[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]




 
       SPENDING, PRIORITIES & MISSIONS OF THE BONNEVILLE POWER 
ADMINISTRATION, WESTERN AREA POWER ADMINISTRATION, SOUTHWESTERN POWER 
          ADMINISTRATION & SOUTHEASTERN POWER ADMINISTRATION

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

                           OVERSIGHT HEARING

                               before the

                    SUBCOMMITTEE ON WATER AND POWER

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                        Tuesday, March 15, 2011

                               __________

                           Serial No. 112-10

                               __________

       Printed for the use of the Committee on Natural Resources



         Available via the World Wide Web: http://www.fdsys.gov
                                   or
          Committee address: http://naturalresources.house.gov



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                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
             EDWARD J. MARKEY, MA, Ranking Democrat Member

Don Young, AK                        Dale E. Kildee, MI
John J. Duncan, Jr., TN              Peter A. DeFazio, OR
Louie Gohmert, TX                    Eni F.H. Faleomavaega, AS
Rob Bishop, UT                       Frank Pallone, Jr., NJ
Doug Lamborn, CO                     Grace F. Napolitano, CA
Robert J. Wittman, VA                Rush D. Holt, NJ
Paul C. Broun, GA                    Raul M. Grijalva, AZ
John Fleming, LA                     Madeleine Z. Bordallo, GU
Mike Coffman, CO                     Jim Costa, CA
Tom McClintock, CA                   Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Jeff Denham, CA                          CNMI
Dan Benishek, MI                     Martin Heinrich, NM
David Rivera, FL                     Ben Ray Lujan, NM
Jeff Duncan, SC                      John P. Sarbanes, MD
Scott R. Tipton, CO                  Betty Sutton, OH
Paul A. Gosar, AZ                    Niki Tsongas, MA
Raul R. Labrador, ID                 Pedro R. Pierluisi, PR
Kristi L. Noem, SD                   John Garamendi, CA
Steve Southerland II, FL             Colleen W. Hanabusa, HI
Bill Flores, TX                      Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann, 
    TN
Jon Runyan, NJ
Bill Johnson, OH

                       Todd Young, Chief of Staff
                      Lisa Pittman, Chief Counsel
                Jeffrey Duncan, Democrat Staff Director
                   Rick Healy, Democrat Chief Counsel
                                 ------                                

                    SUBCOMMITTEE ON WATER AND POWER

                      TOM McCLINTOCK, CA, Chairman
            GRACE F. NAPOLITANO, CA, Ranking Democrat Member

Louie Gohmert, TX                    Raul M. Grijalva, AZ
Jeff Denham, CA                      Jim Costa, CA
Scott R. Tipton, CO                  Ben Ray Lujan, NM
Paul A. Gosar, AZ                    John Garamendi, CA
Raul R. Labrador, ID                 Edward J. Markey, MA, ex officio
Kristi L. Noem, SD
Doc Hastings, WA, ex officio

                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Tuesday, March 15, 2011..........................     1

Statement of Members:
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................     6
        Prepared statement of....................................     7
    McClintock, Hon. Tom, a Representative in Congress from the 
      State of California........................................     1
        Prepared statement of....................................     3
    Napolitano, Hon. Grace F., a Representative in Congress from 
      the State of California....................................     4
        Prepared statement of....................................     5

Statement of Witnesses:
    Legg, Kenneth E., Administrator, Southeastern Power 
      Administration, U.S. Department of Energy, Elberton, 
      Georgia....................................................    25
        Prepared statement of....................................    27
    Meeks, Timothy J., Administrator, Western Area Power 
      Administration, U.S. Department of Energy, Lakewood, 
      Colorado...................................................    16
        Prepared statement of....................................    17
    Worthington, Jon C., Administrator, Southwestern Power 
      Administration, U.S. Department of Energy, Tulsa, Oklahoma.    20
        Prepared statement of....................................    22
    Wright, Stephen J., Administrator, Bonneville Power 
      Administration, U.S. Department of Energy, Portland, Oregon     8
        Prepared statement of....................................    10

                                     



   OVERSIGHT HEARING TITLED ``EXAMINING THE SPENDING, PRIORITIES AND 
MISSIONS OF THE BONNEVILLE POWER ADMINISTRATION, THE WESTERN AREA POWER 
     ADMINISTRATION, THE SOUTHWESTERN POWER ADMINISTRATION AND THE 
                  SOUTHEASTERN POWER ADMINISTRATION.''

                              ----------                              


                        Tuesday, March 15, 2011

                     U.S. House of Representatives

                    Subcommittee on Water and Power

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 10:00 a.m. in 
Room 1324, Longworth House Office Building, Hon. Tom McClintock 
[Chairman of the Subcommittee] presiding.
    Present: Representatives McClintock, Gohmert, Denham, 
Tipton, Gosar, Labrador, Noem, Hastings, Napolitano, Costa, 
Grijalva, Lujan, Garamendi, and Markey.
    Also present: Representatives DeFazio and Inslee.

STATEMENT OF HON. TOM McCLINTOCK, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF CALIFORNIA

    Mr. McClintock. The Subcommittee on Water and Power will 
come to order. The Chair notes the presence of a quorum which 
under Committee Rule 3 is two Members. Luckily.
    The Water and Power Subcommittee meets today to examine the 
spending, priorities, and the missions of the Bonneville Power 
Administration, the Western Area Power Administration, the 
Southwestern Power Administration, and the Southeastern Power 
Administration. We also meet under the mandate of House 
Resolution 72 to identify regulatory impediments to job 
creation.
    As we begin, I would ask unanimous consent that the 
gentleman from Oregon, Mr. DeFazio, and the gentleman from 
Washington, Mr. Inslee, be allowed to sit with the Subcommittee 
and participate in the hearing. Hearing no objection, so 
ordered.
    We will begin with five-minute opening statements by the 
Chairman and Ranking Member, and with that we will start the 
clock.
    As I said, today we are hearing from the four Federal Power 
Marketing Administrations that administer our hydroelectricity. 
When we reviewed these administrations last year, I said that I 
wanted to know how much more is being added to our electricity 
bills from over-regulation, water use restrictions, and 
mandated use of so-called alternative energy sources, and what 
they were doing to reverse these restrictions and costs.
    I also said that I wanted to know what plans were underway 
to increase our hydroelectric resources. I hope that we will 
get clear and accurate answers today on these critical points.
    We should remember that in the 1940s, the cheap and 
abundant hydroelectricity generated in the West's Federal dams 
played a major role in producing the armaments and food needed 
to defeat our enemies in World War II. In the post-war years, 
it laid the foundation for the explosive economic growth and 
prosperity of the western United States. Federal hydropower 
projects and the transmission lines delivering the power 
continue to serve their purpose today. But there is one major 
difference. The objective of providing abundance has been 
replaced by a mentality of rationing shortages and imposing 
wildly expensive mandates.
    Litigation, regulation, Federal judges turned river 
masters, and mission creep are reducing project output and 
slamming consumers when our economy can least afford it. At a 
time when we should be empowering communities and employers to 
create jobs, I am concerned that these policies are adding 
greatly to our economic distress.
    For example, three out of ten ratepayer dollars in the 
Pacific Northwest, literally 30 percent of your electricity 
bill, is now being spent on restoring salmon habitats--over 
$800 million taken from ratepayers annually--while we ignore 
the role that fish hatcheries play in producing and supporting 
abundant salmon populations at a fraction of the cost.
    The Federal Government has deliberately foregone a third of 
the hydropower production, roughly 1,000 megawatts, at Glen 
Canyon Dam in the name of saving the humpback chub. We have now 
discovered that this policy actually increases the predator 
populations that feed on the chub, and yet instead of admitting 
our mistakes and changing our policy, this Administration seems 
intent on doubling down on them.
    Meanwhile, in the afflicted Central Valley of California, 
Central Valley Power customers are fleeced by restoration taxes 
that inflate their electricity prices to the breaking point.
    All of these policies make electricity more expensive, and 
by imposing fees on hydropower or by deliberately restricting 
it for pet causes of the environmental Left, this government is 
forcing consumers to buy ever-more expensive replacement power. 
The effort by the Environmental Protection Agency to radically 
restrict carbon dioxide will vastly exacerbate this burden. And 
I would also add that the Western Area Power Administration's 
quest to incorporate wildly expensive solar and wind power, 
combined with its new borrowing authority, threatens to erode 
the beneficiary-based principal. Under the agency's new 
borrowing authority, any defaulted loans with balances could be 
heaped on taxpayers.
    Instead of deliberately bypassing water away from 
hydroelectric turbines, decreasing storage capacity in the name 
of saving endangered fish, and mandating extremely expensive 
and inherently unreliable generation into the grid, we need to 
restore as our objective the development and maintenance of 
abundant, affordable, and reliable power supplies for those who 
actually pay the bills.
    A government that confuses rationing with abundance or that 
mistakes ideological sophistry with sound resource management 
condemns itself to increasingly painful shortages and 
continuing economic distress. The Power Marketing 
Administrations before us today hold the key to restoring a new 
era of abundance and prosperity if they choose to do so. Or 
they can plunge us into a new Dark Age of rationing, shortages, 
prohibitively expensive water and power, and a dying economy.
    I hope today to discover how much more power they are 
providing today than when they appeared before the Subcommittee 
last year, and at what cost, what they have done to reduce 
prices for their consumers over the past year, and what they 
have done to relieve taxpayers from bearing costs that ought to 
be paid by the beneficiaries of their projects. I would like to 
know what cost-benefit analysis they used to evaluate their 
commitment of resources, and I would like to know what plans 
they have to further increase supply, decrease costs, and 
achieve financial independence in the future.
    And with that, I yield back and recognize the Ranking 
Member, the gentlelady from California, Mrs. Napolitano, for 
five minutes.
    [The prepared statement of Chairman McClintock follows:]

         Statement of The Honorable Tom McClintock, Chairman, 
                    Subcommittee on Water and Power

    Today the subcommittee hears from the four federal power marketing 
administrations that administer our hydroelectricity.
    When we reviewed these administrations last year, I said that I 
wanted to know how much more is being added to our electricity bills 
from over-regulation, water use restrictions and mandated use of so-
called alternative energy sources and what they were doing to reverse 
these restrictions and costs. I also said that I wanted to know what 
plans are underway to increase our hydro-electric resources.
    I hope that we will get clear and accurate answers today on these 
critical points.
    We should remember that in the 1940s, the cheap and abundant 
hydroelectricity generated in the west's federal dams played a major 
role in producing the armaments and food needed to defeat our enemies 
in World War II. And in the post-war years, it laid the foundation for 
the explosive economic growth and prosperity of the western United 
States.
    Federal hydropower projects and the transmission lines delivering 
the power continue to serve their purpose today. But, there's one major 
difference: the objective of providing abundance has been replaced by a 
mentality of rationing shortages and imposing wildly expensive 
mandates. Litigation, regulation, federal judges turned river-masters, 
and mission creep are reducing project output and slamming consumers 
when our economy can least afford it.
    At a time when we should be empowering communities and employers to 
create jobs, I am concerned that these policies are adding greatly to 
our economic distress.
    For example:
          3 out of 10 ratepayer dollars in the Pacific 
        Northwest are now spent on restoring salmon habitats--over $800 
        million taken from ratepayers annually--while we ignore the 
        role that fish hatcheries play in producing and supporting 
        abundant salmon populations at a fraction of the cost.
          The federal government has deliberately foregone a 
        third of the hydropower production--or 1,000 megawatts--at Glen 
        Canyon Dam in the name of saving the humpback chub. We have now 
        discovered that this policy actually increases the predator 
        populations that feed on the chub, and yet instead of admitting 
        our mistakes and changing our policy, this administration seems 
        intent on doubling down on them.
          Meanwhile, in the afflicted Central Valley of 
        California, Central Valley Project power customers are fleeced 
        by restoration taxes that inflate their electricity prices to 
        the breaking point.
    All of these policies make electricity more expensive. By imposing 
fees on hydropower or by deliberately restricting it for pet causes of 
the environmental Left, this government is forcing consumers to buy 
ever more expensive replacement power. The effort by the Environmental 
Protection Agency to radically restrict carbon dioxide will vastly 
exacerbate this burden.
    I might also add that the Western Area Power Administration's quest 
to incorporate wildly expensive solar and wind power--combined with its 
new borrowing authority--threatens to erode the ``beneficiary pays'' 
principle. Under the agency's new borrowing authority, any defaulted 
loans with balances could be heaped on taxpayers.
    Instead of deliberately bypassing water away from hydropower 
turbines, decreasing storage capacity in the name of saving endangered 
fish and mandating wildly expensive and inherently unreliable 
generation into the grid, we need to restore as our objective the 
development and maintenance of abundant, affordable and reliable water 
and power supplies for those who actually pay the bills.
    A government that confuses rationing with abundance or that 
mistakes ideological sophistry with sound resource management condemns 
itself to increasingly painful shortages and economic distress.
    The power marketing administrations before us today hold a key to 
restoring a new era of abundance and prosperity if they choose to do 
so. Or they can plunge us into a new dark era of rationing, shortages, 
prohibitively expensive water and power and a dying economy.
    I hope today to discover how much more power they are providing 
today than they were when they appeared before the subcommittee last 
year--and at what cost; what they have done to reduce prices for their 
consumers over the past year; and what they have done to relieve 
taxpayers from bearing costs that ought to be paid by the beneficiaries 
of their projects. I would like to know what cost/benefit analysis they 
use to evaluate their commitment of resources. And I would like to know 
what plans they have to further increase supply, decrease costs, and 
achieve financial independence in the future.
                                 ______
                                 

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

    Mrs. Napolitano. Thank you, Mr. Chairman. And first of all, 
welcome to all of you, the four of the PMAs' Administrators, 
for coming to Washington to brief us and bring information to 
us, updating Congress on the most important issues that each of 
your agencies face. I know I have toured two. Hopefully I will 
make it to the other two sometime in the future, because I have 
learned from actually seeing and touring and asking the 
questions that are necessary.
    Each of our four PMAs are unique in terms of geographic 
location, your customer base, the amount of infrastructure it 
owns, and your mission. PMA Administrators' testimonies today 
will help shed light on those differences and remind us that 
some of the challenges you face are universal. These challenges 
include water shortages caused by climate change and drought, 
how drought affects how we generate the power--I say ``we''; 
you--and the amount of hydropower available to customers. Aging 
infrastructure--one of the biggest issues that I find is going 
to be an increasingly growing issues, and I am sure it is to 
you.
    I am very interested in learning how your capital costs 
help to continue to rehabilitate our generation resources if we 
are to maintain an historic power production levels and how 
these costs would check up at the end of the year. And, yes, 
hydroelectricity is the cheapest power there is, and I am sure 
customers would be a little concerned if you raised them 
outside of the realm of reason, but I think that we need to 
start recouping some of the costs that are inherent than you 
have already.
    I am very concerned about bark beetle infestation and how 
the problem affects your infrastructure and transmission line. 
I hope to hear if there is any research and development on how 
to keep it in check or help defeat it. We are also continuing 
our strong support for wind and renewables. However, we 
understand we have to find solutions to some of the operational 
changes of integrating these resources.
    Pacific Northwest is fortunate that it depends on 
hydropower, but also wind resources and is exceeding demand, 
causing its own challenges. We need to continue to find out how 
we can help in Congress, as we understand it and you brief us, 
how we can help in those areas.
    I do know that the Northwest delegation is actively looking 
at solutions to support this development of renewals while 
protecting the hydropower resources and the operational 
integrity of the BPA grid. I would like to offer any help in 
facilitating a solution in this discussion since California 
depends on renewables generated in the Northwest region. These 
challenges cause us to look in the future and understand that 
we will have to do more with less.
    In reading some of the testimony, I find that some of you 
are finding yourselves with diminishing personnel because of 
age, retirement age, and that you are hoping to be able to 
bring in individuals who are interested in working in that 
particular area. And I look forward to hearing how you are 
attempting to do that, besides your job fairs, via internships 
and other things that we may be able to put some of our 
youngsters--get their interest in it.
    Look forward to hearing from each one of you on how your 
respective agency plans to confront tomorrow's challenges using 
the funding outlined within the budget request. And thank you 
again for being here and for making us aware of where we need 
to be. And with that, I yield back.
    [The prepared statement of Mrs. Napolitano follows:]

   Statement of The Honorable Grace F. Napolitano, a Representative 
                in Congress from the State of California

    Thank you to all four of the PMA Administrators for making the trip 
to Washington today to update the Congress on the most important issues 
each of your agencies face. Welcome.
    Each of our four PMAs is unique in terms of geographic location, 
customer base, the amount of infrastructure it owns, and their 
missions.
    PMA Administrators' testimonies today help shed light on those 
differences. They also remind us that some of the challenges our PMAs 
face are universal.
    These challenges include water shortages caused by climate change 
and drought. How drought affects how we generate our power and the 
amount of hydropower available to customers.
    Aging infrastructure is also an increasingly growing issue. I'm 
interested in learning about how your capital costs help to 
rehabilitate our generation resources if we are to maintain historic 
power production levels--and how those costs check up at the end of the 
year.
    I'm very concerned about the bark beetle infestation an how this 
problem affects our infrastructure, our transmission lines.
    We are continuing our strong support for wind and renewables, but 
understand that we have to find solutions to some of the operational 
challenges of integrating these resources. The Pacific NW is fortunate 
in that it depends on hydropower but also has wind resources. Right now 
in the Northwest power supply is exceeding demand, causing its own 
challenges.
    I know that the NW delegation is actively looking at solutions to 
support the development of renewables while protecting their hydropower 
resources and the operational integrity of the BPA grid. I would like 
to offer any help in facilitating a solution to this discussion since 
California depends on renewables generated in the NW region.
    These challenges cause us to look to the future and understand that 
we will have to do more with less.
    I look forward to hearing from each PMA Administrator on how their 
respective agency plans to confront tomorrow's challenges using the 
funding outlined in its budget request.
                                 ______
                                 
    Mr. McClintock. The Chair now recognizes the Chairman of 
the Natural Resources Committee, the gentleman from Washington, 
Mr. Hastings.

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

    Mr. Hastings. Thank you very much, Mr. Chairman, and thank 
you for the courtesy. I am pleased to be here today, especially 
since the agencies under the Water and Power Subcommittee have 
a profound and direct impact on my constituents in my Central 
Washington district.
    Two of the largest Federal irrigation projects in the West 
and the Grand Coulee Dam, the flagship of the Federal Columbia 
River Power System, are all in my district. Together they serve 
as the heart of Central Washington's economy and way of life.
    Today's hearing on the Power and Marketing Administration 
is an important endeavor since Congress has the duty to conduct 
oversight on these agencies. While ratepayers typically recover 
all of the cost of these agencies, Congress should focus on 
what Federal matters impact the electricity rates to assess 
whether their rates are fair and the lowest possible cost. For 
example, at least 30 percent of the rates of those served by 
the Bonneville Power Administration are related to endangered 
fish costs that have been subject to almost a decade of 
litigation.
    Despite these expenditures and the fact that fishery 
returns are at the highest levels, some still seek to remove 
the four dams on the lower Snake River in the name of salmon 
protection. Removal will do very little to help the salmon. In 
fact, it will drive up energy costs and destroy jobs. It will 
increase the carbon footprint in the region and eliminate a 
major backup source for wind integration. Snake River Dam 
removal, I will say, Mr. Chairman, will not happen on my watch, 
as long as I am the Chairman of this Committee.
    On wind integration, we will hear later today from 
Bonneville Power Administrator Steve Wright about how wind 
integration presents a lot of challenges for the region. When 
much of the wind resource is destined for California, we need 
to ensure that our ratepayers in the Pacific Northwest are not 
negatively impacted, and that our endangered fish recovery 
efforts are not compromised by wind exports. If the 
beneficiaries are Californians, then these beneficiaries should 
pay.
    I also want to make sure that the Western Area Power 
Administration adheres to the ``beneficiary pays'' principle as 
it implements its new borrowing authority. This new authority 
became law without any congressional hearings or markups. 
Oversight, therefore, is clearly needed. I am told that some of 
the agency's core customers are very concerned about this new 
mission, that this new mission could negatively impact them, 
and that there hasn't been adequate transparency to resolve 
their concerns on recently proposed transmission lines. As we 
all know, there is a potential taxpayer bailout of this new 
authority as well.
    So, in conclusion, I look forward to working with the 
Subcommittee Chairman, Mr. McClintock, and the Ranking Member, 
Mrs. Napolitano, both Californians I might add, on these and 
other issues for the next two years. And thank you, and I yield 
back.
    [The prepared statement of Mr. Hastings follows:]

          Statement of The Honorable Doc Hastings, Chairman, 
                     Committee on Natural Resources

    I'm pleased to be here today, especially since the agencies under 
the Water and Power Subcommittee have a profound and direct impact on 
constituents in my central Washington district. Two of the largest 
federal irrigation projects in the West and the Grand Coulee Dam, the 
flagship of the Federal Columbia River Power System, are in my 
district. Together, they serve as the heart of central Washington's 
economy and way of life.
    Today's hearing on the Power Marketing Administrations is an 
important endeavor since Congress has a duty to conduct oversight on 
these agencies. While ratepayers typically recover all of the costs of 
these agencies, Congress should focus on what federal matters impact 
electricity rates to assess whether the rates are fair and the lowest 
cost possible.
    For example, at least 30% of the rates of those served by the 
Bonneville Power Administration are related to endangered fish costs 
that have been subject to almost a decade of litigation. Despite these 
expenditures and the fact that fish returns are at high levels, some 
still seek to remove four dams on the Lower Snake River in the name of 
salmon protection. Removal would do very little to help the salmon, 
drive up energy costs and destroy jobs, increase the carbon footprint 
of the region and eliminate a major backup source for wind integration. 
Snake River dam removal will not happen on my watch.
    I mentioned wind integration because we will hear later today from 
Bonneville's Administrator, Steve Wright, about how wind integration 
presents a lot of challenges for the region. When much of the wind 
resource is destined for California, we need to ensure that our 
ratepayers in the Pacific Northwest are not negatively impacted and 
that our endangered fish recovery efforts are not compromised by wind 
exports. If the beneficiaries are Californians, then those 
beneficiaries should pay.
    I also want to make sure that the Western Area Power Administration 
adheres to the ``beneficiaries pays'' principle as it implements its 
new borrowing authority. This new authority became law without any 
congressional hearings or markups. Oversight is clearly needed. I'm 
told that some of the agency's core customers are very concerned that 
this new mission could negatively impact them and that there hasn't 
been adequate transparency to resolve their concerns on recently 
proposed transmission lines. As we all know, there is a potential 
taxpayer bailout in this new authority as well.
    In conclusion, I appreciate being here for this important hearing 
and I look forward to working with Subcommittee Chairman McClintock and 
Ranking Member Napolitano--both from California--on these and other 
issues in the next two years.
                                 ______
                                 
    Mr. McClintock. It is customary on this Subcommittee to 
recognize any other Members who wish to make opening statements 
to do so. And in keeping with the Natural Resources Committee 
precedent, I will recognize Members present when the 
Subcommittee came to order, alternating between majority and 
minority. And Mr. Gosar, I believe, is next. Mr. Tipton, do 
you--OK. Well, good.
    Then we will move on to witnesses today. We are pleased to 
be joined by Mr. Steve Wright, Administrator of the Bonneville 
Power Administration; Mr. Timothy Meeks, Administrator of the 
Western Area Power Administration; and Mr. John Worthington, 
Administrator of the Southwestern Power Administration; and Mr. 
Kenneth Legg, Administrator of the Southeastern Power 
Administration.
    Your written testimony will appear in full in the hearing 
record, so I would ask that you keep your oral statement to 
five minutes, as outlined in our invitation letter to you and 
under Committee Rule 4[a]. I also want to explain how our 
timing lights work. When you begin to speak, our clerk will 
start the timer, and a green light will appear. After four 
minutes, a yellow light will appear, and at that time, you 
should begin concluding your statement. At five minutes, the 
red light will come on. You can complete your statement, but I 
would ask that you conclude at that point.
    Before I recognize Mr. Wright, I would note that he 
recently celebrated 30 years of service in the Bonneville Power 
Administration. Congratulations, and I now recognize him to 
testify for five minutes. All witness statements will be 
submitted for the hearing record.

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

    Mr. Wright. Thank you very much, Mr. Chairman, Mrs. 
Napolitano, Members of the Subcommittee. My name is Steve 
Wright, and I am the Administrator of the Bonneville Power 
Administration. My testimony provides a summary of the last 
year, as well as a look at the challenges coming at us.
    First, a quick reminder that BPA receives no annual 
appropriations. We cover all of our costs through the sale of 
power and transmission services. We have limited access to 
capital that must be repaid at the U.S. Treasury's cost of 
money.
    2010 was a challenging but productive year. The downturn in 
the economy, combined with another below-average water year, 
resulted in not achieving our revenue targets and losing money 
for the second year in a row. Fortunately, our conservative 
fiscal policies in previous years resulted in building 
financial reserves designed to carry us through just such 
circumstances.
    In 2010, BPA made its full scheduled $864 million repayment 
to the Federal investment. This marks the 27th straight year 
that BPA has made the full scheduled payment. BPA also 
registered substantial progammatic success. Working with our 
public power customers over 90 average megawatts of energy 
efficiency was acquired, a substantial increase from previous 
years.
    We completed the decade-long refurbishment of the historic 
Bonneville Dam first power house, part of a comprehensive 
effort to assure we are investing to get maximum cost 
effective, renewable hydropower from our system. The 
interconnections of wind power to BPA's transmission now 
exceeds 3,400 megawatts, effectively accomplishing the 
regionally established 2020 goal set just four years ago a 
decade ahead of schedule.
    There are many reasons behind that wind power explosion, 
but one of the most significant is BPA's nationally innovative 
policies to get financial commitments in advance, allowing more 
transmission to be offered and built. Our first major 
construction project utilizing American Recovery and 
Reinvestment Act borrowing authority, The McNary-John Day line, 
is ahead of schedule and under budget.
    We are also witnessing dramatic increases in returning 
adult Columbia Basin salmon and steelhead listed as threatened 
and endangered. While humility demands that we recognize the 
contribution of good ocean conditions, where these fish spend 
the majority of their lives, our extensive research, 
monitoring, and evaluation program tells us that the 
substantial investment Northwest ratepayers are making is 
resulting in increased survival through the hydro system 
corridor.
    There are in fact more successes to celebrate, but I want 
to take time to describe six key issues likely to come to the 
attention of the Subcommittee in the coming year. First, we 
will expand our efforts to support the acquisition of energy 
efficiency by our customers. Energy efficiency is by far the 
least cost, most environmentally benign resource. It deserves 
our priority attention over all other resources.
    Second, the rapid pace of wind development, most of which 
is being exported outside of our control area, has created a 
new set of challenges. For example, development is concentrated 
in a small geographic area, exacerbating the peaks and troughs 
of wind generation. The flexibility available from the hydro 
system to manage the variable output of wind power and maintain 
reliability is nearing exhaustion.
    Wind generation also tends to accentuate the periodic over-
supply of electricity, particularly in the spring. Increasing 
injections of wind energy without mitigation may extend this 
challenge. We are pursuing a lessons-learned effort to help 
address these issues. We believe these challenges can be met, 
but it should be recognized we are likely to encounter 
difficult choices that must be made.
    Our values as we confront these choices are encouraging 
renewable resource development while assuring reliability is 
maintained and assuring that any cost of wind power is paid by 
the purchasers and sellers.
    Third, we are in the process of resetting rates. We are 
seeking to assure adequate investment in a valuable but aging 
hydro system, assuring a probability of repaying the U.S. 
Treasury while keeping rates as low as possible, recognizing 
the state of the economy.
    Fourth, we are awaiting an extremely important Federal 
District Court decision regarding a joint Federal, three State, 
and six tribe plan for salmon restoration. This Subcommittee 
has followed this issue for more than a decade. A decision 
supporting the plan would solidify a remarkably successful 
collaboration that is producing results on the ground and avoid 
a reset button that would likely result in uncertainty, if not 
turmoil.
    Fifth, the Columbia River treaty with Canada is nearing 
deadlines for decisions about its future post-2024. One would 
be hard-pressed to find a more successful trans-international 
boundary river basin agreement. Important questions, though, 
must be addressed, including flood control protection, the 
treatment of power production at U.S. facilities enabled by the 
treaty, and many ecosystem protection and economic issues that 
were not part of the original treaty consideration.
    Sixth and finally, there has been a long-running debate and 
litigation around a program BPA is mandated to operate, 
designed to create greater rate parity for residential and 
small farm consumers in the Northwest. The parties have worked 
hard to resolve their differences. We applaud them for their 
effort and are considering the merits of their agreement in a 
rate case setting, and commend it for your consideration.
    Mr. Chairman, this concludes my testimony. I look forward 
to your questions.
    [The prepared statement of Mr. Wright follows:]

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

    Mr. Chairman and Members of the Subcommittee, I appreciate the 
opportunity to testify here today. My name is Steve Wright. I am the 
Administrator of the Bonneville Power Administration (Bonneville). I am 
pleased to be here today to discuss the President's Fiscal Year (FY) 
2012 Budget as it relates to Bonneville.
    In my testimony today, I will share with the Committee Bonneville's 
significant successes over the past year, how we are addressing the 
considerable challenges we are facing, and an overview of the FY 2012 
budget.

BONNEVILLE'S RECENT SUCCESSES
    FY 2010 was challenging, yet productive for Bonneville. Like almost 
every institution and business in the nation, Bonneville is facing the 
realities of the current economic hardships. But Bonneville has been 
more than up to the challenge of managing through difficult economic 
times while making important progress in areas that advance both 
national and regional energy goals.
    In the Pacific Northwest, poor economic conditions have been 
exacerbated by successive years of low snowpack. Snowpack fuels our 
hydro-powered system. With last year's January--July runoff at only 79 
percent of the 30-year average, we had little surplus power to sell. 
Surplus sales normally represent about one-fifth of our revenues. As a 
result, we fell far short of our start-of-year revenue goals.
    Despite these challenges, Bonneville has retained its fundamental 
financial strength and stability. The same financial discipline and 
management principles that enabled us to recover from the West Coast 
energy crisis of 2000-2001 are ensuring that we can manage the current 
environment, while continuing to make substantial investments in the 
region's transmission, generation, energy efficiency, and fish and 
wildlife restoration efforts.
    As the Committee knows, Bonneville ratepayers repay the debt on the 
Federal investment in the Federal Columbia River Power System (FCRPS). 
In FY 2010, Bonneville made its full scheduled payment of $864 million 
to the U.S. Treasury, including $38.5 million in advanced amortization. 
This payment marks the 27th year in a row that Bonneville has made a 
full, on time payment to the Treasury. Bonneville finances its 
approximate $4.6 billion annual cost of operations and investments 
primarily using power and transmission revenues and borrowing from the 
U.S. Treasury at interest rates comparable to the rates prevailing in 
the market for similar bonds issued by Government corporations.
    As stewards of the FCRPS, Bonneville also has a mandate to mitigate 
the impacts on fish and wildlife of Federal hydropower development and 
operations on the Columbia River and its tributaries. On that front, it 
has been a very successful year. While ocean conditions clearly play a 
big role in the survival of fish, there is strong evidence that our 
efforts are contributing to the increasingly robust salmon populations. 
After years of investing in improvements to make our hydroelectric 
projects and habitat safer for fish, we are seeing remarkable results. 
Some salmon runs are returning in numbers that haven't been seen since 
the 1950s. Last year, more Snake River fall Chinook returned above 
Lower Granite Dam than we have seen since the dam was built in 1975.
    FY 2010 also saw wind power continue to flourish in the Pacific 
Northwest. As the owner of about 75 percent of the high voltage 
transmission in the region, nearly 3,400 megawatts of wind capacity is 
currently integrated into Bonneville's system, an amount that could 
double in the next few years. Major transmission infrastructure 
projects accompany this continuing expansion. We are well into 
construction of the West of McNary Group I Transmission Project (also 
known as McNary-John Day) which was the first of Bonneville's American 
Recovery and Reinvestment Act (ARRA) projects to break ground.
    We are grateful to the Congress and the President for a substantial 
increase in our existing borrowing authority as part of ARRA. We have 
developed asset management plans for our major categories of capital 
assets (transmission, hydro system infrastructure, fish and wildlife, 
and conservation) and have identified cost-effective investments that 
exceed our current total borrowing authority. This means we will need 
to continue to follow rigorous capital review process to assure we 
approve only the most cost-effective uses of our borrowing authority.
    Bonneville captured almost 90 average megawatts of energy 
efficiency in FY 2010, easily exceeding its portion of the Northwest 
Power and Conservation Council's conservation target. The energy 
efficiency team was recognized as a leader in the field with multiple 
awards, including three Energy Management Awards from the Department of 
Energy and two regional Environmental Protection Agency Awards.

KEY CHALLENGES
    The coming years will see fundamental changes in the Pacific 
Northwest power system. Growing demand and increased wind power 
development are combining to put new strains on our transmission and 
power systems. Bonneville is working closely with customers and 
stakeholders throughout the West and looking for opportunities to meet 
these new demands.
Energy Efficiency--The Northwest's Priority Resource
    The Pacific Northwest has long been a national leader in energy 
efficiency and Bonneville has been an integral part of this successful 
effort. Bonneville is significantly increasing investment in the years 
to come which will support the Administration's goals of enhancing the 
economy, increasing energy independence, and promoting clean energy 
(Attachment A).
    In FY 2010, the Northwest Power and Conservation Council issued its 
Sixth Power Plan. The plan identifies energy efficiency as the least 
cost resource and envisions that almost 60 percent of the Pacific 
Northwest's new demand for electricity over the next five years and 85 
percent of load growth over the next 20 years could be met cost 
effectively with energy efficiency. This nearly doubles targets from 
the previous plan. Bonneville agrees with this plan and will work in 
partnership with public power to achieve public power's share of that 
goal. Bonneville budgets reflect increasing investment to achieve the 
higher megawatt targets.
    Bonneville is also supporting two major demonstration initiatives 
supporting a smarter grid--the Pacific Northwest Smart Grid 
Demonstration Project and the Western Interconnection Synchrophasor 
Program. We are exploring how different smart grid technologies can 
benefit Bonneville's customers through cost containment and improved 
reliability. Smart grid technologies hold great potential to improve 
transmission reliability and reduce the need for new transmission 
infrastructure and power resources, although much work remains to be 
done to prove the business case.

Wind--Success Breeds Challenges
    By the end of 2010, Bonneville had connected nearly 3,400 megawatts 
of wind generation to its transmission system (Attachment B). What is 
remarkable about this milestone is that only four years ago, a regional 
wind integration task force thought that 3,000 megawatts of wind 
connection to the Bonneville system was a reasonable target to be 
accomplished by 2020. We hit that target a decade sooner. We now have 
commitments in our interconnection queue that could increase that total 
generating capacity in Bonneville's Balancing Authority Area to 10,000 
megawatts by 2017 (Attachment C).
    It is important to note that most of this wind resource is being 
developed for use elsewhere. More than 80 percent of the wind on 
Bonneville's system is meant to serve renewable electricity demand 
outside Bonneville's Balancing Authority Area. We estimate that over 
half is under contract to serve California utilities. Bonneville's 
ability to connect such significant amounts of renewable generation is 
a major contribution to renewable energy development West-wide.
    This rapid pace of wind development leads us to believe there is a 
need for a ``lessons learned'' discussion with the region. We intend to 
work with regional stakeholders to review our operating experiences and 
the challenges we can expect to face as a result of further accelerated 
wind power development in the Pacific Northwest.
    Bonneville is seeking to simultaneously encourage renewable 
resource development, maintain reliability, protect fish and wildlife, 
and assure that the costs of wind power are paid by wind purchasers and 
sellers. We believe success at achieving these goals is necessary to 
continue the expansion of renewable resources.
    Some of the challenges we are currently experiencing include:
        1.  Wind development has concentrated in a small geographic 
        area east of the Columbia River Gorge where transmission 
        service is available and in close proximity to California 
        interties. This concentration magnifies the peaks and troughs 
        of wind generation.
        2.  Wind generation tends to accentuate the periodic oversupply 
        of energy in the spring.
        3.  Bonneville's transmission system has limited ability to 
        move all of this generation out of the region.
        4.  Bonneville has embarked on major transmission projects 
        within the region to improve service for all transmission 
        transactions, including wind generation, but due to flexibility 
        we have offered we do not always know the ultimate destination 
        of wind electricity and this uncertainty is increasingly 
        affecting our ability to plan for reliable transmission 
        service.
        5.  The Federal hydro system has worked well to back up wind 
        generation's high variability. The dams can ramp generation up 
        when wind generation falls off and back down when wind 
        generation comes back up. We have worked successfully for the 
        last several years on new tools to stretch the reserve 
        capabilities of the hydro system but we are nearing the limits 
        of those capabilities.
    If wind generation in our system is to triple in the next six 
years, we need to engage the region to expand the integration strategy.

Rates -Managing for Short and Long-Term
    Bonneville is currently engaged in processes to re-set rates for 
sales of power and transmission and is following an extensive public 
process to review and make changes to Bonneville's budget. Almost all 
Transmission customers have agreed in principle to a settlement of 
rates for FY 2012-2013.
    On the Power side, this is the first time we will be implementing 
rates under our new contracts, which include tiered rates. Bonneville 
is proposing an 8.5 percent wholesale power rate increase primarily 
driven by the need for investment in the non-CO2 emitting, 
low cost hydropower assets that create substantial value for the 
region. We are committed to establishing rates that will maintain at 
least a 95 percent Treasury Payment Probability while also seeking to 
keep rates as low as possible reflecting the stress the regional 
economy is experiencing.

Residential Exchange--Addressing a Regional Controversy
    Representatives of consumer owned and investor owned utilities 
across the region have worked hard in response to our request that they 
attempt to settle on Residential Exchange Program costs and benefits 
for the next 17 years. Disputes and litigation have plagued the Program 
since its inception. Together they have reached a proposed settlement 
that will now be considered by the utilities for adoption. We applaud 
their efforts and are considering the merits of their proposal in a 
formal rate setting process. We are under ex parte rules for both this 
and the power and transmission rate setting processes.

Protecting ESA Listed Fish
    After more than a decade of litigation, we are awaiting an imminent 
ruling on biological opinions protecting threatened and endangered fish 
in the Columbia River Basin. A Federal plan has been introduced in the 
Federal District Court of Oregon under Judge James Redden. This plan 
responds to Judge Redden's request for funding commitments that ensure 
the improvements are reasonably certain to occur. Consistent with the 
Court's request for collaboration, the Federal plan is the product of 
extensive regional collaboration resulting in support from three states 
and seven Indian Tribes. The National Oceanic and Atmospheric 
Administration performed a review of the plan, which also included 
review by independent biologists. The independent review confirmed that 
the underlying science of the plan was sound.
    Bonneville believes the region is at a fundamental fork in the road 
with respect to salmonid restoration. The Federal plan is well 
positioned to succeed. The Federal plan addresses the whole salmonid 
life cycle: habitat, hydro, hatcheries and harvest, while the 
plaintiffs' plan focuses only on hydro projects. The Federal plan has 
unprecedented state and tribal support. It is the product of regional 
collaboration and supported by the best science available. The data 
shows that surface passage and spill has improved fish survival, 
habitat restoration provides healthy rivers for returning fish to 
spawn, and returns are improving. Moreover, the Federal plan also 
creates a substantial number of jobs. Bonneville believes that it's 
time to let the plan work.
    Part of implementing the plan includes beginning construction in FY 
2012 on three significant fish projects. These projects are listed in 
the Proposed Appropriations (Expenditure Authority) Language of 
Bonneville's Congressional Budget submission pursuant to Public Laws 
93-454 and 96-501. The projects are consistent with the 2008 Biological 
Opinion and the 2008 Columbia Basin Fish Accords. The projects 
exemplify the commitment by tribes, states, and Bonneville to work 
collaboratively towards achieving specific biological objectives and 
meeting salmon recovery requirements.

Columbia River Treaty--Important Decisions are Coming
    The Columbia River Treaty (CRT) is a marvel of international 
cooperation enabling a wide range of related benefits that affect 
British Columbia and the Pacific Northwest (Attachment D). Signed in 
1961 and ratified in 1964, the CRT is known throughout the world as one 
of the best and most successful examples of a transboundary water 
Treaty. The Treaty includes a unilateral right for either country to 
terminate beginning in 2024 provided 10 years' notice is provided. The 
U.S. Entity for the CRT, through Bonneville and the Army Corps of 
Engineers, has initiated the process to discuss with the region's state 
governments and tribes, as well as other stakeholders, issues related 
to the continuation of the CRT. The CRT was designed to provide flood 
control and hydropower benefits in both countries, but we understand 
that values in the region have changed in the last 50 years and issues 
need to be considered that were not part of the debate 50 years ago. 
The U.S. Entity is establishing management structures to engage fellow 
Federal agencies, regional sovereigns and non-sovereign stakeholders in 
order to develop a recommendation to be provided to the State 
Department in fall 2013.

FY 2012 BUDGET OVERVIEW
    Bonneville is in sound financial condition and is well positioned 
for the future. Bonneville's FY 2012 budget proposes estimated accrued 
expenditures of $3,195 million for operating expenses, $52 million for 
Projects Funded in Advance, and $937 million for capital investments.
    Bonneville's commitment to fish and wildlife mitigation and 
enhancement is exemplified in its substantial direct program budget of 
$300 million, capital and expense.
    Bonneville's FY 2012 budget is a business based budget that 
strongly supports Department of Energy priorities and goals.
    Even with the ARRA providing a sizable increase in Bonneville's 
authority to borrow from the Treasury, the agency will continue to face 
capital funding challenges as the pace of capital spending increases to 
meet the infrastructure and energy efficiency needs of the region. We 
continue to seek opportunities for alternative funding sources with 
third parties. Table BP-5 in Bonneville's FY 2012 Congressional Budget 
submission provides increased transparency regarding potential 
Bonneville third-party financing activity, which is estimated at about 
$203 million during the FY 2010 through FY 2016 period. This use of 
third-party financing pushes out the point in time where capital 
spending plans are estimated to exhaust Treasury borrowing authority.
    Please see Attachment E for budget data based on current services 
for FYs 2010 through 2012.

CONCLUSION
    That concludes my prepared remarks Mr. Chairman. I am excited by 
the role Bonneville is playing to achieve regional and national goals 
for clean and reliable electricity supplies while managing the 
operation in a fiscally prudent manner. I would be happy to respond to 
any questions from the Committee.
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                            Attachment C

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                            Attachment E

    The accompanying notes are an integral part of this table.
    \1\  BPA finances its operations with a business-type budget under 
the Government Corporation Control Act, 31 U.S.C 9101-10, on the basis 
of the self-financing authority provided by the Federal Columbia River 
Transmission Act of 1974 (Transmission Act) (Public Law 93-454) and the 
U.S. Treasury borrowing authority provided by the Transmission Act, the 
Pacific Northwest Electric Power Planning and Conservation Act (Pacific 
Northwest Power Act) (Public Law 96-501) for energy conservation, 
renewable energy resources, capital fish facilities, and other 
purposes, the American Recovery and Reinvestment Act of 2009 (Public 
Law 111-5), and other legislation. Authority to borrow from the U.S. 
Treasury is available to the BPA on a permanent, indefinite basis. The 
amount of U.S. Treasury borrowing outstanding at any time cannot exceed 
$7.70 billion. BPA finances its approximate $4.6 billion annual cost of 
operations and investments primarily using power and transmission 
revenues and borrowing from the U.S. Treasury at rates comparable to 
borrowings at open market rates for similar issues.
    \2\  BPA includes updated operating year budget estimates in each 
Congressional Budget submission. Updated BPA FY 2011 operating year 
estimates are included in the FY 2012 Congressional Budget.
    \3\  This budget has been prepared in accordance with the Budget 
Enforcement Act (BEA) of 1990. Under the BEA all RPA budget estimates 
are treated as mandatory and are not subject to the discretionary caps 
included in the BEA. These estimates support activities which are 
legally separate from discretionary activities and accounts. Thus, any 
changes to BPA estimates cannot be used to affect any other budget 
categories which have their own legal dollar caps. Because BPA operates 
within existing legislative authority, BPA is not subject to BEA ``pay-
as-you-go'' test regarding its revision of current-law funding 
estimates.
    \4\  Original estimates reflect BPA's FY 2011 Congressional Budget 
Submission. Revised estimates, consistent with BPA's annual near-term 
funding review process, provide notification to the Administration and 
Congress of updated capital and expense funding levels for FY 2011.
    \5\  Includes infrastructure investments designed to address the 
long-term needs of the Northwest and to reflect significant changes 
affecting BPA's power and transmission markets.
    \6\  Power Services includes Fish & Wildlife. Residential Exchange 
Program, Planning Council, Conservation & Energy Efficiency and 
Associated Project Costs which have been shown separately for display 
purposes.
    \7\  This FY 2012 budget includes capital and expense estimates 
based on preliminary IPR forecasted data for FYs 2011-2016.
    \8\  PFIA for Transmission Services paid by customers. The 
cumulative amount of actual advance amortization payments as of the end 
of FY 2010 is $2,574 million. Refer to 16 USC Chapters 12B, 12G, 12H, 
and BPA's other organic laws, including P.L. 100-371, Title III. Sec. 
300, 102 Stat. 869, July 18, 1988 regarding BPA's ability to obligate 
funds.
                                 ______
                                 
    Mr. McClintock. I now recognize Mr. Timothy Meeks, 
Administrator of the Western Area Power Administration, to 
testify for five minutes.

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

    Mr. Meeks. Thank you, Mr. Chairman, Congresswoman 
Napolitano. I am glad to be here today to answer any questions 
you may have in regards to what the Western Area Power 
Administration has done and where we are headed in the future.
    But first, I would like to remind the Committee of who we 
are. We are a Power Marketing Administration that covers 15 
western United States. We are responsible for 17,000 miles of 
transmission. We market from 56 Federally owned dams in 15 
States. We market 10,000 megawatts of clean, renewable energy. 
Ultimately, this energy goes to over 25 million consumers in 
the western United States.
    We recover our costs with interest and meet our repayment 
obligations to the Treasury. We have a proud history. I am 
proud of our employees and what we have done, given the 
resources that we have been provided. Over our history, we have 
a proud tradition of building such projects as Bears Ears-
Bonanza, the California-Oregon Transmission Project, and most 
recently the Path 15 Upgrade Project. Many of these projects 
were groundbreaking, and the fact that we worked with third 
parties outside of the government.
    I am proud of our tradition of working with our customers. 
We present to our customers every year our 10-year plan. This 
10-year plan shows transparency of what we are doing. It is a 
working collaboration for our asset management program. In 
other words, we work with our customers to show them what 
projects that we are doing in the future and why they are 
value-added, and we reach consensus and move forward based on 
that.
    We have put together groundbreaking--what I call a budget 
council within our PMA customer group. Never before have our 
customers from various regions all across the 15 western United 
States got together to look at our budget and to help us meet 
the future resource needs that we will have. So I am proud of 
that fact.
    As a result of that fact, only a small fraction of our 
operating budget--we operate over a billion dollar program, and 
that is not counting the borrowing authority. Only $96 million 
in appropriations, net appropriations, is our request. So that 
comes from other sources, and that source is our customers. 
They represent 84 percent of our construction, rehabilitation, 
and replacement program. So that equates to $93 million that we 
get directly from them. So obviously, they believe in what we 
are doing.
    We are meeting our reliability standards, as set forth by 
the NERC, WEEC, FERC, MRO. We are also meeting our safety 
standards. We are substantially lower as far as our safety 
incidents as compared to like industry.
    Over last year, we had our open access transmission tariff 
substantially approved by FERC. There are a few minor things 
that we have to submit, but for all practical purposes, that 
was approved in December. We are continuing to work with others 
on new transmission projects, utilizing our borrowing authority 
as well as our traditional means of projects. And we adhere to 
the construct of beneficiary pays.
    Our costs associated with each program is separated out, as 
we do with our marketing projects, and those that benefit pay 
for it; those that don't, don't. We are working with our sister 
agencies on the precious hydro resource that the Chairman 
mentioned. We understand there is a balance that must be 
struck. And obviously, we support hydropower, and we believe in 
it, and we market it to the most value that we are able to do 
so. And that comes from conversations with the Corps, with the 
Bureau, and maximizing the value of that product.
    In short, I believe that we are doing an outstanding job to 
be good stewards of the Federal resources that we have been 
provided, and I am happy to answer any questions you may have 
today. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Meeks follows:]

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

    Thank you, Chairman McClintock and members of the Subcommittee. My 
name is Timothy Meeks. I am the Administrator of the Western Area Power 
Administration (Western), and I'm proud to be here today to represent 
Western and to tell you about who we are, and our role in delivering 
clean, renewable power to the western United States.
Who we are and what we do
    On December 21, 1977, high gas prices and a concern over reliable 
energy supplies led Congress to create the Department of Energy, 
including the Western Area Power Administration--a new agency to market 
and deliver Federal hydropower within a 15-state region of the central 
and western United States. More than three decades later, our mission 
of delivering clean, renewable energy continues to be crucial in 
meeting today's energy demands. Federal hydropower has been critical in 
providing reliable electricity to light homes and drive industry in 
small towns and large communities, and on Tribal lands and military 
bases.
    As one of four power marketing administrations within the U.S. 
Department of Energy, we market hydropower generated at 56 multi-use 
Federal water projects operated by the Bureau of Reclamation, U.S. Army 
Corps of Engineers and the International Boundary and Water Commission. 
Together, these plants are capable of delivering approximately 10,000 
megawatts of power. Western does not market this power as a single 
power system. Rather, Western takes the power generated by each 
Federally-authorized, multi-purpose water project, and markets it 
within the region served by that water project. As a result, Western 
has 10 power systems, each with its own marketing plan and rates.
    To deliver this power to our customers, Western owns, operates and 
maintains more than 17,000 miles of high-voltage transmission line and 
about 300 substations throughout our 1.3 million square-mile service 
territory.
    Our permanent full-time staff of about 1,400 employees works around 
the clock, maintaining the interconnected transmission system and 
ensuring that energy supply instantaneously matches energy demand to 
ensure power keeps moving through the system and electricity ultimately 
reaches homes and businesses throughout our marketing area.
    As an essential part of our mission to deliver Federal hydropower, 
Western has a long history of constructing transmission lines. Western 
has played important roles in the construction of such major 
transmission facilities as the California-Oregon Transmission Project, 
the Mead-Phoenix Transmission Line, and the Path 15 Transmission 
Upgrade, among many others. Recognizing this capability, Congress 
amended the Hoover Power Plant Act of 1984 in 2009 to give Western 
borrowing authority to construct new or upgraded transmission 
facilities that would deliver, or facilitate the delivery of, renewable 
energy.

How we conduct business--cost-based rates and the beneficiary pays 
        principle
    We sell our Federal hydropower according to Federal reclamation 
law, which requires our power be sold at the lowest possible rates to 
consumers consistent with sound business principles. This means we sell 
our firm power at rates designed to recover all the costs of providing 
this power. This includes not only our own costs, but also the costs of 
Federal generating agencies that are attributable to power generation. 
Operating expenses and capital investments are both repaid, the latter 
with interest. All the costs associated with the generation and 
transmission of electricity are paid by Western's customers, with 
essentially none of those costs borne by Federal taxpayers. In fact, in 
certain instances Congress has directed that power users pay non-power 
costs of multi-purpose Federal water projects that other project 
beneficiaries, such as irrigators, are unable to repay. In these cases, 
our power customers provide a subsidy to other project beneficiaries.
    We operate in a business-like manner and we believe strongly in the 
principle that ``the beneficiary pays.'' By this, we mean those 
entities that benefit from the use of these Federal resources should 
pay for the use of those resources. We design our rates so each power 
system pays only for its own costs. By law, we will ensure that 
transmission facilities built with our borrowing authority pay for 
themselves without relying on revenues from our core-mission projects.

Relationship with customers
    Since our inception as an agency, we have worked to establish 
valuable partnerships with our customers to deliver affordable, 
reliable, renewable and clean Federal hydropower. We work diligently 
with our partners to ensure that our rates remain as low as possible. 
For example, in Western's Folsom, California, office, Western has 
implemented the Base Resource Displacement Program, resulting in 
avoiding significant transactional costs associated with delivering 
power between balancing authorities. Since its inception in June 2009 
and through December 31, 2010, the Base Resource Displacement Program 
has resulted in over $3.5 million in cost savings.
Importance of cost control and cost control efforts
    We have a strong culture of cost awareness and control throughout 
Western. It makes good business sense, and our customers expect it. Our 
rates are set through public processes for each project, ensuring 
involvement and transparency in the development of rates and 
understanding of the need for rate increases, when they occur. We meet 
regularly with our customers to review our capital improvement plans to 
ensure that we are concentrating our efforts on projects that meet 
recognized needs.
    Western scrutinizes its expenses to minimize impacts to our core 
business units and to keep rates as low as possible. Western has a 
strong program to affirmatively practice cost containment via position 
management and looking for opportunities to streamline and improve 
business processes in both our administrative and core business lines.
    We are reviewing and moving forward to maximize value from our 
procurement actions. Given the twin requirement of acquiring supplies 
and services in a cost effective manner while achieving agency targeted 
socio-economic goals, Western's procurement community has used a number 
of different acquisition authorities and cost-avoidance strategies to 
ensure best value procurement buys. In the area of administrative 
support contracts, Western has aggressively moved to use performance-
based contracts to reduce costs by reducing the number of contractor 
employees and increasing accountability and responsibility for 
performance on the part of the individual contractor.
    In addition, Western has undertaken a series of initiatives to 
identify and implement activities which reduce the cost of performing 
its core business. For example, Western's Operations Consolidation 
Project (OCP) is merging the operations of two regions into one, 
improving business efficiencies and reducing the overall cost of 
complying with mandatory industry-wide reliability standards. 
Consolidating the operations of two regions will also eliminate the 
need to support redundant backup alternative control centers, enable 
the use of a single computerized power control system, and optimizes 
transmission planning and administration of the Open Access 
Transmission Tariff over a larger geographic footprint. Western also 
has a program to consolidate and standardize Information Technology 
applications such as the Power Billing System to eliminate 
redundancies, avoid duplication, and reduce administrative support 
costs. Coupled with this initiative are ad hoc programmatic initiatives 
to automate to the extent practicable, manual processes which are 
unduly complex and burdensome.
    Western continues to work collaboratively with our generation 
partners to maximize hydropower operations to the extent practicable to 
ensure that customers continue to receive their hydropower allocations 
in a timely, reliable, and cost-effective manner.
    However, there are a number of factors that are exerting upward 
pressure on our rates, most of which are out of Western's control. Some 
of the factors that have caused Western's costs to increase include:
          increased environmental regulatory compliance costs, 
        which have had the net effect of increasing expenses, while 
        reducing the quantity and reliability of the hydropower product
          the need to replace aging generation and/or 
        transmission-related infrastructure
          the higher cost associated with operating and 
        maintaining aging generation and/or transmission-related 
        infrastructure until it can be replaced
          the cost associated with ensuring ongoing compliance 
        with industry-wide mandatory reliability standards (including 
        critical infrastructure protection assets)
          the impact that drought has had on the available net 
        hydropower generation in recent years.

Western's role in transmission
    While our role as transmission owner and provider is critical to 
the delivery of Federal power, the role we play in transmission is 
integral to our Nation's interconnected electrical grid and helps 
ensure the reliable and secure delivery of our Nation's power supply. 
Our customers, the industry and others look to Western as a partner in 
initiatives to increase transmission capacity and reliability, to 
eliminate congestion points and to respond to additional requests for 
interconnection onto the grid.
    Demand for transmission capacity has been on the rise over the past 
several years. Renewable generation such as wind power, which is 
typically located in remote areas away from load centers, is increasing 
dramatically. Western's service territory encompasses nine of the 10 
windiest states in the Nation, and developers are increasingly looking 
to our transmission system as the vehicle to move renewable generation 
to market.
    However, a recent FERC study \1\ indicates the current transmission 
system, nationwide, is nearing its capacity to accept new generation. 
Analyses point to key transmission constraints where reinforcements 
would allow lower-cost resources to flow toward higher-cost load areas. 
In addition, our transmission system is aging. It has become clear that 
additional transmission will be required to ensure a reliable supply of 
clean energy into the future.
---------------------------------------------------------------------------
    \1\ Use of Frequency Response Metrics to Assess the Planning and 
Operating Requirements for Reliable Integration of Variable Renewable 
Generation, Lawrence Berkeley National Laboratory, December 2010
---------------------------------------------------------------------------
Borrowing authority begins to provide solutions
    Through the 2009 amendment to the Hoover Power Act of 1984, Western 
now has the authority to borrow from the Treasury to construct and/or 
upgrade transmission lines to help deliver renewable resources to 
market.
    Western moved forward diligently to establish our Transmission 
Infrastructure Program (TIP) that implements this new borrowing 
authority. In less than nine months, we formalized our agreement to 
finance development and construction of the Montana-Alberta Tie Limited 
Transmission Project, or MATL, the first project financed with our new 
authority.
    MATL is a 230-kilovolt, 214-mile transmission line that will run 
from a substation near Great Falls, Montana, to one near Lethbridge, 
Alberta, and allow energy flow in both directions. Northern Montana and 
southern Alberta are home to some of the best wind energy sources in 
North America. The MATL line will enable the development of new wind-
energy projects by linking this renewable and emission-free source of 
power to consumers across North America. Construction is now underway, 
and we expect the line to be in service by January 2012.
    With MATL and other TIP projects under consideration, we strive to 
maintain flexibility in our approach as we use our borrowing authority 
to maximize use of the authority while keeping costs at a minimum. 
Three models--financier, customer partnership and public-private 
partnership--allow us to select the right tool for the job.
    The concept of ``beneficiary pays'' remains a cornerstone of our 
Transmission Infrastructure Program. Each project funded under this 
authority will be repaid separately and distinctly from Western's other 
power and transmission facilities and from other projects funded using 
borrowing authority. This safeguard assures that costs are properly 
allocated to entities that benefit from each project and protects 
existing projects and customers. This fits well with our existing 
business practices and principles, so we are able to use our normal 
business systems and tools, as appropriate, to track and report cost 
and performance information.

Western's Budget request
    We can't do any of this without resources, including Congress's 
support and the support of our customers. We plan to continue using 
collections from the sale of power and transmission to offset the 
appropriation for our annual expenses, keeping our net appropriations 
down and providing greater planning certainty for the annual expense 
portion of our program. Our FY 2012 Construction, Rehabilitation, 
Operation and Maintenance (CROM) Appropriation Account request totals 
$863 million, of which only $96 million (11 percent) would be funded by 
appropriations. This appropriation request of $96 million is down $13 
million from FY 2010.
    Much of Western's 17,000 miles of integrated high-voltage 
transmission infrastructure was constructed in the 1950s and 60s, with 
an anticipated useful lifespan of 50 years. The $96 million of 
appropriations requested will fund high priority capital rehabilitation 
and maintenance replacements and improvements across our 15-state 
service area. In addition, we are working with our customers to obtain 
$93 million in customer funding to keep the power system properly 
maintained and to address additional high priority capital 
rehabilitation needs in FY 2012. It's important to note that we can't 
use our new borrowing authority to replace or upgrade our existing 
transmission facilities unless it facilitates delivery of power from 
new renewable generation sources.
    Purchase Power and Wheeling is another large component of our 
annual budget that does not require any appropriations. FY 2012 
expenses for Purchase Power and Wheeling are estimated at $472 million. 
The program is down slightly from the prior year reflecting improving 
hydro conditions in the Pick-Sloan Missouri Basin after many years of 
drought.

As we look to the future
    I'm proud of the role Western is playing to provide clean, 
renewable power to the West at the lowest possible cost, and I'm 
excited about the progress we've made in enhancing our transmission 
system to meet our customers' needs and to begin to realize the promise 
of renewable energy. Working together with our customers, we repay our 
expenses with interest, ensuring that the beneficiary pays and keeping 
costs down through sound business and project management practices to 
be good stewards of the public's resources.
    We appreciate your continued support and confidence, and together 
with the support of the Administration, our customers and industry 
partners, we will continue to move as quickly as possible to do our 
part for economic recovery and energy independence as we build the 
electrical grid of tomorrow while continuing to fulfill our core 
mission.
    Thank you, Mr. Chairman. I would be pleased to answer any questions 
that you or the Subcommittee members may have.
                                 ______
                                 
    Mr. McClintock. Thank you, Mr. Meeks. I now recognize Mr. 
John Worthington, Administrator of the Southwestern Power 
Administration, for five minutes.

      STATEMENT OF MR. JON C. WORTHINGTON, ADMINISTRATOR, 
       SOUTHWESTERN POWER ADMINISTRATION, TULSA, OKLAHOMA

    Mr. Worthington. Thank you, Mr. Chairman, Congresswoman 
Napolitano, and Members of the Subcommittee. I am Jon 
Worthington, Administrator of Southwestern Power 
Administration. I appreciate this opportunity to share with you 
today how Southwestern continues to focus on accountability, 
reliability, and cost-effectiveness as we approach our 68th 
year of marketing and delivering Federal hydropower.
    We have effective means of keeping the downward pressure on 
our rates through our partnerships with our agencies and our 
customers. We have partnered with the U.S. Army Corps of 
Engineers to take over maintenance of their switch yards. This 
allows for staffing uses of both Southwestern and the Corps. It 
keeps training costs down and inventories low. It calls for a 
standardization of high voltage electrical equipment.
    Perhaps the most successful partnership we currently enjoy 
is the arrangement among Southwestern, our customers, and the 
Corps, which allows our customers to fund major replacement 
work at the Corps generating facilities. Since 1999, our 
customers have provided the Corps with nearly a quarter of a 
billion dollars in critical funding of capitalized items to 
keep the hydropower's turbine spinning and the power flowing. 
This arrangement is cost effective in many multiple ways.
    First, the generation asset remains available so we don't 
have to purchase replacement power. Second, money is spent only 
on what the stakeholders deem as prudent and necessary, with 
average expenditures now exceeding 40 million per year. Third, 
it is money that is not coming from Federal appropriations. And 
finally, this established funding process provides for better 
long-term planning of major equipment replacements at the core 
hydroelectric facilities.
    This results in an even more efficient Federal hydropower 
system in our region, and it will continue to create jobs as 
the aging plants undergo more replacement work.
    Southwestern and its customers remain committed to funding 
this critical work. We believe that investment in the 
generating plants, the transmission facilities that make up 
Southwestern's hydropower system, is essential in keeping 
assets available and fully capable of producing and delivering 
power in our region.
    On the Federal transmission system, we have upgraded 
components and incorporated new technologies that reduce energy 
losses and enable a greater use of the Federal transmission 
assets.
    Our budget includes funding to replace approximately 35 
miles of conductor and components on Southwestern's high 
voltage transmission system. These upgrades are already 
accounted for in our existing rates, which cover the cost of 
replacing the equipment over its expected life.
    As you know, our accountability to Congress, our customers, 
and the American people is largely accomplished through 
budgeteering such as this one and our ratemaking process. To 
date, Southwestern has repaid approximately 65 percent of the 
1.3 billion in capital assets attributable to Federal power in 
our region.
    We are also constantly looking for ways to increase 
efficiencies. For example, Southwestern continues to evaluate 
existing resources to determine if they can be used more 
efficiently as old initiatives give way to new ones. An example 
of this occurred recently when Southwestern restructured 
staffing resources to address compliance with the mandatory 
requirements of the North American Electric Reliability 
Corporation.
    No matter how conscientious we are, though, nature 
sometimes has other plans for us. Unlike my home state of Idaho 
that has large reservoirs and runoff from snow pack, the 
Southwestern system is 100 percent reliant on annual rainfall. 
Fortunately, in 2010, we did not incur any major dry spells, 
and inflows were even above normal. this resulted in 
Southwestern marketing 7.6 billion kilowatt hours of energy, 
with revenues of 202 million from the sale of energy capacity 
and transmission services.
    Based on our 2010 generation, Southwestern's hydropower 
saved 12.8 billion barrels of oil--million barrels of oil, 
pardon me--and prevented emissions of 6.6 tons of greenhouse 
gases. But regardless of how much we save or how much water we 
have to work with, we couldn't do it without the right people. 
I truly believe that Southwestern's most important asset is our 
people.
    Mr. Chairman, this concludes my testimony. I would be glad 
to answer any questions that you or the Committee may have.
    [The prepared statement of Mr. Worthington follows:]

            Statement of Jon C. Worthington, Administrator, 
      Southwestern Power Administration, U.S. Department of Energy

    Mr. Chairman and members of the Subcommittee, thank you for the 
opportunity to share with you today the highlights of the President's 
Fiscal Year 2012 budget request for the Southwestern Power 
Administration (Southwestern).
    Southwestern markets and delivers clean, efficient, and reliable 
energy to the Nation. As our budget request shows, we are focused on 
continuing this important mission even as we seek to tighten our belts 
along with the rest of the country so that present and future 
generations will continue to have the hope of a brighter future.

SOUTHWESTERN PROFILE
    As one of four Power Marketing Administrations in the United 
States, Southwestern markets hydroelectric power in Arkansas, Kansas, 
Louisiana, Missouri, Oklahoma, and Texas from 24 U.S. Army Corps of 
Engineers (Corps) multipurpose dams with a generating capacity of 
approximately 2,174 megawatts (MW).
    By law, Southwestern's power is marketed and delivered primarily to 
public bodies and rural electric cooperatives. Southwestern has over 
one hundred such customers, and these entities ultimately serve another 
nine million end-use customers.
    Southwestern operates and maintains 1,380 miles of high-voltage 
transmission lines, 25 substations and switching stations, and a 
communications system that includes microwave, VHF radio, and digital 
fiber optic components. Staff members work from offices located in 
Gore, Oklahoma; Jonesboro, Arkansas; Springfield, Missouri; and Tulsa, 
Oklahoma. Around-the-clock power scheduling and dispatching are 
conducted by staff in the Springfield Operations Center.

RATES AND COST RECOVERY
    I am proud to say that, at Southwestern, we have always been and 
will continue to be cost-conscious. We have to be cost-conscious, 
because the power we market is cost-based, so, when expenses go up, our 
power rates quickly follow. To make sure that we are recovering the 
cost of marketing and delivering power, every year, Southwestern 
conducts Power Repayment Studies (PRS) for each of the three rate 
systems in our marketing area: the Integrated System, the Robert D. 
Willis Hydropower Project, and the Sam Rayburn Dam.
    In each annual PRS, Southwestern studies the projected and actual 
costs of operating and maintaining the generation and transmission 
facilities to make sure that sufficient revenues are being collected to 
repay these costs, plus the principal and interest on the Federal 
investment. We do this by working within our own agency to accurately 
capture our current expenses and to assess and plan for future 
replacement of transmission assets. We also work with the U.S. Army 
Corps of Engineers (Corps) to fully recover current and future 
hydropower expenses, which by law we are required to repay, at the 
hydroelectric generating plants from which we market power.

SYSTEM CONDITIONS AND PURCHASED POWER
    No matter how conscientious we are though, nature sometimes has 
other plans for us. Unlike the Pacific Northwest, where there are large 
reservoirs with runoff from snowpack, Southwestern's system is 100 
percent dependent on rainfall, with very limited reservoir storage. As 
a result, extended spells of dry weather can sometimes force us to 
purchase power to meet our contractual obligations. In planning for 
purchases, we strive to work with Congress, the Administration, and our 
customers to avoid increases in Federal spending and prevent severe 
rate impacts to our customers by using the various funding mechanisms 
we have in place. To this end, Southwestern's customers have already 
pre-funded \1\ a significant portion of the estimated cost of 
Southwestern sustaining its contractual obligations during a major 
drought.
---------------------------------------------------------------------------
    \1\ Southwestern has an internal accounting mechanism which takes 
into account and defers surplus receipts collected for purchased power 
expenses that did not occur. This is in accordance with Financial 
Accounting Standard Number 71.
---------------------------------------------------------------------------
    Fortunately, in FY 2010 we did not encounter any major dry spells, 
and inflows were even above normal. While audited numbers are still 
being finalized, pre-audit numbers place the quantity of energy 
marketed in FY 2010 as 7.6 billion kWh, with revenues of $202.3 million 
from the sale of energy, capacity, and transmission services. On 
average, Southwestern markets 5.6 billion kWh of energy annually with 
revenues of $182.5 million. To date, Southwestern has repaid 
approximately 65 percent of the $1.3 billion in capital investments 
attributable to Federal power within our region.
    As a renewable resource, the hydropower marketed by Southwestern 
saves a considerable amount of fuel that would otherwise have to be 
obtained from other sources, usually hydrocarbon-based. For example, in 
FY 2010, based on actual generation, Southwestern's hydropower saved 
12.8 million barrels of oil and prevented emissions of 6.6 million tons 
of greenhouse gases. \2\
---------------------------------------------------------------------------
    \2\ Emission savings computed using 1998-2007 data from U.S. Energy 
Information Administration (EIA), assuming a 50/50 Coal/Natural Gas Mix 
as representative of replacement energy for hydropower in 
Southwestern's area. Fuel savings based on thermal conversion factors 
from EIA's Annual Energy Review-2009.
---------------------------------------------------------------------------
INVESTMENT IN THE FUTURE
    Investment in the aging facilities that make up Southwestern's 
Federal hydropower system is critical in keeping the generation and 
transmission assets available and fully capable of producing and 
delivering power to our region. Our goal is to keep these Federal 
assets intact while minimizing any Congressional appropriations 
necessary for capitalized replacements.
Generation
    A significant funding mechanism for the maintenance of the Corps 
generation assets is the Jonesboro Memorandum of Agreement (MOA), which 
allows our customers to fund major replacement work at the 
hydroelectric plants. Signed in 1999, the Jonesboro MOA between 
Southwestern, the Corps, and City Water and Light Plant of the City of 
Jonesboro, Arkansas, has provided nearly a quarter of a billion dollars 
in critical funding of capitalized items to keep the turbines spinning 
and the power flowing. Perhaps more importantly, decisions as to which 
projects will be funded are made with all of the stakeholders at the 
table--the Corps as the owner of the generation assets, Southwestern as 
the marketer of power, and Southwestern's customers as the ones who buy 
the power and, ultimately, bear the responsibility of repayment. This 
mechanism also assures that Southwestern's power will remain marketable 
by funding what the stakeholders deem as prudent and necessary. To this 
end, the average funding provided by Southwestern's customers through 
Jonesboro is now over $40 million annually. This is $40 million that is 
not funded by Congressional appropriations, but, of course, is 
permitted with the authority and oversight of Congress.
    We believe this established funding process provides for better 
planning, will result in an even more efficient Federal hydropower 
system in our region, and will continue to create jobs as more of the 
aging plants undergo major replacement work. Southwestern and its 
customers remain committed to this effort.
Transmission
    Like the generation assets, Southwestern's 1,380 miles of 
transmission line and 25 substations are also experiencing the effects 
of age. Failure of these facilities would not only impact the delivery 
of power to Southwestern's customers, but would also ultimately impact 
the transmission systems of neighboring utilities and their customers 
within our region.
    To make sure this doesn't happen, Southwestern continuously 
inspects its transmission equipment and evaluates the risk of failure 
based on its current condition, age, and life expectancy. We put this 
knowledge to work by prioritizing investment in critical transmission 
components, such as poles, conductor, transformers, protective relays, 
and other equipment.

REGIONAL RELIABILITY
    As an integral part of our region's power delivery infrastructure, 
Southwestern participates in regional planning initiatives conducted by 
Southwest Power Pool (SPP), the Regional Transmission Organization 
(RTO) in our area. Through special contractual arrangements with SPP 
consistent with the requirements of Section 1232 of the Energy Policy 
Act of 2005 (EPACT), Southwestern has completed upgrades on the Federal 
transmission system that were identified by SPP while maintaining our 
statutory responsibilities as a Federal agency. Currently, we are 
exploring ways we may be able to more fully partner with SPP and other 
utilities in the region so that our Nation's transmission system will 
be more robust, reliable, and efficient.

COMPLIANCE WITH NERC STANDARDS
    Consistent with Section 2111 of EPACT, and to do its part in 
ensuring the reliability of the bulk electric system, Southwestern 
complies with the standards of the North American Electric Reliability 
Corporation (NERC). According to industry reports, in 2008, there were 
approximately 60 mandatory NERC reliability standards. Today, there are 
102. Southwestern has, in the past year, reorganized staff to manage 
this growing number of mandatory standards and assure a continued 
culture of compliance.
Right-of-Way Clearing
    Inadequate Right-of-Way (ROW) clearing has been cited as a major 
reason for blackouts and brownouts across the country, including the 
Northeast Blackout of 2003. To address this, NERC's vegetation 
management standard requires transmission owners to regularly patrol 
and clear their lines. In response, Southwestern has increased our ROW 
clearing efforts. In FY 2010, we cleared or contracted to clear nearly 
700 of our 1,380 miles of transmission line, as opposed to previous 
years in which our clearing averaged between 400-500 miles. Regardless 
of the number of miles we clear, we are able to accomplish the work 
through the use of alternative financing, which, again, does not 
require Congressional appropriations.

Physical and Cyber Security
    As with ROW clearing, NERC has defined critical security standards 
which protect the integrity of our Nation's power grid. To comply with 
these standards, we've continued to make improvements to our facilities 
and increased the use of video monitoring at our sites. We also 
implemented new cyber encryption techniques to prevent the loss of 
personally identifiable information and to strengthen our password 
protection scheme. As new requirements and responsibilities emerge, we 
will continue to dedicate resources to maintain cyber and physical 
security.

WORKFORCE PLANNING
    I truly believe that Southwestern's most important asset is our 
people. But the fact of the matter is that a great number of these 
people will be eligible for retirement soon. In fact, approximately 25 
percent of Southwestern's workforce could walk out the door next year 
if they chose to do so.
    To address this, Southwestern has instituted several programs, in 
accordance with the President's hiring reform initiatives, to ensure 
that we have sufficient resources to meet the challenges of the future. 
For example, we have increased our use of student and veterans programs 
and attended job fairs at local universities specifically geared toward 
persons with disabilities so that we can aggressively recruit and fill 
the many technical positions that will become vacant in the next few 
years.
    We are also able to address the resource and skills gaps that we 
identify through our regular analyses through our support services 
contracts for information technology and administrative services. As 
pressure mounts to reduce staff positions, these contracts have become 
more and more critical in assuring that Southwestern has adequate and 
appropriate staff on board to accomplish our mission. The contracts 
have the added benefit of supporting Native-American owned businesses 
in the region and providing good jobs to local residents.

[GRAPHIC] [TIFF OMITTED] T5177.006


BUDGET HIGHLIGHTS
    Southwestern's budget request reflects a 9 percent decrease in 
appropriations; however, Southwestern's overall program makes use of 
alternative financing and offsetting collections for annual expenses. 
Both the use of alternative financing and the authority to use 
offsetting collections for annual expenses are essential in enabling 
Southwestern to operate a reliable Federal power system, produce power 
at the lowest cost-based rates possible consistent with sound business 
principles, repay the American taxpayers, provide economic benefits to 
the region, and ensure that our Nation receives as much clean, 
renewable, and domestically produced power and energy as possible.
    Mr. Chairman, this concludes my testimony. I would be pleased to 
address any questions that you or the Members of the Subcommittee may 
have.
                                 ______
                                 
    Mr. McClintock. Thank you very much, Mr. Worthington. I now 
recognize Mr. Kenneth Legg, Administrator of the Southeastern 
Power Administration, for five minutes.

  STATEMENT OF MR. KENNETH LEGG, ADMINISTRATOR, SOUTHEASTERN 
            POWER ADMINISTRATION, ELBERTON, GEORGIA

    Mr. Legg. Mr. Chairman, Mrs. Napolitano, and Subcommittee 
Members, I am Kenneth Legg, Administrator of the Southeastern 
Power Administration. I appreciate this opportunity to 
represent Southeastern and to provide for you today the 
highlights of the Fiscal Year 2012 budget request for the 
Southeastern Power Administration.
    The mission of Southeastern is to market and deliver at 
wholesale Federal hydroelectric power at the lowest possible 
cost consistent with sound business principles to public bodies 
and cooperatives. With a staff of 44 full-time employees, 
Southeastern markets power produced at 22 multiple-purpose 
projects, and operated and maintained by the U.S. Army Corps of 
Engineers, which are separated into four marketing systems 
serving an eleven-State area.
    Southeastern does not own or operate any transmission 
facilities, but delivers contracted Federal power through 
transmission lines and substations owned and operated by 
others. Rate schedules are formulated to repay all of 
Southeastern's costs, as well as all Corps of Engineers costs 
allocated to power.
    In Fiscal Year 2010, Southeastern sold approximately 7,714 
gigawatt hours of energy to 491 wholesale customers, with 
revenues totaling approximately $246 million. Southeastern 
supports the Department of Energy's strategic goals. This is 
accomplished through two sub-programs--Purchased Power and 
Wheeling and Program Direction--supported by appropriations 
offset by Federal power receipts and alternative financing 
arrangements.
    In keeping with this strategic goal, Southeastern performs 
its mission in a manner that promotes maintaining and upgrading 
our region's Federal energy infrastructure. The Southeastern 
Federal power system contributes program benefits by reducing 
carbon emissions from fossil fueled energy sources through 
production and marketing of hydroelectric power, which adds no 
carbon to the environment.
    Southeastern' string flow generation of 7,217 gigawatt 
hours in Fiscal Year 2010 offset fossil fuel resources and 
reduced overall CO2 emissions by 5.1 million metric 
tons. Southeastern supports the Administration's and the 
Department of Energy's clean energy targets by promoting 
residential, commercial, and industrial energy efficiency, as 
well as development of wind, solar, and biomass technologies 
when they are economically feasible.
    Southeastern works with DOE's Energy Efficiency and 
Renewable Energy Programs to ensure that municipal and 
cooperative utilities in the Southeast benefit from the Federal 
services and technologies.
    Southeastern will continue to work with the Corps of 
Engineers on the Wolf Creek and Center Hill safety issues. 
Cumberland River Basin operations have been severely impacted 
by the restrictions necessary due to dam safety concerns at 
both Wolf Creek and Center Hill projects. Restricted operations 
are expected to remain in place for several more years. 
Southeastern will continue an interim operations strategy until 
we can resume normal operations.
    Southeastern maintains a cooperative working relationship 
with its customers and the Corps of Engineers in both the South 
Atlantic and Great Lakes and Ohio River divisions. Financial 
and operations issues are discussed regularly among members of 
the Southeastern Federal Power Alliance and Team Cumberland. 
Both groups meet on a biannual basis.
    Southeastern is committed to maintaining open 
communications with its customers and with the Corps of 
Engineers. Southeastern's Fiscal Year 2012 budget requests a 
net appropriation of zero dollars. It provides $8.4 million for 
program direction expenses, which are completely offset by 
collections for these annual expenses, and $114.9 million for 
purchase power and Wheeling costs, which are entirely financed 
with offsetting collections and net billing.
    Southeastern relies on existing transmission providers to 
transmit Federal power to its customers at a cost of $38.5 
million, and Southeastern will purchase $76.4 million in 
replacement power and energy and pump storage energy.
    The use of offsetting collections and net billings enables 
Southeastern to operate more like a business by allowing 
Southeastern's revenues to pay for purchase power and 
transmission costs rather than relying upon appropriations. 
There are no new program starts included in Southeastern's 
Fiscal year 2012 budget request.
    Mr. Chairman, this concludes my presentation, and if you or 
any other Subcommittee Members have questions, I would be 
pleased to answer them.
    [The prepared statement of Mr. Legg follows:]

             Statement of Kenneth E. Legg, Administrator, 
      Southeastern Power Administration, U.S. Department of Energy

    Mister Chairman and members of the Subcommittee, I am Kenneth Legg, 
Administrator of the Southeastern Power Administration (Southeastern). 
I appreciate this opportunity to represent Southeastern and to provide 
for you today the highlights of the Fiscal Year 2012 Budget Request for 
the Southeastern Power Administration.

PROFILE OF SOUTHEASTERN POWER ADMINISTRATION
    The mission of Southeastern is to market and deliver at wholesale 
Federal hydroelectric power at the lowest possible cost, consistent 
with sound business principles, to public bodies and cooperatives in 
accordance with Section 5 of the Flood Control Act of 1944 (16 U.S.C. 
825s).
    With a staff of 44 full-time employees, Southeastern markets power 
produced at 22 multiple-purpose projects, operated and maintained by 
the U. S. Army Corps of Engineers (Corps of Engineers), which are 
separated into four marketing systems serving an 11--state area. These 
systems are integrated hydraulically, financially, and electrically; 
and have separate rate and repayment schedules.
    Southeastern coordinates the operation of the projects using 
customers' load schedules and the North American Electric Reliability 
Corporation's control area criteria, while complying with Corps of 
Engineers' operational and environmental requirements.
    Southeastern does not own or operate any transmission facilities, 
but delivers contracted Federal power through transmission lines and 
substations owned and operated by others. Southeastern compensates 
these transmission providers using the revenue from electrical power 
sales.
    Rate schedules are formulated to repay all of Southeastern's costs, 
as well as all Corps of Engineers' costs allocated to power. Rate 
schedules are designed to recover, on an annual basis, operation and 
maintenance expenses, purchased power and transmission expenses, and 
expensed interest. Rate schedules also include the costs of capital 
investments that are recovered over a reasonable number of years.

PROGRAM ACCOMPLISHMENTS
    In FY 2010, Southeastern sold approximately 7,714 gigawatt-hours of 
energy to 491 wholesale customers, with revenues totaling approximately 
$246 million dollars. Southeastern supports the Department of Energy's 
strategic goals. This is accomplished through two sub-programs 
(Purchased Power and Wheeling, and Program Direction) supported by 
appropriations offset by Federal power receipts and alternative 
financing arrangements. Alternative funding sources include net billing 
\1\ and bill crediting. In keeping with this strategic goal, 
Southeastern performs its mission in a manner that promotes maintaining 
and upgrading our region's Federal energy infrastructure. These efforts 
help to ensure reliable and efficient delivery of Federal power, which 
is an integral part of the Nation's electric energy supply.
---------------------------------------------------------------------------
    \1\ Southeastern's authority to use net billing and bill crediting 
is inherent in the authority provided by the Flood Control Act of 1944, 
and has been affirmed by the Comptroller General. Honorable Secretary 
of the Interior B-125.127 (February 4, 1956) available at WL 3064 
(Comp. Gen.).
---------------------------------------------------------------------------
    Southeastern has an active succession management plan that is 
reviewed on an ongoing basis. The succession plan addresses the need of 
replacing several members of Southeastern's management team and other 
critical staff, and recruiting highly-skilled technical personnel in 
the near future.

CLEAN ENERGY AND ENERGY CONSERVATION
    The Southeastern Federal Power System contributes program benefits 
by reducing carbon emissions from fossil-fueled energy sources through 
production and marketing of hydroelectric power, which adds no carbon 
to the environment. Southeastern's stream-flow generation of 7,217 GWH 
in FY 2010 offset fossil fuel resources and reduced overall 
CO2 emissions by 5.1 million metric tons \2\.
---------------------------------------------------------------------------
    \2\ http://www.epa.gov/cleanenergy/energy-resources/calculator.html
---------------------------------------------------------------------------
    Southeastern supports the Administration's and the Department of 
Energy's clean energy targets by promoting residential, commercial, and 
industrial energy efficiency, as well as development of wind, solar, 
and biomass technologies when they are economically feasible. 
Southeastern works with DOE's Energy Efficiency and Renewable Energy 
programs to ensure that municipal and cooperative utilities in the 
southeast benefit from Federal services and technologies.

PROGRAM GOALS
Cumberland River System
    Southeastern will continue to work with the Corps of Engineers on 
the Wolf Creek and Center Hill safety issues. Cumberland River Basin 
operations have been severely impacted by the restrictions necessary 
due to dam safety concerns at both Wolf Creek and Center Hill projects. 
Restricted operations are expected to remain in place for several more 
years. Southeastern will continue an interim operations strategy until 
we can resume normal operations.
Wolf Creek Project
    The Wolf Creek Dam Safety issue will continue to be a major concern 
for the remainder of fiscal year 2011 and 2012. Last year Cumberland 
System River Basin power generation was severely impacted by the 
operational restrictions determined to be necessary as a result of dam 
safety concerns at the project. On January 22, 2007, the Corps of 
Engineers lowered the lake elevation of the Wolf Creek Project to 680 
feet to reduce the risk to human life, health, property, and severe 
economic loss in the region. This decision came in response to numerous 
studies, conducted by dam safety experts, which concluded that Wolf 
Creek Dam was at high risk of failure. We expect that the 680 foot 
operating level will continue in place until ongoing remedial efforts 
at the project show a reduced risk of failure. In early FY 2009, the 
Corps of Engineers completed the first line of grouting at the project 
in an effort to fill all the cavities and voids under the foundation, 
which are providing paths for seepage. Work is currently under way on 
the installation of the cutoff wall through the project's earthen 
embankment.
    The decrease in the lake elevation of the Wolf Creek Project has 
resulted in a significant reduction in the quantity of water stored in 
the Cumberland System. Due to the large volume of system storage 
normally provided by the Wolf Creek Project, virtually all in-lake and 
in-stream purposes throughout the entire Cumberland River System have 
been dramatically impacted, either by the reduced storage or the 
corresponding reduction in flows. In-stream flows and the operation of 
all hydroelectric projects in the basin are directly or indirectly 
impacted by the lack of system storage and the altered river basin 
operational criteria, which call for a relatively constant elevation in 
lake level at Wolf Creek Dam to be maintained. Consequently, dramatic 
impacts are being experienced by stakeholders throughout the river 
basin, including marina operators, recreation-related businesses, 
environmental purposes, navigation, municipal and industrial water 
supply, and power generating facilities. The impact to Southeastern's 
hydropower program is significant. The 216 municipalities and 
cooperatives located in the states of Tennessee, Kentucky, Georgia, 
Illinois, Mississippi, Alabama, and North Carolina that normally 
receive Cumberland System generation as a dependable peaking resource 
have been forced to replace this generation with costly alternative 
sources of power. At the onset of the altered river operation for the 
Cumberland System, Southeastern implemented an interim marketing 
strategy for system generation in order to provide a method of 
equitably sharing any remaining system generation benefits among all of 
Southeastern's customers. This revised operation for the Cumberland 
System provides benefits to each customer on an ``as available'' basis, 
as power is made available by the Corps of Engineers. Southeastern will 
continue this method of operating until it can once again resume a more 
normal operation.

Center Hill Project
    Center Hill Dam is located on the Caney Fork River in DeKalb 
County, Tennessee, approximately 30 miles upstream from the river's 
confluence with the Cumberland River. Construction on the project was 
completed in 1951, and it is operated for flood control, hydropower 
production, recreation, navigation, water supply, and water quality. 
Since the 1960s, the Center Hill Project has experienced serious 
seepage problems as a result of the Karst limestone features which 
comprise the project's foundation.
    Through the years, the foundation features have allowed water to 
seep under the dam, eroding material and creating voids and cavities in 
the abutments. The uncontrolled seepage of water has caused muddy 
downstream flows and the formation of large sinkholes in the left 
abutment. All previous attempts at remedying the foundation conditions 
through grouting have been ineffective, since previous methods did not 
meet current grouting standards.
    Based on the findings of the External Peer Review Panel for Dam 
Safety, the situation at the Center Hill Project was classified as 
Corps of Engineers' Class I designation (Urgent and Compelling) under 
the Corps of Engineers' Dam Safety Action Classification System. The 
Panel recommended an immediate lowering of the reservoir elevation at 
the Center Hill Project. As a result, the Corps of Engineers 
implemented a revised operating plan for the Center Hill Project which 
will maintain a lower reservoir level to relieve pressure and stress on 
the foundation. The range of operation for the project will be from a 
low elevation of 620 feet to a high elevation of 630 feet during the 
year. The Panel recommended a comprehensive grouting program and 
installation of a cutoff wall as soon as possible. The work is 
tentatively scheduled to be completed by 2014. Southeastern continues 
to work with the Corps of Engineers as they implement their operational 
plan for the Center Hill Project.

Compliance Requirements
    In order to maintain compliance with North American Electric 
Reliability Corporation and the SERC Reliability Corporation 
reliability standards, Southeastern will ensure that its power system 
operators are recertified as necessary so that available power can be 
delivered to the transmission system for the benefit of Southeastern's 
customers.

SOUTHEASTERN'S RELATIONSHIP WITH ITS CUSTOMERS AND THE CORPS
    Southeastern maintains a cooperative working relationship with its 
customers and the Corps of Engineers in both the South Atlantic, and 
Great Lakes and Ohio River Divisions. Financial and operations issues 
are discussed regularly among members of the Southeastern Federal Power 
Alliance and Team Cumberland. The Alliance was established in 1991 and 
includes representatives from Southeastern, the Corps of Engineers, 
South Atlantic Division, and Southeastern's preference customers 
located in the Georgia-Alabama-South Carolina, Kerr-Philpott, and Jim 
Woodruff Systems. Team Cumberland was formed in 1992 and includes 
representatives from Southeastern, the Corps of Engineers, Great Lakes 
and Ohio River Division, and Southeastern's preference customers 
located in the Cumberland System. Both groups meet on a biannual basis. 
Southeastern is committed to maintaining open communications with its 
customers and the Corps of Engineers.

2012 BUDGET REQUEST
    Southeastern's FY 2012 budget requests a net appropriation of $0 
(Attachment 1). It provides $8.4 million for Program Direction 
expenses, which are completely offset by collections for these annual 
expenses, and $114.9 million for Purchase Power and Wheeling costs, 
which are entirely financed with offsetting collections and net 
billing. Southeastern relies on existing transmission providers to 
transmit Federal power to its customers at a cost of $38.5 million, and 
Southeastern will purchase $76.4 million in replacement power and 
pumped storage energy. The use of offsetting collections and net 
billing enables Southeastern to operate more like a business by 
allowing Southeastern's revenues to pay for purchase power and 
transmission costs rather than relying upon appropriations. There are 
no new program starts included in Southeastern's Fiscal Year 2012 
budget request.
    Mister Chairman, this concludes my presentation of Southeastern's 
Fiscal Year 2012 budget request and program status. If you or any of 
the Subcommittee members have questions, I will be pleased to answer 
them.

[GRAPHIC] [TIFF OMITTED] T5177.007

    Mr. McClintock. Well, thank you very much. And as a matter 
of fact, we do. Let me begin just by asking for some very brief 
answers from each of you. If you don't know, just let us know, 
but please get us that information. I would like to know for 
each of the administrations how much have you increased 
electricity generation over the past year?
    Mr. Wright. I would say that we have a very modest increase 
because we had an ongoing refurbishment program going on, and 
we completed some projects. I would like to provide that for 
the record.
    Mr. Meeks. Over the past year, I would say none. But I 
would like to double check with my staff and provide it for the 
record if it is something different.
    Mr. Worthington. I am pleased to say that the Stockton 
Plant was put back in service this year, so that was 50 
megawatts that is now back in service. The Ozark and Webber 
Falls Hydro Projects will be back--one of their units will be 
back in service any day now. And so each of those units would 
be 25 megawatts.
    Mr. Legg. In our service area, a number of generators have 
also been restored to operation that had either failed or were 
out for refurbishment. That is the bulk of the increase we have 
seen. The Southeast is operating under drought conditions. 
Hopefully, we are going to go into this season with adequate 
water to make it through the summer.
    Mr. McClintock. Thank you. Could we also get population 
increase figures from each of your service areas? Again a 
critical question is whether we are meeting growing demands for 
power. And, of course, you guys are a big part of that. The 
next question I would have, again just a brief answer, how much 
of your cost increased or decreased over this past year per 
megawatt hour?
    Mr. Wright. In the last year, our costs have not increased. 
Our rates are set every two years, and we are in the midst of a 
ratesetting process right now. On the transmission side, we 
have reached a settlement agreement, and we will be keeping our 
transmission rates constant for the next rate period. On the 
power side, we have proposed an 8-1/2 rate increase.
    Mr. Meeks. We are coming out of 10, 11 years of drought. So 
basically, much of our costs have been, I would say, out of our 
control; and in the fact that we have had to purchase as much 
as 500--more than 500 percent of normal to meet our contractual 
obligations. So as far as the actual things within our control, 
I feel that we are doing a great job of holding our costs down. 
As far as things out of our control, as far as drought and 
water supply, there has been increase.
    Just by way of example----
    Mr. McClintock. I am going to have to cut you off right 
there.
    Mr. Meeks. OK.
    Mr. McClintock. But thank you. Mr. Worthington?
    Mr. Worthington. Thank you, sir. Southwestern did its power 
repayment study this year, and it showed a .9 percent increase 
in our--would be needed. We defer that. Anything less than 2 
percent rate increase we defer. So our expenses have increased 
by approximately .9 percent.
    Mr. McClintock. Mr. Legg?
    Mr. Legg. In Southeastern's area, we have four marketing 
systems. Two of those saw rate increases, one of 10 percent, 
one of 15 percent. This is due in combination, drought 
conditions, and also one of our projects, the Richard B. 
Russell, we received final cost allocation, and that investment 
was added.
    Mr. McClintock. How much hydropower has been lost directly 
or indirectly because of environmental regulations, would you 
say, over the past 10 years, and what sources have replaced it, 
and at what cost? Mr. Wright?
    Mr. Wright. I couldn't say for the last 10 years. Over the 
last 20 years, I know that we have reduced the output of the 
Federal hydropower system by about 1,000 average megawatts as a 
result of protections that have been in place to help restore 
threatened and endangered salmon and steelhead.
    Mr. McClintock. Mr. Meeks?
    Mr. Meeks. I know out of the Glen Canyon Dam we lost a 
third of the generation, roughly around 400 megawatts of 
capacity, back in '97.
    Mr. McClintock. Mr. Worthington?
    Mr. Worthington. I am not certain of the amount of capacity 
that has been lost. Southwestern pays approximately--or their 
voided cost is about less than a million dollars for the three 
endangered species that we work with.
    Mr. McClintock. And Mr. Legg.
    Mr. Legg. For our region, the only reductions we have seen 
have been in energy, and that has been as a result of required 
operational changes to meet some of the threatened and 
endangered species conditions during drought. Our revenue 
impact has been minimal.
    Mr. McClintock. Thank you. I now recognize the Ranking 
Member, Mrs. Napolitano.
    Mrs. Napolitano. Thank you, Mr. Chair. And I would like to 
take just a slight different vein on questioning. Our Ranking 
Member for the full Committee couldn't be here, so I am going 
to ask one of the questions that he wanted to bring before you.
    The Columbia generating station is one of 31 reactors in 
the United States that share the same reactor design as the one 
in the Fukushima Daiichi Power Plant. BPA is responsible for 
power at the station. What is the role and emergency planning 
in the case of a catastrophic disaster like a dam breach? Would 
Bonneville be able to restore or replace power through 
alternate resources in adequate time, and how safe would that 
be?
    Mr. Wright. Well, let me just take a second and describe 
the relationship that we have. Energy Northwest is the operator 
of the Columbia generating station, and we have, under what are 
called the net billing agreements, an arrangement where we pay 
all of the costs of the facility and receive all of the output 
from the facility but the management is actually run by the 
organization Energy Northwest.
    So in that situation, we would be responsible for making up 
the lost power supply. If there is power supply not provided, 
then we would be making sure the reliability is maintained, 
purchasing power in the open market in order to be able to 
substitute for it.
    I did have a conversation with Mark Reddemann, who is the 
CEO for Energy Northwest, last night, just to make sure that I 
understood from him what would happen in the case of an 
earthquake in that region. And, of course, the plant is on the 
Hanford Reservation. It is a long way from the ocean. We are 
not really worried so much about a tsunami, but the risk would 
be potentially from upstream, as the loss of Grand Coulee or 
Chief Joseph Dam.
    That plant was built with the expectation of that 
possibility, and is built on high enough ground that at least 
the Energy Northwest folks believe that it would be able to 
continue operation, even if there was a loss of Grand Coulee 
and Chief Joseph.
    Mrs. Napolitano. Thank you. And to all Administrators, not 
to answer today, but for the record and for you to please reply 
in writing, there are approximately 50 nuclear reactor sites in 
the four Power Marketing Administration service areas. How are 
the PMAs involved in backup power emergency planning matters. 
That is for the record, if you would not mind.
    And now I will go on to Mr. Meeks and Mr. Worthington. How 
do your requests for capital cost appropriations solve the 
issue of aging infrastructure critical to us, and how are the 
projects prioritized so changes will help the system as a 
whole?
    Mr. Meeks. As I stated in my opening remarks, we do work 
with our customers ten years out. So we use asset management 
principles. So that is looking at the age of the 
infrastructure, the likelihood of failure, and things such as 
that. We are----
    Mrs. Napolitano. Are you saying then that you are pretty 
much upgrading as you go on your infrastructure, so it is not 
really a big problem in the foreseeable future?
    Mr. Meeks. I would say that as has been noted, resources 
are tight, and we have to prioritize what we upgrade and 
replace in some form or fashion. Our customers provide a 
significant chunk of that resource, but they are stretched. And 
so there is a limit to how much money they can provide because 
they have their own infrastructure they have to upgrade.
    So in short, to move on to my counterpart, we are working 
with our customers to help maximize the resources.
    Mrs. Napolitano. Mr. Worthington, time is running out.
    Mr. Worthington. Thank you. With our budget request, we are 
now looking at replacing 35 miles of line each consecutive year 
going forward for the foreseeable future. A number of our 
transmission lines were built in the '40s, and they are old, 
and they need to be rebuilt and reconducted. We are also 
looking at purchasing new transformers. A large transformer is 
approximately 1.3 million each. Again----
    Mrs. Napolitano. So you are continuing to replace.
    Mr. Worthington. Yes.
    Mrs. Napolitano. I am sorry. I am running out of time. But 
what does a PMA do if there is not sufficient funding for these 
capital costs?
    Mr. Worthington. We defer that to a later time, or we defer 
that capital investment. We can also go to our customers and 
ask for the funding from the customers, and they can choose to 
fund that or not.
    Mr. Meeks. If there is a failure, we do have access to the 
emergency fund that allows us to do immediate action on 
something that is critical to the system.
    Mr. Worthington. We also have access to the emergency fund.
    Mrs. Napolitano. The other two, the same?
    Mr. Wright. So we put in place a hydro and transmission 
asset management program a couple of years ago. We are working 
through the standard way you would look at risk management. 
What is the probability of event times the consequence of the 
event, and then we direct our resources to the places that 
create the greatest value for our customers.
    Mrs. Napolitano. Thank you.
    Mr. McClintock. Thank you. Mr. Tipton.
    Mr. Tipton. Thank you, Mr. Chairman and Ranking Member. Mr. 
Meeks, we come out of the same part of the world. Welcome to 
this Committee. I am out of Colorado as well. Can you give me 
an idea, when is the next planned flood for the Glen Canyon 
Dam, artificial flood?
    Mr. Meeks. There is a debate or talk about whether that is 
the appropriate thing to do. I know it is a substantial concern 
to our customers. I know there is a debate on how much it would 
cost as far as that flow testing. We estimate that it would 
cost the power customers $30 million.
    Mr. Tipton. Around $30 million. So this means that 
basically the Aspinall Unit is critical, though, really in 
meeting a lot of the peak demands, particularly in our part of 
the world. Is that a fair assessment?
    Mr. Meeks. Yes, sir. Glen Canyon Dam provides 80 percent of 
the baseload for our Salt Lake City area integrated projects. 
But Aspinall provides 40 percent of the load following 
capability within that area. In other words, if you look at 
Glen Canyon as the base resource, you look at Aspinall as very 
critical to following the loads and helping shape that. So it 
is an important project.
    Mr. Tipton. Great. You know, when we are doing this, what 
is the ultimate cost really to the consumer? What are the 
people paying in terms of increased rates?
    Mr. Meeks. Again, the example I used was $30 million. When 
you look at the estimate on the Aspinall Units for the stuff 
that is doing, if you look on average, it doesn't look 
significant. It looks like 600,000 a year on average, which I 
don't want to pay it. But it varies wildly on a year to year, 
so it is kind of a deceiving number. So it does end up going to 
the ratepayer.
    Mr. Tipton. Right. Can you give me an idea--in your written 
testimony, you had commented that regulations are increasing 
your costs, and the second side of that is when we are talking 
about some false floods and that, you aren't going to be 
receiving income at that point. How much of regulatory costs--I 
didn't hear that when the original question was brought by the 
Chairman. How much is that increasing rates?
    Mr. Meeks. A lot of what we are facing isn't so much what 
has been done. It is what is proposed to be done. In other 
words, you mentioned the high flow testing. Again, I use the 30 
million. You look at stuff that has been done in the past, the 
other testing, where it adds up to somewhere around $10 
million. What you are looking at in the future is some 
significant increase. When you look at other parts of our 
system, you look at, for example, $100 million was spent on 
temperature control device for the Central Valley Project.
    So it is little incremental things that add up that is 
ultimately paid for by the power user. And so much what we are 
facing is, one, making sure decisions are made with sound 
science. We understand resources are sensitive. We get that. We 
are working with our generating agencies. I don't wish that 
mission on anybody because they have to balance a bunch of 
priorities. And we work closely to try and maximize whatever 
water we have that goes through the generation.
    Mr. Tipton. One thing if you could provide this, visiting 
with staff, as you note, we have all got budgetary concerns 
right now, and I think that the outreach that you are doing 
with the customers is admirable. I think it is 93 million, if I 
recall correctly, that you have been in consultation with. But 
we have been trying to get some answers in regards to some of 
the new staff hires in the Lakewood office that we are going to 
be addressing attrition and retirement that was going to be 
coming. Can you get us that information? Because those are 
going to be some real increased costs.
    And I would like to know, how much of your operational 
costs overall are related to environmental concerns?
    Mr. Meeks. I will get you an answer for the record on that.
    Mr. Tipton. OK. We would appreciate that. And if you would 
also, in terms of the follow-up on that, we would just like to 
know how much those costs do ultimately affect the consumers. 
You know, we are going through every one of our communities, 
senior citizens, struggling young families right now having a 
tough time paying their bills, and this is obviously a very 
critical component for all of our communities, and we need to 
be looking out for them at this particular time.
    Thank you. Mr. Chairman, I yield back the balance of my 
time.
    Mr. McClintock. Thank you. Mr. Garamendi.
    Mr. Garamendi. Mr. Chairman, thank you for a very 
informative hearing, and, the witnesses, thank you. We bounced 
around the issue of transmission. This is a particular issue in 
the Western Power Administration. The lines coming in from the 
Columbia River Basin into California, they are some 50 years 
old. Could you briefly discuss or at length discuss where we 
are with the upgrade of those lines and what might be in the 
offing?
    Mr. Wright. I would be willing to take that one. There has 
been a great deal of conversation about what the potential 
upgrade for either the A/C or the D/C interties that connect 
the Northwest to California. The first thing that happened is a 
group made of Western Area Power Administration 
representatives, Pacific Gas & Electric, and Bonneville Power 
Administration was to look at the utilization of the existing 
interties and determine whether in fact they were being fully 
utilized. And the reports that I have seen indicate that while 
there are times of the year when the intertie is not fully 
utilized, it actually is pretty heavily utilized right now. So 
that raises the question as to whether there are upgrade 
opportunities, and that group that has been working together is 
taking that on as the next phase of their efforts--to look at 
just what are those opportunities, how much would it cost, is 
it cost effective, and are there people who are willing to put 
capital on the table in order to be able to support those kinds 
of things?
    Mr. Garamendi. At one point, there was a new intertie line 
that was supposed to be developed from the Northwest into 
California. I understand that has been dropped. Has there been 
further discussion about upgrading the cables, that is, the 
transmission cables themselves, on the existing line?
    Mr. Wright. So the only thing that I am familiar with right 
now is on the D/C intertie there is an opportunity to 
potentially accomplish an upgrade there. There is some work 
that we are doing at our end to modernize facilities, which 
could also add an increment of additional capacity. We are 
working with our partners in Southern California to determine 
whether they have an interest in that as well.
    Mr. Garamendi. Yes. I understand that there are 
transmission facilities, cables available that are 20, 30 
percent more efficient in transmitting power. Is that true?
    Mr. Wright. There have been companies that have approached 
us that believe that they can increase the capacity of the 
line. We are involved in a research and demonstration program 
with one of them now to determine in fact how much capability 
there is there. I would say we are not at a point yet where we 
know enough to make a determination as to whether it is worth a 
substantial investment.
    Mr. Garamendi. Well, it seems to me that if you can 
increase the flow or power by 20, 30 percent, that is like 
creating a new power plant that gives you that much more 
capacity. I would like to have you follow up on that.
    Mr. Wright. OK.
    Mr. Garamendi. The other question has to do with the wind 
power in the Northwest as well as in California, the 
transmission of that power through the lines, and how you deal 
with the necessity of balancing. You briefly touched on this, 
both of you. Could you go into that in a little more detail, 
what problems exist, what opportunities exist, and how you 
intend to deal with that?
    Mr. Wright. It will be hard to deal with that briefly. I 
will do the best I can. The fundamental challenge that we find 
with respect to wind is the variability of the output, 
particularly within the hour because within the hour of the 
transmission, the provider is responsible for maintaining 
reliability and assuring that loads and resources are in 
balance. What we are doing currently in order to be able to 
balance that is use the hydro system.
    A few years ago, we thought that we could probably handle 
about 2,000 to 3,000 megawatts of wind, and then we would 
exhaust the capability of the hydro system. Through a variety 
of mechanisms that we have put in place, we are now operating 
at about 3,400 megawatts, and we think we can get above 4,000 
megawatts, probably in the 5,000-megawatt range, just as we put 
new technology in place.
    I will tell you the expansion of wind power is happening at 
a much, much more rapid pace than we had predicted. And 
consequently, our ability to keep up technologically has been a 
real challenge for us.
    Mr. Garamendi. Thank you very much. I yield back my time.
    Mr. McClintock. Well, thank you. Mr. Gosar.
    Dr. Gosar. Mr. Meeks, as you may not know, the Navajo 
generating station and the Glen Canyon Dam are both in my 
district in Arizona. So given those questions, I want to refer 
to my colleague's question and kind of highlight a little bit 
more about the Aspinall Unit. If it is not in play, how do we 
make up for the loss during those high peak times? What is 
going to replace it?
    Mr. Meeks. Well, you would have to definitely purchase, be 
out on the market, and that is a mixture of all sorts of 
things, whether it is gas, coal, if there is other hydro out 
there, whatever. But we would be on the market. It definitely 
wouldn't be our hydro.
    Dr. Gosar. So is it even available right now?
    Mr. Meeks. Is it available? I don't know the answer to 
that. In other words, it is a precious resource. The ability to 
follow load is a very valuable commodity. Let us put it that 
way.
    Dr. Gosar. I would sure like to know what the backup would 
be for the next five years, if I could get an answer on that.
    Mr. Meeks. Sure, absolutely.
    Dr. Gosar. Because it is much more expensive, particularly 
an intermittent, particularly if we are looking at wind and 
solar and buying it on the market.
    Mr. Meeks. Though you notice I didn't throw that out 
because those aren't resources that are able to do what those 
units are able to do. So it would be more of a guess, 
combustion-type generation.
    Dr. Gosar. Thank you. You answered my question. Your agency 
sells any excess power from the coal burning Navajo generating 
station in Page.
    Mr. Meeks. Right.
    Dr. Gosar. In 2009, your agency sold about 4 million 
megawatt hours from the plant, generating about $121 million to 
the U.S. Treasury. If EPA goes through with its worst case 
scenario in air regulations upon NGS, either the plant shuts 
down because it is uneconomical to make the retrofit, or the 
price of the energy produced goes through the roof. The net 
effect on WAPA is that no one would want to buy the power since 
it would be expensive.
    What would be the impact of the EPA proposal, specifically 
the cost of the power sold in 2009, versus what it could be 
under the EPA scenario?
    Mr. Meeks. Basically, when it comes to the Navajo plant, we 
provide a service, if you will. In other words, we have no 
repayment responsibility for that plant. We are providing a 
service through the Bureau of Reclamation for selling excess 
energy, as you stated.
    So whatever we can sell is what gets returned to the 
Treasury. Obviously, it is a market-based price. It is a price 
that has competition. So if I am unable to sell it, then I am 
unable to return anything to the Treasury.
    Dr. Gosar. But that whole area has grown immensely over the 
last 10 years, wouldn't you agree, its service line? And if it 
was to go out of production, we have no way of compensating for 
that, do we?
    Mr. Meeks. Again, if you take something out of service, it 
has to be replaced by something else.
    Dr. Gosar. OK. Finally, to close, in light of the 
Administration's policies that are reducing generation at the 
Glen Canyon policy, regulating uncertainty on the NGS is 
putting that kind of power at risk, and the aging and the 
inadequate amount of transmission lines, particularly on the 
reservations in my rural district, and considering your 
operational costs recovered by your rates, how much do you 
estimate my constituents will increase their rates in the next 
10 years?
    Mr. Meeks. Again, as I stated before, a lot of the things 
that we are looking at are scary as far as someone who is in 
the business to sell hydropower. One other figure that I didn't 
mention from the impacts of Glen Canyon in your district, we 
used to track the costs as far as the lost generation, and what 
we found out from--an average amount of extra money for 
replacing Glen Canyon is $50 million a year that customers have 
to pay.
    And in addition, going back to your replacement question, 
replacing that generation source, the estimates have been a 
billion dollars in capital costs to replace the resource we 
lost through Glen Canyon Dam.
    So again, I don't want to be the generating agencies. They 
have a tough mission. But again, if you lose something, you 
have to replace it with something.
    Dr. Gosar. Real quickly, could you compare the transmission 
lines from the Hoover Dam on the western side of Arizona to the 
eastern side of Arizona? Which is in worse condition?
    Mr. Meeks. It depends where you are at. In other words, I 
would say they are equal. We need help.
    Dr. Gosar. Thank you.
    Mr. McClintock. Mr. DeFazio.
    Mr. DeFazio. Thank you, Mr. Chairman. To the Bonneville 
Power Administrator, Mr. Wright. And Mr. Garamendi at least 
initiated the issue, the discussion of integrating wind in the 
Northwest, which is contracted to Southern California. And 
obviously, we want to optimize the capability of transmitting 
that, and I am all on board with that.
    But my other concern is where the costs go. You know, the 
costs should not be borne by Northwest ratepayers for wind 
power contracted to California. So I would like you to just 
tell me a little bit about the integration, cost of service 
issues. I know you have some particular problems now, and I 
have heard a lot of concerns about this high wind, high water 
situation, which we may see this year, the way snow pack is 
going. And if you could address those two things, I would 
appreciate it.
    Mr. Wright. So first on wind integration. There are costs 
associated with wind integration. When wind is operating on 
your system, you have to be able to fill in the holes. When 
wind goes up or wind goes down, that requires an operation of 
the hydro power system, and there are costs associated with 
that.
    In 2008, we put in place our first wind integration rate. 
The 2009, we adopted an additional rate, and then we are 
operating our rates today, '10 and '11, that increase that rate 
because as we have added more wind to the system, the costs of 
wind integration have increased as well.
    Mr. DeFazio. What is that cost? Can you tell us? How is it 
measured?
    Mr. Wright. It is measured in dollars per kilowatt month. 
You can roughly translate it to about six dollars a megawatt 
hour.
    Mr. DeFazio. OK.
    Mr. Wright. So we are in the midst of rate case right now 
to set rates for the '12-'13 period, and wind integration is a 
substantial issue in that case. I am not allowed to speak very 
much about it because it is an ex parte process, and I am the 
decision maker in that process. So discussing the merits of it 
would be----
    Mr. DeFazio. Yes. I have been there before, OK.
    Mr. Wright. The second part of your question got to just 
what about this high water, high wind event, which is really a 
set of unique circumstances that is a little different from 
wind integration. What we find in this circumstance, in the 
spring we can have more electricity than we need. In fact, if 
you get a slug of water that comes down the system, you get a 
big rainstorm of some kind, we can produce enough energy off 
the hydropower system to meet all of the loads in the Pacific 
Northwest, even assuming that the thermal units are shut down, 
coal plants, gas plants, et cetera are shut down.
    And then if wind is operating on top of that, we have more 
electricity than we know what to do with, even if all of the 
interties are full. In that moment, we actually face a very 
difficult circumstances where we have to choose among our 
values. If there is more water than we can use to produce 
electricity, the only way to pass it is to spill it over the 
top of the dams. And yet at certain points, we can be spilling 
so much water that we exceed what are called the gas caps. A 
certain amount of gas in the water is bad for threatened and 
endangered salmon. And so we have an exposure with respect to 
trying to provide salmon protection, trying to provide 
reliability, make sure that the lights don't go out, try to 
make sure that any costs are paid for by those why created the 
costs and the system, and assuring that we are at the same 
trying to encourage renewable resources, which has been a part 
of our mandate, to try to encourage renewable resources.
    So we find ourselves having to choose between those values. 
Fortunately, so far we have not had to make that choice. We 
came very close last spring to having to do so. We have held 
six months of public process on this issue, trying to identify 
options so that we wouldn't have to make those hard choices. I 
would say so far we have found alternatives that help us to 
delay the choice. We have not found alternatives so far that 
solve the problem. And so I am concerned that we will have to 
make choices even this spring if we get that large slug of 
water.
    Mr. DeFazio. Well, some way if you just went to 120 percent 
on the dissolved, you know, on the spill, that you could solve 
the problem.
    Mr. Wright. Yes. So the issue there is that there are 
certain gas caps that are created under the Clean Water Act 
that are implemented by the States, and there are differences 
of use between the States of Oregon and Washington, which share 
the river system, about what those gas caps should be.
    Mr. DeFazio. So Washington is higher?
    Mr. Wright. Washington allows--it cuts off spill at a lower 
point.
    Mr. DeFazio. Oh, a lower point, OK.
    Mr. Wright. This is an issue in which we have a great deal 
of interest because our salmon protection program, we are 
spending about $800 million a year, have costs about $800 
million a year. And so candidly, we have not been willing to 
take a lot of risk with respect to salmon protection because it 
puts at risk the other investments that we are making in trying 
to make sure that we are mitigating for damage cause by the 
Federal hydroelectric resources.
    So our view has been we would stick with the current 
standards which have been debated for probably more than 10 
years rather than make a modification to them to allow more 
spill to occur.
    Mr. DeFazio. OK, thank you. Thank you, Mr. Chairman.
    Mr. McClintock. Thank you. Mr. Costa.
    Mr. Costa. I would like to go back to that line of 
questioning that Mr. DeFazio was engaged in because it is my 
understanding on the Columbia and on the Bonneville project you 
have some issues with the Endangered Species Act with regards 
to salmon and biological opinions that have been part of the 
standard of their criteria that you have had to comply with 
over the years. Is that not correct?
    Mr. Wright. It is correct, that we do operate under a 
biological opinion.
    Mr. Costa. Yes. And they have been disputed, and then 
various debate has taken place between all the parties, between 
the power users, between the farmers, between the Indians, 
between the environmental community. Is that correct?
    Mr. Wright. That is correct. And that plan is pending in 
the Federal District Court today.
    Mr. Costa. OK. So then there has been more than one 
biological opinion, I think. Secretary Locke and I had a 
conversation about that a year ago.
    Mr. Wright. There have been a number of biological opinions 
over the years, starting in 1994. We are operating under a 
biological opinion that was adopted in 2008 today. It was 
adopted under the Bush Administration but was reviewed under 
the Obama Administration. And as I indicated before, it is 
pending in Federal District Court of Oregon.
    Mr. Costa. So depending upon that decision, it could 
maintain the current level of power that you are able to 
generate, or it could decrease it. Or what other impact might 
it have?
    Mr. Wright. Well, the 2000 biological opinion made 
modifications to the way we operate the hydro system and did 
result in some reductions in the output of the system as we 
increase spill to help juvenile salmon pass downstream. That 
plan, like I say, is the one we have been operating under for 
the last two years as we wait for the Federal District Court to 
rule.
    Mr. Costa. I see. And so is there a level of consensus that 
has taken place as a result, or everybody is waiting for the 
court to decide?
    Mr. Wright. Well, we are very proud of the fact that at the 
court's direction, we went off and instigated a collaboration 
process in the region, and currently in the Federal District 
Court, three Northwest States, Washington, Idaho, and Montana, 
have joined with the Federal Government, along with six Indian 
tribes, and are supporting that Federal plan. So there has been 
a great deal of collaboration, and we hope that the court will 
sustain that decision.
    Mr. Costa. We have a similar situation in California that 
you may have heard about, and it seems like the court may be 
the final arbiter of trying to get people to reach an 
agreement, for reasons that I think are probably similar on the 
Columbia.
    Back to the point of transmission of power and the question 
that was asked earlier with regards to the need to upgrade our 
transmission lines. How much more power could we provide if we 
were to make that investment? Mr. Meeks, are you the proper 
person to ask that question?
    Mr. Meeks. I wish I was. One thing I do want to address, 
there are a lot of things we need to look at, including 
upgrading of existing infrastructure. One thing I just wanted 
to go back to the Congressman's question on composite 
conductor, it is not as simple as just slapping in a new 
conductor and calling it good. You have to as well upgrade your 
equipment on each end, you know, for higher amperage, and 
follow-up duty and things like that.
    Mr. Costa. But no. My sense is it is a significant 
investment. Otherwise, we would have done it----
    Mr. Meeks. Exactly.
    Mr. Costa.--two years ago. But again, in terms of the cost 
effectiveness or efficiencies that you would realize, I think 
that is what we really need to know, what bang for our buck. 
How much more power could we provide from power that we lose by 
the existing transmission lines that are outdated and not as 
efficient? There has to have been some study on this.
    Mr. Meeks. I will get you that for the record as well.
    Mr. Costa. Yes. We want to know the cost benefits. If you 
could provide that to the Subcommittee, I think we would all 
like to know that because we are looking at investing in our 
infrastructure. This is an important part of our 
infrastructure, and go from there.
    I hear it was touched upon earlier, and I don't know if we 
got a complete answer or not on the conditions of the 
Bonneville projects to withstand seismic issues, since we are 
looking at the situation in Japan. Did we get a definitive 
answer on what standards of seismic events you think you are 
capable of withstanding?
    Mr. Wright. The question that came earlier was with respect 
to the nuclear project that Bonneville pays for and receives 
all the output from. And for that project, it is located on the 
Hanford Reservation. They looked at historical earthquakes that 
have occurred in that area. And the seismic event that they 
have planned for is well in excess of the historical seismic 
events that have occurred there.
    Mr. Costa. Which is?
    Mr. Wright. It is in the range of somewhere around four to 
five on the Richter scale.
    Mr. Costa. I am just as concerned about the dams.
    Mr. Wright. So I actually would need to provide that for 
the record. I don't know exactly what that is. I do know that 
the fundamental concern with respect to the nuclear plant was 
whether a dam might be taken out, and then you would have 
potentially a surge of water coming downstream that would 
affect the nuclear plant. And from the evidence that I have in 
front of me, it appears that that would be very unlikely, that 
the nuclear plant is built on high enough ground that a loss of 
Grand Coulee or Chief Joseph would not cause an inundation of 
the diesel generators that provide the backup power supply for 
Columbia generating station.
    Mr. McClintock. I am going to have to cut it off there. But 
happily, we do have time for a bonus of questioning that begins 
right now. Mr. Wright, we have been talking about the enormous 
amount of wind generation that you folks have added in the last 
few years, and we have also talked about the fact that because 
wind generation is unreliable, obviously the wind comes and 
goes, you have to be able to have an equal amount of backup 
power ready to replace it.
    So does that mean that wind generation essentially adds 
zero to the baseline because you have to back up every megawatt 
of wind with a megawatt of reliable power?
    Mr. Wright. We have quite a debate about that going on in 
the Northwest, but basically the capacity factors that we use 
in the Northwest are somewhere between 5 percent and zero.
    Mr. McClintock. And you testified, if I understand 
correctly, that this mandate is adding about six dollars per 
megawatt to your generating costs?
    Mr. Wright. It creates costs that work out to be about six 
dollars per megawatt of wind. We collect that cost from the 
wind producers to assure that there is not a cost shift between 
wind purchasers and sellers, and then Northwest ratepayers who 
buy our firm power----
    Mr. McClintock. But that is a rather substantial amount 
compared to your baseline costs, isn't it?
    Mr. Wright. I think it does make a difference to the wind 
power producers. They certainly are very active in our rate 
case.
    Mr. McClintock. What does a megawatt of hydroelectricity 
cost, and what is the final cost of the same megawatt of wind, 
taking account for a need for backup, obviously including all 
subsidies, and the additional transmission cost because a lot 
of these areas, I understand, require additional transmission?
    Mr. Wright. So we sell our firm power products at roughly 
about $30 a megawatt hour today, which is an all-in cost, and 
includes the hydro project, the nuclear projects, Fish and 
Wildlife mitigation costs, et cetera.
    Mr. McClintock. Yes. But again, what I am trying to get at 
is what is the basic price or cost of generating, say, a 
megawatt of hydroelectricity compared to the same megawatt of 
wind?
    Mr. Wright. So the cost of the hydro units alone would be--
the fully allocated costs would probably be in the $10 per 
megawatt or less range. If you were purchasing a wind power----
    Mr. McClintock. And wind?
    Mr. Wright. If you were purchasing a wind power product in 
the market today, the price may range from anywhere from 70 to 
say $100 a megawatt hour.
    Mr. McClintock. Good heavens. I guess the answer to the 
next question may be self-evident. Suppose instead of your 
mandate being to encourage renewable electricity, suppose it 
was to encourage the most efficient and least expensive 
electricity. How would that change your policy?
    Mr. Wright. Actually, that is the policy. It is in Federal 
law today under the Northwest Power Act.
    Mr. McClintock. Well, obviously, $10 a megawatt power is an 
awful lot cheaper than $70 a megawatt power.
    Mr. Wright. It is. And for that reason, we are very 
actively pursuing trying to make sure that we are getting as 
much out of the hydro system as we possibly can. It is the 
cheapest resource available.
    Mr. McClintock. You have all testified to substantially 
increased costs because of ESA compliance mandates. Suppose the 
policy were changed to allow the product fish hatcheries not 
only to be included in population counts, but also to be used 
as mitigation. Would that increase or decrease your costs?
    Mr. Wright. That would make a substantial difference in 
terms of the calculation of how to meet threatened and 
endangered species costs. It would be a substantial change in 
the policy with respect to whether a hatchery fish is the same 
as a wild fish or not. And not being a biologist, I would 
probably need to stop there in terms of my explanation. But it 
certainly would make a difference.
    Mr. McClintock. Mr. Meeks, how about you folks? You have 
substantial compliance costs.
    Mr. Meeks. I agree with my colleague here.
    Mr. McClintock. Let me have one final question for Mr. 
Meeks on the Central Valley Project Improvement Act. Obviously, 
water customers have been charged $30 million annually. The cap 
was supposed to be reduced to 15 million upon completion. It 
was specified mitigation and restoration activities. I 
understand today, 19 years after enactment of the Act, the 
annual fee cap on water and power customers is still $30 
million per year, with no indication of when that cap will be 
reduced, if ever. And I am told that makes the price above 
market.
    What is going on with that? Ten seconds, what is going on 
with that, and what can be done about it?
    Mr. Meeks. Ten seconds. You are right in everything you 
said, 20 percent added on top, at market. I am meeting with the 
Commissioner next week, hopefully, to talk about that very 
issue.
    Mr. McClintock. Great, thank you. and if you could submit 
an additional response for the record, that would be 
appreciated. Now I recognize the Ranking Member, Mrs. 
Napolitano.
    Mrs. Napolitano. Thank you, Mr. Chair. And while you do 
that, maybe it is possible to have the people, the tribes and 
the States who are saying that the increase in salmon is 
creating another increase in their economy, whether it is 
tourism, whether it is fishing for the salmon, and what is that 
in return giving those areas in terms of economy, if you would 
look into that. Or maybe they have the ability to get input 
from your customers.
    Mr. Meeks. Well, actually, I have another question that has 
to do with--on page 6, Mr. Worthington, you indicated on the 
right-of-way clearing because of the blackouts, the inadequate 
right-of-way clearing. You have increased it. When I toured one 
portion of the WAPA, and I was looking at the clearing, and 
apparently the bark beetle infestation, the pine beetle 
infestation was creating a problem with the right of way 
because those trees could fall on the lines that were--the 
right of way wasn't wide enough, and apparently there was an 
issue with forestry and all that.
    Is that still a problem, and is there an R&D on the pine 
beetle infestation that has been looked at? It is an update on 
the environmental impact statement regarding the protection of 
the power lines against possible damage due to that 
infestation, including the right of way issue.
    Mr. Worthington. We have utilized aggressive means to 
address this situation, but we don't have specific issues with 
the pine beetle infestation in our service region.
    Mrs. Napolitano. Mr. Meeks does.
    Mr. Meeks. Yes, I do. We are continuing to work with the 
Forest Service. We expect to have the draft environmental 
statement done in October of this year, and a final April of 
next year. So we are aggressive with it. We are doing the best 
we can on that issue.
    Mrs. Napolitano. Who is working on the R&D to be able to 
address this?
    Mr. Meeks. R&D, as far as what you said in your opening 
statement, I do not know as far as how do you prevent this in 
the future. I will get you something.
    Mrs. Napolitano. Please. Then the other question, Mr. 
Meeks, is how are you helping to integrate the renewable energy 
into the service area while keeping the core mission?
    Mr. Meeks. As I have said in the past, we cover nine of the 
ten windiest states. So we have 14,000 megawatts of wind in the 
queue. We only have 1,000 megawatts in service right now today. 
So what we are doing is, one, we have open access transmission 
tariffs. In other words, if people want to build into it, they 
have access to the system, given the proper constraints. We are 
offering products, transmission products, like long-term, non-
firm, and conditional-firm, that is attractive to renewable 
users, as well as working with the balance with our borrowing 
authority, our customer needs, and all of the above.
    Mrs. Napolitano. So you are juggling pretty well.
    Mr. Meeks. Yes.
    Mrs. Napolitano. There is a question in regard to the 
mandatory standards that have increased in 2008 from 60 to 
current 102. Is there anything that can be done to consolidate 
some of those mandates and save you time and money and save the 
ratepayers? Anybody? I am looking at the North American 
Reliability Corporation, the NARC.
    Mr. Meeks. Oh, there is an added burden, there is no doubt 
about it, as far as the reliability standards. One of the 
things that we are trying to work with the reliability 
organizations is how much is real, is value added to 
reliability of the system, versus checking the box and feeding 
a monster.
    So that is one thing throughout industry that we are 
working on moving toward. We are doing things internally I 
would be happy to tell you about--I know time is short--to help 
alleviate costs related to those.
    Mrs. Napolitano. I would like to have you answer that in 
writing so that the rest of the Committee can understand what 
some of these standards do, how it affects your ability to 
provide the service. And with that, I yield back.
    Mr. McClintock. Thank you. Mr. Labrador.
    Mr. Labrador. Thank you, Mr. Chairman. I only have one 
question for Mr. Wright. As you know, there has been a dramatic 
increase in the amount of wind generation located in the 
Northwest. I realize that some of the resulting wind energies 
are being used to meet our RPS requirements in Washington and 
other Northwest States. With California increasing its RPS to 
33 percent, I am curious about what percentage of the wind 
energy generated in the Northwest is exported to California?
    Mr. Wright. I am not sure I can answer with respect to the 
Northwest as a whole, but for the Bonneville system--and I 
believe this is applicable for the rest of the region--it is in 
excess of half.
    Mr. Labrador. OK. And does BPA have policies that 
differentiate between wind projects, where the output is 
consumed in the Northwest, versus sold out of region?
    Mr. Wright. We do not have a difference in terms of pricing 
for where the power ultimately is delivered to. We do create 
charges to assure that the costs that are created by wind 
power, wherever it is delivered to, are paid for by wind 
purchasers and sellers.
    Mr. Labrador. All right. Thank you. I yield back.
    Mr. McClintock. Mr. DeFazio.
    Mr. DeFazio. Thank you, Mr. Chairman. Mr. Wright, the 
Chairman asked a question I thought was interesting, but I 
doubt that anyone has developed the data because it would 
require a present cost or value analysis. But he was comparing 
the cost of the wind, new wind generation, versus the installed 
hydroelectric capacity, which of course was built 70 years ago 
during the Great Depression, for the most part, or then through 
World War II.
    Has anyone ever looked at--I mean, it would be a real Blue 
Sky thing, but if you had to build Grand Coulee today and 
install the capacity, I assume it would be much more expensive 
than it was then. Anyone ever looked at that?
    Mr. Wright. I think it would be safe to say it would be 
much more expensive.
    Mr. DeFazio. Yes. So any new capacity is obviously very 
expensive, no matter what technology we are using. And that 
said, I would like to ask, as I understand it, the most cost 
effective way to meet the future projected power needs in the 
Pacific Northwest is neither wind, hydro, coal, oil, gas, or 
nuclear. There is one thing left, right?
    Mr. Wright. Yes. The number one resource in the resource of 
priority for the Northwest is energy efficiency. By all of the 
studies that I have seen by the Northwest Power and 
Conservation Council or by Bonneville staff, we think that we 
can acquire energy efficiency at somewhere in the range of 
about $30 a megawatt hour, which is probably half the cost of 
any other resource that is out there.
    Mr. DeFazio. My local utility has been very good at 
subsidizing the cost of compact fluorescents. I believe BPA had 
a program perhaps encouraging them to do that. I am not sure. 
And I know historically BPA has been very involved in 
conservation. Are there any estimates just on--I mean, as I 
understand, there are some cities in Washington State where you 
can't even find incandescent light bulbs anymore, they have 
been so aggressive.
    But can you tell me just on the lighting side what we can 
save? Do you have an estimate on that breakout?
    Mr. Wright. I don't have that one at the tip of my tongue. 
I know that our market penetration rate is still probably in 
the 15, 20 percent range. So there is a substantial amount of 
opportunity still out there in the lighting area, both in 
residential, but particularly in the commercial arena, where 
our programs have really just begun.
    Mr. DeFazio. Well, I would be interested in any estimates 
you might have on that. We are about to have a raging 
controversy over, you know, save Edison's invention and, you 
know, ignore the 21st century here in Washington to move beyond 
the incandescent light bulb. It would be useful to have that 
data for that debate.
    Mr. Wright. I would be happy to provide that for the 
record.
    Mr. DeFazio. All right. Thank you. I just want to get 
straight on the 115, 120 nitrogen issue. I mean, are you 
feeling--is it just the legal constraints or is your agency 
convinced that the preponderance of the evidence is that 120 is 
detrimental, and therefore you wouldn't want to go there even 
if you weren't concerned about further litigation?
    Mr. Wright. I think it is both.
    Mr. DeFazio. Yes.
    Mr. Wright. So the biological opinion says that we will 
comply with the water quality standards as adopted by the 
States of Oregon and Washington. And so the adopted standard 
right now is Oregon different from Washington. But a majority 
of the facilities are, of course, in Washington.
    So it is a matter of complying with the law. But in 
addition to that, our view has been that excessive levels of 
gas can have a negative impact on salmon and steelhead. And the 
fundamental problem that you have is there is a curve out 
there, and the curve is you put more gas in the river, and you 
get increased risk. And the question just is where do you draw 
the point on that curve that says that is the straw that breaks 
the camel's back.
    Given the substantial investment that we are making in the 
salmon and steelhead restoration, we have been reticent to draw 
that place in the curve in a place where we might be putting at 
risk the hundreds of millions of dollars a year investment that 
we are making in salmon restoration.
    Mr. DeFazio. I find it interesting that Oregon would have a 
higher standard, Washington a lower standard. Yet as I 
understand it, Oregon is the one outlier in the pending Federal 
litigation among the affected states who does not agree with 
the proposed biological opinion. Is that because they want a 
higher dissolved nitrogen standard?
    Mr. Wright. Well, to be fair to Oregon, their view in the 
litigation has been that additional spill would be a good 
thing. And so I think that their position with respect to the 
state's position on gas----
    Mr. DeFazio. Oh, it is a good thing even with higher 
nitrogen, in Oregon's view?
    Mr. Wright. Oregon has been of the view that increasing 
spill does increase juvenile survival, and that they have been 
less concerned about the gas impacts than the potential 
benefits from spilling fish. Now, that has been different from 
Washington's view and different from our view.
    Mr. DeFazio. Thank you.
    Mr. McClintock. Mr. Garamendi.
    Mr. Garamendi. A fascinating issue. I hope you can resolve 
it in Oregon. We have similar issues in California with our 
downstream flows, temperature and the like.
    I want to go to conservation here. Clearly, it is the 
cheapest, the best, and the most immediate available. I just 
stepped out into the hallway and noticed the window that I was 
standing next to has to be about a 1920 to 1930 model window, 
single pane. I was just thinking about a public-private 
partnership where maybe we get a private entity to come in and 
take us and enjoy some of the benefit of the savings that would 
inure if we were to replace the windows in at least these two 
buildings, the Longworth as well as the Cannon.
    We will have to talk to Mr. Lungren about that, Tom, when 
we get back on the airplane going to California.
    Mr. DeFazio. Rayburn is also single pane, even though it 
was built in the 1960s.
    Mr. Garamendi. OK. We will change out all the windows and 
get a private contractor in to do it, and let him benefit with 
some of the cost savings.
    Just a question--just not a question, a comment. California 
energy standards, among the highest in the nation, if not the 
highest, have allowed the state to actually maintain the same 
per capita energy consumption, even though we have had enormous 
growth in the population over the last 20 years, 25 years, 
since it was put in place. We ought to have a national energy 
standard.
    If we take a look across the nation, certain Midwest States 
have very cheap power and extraordinary energy consumption in 
their homes. And so just something we ought to be thinking 
about if we want to meet the entire nation's demand.
    I want to go really the--I guess I am stuck on conduit 
today. It just keeps coming back. Somebody handed me a piece of 
conduit 10 years ago and said, if we did this, we wouldn't need 
to build an additional power plant. I really want to get into 
that. I would like to have the analysis done by the two, I 
guess all three of you, on conduit. How much more energy can we 
push through the lines, taking into account, yes, you have to 
be on both sides. You have your substations and switching and 
so on and so forth.
    And the other issue, which I don't think we are going to 
get an answer to today, has to do with the integration of the 
green energy sources together with the baseload power, which 
hydro does have flexibility, but again nuclear.
    And finally, on the nuclear issue, it seems to me that we 
will be building nuclear power plants, notwithstanding the 
Fukushima issue, if not here, then other nations will. That 
brings us to what are we going to do with the used nuclear 
fuel, of which about 95 percent will remain, even with the 
French recycling. What do we do with that? How do we handle it? 
Do we stick it in the ground someplace and walk away, or do we 
close the nuclear cycle? And if any of you gentlemen are 
involved in that, could you please for the record speak briefly 
to that?
    These are issues that are not going to be answered today. 
National energy standards, similar to what California has, we 
ought to do it, Tom. I should say Mr. Chairman. Excuse me for 
being more familiar. We are just Californians here today, so we 
are talking down home. And then the issue of how we deal with 
the integration of the green, the renewables. I think we really 
need to spend a lot of time on that. Various kinds of storage 
systems. I was thinking of water pumping into various 
reservoirs, and then being released later, something that is 
used in California, I think in other states also.
    Perhaps more of that, and this is part of what I know the 
Chairman is interested in, this off-stream storage, which is 
part of what we are going to have to do. And then I guess I am 
talking and not asking questions. I am sorry, gentlemen. But 
for the record, if you could provide some insight into these 
issues. I will yield back my time, Mr. Chairman.
    Mr. McClintock. Well, thank you. And that concludes the 
hearing today. I want to thank our witnesses for sharing their 
valuable time and the insight into these issues. Members of the 
Subcommittee may have additional questions for witnesses. In 
fact, I can personally guarantee it. And we would ask that you 
respond to these in writing. The hearing record will be open 
for ten business days to receive these responses.
    And if there is no further business to come before this 
Subcommittee, without objection, the Committee stands 
adjourned.
    [Whereupon, at 11:31 a.m., the Subcommittee was adjourned.]

                                 
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