendez
    Question 1. The Energy Bill as currently drafted would allow FERC 
to approve lines anywhere and for almost any reason. Some are concerned 
that this means the federal government will be siting transmission 
lines thorough protected open spaces and through people's back yards. 
Do you believe that FERC should have the authority to site transmission 
lines and use eminent domain power to site those lines over local 
opposition?
    Answer. Electric transmission is essential for consumers and 
interstate commerce, and I believe consumers would benefit from FERC 
having its siting authority clarified when it is presented with 
transmission proposals. However I envision this as ``backstop'' 
authority that is exercised rarely, partly because the very existence 
of such backstop authority would result in it rarely needing to be 
used, as it would encourage states and local entities to find the 
optimum regional solution that meets the needs of customers. Though 
there are energy infrastructure projects where eminent domain authority 
is exercised as a result of a FERC certificate order, there are many 
where it is not exercised at all.
    Question 2. Some claim that enhanced federal power to site 
transmission lines will only result in getting more wind power on the 
grid, but for New Jersey more transmission will likely lead to more 
dirty, coal power being transported into our state, a concern that 10 
governors of the Northeastern states have also voiced. When exercising 
your current back stop authority to site transmission lines or future 
powers Congress might bestow on you, do you believe it is appropriate 
to consider the fuel mix that transmission project will likely bring 
onto the grid? In other words if you know a transmission line will 
result in more coal being burned and in turn increase pollution and 
public health impacts, would it be appropriate to reject that line 
because of those environmental and public health impacts? Should those 
impacts even be a factor in your decisions?
    Answer. In general, I believe the future of coal-generated 
electricity is going to hinge much more on environmental laws and 
regulation rather than on transmission policy. My decisions are 
motivated by assuring the reliability of the bulk power system due to 
the inability to ``color'' the electrons on the grid. However, 
environmental impacts are factors that I presently consider in siting 
decisions and will continue to do so.
    Question 3. FERC is currently reviewing an application to have a 
high pressure natural gas pipeline located in a dense urban environment 
of high-rise residences in New Jersey. There are concerns that this 
pipeline could have a significant detriment to economic development. 
What is your position on placing these types of high pressure natural 
gas pipelines in dense urban environments? Is that appropriate? Should 
FERC consider the economic impacts of such pipelines before providing 
approval?
    Answer. The Commission has a long history and a great deal of 
experience in siting natural gas infrastructure, including lines in 
dense urban environments. Cities represent large and growing markets 
for natural gas. Thus, there may well be a need to site additional 
infrastructure in such areas. All interstate natural gas pipelines are 
required to comply with the Department of Transportation's safety 
regulations, and it is my understanding that these regulations take 
population density into account. In addition, in our review pursuant to 
the National Environmental Policy Act, the Commission analyzes the 
potential environmental impact a proposed project would have on 
residents and communities in the vicinity of the projects. Also, 
pursuant to our Certificate Policy Statement, the Commission 
specifically considers potential economic effects of proposed pipelines 
on affected communities.
   Responses of Philip D. Moeller to Questions From Senator Barrasso
    Question 1. The Energy and Natural Resources Committee approved 
legislation that expands FERC's eminent domain authority. It allows 
FERC to override State rejections of proposed transmission lines. Do 
you believe FERC should have the authority to override a State's 
rejection of a transmission proposal?
    Answer. I believe that it would be helpful for Congress to clarify 
and strengthen FERC's backstop siting jurisdiction. However, I believe 
it is important for states and local jurisdictions to have the primary 
responsibility for siting transmission lines. If Commission involvement 
becomes necessary, the Commission will give appropriate consideration 
to the effects of proposed projects on the interests of landowners and 
communities, as it currently does in its other infrastructure siting 
work.
    Question 2. What is your view on the future role of baseload power 
sources like coal and nuclear in America's energy portfolio?
    Answer. Baseload power sources including coal and nuclear will be 
essential in our fuel mix for the foreseeable future, at least many 
decades in my view.
    Question 3. Last year, Chairman Wellinghoff said that the nation's 
future power needs can be fully met by renewable energy sources and 
efficiency improvements. Do you agree?
    Answer. Although I support renewable energy and energy efficiency, 
I do not believe these sources will be sufficient to meet the nation's 
future electricity needs. New methods of energy storage will help to 
greatly increase our use of renewable energy, but these methods of 
storage need to be proven cost effective and technologically feasible 
before they can be applied on a wide scale.
    Question 4. Do you support requirements that new transmission favor 
or be limited to renewable or low-carbon emitting resources?
    Answer. I do not support limiting new transmission to only certain 
types of resources. And in this situation the laws of physics would 
rule: electricity flows on the path of least resistance.
   Responses of Philip D. Moeller to Questions From Senator Sessions
    Question 1. Do you believe FERC needs new cease and desist 
authority, or is FERC's current authority sufficient to deal with 
energy market manipulation?
    Answer. I believe consumers would enjoy a greater level of 
protection if FERC is given additional cease and desist authority.
    Question 2. Once the economy recovers, it is expected our nation's 
demand for electricity will increase significantly over the next 20 
years. I subscribe to the belief we will need a variety of both supply 
and demand side resources to meet our energy needs, including new 
nuclear, renewables, clean coal, demand response, and energy 
efficiency. In your opinion can we afford to take any of these 
resources off the table and still deliver the reliable, low cost, and 
clean energy our homes and businesses need?
    Answer. I agree that all sources of supply and demand need to be in 
the mix to assure that consumers have the electricity they need.
    Question 3. Considering your extensive knowledge of the energy 
industry, I'm sure you are familiar with ``standard market design,'' a 
Commission proposed restructuring of the electric industry that would 
have required all utilities to join Regional Transmission Organizations 
and adopt centralized operating control of the grid. As a result of 
concerns from many states and members of Congress, that proposal was 
dropped, and as a result today's industry structure has a mix of 
vertically-integrated utilities operating under state rate regulation 
and restructured utilities operating in organized markets. In your 
opinion do you believe that these two market structures can continue to 
co-exist?
    Answer. I believe these two market structures can continue to co-
exist.
    Question 4. Section 215 of the Federal Power Act requires the 
Commission to provide ``due weight to the technical expertise'' of NERC 
with regard to reliability standards. It also requires FERC to 
``provide for reasonable notice and opportunity for public comment, due 
process, openness, and balance of interests in developing reliability 
standards and otherwise exercising its duties''. How do you reconcile 
these statutory requirements with a series of recent FERC orders that 
are very prescriptive in directing NERC to make certain modifications 
to its standards and to do so by specified deadlines?
    Answer. The recent FERC orders to which you refer are pending on 
rehearing, and thus it would be inappropriate for me to comment. I 
would note, however, that we have approved most of the proposed 
standards presented by NERC and the regional entities for approval. 
Where appropriate, I believe that deadlines are an important tool.
    Question 5. Regarding the NIST lead effort to develop Smart Grid 
interoperability standards under the 2007 Energy Independence and 
Security Act (EISA),

          a. How will FERC determine and confirm that sufficient 
        consensus has been reached before moving forward with a 
        rulemaking proceeding to adopt such standards?
          b. How will FERC determine which of the many standards 
        proposed by NIST are appropriate for a rulemaking proceeding?

    Answer. I anticipate that NIST will finish a package of standards 
in the near future and that we will need to examine any supporting 
evidence to determine if sufficient consensus was reached. I will want 
to evaluate the package before determining which of the standards are 
appropriate for an initial rulemaking, but I fully expect that we will 
have more than one rulemaking proceeding as more standards are proposed 
and as consumers and the industry gain experience.
     Responses of Philip D. Moeller to Questions From Senator Wyden
    Question 1. In response to questions for the record during the 
Committee's 2005 hearing on LNG permitting, Mark Robinson, then 
Director of the Office of Energy Projects responded that,

          The Commission is supportive of competition within the energy 
        industry and of the idea that the market drives infrastructure 
        development. Past experience, particularly since the 
        restructuring on the gas industry following Order No. 636, has 
        demonstrated that market forces can serve the same end as a 
        competitive or ``Ashbacker'' hearing. Where the Commission 
        approves multiple projects to serve a similar market, only an 
        economically viable project will actually be built, i.e., only 
        where customer commitments ensure new service will fulfill a 
        genuine need.

    The Commission continues to follow this policy.

          a. How is this policy consistent with the obligation of the 
        Commission to make an affirmative finding of public convenience 
        and necessity under the Natural Gas Act?

    Answer. Ashbacker Radio Corp. v. FCC requires comparative hearings 
for mutually exclusive applications, i.e., where granting approval to 
one would preclude the grant of approval to the other. Most of the LNG 
applications that come before the Commission are not mutually 
exclusive--they propose to serve different customers, may have proposed 
different sources of supply, and may be on different timelines. The 
Commission thus examines each project on its own merits, including a 
rigorous review of all potential environmental and safety impacts, and 
will grant approval only if it affirmatively finds that construction 
and operation of the project would be consistent with the public 
interest. If a project is approved, the Commission then lets market 
forces determine whether a project will be built.

          b. Do you agree with this policy that competitive or 
        ``Ashbacker'' hearings need never be conducted where multiple 
        projects are proposed for a given market or to serve a specific 
        demand, such as send-out capacity for an LNG terminal?

    Answer. I think that the Commission should avail itself of whatever 
regulatory tool best suits the circumstances at hand. I will keep an 
open mind as to best manner of processing specific cases.

          c. Are there any circumstances where you believe that it is 
        ever appropriate for the Commission to conduct competitive or 
        ``Ashbacker'' hearings where multiple projects are being 
        proposed to serve a single market or even a specific facility, 
        such as an LNG terminal? If so, when?

    Answer. Although, as noted in Mr. Robinson's statement, it has been 
the Commission's policy that market forces may serve the same end as a 
competitive hearing, where projects appear to be mutually exclusive, 
the Commission could decide that it was appropriate to hold an 
``Ashbacker'' hearing. I cannot prejudge what process I would consider 
to be the most appropriate in the absence of case-specific facts.

          d. In Oregon there are multiple projects including three LNG 
        terminals all proposed to serve the Northwest market with far 
        more capacity than the region uses. Under what circumstances, 
        if any, should LNG projects such as these be the subject of 
        combined proceeding?

    Answer. Unfortunately, it would not be appropriate for me to 
speculate on the outcome of a pending case. However, as I stated above, 
I will consider arguments for comparative hearings with an open mind.

          e. In the circumstance of the Palomar Pipeline pending before 
        FERC now, and the Northern Star pipeline approved by FERC as 
        part of the Bradwood LNG projects, the projects are intended to 
        transport exactly the same Bradwood-originated gas shipments. 
        Under what circumstances, if any, should pipeline projects be 
        the subject of a combined proceeding?

    Answer. Unfortunately, it would not be appropriate for me to 
speculate on the outcome of a pending case. However, as I stated above, 
I will consider arguments for comparative hearings with an open mind.

          f. If the Commission has already approved a pipeline, for 
        example the Northern Star pipeline, to serve a specific demand, 
        what basis does it or should it have to make the public 
        convenience and necessity finding required under the Natural 
        Gas Act for a second pipeline for exactly the same shipments?

    Answer. The Commission could not authorize construction of the 
second pipeline unless the Commission found that the pipeline was 
required by the public convenience and necessity.
    Question 2. The Federal Power Act currently includes authority to 
establish an Office of Public Participation which has never been 
created. FERC is now being given more and more authority over the 
siting energy facilities. In addition to natural gas pipelines, in 2005 
Congress gave FERC authority over siting LNG, and back-stop authority 
to site electric transmission. Congress is currently considering 
legislation to give FERC even broader authority over the siting of 
electric transmission lines. Our experience in Oregon with LNG and 
natural gas pipelines has been abysmal. Most recently, land owners were 
denied the ability to submit written testimony in a FERC proceeding to 
investigate possible abuses by the applicant on their own property. Why 
shouldn't FERC have an Office of Public Participation to ensure that 
citizens have a voice in FERC decisions that so directly affect their 
lives and their communities? Would you support establishing and funding 
this office to ensure that the public is heard?
    Answer. If Congress chooses to fund an Office of Public 
Participation, I believe it might play a useful role in the 
Commission's proceedings. Even without such an Office, however, I 
assure you that I take very seriously the interests of consumers in 
making decisions at the Commission.
    Question 3. The Federal Power Act and the Natural Gas Act require 
FERC to ensure that rates are just and reasonable--a requirement FERC 
has decided it can ignore in favor of letting the market set the 
price--even when that market is dysfunctional or being manipulated as 
we saw with Enron. Utility consumer advocates exist in many states. 
Wouldn't you agree that consumer advocates can provide important 
consumer protections for rate payers? Would you support the creation of 
an office of consumer advocate within FERC?
    Answer. Consumer advocates play a valuable role at many state 
commissions. If Congress chooses to create such an office, it could be 
helpful in identifying and presenting the interests of consumers. 
However, it would be preferable for any such office to be external to, 
and thus independent from, FERC.
                                 ______
                                 
   Responses of Cheryl A. LaFleur to Questions From Senator Murkowski
                          regional perspective
    Question 1. Coming from New England, you're viewed as a candidate 
who will bring some geographical diversity to the Commission. Too often 
it seems Congress attempts to impose a ``one-size-fits-all'' solution 
for the nation. However, this Committee can tell you that energy issues 
often fall along regional lines. How important is it at FERC to 
recognize and appreciate these regional differences?
    Answer. I believe that it is very important for FERC to understand 
and consider regional differences in shaping energy policy. The regions 
vary considerably not just in obvious characteristics such as geography 
and population density but also in their market structures (organized 
or bilateral markets), resource mix, and ongoing regional energy and 
environmental efforts. At the same time, FERC is by its very nature a 
federal agency, and needs to consider energy needs and projects that 
span regions, as it has done for example in the area of natural gas 
pipeline construction.
                               hydropower
    Question 2. Do you consider hydropower to be a renewable resource? 
Please state your views on the hydropower resource and its contribution 
and value to the nation's energy mix.
    Answer. Yes. Hydropower is the original renewable resource and the 
predominant renewable resource in the nation's generation mix today. I 
believe that both existing and new hydropower facilities will play an 
important role in meeting future energy needs and contributing to 
environmental improvement. In my own region of New England, the hydro 
generation facilities along the Connecticut and Deerfield Rivers are an 
important component of our energy mix, and of course I know the large 
hydro facilities in the Western United States are critical to the 
energy and economic needs of those regions. I also believe there is 
considerable potential for new small (low-head) hydro facilities, as 
well as new technologies such as hydrokinetics.
                                general
    Question 3. Do you agree that one of the important aspects of the 
Commission's mission is to set clear policy and to provide clear 
guidance to the energy industry regarding the enforcement of your 
policies? Do you agree that market participants must be able to clearly 
understand what behavior is prohibited in order to avoid engaging in 
that conduct? For example, I understand that a number of trade 
associations have requested greater clarity with respect to affiliate 
bids in the same open season for interstate transportation or storage 
capacity.
    Answer. Yes. I believe that clarity and transparency are very 
important in the enforcement area. While I cannot comment on a matter 
pending before the Commission, the purpose of enforcement is to 
encourage compliance, and only if the policies are understood can that 
purpose be met.
                         transmission (siting)
    Question 4. Do you believe that transmission should be an asset for 
all generation resources? How do you view efforts to limit federal 
benefits like cost allocation and back-stop siting to new transmission 
for only renewable or low-carbon emitting resources?
    Answer. By definition, transmission is the link between generation 
and load. Currently, transmission facilities connect to and support all 
types of generation resources. Transmission capacity cannot be limited 
to electrons generated only by specific resources, nor can electrons be 
targeted only to specific transmission facilities, as electricity by 
its nature follows the path of least resistance. It is true that 
transmission is a particularly critical issue for geographically-
constrained renewable resources that are remote from load, and that 
transmission would need to be constructed in order for such potential 
resources to serve energy markets. At the same time, I believe that the 
generation mix will largely be influenced by environmental policies, 
such as the renewable portfolio standard that this Committee passed 
last year, and not driven by transmission policy.
    Question 5. Do you believe federal siting authority in the area of 
transmission should be uniform in the Eastern and Western 
interconnection?
    Answer. FERC's existing siting authority does not vary between the 
Eastern and Western Interconnections, and I note that the bill passed 
by this Committee similarly does not distinguish between the Eastern 
and the Western Interconnections. I believe that is appropriate. 
However, I do believe FERC should exercise its authority with respect 
for and consideration of regional and geographic differences.
                     transmission (cost allocation)
    Question 6. In your opinion, what is the appropriate standard or 
principle that governs who should be assessed the costs for new 
transmission lines?
    Answer. In general, those who benefit from transmission should pay 
for it. I believe that there are several well-functioning models of 
cost allocation that have been negotiated and agreed to within existing 
RTOs, which in general terms allocate the cost of high-voltage 
transmission more broadly because it provides reliability and economic 
benefits across a region, and assign the costs of lowervoltage 
transmission to more limited geographic areas that directly receive 
such benefits.
    Question 7. As a general matter, do you believe that the 
beneficiaries of a transmission project should bear the costs of that 
project?
    Answer. Yes, as a general matter. I have an open mind about how 
benefits and beneficiaries are defined, but believe the principle is 
important.
    Question 8. Do you believe it is ever appropriate to allocate the 
costs of transmission infrastructure over an entire interconnection 
area?
    Answer. Because I know that proposals for transmission cost 
allocation will come before me if I am confirmed as a commissioner, I 
have an open mind about specific proposals. I believe, however, that 
the larger an area across which costs are proposed to be allocated, the 
more care should be exercised in assessing whether customers within the 
area are receiving a benefit. In general, I believe the Commission 
should seek to encourage cost allocation proposals that gamer support 
from market participants and state and local regulators.
                        transmission (planning)
    Question 9. Last year, the Commission conducted a series of 
regional transmission planning conferences. What is your assessment of 
the existing transmission processes? Does FERC require additional 
statutory legislation in this area?
    Answer. In general, I think that much progress has been made on 
transmission planning within regions. But I do believe that the U.S. 
needs more high-voltage transmission infrastructure to support 
reliability and energy security, help connect new domestic energy 
resources, and make markets work well for customers. I believe it was 
prudent for FERC to issue Order No. 890, requiring open and transparent 
transmission planning processes. It was also prudent for FERC to 
request comments late last year on how existing transmission planning 
processes can be improved, and I understand FERC has received a large 
number of comments from a very broad group of stakeholders. Were I to 
be confirmed, I would look forward to considering those stakeholder 
comments on this issue. I have not studied the issue of whether FERC 
needs additional statutory authority in this area.
                       transmission (incentives)
    Question 10. Do you believe that FERC's authority to provide 
incentive-based rate treatment to promote construction of new or 
upgraded transmission facilities to address reliability and 
accommodated the integration of renewable resources has had a positive 
impact in transmission investment?
    Answer. Yes, I believe that FERC's authority to provide incentive-
based rate treatment for transmission, including the authority that 
Congress provided in the Energy Policy Act of 2005, has had a positive 
impact on transmission investment.
    Question 11. In your opinion, has the Commission given appropriate 
incentives to promote investments in transmission? Additionally, what 
types of projects do you see as meriting incentive-based rate 
treatment?
    Answer. I think incentives can be in the best interests of 
customers where they help promote transmission construction that 
strengthens reliability and makes markets work better. I agree with 
FERC's statement in its rulemaking implementing the incentives 
provision of the Energy Policy Act of 2005 that routine investments 
made in the ordinary course of expanding the system are less compelling 
cases for incentives. It is also important that incentives be 
proportional to the benefits they are intended to promote, and I would 
support them in appropriate cases where supported by customer benefits.
          transmission (integrating variable energy resources)
    Question 12. FERC recently initiated an inquiry on the integration 
of variable energy resources. What actions will FERC take in this area? 
Will FERC recognize the regional differences that will impact such 
integration and support market-based innovation to facilitate 
integration?
    Answer. I believe that FERC's ongoing inquiry is important to 
address the unique characteristics of variable energy resources, 
particularly wind and solar generation, and the implications of 
integrating those resources into grid operations. I do believe that 
FERC should consider regional differences and support marketbased 
innovation when considering any changes to market rules that may be 
necessary to enable the efficient and reliable integration of variable 
generation.
           transmission (congestion on interconnection queue)
    Question 13. The focus on interconnecting renewable resources to 
the transmission grid has created significant backlogs in some 
interconnection queues, resulting in additional congestion and 
reliability concerns. Do FERC's current interconnection policies 
adequately address these issues? How should FERC update its current 
interconnection policies to ensure that viable projects addressing the 
needs of all generating resources, including renewable resources, are 
not stuck in the interconnection queue?
    Answer. I understand that in December 2007, the Commission held a 
technical conference on interconnection queuing practices, which 
focused on the significant increases in the queue backlogs of ISOs and 
RTOs due to greater interest of new generation entrants, particularly 
renewable resources. The Commission directed each ISO and RTO to file a 
report describing the status of stakeholder discussions on queue reform 
and the schedule for selecting and implementing any necessary reforms.
    As a result of these efforts, the Commission has received and 
approved proposals from several RTOs to improve the interconnection 
process and shorten the time required for the parties to execute a 
generator interconnection agreement. In accepting these proposals, the 
Commission has evolved its policy toward generator interconnection from 
a rigid ``first-in, first-served'' approach to a more flexible policy 
that allows transmission providers to adopt a ``first-ready, 
firstserved'' approach, and has allowed other adjustments to the RTOs' 
queueing methodology.
    I understand that the Commission is waiting to see how these 
changes have impacted interconnection queue backlogs and to determine 
if further action is required. If confirmed, I would consider this 
issue carefully.
                             cybersecurity
    Question 14. S. 1462, as reported by this Committee last year, 
provides DOE with the authority to deal with cybersecurity threats and 
FERC with the authority to deal with cybersecurity vulnerabilities. Do 
you support this shared responsibility?
    Answer. Yes, I support the proposed division of authority between 
DOE and FERC in S. 1462 to respond to cybersecurity threats and 
vulnerabilities.
    Question 15. I understand that FERC is working with NERC on cyber 
security protection through the standards development process set forth 
in Section 215 of the Federal Power Act. Is this Section 215 process 
adequate to address cyber security threats and vulnerabilities? Absent 
Congressional legislation in this area, what actions can FERC take 
administratively to secure critical electrical infrastructure?
    Answer. I believe that nothing in the area of energy is more 
important than the security and reliability of the nation's electric 
grid. I support Congressional proposals to give FERC more authority in 
this area, particularly the authority to address imminent threats, as 
well as vulnerabilities, promptly and effectively. Absent increased 
authority, FERC should continue to make improving the cybersecurity of 
the electric grid a very high priority in its current work under 
section 215.
    Question 16. On March 18,2010, FERC issued a Notice of Proposed 
Rulemaking which directs the North American Electric Reliability 
Corporation to include electric transmission facilities of 100 
kilovolts (kV) or more in its ``bulk electric system'' definition.

          a. What is the status of this NOPR and how soon does FERC 
        intend to move forward on implementation?

    Answer. I understand that the Commission has sought comments on its 
proposal to direct NERC to include electric transmission facilities of 
100kV or more in its ``bulk electric system'' definition, and that 
those comments will be submitted by May 10,2010. The next step would be 
for FERC to consider the comments and then determine whether to proceed 
to a final rule. I do not know how soon FERC intends to make that 
determination or to move forward on implementation of its proposal.

          b. If the NOPR requires a case by case review by FERC for 
        each facility exemption, does the Commission have the capacity 
        to manage this workload?

    Answer. My understanding is that only one of the eight Regional 
Entities currently uses a definition that sets a voltage baseline-in 
excess of NERC's 100 kV threshold. Considering that every region except 
that one uses the 100 kV threshold, and that any exemption must first 
be approved by the applicable Regional Entity and then by the ERO 
before it is submitted to the Commission, I understand that the 
Commission expects that it will receive a small volume of exemption 
requests based on particular circumstances and therefore that it has 
the capacity to manage the exemption process.
                               smart grid
    Question 17. There is growing concern that ``smart'' meters are 
vulnerable to hacking. At a recent House oversight hearing, Chairman 
Wellinghoff noted that because smart grid technology will introduce 
many potential access points, security must be addressed. Are these 
concerns being addressed at the federal level? Please respond.
    Answer. I am informed that the Commission and other federal 
agencies are working to identify and address potential vulnerabilities 
that may be introduced by the deployment of smart grid technology. Most 
notably, the National Institute of Standards and Technology (NIST) has 
organized a Smart Grid Interoperability Panel Cyber Security Working 
Group to analyze cyber security issues and assess individual smart grid 
standards to ensure that cybersecurity is properly addressed. The 
Commission participates with this group. The Cyber Security Working 
Group is expected to issue a final NIST Interagency Report on Smart 
Grid Cyber Security Strategy and Requirements later this year.
    Other agencies involved with smart grid initiatives include the 
Department of Energy and the Department of Homeland Security. The Smart 
Grid Task Force meets regularly to ensure awareness, coordination and 
integration of the diverse activities among DOE and other agencies in 
the Federal Government related to Smart Grid, including identifying and 
addressing potential vulnerabilities. If confirmed, I would look 
forward to learning more about these issues and working to address 
them.
    Question 18. The 2007 Energy Independence and Security Act (EISA) 
directs the National Institute of Standards and Technology (NIST) to 
coordinate the development of standards to ensure the interoperability 
and functionality of Smart Grid. When sufficient consensus of NIST's 
work is reached, EISA directs FERC to initiate a rulemaking to adopt 
such standards and protocols. The FERC Policy Statement issued last 
July adopts key priorities for the interoperability and cyber security 
of standards. With respect to cyber security, how does FERC plan to 
determine whether the standards are cyber secure? Is there a 
coordination process between FERC and NIST or is PERC planning to wait 
for NIST to submit standards before making any determinations?
    Answer. I have been informed that FERC and NIST are coordinating 
closely regarding the smart grid standards development process, holding 
weekly meetings and sharing information about issues and new 
developments as they arise. Beyond these efforts, and the efforts 
described in the preceding answer, I do not know the Commission's 
specific plans on this point.
                               hydropower
    Question 19. Last year, the Commission conducted a technical 
conference on improving the licensing process for small hydropower 
development. The comment period closed last month and I understand FERC 
has already identified several common issues to address. Has the 
Commission identified any legislative actions Congress can take to help 
facilitate small hydropower?
    Answer. I understand that at the last Commission meeting, the 
Commission discussed an action plan, under its existing authority, for 
assisting developers of small hydropower projects in the licensing 
process. I am not aware of any statement by the Commission that 
additional legislative authority is needed in this area.
    Question 20. What are your thoughts on the issue of reliably 
integrating intermittent renewable resources onto the grid? What role 
can both conventional hydropower and pumped storage have to play in 
addressing these problems?
    Answer. I believe that peaking resources such as pumped storage as 
well as demand response can playa valuable role in helping to balance 
certain energy resources, especially wind and solar generation. Those 
conventional hydropower projects that can operate in a peaking mode may 
also be able to assist in this area.
                              reliability
    Question 21. FERC recently released a policy statement on penalties 
for violation of reliability rules. There has been some concern by 
stakeholders regarding the substantial penalties for shedding load. 
What about a situation where there is a failure of critical facilities 
due to natural or manmade disasters and utilities must intentionally 
shed the load in order to preserve the reliability of the larger 
system? Is it FERC's intention to impose some of its highest penalty 
fees - which will ultimately be passed through to consumers - onto 
utilities when it might be more desirable for the overall grid to shed 
a portion of the load?
    Answer. While I cannot speak to FERC's intention in releasing its 
Policy Statement on Penalty Guidelines, I believe that utilities should 
not be penalized for acting in the best interests of customers. I 
cannot comment on specific cases that might come before the Commission 
should I be confirmed, but in general I believe it would be important 
to consider the overall circumstances that led to the need for the 
load-shedding. If none of NERC's reliability standards were violated by 
the circumstances that led to the load-shedding, and if load-shedding 
was conducted pursuant to the requirements of the reliability 
standards, no penalty would be appropriate. I also note that FERC 
settlement agreements typically require entities that pay civil 
penalties to agree not to pass through the penalty to current or future 
ratepayers.
    Question 22. Are you concerned that substantial penalties could 
have a chilling effect on self-reporting?
    Answer. I believe that self-reporting plays a critical role in an 
overall compliance structure. In general, self-reporting requires that 
the reporters have trust in the entity to whom they are reporting, 
including the likely proportionality of penalties to violations.
                            demand response
    Question 23. How important is FERC action to recognize demand-side 
and efficiency measures in its efforts to support the grid integration 
of renewable and other energy resources?
    Answer. I believe it is important to recognize demand-side measures 
in considering overall capacity needs, particularly for peak periods, 
and in supporting grid integration of variable renewable resources. I 
have experience in delivering demand response programs for customers 
(such as radio control of water heaters and other appliances to shift 
load off peak), and know that they can work well to reduce the need for 
new resources and save money for customers. Newer technologies such as 
smart meters and internet-enabled communication to control energy needs 
have tremendous potential to reduce peak energy needs. They can also 
playa very important role in complementing the load characteristics of 
variable energy resources such as wind and solar.
    I do believe that harnessing demand response resources will require 
not just FERC action but close collaboration between FERC and state 
regulators, since state regulators are close to end-use customers and 
can help influence customers to manage their energy and shift loads off 
peak through time-of-use-rates and other mechanisms.
    Question 24. FERC has issued a Notice of Proposed Rulemaking to 
require all RTOs to pay wholesale demand response providers in RTO 
markets the locational marginal price in all hours. There are some 
concerns that such pricing policies could result in perverse economic 
incentives that might overcompensate demand response providers. What 
are your thoughts on how best to compensate demand response measures?
    Answer. I am reluctant to comment on the specific proposal since it 
could still be under consideration if I were confirmed. In general I 
believe locational pricing for demand response makes good economic 
sense, since capacity needs can be very geographically specific. 
Ensuring that demand response resources bidding into RTO markets are 
compensated appropriately is an important element of setting the just 
and reasonable wholesale rate, and if confirmed I would consider 
carefully any proposed rules in this regard.
                           organized markets
    Question 25. What is the appropriate path forward with respect to 
organized and bilateral wholesale markets? Can and should they co-exist 
or should all utilities ultimately be in organized markets?
    Answer. I believe that organized and bilateral markets are likely 
to co-exist for the foreseeable future, and that FERC can accommodate 
and work effectively with this dual market structure.
    Question 26. Is PERC's oversight of electricity markets sufficient 
to ensure that the wholesale electric rates meet the ``just and 
reasonable'' standard of the Federal Power Act?
    Answer. I believe that, with respect to organized markets, FERC 
carries out its responsibility to ensure just and reasonable rates by:

   ensuring that markets are structured effectively, 
        recognizing the interests of customers
   monitoring markets carefully and investigating any market 
        aberrations or possible manipulation or exercise of market 
        power
   seeking penalties and other appropriate remedies for any 
        market manipulation, and implementing corrective action to 
        prevent recurrence.

    While FERC and all agencies can and should always strive to improve 
their operations, I believe FERC is satisfying its responsibilities 
under the Federal Power Act in this area.
    Question 27. Do you believe that the wholesale electricity markets 
operated by regional transmission organizations are achieving net 
benefits for consumers as compared to those regions without RTOs?
    Answer. I believe it is difficult to compare benefits to customers 
between organized markets run by RTOs and bilateral markets in regions 
without RTOs. In general, and not coincidentally, market restructuring 
and the introduction of competitive markets occurred in regions of the 
country that had high energy costs. Northeastern states such as my own 
have historically had much higher rates than many other regions of the 
country, and still largely do. I would look to whether the regions with 
RTOs are better off than had they not been restructured, and I believe 
in general they are. Certainly in New England we have seen much more 
generation come online and more transmission be constructed than was 
occurring in the period prior to the competitive market, reducing 
wholesale costs to customers and improving grid reliability. RTOs have 
also played a very useful role in organizing large-scale demand 
response efforts and other regional projects on a scale very difficult 
to achieve company-by-company.
    Question 28. Do you think that there is a sufficient level of 
transparency in the pricing and other relevant data from the 
electricity markets, particularly those operated by RTOs?
    Answer. Market transparency is desirable and, if I am confirmed, I 
would be interested in exploring whether additional transparency is 
needed, particularly in RTO and ISO markets. RTO and ISO markets 
provide pricing data, transmission characteristics, and forecasted and 
actual demand. In addition, all FERC jurisdictional sellers, including 
those in RTO and ISO markets, are required to file quarterly reports 
providing prices on all jurisdictional power transactions. I also 
understand that the Commission has recently issued a Notice of Inquiry 
seeking comment on whether it should require pricing information from 
market participants that are excluded from the Commission's 
jurisdiction under section 205 of the Federal Power Act.
    Question 29. What is your assessment of the success of pricing 
incentives in the RTO markets, such as Locational Marginal Pricing, to 
spur infrastructure development and address transmission congestion?
    Answer. I believe locational marginal pricing is a useful tool to 
spur the construction of needed generation and transmission and help 
reduce long-run costs for customers in transmission-constrained 
geographic pockets. Of course, experience in the Northeast and other 
organized markets shows the difficulty of crafting market rules that 
always ensure strong competition, and the rules may need adjusting over 
time. I believe FERC must continue to monitor the markets carefully, 
and allow or require changes to market rules when appropriate.
    Question 30. Do you believe RTO-run locational capacity markets are 
providing adequate revenue and certain for new generation while 
avoiding excess payments to existing generation?
    Answer. I believe the locational capacity markets help provide a 
reasonable price signal for construction of capacity or development of 
other resources when and where needed. The rules for these markets must 
ensure that rates are neither excessive for customers nor inadequate to 
elicit the necessary supply of resources. I believe it is important, 
however, to continually examine the market structure and rules to 
ensure that they are achieving these goals.
                               cftc/ferc
    Question 31. As the Senate works on Wall Street reform legislation, 
we can all agree that Congress must guard against systemic risk by 
improving the oversight, transparency, and stability of financial 
markets. The CFTC will certainly be provided with additional regulatory 
authority aimed at addressing systemic risk in the Over-the-Counter 
market. But we need to carefully tailor Congressional action to avoid 
sweeping in the physical energy markets that are regulated by FERC.

          a. How would CFTC jurisdiction over electricity market 
        mechanisms like Financial Transmission Rights (FTRs) affect 
        FERC's overall mission of ensuring just and reasonable rates?

    Answer. I am not yet familiar with the scope of CFTC jurisdiction, 
but do consider FTRs an important tool for FERC in protecting customers 
against the risk of price increases for transmission services in RTOs/
ISOs. Congress recognized the importance of FIRs when it enacted the 
Energy Policy Act of 2005, requiring FERC to use its authority in a way 
that enables load-serving entities to secure FTRs on a long-term basis 
for long-term power supply arrangements made to meet their customer 
needs.

          b. How would CFTC jurisdiction over FTRs impair FERC's 
        ability to protect against manipulation in the RTO markets?

    Answer. I am not yet familiar with the scope of CFTC jurisdiction, 
but would be concerned if its jurisdiction were deemed to limit or 
impair FERC's authority to prevent and penalize market manipulation in 
the RTO markets.

          c. Are you concerned about potential CFTC jurisdiction over 
        products that are available outside of RTO and ISO markets?

    Answer. I am not yet familiar with the scope of CFTC jurisdiction, 
but would be concerned if its jurisdiction were deemed to limit or 
impair FERC's ability to ensure just and reasonable rates, or to 
prevent and penalize market manipulation outside of RTO and ISO 
markets. For example, capacity contracts allow a loadserving entity to 
assure its ability to meet its customers' needs by buying the right to 
use certain resources (e.g., a power plant's output or a right to 
demand response). In an RTO/ISO market, capacity obligations help 
ensure that there will be enough resources to meet the aggregate needs 
of the market's customers. In bilateral markets, capacity contracts can 
serve the same purpose for an indi vidual utility. In both organized 
markets and bilateral markets, capacity contracts can be critical in 
ensuring that a proposed resource has a projected revenue stream 
sufficient to allow development of the resource.
                        ferc/ercot jurisdiction
    Question 32. The Tres Amigas project currently under development 
seeks to transmit renewable power out of the Southwest and into Texas. 
This project, then, raises a tough jurisdictional issue since it would 
create a historic linkage among the three separate power grids - ERCOT 
and the Eastern and Western grid interconnections. Because this is an 
ongoing case at the Commission, I won't ask you to comments on the 
specifics of the proposal. However, I am interested in your thoughts on 
the relationship between FERC and ERCOT and whether the jurisdictional 
bright lines will be able to be maintained in the future.
    Answer. This is a subject about which I look forward to learning 
more. I am of course aware of ERCOT's unique jurisdictional 
circumstances as a single-state transmission grid. I think it is 
important to respect ERCOT's jurisdiction when considering cross-
interconnection projects. I also note by comparison that a number of 
highly beneficial projects have been undertaken between the U.S. and 
Canada without compromising the energy jurisdiction of either nation. 
Thus, I expect that projects can be structured to maintain the 
jurisdictional lines between ERCOT and the Western and Eastern 
Interconnections.
    Responses of Cheryl A. LaFleur to Questions From Senator Shaheen
    Question 1. Traditionally, the planning, siting and cost allocation 
of new transmission has been left up to the states. However, given the 
importance of investing in our transmission system - especially for the 
connection of renewables, some have talked about the need for an 
increased federal role and sharing of costs.
    How do we balance the concerns expressed by the New England 
Governors, PUC Commissioners and others about protecting the 
competitive New England markets from potentially market-distorting 
subsidies for new transmission as a result of a broad cost allocation 
scheme with the need to overcome the barriers of connecting renewable 
resources that are often location constrained and distant from load?
    Answer. I believe that the cost-sharing mechanisms within ISO-New 
England have functioned particularly well because they have been 
negotiated among the participants and have built on a long tradition of 
close cooperation in regional planning dating back to NEPOOL. A cost-
sharing mechanism to bring Midwestern renewable resources to Eastern 
markets, such as the New England Governors and others have expressed 
concerns about, would obviously involve a much larger geographic area 
and span regions with greatly different market structures and existing 
resources plans. I think cost allocation between regions should be 
approached with great care, but I would approach the issues with an 
open mind, considering the concerns of the New England region but of 
course the needs of other regions as well. In general, I believe the 
Commission should seek to encourage cost allocation proposals that 
garner support from market participants and state and local regulators.
    Question 2. In New England, we share costs of new transmission 
projects needed for reliability rather broadly. In your view, could a 
similar structure work for the construction of transmission needed to 
connect renewable energy? Could such a policy be workable for new 
transmission, or upgrades to existing transmission infrastructure, 
solely to connect renewable resources?
    Answer. I believe if Congress gives FERC more express authority to 
allocate costs of high-voltage transmission, it would need to be 
executed with great care and in close collaboration with the states and 
regions affected. I believe that more transmission is needed to connect 
new sources of energy as well as for reliability and to make markets 
work for customers. I would have an open mind about cost allocation 
proposals for transmission intended to connect renewable resources to 
the grid and bring them to market. As far as special policies solely to 
connect renewable resources, it would be difficult to isolate 
transmission for a particular purpose, since transmission by its nature 
would connect the existing generation mix as well as new resources. I 
believe that the generation mix will largely be influenced by 
environmental policies, such as the renewable portfolio standard that 
this Committee passed last year, and not driven by transmission policy.
    Question 3. How can we connect our renewable resources to the grid 
and allocate costs in a fair way that helps pay for transmission 
projects or upgrades?
    What role should the FERC play in helping to get renewable 
resources connected to the grid? What problems would be addressed with 
this new authority?
    Answer. As noted above, I believe that if Congress gives FERC more 
explicit authority to allocate the costs of high-voltage transmission, 
it will need to be used carefully and in collaboration with states and 
regions. The backstop siting authority that Congress gave FERC in the 
Energy Policy Act of 2005 provides a useful example of how giving FERC 
more authority can help in bring states to the table to agree on 
transmission projects that cross state lines and affect different 
regions differently. I believe that passage of new legislation giving 
FERC more explicit authority to allocate costs of high-voltage 
transmission could similarly playa very valuable role in bringing 
states and regions to the table to work together with FERC on high-
voltage transmission improvements that serve the interests of more than 
one region, including the interest in connecting new renewable power 
sources.
    Question 4. Municipal and cooperative utilities in New England have 
told me that they would like the opportunity to jointly plan, finance 
and own new transmission facilities. They believe their participation 
will bring additional capital and political support to needed projects 
and will make cost allocation decisions easier. Do you support joint 
ownership by these utilities?
    Answer. I believe participation by municipal and cooperative 
utilities can play an important part in expansion of the transmission 
system. While joint ownership can increase the complexity of planning 
and developing a transmission project, the benefits ofjoint ownership 
include increasing opportunities for investment in the transmission 
grid.
    Question 5. One issue that has come up in the context of 
transmission incentives is whether their availability should be 
conditioned on the applicant taking steps to allow financial 
participation and investment by other entities, including public power 
and cooperative utilities. The FERC has stated that it seeks to 
encourage diversity of ownership of the nation's transmission grid, 
which is an essential set of facilities. My understanding is that, 
encouragement aside, little is happening in terms of ownership 
diversity.
    Why has the Commission refused to link incentive compensation to 
affording public power and cooperative entities an opportunity to 
participate in new investment?
    Answer. As stated above, participation by municipal and cooperative 
utilities can play an important part in expansion of the transmission 
system. I agree with FERC's statements that it is appropriate to 
encourage such utilities' participation in new transmission projects. 
For example, FERC has stated that it will look favorably on a request 
for transmission incentives that includes joint ownership with such 
utilities. Making a joint ownership structure a precondition for 
transmission incentives, however, could inadvertently chill some needed 
transmission investment. Participation by a diverse group of investors 
may be the best ownership structure for a particular transmission 
project, but may not be appropriate in all circumstances.
    Question 6. There is great concern about the substantial increase 
in transmission charges, including in New England. The transmission 
investment base is growing by leaps and bounds. The transmission 
investment base (the basis for rates) was roughly $3.5 billion in mid-
2009. By 2013, it is forecast to be $8.5 billion. I am concerned that 
ladling incentive return on equity adders on top of the existing rate 
of return will exacerbate the cost impact on consumers.
    In your view, what are the risks that would justify additional 
incentives for owners of new transmission facilities?
    Answer. Incentive-based ratemaking encompasses many techniques, 
such as incentive return on equity (ROE) adders and recovery of costs 
associated with projects that are abandoned for reasons beyond the 
developer's control. I think such incentives can be in the best 
interests of customers where they help promote transmission 
construction that strengthens reliability and makes markets work 
better. However, routine investments made in the ordinary course of 
expanding the system are less compelling cases for incentives, 
particularly incentive ROE adders. It is also important that incentives 
be proportional to the benefits they are intended to promote.
   Responses of Cheryl A. LaFleur to Questions From Senator Menendez
    Question 1. The Energy Bill as currently drafted would allow FERC 
to approve lines anywhere and for almost any reason. Some are concerned 
that this means the federal government will be siting transmission 
lines thorough protected open spaces and through people's back yards. 
Do you believe that FERC should have the authority to site transmission 
lines and use eminent domain power to site those lines over local 
opposition?
    Answer. I believe that it would be helpful for Congress to clarify 
and strengthen FERC's backstop siting jurisdiction. However, I believe 
that jurisdiction would have to be applied very judiciously, because 
siting is first and foremost a state and local responsibility. I know 
from my own experience that siting projects across state lines can be 
very difficult, particularly when the projects impact different 
customers differently. I think a major benefit of FERC's backstop 
siting authority is to encourage states to work out issues 
collaboratively and resolve them without FERC doing so. In addition, 
the Commission's current transmission siting authority is constrained 
by specific limitations, particularly a ``public interest'' standard. I 
believe a similar standard in any additional authority would help 
ensure that the Commission gives appropriate consideration to the 
effects of proposed projects on the interests of landowners and 
communities.
    Question 2. Some claim that enhanced federal power to site 
transmission lines will only result in getting more wind power on the 
grid, but for New Jersey more transmission will likely lead to more 
dirty, coal power being transported into our state, a concern that 10 
governors of the Northeastern states have also voiced. When exercising 
your current back stop authority to site transmission lines or future 
powers Congress might bestow on you, do you believe it is appropriate 
to consider the fuel mix that transmission project will likely bring 
onto the grid? In other words if you know a transmission line will 
result in more coal being burned and in turn increase pollution and 
public health impacts, would it be appropriate to reject that line 
because of those environmental and public health impacts? Should those 
impacts even be a factor in your decisions?
    Answer. Transmission capacity cannot be limited to electrons 
generated only by specific resources, nor can electrons be targeted 
only to specific transmission facilities, as electricity by its nature 
follows the path of least resistance. As a result, transmission lines 
built to connect different regions of the country would likely carry 
electricity reflecting the overall generation mix, not just new 
sources. Also, I believe that changes in the generation mix are likely 
to be determined largely by environmental policy, such as the renewable 
portfolio standard that the Committee passed last year, and not driven 
by transmission policy.
    Having said that, FERC is required under section 216 of the Federal 
Power Act to consider whether proposed interstate electric transmission 
facilities within FERC's limited backstop siting jurisdiction are 
consistent with the public interest and with sound national energy 
policy. Moreover, the National Environmental Policy Act requires 
federal agencies to take a hard look at the environmental impacts of 
proposed actions. Thus, I would expect FERC, in examining a proposed 
transmission project, to consider all public interest factors, 
including environmental impacts, and to impose conditions reducing such 
impacts to an acceptable level or to deny approval if it finds that the 
impacts cannot be so reduced. I cannot predict what issues would be 
within the scope of FERC's review in a given case, but if confirmed I 
would carefully consider and apply the law in this area.
    Question 3. FERC is currently reviewing an application to have a 
high pressure natural gas pipeline located in a dense urban environment 
of high-rise residences in New Jersey. There are concerns that this 
pipeline could have a significant detriment to economic development. 
What is your position on placing these types of high pressure natural 
gas pipelines in dense urban environments? Is that appropriate? Should 
FERC consider the economic impacts of such pipelines before providing 
approval?
    Answer. I cannot comment on any specific proposal that might come 
before me should I be confirmed. I do know that interstate natural gas 
pipelines are required to comply with the Department of 
Transportation's safety regulations, which take population density into 
account. In addition, in reviewing proposed projects, FERC analyzes the 
potential environmental impact they would have on residents and 
communities, and the potential economic effects of proposed pipelines 
on affected communities. Ifconfirmed, I would certainly strive to 
consider all relevant impacts on communities in reviewing any siting 
proposals.
           consumer protection--wholesale electricity markets
    Question 4. Ms. LaFleur, many of the nominees we have for FERC come 
from State Boards of Public Utilities. I think this helpful because in 
this position they need to weigh the interests of utilities against 
those of consumers. On your resume, however, I only see that you have 
experience on the utility side of things. In fact, as far as we can 
tell you might be the first nominee to FERC or the FPC (became an 
independent body in 1935) by Democratic President for a Democratic seat 
that is coming from the industry. What in your background can assure me 
that you will protect consumers and make sure they are charged just and 
reasonable rates for electricity?
    Answer. First of all, in terms of my experience in the electric and 
gas industry, most of my experience has been at the distribution 
customer level, directly serving residential and business customers. I 
have had considerable face-to-face experience meeting with customers to 
discuss their questions about their electric bills, reliability 
problems and storm response, siting new distribution projects such as 
new lines and substations, and providing energy services such as 
conservation and load management. I believe I understand well the 
impact that all regulatory decisions have on people and communities, 
and would reflect those considerations as I weigh issues before the 
Commission. In addition, beyond my utility background, I have 
considerable experience as a community and non-profit board member, a 
lawyer, and a private citizen. I have been closely involved in 
hospitals, colleges, community service agencies, and economic 
development organizations, and I know how much the cost and 
availability of energy affects jobs and customers' pocketbooks.
    Although I have not served as a state regulator, I have worked 
closely and productively with state commissioners in Massachusetts, New 
Hampshire and Rhode Island, and to a more limited extent in New York. I 
would look forward to working with state utility commissioners from 
across the country through NARUC and other collaborative efforts.
    Finally, if confirmed it would be my sworn duty to decide all 
matters based on my independent judgment and in the public interest, 
and that is what I would do.
   Responses of Cheryl A. LaFleur to Questions From Senator Barrasso
    Question 1. The Energy and Natural Resources Committee approved 
legislation that expands FERC's eminent domain authority. It allows 
FERC to override State rejections of proposed transmission lines. Do 
you believe FERC should have the authority to override a State's 
rejection of a transmission proposal?
    Answer. I believe that it would be helpful for Congress to clarify 
and strengthen FERC's backstop siting jurisdiction. However, I believe 
that jurisdiction would have to be applied very judiciously, because 
siting is first and foremost a state and local responsibility. I know 
from my own experience that siting projects across state lines can be 
very difficult, particularly when the projects impact different 
customers differently. I think a major benefit of FERC's backstop 
siting authority is to encourage states to work out issues 
collaboratively and resolve them without FERC doing so. In addition, 
the Commission's current transmission siting authority is constrained 
by specific limitations, particularly a ``public interest'' standard. I 
believe a similar standard in any additional authority would help 
ensure that the Commission gives appropriate consideration to the 
effects of proposed projects on the interests of landowners and 
communities.
    Question 2. What is your view on the future role of baseload power 
sources like coal and nuclear in America's energy portfolio?
    Answer. I believe that existing generation resources, including 
both coal and nuclear, are likely to continue to be a part of America's 
energy portfolio. As far as new resources to be added to the portfolio, 
I support efforts to add nuclear generation where supported by local 
communities and states. I think that the future of new coal generation 
units will likely depend on the success of ongoing research on clean 
coal and carbon sequestration technology. I support research in these 
areas.
    Question 3. Last year, Chairman Wellinghoff said that the nation's 
future power needs can be fully met by renewable energy sources and 
efficiency improvements. Do you agree?
    Answer. I certainly agree with Chairman Wellinghoff that renewable 
energy and demand-side resources, both energy efficiency and demand 
response, can play a very substantial role in meeting new power needs. 
Because of the characteristics of those resources, I do not believe 
that they will supplant the need for new baseload resources in the 
short to medium term.
    Question 4. Do you support requirements that new transmission favor 
or be limited to renewable or low-carbon emitting resources?
    Answer. By definition, transmission is the link between generation 
and load. Currently, transmission facilities connect to and support all 
types of generation resources. Transmission capacity cannot be limited 
to electrons generated only by specific resources, nor can electrons be 
targeted only to specific transmission facilities, as electricity by 
its nature follows the path of least resistance. It is true that 
transmission is a particularly critical issue for geographically-
constrained renewable resources that are remote from load, and that 
transmission would need to be constructed in order for such potential 
resources to serve energy markets. At the same time, I believe that the 
generation mix will largely be influenced by environmental policies, 
such as the renewable portfolio standard that this Committee passed 
last year, and not driven by transmission policy.
   Responses of Cheryl A. LaFleur to Questions From Senator Sessions
    Question 1. Do you believe FERC needs new cease and desist 
authority, or is FERC's current authority sufficient to deal with 
energy market manipulation?
    Answer. I believe that it would be useful for FERC to have cease 
and desist authority to deal promptly and effectively with instances of 
market manipulation, which would bring FERC's authority in line with 
that of the SEC and the CFTC. I would also support FERC having 
authority, with appropriate judicial review, to freeze assets to ensure 
that FERC can prevent the significant dissipation or conversion of 
assets and thus ensure that it can effectuate a remedy.
    Question 2. Once the economy recovers, it is expected our nation's 
demand for electricity will increase significantly over the next 20 
years. I subscribe to the belief we will need a variety of both supply 
and demand side resources to meet our energy needs, including new 
nuclear, renewab1es, clean coal, demand response, and energy 
efficiency. In your opinion can we afford to take any of these 
resources off the table and still deliver the reliable, low cost, and 
clean energy our homes and businesses need?
    Answer. I believe that there is considerable potential for demand-
side resources such as energy efficiency and demand response to slow 
the growth of energy demands, especially peak demands, and believe we 
should work hard at the state and federal level to harness that 
resource. However, I agree that we will also continue to need a diverse 
mix of supply-side resources to meet energy needs. I would not take any 
of the resources you list off the table.
    Question 3. Considering your extensive knowledge of the energy 
industry, I'm sure you are familiar with ``standard market design,'' a 
Commission proposed restructuring of the electric industry that would 
have required all utilities to join Regional Transmission Organizations 
and adopt centralized operating control of the grid. As a result of 
concerns from many states and members of Congress, that proposal was 
dropped, and as a result today's industry structure has a mix of 
vertically-integrated utilities operating under state rate regulation 
and restructured utilities operating in organized markets. In your 
opinion do you believe that these two market structures can continue to 
co-exist?
    Answer. I believe we will continue to see a dual structure of 
organized markets in some regions and bilateral markets in other 
regions for the foreseeable future. I believe that FERC can work 
effectively with this dual structure in its development of energy 
policy.
    Question 4. Section 215 of the Federal Power Act requires the 
Commission to provide ``due weight to the technical expertise'' of NERC 
with regard to reliability standards. It also requires FERC to 
``provide for reasonable notice and opportunity for public comment, due 
process, openness, and balance of interests in developing reliability 
standards and otherwise exercising its duties''. How do you reconcile 
these statutory requirements with a series of recent FERC orders that 
are very prescriptive in directing NERC to make certain modifications 
to its standards and to do so by specified deadlines?
    Answer. The recent FERC orders to which you refer are pending on 
rehearing, and thus it would be inappropriate to comment on them as 
they might come before me should I be confirmed as a Commissioner. 
However, I respect the expertise of those who have developed the 
standards, and understand the Congressional intent that FERC should 
give ``due weight'' to NERC. In any event, I believe that deadlines are 
important to keep the process of standard setting moving.
    Question 5. Regarding the NIST lead effort to develop Smart Grid 
interoperability standards under the 2007 Energy Independence and 
Security Act (EISA),

          a. How will FERC determine and confirm that sufficient 
        consensus has been reached before moving forward with a 
        rulemaking proceeding to adopt such standards?

    Answer. EISA section 1305 directs FERC to institute a rulemaking 
after the work by NIST ``has led to sufficient consensus in the 
Commission's judgment,'' but does not specify criteria for finding 
``sufficient consensus.'' I think it might be informative to consider 
the process for developing consensus in other standards development 
processes accredited by the American National Standards Institute. 
Ifconfirmed, I would look forward to learning more about this and 
helping to move this important process to completion.

          b. How will FERC determine which of the many standards 
        proposed by NIST are appropriate for a rulemaking proceeding?

    Answer. EISA section 1305 requires FERC, upon finding sufficient 
consensus, to adopt ``such standards and protocols as may be necessary 
to insure smart-grid functionality and interoperability in interstate 
transmission of electric power, and regional and wholesale electricity 
markets.'' Consistent with these criteria, FERC issued a Policy 
Statement in July 2009 to provide guidance to NIST and industry as to 
FERC's priorities in the development of smart grid standards. However, 
NIST has not yet completed work on its initial set of smart grid 
standards and it is therefore too early to tell which may be 
appropriate for a rulemaking by FERC.
     Responses of Cheryl A. LaFleur to Questions From Senator Wyden
    Question 1. In response to questions for the record during the 
Committee's 2005 hearing on LNG permitting, Mark Robinson, then 
Director of the Office of Energy Projects responded that,

          The Commission is supportive of competition within the energy 
        industry and of the idea that the market drives infrastructure 
        development. Past experience, particularly since the 
        restructuring on the gas industry following Order No. 636, has 
        demonstrated that market forces can serve the same end as a 
        competitive or ``Ashbacker'' hearing. Where the Commission 
        approves multiple projects to serve a similar market, only an 
        economically viable project will actually be built, i.e., only 
        where customer commitments ensure new service will fulfill a 
        genuine need.

    The Commission continues to follow this policy.

          a. How is this policy consistent with the obligation of the 
        Commission to make an affirmative finding of public convenience 
        and necessity under the Natural Gas Act?

    Answer. I want to be very careful in my answer as I have not 
studied FERC policy and past decisions in this area. If confirmed as a 
Commissioner, I would certainly work hard to study these matters with 
care.
    Having said that, as I understand FERC decisions in this area, LNG 
proposals have been approved without comparative hearings where such 
proposals were deemed to be not mutually exclusive within the meaning 
of Ashbacker. FERC has examined each project on its own merits, 
including all potential environmental and safety impacts, and granted 
approval if it affirmatively found the project to be consistent with 
the public interest.

          b. Do you agree with this policy that competitive or 
        ``Ashbacker'' hearings need never be conducted where multiple 
        projects are proposed for a given market or to serve a specific 
        demand, such as send-out capacity for an LNG terminal?

    Answer. If confirmed, I would work hard to study this area and to 
understand the background of existing FERC policy. As with all matters, 
I would give due deference to existing precedent but would seek to 
apply the law in my independent judgment based on the facts of the case 
before me.

          c. Are there any circumstances where you believe that it is 
        ever appropriate for the Commission to conduct competitive or 
        ``Ashbacker'' hearings where multiple projects are being 
        proposed to serve a single market or even a specific facility, 
        such as an LNG terminal? If so, when?

    Answer. As stated above, I have an open mind and, if confirmed, 
would consider this in view of the specific circumstances of the case 
before me.

          d. In Oregon there are multiple projects including three LNG 
        terminals all proposed to serve the Northwest market with far 
        more capacity than the region uses. Under what circumstances, 
        if any, should LNG projects such as these be the subject of 
        combined proceeding?

    Answer. I cannot comment on the specifics of cases that are still 
pending or could be brought before the Commission should I be 
confirmed. Were I presented with such an issue if confirmed as a member 
of the Commission, I would approach it with an open mind based on the 
facts and law of the case before me.

          e. In the circumstance of the Palomar Pipeline pending before 
        FERC now, and the Northern Star pipeline approved by FERC as 
        part of the Bradwood LNG projects, the projects are intended to 
        transport exactly the same Bradwood-originated gas shipments. 
        Under what circumstances, if any, should pipeline projects be 
        the subject of a combined proceeding?

    Answer. Since these cases are pending before the Commission, I 
cannot comment on the specific proceedings or how I might approach them 
should I be confirmed. On the general question of when proceedings 
should be combined, I would consider arguments with an open mind and 
seek to make the best decision on the facts and the law in cases that 
came before me.

          f. If the Commission has already approved a pipeline, for 
        example the Northern Star pipeline, to serve a specific demand, 
        what basis does it or should it have to make the public 
        convenience and necessity finding required under the Natural 
        Gas Act for a second pipeline for exactly the same shipments?

    Answer. As I understand the law, the Commission could not authorize 
construction of the second pipeline unless it affirmatively found that 
the pipeline was required by the public convenience and necessity. This 
finding would have to be made based on the facts of the specific case 
before it.
    Question 2. The Federal Power Act currently includes authority to 
establish an Office of Public Participation which has never been 
created. FERC is now being given more and more authority over the 
siting energy facilities. In addition to natural gas pipelines, in 2005 
Congress gave FERC authority over siting LNG, and back-stop authority 
to site electric transmission. Congress is currently considering 
legislation to give FERC even broader authority over the siting of 
electric transmission lines. Our experience in Oregon with LNG and 
natural gas pipelines has been abysmal. Most recently, land owners were 
denied the ability to submit written testimony in a FERC proceeding to 
investigate possible abuses by the applicant on their own property. Why 
shouldn't FERC have an Office of Public Participation to ensure that 
citizens have a voice in FERC decisions that so directly affect their 
lives and their communities? Would you support establishing and funding 
this office to ensure that the public is heard?
    Answer. FERC has an existing obligation to consider the interests 
of citizens, and allow them to be heard in FERC proceedings, regardless 
of whether an Office of Public Participation is created and funded. 
Ifconfirmed as a Commissioner, I would strive to uphold this duty. 
However, if Congress chooses to fund an Office of Public Participation, 
I believe it might playa useful role in helping consumers and other 
stakeholders participate in FERC proceedings and making sure that FERC 
processes support such participation. An alternative approach might be 
the creation of an Office of Consumer Advocacy, as mentioned in your 
next question.
    Question 3. The Federal Power Act and the Natural Gas Act require 
FERC to ensure that rates are just and reasonable - a requirement FERC 
has decided it can ignore in favor of letting the market set the price 
- even when that market is dysfunctional or being manipulated as we saw 
with Enron. Utility consumer advocates exist in many states. Wouldn't 
you agree that consumer advocates can provide important consumer 
protections for rate payers? Would you support the creation of an 
office of consumer advocate within FERC?
    Answer. The Commissioners of FERC, and all offices within FERC, 
have an existing obligation to consider the interests of consumers when 
applying the enabling acts and making decisions about energy projects 
and other matters. If confirmed as a Commissioner, I would work very 
hard to meet that obligation. I do not think a consumer advocate could 
relieve FERC of that obligation, or be responsible for representing 
consumers in all matters before the Commission. However, I know that 
consumer advocates playa valuable role at many state commissions. If 
Congress chooses to appropriate funds to create such an office, it 
might play a useful role, for example in helping consumers participate 
in FERC proceedings and strengthening relationships between FERC and 
consumer groups that seek to be heard on energy policy.

                                    

      
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