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

      H.R. 1719, ``ENDANGERED SPECIES COMPLIANCE AND TRANSPARENCY ACT OF
       2011'' AND H.R. 2915, ``AMERICAN TAXPAYER AND WESTERN AREA POWER
               ADMINISTRATION CUSTOMER PROTECTION ACT OF 2011''

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

                              LEGISLATIVE 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

                                   __________

                          Thursday, September 22, 2011

                                   __________

                               Serial No. 112-64

                                   __________

           Printed for the use of the Committee on Natural Resources

      Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                                   index.html
                                       or
              Committee address: http://naturalresources.house.gov

                                   ----------
                             U.S. GOVERNMENT PRINTING OFFICE

    68-510 PDF                       WASHINGTON : 2012

    For sale by the Superintendent of Documents, U.S. Government Printing
    Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
    DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
    Washington, DC 20402-0001

                         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
                     David Watkins, 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 Thursday, September 22, 2011.....................     1

    Statement of Members:
        Hastings, Hon. Doc, a Representative in Congress from the
          State of Washington........................................     6
            Prepared statement of....................................     8
        Markey, Hon. Edward J., a Representative in Congress from the
          Commonwealth of Massachusetts..............................    16
            Prepared statement of....................................    17
        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:
        Azar, Lauren, Senior Advisor, Office of the Secretary of
          Energy, U.S. Department of Energy, Washington, D.C.........    41
            Prepared statement on H.R. 2915 and H.R. 1719............    43
        Corwin, R. Scott, Executive Director, Public Power Council,
          Portland, Oregon...........................................    27
            Prepared statement on H.R. 1719..........................    29
        Glotfelty, James, Executive Vice President, Clean Line Energy
          Partners LLC, Houston, Texas...............................    55
            Prepared statement on H.R. 2915..........................    57
        James, Leslie, Executive Director, Colorado River Energy
          Distributors Association, Phoenix, Arizona.................     9
            Prepared statement on H.R. 1719..........................    10
        Michaels, Robert J., Ph.D., Professor of Economics,
          California State University, Fullerton, California.........    44
            Prepared statement on H.R. 2915..........................    45
        Patton, Sara, Executive Director, NW Energy Coalition,
          Seattle, Washington........................................    21
            Prepared statement on H.R. 1719..........................    23
        Rettenmund, Frederic Dean, Power Resources and Communications
          Manager, Inland Power and Light Company, Spokane,
          Washington.................................................    18
            Prepared statement on H.R. 1719..........................    19
        Yeatman, William, Assistant Director, Center for Energy and
          Environment, Competitive Enterprise Institute, Washington,
          D.C........................................................    59
            Prepared statement on H.R. 2915..........................    61

    Additional materials supplied:
        American Wind Energy Association, Statement submitted for the
          record.....................................................    73
        TransWest Express LLC, Letter submitted for the record.......    74

    LEGISLATIVE HEARING ON H.R. 1719, TO BETTER INFORM CONSUMERS REGARDING
        COSTS ASSOCIATED WITH COMPLIANCE FOR PROTECTING ENDANGERED AND
         THREATENED SPECIES UNDER THE ENDANGERED SPECIES ACT OF 1973.
      ``ENDANGERED SPECIES COMPLIANCE AND TRANSPARENCY ACT OF 2011''; AND
     H.R. 2915, TO REPEAL THE WESTERN AREA POWER ADMINISTRATION BORROWING
    AUTHORITY, AND FOR OTHER PURPOSES. ``AMERICAN TAXPAYER AND WESTERN AREA
            POWER ADMINISTRATION CUSTOMER PROTECTION ACT OF 2011.''

                                  ----------

                          Thursday, September 22, 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 2:01 p.m., in
    Room 1324, Longworth House Office Building, Hon. Tom McClintock
    [Chairman of the Subcommittee] presiding.
        Present: Representatives McClintock, Hastings, Napolitano,
    Garamendi, and Markey.

    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 notices the presence of a quorum,
    which under Committee Rule 3(e) is two Members.
        The Chair asks unanimous consent that Mrs. McMorris Rodgers
    be allowed to sit with the Subcommittee and participate in the
    hearing.
        Hearing no objection, so ordered.
        We will begin with 5-minute opening statements by myself
    and the Ranking Member of the Water and Power Subcommittee, and
    the Chair will begin.
        The Water and Power Subcommittee convenes today to hear
    testimony on H.R. 1719 by Congresswoman McMorris Rodgers that
    will provide electricity consumers with transparent price
    information on the cost of ESA mandates; and also my bill, H.R.
    2915, that will rescind the provision of the discredited
    stimulus that puts taxpayers on the hook for loans to wind and
    solar transmission developers administered by the Western Area
    Power Administration.
        For the past decade, the Federal Government has taken
    extraordinary steps to force wind and solar electricity on
    American consumers while spending untold hundreds of billions
    of dollars of direct subsidies and loans and loan guarantees
    that hide from consumers the actual price of these sources and
    puts taxpayer money in jeopardy when investors recoil at the
    risk and these schemes collapse.
        As we will hear, the unsubsidized cost of solar and wind
    power makes them the most expensive forms of electricity
    generation yet to be invented. Solar voltaic, for example,
    costs about $211 per megawatt hour, compared to combined-cycle
    gas-fired generation at $63.
        And that is just the beginning of the expense. Electricity
    systems are integrated, meaning that the amount of power being
    put onto the grid must constantly match the amount being drawn
    from the grid or the grid collapses. Solar and wind are
    intermittent and unpredictable. At a moment's notice, a passing
    cloud bank or a sudden calm can drop generation to zero. This
    means that consumers must also pay for backup generation of
    equal amount to be kept constantly ready and on call to fill
    the gap at a moment's notice.
        As we will hear, ironically, this often means more carbon
    emissions are produced because of the wind and solar mandates.
    And we pay twice: once for the enormous capital expense of
    these systems and a second time for the backup power that we
    must also build, maintain, operate, and keep in a constant
    state of readiness.
        Then we get to the next problem: transmission. Unlike
    conventional power, solar and wind arrays are usually placed in
    the most remote regions of the country, requiring construction
    of transmission lines over vast distances. Because of
    electrical current degradation over those long distances and
    the low initial output of wind and solar, the transmission
    lines must be special high-tension direct-current lines that
    are much more expensive than normal transmission facilities.
        Put all this together and one wonders, who in his right
    mind would invest in such a ridiculous arrangement? Well, the
    answer is, nobody in his right mind would risk their own money
    to do so, but there have been Members of Congress more than
    willing to risk their constituents' money, and those bills are
    now coming due.
        We are told that creating jobs is the purpose of this
    money. I suppose you could say that Solyndra created jobs while
    their management was raking in government-guaranteed loans.
    What we found out, though, is that jobs that are not
    economically viable do not last. And these temporary jobs come
    at a steep price. When taxpayers are left holding the bag to
    bail out these loans, that money comes from the same capital
    pool that would otherwise have been available to invest in
    permanent, economically viable jobs.
        And if investors, with all the information at their
    disposal, aren't willing to risk their own money on these
    ventures, well, that ought to be a warning that Congress has no
    right to risk their constituents' money in them either. Yet the
    so-called ``stimulus'' bill gave the Western Area Power
    Administration the authority to put $3.25 billion of tax money
    at risk to finance wind and solar transmission lines. And here
    is the ultimate warning: The measure even provides for loan
    forgiveness if the developer can't repay it. They don't even
    have to declare bankruptcy.
        My bill pulls the plug on this program before taxpayers end
    up holding the bag for these projects. Some Members of this
    House already bear enormous responsibility for the Solyndra
    fiasco. This bill gives them a chance to redeem themselves
    before this program, too, blows up in their faces.
        The Subcommittee will also hear testimony on H.R. 1719, a
    bill to provide consumers with the information on the cost of
    the Endangered Species Act as it affects their electricity
    prices. Consumers deserve to know the actual cost of what they
    are paying for, and this measure does so.
        I look forward to the consideration of these two important
    bills that will help us return sanity, abundance, and
    transparency back to our water and power policies.
        And, with that, the Chair recognizes the Ranking Member,
    the gentlelady from California, Mrs. Napolitano.
        [The prepared statement of Mr. McClintock follows:]

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

        The Water and Power Subcommittee convenes today to help return our
    federal power policies back to a rational cost-benefit approach and
    force government transparency as one way to reduce higher energy costs
    and bring about job creation.
        This Administration's underlying agenda is to promote a so-called
    ``green transmission system''--meaning facilities that limit
    transmission to sources the minority party finds ideologically
    pleasing--principally wind and solar--and that exclude electricity they
    find ideologically displeasing--namely hydropower, coal and nuclear.
    Never mind that wind and solar are the two most expensive ways to
    generate electricity and forget that hydropower, coal and nuclear are
    the least expensive while two of those produce exactly zero emissions.
        Wind and solar are also entirely unreliable, so they require a
    highly complex transmission system and a kilowatt-for-kilowatt backup
    system to maintain the electrical grid. This dual system makes these
    energies extremely expensive and could not possible survive a rational
    cost-benefit analysis. Despite that, the Democrat majority and this
    Administration rushed through in 2009--with no debate or committee
    consideration--a $3.25 billion stimulus loan slush fund for wind and
    solar developers. The provisions governing this so-called borrowing
    authority even provide forgiveness of the loans to companies that
    cannot repay them--forcing taxpayers and ratepayers to bail out
    fiscally irresponsible projects. While the Administration has only
    doled out 8.5% of these loans over two and a half years later, we need
    only look to the Solyndra failure of what could happen to the next
    transmission project that lacks the merit to attract full private
    investment.
        The WAPA borrowing authority is simply a governmental financial
    exercise that picks winners and losers when in fact the market should
    be the decision-maker. The real losers are the taxpayers that may end
    up holding the bag. It is time to require every sector of the energy
    industry to raise its own capital through its own merit rather than to
    perpetuate the crony capitalism that is now running rampant through
    this government. My bill, The American Taxpayer and Western Area
    Customer Protection Act of 2011, helps return us to the market approach
    that has been lost over the last decade. I'm pleased to have two
    excellent witnesses testifying on the notion that federal subsidies on
    intermittent power are not in the best interest of the taxpayer,
    ratepayer, the economy and the environment.
        On that note, we will hear from the Democrat minority today that my
    bill kills clean energy jobs. On the contrary, all we are asking is
    that wind and solar stand on its own without one form of government
    subsidies. I have been a longstanding proponent that no form of energy
    should be subsidized through any federal means. Instead, we should
    provide the regulatory climate by which all energies are not blocked by
    government fiat and can stand against each other in the marketplace. I
    only wish my Democrat colleagues had that same approach. At a hearing
    last week on a common sense hydropower production bill, my counterparts
    were all too eager to stand behind regulatory red tape that
    strangulates rural job creation. It reminded me of the Tolstoy saying:
    ``I sit on a man's back, choking him and making him carry me, and yet
    assure myself and others that I am very sorry for him and wish to ease
    his lot by all possible means--except by getting off his back.''
        The Subcommittee will also hear testimony on H.R. 1719, a bill to
    provide needed transparency on how Endangered Species Act mandates
    impact electricity ratepayers. As I've said before to this
    Subcommittee, the Endangered Species Act has put a gun to the head of
    the West. The utterly unreasonable effect of this law is now
    impoverishing millions of people in western communities, devastating
    the agricultural sector of our economy and threatening all of us with
    permanent water shortages, higher energy costs, skyrocketing food
    prices and chronic unemployment.
        Congresswoman McMorris Rodgers' bill does not amend the Act itself,
    but provides a mechanism by which electricity ratepayers have the
    ability to understand how much of their wallet goes towards complying
    with endangered species regulations. The environmental community has
    concerns over such transparency and that should be telling given that
    they drive the lawsuits that increase these costs. This bill, which I'm
    cosponsoring, provides much needed light on these activities and the
    resulting costs.
        I look forward to further consideration of these two important
    bills that will help us return sanity and abundance back to our water
    and power policies.
                                     ______

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

        Mrs. Napolitano. Thank you, Mr. Chairman.
        And thank the witnesses for coming and being our witnesses
    today. I look forward to your testimony.
        The bills we are considering today attempt to create more
    transparency and protect our taxpayers, but both pieces of
    legislation fail in their attempts.
        H.R. 1719 is an oversimplification of cost in an overly
    complicated power system. The PMAs are required, under numerous
    existing laws, including ESA, treaties, tribal trust
    responsibilities, to protect, mitigate, and enhance fish and
    wildlife and their habitat. It attempts to pay all fish and
    wildlife costs associated with the dam operations under the
    Endangered Species Act. H.R. 1719 is misleading and disregards
    the PMAs' other responsibilities and obligations. BPA is
    already transparent in providing thorough information on their
    fish and wildlife program funding. And it is available to all.
    On this Committee, there have been repeated assertions to that
    effect.
        Transparency also does not mean, and should not mean, that
    we can pick and choose and single out compliance with one law.
    Transparency means that we should include all costs that affect
    power rates, such as the cost of transmission, the cost of
    irrigation, as well as the cost of failed investments like the
    Washington Public Power Supply System, or ``WPPSS'' for short,
    nuclear plant default of 1983--$6.8 billion default, the
    largest municipal bond default in U.S. history. And 28 years
    later, the BPA ratepayers are still paying for this defunct
    investment.
        Meanwhile, the millions of dollars that BPA ratepayers are
    paying annually for fish and wildlife costs are allowing the
    hydropower system to operate while protecting endangered
    species. And I keep repeating, those are fish species. We are
    the man species. When are we next?
        If we are going to list transparency, let's list all the
    costs that affect power rates, as well as the benefits of a
    robust ecosystem. And for the record, to help better understand
    the issues, I am requesting and would like the power users on
    this first panel to submit for our record for this
    Subcommittee, at your agency--record the price at which your
    agency purchases power from the PMA and the price you sell it
    for.
        H.R. 2915, introduced by the Chair of the Subcommittee,
    repeals Western borrowing authority as authorized by the
    American Recovery and Reinvestment Act. In reality, what this
    legislation does is repeal thousands of jobs associated with
    the construction of transmission lines, wind farms, and across
    the West. And, yes, some of these may be sometimes short-term,
    but let me tell you, the benefits are long-term.
        For example, Montana-Alberta line project, the first
    project to utilize Western's borrowing authority, created
    approximately 900 short- and long-term jobs. The number does
    not take into account the spillover effects of employment
    incomes being spent in the economy as well as tax revenues for
    the communities. This is one of 21 job-creating projects that
    is in the queue to utilize this authority. Enactment of
    Western's borrowing authority repeals those jobs, mostly in
    rural communities.
        2915 also disregards a 2009 Department of Energy study that
    shows that more transmission is needed to relieve areas of
    congestion within our Federal power grid. It is also important
    to note that, in the stimulus bill, the Bonneville Power
    Administration was also given an additional $3.25 billion in
    borrowing authority, which they will pay back with interest,
    yet today's legislation only addresses Western's borrowing
    authority because of its focus on promoting renewable energy.
        A February 2011 Gallup poll found that 83 percent of the
    general public supports an energy bill that provides incentives
    for using solar and other alternative energy sources. 2915 not
    only repeals those jobs and disregards the need for upgrading
    our transmission, it also ignores what the American people not
    only want but need. Mr. Chairman, now is not the time to kill
    good legislation or jobs.
        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

        The bills we are considering today attempts to create more
    transparency and protect our tax payers. Both pieces of legislation
    fail at their attempts.
        H.R. 1719 is an oversimplification of costs in an overly
    complicated power system. The PMAs are required under numerous laws,
    including the ESA, treaties, and tribal trust responsibilities to
    protect, mitigate and enhance fish and wildlife and their habitat. H.R.
    1719 also attempts to peg all fish and wildlife costs associated with
    dam operations on the Endangered Species Act.
        This legislation is misleading and disregards the PMAs other
    responsibilities and obligations.
        BPA is already transparent in providing thorough information on
    their fish and wildlife program funding.
        Transparency does not mean and should not mean that we can pick and
    choose and single out compliance with one law. Transparency means that
    we should include all costs that affect power rates, like
              the costs of transmission,
              the cost of irrigation,
              as well as the cost of failed investments, like the
            Washington Public Power Supply System (or WHOOPS for short)
            nuclear plant default in 1983.
              The $6.8 billion default became the largest municipal
            bond default in US history, and 28 years later, the BPA rate
            payers are still paying for this defunct investment.
        Meanwhile, the millions of dollars that the BPA rate payers are
    paying annually for fish and wildlife costs are allowing the hydropower
    system to operate, while protecting endangered species.
        IF we're going to list transparency, let's list all the costs that
    affect power rates as well as the benefits of a robust ecosystem.
        To help better understand the issues, I would like the Power users
    on the first panel to submit for the record the price at which your
    agency purchases power from the PMAs and the price it is sold for.
        H.R. 2915, introduced by the Chair of the Subcommittee, repeals
    Western's Borrowing Authority as authorized by the American Recovery
    and Reinvestment Act.
        In reality what this legislation does is repeal thousands of jobs
    associated with the construction of transmission lines and wind farms
    in across the west.
        For example, the Montana-Alberta Line Project, the first project to
    utilize Western's borrowing authority created approximately 900 short
    term and long term jobs.
        This number does not take into account the spillover effects of
    employment incomes being spent in the economy, as well tax revenues for
    the communities.
        This is one of 21 job creating projects that in queue to utilize
    this authority. Enactment of Western's Borrowing Authority repeals
    those jobs, mostly in our rural communities.
        H.R. 2915 also disregards a 2009 Department of Energy Study that
    shows that more transmission is needed in order to relieve areas of
    congestion within our federal power grid.
        It is also important to note that in the stimulus bill, the
    Bonneville Power Administration was also given an additional $3.25
    billion in borrowing authority.
              Yet today's legislation only addresses Western's
            borrowing authority, because of its focus on promoting
            renewable energy.
        A February 2011 Gallup poll that found that 83% of the general
    public supports an energy bill that provides incentives for using solar
    and other alternative energy sources.
        H.R. 2915 not only repeals jobs and disregards the need for
    upgrading our transmission, it also ignores what the American people
    want.
        Mr. Chairman, now is not the time to kill jobs.
                                     ______

        Mr. McClintock. The gentlelady yields back.
        The Chair is pleased to note the presence of the Chairman
    of the Natural Resources Committee, Congressman Doc Hastings of
    northern Oregon--oh, Washington.

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

        Mr. Hastings. It used to be northern Oregon.
        Thank you very much for holding this hearing.
        Today's hearing is really about restoring transparency,
    fiscal responsibility, and American jobs. The Water and Power
    Subcommittee Chairman McClintock's bill to repeal the Western
    Area Power Administration's Stimulus Act borrowing authority
    for renewable energy transmission is a necessary response to a
    recent bankruptcy of Solyndra, the now-bankrupt recipient of
    535 million stimulus dollars.
        In the same way the taxpayers are now on the hook for over
    a half a billion dollars due to the failed Solyndra loan, the
    WAPA borrowing authority actually envisions and allows for
    similar failed investments. I will simply read to you what the
    statute says, and I quote: ``If, at the end of the useful life
    of a project, there is a remaining balance owed to the Treasury
    under this section, the balance shall be forgiven,'' end
    quote--another way of saying, ``Taxpayers, it is your
    responsibility.''
        This is a Stimulus Act experiment that needs to be halted
    and repealed. Billions of dollars in taxpayer dollars are at
    risk of a failure and a bailout. Chairman McClintock's bill
    would protect taxpayers and responsibly end this risky stimulus
    program.
        We will hear that protecting taxpayers in this manner is an
    action hostile to renewable energy development and the
    construction of major transmission lines. Yet that is simply
    nonsense, that such projects aren't economically possible
    without government handouts. Such projects were under way
    before the program existed, and undoubtedly they will continue
    to stand on their own economically after it has ended.
        In responding to and discussing this bill, I would urge all
    to be cautious about seeking to compare WAPA borrowing
    authority with the longstanding Bonneville Power authority,
    since that has been referenced at least a bit already. These
    authorities are as different as day and night. WAPA's authority
    is a creature of the stimulus and is mandated to be used for
    renewable energy transmission, while BPA's authority has been
    in existence for decades and has no such mandates. WAPA's
    authority specifically allows for a bailout by taxpayers, while
    BPA customers are fully responsible for any shortfall. In fact,
    that was referenced with the Washington Public Power Supply
    System default.
        The BPA authority is administered in a public,
    collaborative process without political interference from
    Washington, D.C., while WAPA's activities have been anything
    but open and transparent. BPA's authority also exists to
    respond to the many Federal regulatory conditions, including
    for fish and wildlife protection, placed upon by the region's
    hydropower system. Do not make the mistake of trying to defend
    the indefensible in WAPA by attempting to change the subject.
        And as it relates to Bonneville costs, I also commend the
    Chairman for hearing the bill sponsored by our colleague, Cathy
    McMorris Rodgers, that provides for the Endangered Species Act
    transparency on electric bills. Endangered fish costs are a
    major reason for electricity increases in the Pacific Northwest
    region--in some cases, 30 percent of the costs right now. And
    now, environmental extremists are pushing Snake River dam
    removal, which obviously would drive up power rates to
    unprecedented levels.
        And I will just say tangentially, Mr. Chairman, as long as
    I am Chairman of the full Committee, that any legislation
    dealing with removing the Snake River dams will not be looked
    upon favorably by me. And, of course, now we have a problem
    there because we have a Federal judge that has recently put
    another cloud on the operating process for that area, and we
    have to deal with that now.
        But I just want to say one thing, and that is that it is
    clear that in the Pacific Northwest and elsewhere in our
    Nation, when energy prices rise and it is followed by lower job
    growth and more out-of-work Americans, these two bills will
    protect and inform taxpayers. And they deserve bipartisan
    support from this Committee.
        And I thank the Chairman for his courtesy in allowing me to
    be here, and I yield back my time.
        [The prepared statement of Mr. Hastings follows:]

              Statement of The Honorable Doc Hastings, Chairman,
           Committee on Natural Resources, on H.R. 1719 and H.R. 2915

        Thank you for holding this hearing.
        Today's hearing is about restoring transparency, fiscal
    responsibility and American jobs.
        Water and Power Subcommittee Chairman McClintock's bill to repeal
    the Western Area Power Administration's borrowing authority is a
    necessary response to the recent bankruptcy of Solyndra, a recipient of
    a $535 million stimulus loan guarantee. In the same way that taxpayers
    are now on the hook for over a half billion dollars due to the failed
    loan guarantee, the WAPA borrowing authority actually envisions and
    allows for similar failed investments. I will simply read to you what
    the statute says: ``If, at the end of the useful life of a project,
    there is a remaining balance owed to the Treasury under this section,
    the balance shall be forgiven.''
        At a time when we need to protect scarce taxpayer dollars, we
    shouldn't be in the business of continuing programs that allow
    taxpayers to be fleeced by failed federal investments. And, we should
    be asking ourselves whether it's appropriate to have the federal
    government even considering using 1.5 billion of additional taxpayer
    money a few years from now to prop up a renewable-only transmission
    line being financed by a multi-billion dollar company. It is simply
    nonsense to believe that it's economically possible without taxpayer
    assistance to build major transmission lines that only support
    intermittent renewable energy sources.
        As part of this debate, I want to make sure there is a clear
    understanding of the distinct difference in the borrowing authorities
    of the Bonneville Power Administration and WAPA. While WAPA has a
    mandate to only use its authority for renewable energy transmission for
    developers, Bonneville has no such mandates, is able to use its funding
    for other regional matters and is able to prioritize its needs without
    interference from Washington, DC. The borrowing authorities are as
    different as night and day.
        As it relates to Bonneville costs, I also commend the Chairman for
    hearing our colleague Cathy McMorris Rodgers' bill to provide
    Endangered Species Act transparency on electric bills. Endangered fish
    costs are a major reason for electricity rate increases in the Pacific
    Northwest region, reaching over 30% of the costs passed on to
    consumers. Environmental extremists are pushing Snake River dam
    removal, which would drive up power rates to unprecedented levels -
    while likely harming fish. Although that will not happen as long as I'm
    Chairman of this Committee, with a federal judge recently putting
    another cloud of uncertainty on the river system, electricity consumers
    have a right to know what their hard-earned dollars are paying for
    under current regulations. That's what this bill does and it's time for
    this Administration to open the books on salmon spending to provide
    more answers and to allow consumers to make informed decisions on the
    effectiveness of their increased energy costs.
        One thing is clear in the Pacific Northwest and elsewhere in our
    nation: when energy prices rise, lower job growth follows. Government
    intervention that picks winners and losers is not the answer nor are
    increased regulations aimed at stifling energy production. That's why
    it's imperative for this Committee to help provide the business climate
    for an all-of -the-above energy plan that includes increased oil and
    natural production along with alternative and renewable sources such as
    hydropower, wind, solar and nuclear. This comprehensives approach will
    help ensure low energy costs, strengthen our economy and create new
    American jobs.
        Thank you again for holding this hearing.
                                     ______

        Mr. McClintock. I thank the Chairman.
        We will now hear from our first panel of witnesses. Each
    witness's written testimony will appear in full in the hearing
    record, so I would ask that our witnesses keep their oral
    statements to 5 minutes, as outlined in the invitation letter
    and also in the Committee's rules.
        We have a timing system. A green light means you have all
    the time in the world. The yellow light means you are down to 1
    minute. And the red light means that we have stopped listening
    so you might as well stop talking.
        The Chair will begin by recognizing Ms. Leslie James,
    Executive Director of the Colorado River Energy Distributors
    Association, from Phoenix, Arizona.
        I would like to note that Ms. James has to leave for a
    flight out of Baltimore, and if there is no objection, she can
    be excused from the panel after her testimony, and we will
    submit questions to her to answer.

     STATEMENT OF LESLIE JAMES, EXECUTIVE DIRECTOR, COLORADO RIVER
           ENERGY DISTRIBUTORS ASSOCIATION, PHOENIX, ARIZONA

        Ms. James. Thank you, Mr. Chairman and members of the
    Subcommittee. As noted, I am Leslie James, Executive Director
    of CREDA. I am pleased to be here today to speak with you
    regarding H.R. 1719 as it relates to the Federal Colorado River
    Storage Project, or CRSP.
        CREDA is a nonprofit organization representing consumer-
    owned electric utility systems that purchase Federal hydropower
    from the CRSP. We were formed in 1978, and our members serve
    over 4 million consumers in the States of Arizona, Colorado,
    Nevada, New Mexico, Utah, and Wyoming. CREDA members have all
    entered into long-term cost-based contracts with the Western
    Area Power Administration for purchase of these resources.
        CRSP customers have been insuring repayment of the Federal
    investment for 40 years. The rates charged under these long-
    term cost-based contracts repay all of the Federal investment
    with interest, including generation, transmission, O&M, and
    environmental costs. In addition, the CRSP customers are paying
    over 95 percent of the cost of the irrigation features of the
    CRSP, which are beyond the ability of the irrigators to repay.
    There are no taxpayer subsidies in this project.
        Let me give you an example of--another example of
    transparency. Since 1992, CREDA has been party to a
    collaborative work program review process with Reclamation and
    Western. This process is a beneficial relationship and has
    provided transparency to customers of the work program elements
    of these Federal agencies.
        H.R. 1719 is consistent with that objective. The
    environmental-related costs incurred by Western and Reclamation
    in the CRSP are both substantial, both in terms of direct
    program costs as well as indirect costs and replacement power
    due to restricted generation. From the year 2000 to the
    current, Western has incurred $743 million in purchase power
    costs due to endangered species and other environmental
    objectives, market and hydrologic conditions. It is important
    that the customers, the firm electric service customers who are
    paying the bill, are apprised and aware of these costs.
        Let me talk a little bit about the CRSP in general. Glen
    Canyon Dam is the largest generating facility in this project.
    It is located near Page, Arizona. In 1996, after many years of
    study and a $104 million environmental impact statement, Glen
    Canyon operations were changed. Approximately one-third of the
    generating capacity has been reduced. The actual cost of this
    reduction, as reported in a very recent study by Argonne
    National Labs, is estimated to be $50 million per year, on
    average. This number reflects environmental restrictions,
    market conditions, and hydrologic conditions. To date, over
    $273 million has been spent on studies at Glen Canyon Dam, also
    paid for by CRSP power revenues.
        Another example: During the year 2000, due to the
    requirements of a 1994 Fish and Wildlife Service biological
    opinion, a low steady flow experiment was undertaken. This
    experiment was intended to gain information regarding
    endangered humpback chub conditions. The cost of this
    experiment required Western to purchase replacement power
    totaling $26 million for that summer. In addition, the cost of
    the experimental loan was about $3.5 million, also paid by CRSP
    power revenues. Just last month, we are finally receiving a
    report on the results of that experiment from 2000. In 1997,
    the Glen Canyon Dam Adaptive Management Program was
    established. Since that time, the direct program costs paid for
    by CRSP power revenues have exceeded $105 million.
        Moving up the basin, Flaming Gorge Dam is on the Green
    River, located near Vernal, Utah. Since 1992, Flaming Gorge
    operations have been changed to benefit endangered fish,
    reducing the generation about 17 percent. The cost averages
    about $2 million a year, and the cost of the EIS was about $1.6
    million.
        Over in Colorado, the Aspinall Unit includes three dams and
    generating facilities along the Gunnison River. Since 1998, the
    Upper Colorado River Endangered Fish Recovery Implementation
    Program has been funded $84.5 million from CRSP power revenues.
    CREDA's current concern is that, once again, there may be
    efforts to reoperate the Aspinall Unit in favor of endangered
    fish and National Park Service concerns and to the detriment of
    hydropower generation.
        These facilities are the last remaining peaking units in
    the CRSP. A preliminary final EIS is currently under review by
    the cooperating agencies, but this process has been under way
    for about 8 years, with about $3.4 million being spent on
    studies to date.
        There should be an appropriate balance of environmental
    needs with authorized project purposes. We believe that H.R.
    1719 provides good cost transparency for the customers who are
    paying the bill.
        I thank the Subcommittee for being here today, and I would
    be glad to take any questions.
        [The prepared statement of Ms. James follows:]

                Statement of Leslie James, Executive Director,
      Colorado River Energy Distributors Association (CREDA), on H.R. 1719

        Mr. Chairman, members of the Subcommittee, I am Leslie James,
    Executive Director of the Colorado River Energy Distributors
    Association (CREDA). I am pleased to have been asked to talk with you
    today regarding H.R. 1719, the Endangered Species Compliance and
    Transparency Act of 2011.
        CREDA member utilities (firm power customers) have long-term, cost-
    based contracts with the Western Area Power Administration (WAPA), an
    agency within the Department of Energy, for purchase of federal
    hydropower generation from the Colorado River Storage Project (CRSP).
    My purpose today is to provide some background on the CRSP facilities,
    to describe environment-related impacts on the CRSP federal facilities,
    and to offer our support of H.R. 1719.
        CREDA is a non-profit organization representing consumer-owned
    electric systems that purchase federal hydropower generation of the
    CRSP. CREDA was established in 1978, and serves as the ``voice'' for
    them in dealing with resource availability and affordability issues.
    CREDA represents its members in working with the Bureau of Reclamation
    (Bureau), as the owner and operator of the CRSP, and WAPA, as the
    marketing agency of the CRSP. CREDA members are all non-profit
    organizations, serving over four million electric consumers in the six
    western states of Arizona, Colorado, Nevada, New Mexico, Utah and
    Wyoming. CREDA members purchase over 85% of the CRSP hydropower
    generation.
        Attached is a listing of current CREDA members. When CREDA was
    formed, the key issue for its members was the increasing CRSP rate.
    CREDA members felt it would be more effective to have a single
    ``voice'' for them on rate, federal legislative and environmental
    issues impacting the CRSP.
        CRSP contractors have been ensuring repayment of the federal
    investment for 40 years, by entering into long-term contracts to
    purchase the CRSP hydropower generation and by paying all of the
    federal investment in generation and transmission facilities (with
    interest), all power-related operation and maintenance costs, and
    associated environmental costs. In addition, the CRSP contractors are
    paying over 95% of the cost of the irrigation features of the CRSP--the
    costs that are determined to be beyond the irrigators' ``ability to
    pay''. In fact, in the current CRSP rate, 21% of the total annual
    revenue requirement is due to irrigation assistance!
        It is important to note that the CRSP rate includes costs other
    than those associated with generation of the hydropower and irrigation
    assistance. Specific examples of the environment-related costs assessed
    to the CRSP are the programmatic (i.e., ``direct'') costs of the Glen
    Canyon Adaptive Management Program (AMP) and the Upper Basin Endangered
    Fish Recovery Implementation Program (RIP). Since approximately $743
    million in purchased power costs have been incurred by WAPA since 2000,
    CREDA believes it is important that the customers have visibility of
    those costs, which are included in their firm power rates. More detail
    on these costs and programs will be provided below.
    I. H.R. 1719 AND THE CRSP
        The environment-related costs incurred by the Bureau and WAPA in
    the CRSP are significant. Those costs are borne almost exclusively by
    the power customers of the CRSP. By law, these customers are not-for-
    profit entities; thus they have no option other than to pass those
    costs on to their consumers.
        H.R. 1719 provides a mechanism for the power customers to readily
    receive information regarding the direct and indirect costs associated
    with the federal agencies' compliance with the Endangered Species Act
    (ESA) and other environmental requirements. These costs should also
    include those costs associated with mitigation and reasonable and
    prudent alternative compliance under the ESA. Each power customer would
    then have the ability to utilize that information in a manner that best
    fits its individual needs. It is our understanding that this
    information is readily available and can be provided at little or no
    incremental cost to the agencies. CREDA supports the additional
    transparency of these costs as a sound business practice.
        In 1992, CREDA, the Bureau and WAPA entered into a contractual
    arrangement that gives CREDA the ability to review agency work plans
    and, through a defined process, provide customer input and perspective
    to the agencies. This contractual arrangement has been has been
    invaluable to fostering a partnership-type relationship among the three
    entities and has encouraged transparency in agency cost reporting. H.R.
    1719 is consistent with that objective; it provides more information to
    the customers who ultimately are responsible for ``paying the bills''.
    II. THE CRSP FACILITIES AND ENVIRONMENTAL IMPACTS
        CRSP was authorized in the Colorado River Storage Project Act of
    1956 (P.L. 485, 84th Cong., 70 Stat. 50), as a multi-purpose federal
    project to provide flood control; water storage for irrigation,
    municipal and industrial purposes, in addition to the generation of
    electricity. This testimony will focus on the major generation features
    of the CRSP, although there are several irrigation projects authorized
    as part of the Project. The CRSP power features include five dams and
    associated generators, substations, and transmission lines.
    GLEN CANYON DAM
        Glen Canyon Dam is located near Page, Arizona and is by far the
    largest of the CRSP projects. Glen Canyon Dam began operation in 1964.
    The water stored behind the dam is the key to full development by the
    Upper Colorado River Basin states of their Colorado River Compact share
    of Colorado River water. The Glen Canyon power plant consists of eight
    generators for a total of about 1300 MW, which is more than 76% of
    total CRSP generation.
        The ability of the Bureau to generate, and WAPA to market, the
    total generating capability of Glen Canyon Dam has been impacted over a
    period of many years, by various processes and laws. In 1978 the Bureau
    began evaluating the possibility of upgrading the eight generating
    units at Glen Canyon. This was possible, primarily due to design
    characteristics of the generators and improved insulating materials.
    This upgrade was completed, and the generation was increased from about
    1000 to 1300 MW.
        To fully utilize the unit upgrades would require the maximum
    release of water from Glen Canyon to be increased from 31,500 cubic
    feet per second (cfs) to about 33,200 cfs. The Bureau also studied the
    possibility of adding new generating units on the outlet works to
    provide additional peaking capacity. The possibility of increasing
    maximum releases from Glen Canyon raised concerns with downstream
    users. After discussion with stakeholders, the Secretary of the
    Interior initiated the first phase of the Glen Canyon Environmental
    Studies.
        In 1982, the Bureau began Phase 1 of the Glen Canyon Environmental
    Studies. These studies were primarily to analyze the impacts of raising
    the maximum release from 31,500 cfs to 33,200 cfs on the transport of
    sediment downstream from the dam, recreation (including fishing and
    rafting), endangered species (including the humpback chub in the Lower
    Colorado River), and the riparian habitat along the river banks. The
    studies proceeded during the early 1980's and were concluded in 1987.
    The general conclusion of the Glen Canyon Environmental Studies Phase 1
    was that the dam had blocked much of the sediment coming down the
    Colorado River and therefore beaches were not being replenished with
    sand. However, the impact on power and water economics was not fully
    explored.
        After reviewing the Glen Canyon Environmental Studies Phase 1 and a
    review by the National Academy of Science, the Secretary of the
    Interior determined that the Glen Canyon Environmental Studies should
    be continued to address the economic impacts, particularly as they
    relate to power, and also to collect additional data to substantiate
    some of the conclusions in the Phase 1 report. The Glen Canyon
    Environmental Studies Phase 2 was initiated in 1989, which included a
    series of test flows to evaluate the impact of different operating
    conditions.
        In July 1989, the Secretary of the Interior announced the start of
    an environmental impact statement (EIS) on the operation of the Glen
    Canyon Dam. No specific Federal action was identified for study.
    Meetings were held during 1990 to seek input into alternatives that
    should be considered, and the Bureau determined that nine alternatives
    (including a ``no action'' alternative) should be studied. Meanwhile,
    in 1992, the Grand Canyon Protection Act (GCPA) (106 Stat. 4672) was
    signed into law. Section 1804 of the Act required completion of the EIS
    within two years. The EIS was completed and the Record of Decision
    (ROD) signed in October 1996. As a result, Glen Canyon operations were
    changed to reflect a revised flow regime; approximately one-third of
    the generating capacity was lost (456 MW).
        The cost of the Glen Canyon EIS was approximately $104 million, and
    was funded by power revenues collected from the CRSP contractors. To
    date, over $273 million has been spent on Glen studies, and paid by
    CRSP power revenues. This figure does NOT include the over $105 million
    spent from 2000 to the current year for the Adaptive Management
    Program. The GCPA says that CRSP power revenues MAY be used to fund the
    Adaptive Management Program (emphasis supplied). It is not a mandate,
    but a permissive use of power revenues, which will be addressed in more
    detail below.
        In 1991, the Department of the Interior estimated the expense from
    lost generation due to the changes in Glen Canyon Dam operation to be
    $44.2 million annually (adjusted for inflation). Given what has
    occurred in the energy markets and hydrologic conditions (drought)
    since that time, the cost was higher. A recent study prepared by
    Argonne National Labs for the Western Area Power Administration (the
    ``post-ROD study''), the average annual cost has been approximately $50
    million annually. The cost of replacing that power is borne by the CRSP
    customers.
        In April of 2000, it was determined that due to hydrologic
    conditions and requirements of a 1994 USFWS biological opinion, a low
    steady flow summer experiment would be undertaken. The experiment
    included high spike flows in May and September, with low flat flows
    (8,000 cfs) all summer. The purpose was to gain information regarding
    endangered humpback chub conditions. The low, flat flows and hydrology,
    along with western energy market prices, had a severe impact on power
    generation, requiring CRSP customers and WAPA to purchase replacement
    power to meet their resource needs. The cost incurred by WAPA (and to
    be recovered from CRSP contractors) for this replacement power was $26
    million, during that summer. The cost of the experiment alone was over
    $3.5 million, funded by CRSP power revenues. These figures do NOT
    include additional costs to CRSP contractors who had to purchase or
    supplement their CRSP resource with purchases from the energy market. A
    final report on the responses of key resources was finally issued in
    August 2011 (USGS Open File Report 2011-1220).
    ASPINALL UNIT
        The Aspinall Unit includes three dams and generating plants along
    the Gunnison River near Gunnison, Colorado. Blue Mesa is the first dam
    on the river and has two units producing about 97 MW. Morrow Point is
    the second dam in the series and consists of two generators producing a
    total of 146 MW. Crystal is the final dam and has one 32 MW generator.
    Morrow Point and Crystal Reservoirs allow some regulation of the river
    flow so that releases from Crystal can be used to regulate downstream
    flows as necessary.
        Since the early 1990's as part of the Upper Colorado River
    Endangered Fish Recovery Implementation Program, or RIP, studies have
    been undertaken to determine fish needs in this region. In November
    2004, the Bureau held the first Cooperating Agency meeting, which they
    have opened to the public. One of CREDA's members, Platte River Power
    Authority (Colorado), is a cooperating agency in the process. This EIS
    process has been underway for about 8 years, and a draft preliminary
    final EIS was issued to the cooperating agencies in late August, 2011.
    Study costs to date total $3.4 million. CREDA's view is that, while
    maintaining authorized project purposes, the Bureau may operate the
    facilities to benefit fish and wildlife and recreation resources. Their
    obligation, however, is to avoid jeopardy to endangered species, not a
    broader duty.
    FLAMING GORGE DAM
        Flaming Gorge Dam is on the Green River, a major tributary of the
    Colorado River, and is located near Vernal, Utah. Flaming Gorge has
    three units producing about 152 MW of generation. In 1992, the USFWS
    issued a Biological Opinion on the operation of Flaming Gorge Dam.
    Approximately 26 MW of generating capacity have been lost to date due
    to changed operations to benefit endangered fish, estimated at
    approximately $2 million per year. The Record of Decision on the
    operation of Flaming Gorge Dam was signed in February 2006. The cost of
    the EIS was approximately $1.6 million. Two CREDA members from Utah
    have been ``cooperating agencies'' through this process. We expect the
    same level of operational expense to be incurred following issuance of
    the ROD.
    III. THE ENVIRONMENTAL PROGRAMS IN THE CRSP
    GLEN CANYON DAM ADAPTIVE MANAGEMENT PROGRAM
        CREDA participates on the Federal Advisory Committee charged with
    making recommendations to the Secretary of the Interior as to
    operations of Glen Canyon Dam pursuant to the Record of Decision and
    underlying laws. Funding for the program (Adaptive Management Program)
    is provided through CRSP power revenues. Proposed funding for this
    year's program is over $10 million.
        On October 27, 2000, President Clinton signed the FY 2001 Energy
    and Water Development Appropriations Act, which includes language
    (Section 204) capping the amount of CRSP power revenues that can be
    used for the Adaptive Management Program at $7,850,000, subject to
    inflation. Without this cap, the annual program costs would have
    continued to increase more rapidly, with power revenues being the
    primary funding source. Over $105 million of CRSP power revenues has
    been spent to date on direct program costs.
        Science findings over the past 14 years indicate that some of the
    premises on which the EIS/ROD were based may have resulted in different
    or inconclusive resource impacts and that the current flow restrictions
    may not be beneficial to downstream resources (primarily humpback chub
    and sediment). For instance, the endangered humpback chub population
    has continued to increase since 2000, albeit it is unclear whether this
    increase is due to current fluctuating operations, temperatures, or
    non-native fish interactions. It is imperative that these science
    findings be incorporated into recommendations to the Secretary of the
    Interior to implement flow changes and management actions to benefit
    the downstream resources and to maximize power production.
        On February 15, 2006, ESA-related litigation was filed in Arizona
    District Court by the Center for Biological Diversity, Sierra Club,
    Living Rivers and Arizona Wildlife Federation against the Department of
    the Interior and the Bureau. This litigation was ultimately settled.
    Unfortunately, additional litigation was filed by the Grand Canyon
    Trust in December 2007 against the Bureau and Fish and Wildlife
    Service, seeking to impose an extreme operational shift to a steady
    flow regime. Although the District Court in Arizona found for the
    United States on all counts in March 2011, the case has been appealed
    to the 9th Circuit Court of Appeals. This litigation could have program
    and cost implications for the Adaptive Management Program.
        CRSP contractors have paid, and continue to pay, the majority of
    costs at Glen Canyon, even while the dam's generating capacity has been
    depleted by about one-third, and there are significant operating
    constraints on the remaining available capability, as required by the
    1996 ROD. Just since 2000, the replacement power cost (i.e.,
    ``indirect'' cost) incurred by WAPA (and borne by CRSP power customers)
    totals $239 million. This amount does not include costs borne by each
    CRSP power customer to ``make up'' any additional resource not provided
    by WAPA. These costs are significant and H.R. 1719 would enhance the
    ability of the power customers to be aware of the environmental costs
    associated with these programs.
    UPPER COLORADO RIVER ENDANGERED FISH RECOVERY IMPLEMENTATION PROGRAM
            (RIP)
        The RIP was established through cooperative agreements among States
    and federal agencies in 1988 for a 15-year period to help recover four
    endangered fish in the Upper Colorado Basin. Power revenues currently
    fund about 60% of the base research/study program. Federal legislation
    was passed in October 2000, which authorized a $100 million capital
    improvements program. CREDA testified in support of this legislation in
    both House and Senate hearings. The legislation provides matching funds
    for the capital program so that, in the event State funding for the
    program ceases, power revenue funding also ceases.
        The legislation requires CRSP power revenue funding for monitoring
    and research (currently $7.2 million per year. In addition, the Upper
    Basin States and CRSP power customers each contributed $17 million
    toward funding capital features. The legislation recognized that
    changes in operation of Flaming Gorge and Aspinall generation as a
    result of Biological Opinions cost CRSP contractors $15 million. To
    date, $84.5 million has been funded by CRSP power revenues for
    monitoring and research activities in this program.
    IV. RECOMMENDATION
        CREDA encourages passage of H.R. 1719 as a sound business practice
    and an important measure, which will provide transparency and cost
    information to the customers of the federal Power Marketing
    Administrations.
        Thank you for the opportunity to appear today.

       COLORADO RIVER ENERGY DISTRIBUTORS ASSOCIATION (CREDA) MEMBERSHIP

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

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        .epsMr. McClintock. Thank you, Ms. James, for your
    testimony. We also understand your transportation constraints,
    and you are excused from the panel whenever you need to leave.
        Ms. James. Thank you.
        Mr. McClintock. The Ranking Member of the Committee on
    Natural Resources has arrived and would like to make an opening
    statement. So, without objection, we will suspend the regular
    order to recognize him.
        I will also ask unanimous consent that we suspend the
    regular order for Ms. McMorris Rodgers, who is detained at a
    House Republican Conference meeting.
        So, without objection, the Chair recognizes the Ranking
    Member, Mr. Markey, for 5 minutes.

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

        Mr. Markey. Thank you, Mr. Chairman. Thank you for your
    graciousness.
        Mr. Chairman, we are meeting today to consider two bills.
    They may be the worst policy suggestions that have come before
    this Committee since yesterday.
        The first bill would bar the Western Area Power
    Administration from using borrowing authority to support the
    construction of transmission lines. But the Bonneville Power
    Administration also has a similar borrowing authority. The bill
    doesn't go after the $3.25 billion in borrowing authority; it
    only targets Western's, because Western's borrowing authority
    is intended for transmission of renewable energy. Bonneville's
    does not specify.
        What happened to the GOP's all-of-the-above energy
    strategy? Apparently, it has been replaced by an all-of-the-
    below strategy, energy sources that come from below the
    ground--oil, natural gas, coal--along with nuclear power, which
    all get lavished with huge tax breaks, royalty breaks,
    government loan guarantees, and other subsidies. Solar, wind,
    and other renewable energy sources get left behind under the
    Republican plan.
        From Alexander the Great to our current conflagrations in
    the Middle East, battles are often won or lost on the supply
    routes. And in the growing Republican war on clean energy,
    today we are seeing that they are using the same tactics,
    attacking the transmission supply route for wind and solar
    energy to starve the sound basis for new projects. It is
    classic military strategy. But in this war on clean energy,
    Republicans are on the wrong side of history and of economics.
        The second bill that we are considering would have Power
    Marketing Administrations make a special note on customer bills
    highlighting the cost of compliance with the Endangered Species
    Act. If my Republican colleagues are really concerned about
    disclosing costs to their customers, let me suggest an
    alternative.
        In 1982, the Washington Public Power Supply System, more
    commonly and appropriately remembered as WPPSS, finally gave up
    on the construction of four nuclear power plants after
    realizing they were hopelessly behind schedule and way over
    budget. The ensuing default was the largest municipal bond
    failure in the history of our country until that time.
    Ratepayers were on the hook for $2.3 billion--big money in the
    early 1980s. This worked out to more than $12,000 per customer
    in some regions. Ratepayers to this day are still paying back
    the cost of that nuclear folly nearly 30 years later.
        If the idea behind this bill is transparency, I would
    suggest the legislation also require inclusion of the cost of
    nuclear bailouts on customer bills in the Bonneville operating
    region, where WPPSS is located. I think they should each know
    how much they are still paying on that mess that was created
    with nuclear power back in the 1980s.
        We could also require bills to note what the power would
    actually cost if market rates were being charged, like they are
    in most places in the country, rather than taxpayer-subsidized
    cost-based rates.
        Maybe we could also include a line item on customer bills
    to show the discount power administration customers are getting
    from U.S. taxpayers subsidizing the construction of the
    hydroelectric dams generating the vast majority of their
    electricity.
        Bonneville's cost to service the debt left over from the
    nuclear bailout three decades ago was more than $550 million
    last year alone. The cost of compliance with the Endangered
    Species Act, something that the region actually receives a
    significant benefit from, is $175 million. So what we really
    have here is a little fish in a big nuclear debt pond.
        These bills are part of the same Republican agenda that
    yesterday attempted to push through emergency funding for
    natural disaster victims at the expense of a program that helps
    American companies manufacture super-efficient vehicles that
    reduce our dangerous dependence on foreign oil. That initiative
    failed yesterday. That is why the Republicans are in caucus
    right now; how can they resuscitate that? These two anti-
    environment, anti-clean-energy bills before us today should
    fail, as well.
        Thank you, Mr. Chairman, very much.
        [The prepared statement of Mr. Markey follows:]

         Statement of The Honorable Edward J. Markey, Ranking Member,
                         Committee on Natural Resources

        Mr. Chairman, we are meeting today to consider two terrible bills.
    If fact, they may be the worst policy suggestions that have come before
    this Committee since. . .yesterday.
        The first bill would bar the Western Area Power Administration from
    using borrowing authority to support the construction of transmission
    lines. But the Bonneville Power Administration also has a similar
    borrowing authority. Mr. McClintock's bill doesn't go after that $3.25
    billion in Borrowing Authority, it only targets Western's. Why? Because
    Western's borrowing authority is intended for transmission of renewable
    energy. Bonneville's does not specify.
        What happened to the GOP's ``All of the Above'' energy strategy?
    Apparently it has been replaced with an ``All of the Below'' strategy.
    Energy sources that come from below the ground--oil, natural gas, and
    coal--along with nuclear power get lavished with tax breaks, royalty
    breaks, government loan guarantees, and other subsidies. Solar, wind
    and other renewable energy sources get left behind under the Republican
    plan.
        From Alexander the Great, to our current conflagrations in the
    Middle East, battles are often won or lost on the supply route. And in
    the growing Republican war on clean energy, today we see they are using
    the same tactics, attacking the transmission supply route for wind and
    solar energy to starve the sound basis for new projects. It's classic
    military strategy, but in this war on clean energy, Republicans are on
    the wrong side of history and of economics.
        The second bill that we are considering would have Power Marketing
    Administrations make a special note on customer bills highlighting the
    cost of compliance with the Endangered Species Act.
        If my Republican colleagues are really concerned about disclosing
    costs to their customers, let me suggest an alternative.
        In 1982, the Washington Public Power Supply System--more commonly
    remembered as WOOPS--finally gave up on the construction of four
    nuclear power plants after realizing they were hopelessly behind
    schedule and way over budget. The ensuing default was the largest
    municipal bond failure in history at the time. Ratepayers were on the
    hook for $2.3 billion. This worked out to more than $12,000 per
    customer in some regions. Ratepayers to this day are still paying back
    the costs of that nuclear folly nearly 30 years later.
        If the idea behind this bill is transparency, I would suggest the
    legislation also require inclusion of the cost of nuclear bailouts on
    customer bills in the Bonneville operating region, where WPPS
    [PRONOUNCE: WOOPS] is located. We could also require bills to note what
    the power would actually cost if market rates were being charged like
    they are in most places in the country--rather than taxpayer subsidized
    ``cost based'' rates. Maybe we could also include a line item on
    customer bills to show the discount Power Administration customers are
    getting from U.S. taxpayers subsidizing the construction of the
    hydroelectric dams generating the vast majority of their electricity.
        Bonneville's cost to service the debt leftover from the nuclear
    bailout 3 decades ago was more than $550 million last year alone. The
    cost of compliance with the Endangered Species Act--something that the
    region actually receives a significant benefit from--is $175 million.
    So what we really have here is a little fish in a big nuclear debt
    pond.
        These bills are part of the same Republican agenda that yesterday
    attempted to push through emergency funding for natural disaster
    victims at the expense of a program that helps American companies
    manufacture super-efficient vehicles that reduce our dangerous
    dependence on foreign oil. That initiative failed. These two anti-
    environment, anti-clean energy bills before us today should also fail.
                                     ______

        Mr. McClintock. Thank you.
        We will now resume the regular order of the Committee,
    which begins with Mr. Fred Rettenmund, Power Resources and
    Communications Manager of the Inland Power and Light Company,
    from Spokane, Washington, to testify.

      STATEMENT OF FREDERIC DEAN RETTENMUND, POWER RESOURCES AND
        COMMUNICATIONS MANAGER, INLAND POWER AND LIGHT COMPANY,
                          SPOKANE, WASHINGTON

        Mr. Rettenmund. Thank you, Mr. Chairman and other Committee
    members. Inland Power and Light appreciates the opportunity to
    be here today and share our views on H.R. 1719, which we think
    is an important piece of legislation that would help all of us
    better understand, and our consumers understand, costs related
    to the Endangered Species Act and related programs.
        First, though, Inland is a small utility. We only serve
    39,000 members or consumers, but we cover that area in 13
    counties in eastern Washington and northern Idaho. We buy all
    of our power, currently, from the Bonneville Power
    Administration, which I would happily note is 80 percent clean,
    renewable hydropower, and we really like that aspect of their
    portfolio.
        Our total cost of purchasing power and transmission
    services from Bonneville is about $27 million per year. That is
    $24 million for power and about $3 million for transmission.
    Transmission is a much smaller component of the total cost from
    Bonneville.
        About half of our total cost of business is to buy power
    and transmission services from Bonneville. The other portion is
    related to our own distribution costs. To get it to our
    members--which, by the way, we only have five members per mile
    line. So, Mr. Chairman and others, to give you a sense of the
    real rural nature of our service territory, we are quite rural.
    Our service territory overlaps Congresswoman McMorris Rodgers'
    service territory--or, her district quite well. And we
    appreciate her efforts to focus on issues that are of interest
    to us.
        So we support 1719. We support it both in terms of the
    direct costs that Bonneville incurs and the indirect cost. And
    the importance there is, both of those affect the rates that
    BPA charges us. And indirect costs are just as important, if
    not more so, than direct costs. The number is considerable.
        I guess I would indicate that these costs are paid for by
    our consumers. We don't have any money, ourselves. We get it
    from our consumers, who are working families and they are
    irrigators and they are small businesses. And those people are
    working hard to make ends meet. And that is who we get the
    funds to pay this $27 million to Bonneville.
        Now, I have attached to my testimony a fact sheet that
    Bonneville issued, 2010, that describes the total cost of their
    providing fish and wildlife programs that, as I indicated, we
    pay for. The cost has risen from around $470 million in 1999 to
    about $745 million per year. That is big numbers.
        I would note that over the course of the whole fish and
    wildlife program, the total cost of that is about $12 billion
    from the beginning in 1980. That is also, in anybody's
    scorecard, that is real money.
        I would address the notion that, yes, there are other cost
    categories, but fish and wildlife is the cost category that
    seems to be growing faster than other, sort of, components of
    Bonneville's rates. A lot of the other costs are fixed, and a
    lot of the fish and wildlife costs are varying significantly.
        Thirty percent of Bonneville's rate is related to fish and
    wildlife costs. That is a significant portion. And, quite
    frankly, the $750 million a year for the total cost of the
    program is very difficult for our members to get, sort of, a
    handle on what that means for them. So what we need to do is
    provide them with good information about how that relates to
    their bill and what they are sending to us.
        Now, we think Bonneville can play a major role in sort of
    clarifying some of that, providing better information. I have
    done a back-of-the-envelope calculation, but we really would
    like to rely on Bonneville to provide a more precise set of
    numbers with respect to what is on our bill and other
    customers' bills. It won't be real tough for them to do. They
    have some of the best analytical staff in the country on the
    power side of the business. And it won't be, really, a
    difficult thing for them to do, at least in total. And we are
    interested in a total, as well as ESA costs, as an estimation.
        So I guess I would just leave you with the concluding, sort
    of, notion that we are on board with the general notion that we
    need to try and do right things for fish, things that are cost-
    effective, prudent, things that are based on sound science,
    but, basically, there are some questions there.
        I would indicate, finally, we support 1719. And our
    fundamental view is that, in the spirit of 1719, better-
    informed electric consumers mean better-informed citizens, and
    that is a good thing.
        Thank you.
        [The prepared statement of Mr. Rettenmund follows:]

          Statement of Frederic Dean Rettenmund, Power Resources and
      Communications Manager, Inland Power and Light Company, on H.R. 1719

    Introduction and Background
        Chairman McClintock, Ranking Member Napolitano, Representative
    McMorris Rodgers and members of House Subcommittee on Water and Power,
    I appreciate the opportunity to appear before you today representing
    Inland Power and Light Company to share our views on the importance of
    having timely, accurate and easy to use information about ESA
    compliance costs.
        My name is Fred Rettenmund. I am the Power Resources and
    Communications Manager for Inland Power and Light Company. Inland Power
    is a cooperative utility that serves approximately 39,000 consumers in
    thirteen counties in eastern Washington and northern Idaho. Inland
    Power currently purchases all its wholesale power from the Bonneville
    Power Administration. Over 80% of our total power supply comes from
    clean, renewable hydroelectric power. Inland Power spends about $27
    million a year for BPA power and transmission services. BPA related
    costs make up about half of our total cost of doing business with the
    other half covering the costs of delivering power to our members.
    Inland Power primarily serves residential consumers and has a largely
    rural service territory averaging only five members per mile of
    distribution line.
        Inland Power is located principally in Washington's 5th
    Congressional District served by Representative Cathy McMorris Rodgers.
    We appreciate her ongoing support regarding issues facing our
    consumers.
    Inland Power Supports H.R. 1719
        Inland Power supports H.R. 1719, the Endangered Species Compliance
    and Transparency Act of 2011. BPA should report to its utility
    customers what portion of each utilities' monthly wholesale power and
    transmission bill is related to direct and indirect fish costs. This
    information will assist utilities in their efforts to better inform
    their consumers.
        BPA costs are paid for by the consumers of utilities that purchase
    power from BPA. The policies BPA adopts, actions it takes and costs it
    incurs have a large impact on our members. Accordingly, we participate
    in a large number of BPA related forums and meetings. We commit the
    time and effort to these activities to create a better understanding of
    BPA's programs and their related costs, and in turn provide informed
    recommendations and comments about BPA's policies, operations and
    practices. H.R. 1719 will be of significant value in these efforts.
    Challenges Utilities Face with Fish and Wildlife Costs
        Key amongst the challenges faced by BPA are issues dealing with
    salmon and steelhead programs. The BPA funded, or should I say consumer
    or ratepayer funded, actions regarding fish are very complex, diverse
    and on a scale unmatched anywhere else in the United States or possibly
    the world. As shown in the BPA's January 2010 Fact Sheet (``BPA invests
    in fish and wildlife'') attached to this testimony, in the eleven years
    from 1999 to 2009 BPA's fish and wildlife expenditures increased from
    approximately $470 million to about $745 million per year. What was
    spent in total for fish and wildlife during this period was about $8
    billion, and almost $12 billion has been spent since 1980. Fish related
    costs are one of the fastest growing BPA cost categories, have a
    significant impact on BPA wholesale power rates and what utility
    customers like Inland Power, and our consumers, pay for electric power.
        All these costs end up in the monthly electric bills of the
    ratepayers of 125 Northwest utilities. It is our understanding that
    fish and wildlife costs represent more than 30 percent of the rate that
    is charged to Inland Power and other utilities. We doubt that many of
    the consumers in the region are aware of what they are paying towards
    BPA's fish related costs. Providing clear direction to BPA about their
    responsibilities in reporting Endangered Species Act related costs
    would be useful to the region and the public. Having readily accessible
    and transparent cost information would be most beneficial.
    Providing Valuable Information
        We are aware that the Northwest Power and Conservation Council
    annually provides a report to the Northwest Governors on the
    expenditures of Columbia River Basin Fish and Wildlife Program. Using
    data primarily supplied by BPA this report provides extensive
    information on the varied aspects of the BPA funded fish program.
    However, making these very large and program-wide numbers meaningful to
    the typical consumer is another story. It is very difficult for an
    Inland Power consumer to understand what $700 to $800 million per year
    in BPA fish costs might mean in terms of their own electric bill.
    Inland makes an effort to convey what fish costs are included in an
    Inland members' retail electric bill. However, it would be a big
    improvement if the monthly wholesale power bill Inland Power receives
    from BPA would provide information regarding what portion of that bill
    is related to fish costs.
        From Inland Power's perspective H.R. 1719 is about information
    sharing. While from time to time there is much debate about the
    effectiveness of various specific fish programs and actions,
    information and knowledge about fish and wildlife costs should be seen
    as a means to improve the overall discussions about the fish and
    wildlife programs.
        Inland Power, like many other utilities, has in recent years
    experienced increases in retail electric rates and will undoubtedly
    have to raise its rates in the not too distant future. Our members want
    and deserve to have quality information about the factors impacting
    their electric bills. That would include information related to Inland
    Power's own costs of operating and maintaining over 7,500 miles of
    distribution lines, other costs of providing reliable and safe
    electrical service and information regarding BPA costs, including fish
    costs.
    Conclusion
        In summary, having easy access to factual numbers about how much
    each utility is spending on ESA costs and related activities would be
    very helpful to the region's utilities as they seek to provide
    information to their consumers. Mr. Chairman, I would like to thank you
    for holding this hearing and providing Inland Power with the
    opportunity to share our views on this significant issue affecting our
    utility and the members we serve.
                                     ______

        Mr. McClintock. Thank you for your testimony.
        Our next witness is Ms. Sara Patton, Executive Director of
    the Northwest Energy Coalition, from Seattle, Washington, to
    testify.

             STATEMENT OF SARA PATTON, EXECUTIVE DIRECTOR,
                NW ENERGY COALITION, SEATTLE, WASHINGTON

        Ms. Patton. Good morning, Mr. Chairman and members of the
    Committee. Thank you very much for the opportunity to be here.
        My name is Sara Patton. I am the Executive Director of
    Northwest Energy Coalition. The Northwest Energy Coalition is a
    coalition of more than 110 consumer, environmental, faith-
    based, and low-income groups, unions, clean energy businesses,
    and progressive utilities from the four Northwest States and
    British Columbia, working together for a clean and affordable
    energy future.
        I am testifying today to raise concerns about H.R. 1719. My
    remarks focus on the Bonneville Power Administration because
    that is what we basically know about. And I have also submitted
    detailed written comments and will be brief and happy to answer
    any questions.
        For the groups I represent, H.R. 1719 raises a number of
    concerns. First, I would like to emphasize that environmental
    and consumer public interest groups enthusiastically support
    transparency in economic analyses and reporting. We would
    support H.R. 1719 if it mandated a full and thorough accounting
    of the costs and benefits of Federal dam operations on fish
    anglers and fishing communities, irrigators, recreational
    businesses, and other users of the river along with power
    consumers. Only by looking at the whole picture can any
    particular cost category be put in perspective. H.R. 1719 looks
    only at a small part of how the Columbia River is shared and
    paid for.
        The whole picture would include, for example, disclosure of
    the high cost of the Columbia Generating Station, a nuclear
    power plant which BPA funds. BPA reported in 2009 that the
    operations and maintenance costs for the Columbia Generating
    Station, which produces 10 percent of BPA's power, are greater
    than the operations and maintenance costs of the entire
    remainder of the Federal Columbia River Power System, the 31
    hydroelectric dams which produce the remaining 90 percent of
    Bonneville's electricity. Those are costs and benefits worth
    thinking about.
        My next concern is that this bill is unnecessary for the
    Northwest. Information on fish and wildlife restoration costs
    are readily available from BPA and the Northwest Power and
    Conservation Council. Utilities are free to inform their
    consumers if they wish, and many do so now. And it must be
    noted, the bill doesn't guarantee the information will get to
    the utilities' customers but only to the utilities.
        Third, it must be noted that BPA's fish and wildlife
    restoration is required by a number of Federal laws and
    treaties dating back to 1855, so separating out the ESA cost is
    next to impossible. H.R. 1719 proposes no way to separate which
    costs are specifically required to meet the ESA alone, perhaps
    because it can't be done.
        Fourth, H.R. 1719 should not count the cost of foregone
    revenue as an ESA compliance cost. Including foregone revenue
    and the cost of replacement power as a cost implies that BPA
    can claim savings for violating Federal laws or that BPA
    somehow owns the river. Bonneville does not own the river; it
    shares the river with all the other users, including fish and
    wildlife. BPA is not entitled to all the possible revenue it
    can squeeze out of the river, only its share. Nor is BPA
    entitled to claim lost revenue from power that is illegal to
    generate in the first place.
        An analogy will help. Trucking companies must obey a number
    of safety regulations. These include providing seatbelts and
    equipment inspections. Equipment costs are real and should be
    counted as a cost of compliance with regulations. However, we
    do not count as a cost the forgone revenue that a company could
    have realized if its drivers could drive over the speed limits
    or ignore weight limits. Trucking companies do not own the
    highways, and the cost of sharing them with other users is not
    revenue somehow owed to them. Similarly, the various users of
    the river do not owe each other money. They are all simply
    sharing this great resource.
        In fact, the Northwest Power and Conservation Council
    reported in 2006 that irrigation water withdrawals account for
    about $250 million per year in, quote, ``foregone revenues,''
    end quote. Does that mean BPA ratepayers are subsidizing
    farmers? Of course not. Farmers and power users are sharing the
    river with recreation, flood control, navigation, and, of
    course, fish and wildlife.
        However, if Congress believes it is important to report
    such costs, then it should require a calculation of all the
    costs of the Federal river system and report all of them on a
    consistent basis.
        Furthermore, true transparency would examine both costs and
    benefits. A real examination of ESA impacts must include the
    economic benefits to the region of salmon restoration in terms
    of jobs and revenue. This legislation would only identify costs
    and, therefore, would not give the public or utilities a clear
    and complete picture of Federal and regional investments in
    salmon recovery unless it includes the enormous benefits these
    expenditures provide.
        Finally, even if we accept the foregone revenue for ESA
    compliance as a cost, BPA rates will still be a great deal. We
    don't think it is a good idea to jeopardize the low-cost
    hydropower the Northwest depends on by failing to meet our
    legal and stewardship responsibilities for God's creation.
        In conclusion, the Northwest Energy Coalition supports
    objective and transparent accounting of BPA's fish-and-
    wildlife-related costs, but H.R. 1719 introduces a number of
    difficult issues that need to be resolved before our coalition
    could support it.
        Thank you very much for this opportunity.
        [The prepared statement of Ms. Patton follows:]

                 Statement of Sara Patton, Executive Director,
                       NW Energy Coalition, on H.R. 1719

        The NW Energy Coalition is a coalition of more than 110 consumer,
    environmental, faith-based and low-income groups, unions, clean energy
    businesses, and progressive utilities from the four Northwest states
    and British Columbia, working toward a clean and affordable energy
    future. I am testifying today in opposition to H.R. 1719. Although H.R.
    1719 applies equally to all Federal Power Marketing Agencies (PMAs),
    this testimony is focused mainly on the Bonneville Power Administration
    (BPA) because that is our area of expertise and concern. However, in
    most cases, we believe the intent of these comments is applicable to
    the other PMAs.
    Summary
        The proposal in H.R. 1719 to require the Bonneville Power
    Administration (BPA) to report the costs of compliance with the
    Endangered Species Act (ESA) raises a number of concerns:
              Transparency of BPA's costs is a laudable goal, if
            there is full and honest accounting to inform the public of the
            whole story.
              This bill is unnecessary: the information on fish and
            wildlife program funding is already readily available from BPA,
            and utilities are free to inform their customers if they wish.
              BPA's fish and wildlife funding is required by a
            number of federal laws and treaties; separating out ESA costs
            is difficult or impossible.
              Proposals to include foregone revenues in these costs
            imply that BPA can claim benefits for violating federal laws,
            and that BPA power production usage is paramount to all other
            uses.
              Meaningful economic transparency should address both
            costs and benefits.
              The definition of the firm customers' share of BPA's
            ESA costs can be interpreted in different ways, leading to
            starkly different conclusions. If not done correctly such
            accounting fosters more confusion than transparency.
              This issue is likely to focus national attention on
            the fact that BPA's wholesale power rates are lower than most
            any other wholesale generator, and normally well below market
            rates.
    The NW Energy Coalition Supports Real Transparency
        Environmental and consumer advocates would enthusiastically support
    H.R. 1719 if it mandated honest accounting of the costs and benefits of
    federal dam operations on fish, anglers and fishing communities,
    irrigators, recreation businesses and other users of the river--along
    with power consumers. Only by looking at the whole picture can any
    particular cost category be put into perspective. H.R. 1719 looks at
    only a small part of how the Columbia River system is shared and paid
    for. This issue will be addressed in detail later in this testimony.
    H.R. 1719 is Unnecessary
        H.R. 1719 does not compel the production of any information that is
    not already available to the public, electricity utilities, or anyone
    else who seeks it. BPA currently provides information to the region
    regarding the costs of its fish and wildlife programs (including so-
    called ``indirect costs''). Bonneville also provides a detailed walk
    through of all of its costs as part of its Integrated Program Review
    preparatory to each power rate case. Any utility wishing to provide
    this information to its retail consumers may do so; some do this now.
    This bill is not needed and would not change current practice at all.
    Salmon Recovery Actions Meet a Myriad of Federal Responsibilities
        BPA's investments in rebuilding fish and wildlife populations are
    required by a number of federal laws and treaties, including the
    Endangered Species Act, the Northwest Power Act, the Fish and Wildlife
    Coordination Act, the Clean Water Act and United States treaties with
    Indian Tribes and Canada. It is not possible to categorize which of the
    costs are related solely to the ESA.
        Bonneville and the federal family have numerous legal obligations
    to recover these valuable fish in addition to the ESA. H.R. 1719's
    mandate to isolate ESA costs is impossible, since most of the actions
    being taken for endangered and threatened fish and habitat overlap or
    are also required by these other laws and treaties.
        For example, the Pacific Northwest Electric Power Planning and
    Conservation Act (Northwest Power Act), Section 16 U.S.C.
    839b(h)(6)(E), requires the Northwest Power and Conservation Council
    (NPPC) to include measures in its Fish and Wildlife Program (Program)
    that:
             (i)  provide for improved survival of such fish at
            hydroelectric facilities located in the Columbia River system;
            and
            (ii)  provide flows of sufficient quality and quantity between
            such facilities to improve production, migration, and survival
            of such fish as necessary to meet sound biological objectives.
            (Emphasis added)
        More generally, the Northwest Power Act requires the Administrator
    and other Federal agencies to exercise their responsibilities ``in a
    manner that provides equitable treatment for such fish and wildlife
    with the other purposes for which such system and facilities are
    managed and operated.'' (Section 16 U.S.C. 839b(h)(11)(A); emphasis
    added). BPA's obligation ``to adequately protect, mitigate, and enhance
    fish and wildlife. . .'' (ibid.) is not a secondary ``cost'' of the
    power system, it is a coequal purpose along with irrigation,
    navigation, recreation and flood control.
        Similarly, there are numerous treaty obligations to Native American
    Tribes that require BPA and the Federal agencies to restore and enhance
    their native fisheries. At the same time, the Federal Columbia River
    Power System (FCRPS) Biological Opinion requires specific flow and
    spill operations to ensure that the operation of the FCRPS does not
    jeopardize the continued existence of listed species under the ESA.
        It is important to note that the flow targets in the Program and
    Biological Opinion are constrained by the current configuration of the
    hydroelectric system. Average spring flows in the Columbia before the
    dams were 450,000 cubic feet per second. The current target is 200,000
    cubic feet per second--less than half the historical average.
    Unfortunately, the federal agencies have only met this flow target
    37.5% percent of the time between 1995 and 2010, and not once between
    2006 and 2010.
        It is evident that these various obligations overlap and cannot be
    separated into ESA and non-ESA obligation
        Adding ``Indirect Costs'' is Improper and Obscures The Actual
    Monetary Contribution BPA Makes to Salmon Recovery
        H.R. 1719 requires PMAs to include ``foregone generation and
    replacement power costs'' as indirect costs in their ESA-compliance
    calculations (Sec. 2 (c)). As explained below, it is false and highly
    misleading to include these items as ``costs.'' It also improperly
    distorts the actual monetary contribution BPA makes to salmon recovery.
    H.R. 1719 would set a dangerous precedent by codifying this type of
    accounting.
        BPA already counts the revenue foregone and the cost of replacement
    power from operating the FCRPS to meet the requirements of the
    Endangered Species Act, the Northwest Power Act, the Clean Water Act,
    and other laws and regulations as a part of these costs. According to
    the NW Power and Conservation Council's Tenth Annual Report to the
    Northwest Governors on BPA Expenditures (July 1, 2011; Document 2011-
    04), over 50% of BPA's claimed expenditures for Fish and Wildlife
    programs are from foregone revenue and replacement power costs.
    Foregone Revenue
        ``Foregone revenue'' is the cost of foregone generation; that is,
    the money BPA speculates it could have made if it did not have to
    operate the river to assist salmon migration. It is the lost generation
    from water spilled over the dams plus the difference in prices BPA
    forecasts it might have received if it could shift timing of generation
    into higher priced periods rather than when salmon need a push out to
    sea. Considering as a ``cost'' the revenues or profits that a business
    or agency could have made if it had violated federal laws, regulations,
    or court orders is a curious accounting concept, to say the least.
        An example is illustrative. Trucking companies must obey a number
    of safety regulations. These include providing seat belts, equipment
    inspections and rest breaks for drivers. These are all proper costs of
    compliance with these regulations. However, we do not count as a cost
    or even ``indirect cost'' the foregone revenue that the company could
    have realized if it did not have to give its drivers rest breaks, or if
    those drivers could drive over the speed limits or ignore weight
    limits. On the contrary, it is understood that the trucking companies
    do not own the highways, and the ``cost'' of sharing it with other
    users is not revenue somehow owed to them.
        Given its practice of reporting foregone revenue for fish and
    wildlife protection, it is important to note that BPA does not report
    the foregone revenue associated with meeting other legal constraints on
    power generation such as providing irrigation water, flood control,
    maintaining minimum flow depths for river transportation, limiting
    rapid variations (``ramping''--which can damage streambeds and banks)
    in flow rates, or recreation. All of these other federally mandated
    purposes limit the ability to generate electricity and reduce BPA's
    potential revenue. Hence, to be consistent, BPA would need to count
    them as ``costs'' as well.
        For example, the Northwest Power and Conservation Council has
    calculated that the 14.4 million acre-feet withdrawn for irrigation
    could generate an additional 625 average megawatts if the water
    remained in the river--about five percent of the total output of the
    BPA system. (``Multiple Use Memorandum,'' NPCC, February 7, 2006, p.5)
    Analysis by the NPCC calculated that at average market rates, the
    foregone revenue of this irrigation would be $250 million per year. At
    the market prices for the summer of 2005, the lost revenue associated
    with irrigation withdrawals was over $380 million. Neither BPA nor H.R.
    1719 counts this ``cost.''
        While these numbers are dated and the impact of other uses of the
    river will vary from year to year depending on market power prices and
    the amount of water in the river at any given time, the point remains
    that BPA is not including foregone revenue from any other uses of the
    river in its calculations of costs.
        All of this begs the important question of whose costs these are.
    Are irrigation foregone revenues a ``cost'' for BPA's ratepayers? Is a
    requirement to keep rivers flowing at minimum levels for navigation
    another ``cost''? If so, then one would conclude that Bonneville is
    subsidizing the irrigators and barge and boat operators. This logic is
    absurd. Bonneville does not own the river; it shares the river with all
    the other uses, including fish and wildlife. BPA is not entitled to all
    of the possible revenue it can squeeze out of the river, only its
    share. NW Energy Coalition recommends that Sec. 2(c) be deleted from
    the bill. The various uses and users of the river do not owe each other
    money; they are all simply sharing in this great resource.
        However, if Congress believes it is important to report such costs,
    then it should require BPA to calculate the costs of each of the other
    purposes of the dams and report all of them on a consistent basis.
    After all, every use of the river, from navigation to flood control to
    irrigation, reduces BPA's revenues, and its ability to fund its
    obligations.
    Foregone salmon
        We should also note, if the Committee wants to continue down the
    road of assigning indirect costs, that the NPCC found that 5 to 11
    million salmon lost each year (compared to the period prior to dam
    construction) were attributable to damage caused by the hydroelectric
    system. Based on this estimate, the Columbia River Indian tribes,
    anglers and fishing businesses have ``foregone'' 365 to 805 million
    salmon and steelhead since the dams were built.
        Salmon and steelhead are invaluable to tribal culture and
    religion--the tribes would not put a price on this loss. Non-tribal
    economists, on the other hand, would value the annual losses in the
    hundreds of millions of dollars.
    Replacement Power Costs
        H.R. 1719 also requires that BPA include ``replacement power
    costs'' due to fish and wildlife operations in its estimate of indirect
    costs. These costs can vary dramatically depending on water
    availability, market energy prices, and load demand--none of which can
    be properly attributed to salmon recovery.
        This problem was made very clear in 2001 when BPA's power purchase
    costs alone exceeded $1 billion. But that was a year when the agency
    eliminated ``spill'' for salmon, so it would be fair to say that
    Bonneville's salmon restoration efforts were reduced because the impact
    of fish operations on generation was even less than in previous years.
    Instead, BPA counts that as a year when its indirect costs skyrocketed.
    It is bad public policy to pin power purchase costs that could arise
    for any number of non-salmon-related reasons on salmon recovery. In
    fact, the reason power purchase costs were so high that year had
    nothing to do with fish and everything to do with energy deregulation
    problems and weather.
    Costs Must be Balanced with Benefits
        Any meaningful effort to provide real transparency should include
    both the cost and the benefits of actions to recover salmon. H.R. 1719
    would require that only costs be reported, and therefore would fail to
    provide the public a complete picture. The economic benefits of salmon
    recovery efforts come in at least two forms: the economic benefit from
    increased fishing opportunities and the impact of actually implementing
    recovery measures.
    Economic Impact of Implementing Salmon Recovery Measures
        BPA funds implementation of habitat improvements and other
    restoration measures through the Federal Columbia River Power System
    (FCRPS) Biological Opinion and through BPA's ``Integrated Fish and
    Wildlife Program.'' Most of these fish and wildlife activities are
    implemented in rural areas east of the Cascade Mountains These
    investments pay salaries and purchase materials creating additional
    jobs and economic activity. The effects of these investments over the
    next several years can be expected to ripple through tribal and rural
    economies, creating thousands of additional jobs and significant
    economic activity. If this work is implemented over the next ten years
    at the level recommended by state and tribal scientists, the annual
    funding would support more than 5,000 jobs over the next ten years
    (assuming $40,000 per job).
    Economic Benefits of Commercial and Recreational Fishing Opportunities
        If fish and wildlife populations increase, the Pacific Northwest
    will experience increased spending by fishers, hunters, and
    recreationalists creating additional jobs and economic benefits.
    Increased fishing opportunities for the commercial fishing industry
    will also have a ripple effect on local coastal communities.
        To illustrate the economic benefit of increased fishing
    opportunities, one need not look further than 2001, when the region
    experienced better-than-average adult salmon returns due to improved
    ocean conditions. In that year, salmon runs increased sufficiently for
    Idaho to open a rare recreational fishing season on salmon. A report by
    credentialed independent economists (Ben Johnson Associates, Inc. The
    Economic Impact of the 2001 Salmon Season in Idaho, prepared for the
    Idaho Fish and Wildlife Foundation, April 2003) examined the economic
    impact of the 2001 salmon season and found that the increased fish
    opportunity was responsible for almost $90 million in angler
    expenditures. These expenditures were split evenly between the local
    river communities and the rest of the state. However, impacts were more
    significant in the smaller local economies. Angler expenditures in
    Riggins, Idaho (on the Salmon River) during the salmon fishing season
    stimulated 23 percent of the town's annual sales. While more recent
    economic analysis is not yet available, modestly higher salmon returns
    over the past three years (an increase widely attributed to spill) have
    provided fishermen and fishing businesses with seasons similar to the
    2001 fishing season. Any presentation of economic costs must also
    provide the important benefits to local economies of investments in
    fish and wildlife while considering the costs of the actions.
    BPA's Firm Customers' ``Share'' of Fish Costs is not Well-Defined.
        H.R. 1719 requires that PMAs report each firm power customer's
    ``share'' of ESA compliance costs, but leaves the determination of what
    constitutes a share to the PMAs (in coordination with other Federal
    agencies). How shares are calculated, and what constitutes a firm
    customer, is left open in the legislation, but these issues are highly
    contentious. How shares are calculated can vary tremendously, depending
    on various assumptions. We have seen media reports that set the
    proportion of fish restoration costs in Bonneville's rates ranging from
    less than 5% to 30% using the same basic information!
        While this information is extremely important, we all know that
    statistics can be presented or ``spun'' in different ways depending on
    the desired outcome. It is important that this information be fair and
    objective.
        There are several reasons why this calculation is not
    straightforward and will most likely foster confusion rather than
    transparency. First to recover its costs, BPA sells to many different
    types of firm customers at different rates. Some of these rates are
    determined by BPA, some by the market. Some rates to firm customers are
    fixed for many years, while others can vary periodically.
        This complicated web of arrangements can lead to confusion and
    misinterpretations of what, at first, seem easy questions. We have seen
    the media and electric utility representatives take an accurate BPA
    statement that BPA power rates could go down by a specified percentage
    if it didn't have any fish costs and report that specified percentage
    of ``your power bill'' goes for fish. This deductive leap is incorrect
    and troubling for several reasons:
            1.  All of BPA's sales help pay its fish costs, but many of
            BPA's firm customers' rates are fixed or set by the market.
            Therefore, if costs are reduced, only a subset of BPA's
            customers would get all the benefit of the reduction. How much
            those customers' rates would be reduced is not the same as how
            much of BPA's rates go to fish.
            2.  BPA was referring to its power rates only. But almost a
            quarter of BPA's budget is transmission, whose costs are
            recovered through a separate rate. Those rates were not
            included in the calculation, but all customers have to pay for
            transmission.
            3.  BPA was referring to its wholesale rate, but consumers pay
            retail bills. Retail bills contain all the other costs of
            delivering electricity, such as meter reading, distribution
            wires, billing, etc. Only about 50-60% of a homeowner's bill is
            due to the actual wholesale cost of power.
            4.  Finally most consumers in the region are served by
            utilities that buy only some of their power from BPA, if any.
            These consumers' bill-impacts would be proportionally less.
        This discussion illustrates how controversial and complicated this
    issue is--and how open to misinterpretation it will be.
    There are less costly, and more effective ways to restore wild salmon
            and steelhead.
        Public interest groups, fishing based businesses, taxpayer
    advocates and others support a full and honest accounting of BPA's
    fish-restoration costs. This is because we know that the public
    supports the goal of restoring wild salmon and steelhead to the
    Columbia Basin, but only if that effort is successful. That is why we
    believe that there is a better way: the removal of the four lower Snake
    River Dams; replacing their modest amount of power with energy
    efficiency and renewables; extending irrigation pumps to continue
    irrigation to the 13 or so affected farms; and refurbishing the rail
    and highway system to ensure farmers can economically ship their goods
    to market.
        As the true costs of the expensive and ineffective path we are
    currently on becomes clear, the region will realize that removing those
    four dams is a less-expensive option. Every day these dams continue to
    exist, the federal government is wasting money and holding back the
    quality of life for people in the region.
        The federal government can act responsibly by taking down these
    four dams. Eliminating them will be less costly than allowing them to
    exist, and will create a more reliable energy source in the Pacific
    Northwest that is paid for by people in the region. Taking down these
    dams will also reverse the decline of an important natural resource,
    Pacific salmon.
        While NW Energy Coalition supports full transparency, it is
    important to note that even with BPA's large fish obligations, BPA's
    rates are the envy of other regions. If BPA's customers want to avoid
    these fish costs, they are free to get their power elsewhere--at about
    twice the price! We are concerned that shining a spotlight on BPA's
    rates will only renew calls by some outside the region who believe our
    rates are heavily subsidized.
    Conclusion
        Although the NW Energy Coalition supports objective accounting of
    BPA's fish and wildlife-related costs, indirect costs are not
    appropriate to assign to one party in a shared system that is put to
    multiple uses. However, if Congress believes it is important to attempt
    to quantify these costs, it should insist that the impacts from other
    users such as irrigation and navigation are also accounted for.
    Unfortunately, H.R. 1719 introduces a number of difficult issues that
    need to be resolved before our Coalition could support it.
        Thank you for this opportunity to provide these comments.
                                     ______

        Mr. McClintock. Thank you for your testimony.
        Our final witness on this panel is Mr. Scott Corwin,
    Executive Director of the Public Power Council, from Portland,
    Oregon.

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

        Mr. Corwin. Thank you, Mr. Chairman, Ranking Member, other
    members of the Committee. Greetings from the Northwest.
        I should also note, with me today is my 10-year-old
    daughter, Hadley, learning about Congress.
        I appreciate the opportunity to testify today on H.R. 1719,
    the Endangered Species Compliance and Transparency Act. And we
    appreciate the initiative of Representative McMorris Rodgers
    and the co-sponsors in raising the issue and proposing H.R.
    1719.
        Our members provide retail electricity service to millions
    of citizens throughout the Northwest, including Washington,
    Oregon, Idaho, western Montana, parts of California, Nevada,
    and Wyoming. And while these consumers often ask about the
    nature of costs that make up their electricity rates, some have
    little knowledge about the level of fish and wildlife costs
    affecting those rates.
        In the case of BPA, ESA-related costs in the rates the
    agency charges for wholesale power are inordinately large.
    According to the Northwest Power and Conservation Council, the
    independent State compact that looks at these costs, last year
    alone those costs were $802 million. This single category of
    costs accounted for about 30 percent of the BPA power costs
    charged in rates. The total BPA ratepayer cost for fish and
    wildlife since 1980 is well over $12 billion. Now, that does
    not count the amounts contributed through other Federal, State,
    and local entities.
        More knowledge about fish and wildlife costs is not an
    impetus to do less for fish. Rather, it can create ownership in
    the efforts under way and serve as an inducement to create
    better, more effective means of assisting species in the
    future. Support for this bill should not depend upon whether
    you believe these expenditures in the name of salmon and
    steelhead should be lower, higher, or are just about right. The
    issue here really is information.
        It could make the understanding of these costs clearer if
    they were displayed directly on the power bill each month. What
    happens to the information after that or to the opinions of
    consumers that get that information will vary greatly from
    utility to utility and from customer to customer. This is the
    local control that public power values highly.
        It is not necessarily the case, certainly, as has been
    claimed, that a utility or ratepayers could gain this
    information without this bill. The processes in place to
    determine the costs that I just described are lengthy and
    complex in the region. Utilities would benefit from having one
    official estimate that is produced by the agency and disclosed
    on the actual bill.
        In addition, with respect to whether ESA-related costs
    should be the only costs displayed on the bill, certainly there
    are other costs displayed now. Transmission is completely
    billed separately. But there are not other costs in BPA's power
    rates that are of this magnitude and this level of volatility.
    This does distinguish these particular costs from all the other
    categories that flow into the rates of Power Marketing
    Administrations. There are existing accounting systems with
    which the agency can produce the number for fish and wildlife
    costs already at little additional administrative burden.
        How should these costs be defined? As you just heard, some
    question the approach here that would include indirect costs as
    well as direct costs of ESA implementation in H.R. 1719. To the
    ratepayers, they are one and the same. Water spilled over a
    dam, rather than creating electricity, impacts ratepayers just
    as much as direct projects or capital costs. It is also not a
    foregone conclusion that that particular mode of meeting that
    statutory obligation is most efficient or effective at any
    particular point in time. In other words, the law does not
    directly compel the action that is creating the loss to
    ratepayers in this instance.
        The pertinent question is, without the set of actions in
    question, would the power rate be lower? Whether the action
    causes a loss of generation or is a direct expenditure, the
    impact is pressure on rates to be higher than they otherwise
    would be. And, in this case, an objective baseline is already
    established. You can look at generation capacity clearly, pre-
    and post-implementation of the biological opinions.
        In conclusion, H.R. 1719 is a straightforward approach to
    providing more information and accountability. Timely release
    of this information is a worthy goal in and of itself. And to
    the extent it can create incentives for better management of
    our natural resources, this can benefit endangered species and
    ratepayers alike.
        Again, thank you very much for the opportunity to testify
    today.
        [The prepared statement of Mr. Corwin follows:]

               Statement of R. Scott Corwin, Executive Director,
                       Public Power Council, on H.R. 1719

    Introduction
        Good afternoon, Chairman McClintock, Ranking Member Napolitano, and
    Members of the Subcommittee. My name is Scott Corwin. I am the
    Executive Director of the Public Power Council. I thank you very much
    for the opportunity to testify today on H.R. 1719, The Endangered
    Species Compliance and Transparency Act of 2011.
        The Public Power Council (PPC) is a trade association representing
    the consumer-owned electric utilities of the Pacific Northwest with
    statutory first rights (known as ``preference'') to purchase power that
    is generated by the Federal Columbia River Power System and marketed by
    the Bonneville Power Administration (BPA). These preference rights were
    granted to publicly and cooperatively-owned utilities because they have
    a mandate to pass the benefits through to the citizens of the
    Northwest, the consumers who are their owners. Our member utilities
    have service territories in portions of seven western states and serve
    over 41% of the electricity consumers in the region.
        These utilities, being both some of the largest and the smallest in
    the Northwest, are committed to preserving the value of the Columbia
    River system for clean, renewable hydropower and for the system's
    multiple other uses. Customers pay for all of the power costs incurred
    by BPA; the agency is a pass-through entity of its costs and
    obligations. And, because the utility members of PPC are owned by and
    answer directly to their customers, they are very sensitive to the
    rates they pay for wholesale power and transmission of electricity.
        We appreciate the initiative of Representative McMorris Rodgers and
    the cosponsors in raising this issue, and for proposing H.R. 1719, the
    Endangered Species Compliance and Transparency Act of 2011. H.R. 1719
    is narrowly tailored to require the power marketing administrations to
    display these costs on the monthly wholesale power bill sent to
    utilities. It is then up to the local utility to decide what to do with
    that information. Local control over management of the utility is a
    fundamental priority of each consumer-owned utility in the Northwest.
        This bill offers the opportunity for ratepayers to be better
    informed consumers. Our members provide electricity to retail utilities
    serving millions of citizens throughout the Northwest, including
    Washington, Oregon, Idaho, and parts of Montana, California, Nevada,
    and Wyoming. While these consumers often ask about the nature of the
    costs that make up their electricity rates, some have little knowledge
    about the level of fish and wildlife costs affecting those rates.
        With respect to awareness of costs, past polling conducted by a
    consortium of river users and utilities who support a balanced approach
    to the use of the Columbia River system (Northwest RiverPartners) found
    that about 60% of respondents did not know there were any costs in
    their rates related to implementation of the Endangered Species Act. A
    poll conducted this year found concern about the impact to electricity
    rates once respondents were informed about these costs.
    Fish and Wildlife Costs
        In the case of BPA, the fish and wildlife costs in the rates the
    agency charges for wholesale power are inordinately large. At $802
    million last year alone, this single category of costs accounted for
    about 30 percent of the BPA power costs charged in rates. The total BPA
    ratepayer cost for fish and wildlife since 1980 is well over $12
    billion. That does not count the amounts contributed through other
    federal, state, and local entities.
        The latest assumption for fish and wildlife annual costs in the BPA
    power rate starting on October 1, 2011 is likely to include $745.5
    million annually, broken down as follows:
              $239.4 million for direct expenditures under the
            Integrated Program;
              $5.1 million for internal costs of the Northwest
            Power and Conservation Council related to fish and wildlife;
              $29.4 million for the U.S. Fish and Wildlife Service;
              $42.8 million for the U.S. Army Corps of Engineers;
              $5.4 million for the Bureau of Reclamation;
              $280 million of indirect operational costs; and,
              $143.4 million in capital investments.
        The efficiency and effectiveness of some of the specific projects
    and methods for salmon recovery are questions with which the region has
    struggled significantly over the last two decades as the underlying
    science continues to develop. Certainly, highlighting the costs on
    power bills could lead to more scrutiny over the effectiveness of
    salmon mitigation measures. If it does, then that would be a useful
    byproduct of H.R. 1719 that would benefit fish as well as ratepayers.
    In the meantime, the federal agencies overseeing salmon recovery
    efforts, along with most of the states and tribes in the region, have
    done extensive collaboration to come together on a scientifically sound
    plan (``biological opinion'') under the Endangered Species Act
    committing to an enormous continued effort for these fish.
        More knowledge about fish and wildlife costs is not an impetus to
    do less for fish. Rather, it can create ownership in the efforts
    underway and serve as an inducement to create better, more effective
    means of assisting fish in the future. And, it should be noted that any
    approach to salmon recovery that will be successful long-term must take
    into account all aspects of the salmon lifecycle including impacts from
    hatcheries, harvest, and all areas of habitat.
    Providing Valuable Information
        Support for this bill should not depend upon whether you believe
    these expenditures in the name of salmon and steelhead should be lower,
    higher, or are just about right. The issue here is information.
    Certainly, it would make the understanding of these costs clearer if
    they were displayed directly on the power bill each month. What happens
    to the information after that, or to the opinions of consumers
    receiving that information, will vary greatly from utility to utility
    and from customer to customer.
        Some may argue that a utility and its ratepayers could gain this
    information without this bill. This is not necessarily the case. In the
    case of BPA, only the agency itself is in the best position to
    determine with accuracy the costs it expends on fish and wildlife. The
    processes in place to determine those costs and inform customers about
    them are lengthy and complex. Utilities would benefit from having one
    official estimate that is produced by the agency and disclosed on the
    actual power bill.
        Some might question why only ESA-related costs should be displayed
    on the bill. There are very few costs in BPA's power rates that are of
    this magnitude and this level of volatility. In addition, these costs
    are particularly driven by federal laws that do not directly relate to
    the business of producing power. This distinguishes them from many of
    the cost categories that flow into the rates of power marketing
    administrations. And, there are existing accounting systems with which
    the agency can produce the number for fish and wildlife costs at little
    additional administrative burden.
    Defining ESA Costs
        Under H.R. 1719, some may argue about whether the number that a
    power marketing agency displays is the correct reflection of fish and
    wildlife costs. Those arguments are inevitable, and there are plenty of
    venues in the region for all of us to voice our concerns to the agency.
    But, that discussion should not inhibit the agency from making a final
    determination and getting that information to customers.
        For example, H.R. 1719 correctly includes the indirect costs as
    well as the direct costs of ESA implementation. To a ratepayer they are
    one and the same. Water spilled over a dam rather than creating
    electricity impacts rate-payers just as much as direct projects,
    capital costs, or operations and maintenance. The pertinent question
    is: without the set of actions in question would the power rate be
    lower? Whether the action causes a loss of generation or whether it is
    a direct expenditure, the impact is pressure on rates to be higher than
    they otherwise would be. An objective baseline can be clearly
    established in generation capacity pre and post-implementation of the
    biological opinions.
        We would hope that BPA would administer this provision by including
    all fish and wildlife costs in its calculation of cost for purposes of
    this bill. While the bill refers specifically to costs incurred related
    to compliance with the Endangered Species Act (ESA), it also refers to
    ``activities related to such Act''. In the case of mitigation paid for
    by BPA and its ratepayers, the ESA has such broad impact that most if
    not all fish and wildlife mitigation could be defined as related to
    that Act even if it is more formally associated with another law such
    as the Northwest Power Act.
    Conclusion
        H.R. 1719 is a straightforward approach to providing more
    information and accountability regarding a major factor in the power
    rates of consumer-owned utilities. Timely release of useful information
    is a worthy goal in and of itself. And, just as important is the
    potential that this information may create incentives for better
    management of our natural resources that could benefit endangered
    species and ratepayers alike. Thank you for this opportunity to testify
    today. I look forward to working with you on this matter and addressing
    any questions.
                                     ______

        Mr. McClintock. Thank you, Mr. Corwin.
        This concludes the testimony of the first panel. We will
    now move to questions by each of the Members, and the Chair
    will begin.
        Mr. Corwin, I will start with you. Both of the Ranking
    Members mentioned the failure of WPPSS as an argument against
    this bill. You would think that highly speculative ventures
    like WPPSS would caution them against even more speculative
    ventures like solar and wind transmission, but we will save
    that for the next panel.
        The question I would ask of you is to highlight again the
    difference between the fixed expenditures for retiring the
    WPPSS bonds and ESA costs.
        Mr. Corwin. Thanks. Yeah, I would say, the region has
    learned a lot by the Western Power Supply System issues in the
    past. As far as the differences between those costs, right now
    the bonding piece from the--it is now Energy Northwest--is
    melded with Bonneville's portfolio, and they have been
    refinanced several times. And I would have to get with BPA to
    pull out the exact cost of that, but it is lower than I heard
    stated because the entire debt service of the agency----
        Mr. McClintock. Well, I just wanted to underscore the point
    you made, that these are fixed costs, as opposed to the ESA
    costs, which are volatile and steadily mounting.
        Mr. Corwin. Yes, there is a fixed amortization on those
    costs now. ESA is volatile year to year by hundreds of millions
    of dollars.
        Mr. McClintock. And those ESA costs have nothing to do with
    power generation. They are tacked on, having nothing to do with
    that power generation.
        Mr. Corwin. There is certainly not a direct O&M cost of
    generating power.
        Mr. McClintock. One of the pressing questions I have for
    both Mr. Rettenmund and Mr. Corwin is, why can't the local
    retailers simply provide this to their customers anyway? Why
    don't you already put that on the bill?
        Mr. Rettenmund. Well, it is readily available, the total
    amount that Bonneville spends on fish and wildlife----
        Mr. McClintock. But is there anything stopping you from
    just putting that on the bill?
        Mr. Rettenmund. What we want to put on is what our
    individual consumer is contributing toward that total, and so
    we need some way for the actual cost that we are incurring, and
    then we can calculate what is representative for the individual
    member. It wouldn't help the individual member, just the whole
    750 million bucks, so----
        Mr. McClintock. Right.
        Mr. Rettenmund.--so we need a way to understand our share.
        Mr. McClintock. But can't you do that anyway without
    Federal legislation?
        Mr. Rettenmund. It would be much better, much higher-
    quality. I have done a back-of-the-envelope, but it is not very
    precise. Bonneville is much more capable of telling us what our
    share, of our $24 million in power costs, how much of that
    relates to fish and wildlife. That is something they are
    uniquely positioned to do.
        Mr. McClintock. Well, just looking at it from the
    perspective of a customer, my advice would be not to wait for
    Federal legislation, just give it your best shot, so that
    people at least have a ballpark estimate of what they are
    paying through their power bills for all of these mandates.
    Because, right now, they have no guidance. And, you know,
    prices are absolutely critical to people. Prices convey all of
    these costs and give them an accurate picture of what they are
    getting for what they are paying. I rather suspect they would
    be appalled. And I am surprised that utilities don't already
    provide them with the best estimate of this information that
    they can make.
        Mr. Rettenmund. Well, we do. I can't speak for other
    utilities, but we have taken our shot at it. And for our
    typical residential customer, it is about $150 per year. For an
    irrigator, we are talking about $8,000, $9,000 a year. And for
    a larger business--not real large, because we don't have a lot
    on our system--we are talking $30,000-plus a year.
        So, Mr. Chairman, we do take our shot at doing that, and we
    provide that information to our customers, our members on their
    bill. But it is just our best estimate, and we would like to do
    a better job of conveying that information.
        Mr. McClintock. Well, I understand this bill will give you
    far more accurate information. But, in the meantime, I wouldn't
    wait for it.
        Mr. Rettenmund. We do it.
        Mr. McClintock. As a consumer, I would love to see what I
    am actually paying for when I write those big checks to the
    utility district every month.
        Mr. Rettenmund. We get calls on that.
        Mr. McClintock. Just to cover the question of replacement
    costs, you know, when you are required to spill massive amounts
    of water from a dam to meet these ESA requirements, for
    example, the opposition says, ``Well, that is not really a
    cost, that is just impossible to estimate,'' what is your
    response to that?
        Are these real costs when you have to spill water off a dam
    that would be going for power generation instead to meet some
    of these requirements? Is that an actual cost to consumers?
        Mr. Rettenmund. Most definitely, that is an actual cost. To
    the extent water is spilled, doesn't run through the generator,
    there is an impact on the rates. They are higher than they
    otherwise would be.
        This is the ``compliance'' in the title of the Act,
    ``compliance.'' And those actions are in compliance, arguably,
    with the Endangered Species Act. So this isn't saying, you
    know, we will have a debate another time about whether they are
    really cost-effective, some of those, but this is to identify
    the cost of complying with the Act, that those costs are very
    much definitely a compliance cost.
        Mr. McClintock. Thank you.
        Mr. Rettenmund. Scott can probably speak to it in more
    detail than I can, but----
        Mr. McClintock. Yes, but he doesn't have the time now, so--
    --
        Mr. Rettenmund.--that is the gist of it.
        Mr. McClintock.--thank you.
        The Chair recognizes Mrs. Napolitano for 5 minutes.
        Mrs. Napolitano. Thank you, Mr. Chairman.
        And normally, in business, that is known as the cost of
    doing business. OK?
        Ms. Patton, most of the discussion on the legislation
    involves the costs related to the Endangered Species Act
    compliance. Could you elaborate on the economic benefits of a
    healthy fishery for the Northwest?
        Ms. Patton. Yeah, I would love to.
        Just the fisheries alone, the commercial fishery, the
    tribal fishery, and the sports fishery, are a huge contribution
    to the Northwest economy and to jobs in and around. They also
    contribute to those fisheries in Alaska and elsewhere. So that
    is one of the big issues.
        The sports alone is in the billion dollars of annual kinds
    of revenue. I, in fact, was--a couple of good old boys from
    West Virginia sat next to me on the plane out here, and they
    were telling me about their NRA problems with elk hunting, but
    they also were telling me they were out there for a fishing
    visit to the Columbia River, their very first, and they were
    thrilled. And we kidded around about how much they spent on
    hotels and meals and all that kind of stuff. But that is part
    of what the benefit is of having a solid fishery that can
    benefit commercial sports and tribal fisheries.
        Mrs. Napolitano. OK. BPA has the highest ESA compliance
    cost of any of the four PMAs, right?
        Ms. Patton. Yes.
        Mrs. Napolitano. And we often hear fish and wildlife
    mitigation costs account for as much as 30 percent of BPA's
    wholesale rates. But what impact does all these costs have on
    the ratepayers?
        Ms. Patton. Well, actually, looking at that analysis, we
    have parsed out those numbers for 2010, which is not the same
    number as the 802. It is more like in the $700 million range.
    And once you look at that, it is about 21.5 percent of BPA's
    budget in that year.
        And when you look at how much that then translates into for
    individual end-users, an investor-owned utility end-user pays
    nothing because they don't buy from BPA. A full requirements
    customer from Inland or one of the other utilities that buys
    all their power from BPA, it is 13--well, closer to 14 percent.
    That is including the foregone revenue and the replacement
    power costs that we don't think should be included.
        Mrs. Napolitano. Is that the spill also?
        Ms. Patton. Yeah, that is paying for spill. If you took the
    coalition's point of view and said that those are not the real
    costs, then you would be down to more like 6 percent for those
    who buy all.
        And then there are a number of utilities that buy only part
    of their power from BPA, like Seattle City Light. And the
    relevant numbers there would be--if we include foregone revenue
    and the indirect costs that we were talking about, that is
    about 5-1/2 percent of their bills. And if you don't do that,
    as we would suggest, it would be in the neighborhood of 2 to 2-
    1/2 percent.
        And it is a little higher if the costs are higher, but that
    is because, as Mr. Rettenmund said, the power costs are only
    about half of any----
        Mrs. Napolitano. I have a limited time, so----
        Ms. Patton. Sorry.
        Mrs. Napolitano.--I want to be able to get to the next
    question.
        And is spill the only source of so-called foregone revenue
    for BPA? And to that, what other uses of Columbia Basin water
    prevent BPA from generating electricity? And how would these
    uses affect power rates?
        Ms. Patton. Well, the spill is not the only foregone
    revenue. We definitely have uses for irrigation, for
    navigation, and for flood control. And those are all important
    uses, and we definitely support them.
        This year, when BPA actually gave away power because we had
    so much water coming through the system to avoid--to balance
    the system----
        Mrs. Napolitano. How do they affect the power rates?
        Ms. Patton. Well, if they could have sold that power, they
    would have made a lot more money and they would have been able
    to reduce the rates. But they couldn't because we all care
    about flood control, especially the people who live in
    Portland.
        Mrs. Napolitano. The farmers, right.
        And the question is, in regard to the printing of the
    information, how often would that change based on some of the
    conditions of drought, the purchase power, the court-ordered
    spills, and the irrigation needs?
        Ms. Patton. It would certainly change annually. To keep up
    even better, it would probably change monthly. But I am sure it
    would be at least annually.
        Mrs. Napolitano. Thank you, Mr. Chair. I yield back.
        Mr. McClintock. I think we are going to go to a second
    round on questions, since we only have two Members here and I
    have a number of additional items to cover on this bill.
        Mr. Rettenmund, we are told--and we know this bill requires
    Federal agencies to provide very objective numbers, not the so-
    called, you know, benefits from the ESA such as tranquility,
    that sort of thing. That seems to me to be subject to
    interpretation.
        I mean, if you are required to provide ESA benefits on
    customer bills, how would you be able to list quantifiable,
    objective benefits, or would they be highly subjective and
    subject to interpretation?
        Mr. Rettenmund. Well, the benefits would be very
    complicated and certainly beyond our capability of doing that.
    But when you are talking about fish, they are a creature that
    migrates out to the ocean, they have lots of interactions with
    lots of elements, and to be able to then assign the benefits
    for what we get for our $750 million would be a real challenge.
    And, certainly, I don't know how anybody would objectively and
    straightforwardly do that.
        I mean, we can look at particular actions under the fish
    and wildlife program, such as the removable spillway weirs
    called the fish slides at the dams, and, you know, they cost
    tens of millions of dollars. And we can kind of get a ballpark
    number about what the benefits of those particular things would
    be in terms of getting them downstream. What happens out in the
    ocean and how many return as adults, there are lots of other
    variables out there, and it would be very difficult to do that,
    Mr. Chairman.
        Mr. McClintock. Actually, I think people would be appalled
    at the per-fish cost of many of these mandates, which, in many
    cases that I have seen, runs into the tens of hundreds of
    thousands of dollars per fish.
        Mr. Rettenmund. Yes, Mr. Chairman. We haven't gone that
    route. We have put this estimated individual cost to our
    members, but we haven't attempted to do that. But it is my
    understanding that for certain species it would be quite
    significant per fish.
        Mr. McClintock. I think the public would be absolutely
    appalled to see such numbers.
        Mr. Rettenmund. I talk to our members, and they are quite
    vocal about sometimes what they see on their bill. They would
    like not to pay that portion. We make it clear----
        Mr. McClintock. It is amazing, when you pull out a pocket
    calculator, the lunacy of some of the requirements and the
    costs that they impose, real costs on real people paying real
    electricity bills every month. And it seems to me and many
    others that they have a right to know how much of that is
    actually going to power generation and how much of it is going
    to the pet causes of the environmental left.
        The group American Rivers has said that the Klamath Dam
    removal is a model for the Snake River dam removal. The removal
    of the four Snake River dams would be under the guise of
    helping endangered salmon. What would be the impact on your
    electricity rates, and the salmon by the way, if the dams were
    destroyed?
        Mr. Rettenmund. Well, it would be a significant increase in
    the rates that Bonneville would charge us, a significant
    increase to our members. Those 4 projects, if memory serves me
    correctly, are about 1,100 average megawatts of firm energy,
    which is about 15 percent of Bonneville's total portfolio of
    firm energy. You would have to replace that lost energy with
    some other, much more higher-cost resource, much higher than
    the cost of the hydro.
        It is often argued that conservation can step in and do
    that. We are already assigning conservation the role of trying
    to reduce the cost of low growth. And there isn't an unlimited
    supply of conservation. The six-power plan that the council put
    out does not call for the removal of the Snake River dams and
    has conservation being the resource of first choice to try and
    tamp down low growth to help lower rates and make our system
    more cost-effective.
        Mr. McClintock. Final question. This will be a matter of
    discussion on the next panel, as well, but I would like to take
    the opportunity to ask you a question about the difference
    between the Bonneville Power Administration's borrowing
    authority compared to WAPA's authority.
        Actually, I guess, Mr. Corwin, you would be the best person
    to take that one on. Can you tell the Subcommittee what
    differences there are between the two of them?
        Mr. Corwin. Sure. Thank you, Mr. Chairman. And I had the
    opportunity to testify on the Bonneville authority in March of
    2009 when this Subcommittee was considering it.
        They really are apples and oranges. The Chairman put it
    pretty well. Bonneville had existing authority that it has had
    for decades under the Transmission System Act. They had
    structures in place for decades to use that financing for
    transmission infrastructure and reliability, energy efficiency,
    fish and wildlife, hydropower generation, such as the upgrades
    to the Grand Coulee--or refurbishment at Grand Coulee.
        The agency is legally required to act with adherence to
    business principles, by statute, and they do so. Most
    importantly of all, they have the strong, well-established
    process that they go through for planning and building of any
    infrastructure and looking at those costs with customers. In
    fact, we spent 2 days earlier this week, full days, with the
    agency going through their capital planning process.
        Mr. McClintock. Great. Thank you very much.
        If there is no objection, we will take out of order the
    Ranking Member of the Natural Resources Committee for 5 minutes
    of questions.
        Mr. Markey. Thank you, Mr. Chairman, very much.
        Ms. Patton, I seem to remember reading very recently that
    Google and Facebook are building server farms up in the
    Northwest as fast as they can. Are they doing that because
    electricity rates are high in the Northwest and they like to
    pay high electricity rates, Ms. Patton?
        Ms. Patton. I don't think so. Those server farms use a
    great deal of energy.
        Mr. Markey. Why do you think they picked up there rather
    than, like, the Northeast for something that consumes so much
    electricity?
        Ms. Patton. I think because the power rates are very
    competitive.
        Mr. Markey. Very competitive or very low?
        Ms. Patton. Very low.
        Mr. Markey. Compared to the Northeast, compared to the
    South, compared to the Midwest. Do you think that is the case,
    Ms. Patton?
        Ms. Patton. That is correct. The hydropower base is very--
    --
        Mr. Markey. Have you ever heard of Google complaining about
    the Endangered Species Act as one of the reasons why they might
    not move to the Northwest with all of these server farms?
        Ms. Patton. I have not.
        Mr. Markey. What?
        Ms. Patton. I have not heard Google complain.
        Mr. Markey. You have not heard them.
        Ms. Patton. In fact, I have asked them about it, and they
    don't complain.
        Mr. Markey. Actually, I remember reading that Facebook and
    Google are actually touting all of the green power that they
    have, huh, coming out of----
        Ms. Patton. They are. They are. We actually brought to
    their attention that they should think about the fact that
    green hydropower is great hydropower. It has many, many great
    attributes, but it also has some problems with salmon.
        Mr. Markey. Do you believe, Ms. Patton, that it would be
    good, in terms of attracting investment from large high-tech
    companies that are streaming into your region, that they all
    know that, you know, they are all going to be part of an effort
    to undercut the Endangered Species Act? Do you think that would
    help to draw Google and eBay and Amazon and Hulu up there?
        Ms. Patton. I think they would be very embarrassed.
        Mr. Markey. Do you think they would be very embarrassed?
    Yeah. That is interesting.
        Now, as you know, the Federal Government, pursuant to a
    program that has been authorized by the Congress, is going to
    be providing an $8.2 billion loan guarantee program for the
    Southern Company to build nuclear power plants down in
    Georgia--$8.2 billion worth of Federal funding.
        Do you think it might be helpful for them to know what
    happened with WPPSS, in terms of the exposure to the taxpayers?
        Ms. Patton. I think that would be. I think that the WPPSS--
    we call it Energy Northwest now--debt has----
        Mr. Markey. They changed the name to protect the guilty.
    Yeah, they are in, like, a big witness-protection program up
    there now, you know. But----
        Ms. Patton. But it is paid for by the ratepayers.
        Mr. Markey. Yeah, we have been able to track them down up
    there. They changed the name.
        But do you think it might be helpful, in other words, for
    the American taxpayer if the people up in the Northwest, those
    who are still paying that WPPSS bill, had it on their bill?
        Ms. Patton. It would be great.
        Mr. Markey. Don't you think it would help all of us here--
    --
        Ms. Patton. I think so.
        Mr. Markey.--if that was on the bill and then they could
    see the $500 million, even last year, that they had to pay on
    it, so they can see what happens when something goes wrong with
    nuclear power in terms of their bills? Especially if it is
    taxpayer-guaranteed.
        Ms. Patton. Yeah. Almost $550 million. And the total debt
    is now $5.9 billion for those three plants.
        Mr. Markey. Yeah. So would you have a problem with us
    putting that on the bill?
        Ms. Patton. I would have no problems, but I would want it
    to be----
        Mr. Markey. Mr. Rettenmund, would you have a problem if we
    put that on the bill, just so that the----
        Ms. Patton.--everything on the bill.
        Mr. Markey.--yeah, the public would know about that? Would
    you have a problem with that?
        Mr. Rettenmund. I think the public is already generally
    aware----
        Mr. Markey. No, no. Well, they are generally aware of the
    Endangered Species Act, too, but you are going to give them a
    specific number. Don't you think----
        Mr. Rettenmund.--and the costs that were incurred during--
    --
        Mr. Markey. But $500 million--how many people do you really
    think know they are paying still $500 million on that mistake?
        Mr. Rettenmund. I think most of our members are aware of
    the----
        Mr. Markey. I am talking about the consumer, the consumer.
        Mr. Rettenmund. Our members are--we refer to our consumers
    as members in the co-op.
        Mr. Markey. Oh. You think they all know?
        Mr. Rettenmund. I don't think they all know, no, sir.
        Mr. Markey. Would you object to us putting it on the bill?
        Mr. Rettenmund. I think the way the bill is crafted right
    now works.
        Mr. Markey. No. But I am asking, would you mind if we added
    that as an extra line?
        Mr. Rettenmund. I don't need that information, sir.
        Mr. Markey. You don't think that the consumer needs that
    information?
        Mr. Rettenmund. I didn't say that.
        Mr. Markey. Why not? Why not? Why don't they need the
    information?
        Mr. Rettenmund. I think we can do an adequate job now of
    putting that type of information, conveying it----
        Mr. Markey. How would you convey that information, Mr.
    Rettenmund?
        Mr. Rettenmund. Well, we know that there are three broad
    cost categories for Bonneville. There is the operating----
        Mr. Markey. No, but how do you communicate the $550 million
    last year to your consumers? How do you do that?
        Mr. Rettenmund. We would be able to--monthly, we
    communicate with our members about what the overall costs are.
    And we can do the $750 million for fish and wildlife. We can do
    the $700 million for the nuclear plants, including the
    operation and maintenance. And there is the other big bucket of
    dollars of $700 million for the operation/maintenance debt.
        Mr. Markey. So if I made the Markey amendment to add in,
    you know, the WPPSS money to the bill so that everyone could
    know, would you object to that?
        Mr. Rettenmund. I don't have an opinion on that today, sir.
        Mr. Markey. You don't.
        OK, how about you, Mr. Corwin? Would you object to it if we
    were able to put that in?
        Mr. Corwin. I don't think it is necessary because it is one
    number.
        By the way, I think that estimate is high for just the
    WPPSS part of the debt.
        It is one number you can come up with. Fish and wildlife is
    much more complex, much more volatile year to year. It goes
    hundreds of millions of dollars up and down between years. So
    that is why it is valuable to have the agency produce it.
        Mr. McClintock. All right, thank you. The gentleman's time
    has expired.
        Mrs. Napolitano?
        Mrs. Napolitano. Thank you, Mr. Chair.
        And I would like to introduce into the record a copy of the
    U.S. residential average price per kilowatt hour. I think Mr.
    Markey had an issue with this, over his subsidizing the rest of
    the Western U.S., and I will yield to him in a minute if he
    wants to comment on that.
        Mr. McClintock. A question for the Ranking Member. Is that
    the chart that shows that the areas with large hydropower
    production have the lowest prices?
        Mrs. Napolitano. That is correct.
        Mr. McClintock. Thank you. I would be happy to enter that
    into the record, without objection.
        Mrs. Napolitano. Thank you.
        Mrs. Napolitano. And then, to Mr. Corwin, in your written
    testimony, you state BPA's fish costs are particularly driven
    by Federal laws that do not directly relate to the business of
    producing power, and that--that is it. Therefore, more
    important that these costs be displayed on the utility bills.
        Would you agree that, since BPA, the WPPSS-related costs
    are not directly related to the business of producing power,
    they should also be displayed on the customers' monthly power
    bills?
        Mr. Corwin. Right now, that bucket of nuclear debt and
    costs is kind of melded together. It does relate to producing
    10 percent of the power that Bonneville purchases.
        Mrs. Napolitano. I know. But would you--they should also be
    displayed, wouldn't you agree?
        Mr. Corwin. I don't know. I was entertained by the
    foregoing discussion, but I hadn't come prepared to take a
    position on what else should be on the bill. I could think of
    many other things that could be, in theory.
        Mrs. Napolitano. Precisely. And if you want to really be--
    --
        Mr. Corwin. But this one is unique, I think.
        Mrs. Napolitano.--transparent to the general paying
    customer and the public--that is, the end-user, which would be
    your residential--don't you think all of this information would
    be valuable to them to be able to then assess where their
    taxpayer money is going to in helping fund some of these
    entities?
        Mr. Corwin. I do think that transparency of all costs is
    valuable to the consumers. And we work with the agency to make
    sure that we can identify those costs.
        This one is just unique in that it has many, many different
    parts that you have to try to combine together to get the one
    figure that we are talking about, as opposed to identifying,
    you know, just--another cost we haven't talked about is the
    cost of the treaty with Canada, for example----
        Mrs. Napolitano. Right.
        Mr. Corwin.--and other----
        Mrs. Napolitano. Precisely. There are many moving parts.
        Mr. Corwin. But those are much easier to--like Mr.
    Rettenmund's testimony earlier, when he is trying to figure out
    how to display a cost, he can grab those, put them on if he
    wants. That is the local prerogative of the utility.
        Mrs. Napolitano. OK.
        But, to any of you, do you think it is worth almost half a
    million dollars--$500 million a year to add this? I mean, this
    is a--well, if you want to say it is a--it is an additional
    cost to the taxpayer and the ratepayer.
        Ms. Patton. I think it would be great. I do think it should
    be all of the costs and benefits of all of those major pieces
    of Bonneville's budget.
        Mrs. Napolitano. But would it be worth----
        Ms. Patton. Absolutely worth having.
        Mrs. Napolitano.--$500 million annually to do display for
    this?
        Ms. Patton. Yes.
        Mrs. Napolitano. OK.
        Mr. Markey, would you care to take over?
        Mr. Markey. Yes. I thank you. I very much appreciate it.
        And I am a little shocked at the fact that a couple of our
    witnesses here seem to think that the consumers only care about
    endangered species compliance costs and that they don't care or
    don't have to know on a monthly basis about the WPPSS costs. I
    just am kind of shocked by that because the WPPSS cost is just
    so massive. And I just think that you have to keep it in front
    of them so they can see what happens when these nuclear
    projects go wrong. And, again, I am going to continue to
    advocate for that, because, you know, I do think that there is
    a real problem there.
        And I think one other thing--maybe you can help me with
    this, Ms. Patton. Don't you think that we should also be
    telling consumers how much lower their bills are because they
    are only being charged cost-based rates rather than market-
    based rates? Because I'm a big market guy. You know, I am a big
    free-market guy. And the whole idea of, you know, subsidies out
    there and the government getting in and subsidizing--so, don't
    you think they should know that, that they are getting this
    incredible discount because of--you know, they don't get
    charged market rate?
        Ms. Patton. Well, I think that----
        Mr. Markey. And I was up in New England. All of us in New--
    it is all market-based up in New England. We believe in
    capitalism and the free market. But up in the Northwest, they
    don't; they don't believe in that whole concept of market-based
    rates.
        So do you think that the consumers should know that, that
    they are getting this additional benefit?
        Ms. Patton. Well, I guess I have a couple things. One,
    there are a lot of good reasons for the market-based rates in
    the Northwest. Two, right now the market is so low for
    wholesale power that Bonneville might even be higher than some
    of the market.
        And, three, the good thing is that our utilities, the
    publicly owned utilities that get that power from Bonneville
    are very happy to explain on a regular basis how their rates
    are cheaper than the investor-owned utilities that neighbor
    them. So we do get that information out to them.
        Mr. Markey. Yeah, but having them put it on the bill each
    month is what I am saying. You know, apparently, we are just
    going to be expanding these bills with all the extra info they
    get each month, because they can't remember it, so they see it
    each time. Don't you think we should be putting in this other
    extra info so they can just understand a little bit better how
    the flow of cash works?
        Ms. Patton. It would be very interesting to see the market
    rate for power next to the portion of the customer's bill
    that----
        Mr. Markey. Yeah. I am a big Darwinian paranoia-inducing
    capitalist, OK? So I would just like to get that info out
    there. Thank you.
        Mr. McClintock. The Chair is delighted that at this hearing
    of the Water and Power Committee the Ranking Member has had an
    epiphany on free markets.
        And, with that, we will conclude this panel and thank the
    witnesses for their testimonies. And we will excuse them at
    this time and call up our second panel on the subject of H.R.
    2915.
        OK. If we are all set, the Chair would like to welcome our
    second panel of witnesses.
        You heard what I said earlier about time and timekeeping
    and records, so we will just go right into the testimony.
        We will begin with Ms. Lauren Azar, Senior Advisor to
    Secretary Steven Chu, Department of Energy, from Washington,
    D.C.

    STATEMENT OF LAUREN AZAR, SENIOR ADVISOR TO SECRETARY OF ENERGY
           STEVEN CHU, DEPARTMENT OF ENERGY, WASHINGTON, D.C.

        Ms. Azar. Good afternoon, Mr. Chairman and Ranking Member
    Napolitano.
        Three months ago, I arrived here after Secretary Chu hired
    me to get things built--things like transmission and storage.
    Four months ago, I was a utility commissioner in Wisconsin.
    Prior to that, I was a partner in the same law firm as Reince
    Priebus, and, as a lawyer, I helped to create the American
    Transmission Company. I also helped to site a 220-mile extra-
    high-voltage line through the wetlands and scenic rivers of
    Wisconsin and Minnesota. In short, I come from the trenches.
        Today I sit before you in strong opposition of H.R. 2915. I
    applaud the Chairman's goal to minimize Federal risk, but 2915
    doesn't further that goal. While I have only been at the DOE
    for 3 months, I have discovered ways this Subcommittee could
    minimize the risk associated with WAPA, and I would be happy to
    work with you to get this done, but that is not our task today.
    Our task today is to address whether Congress should remove
    WAPA's borrowing authority.
        Congress, when led by Republicans and Democrats, has
    recognized this Nation's desperate need for new electric
    transmission. Federal mechanisms to bolster transmission were
    passed in 2005 and 2009. And we need to look no further back
    than 2 weeks ago, when apparently maintenance on a substation
    in Arizona prompted a cascading blackout for about 5 million
    customers. That event should never, never have happened. When
    the investigations are completed, I suspect we will find that
    additional transmission would have stopped the blackout from
    spreading. Indeed, the transmission engineer from WAPA's
    Phoenix office suspects some lines that WAPA may fund through
    its borrowing authority could have localized that blackout.
        I have attached a map to my testimony--and it is on the
    screen right now--showing project applications that WAPA is
    most actively pursuing as of May 2011. I would welcome
    questions about the West's need for more transmission, but,
    given the legislation in 2005 and 2009, I suspect you already
    know it.
        So if the West needs more transmission, why would someone
    try to eliminate the government financing for that
    transmission? Policy alone appears to be driving this bill:
    that the Federal Government should have no role in funding our
    Nation's infrastructure. I disagree for three reasons.
        First, public-private partnerships built our Nation's
    electric infrastructure. Our Nation is relatively unique in the
    world as to how we built electric infrastructure. From the
    birth of the electric industry, public-private partnerships
    have been at the heart of its infrastructure build-out. This
    borrowing authority simply continues that legacy. WAPA has
    borrowed funds for three projects. For two of the three, it has
    partnered with a private entity. In exchange WAPA, has the
    opportunity to be part-owner. For the third, WAPA is developing
    it alone to assist its preference customers--your
    constituents--and to convey power from a renewable energy zone
    to the Palo Verde hub.
        Second, borrowing authority increases competition in
    transmission. Historically, public utilities have been able to
    rely on bonding authority through their State statutes to build
    transmission. But sometimes public utilities would prefer not
    to build transmission because it brings competition into
    utility service territories. While public utilities have
    bonding authority, private entities who could compete with them
    do not. WAPA's borrowing authority helps to levelize this
    playing field, thereby bolstering competition in the
    development of transmission.
        Third, WAPA brings more than just a purse. Thirteen of the
    15 States in WAPA's territory have implemented renewable
    portfolio standards or goals, as shown on the map attached to
    my testimony and now on the screen. More renewable generators
    will be built because of these State decisions. Coal, natural
    gas, and nuclear generators can be built nearly anywhere
    because the fuel can be transported to the generator. Not so
    with renewables. For renewables, the fuel cannot be shipped, so
    the generators must be sited where the fuel is located and the
    transmission built to the site, often through multi-State
    transmission lines. Multi-State transmission lines are
    particularly difficult to build. If built at all, they take 5
    to 15 years because of both the State siting and Federal
    permitting processes.
        In administering the borrowing authority, WAPA brings more
    than a purse. It also brings a partner in development who can
    assist with the NEPA process and a partner who can condemn
    property if there are no other alternatives. While WAPA brings
    more than a purse, the purse itself is also significant because
    the interest rates under the borrowing authority drive down the
    cost of capital.
        In conclusion, I am ready, I am willing, and I am able to
    help both sides of the aisle reduce risk associated with WAPA
    and the other Power Marketing Administrations--actions that
    would address the patchwork of legislation created over the
    last 100 years. But I ask you not to adopt H.R. 2915 unless you
    would like to hinder the development of transmission in the
    West.
        I look forward to your questions.
        [The prepared statement of Ms. Azar follows:]

                   Statement of Lauren Azar, Senior Advisor,
     Office of the Secretary of Energy, U.S. Department of Energy, on H.R.
                                      2915

        Chairman McClintock and Ranking Member Napolitano, I appreciate the
    opportunity to testify on H.R. 2915, a bill to repeal Western Area
    Power Administration's borrowing authority. The Department of Energy
    (DOE) will be submitting additional comments on H.R. 1719 at a later
    date.
        I currently serve as a Senior Advisor to U.S. Secretary of Energy,
    Steven Chu, whom I assist in developing energy infrastructure and
    storage opportunities. Prior to joining DOE, I was a Commissioner of
    the Public Service Commission of Wisconsin, a state regulatory body
    responsible for electricity, natural gas, telecommunications and water
    industries. I also served as President of the Organization of Midwest
    Independent Transmission System Operator States, a non-profit
    organization of states covered by the Midwest ISO--which is the
    transmission operator and planner for the upper Midwest region. In both
    positions I have had the responsibility to ensure that needed
    transmission projects are planned and built in a responsible, cost-
    effective way.
        Today I am testifying in strong opposition to H.R. 2915, a bill to
    repeal the Western Area Power Administration (Western) borrowing
    authority statute. Western's borrowing authority statute empowers it to
    develop transmission facilities that deliver power generated by
    renewable energy sources.
        New transmission is urgently needed in the western United States.
    And yet, getting lines in the air has been far too slow over the past
    few decades. Western's $3.25 billion of permanent, indefinite,
    borrowing authority is, therefore, a critical tool for addressing two
    of the major energy challenges we now face in the West--the need for
    additional transmission infrastructure and integration of renewables
    onto the grid. To date, three projects have been approved: Montana
    Alberta Tie, Ltd., a 214-mile, 230-kilovolt single-circuit alternating
    current transmission line between Great Falls, Montana, and Lethbridge,
    Alberta; the development phase of TransWest Express, a 725-mile, 600-
    kilovolt direct current transmission line from south central Wyoming to
    the El Dorado Valley south of Las Vegas, Nevada, a transmission gateway
    to California; and Electrical District 5 to Palo Verde Hub, a 45-mile,
    230-kilovolt transmission line in Arizona. The construction of these
    three transmission lines alone, if completed, would use more than half,
    or approximately, $1.8 billion, of Western's borrowing authority.
    Western is also considering a number of other projects that are at
    various stages of the review process.
        The heart of our Nation's renewable energy potential lies within
    Western's service territory. It includes nine of the ten windiest
    states of the country, as well as the best geothermal, hydropower, and
    solar potential in the Nation. That is why there are 57 active requests
    for transmission interconnections for wind power pending in Western's
    interconnection request queue--representing a total of 9,223 megawatts
    of wind power to add to the grid. On average, each of these requests
    represents the equivalent of a 162-megawatt wind farm. These are
    private sector developers that want to put people to work and steel in
    the ground, but can't without access to transmission to bring their
    electricity to market.
        In addition to being a promising area for renewable energy
    development, Western's service territory also suffers from significant
    transmission congestion. Several areas in Western's service territory
    were identified in DOE's December 2009 National Electric Transmission
    Congestion Study either as critically congested, as congestion areas of
    concern, or as conditionally congested areas where future congestion
    would result if new generation is developed without simultaneous
    development of transmission.
        If the legislation before this Committee were enacted into law,
    very promising renewable energy projects in California, Arizona, New
    Mexico, Wyoming, Colorado, and Nevada would likely be delayed, or worse
    not materialize at all. Just two weeks ago, Arizonans and Californians
    experienced the impacts of our fragile transmission infrastructure when
    widespread blackouts impacted millions of people in the Southwest. The
    Administration firmly believes that Western's borrowing authority is
    essential to enhancing domestic energy production and improving
    electricity reliability throughout the West. For these reasons, the
    Administration strongly opposes H.R. 2915.
        Finally, I would like to stress that no funds will be provided
    through Western's borrowing authority except after substantial due
    diligence on the part of both Western and the Department of Energy. The
    technical merits and feasibility of each project, as well as the
    financial stability and capability of potential project partners are
    thoroughly reviewed. Also, there must be a reasonable expectation that
    a project considered for funding will generate enough transmission
    service revenue to repay the principal investment; all operating costs,
    including overhead; and accrued interest. Facilities funded through
    Western's borrowing authority will be repaid through the rates paid by
    subscribers of that new facility. Moreover, the statute calls for each
    project funded under this authority to be repaid separately from
    Western's other facilities, as well as from other projects funded using
    borrowing authority. This safeguard assures that costs of each new
    project are properly allocated to those who benefit from it.
        DOE appreciates and respects the oversight role this Committee and
    others play in ensuring we are implementing laws in the manner Congress
    intended. Thank you for the opportunity to share these views and I look
    forward to your questions.
                                     ______

        Mr. McClintock. Thank you for your testimony.
        I now recognize Dr. Robert Michaels, Professor of Economics
    at California State University-Fullerton, to testify.

    STATEMENT OF ROBERT J. MICHAELS, PH.D., PROFESSOR OF ECONOMICS,
      CALIFORNIA STATE UNIVERSITY-FULLERTON, FULLERTON, CALIFORNIA

        Dr. Michaels. Thank you, Mr. Chairman. I am honored to be
    here.
        We have three basic points that we want to make here. The
    question about transmission of renewables, priority for
    renewables, is really a question that needs to be rethought,
    particularly in light of what we now know about renewables,
    what we now know about the operations of the electrical system,
    and what we understand about the economic effects of
    renewables.
        There have always been some renewables that have, in fact,
    made the market test: biomass, such similar things. Right now,
    the renewables we are talking about are renewables that
    overwhelmingly do not pass the market test. They are wind,
    solar--which, generally speaking, live on subsidies. Wind and
    solar are high-cost energy. Wind and solar are intermediate
    energy. And the contribution that wind and solar make to
    reliability is often negative.
        The problem that we are facing here is a much broader
    question of subsidies, much broader than the immediate subject
    matter here, and which needs to be thought about.
    Interestingly, there is a Federal agency that is exactly doing
    that. The Energy Information Administration has come out and
    produced the first set of estimates of subsidies per kilowatt
    hour for different types of generation fuels. The figures that
    they come up with--I have them on my exhibits--are eye-opening,
    to say the least. Allegations that fossil fuel sources carry
    some sorts of preferences, they simply fall apart when you do
    an objective accounting analysis of the data. And, in fact,
    wind, solar--far, far more heavily subsidized, and it is not at
    all clear that they make a contribution.
        Well, you might say, what if we need this to develop them?
    The problem is the subsidies that they are giving out are not
    like research subsidies. The subsidies are basically production
    tax credits. They are not things to incorporate, say, like
    happens with coal, all the hundreds of millions being done on
    carbon capture and sequestration.
        We really need to rethink the subsidies. We need to rethink
    the role of the intermittent renewables. And we need to think
    out once more the question on which so much of this policy is
    justified, an argument that it is going to bring us so-called
    ``green jobs.''
        Green jobs are something nobody wants to think about too
    hard because it is a matter of hope more than anything else.
    But if you think about it with a little bit of sense, there is
    a problem. What happens when some of these subsidies are used
    to create green jobs? Taxes are paid by people or higher
    electric bills are paid by people. The money they have to pay
    out is money that they don't get to spend on stuff that is
    produced by other people. The problem that we have in here is,
    all we think about is creation. And the real difficulty is
    nobody wants to be thinking about the job destruction that is
    just as likely to happen.
        We have some interesting figures because one of the big
    problems with the analysis of so-called green jobs is this:
    Nobody has any idea what they are. And you have remarkable sets
    of figures coming out of prestigious research institutions like
    the Brookings Institution. They recently put out one which said
    that there were 2.7 million green jobs in the economy, and
    somehow this was going to be a good reason for them to have
    additional subsidies and additional renewables. About three-
    quarters of a million of those jobs are for bus drivers and
    trash haulers. Green jobs are whatever you want to define them
    as. Bus drivers supposedly reduce congestion and pollution.
        There is a great deal of work that needs to be done here.
    It really needs to be done before we think about any policies
    to expand renewables usage. And, more than that, we need to be
    rethinking all about markets for electricity.
        The Federal Energy Regulatory Commission used to actually
    have a statement of its vision on the front page of its Web
    site. It is gone. But only 7 years ago, a regulatory
    commission, if you can imagine this, said, ``We want reliable,
    affordable energy through sustained competitive markets.'' If
    there is anything that we need on the Department of Energy's
    Web page, it is the same slogan.
        Thank you.
        [The prepared statement of Dr. Michaels follows:]

         Statement of Robert J. Michaels, PhD, Professor of Economics,
                          California State University

    I. Introduction
        My name is Robert J. Michaels. I am Professor of Economics at
    California State University, Fullerton and an independent consultant. I
    hold an A.B. Degree from the University of Chicago and a PhD from the
    University of California, Los Angeles, both in economics. My past
    employment as an economist includes the Institute for Defense Analysis
    and affiliations with consulting firms. I am also Senior Fellow at the
    Institute for Energy Research and Adjunct Scholar at the Cato
    Institute. I attach a biography to this testimony. The findings and
    opinions I am presenting today are entirely mine, and they are not the
    official views of any of my professional or consulting affiliations.
         For over 20 years I have performed research on regulation and the
    emergence of markets in the electricity and gas industries. My findings
    have been presented in peer-reviewed journals, law reviews, and
    industry publications and meetings. I am Co-Editor of the peer-reviewed
    journal Contemporary Economic Policy, an official publication of
    Western Economic Association International with a circulation of 2,800.
    I am also author of Transactions and Strategies: Economics for
    Management (Cengage Learning, 2010), an applied text for MBA students
    and advanced undergraduates. My consulting clients have included state
    utility regulators, electric utilities, independent power producers and
    marketers, natural gas producers, large energy consumers, environmental
    organizations, public interest groups and governments. My services have
    at times entailed expert testimony, which I have presented at the
    Federal Energy Regulatory Commission, public utility commissions in
    California, Illinois, Mississippi and Vermont, the California Energy
    Commission, and in three previous appearances before other House
    committees.
    II. Background and Purpose
        The Committee today is exploring the economics that underlies H.R.
    2915, and in particular the consequences of repealing the Western Area
    Power Administration's (WAPA) $3.25 billion borrowing authority under
    The American Reinvestment and Recovery Act of 2009. That Act authorizes
    borrowing to construct new or upgraded transmission lines
    interconnected with WAPA, and specifically mentions lines ``delivering
    or facilitating the delivery of power generated by renewable energy
    resources.'' \1\ Numerous individuals and agencies have alleged that
    the increased investment in ``renewable'' sources of power is a
    worthwhile national objective on two grounds:\2\ [1] it will provide
    environmental and climate benefits that outweigh their higher costs,
    and [2] these investments will favorably impact employment,
    particularly in a time of recession. If these statements were even
    approximately true, they could justify support and subsidization of
    renewable power. Unfortunately, they are not.
    ---------------------------------------------------------------------------
        \1\ 42 U.S.C. Sec. 16421a.

        \2\ There is no generally accepted definition of ``renewable''
    sources, but popular usage includes biomass, geothermal, wind and solar
    facilities. The U.S. Department of Energy has sometimes included
    hydroelectric generation and some states include still others, e.g.
    Pennsylvania's inclusion of waste coal as a renewable source.

    ---------------------------------------------------------------------------
        My testimony addresses the realities of renewable electricity. It
    first addresses the very minor contribution of renewables to the
    nation's power supply, and how that contribution reflects subsidies and
    regulations rather than market factors. It continues with a summary of
    the actual subsidies to various power sources, showing that some
    renewables receive highly disproportionate treatment that is
    unjustifiable on economic grounds. The third part questions the logic
    behind any policy that purports to ``create jobs.'' Even if government
    can create them, energy policy is one of the poorest possible vehicles
    with which to do so. Renewables are seldom sources of durable jobs, and
    their actual importance for the nation's employment is negligible. On
    closer examination, most of the millions of frequently touted ``green''
    and ``clean'' jobs have little to do with either existing or proposed
    energy policies. I conclude that federal policies toward renewables are
    due for a complete rethinking, and that the WAPA authorization may be a
    useful starting point for that process.
    III. Renewables and reality
    A. Renewables in the U.S. power supply
        Exhibit 1 shows the amounts of the nation's power coming from
    various sources. In 2010, 44.9 percent came from coal, 23.8 percent
    from natural gas, 19.6 percent from nuclear, and 4.1 percent from
    renewables (excluding hydropower).\3\ Note the recent drop in
    production from coal, the longer-term increase in production from gas
    and the remarkable constancy of nuclear generation. Renewable power is
    a small fraction of today's total, but its contribution was even
    smaller in the past--2.1 percent in 1990 and 2.2 percent in 2005, when
    its current growth began. Exhibits 2 and 3 show that the mix of
    renewable sources has changed substantially over the past 20 years. In
    1991, over 95 percent of renewable electricity was from geothermal
    sources, biomass and waste burning. These technologies were viable
    because their unsubsidized power was (and still is) competitive with
    fossil-fuel generation in a few areas. They were also dispatchable,
    operable when their power was valuable and left idle when it was not.
    All three of them have since stagnated. In 1992 they produced 70.5
    million kilowatt-hours (gigawatt hours or gwh) and in 2009 slightly
    more, 72.2 gwh. Solar power remains a minor presence despite its
    substantial subsidies. Its 1993 output of 0.45 gwh grew to only 1.29
    gwh in 2010, under 1 percent of renewable power and 0.03 percentof all
    U.S. power. Exhibit 4 shows that the growth of renewable electricity
    since 2000 has been almost entirely in wind power, which by 2010
    accounted for over half of all renewable generation capacity.
    Explaining that growth is our next task.
    ---------------------------------------------------------------------------
        \3\ All figures are from various reports from the U.S. Department
    of Energy's Energy Information
        Administration. Data and references are available upon request from
    the author.

    ---------------------------------------------------------------------------
    B. Costs of power and costs of reliability
        Wind power is both intermittent and expensive, and official
    expectations are that it will remain so. Exhibit 5 shows the U.S.
    Energy Information Administration's (EIA) projections of the levelized
    cost per megawatt-hour (mwh) of various technologies (including fuel
    where applicable) for plants expected on-line in 2016 (in 2009
    dollars). The three most costly sources are solar thermal ($312/mwh),
    offshore wind ($243) and solar photovoltaic ($211). The cost of onshore
    wind is $97/mwh. Compared with a conventional (not an advanced)
    combined cycle gas-fired generator ($66/mwh) the cheapest intermittent
    source is almost 50 percent more expensive. Intermittent renewables are
    even likely to be poor investments under a carbon tax or cap-and-trade
    system. The costs of carbon capture and sequestration (CCS) technology
    are still highly uncertain, but EIA estimates that adding it to a
    combined cycle gas unit still leaves it 8 percent less expensive per
    mwh than the cheapest wind turbine. At carbon prices typically
    projected for cap-and-trade regimes the wind plant still loses.
        Technology and economics both tell us that intermittent wind
    capacity carries costs that will likely exceed those the same
    dispatchable fossil-fueled capacity. Small amounts of wind can easily
    be integrated into a regional grid because a sudden calm is
    operationally indistinguishable from a minor outage. Larger amounts of
    wind capacity, however, require costlier backup arrangements, including
    operating reserve generators. In most regions wind blows most strongly
    when its power production is least valuable. In 2006, California had
    2,323 MW of wind capacity and was operating under record loads in early
    summer. Wind's average on-peak contribution (over the diverse northern
    and southern climates) was 256 MW.\4\ For system planning purposes,
    ERCOT, the Texas grid operator, currently sets a wind turbine's
    ``effective capacity'' at 8.7 percent of its nominal amount for
    planning purposes.\5\
    ---------------------------------------------------------------------------
        \4\ Robert J. Michaels, ``Run of the Mill, or Maybe Not,'' New
    Power Executive, July 28, 2006, 2. The
        calculation used unpublished operating data from the California
    Independent System Operator. Similarly low wind power production can be
    seen in real time on most warm days at the ISO's web site. http://
    www.caiso.com/Pages/TodaysOutlook.aspx

        \5\ Lawrence Risman and Joan Ward, ``Winds of Change Freshen
    Resource Adequacy,'' Public Utilities
        Fortnightly, May 2007, 14-18 at 18; and ERCOT, Transmission Issues
    Associated with Renewable
        Energy in Texas, Informal White Paper for the Texas Legislature,
    Mar. 28, 2005 at 7.
        http://www.ercot.com/news/presentations/2006/
    RenewablesTransmissi.pdf

    ---------------------------------------------------------------------------
        Because wind requires fossil-fuel generation as backup we cannot
    simply conclude that a mwh of wind power eliminates the pollutants in a
    mwh of conventional power. Research by gas marketer Bentek Energy found
    that in some areas additional wind power has strikingly perverse
    consequences. Bentek found that large increases in Texas and Colorado
    wind capacity indeed led to less coal-fired generation. Emissions of
    EPA ``criteria pollutants'' from these plants, however, actually
    increased, and CO2 emissions were unchanged.\6\ Operating
    data showed that wind's variability required numerous quick adjustments
    by coal-fired units, which were responsible for the added pollution.
    Bentek's controversial conclusion was that the total load in the area
    could have been served with lower total emissions had the wind units
    never existed.
    ---------------------------------------------------------------------------
        \6\ Bentek Energy, How Less Became More: Wind, Power and Unintended
    Consequences in the Colorado
        Energy Market (April 10, 2010). http://docs.wind-watch.org/BENTEK-
    How-Less-Became-More.pdf Criteria pollutants include ozone and oxides
    of nitrogen and sulfur. Bentek's findings have yet to be challenged.

    ---------------------------------------------------------------------------
    C. Who gets what subsidies?
        Subsidies and regulations can explain wind power's rise quite
    graphically. The American Reinvestment and Recovery Act (ARRA) extended
    wind's sporadic production tax credit (PTC, now also applicable to some
    other renewables) through the end of 2012. Before the PTC's first
    enactment in 2000, only 67 megawatts (MW) of wind capacity were built.
    That figure grew to 1,697 MW during its initial year of 2001. For 2002
    (credit not in effect) and 2003 (in effect) the figures are 446 and
    1,687 MW; and for 2004 (off) and 2005 (on) they are 389 and 2,431
    MW.\7\ Many other factors influence investment, but total investment in
    years with the tax credit was 544 percent greater than in years without
    it. (We cannot go beyond these years because subsequent extensions have
    included retroactivity provisions that investors may have come to
    expect.) There is, however, no evidence of changes in market conditions
    that would diminish the importance of subsidies, as was recently noted
    by the American Wind Energy Association (AWEA). In mid-2010 it claimed
    that ARRA's subsidy provisions (which included an investment tax credit
    option) had been responsible for an increase in small turbine
    installations:
    ---------------------------------------------------------------------------
        \7\ U.S. Department of Energy, Energy Efficiency and Renewable
    Energy (DOE/EERE), GPRA07 Wind
        Technologies Program Documentation (2007), App. E at E-6.
        http://www1.eere.energy.gov/ba/pdfs/39684_app_E.pdf

    ---------------------------------------------------------------------------
            ``The ITC was perhaps the most important factor in last year's
            growth. . .[it] helped consumers purchase small wind systems
            during a recession when other financing mechanisms were hardest
            to obtain. The enactment of the ITC [was] the industry's top
            priority. . .'' \8\
    ---------------------------------------------------------------------------
        \8\ AWEA Small Wind Turbine Global Market Study, Year Ending 2009,
    4.
        http://www.awea.org/smallwind/pdf/
    2010_AWEA_Small_Wind_Turbine_Global_Market_Study.pdf

    ---------------------------------------------------------------------------
        Alongside such subsidies, renewable portfolio standards (RPS) and
    related regulations in approximately half of the states require
    utilities to obtain certain quantities of power from renewable sources.
    Although quantification is difficult it is likely that some wind
    investments have been made solely for RPS compliance, rather than
    because they were cost-effective choices.
        Energy subsidies are a sensitive issue in part because they have no
    generally agreed-upon definition. For fiscal 2010 the U.S. Energy
    Information Administration (EIA) produced what are the currently
    authoritative estimates. Its authors took particular care in
    calculating the effects of subsidies to various fuels on the actual
    amounts of power they produced. Thus a subsidy to the oil industry will
    only be relevant to the extent that it affects the (negligible) amount
    of oil used to generate power. Exhibit 6 presents the basics. Per mwh
    of power that it actually produced, wind received a subsidy of $56.29
    and solar received $775.64. Wind gets 88 times more funds per mwh than
    coal, and the same multiple more than gas and oil.\9\
    ---------------------------------------------------------------------------
        \9\ Institute for Energy Research http://
    www.instituteforenergyresearch.org/2011/08/03/eia-releases-new-subsidy-
    report-subsidies-for-renewables-increase-186-percent/

    ---------------------------------------------------------------------------
        Taken by themselves, these figures alone cannot determine the
    desirability of subsidies. For example, the newness of renewable
    technologies might provide an economic rationale for subsidies to fund
    basic research that if successful could render them truly competitive.
    (Justifying the subsidy, however, also requires a demonstration that
    renewables somehow differ from other leading-edge industries in their
    unique needs for support.) Even if so, the current form of the subsidy
    is inappropriate. A targeted research subsidy might make sense, but one
    that simply lowers prices paid by purchasers of renewables or reduces
    the taxes of investors is harder to rationalize. EIA's report states
    that ``tax expenditures'' (i.e. reductions) to the coal industry
    (including those for coal not used to produce power) were $561 million
    in fiscal 2010, while R&D subsidies (possibly necessary if we are to
    have ``clean coal'') were $663 million. Tax expenditures for renewables
    were $8,168 billion, primarily the production tax credit for wind,
    while the R&D that might make them competitive was only $1,409 million
    for renewables as a group with $166 of that going to wind.\10\
    ---------------------------------------------------------------------------
        \10\ EIA, Direct Federal Financial Interventions and Subsidies in
    Energy in Fiscal Year 2010 (2011), http://www.eia.gov/analysis/
    requests/subsidy/pdf/subsidy.pdf

    ---------------------------------------------------------------------------
    IV. Renewables and employment
    A. ``Green jobs''
        It is rapidly becoming apparent that renewable energy is failing to
    produce the promise of painless prosperity embodied in ``green jobs''
    that will simultaneously decrease unemployment rates and reduce
    pollution. Begin with some principles:\11\
    ---------------------------------------------------------------------------
        \11\ Some of these are adaptations of statements that originally
    appeared in Robert Michaels and Robert Murphy, Green Jobs: Fact or
    Fiction? (Institute for Energy Research, Jan. 2009).
    ---------------------------------------------------------------------------
            1. The proper goal of energy policy is to support the efficient
            provision of energy. The lower the cost of energy to the
            economy, all else equal, the higher will be job creation and
            economic growth outside of the energy sector. Raising energy
            costs by forcing the use of uneconomic technologies that create
            more job slots will have exactly the opposite effect. Put
            simply, more workers in energy reduce the production of non-
            energy goods and services.
            2. Any analysis of job creation by green energy must consider
            the simultaneous effect of job destruction. Policies that raise
            the cost of energy to households and businesses must leave them
            with fewer funds to spend elsewhere. Such policies include the
            spending of tax revenues to support green activities instead of
            other government purchases or returning the funds to taxpayers.
            To a first approximation the net effect of such programs on
            employment will be zero. This is particularly important here
            because the new job slots are often visible, while the losses
            are dispersed among the thousands of goods and services that
            households and businesses will spend less on. Jobs that cost
            more to create will generally have higher costs in terms of
            lost jobs elsewhere.
            3. Double counting of jobs and unrealistic assumptions about
            labor markets.
        Although they seldom say so explicitly, the models that underlie
    most studies of green energy and job creation assume that there is a
    limitless pool of idle laborers with just the right skills to fill the
    job slots created by the spending. As always happens in labor markets,
    many such jobs will in fact be filled by already-employed workers,
    whether the nation is in prosperity or recession. Even if green
    policies moved massive amounts of labor between jobs they would have
    little impact on the national unemployment rate.
    B. How Government Models Job Creation
        Much federal research on both the technology and economics of
    renewables is in the hands of the National Renewable Energy Laboratory
    (NREL), where a now-standard computer model of the economic impact of
    renewable projects originated and continues to be maintained. During my
    appearance at a 2010 hearing before the House Energy and Environment
    Subcommittee the discussion turned to what was known about the effects
    of renewables on unemployment. After a representative of NREL testified
    about the optimistic findings of that standard model, known as JEDI
    (Job and Economic Development Impact), I commented that its use was
    entirely inappropriate. I noted that JEDI is structured, by NREL's own
    admission, in a way that makes any outcome other than job creation
    mathematically impossible.\12\ It is thus a worthless tool for
    analyzing the actual employment effects of renewables, because it can
    only produce favorable ones. NREL's representative disputed my
    statement, and that person and I agreed to submit supplemental
    testimony on the matter.\13\
    ---------------------------------------------------------------------------
        \12\ The model and some applications are discussed in detail at
    http://www.nrel.gov/wind/news/2011/1574.html

        \13\ See Supplemental Testimony of Robert J. Michaels, PhD, June
    28, 2010. I have not seen any comparable submittals from NREL.

    ---------------------------------------------------------------------------
        As I detail in that testimony, JEDI is one of a large class of
    ``input-output'' models that analyze the effects of a project by
    examining the payments its owners make to workers and suppliers of
    materials. The monies they receive will in part be respent on other
    goods, and a ``multiplier'' effect brings further increases in incomes,
    outputs and employment across potentially many industries. I noted that
            ``[t]here is nothing in the model that could conceivably
            decrease employment or output in other sectors of the economy.
            Any project consider by JEDI, no matter how efficient or
            inefficient as a source of electricity, will show a positive
            effect on employment. That increase may be large or small, but
            we can be certain that it will not be negative.'' \14\
    ---------------------------------------------------------------------------
        \14\ Id. at 3.

    ---------------------------------------------------------------------------
    I further noted that most of the effects will be transitory, since most
    of the positions created will be in construction rather than operation.
        JEDI's creators appear to have consciously chosen to avoid
    discussing the sources of the workers or the funds for projects under
    study. Even if there is a vast pool of unemployed workers in the
    project area who just happen to have the right skills, we can say
    nothing about its effect on overall employment. JEDI does not net out
    jobs lost due to taxes paid by consumers and businesses elsewhere that
    they cannot spend as they wished to. Even if the project is funded by
    private or public bond issue, alternative projects with their own
    employment consequences could have been undertaken. It is not even
    enough to have workers in the project area with the right skills,
    because net increases in employment usually happen only if those
    persons have also been suffering long-term unemployment.
        NREL's disregard of elementary economics and continued reliance on
    this model is remarkable, particularly in light of its' creators'
    acknowledgments of its inadequacies:
            On occasion [the creators] have cited the works of others who
            use more complex models capable of forecasting both job
            creation and job destruction. Such models can incorporate
            factors that include responsiveness to higher power prices,
            reductions in employment in conventional power, and the
            `crowding out' of other capital spending by increased
            investment in renewables. Sometimes such models produce
            negative effects on employment in the long run. NREL's
            researchers are thus aware that other models that capture
            important complexities are available (or they could surely
            create their own). For unknown reasons, they instead persist in
            using a model that can produce only the single result of job
            creation from renewables.\15\
    ---------------------------------------------------------------------------
        \15\ Id. at 5, one footnote omitted. It is also noteworthy that the
    model has never appeared in the peer-reviewed economics literature. As
    best I can discern, its basic structure was developed by urban planners
    rather than economists.

    ---------------------------------------------------------------------------
        The ``green jobs'' claim is logically insecure at best, and models
    like JEDI mask that insecurity by invariably finding that the jobs are
    created. Interestingly, however, I am aware of no published research in
    which the predictions of JEDI or a similar model for some project have
    been compared with the actual results. Apparently the model's own
    creators also take its claims on faith, and that faith appears to be
    without foundation.
    C. Which jobs are green?
        Even if there were a usable model to analyze job creation, we are
    left with the problem of identifying which jobs are actually ``green.''
    A renewable project can result in the employment of technical personnel
    trained to specialize in operating or maintaining its technology (whom
    we presume are green), as well as additional bartenders who will help
    the workers to enjoy their evenings (harder to classify as green). The
    matter is important because any type of governmental or private
    spending might open up slots for bartenders. Renewable technologies,
    however, have been viewed as the foundation for a massive increase in
    skilled workers whose human capital will provide them with higher
    lifelong earnings.
        Two recent studies point up that the choice of definitions can
    affect estimates of the green workforce, and show that an extremely
    small fraction of jobs defined as green are in renewables. The
    Brookings Institution recently estimated 2.7 million jobs associated
    with the ``clean economy.'' The categories include ``Agricultural and
    Natural Resources Conservation'' (18.9%), ``Regulation and Compliance''
    (5.3%), ``Energy and Resource Efficiency'' (31.0%), and ``Greenhouse
    Gas Reduction, Environmental Management, and Recycling'' (39.6%).\16\
    The clean economy expands its bounds by creative classification. Thus
    we find that energy efficiency includes 350,000 people in public mass
    transit, mostly bus drivers, and environmental management includes
    386,000 people in waste management, formerly known as trash disposal.
    The researchers chose not to use an alternative definition that would
    have been far more helpful to most readers: how many clean jobs have
    (or will) come into being as a result of recent and proposed energy,
    environmental and climate regulations? (And, of course, how many others
    will vanish.)
    ---------------------------------------------------------------------------
        \16\ Mark Muro, et al, Sizing the Clean Economy: A National and
    Regional Green Jobs Assessment, (Brookings Institution, 2011).
    ---------------------------------------------------------------------------
        Some additional insight is possible when we consider the Brookings'
    final category. ``Renewable Energy'' contains 138,000 clean jobs, only
    5.1 percent of the total. If we subtract the 55,000 of them in
    hydropower, which most data sources class as nonrenewable, the figure
    is down to 84,000, or 3.1 percent of all clean jobs. 29,000 of this
    remainder are in solar (thermal and photovoltaic), which accounts for
    under 1 percent of actual renewable power production. 24,000 more are
    in wind (17.4 percent of renewable power workers and under 1 percent of
    total clean workers).\17\ Even if we are willing to assume very large
    ``multipliers'' from renewable power, its impact on employment will be
    trivial, whether taken as a fraction of all energy, clean economy jobs,
    or the entire labor force.
    ---------------------------------------------------------------------------
        \17\ Brookings' authors note (at 12) that the American Wind Energy
    Association claims 30,000 ``direct'' workers and the Solar Energy
    Industries Association 24,000, roughly the same as the Brookings
    figures.

    ---------------------------------------------------------------------------
        As a check on those figures we examine Washington State, where
    environmental awareness is high and renewable energy (non-hydro) is a
    significant presence. Its four base categories are [1] Increasing
    energy efficiency, [2] Producing renewable energy, [3] Preventing and
    reducing environmental pollution, and [4] Providing mitigation or
    cleanup of pollution.\18\ Again, a significant fraction of its green
    workers are bus drivers, trash handlers and the like. The Washington
    data show that renewable energy occupies 3,464 workers, 3.5 percent of
    the state's 99,979 green jobs.\19\ Its current wind capacity is 2,357
    MW, ranking it sixth among the states.\20\ Washington is one of the
    most active states in wind investment and production, but still only a
    small percentage of its green workforce works with renewables,
    including wind. The Washington study's authors further note that
    ``construction-related industries and occupations, as well as
    professional and technical services occupations, accounted for the
    majority of all [renewable] positions.\21\ The majority of these jobs
    are in manufacturing and construction. Per project, both are short-
    lived, and once in operation ``most renewable energy facilities operate
    with a relatively small number of operations and maintenance employees.
    . .. The proportion of part-time positions is higher for renewable
    energy than for any other private-sector core area (35 percent).'' \22\
    ---------------------------------------------------------------------------
        \18\ Washington State Employment Security Department, 2009
    Washington State Green Economy Jobs (Mar. 2010), 5. Brookings notes (at
    14) that its total is approximately 19 percent higher than its own on a
    per capita basis.

        \19\ Calculated from Washington State Employment Security
    Department, 15 and 21.

        \20\ American Wind Energy Association, Wind Energy Facts:
    Washington (Aug. 2011). Washington has very little non-wind renewable
    capacity. http://www.awea.org/learnabout/publications/upload/
    Washington.pdf

        \21\ Washington State Employment Security Department, 7.
        \22\ Washington State Employment Security Department, 30.

    ---------------------------------------------------------------------------
        Both the Brookings and the Washington data tell similar stories.
    Green or clean jobs are not objectively definable, and cases like the
    bus drivers tell us that they are easy to inflate. Under both studies'
    definitions, renewable power jobs are small fractions of the total, and
    most will be short-lived construction work performed in the main by
    people with skills that are usable in almost any type of project.
    Washington's wind units produce a higher fraction of the state's power
    than those of most other states, but their existence has not created
    any discernible difference in Washington's labor market performance.
    Similarly, it appears that most of the solar work force is in
    construction, where opportunities will diminish with the growth of
    installations. The past three years have led many to question the
    federal government's ability to create new employment and the odd logic
    that lies behind that hope. The data, however, should make it clear to
    both believers and nonbelievers that renewable power is a singularly
    inappropriate and ineffective way to increase employment.
    V. Summary and Conclusions
        The reality of most renewable electricity, particularly from
    intermittent sources, is easy to summarize. It is expensive,
    undependable and environmentally problematic. Some renewables such as
    biomass and geothermal are exceptions, often capable of passing market
    tests that wind and solar cannot. Unchallenged data from the Energy
    Information Administration show that the subsidies per kwh actually
    generated by wind and solar power are over 80 times those received by
    non-nuclear conventional sources, and over 15 times those for nuclear
    power. Most subsidies to wind and solar are politically-inspired wealth
    transfers, rather than tools to incentivize improvements in their
    competitiveness. In all but the most extreme scenarios, the Department
    of Energy projects that they will be uncompetitive with conventional
    resources, even if carbon policies come into being.
        The economic theory behind claims that renewables will increase
    employment applies (if at all) to an economy that hardly resembles
    today's. Advocates of job creation almost invariably fail to note the
    concomitant destruction of jobs in industries whose products are no
    longer bought because consumers must pay taxes or higher prices for the
    renewable power. The National Renewable Energy Laboratory's models of
    job creation are curiosities devoid of policy relevance, mathematically
    structured to render any possible job destruction an impossibility.
    Even if we only look at jobs in renewables, their impacts on employment
    are minimal. The Brookings Institution estimates slightly over 80,000
    renewable energy jobs, many of which are short-term construction work.
    The millions of ``clean'' or ``green'' jobs mentioned in the media are
    overwhelmingly positions that would be filled even if all renewable
    electricity vanished--bus drivers, refuse workers, and some building
    trades, to name a few. Calling these workers part of the ``clean''
    economy can only mislead the public about the likely effects of energy
    and climate policy.
        Any choice by government to financially support one energy source
    over another is by definition an exercise in picking winners. All too
    often such spending generates forces that make it very difficult to
    abandon the non-winners. The stories of synfuels and ethanol are back
    today in wind and solar power, which have many friends in Washington.
    Whatever happens there, the real future of energy has already arrived,
    and the winner was picked by the market, with virtually no help from
    the District of Columbia. Independent risk-takers devised ways to
    access shale gas for the simplest of reasons--there was profit to be
    made by alleviating a scarcity of conventional gas. Shale is
    competitive on costs, compliant with environmental rules and in the
    main within state jurisdiction, under which it is producing prosperity.
    The jobs shale creates are the kind that have always powered the
    country, and their finance comes from the voluntary savings of
    households and businesses. The nation is looking at centuries of low-
    cost, clean, secure fuel that creates the kind of jobs that are really
    worth creating--in the making of goods and services that people
    voluntarily trade because doing so makes both sides better off. Wind
    and solar largely exist because government can coerce payments for
    them.
        The subject matter of this hearing is a seemingly minor provision
    in a far larger and more pervasive law. ARRA and many other recent laws
    contain language that prioritizes facilities associated with renewable
    power in ways that I believe are unwarranted. This testimony has
    summarized some facts about renewable energy in order to shed light on
    its true costs, benefits, and labor market effects. These facts clearly
    show that this committee must rethink ARRA's statement that WAPA pay
    particular attention to renewable energy. I am not testifying about the
    organization or performance of WAPA, or about the costs and benefits of
    any specific transmission project. Rather, I am stating that power from
    renewable sources should compete for transmission resources on the same
    terms as power from conventional ones.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. McClintock. Great. Thank you very much for your
    testimony.
        I now recognize Mr. Jimmy Glotfelty, Executive Vice
    President of Clean Line Energy Partners LLC, from Houston,
    Texas, to testify.

     STATEMENT OF JAMES GLOTFELTY, EXECUTIVE VICE PRESIDENT, CLEAN
                LINE ENERGY PARTNERS LLC, HOUSTON, TEXAS

        Mr. Glotfelty. Thank you, Mr. Chairman and Ranking Member,
    members of the Committee. My name is Jimmy Glotfelty. As the
    Chairman said, I am Co-Founder and Executive Vice President of
    Clean Line Energy Partners. I appreciate the opportunity to
    provide comments with our views on H.R. 2915 today.
        In its current form, we oppose this bill, but we would be
    happy to work with you to find ways to address your concerns
    and find a way where this program can sustain transmission
    development in the West while protecting consumers and
    Western's ratepayers.
        We agree with the need to ensure that consumers of Western
    Area Power Administration are financially protected. We also
    understand the concerns really about this hearing have arisen
    as a result of some DOE loan guarantee programs. We believe
    they are two very different types of programs.
        We strongly believe that taxpayers and Western customers
    can be fully protected without repealing one of the most
    important programs enacted in recent years to encourage the
    development of major new electric transmission lines,
    especially in the Western United States. Unlike laws that
    Congress enacted to enable the development of railroads and
    interstate natural gas pipelines, there has never been a
    comprehensive Federal authority to develop and site interstate
    transmission lines. This is precisely why this program is
    extremely important.
        Congress partially addressed the problem of siting
    interstate transmission lines in the Energy Policy Act of 2005.
    Section 1221 provided the Federal Energy Regulatory Commission
    with backstop authority. Unfortunately, legal challenges and
    court decisions have rendered this program largely ineffective.
        Section 1222 of the Energy Policy Act of 2005 authorizes
    the Federal Power Marketing Administrations, like Western, to
    partner with private developers, like Clean Line Energy
    Partners, to finance and develop new transmission lines. We
    provide them with the capital, and we use their development
    authority, siting authority, to build transmission lines. This
    is an extremely viable provision that Clean Line has been
    pursuing in the Eastern interconnection. However, it is
    currently unclear if this authority can be effectively utilized
    in the West.
        Our company is privately funded. We have spent millions of
    dollars in good faith developing our transmission lines in the
    East and in the West. Our projects are based upon the free
    market and will not get built unless market participants
    purchase capacity on our lines. The greatest challenge that we
    face in siting the transmission lines is obtaining necessary
    cooperation from government agencies.
        Once completed, our line in the West, which is called
    Centennial West, will be 900 miles. It will be a high-voltage,
    direct-current transmission line. And it will deliver 3,500
    megawatts of clean energy from very high-capacity-factor wind
    resources and perhaps solar resources to communities in
    California and in the Western United States.
        The development and construction of the Centennial West
    Clean Line is estimated to cost $2.5 billion, and the wind
    resources that will follow are in the $7 billion range. These
    investments do create jobs. If you have been to a wind farm or
    seen a transmission line being built, there are actual jobs
    that come with this type of investment.
        We have been in discussions with Western for over a year
    and have executed a memorandum of understanding and are close
    to executing a joint development agreement to complete this
    line. Under the arrangement we are working on with Western,
    Clean Line would bear all development expenses, and we would
    reimburse Western for all of their expenses as well as any
    environmental costs that they must bear. This will ensure that
    their ratepayers, that their customers, are made whole.
        Western would only use funds borrowed from the U.S.
    Treasury for the project once key development milestones have
    been reached, risks have been mitigated. And this is at a time
    when other financial institutions believe the project is
    secure, as well. We don't expect Western to finance 100 percent
    of a transmission line, so what happens is Wall Street firms
    have to be secure in their understanding of the line, as well.
    So Western is really in a boat with a lot of other financial
    institutions, and that is a risk-mitigation tool.
        Western has been extremely prudent in the manner in which
    the officials have implemented their transmission
    infrastructure program, and I might say, in fact, a little too
    cautious. The Centennial West line is estimated to provide more
    than 5,000 construction jobs and 500 permanent jobs once
    completed.
        The wind resource in the Great Plains from Canada to Texas
    is among the best in the world. For this reason, wind farms in
    that area produce the least-expensive clean energy in the
    country. Recent power purchase agreements signed in this region
    are in the 3-cent range. Please look at the numbers. Wind is
    very inexpensive. There are private-sector Wall Street firms
    that suggest that it is the least cost-expensive electricity on
    the market today.
        I look forward to your questions. Thank you, sir.
        [The prepared statement of Mr. Glotfelty follows:]

            Statement of James Glotfelty, Executive Vice President,
                    Clean Line Energy Partners, on H.R. 2915

        Mr. Chairman and Members of the Committee:
        As a cofounder and Executive Vice President of Clean Line Energy
    Partners, I appreciate the opportunity to provide the Committee with
    our views on H.R. 2915 and the effects it will have on the development
    of transmission in the western United States.
        Clean Line opposes this bill in its current form. We understand the
    desire to ensure that taxpayers and the customers of the Western Area
    Power Administration are financially protected. We also understand the
    concerns that have arisen recently with respect to some unrelated loan
    and loan guarantee programs. But we also strongly believe taxpayers and
    Western's customers can and will be fully protected without the need to
    repeal one of the most important authorities enacted in recent years to
    encourage the development of major new electric transmission lines.
        Clean Line Energy Partners is a developer of long distance, high
    voltage direct current electric transmission lines to connect the best
    renewable energy resources in North America to communities and cities
    that lack access to new, low-cost renewable power. Clean Line provides
    transmission solutions to generators and load-serving utilities in
    order to efficiently interconnect clean energy with consumers.
        The United States is in dire need of new electric transmission
    lines. Transmission is required to move electric power from generating
    facilities to load centers because major renewable, nuclear, and fossil
    generating facilities often are located tens, if not hundreds, of miles
    from load centers where the electric power they produce is consumed.
    Many of the transmission lines in the United States are decades old,
    and were built when generating resources and electric demand were much
    different than they are today. Moreover, new transmission is needed to
    increase reliability in all areas of our grid. And yet, while many
    transmission lines have been announced across the country in recent
    years, very few have actually been built.
        The need for new electric transmission lines and new authority to
    enable development of those lines has been recognized by the industry
    for many years and also has been recognized and acted upon by Congress.
    Unlike laws that Congress enacted many decades ago to enable the
    development of railroads and interstate natural gas pipelines across
    the country, there never has been comprehensive federal authority to
    develop and site interstate transmission lines. Congress partially
    addressed this problem with two provisions of the Energy Policy Act of
    2005. Section 1221 authorized the Federal Energy Regulatory Commission
    to site transmission lines in national interest electric transmission
    corridors designated by the Department of Energy, but legal challenges
    and court decisions concerning DOE's and FERC's exercise of this
    authority have rendered this program largely ineffective in its current
    form. Section 1222 of the 2005 law authorizes the federal power
    marketing administrations to partner with private developers to finance
    and develop new transmission lines. However, the power marketing
    administrations and DOE have not proceeded with any Section 1222
    projects to date.
        In contrast, the Western Area Power Administration's Transmission
    Infrastructure Program (TIP), which Western put in place after
    enactment of the American Recovery and Reinvestment Act and the
    authorization of borrowing authority for Western, has enjoyed success.
    Under this program, one transmission project is under construction and
    several more are in advanced stages of development.
        This leaves us in a precarious situation. At a time when we all
    want energy security, when virtually all informed market participants
    believe new electric transmission facilities are necessary, and when we
    need to improve electric reliability, we have only one currently
    successful national authority whereby public and private sector
    participants can partner to build new interstate electric transmission
    lines: Western's TIP program under the borrowing authority enacted in
    the ARRA. We strongly believe that now is not the time to repeal that
    authority.
        Our company is privately funded and has spent millions of dollars
    in a good faith effort to develop transmission facilities across the
    United States using the legal authorities that Congress and the States
    have made available. Our projects are based upon the free market and
    will not get built unless market participants purchase capacity on our
    lines. The greatest challenge we face is siting the transmission lines
    and obtaining the necessary cooperation from government agencies.
    Western has been a leader among federal agencies, under the TIP
    program, in working with us and seeking to advance the development of
    interstate transmission.
        Clean Line is developing a transmission line in the western United
    States called the Centennial West Clean Line (please see attached
    project description). Once completed, this HVDC transmission line will
    deliver 3,500 megawatts of clean power from very high capacity factor
    renewable energy projects in New Mexico and Arizona to communities in
    California and other areas in the West that have a strong demand for
    clean, reliable energy. We have been in discussions with Western for
    over a year and have executed a memorandum of understanding and are
    close to executing a development agreement. In parallel with our
    discussions with Western, we have invested millions of dollars in
    routing studies, electrical feasibility processes, path rating studies,
    and public outreach activity. Under the arrangement we are working out
    with Western, Clean Line would bear all development costs and reimburse
    Western and other federal agencies for all of their costs. Western
    would only use funds borrowed from the U.S. Treasury for the project
    once key development milestones have been reached and risks have been
    significantly mitigated, and we expect such borrowings to be secured.
    Moreover, as currently contemplated, Western would have ownership of
    the assets purchased with borrowed funds. In our negotiations to date,
    Western has been extremely conscientious about not exposing taxpayers
    or its customers to financial risk.
        Western has been extremely prudent in the manner in which its
    officials have implemented the TIP program. It is our experience that
    Western will not participate in a project if it is not prudent, not
    supported by sufficient market demand, or does not contain strong
    financial protections for customers and taxpayers. In fact, Western has
    a successful track record of public/private partnerships that we as a
    country should build upon, not eliminate.
        The Centennial West Clean Line will transport clean power via an
    approximately 900-mile overhead, high voltage direct current
    transmission (HVDC) line. This line is currently planned to traverse
    New Mexico, Arizona and end in California. The development and
    construction of the Centennial West Clean Line is estimated to cost
    $2.5 billion and will make possible another approximately $7 billion of
    new renewable energy investments. The Centennial West Clean Line is
    estimated to provide more than 5,000 construction jobs and more than
    500 permanent jobs to maintain and operate the wind farms and the
    transmission line.
        Clean Line has invested thousands of hours in the development of
    the Centennial West Clean Line project and has met with thousands of
    landowners, stakeholders, elected officials and others who will be
    impacted by our lines. We have tried to be as transparent and
    straightforward as possible, and work very hard to do a good job at
    siting lines and maintaining landowner relations. Currently in the
    West, the TIP program managed by Western to implement the borrowing
    authority enacted in the ARRA is the only viable program that will help
    us site our line across three states.
        The wind resource in the Great Plains, from Canada to Texas, is
    among the best in the world. For this reason, wind farms in the area
    produce the least expensive new clean energy in the country. Recent
    power purchase agreements signed in the region have been in the range
    of three cents per kilowatt-hour including the Production Tax Credit
    (PTC). Accessing these resources, however, requires new transmission.
        In the West, Western's TIP program is a critical piece of this
    puzzle. Without a workable TIP program or other workable federal
    electric transmission siting authority, it will be virtually impossible
    to site a long distance, interstate electric transmission line. Doing
    so requires working with each state and its own unique state laws, some
    of which--as Clean Line has experienced in some states--will not permit
    the development of interstate transmission lines. As a result, an
    individual state can bring to a complete stop the development of a line
    that is in the nation's and the region's best interests, that would put
    thousands of Americans to work, that would improve electric
    reliability, and that would enable the development of additional
    domestic energy resources.
        A stable and progressive electric transmission siting policy is the
    most crucial need for the development of new transmission in the U.S.
    As a result of stable policy in Texas, the private sector is building
    over $6 billion of transmission to access renewables. These facilities
    reduce costs and provide thousands of jobs across the state.
        I urge the Committee not to move forward with repealing the
    authority that enables Western to carry out its TIP program. It would
    be even better if Congress would move forward with a more comprehensive
    federal electric transmission siting authority. But in the meantime, it
    is important that Congress leave in place the authority it has enacted
    so far that enables at least some new electric transmission to be
    financed and built.
        In closing, Mr. Chairman, the loss of this program would
    potentially mean that Clean Line's efforts, as well as numerous others
    in the West, would grind to a halt. This could have a detrimental
    effect on energy security and eliminate the possibility for thousands
    of jobs. At a time when the American public is demanding investment in
    new infrastructure and access to clean, domestically-produced energy,
    we should be expanding successful programs like TIP, not eliminating
    them.
                                     ______

        Mr. McClintock. Thank you for your testimony.
        Our final witness on this panel is Mr. William Yeatman,
    Assistant Director of the Center for Energy and Environment at
    the Competitive Enterprise Institute, from Washington, D.C.
        Welcome.

     STATEMENT OF WILLIAM YEATMAN, ASSISTANT DIRECTOR, CENTER FOR
       ENERGY AND ENVIRONMENT, COMPETITIVE ENTERPRISE INSTITUTE,
                            WASHINGTON, D.C.

        Mr. Yeatman. Chairman McClintock, Ranking Member
    Napolitano, thank you very much for inviting me before you
    today to testify in strong support of H.R. 2915.
        This legislation is necessary primarily because there is
    strong evidence that the WAPA loan authority is unnecessary. In
    March of 2009, Ed Rahill, the CEO of ITC, America's largest
    transmission company, testified before this Committee that his
    company had no problems raising capital to build transmission
    lines. He said, and I quote, ``Even in the current environment,
    ITC has not found access to the debt or equity markets to be
    difficult. Financing new transmission is not the problem that
    needs to be overcome in order to build transmission to provide
    greater market access for renewable resources,'' unquote.
        Mr. Rahill's testimony begs an important question: If the
    private sector is ready and willing to facilitate the
    transmission of electricity from green energy sources, then why
    is there a need for the WAPA loan authority?
        In addition to the fact that the market renders the WAPA
    loan authority unnecessary, there are several structural
    reasons that suggest the loan authority is an unduly risky use
    of taxpayer dollars, especially in light of our current budget
    woes.
        For starters, assessing the creditworthiness of
    transmission projects is well outside the core competencies of
    WAPA. The Western Area Power Administration was created in 1977
    to market and deliver Federal hydropower to load centers. Now
    it is being asked to create investment-bank-like capabilities
    from scratch.
        The history of much more established loan programs for
    clean energy projects suggests that there is a long learning
    curve. For example, the Department of Energy's Loan Programs
    Office was created by the 2005 Energy Policy Act in order to
    facilitate the development of low-carbon energy technologies.
    Since its inception, the Loan Programs Office has been
    criticized repeatedly by Federal watchdogs for management
    issues. And in my written testimony, I cite all the studies.
    There are five, all told: three from the GAO, Government
    Accountability Office; two from the Inspector General of the
    Department of Energy. Most recently, it was criticized for the
    high-profile bankruptcy of Solyndra, Incorporated, which put
    the American taxpayer on the hook for almost $500 million.
        The Department of Energy's Loan Programs Office has had 6
    years to build capacity, and it is still plagued by problems.
    By comparison, the WAPA loan authority was established in less
    than 3 months. That raises a red flag.
        Finally, the WAPA loan authority is made even riskier by
    the American Recovery and Reinvestment Act's mandate to rush
    money out the door. In enacting this legislation in February
    2009, the Congress' primary purpose was to jump-start the
    economy, made moribund by a global recession. To this end, the
    WAPA loan authority announced its first loan just 7 months
    after the enactment of the stimulus and just 4-1/2 months after
    it was created. In the words of WAPA loan authority manager
    Craig Knoell, this timeline was, quote, ``amazingly fast,''
    unquote.
        However, the WAPA loan authority's mandate to spend quickly
    coexists uneasily with wise fiscal management. Rushed
    investments tend to be rash investments, which tend to be poor
    investments.
        With this in mind, it is worthwhile to consider the current
    state of WAPA's first loan, which financed the Montana-Alberta
    Tie Line, a 200-mile interstate transmission line. As
    originally conceived, the project was slated to cost $150
    million and it was supposed to be completed by the end of 2008.
    In September 2009, it received the first WAPA loan for $160
    million. At the time, the project's cost had risen to $213
    million, so $63 million more than what it originally cost. And
    it was expected to be completed in 2010, so a year after the
    original--or a year later.
        Then, in March 2010 testimony before this Subcommittee,
    WAPA Administrator Timothy Meeks indicated that the project's
    completion date had been pushed back to mid-2011, a further
    delay. In June of this year, construction on the project was
    halted due to a lawsuit filed by the principal contractor
    against the project owner for failure to pay its bills. At the
    time, the project owner indicated that the Montana-Albert Tie
    Line needed to raise an additional $25 million, and it pushed
    the expected completion date back to late 2011. Last month, the
    project owner indicated that it needed an additional $25
    million--so $50 million, all told, since June--to complete the
    line.
        As such, the project is 3 years over schedule and almost
    double what it originally--or it will cost almost double what
    it was originally estimated to cost. That strikes me--or that
    raises a number of red flags for me, with respect to this first
    loan.
        Thank you very much for allowing me to testify, and I look
    forward to answering your questions.
        [The prepared statement of Mr. Yeatman follows:]

    Statement of William Yeatman, Assistant Director, Center for Energy and
          Environment, Competitive Enterprise Institute, on H.R. 2915

        Chairman McClintock, Ranking Member Napolitano, Members of the
    Subcommittee, thank you for inviting me to testify before you today in
    support of H.R. 2915, the American Taxpayer and Western Area Power
    Administration Customer Protection Act of 2011. I am William Yeatman,
    assistant director of the Center for Energy and Environment at the
    Competitive Enterprise Institute. We are a non-profit public policy
    organization dedicated to advancing the principles of limited
    government, free enterprise, and individual liberty. CEI specializes in
    regulatory policy. We accept no government funding and rely entirely on
    individuals, corporations and charitable foundations for our financial
    support.
        My testimony is organized in two sections. The first explains why I
    believe that the Western Area Power Administration Section 402
    Transmission Infrastructure Program (``WAPA loan authority'') is too
    risky for American taxpayers, especially in light of our nation's
    current deficit problems. In the second section, I explain the
    potential unintended consequences of policies like the WAPA loan
    authority that are meant to promote renewable energy.
    I. The WAPA Loan Authority Is Too Risky for Taxpayers
    Environmentalist Public Policy Is a Poor Substitute for the Profit
            Motive
        Investment banks and venture capitalists have a singular purpose:
    To earn a worthwhile return on their capital investments. This is a
    powerful incentive for wise fiscal management. It is their resources
    that are at stake, and foolhardy investments will lose money. Thus,
    private sector financing is subject to market discipline that provides
    powerful incentives for sound money management.
        By contrast, the WAPA loan authority has nothing to do with the
    profit motive. Rather, the purpose of the program is to lend taxpayer
    money to transmission projects that advance environmentalist public
    policy, to the benefit of special interests--in this instance,
    renewable energy developers. Specifically, the American Recovery and
    Reinvestment Act created the WAPA loan authority for the purpose of
    ``delivering or facilitating the delivery of power generated by
    renewable energy resources constructed or reasonably expected to be
    constructed.''
        At a fundamental level, public policy imposes much less discipline
    on capital allocation than does the profit motive. To some extent, the
    WAPA loan authority's mandate to facilitate green energy must compete
    with the taxpayer's interest in ensuring recuperation of the original
    investment. This reality is reflected by the fact that the Western Area
    Power Administration needs to certify only a ``reasonable'' expectation
    of repayment before it can lend taxpayer money through the WAPA loan
    authority. Private sector financing, unencumbered by public policy
    goals to promote green energy, has a higher threshold for repayment
    than a mere ``reasonable'' chance.
        As such, the WAPA loan authority lends money as would an investment
    bank or a venture capitalist, but it is subject to entirely different
    incentives that render it inherently riskier relative to private sector
    financing.
    WAPA Loan Authority Lending Is a Moral Hazard
        This discrepancy in riskiness between private sector lending and
    financing by the WAPA loan authority is increased by the fact that the
    American Recovery and Reinvestment Act allows for the forgiveness of
    loans if they cannot be repaid. Whereas private sector lenders suffer
    direct financial harm if their loans default, the WAPA loan authority
    is under no such constraints, because the American taxpayer in
    general--rather than only the Western Area Power Administration or its
    customers--are on the hook. This is a moral hazard conducive to fiscal
    mismanagement.
    Investment Banking Is outside the Western Area Power Administration's
            Core Competencies
        Another reason for concern is that lending money to facilitate
    green energy projects is well outside the core competencies of the
    Western Area Power Administration. In effect, it has been tasked with
    creating an investment bank from scratch. The history of much more
    established loan programs for clean energy projects suggests that there
    is a long learning curve.
        For example, the Department of Energy's Loan Programs Office was
    created by the 2005 Energy Policy Act, in order to facilitate the
    development of low-carbon energy technologies. Since its inception, the
    Loan Programs Office has been red-flagged repeatedly by federal
    watchdogs i--most recently for betting almost half a billion
    dollars on Solyndra, Inc., a California-based solar power components
    manufacturer that declared bankruptcy in August. The Department of
    Energy's Loan Programs Office has had six years to build capacity, and
    it is still plagued by problems. By comparison, the WAPA loan authority
    was established in less than three months.
    ---------------------------------------------------------------------------
        \i\ In a 2007 report, the Government Accountability Office
    questioned, ``whether this program [the Department of Energy Loan
    Programs Office] and its financial risks will be well managed'' See p.
    4: http://www.gao.gov/new.items/d07339r.pdf
        In a 2008 report, the Government Accountability Office stated that,
    ``The Department of Energy is not well positioned to manage [the loan
    guarantee program] effectively and maintain accountability.'' See: p.1
    http://www.gao.gov/new.items/d08750.pdf
        In a February 2009 report, the Department of Energy Inspector
    General warned that, ``[I]n a number of critically important areas, the
    [Department of Energy] had not fully developed and implemented controls
    necessary to successfully manage the program.'' See p. 2: http://
    energy.gov/ig/downloads/department-energys-loan-guarantee-program-
    innovative-energy-technologies-ig-0812
        In a July 2010 report, the Government Accountability Office noted
    that 50% of the conditional loan guarantees it examined had been issued
    before full reviews were conducted. See p. 8: http://www.gao.gov/
    new.items/d10627.pdf
        In a March 2011 report, the Department of Energy Office of the
    Inspector General, 15 out of 18 loan guarantees issued by the Loan
    Programs Office lacked ``pivotal'' information regarding risk ratings.
    See p. 2 http://www.recovery.gov/Accountability/inspectors/Documents/
    IG-0849.pdf

    ---------------------------------------------------------------------------
    The American Recovery and Reinvestment Act's Priority on Speed Is
            Conducive to Rash WAPA Loan Authority Lending
        The WAPA loan authority is made even riskier by the American
    Recovery and Reinvestment Act's mandate to rush money out the door. In
    enacting this legislation in February 2009, Congress's primary purpose
    was to jumpstart an economy made moribund by a global recession.
        The WAPA loan authority has explicitly adopted this purpose--that
    of speedily spending taxpayer money. As noted by the promulgation of
    the WAPA loan authority in the Federal Register, ``The Purpose of the
    Recovery Act, which authorized this Program, is to stimulate job-
    creation in the near term ii.'' [Italics added] Later in the
    same notice, it stated, ``The [WAPA loan authority] anticipates a
    combination of new transmission construction and upgrades to existing
    infrastructure. . .in order to meet the objectives of the Recovery Act
    to create jobs in the near term and rapidly develop infrastructure to
    deliver renewable resources iii.'' [Italics added]
    ---------------------------------------------------------------------------
        \ii\ Federal Register Vol. 74, No. 92, 14 May 2009, 22733
        \iii\ Ibid., 22734
    ---------------------------------------------------------------------------
        To this end, the WAPA loan authority announced its first loan just
    seven months after the enactment of the American Recovery and
    Reinvestment Act. In the words of WAPA loan authority Manager Craig
    Knoell, this timeline was ``amazingly fast iv.'' However,
    the WAPA loan authority`s mandate to spend quickly coexists uneasily
    with wise fiscal management. Rushed investments tend to be rash
    investments, which are almost always poor investments.
    ---------------------------------------------------------------------------
        \iv\ Western Area Power Administration website, ``About TIF,''
    http://ww2.wapa.gov/sites/western/recovery/Pages/default.aspx
    ---------------------------------------------------------------------------
        This was evidenced recently evidenced by the high-profile July
    bankruptcy of Solyndra, Inc, the recipient of the first loan guarantee
    subsidized by the American Recovery and Investment Act through the
    Department of Energy Loan Programs Office. An ongoing investigation by
    the House Energy and Commerce Subcommittee on Oversight and
    Investigations suggests that this loan was rushed in order to quickly
    demonstrate results from the American Recovery and Reinvestment Act
    v. Notably, the Solyndra loan was closed 10 months before
    the next such loan guarantee; in the 10 months thereafter, 10 loan
    guarantees were issued vi. Serious questions remain whether
    the rushed schedule compromised due diligence.
    ---------------------------------------------------------------------------
        \v\ For information on the investigation, see: http://
    energycommerce.house.gov/hearings/hearingdetail.aspx?NewsID=8897
        \vi\ The Department of Energy posted a timeline of Section 1705
    loan guarantees on its website, available here: https://lpo.energy.gov/
    ?page_id=134
    ---------------------------------------------------------------------------
    Private Financing Is Not a Limiting Factor to Renewable Energy
            Development
        In testimony before this Subcommittee during a March 2009 hearing,
    Western Area Power Administrator Timothy Meeks justified the WAPA loan
    authority as a means to break ``a vicious cycle,'' whereby, ``a lack of
    funding has been the weak link in building transmission and the lack of
    transmission has been the weak link in the development of renewable
    generating resources vii.''
    ---------------------------------------------------------------------------
        \vii\ Statement of Timothy J. Meeks before Subcommittee on Water
    and Power, 10 March 2011, p. 4, http://naturalresources.house.gov/
    UploadedFiles/MeeksTestimony03.10.09.pdf
    ---------------------------------------------------------------------------
        This supposed impetus for the WAPA loan authority was contradicted
    by testimony at the same hearing from Edward M. Rahill, CEO of ITC
    Holdings, Inc, the nation's largest independent transmission company.
    He indicated that there are no constraints on private sector financing
    to link renewable energy projects to the nation's electricity grid. He
    testified,
            ``Despite the current and recent turmoil in the credit markets,
            ITC and its subsidiaries have been successful in every debt and
            equity financing related to the ongoing operating company
            investments and acquisitions since ITC was founded in 2003.
            Even in the current environment, ITC has not found access to
            the debt or equity markets to be difficult. . ..Financing new
            transmission is not the problem that needs to be overcome in
            order to build transmission to provide greater market access
            for renewable resources viii.''
    ---------------------------------------------------------------------------
        \viii\ Statement of Edward M. Rahill before Subcommittee on Water
    and Power, 10 March 2011, p. 2 http://naturalresources.house.gov/
    UploadedFiles/RahillTestimony03.10.09.pdf
    ---------------------------------------------------------------------------
        If the private sector is already financing transmission adequately,
    then the WAPA loan authority is not necessary. At best, it is
    duplicative, and therefore crowds out market mechanisms that allocate
    capital more efficiently. At worst, it is financing only those projects
    that have been spurned by the market, which suggests they are a bad
    bet.
    Too Risky for Private Lenders, Too Risky for Taxpayers
        WAPA loan authority loans are riskier than private sector
    financing. As such, they should also be too risky for public sector
    financing. In light of America's current deficit problems, now is not
    the time to unduly chance taxpayer money on the success or failure of
    novel renewable energy technologies.
    II. Unintended Consequences
    The WAPA Loan Authority's Mission Is at Odds with Affordable and
            Reliable Electricity, Especially in light of Pending/Final
            Regulations from the Environmental Protection Agency
        The Western Area Power Administration's 17,000 miles of high
    voltage transmission lines are a component of the nation's
    interconnected electricity grid. At any given time, the power that
    enters the system must equal the power that leaves the system. Supply
    must equal demand, on a second to second basis, or else the system
    breaks down and the lights go out.
        This balancing feat is a complex engineering challenge, and it is
    made much more difficult by the incorporation of renewable energy.
    Unlike conventional energy sources, which can ``ramp'' electricity
    generation up or down predictably due to fuel stored onsite, renewable
    energy production is variable and unpredictable. After all, the wind
    doesn't always blow and the sun doesn't always shine.
        The primary solution to the reliability challenges engendered by
    the intermittent nature of renewable energy is to back up wind and
    solar generation with conventional energy generation, primarily natural
    gas fired power plants, as they are able to ``ramp'' up and down the
    fastest.
        However, at the same time that the Obama administration is trying
    to incorporate as much renewable energy into the grid as quickly as
    possible, it is also implementing environmental regulations that will
    radically alter the nation's electricity market by dramatically
    reducing demand for coal-fired electricity. Unfortunately, the addition
    of renewable energy and the subtraction of coal power work to the
    detriment of the system's reliability and affordability.
        A significant portion of the nation's coal-fired power plant fleet
    is expected to be shuttered, due to an array of pending and final
    Environmental Protection Agency regulations--including the Cross-State
    Air Pollution Rule, the Utility Maximum Achievable Control Technology
    requirement under Hazardous Air Pollutants program, the Regional Haze
    Rule, and the regulation of greenhouse gases under the Clean Air Act.
    According to the Edison Electric Institute, the breadth and speed of
    EPA regulations could lead to the retirement of up to 90,000 megawatts
    of coal-fired electricity generation ix. And a preliminary
    assessment by the Federal Energy Regulatory Commission Office of
    Electric Reliability showed 40,000 MW of coal-fired generating capacity
    ``likely'' to retire, with another 41,000 megawatts ``very likely'' to
    retire x.
    ---------------------------------------------------------------------------
        \ix\ Edison Electric Institute, Potential Impacts of Environmental
    Regulation on the U.S. Generation Fleet, January 2011, p. v, http://
    www.pacificorp.com/content/dam/pacificorp/doc/Energy_Sources/
    Integrated_Resource_Plan/2011IRP/EEIModelingReportFinal-
    28January2011.pdf
        \x\ FERC Chairman Jon Wellington, Commissioner John Norris,
    Commissioner Cheryl LaFleur, letter to Sen. Lisa Murkowski, 1 August
    2011, p. 2 http://murkowski.senate.gov/public/
    ?a=Files.Serve&File_id=0942ce17-3b12-4643-99ba-8fe2f5a7680a
    ---------------------------------------------------------------------------
        Something must replace this lost power, and the most plausible
    alternative is natural gas. The Fukushima Daiichi disaster in Japan
    helped galvanize opposition to nuclear power, and it is difficult to
    foresee a near to medium term scenario whereby that industry increases
    its market share in the United States. A significant expansion of the
    hydropower industry is also difficult to imagine, thanks to entrenched
    environmentalist opposition to new dams. The only alternative is
    natural gas. Accordingly, it is reasonable to expect that there will be
    a profound shift in baseload electricity generation away from coal and
    to natural gas.
        Thus, the current administration is pushing variable renewable
    energy, which requires backup conventional energy production, primarily
    natural gas, in order to maintain system reliability. At the same time,
    the administration is implementing regulations that will shutter a
    significant amount of coal-fired electricity generation, which will
    likely lead to a precipitous increase in natural gas generation. These
    are two potentially enormous sources of demand for gas, occurring
    simultaneously. Of course, when demand increases, prices follow. The
    result is likely to be expensive electricity.
        There are additional reliability concerns. It is always a challenge
    to site a new power plant, be it conventional or renewable. In the
    short term, therefore, there is no guarantee that sufficient new
    generation will be built to accommodate the expected loss of coal-fired
    generation. As a result, it is possible that natural gas ``peaker''
    power plants--those that are designed to ``ramp'' up and down quickly--
    will be reassigned for baseload generation. This would reduce the
    flexibility of the grid and make it much more difficult to maintain
    system reliability as greater amounts of renewable generation are
    incorporated.
    Environmental Harm
        Presumably, the purpose of promoting renewable energy is to
    mitigate the environmental consequences of conventional energy
    generation. Ironically, recent evidence suggests that adding wind
    power--the predominate form of renewable energy--into the power supply
    actually increases air pollution.
        Demand for intermittent renewable energy is not set by market
    forces, but by government mandates. Thirty states have renewable energy
    productions quotas, known as Renewable Portfolio Standards, which
    require ratepayers to use fixed percentages of renewable energy. As a
    result of these mandates, most utilities operate their wind energy
    generation on a ``must take'' basis. This means they add wind power
    whenever it is available. As wind power is added to the power system,
    conventional energy generators like coal and gas fired power plants
    must ``ramp'' down. However, fossil fueled generators, and coal power
    plants in particular, operate much less efficiently when they are
    ``ramped'' up and down, and this causes more emissions of air
    pollution.
        A recent study by Bentek, a Colorado-based energy market
    information company, found that in Colorado and Texas electricity
    markets, the incorporation of high amounts of wind energy into the grid
    actually increased emissions of sulfur dioxide and nitrogen oxides
    xi.
    ---------------------------------------------------------------------------
        \xi\ Bentek, How Less Became More. . .Wind, Power and Unintended
    Consequences in the Colorado Energy Market, see: http://docs.wind-
    watch.org/BENTEK-How-Less-Became-More.pdf

    ---------------------------------------------------------------------------
                                     ______

        Mr. McClintock. Well, thank you very much for your
    testimony.
        This concludes the formal testimony in the hearing, and we
    will now move to Members' questions. And I would like to begin.
        Dr. Michaels, taxpayers are being asked to risk $3.25
    billion on the same technology and by the same Administration
    that has just delivered the Solyndra scandal. Now, we are told
    that this is a very cheap way of producing electricity. I
    believe that you took a comparative look at the costs of
    various forms of electricity. Is this a cheap form of
    electricity? Is this a good investment for our taxpayers?
        Dr. Michaels. It looks like it has a cost of zero if all
    you think about is the wind turning the turbine. The problem is
    that that is electricity that is almost valueless. It is almost
    valueless because it can't be integrated with the system, it
    can't be firmed up for reliability, unless you make a large
    number of other investments. And you incur a large number of
    other operating costs--in particular, gas-fired units that can
    come on quickly as backup for when the wind stops blowing.
        Mr. McClintock. So you have to build a separate gas
    generator and keep it at constant readiness in order to back up
    the intermittent power coming off of the windmills; is that
    correct?
        Dr. Michaels. Not quite, because each utility already has a
    good-sized fleet of gas generators that is uses to adjust its
    output as you go through the day. It doesn't necessarily entail
    the making of a large number of additional investments.
        When we are getting to the questions like 30 percent wind,
    various studies like that, then you do have issues in gas
    investment.
        Mr. McClintock. Now, hadn't you in your written testimony
    contended that, in many cases, this actually increases
    emissions because of the solar mandate? Or perhaps that was Mr.
    Yeatman's testimony.
        Mr. Yeatman?
        Mr. Yeatman. Oh, indeed, yes, sir. A recent study by
    Bentek, an energy information firm in Colorado, based in
    Colorado, found that there is a high amount of wind input onto
    the grid that exceeds natural gas capacity that forces
    utilities to switch to coal-fired power plants to back up these
    intermittent wind resources due to the inefficiencies wrought
    by turning up and down, ramping up and down coal-fired power
    plants, which is not the way they were intended to operate. It
    actually, ironically, results in an increase of emissions of
    sulfur dioxide and also nitrogen oxide.
        Mr. McClintock. Now, our constituents are actually being
    asked by force--because we are not giving them a choice in the
    matter; we are investing them in the transmission lines for
    these facilities.
        Now, is there a difference between the transmission lines
    required for the wind and solar arrays compared to normal
    transmission facilities?
        Dr. Michaels?
        Dr. Michaels. Wind installations--very often, you have to
    have the turbine where the wind is. We are seeing a lot of
    initiatives, including the one we were talking about here,
    being taken. These are to reach remote units. The difficulty in
    some of these cases is that they have to be reached by radial
    lines--lines that don't improve the reliability of the system
    and are particularly vulnerable.
        Mr. McClintock. But isn't there a degradation in
    transmission over long distances?
        Mr. Glotfelty. Mr. Chairman, if you would let me answer
    that, there is.
        Mr. McClintock. Well, no, I am asking Dr. Michaels.
        Dr. Michaels. For a standard AC, yes. For DC, in fairness,
    there is relatively less loss, but you have to have special
    engineering considerations on the system to make it work.
        Mr. McClintock. So we are talking about more expensive
    lines than you would use for normal transmission; are you not?
        Dr. Michaels. Quite possibly, yes, sir.
        Mr. McClintock. OK.
        Mr. Yeatman, we are being told that the WPPSS collapse was
    devastating for consumers, and it was a very risky investment.
    How would you compare this investment to WPPSS? And, for that
    matter, how would you compare this investment to Solyndra?
        Mr. Yeatman. Well, in all honesty, I am ignorant of the
    WPPSS investment, so I am ill-qualified to answer that
    particular question. Certainly, with respect to Solyndra, I am
    on firmer ground.
        It seems as though--well, I will note this much. Within the
    first 10 months--within the first 10 months of the loan
    guarantee program that issued the Solyndra loan, there was one
    loan, Solyndra. The 10 months thereafter, virtually--well, I
    think it was 17 of the 18 loans issued by the Loans Program
    Office. The appearance is that it was rushed out the door. And
    we all know what happened as a result.
        Certainly, with respect to this Montana-Alberta Tie Line,
    the subsequent problems that the line has experienced, to this
    day actually, would indicate that perhaps in an effort to get
    money out the door, to comply with the stimulus mandate----
        Mr. McClintock. I would simply add that the recipients of
    all of this taxpayer largess appear to be quite clear that it
    is a bad investment or they wouldn't have had written in to the
    law a provision for loan forgiveness when these projects do not
    produce the capital necessary to repay the loans, ending up
    with the taxpayers holding the bag.
        Thank you.
        I now yield to the Ranking Member.
        Mrs. Napolitano. Thank you, Mr. Chair.
        Mr. Glotfelty, do you want to answer that question? You
    seem ready to go. Can you do it quickly? Because I don't want
    to lose time.
        Mr. Glotfelty. I think the question was the difference
    between AC and DC lines. In fact, AC lines are used--DC lines
    are not just used for wind. They are the most efficient manner
    to move large amounts of power long distances. AC lines are
    used for every single type of generation in the United States.
    This was a decision that went way back to Edison and
    Westinghouse. But DC lines are the most efficient type of
    technology to move large amounts of wind long distances.
        Mrs. Napolitano. Thank you, sir.
        Ms. Azar, what are the differences in developing
    transmission for renewables versus non-renewables? And do these
    differences justify the Federal role in development?
        Ms. Azar. As indicated in my opening statement, the
    development for renewables--and let me be clear, this borrowing
    authority is not about renewable generation; it is about
    transmission.
        The development of transmission for renewables is more
    difficult than developing transmission for fossil fuel
    generation for two reasons.
        Number one, as indicated in my opening statement, for
    renewables you have to go where the fuel source is. So usually
    these are long, multistate lines, which means more permitting,
    more State citing issues. And, in fact, the examples given for
    the MATL line and the delays there are a perfect example of why
    it is more difficult to site transmission.
        And, second, there is a timing issue. These lines take much
    longer to build, which essentially is not true--the timing for
    the development of fossil plants actually corresponds with the
    timing of the development of the transmission line for fossil
    plants. Whereas, for renewable lines, renewable plants can be
    built in a very short timeframe, whereas the transmission lines
    needed for those renewables sometimes take 10 to 15 years. So
    there is a disconnect between that.
        Mrs. Napolitano. Thank you. I am sorry, but I have very
    limited time, so I have to kind of move on.
        Ms. Azar. I understand.
        Mrs. Napolitano. To both Mr. Glotfelty and you, Mr. Yeatman
    states that WAPA's lending has been conducted too rapidly and
    rashly. Do you agree?
        And then can you opine on--because Mr. Yeatman was
    indicating that there should be the PPPs, Wall Street should be
    involved in this. But what would be the cost of the interest
    rate Wall Street would charge versus the Treasury with WAPA's
    borrowing authority, and what would that translate to for the
    ratepayer/taxpayer in the household?
        Ms. Azar. With regards to whether or not WAPA has been
    rash, I think Mr. Glotfelty can state the frustrations that
    have been expressed by the applicants because WAPA is doing so
    much due diligence over these projects.
        Mr. Glotfelty. I can echo that. As I said in my opening
    statement, we are privately funded. We have never accepted any
    taxpayer dollars, any Recovery Act dollars. We are spending our
    money and my money. This is partly my company. And I want the
    government to help create jobs and help move this policy along.
    And I can say that I believe that they are actually moving too
    slow.
        Ms. Azar. Of the $3.25 billion, $2.973 billion remains to
    be spent. WAPA has only requested borrowing authority for 8
    percent.
        Mr. Glotfelty. And to answer the second part of your
    question, I believe that I have not seen any indication that
    Western would like to finance an entire transmission line. I
    have seen no indication of that, but I am not on the inside of
    the DOE.
        That means, for instance, for our line, we are going to
    have Wall Street firms that will help finance the debt on this
    project. Western will be a part of it if we are successful, as
    well as other Wall Street firms.
        So the point is, I don't know the differential in the rate,
    but, in fact, there are multiple times when there are risk-
    reduction measures that are taken into consideration when using
    this authority.
        Mrs. Napolitano. But would there be a noticeable rise in
    costs to a ratepayer or to a consumer?
        Ms. Azar. The borrowing authority actually is driving down
    the cost of capital significantly. And, as Mr. Glotfelty
    indicated, WAPA is partnering with private entities for most of
    its projects.
        Mrs. Napolitano. Does that mean that is going to hold the
    costs down? That is what I am trying to----
        Ms. Azar. That is correct.
        Mr. Glotfelty. That is correct.
        Ms. Azar. That is correct.
        Mrs. Napolitano. OK.
        Then, as I understand WAPA's transmission infrastructure
    program, no projects will be funded until it has been
    demonstrated there is sufficient demand and tariffs are in
    place at rates designed to ensure repayment of the borrowed
    funds. As briefly as you can--would you submit for the record
    the process that describes how WAPA protects taxpayers? And
    that is for the record, please.
        Mrs. Napolitano. Thank you, Mr. Chair.
        Mr. McClintock. Great. Thank you.
        And Mr. Markey gets the last word.
        Mr. Markey. I thank you, Mr. Chairman, very much.
        Mr. Yeatman, are you aware that, by law, Western and other
    Power Marketing Administrations must market power at cost, not
    market-based rates?
        Mr. Yeatman. Indeed, yes, sir.
        Mr. Markey. Excuse me?
        Mr. Yeatman. That they must, yeah, at cost.
        Mr. Markey. By law. You are aware of that?
        Mr. Yeatman. Yes, sir.
        Mr. Markey. So it is by design and by statute that the
    Power Marketing Administrations are not subject to market
    discipline, which, according to your testimony, lacks, quote,
    ``powerful incentives for sound money management.''
        So, as you know, Mr. Yeatman, there are several suggestions
    out there about how we decrease the debt of our country,
    especially in areas which are not subject to sound money
    management and market forces. And I understand that Senator
    Coburn and the Congressional Research Service have estimated
    that eliminating the Power Marketing Administrations would save
    $1.1 billion over 10 years.
        Is that something that you could support, privatizing this,
    getting it out of the public domain?
        Mr. Yeatman. Indeed, yes, sir.
        Mr. Markey. Now, we don't see any members of the Committee
    willing to sell off the Bonneville Power Administration. I am
    just guessing; I don't know. I have never heard that suggestion
    coming from the minority side.
        Mr. McClintock. Open to a discussion.
        Mr. Markey. Open to a discussion on selling Bonneville and
    whatever.
        But how about a less radical approach? Based on your
    position on free markets and sound financial decisions, do you
    think that Power Marketing Administrations should be required
    to sell their power at market rates rather than cost-based
    rates in order to prevent a moral hazard conducive to fiscal
    mismanagement?
        Mr. Yeatman. Oh, well, certainly, with respect to the moral
    hazard, I was referencing the forgiveness provision of the
    section----
        Mr. Markey. I understand, but it is the same principle--
    that is, that it kind of induces you to do something that you
    would not otherwise do because it is not market-based. It is--
    --
        Mr. Yeatman. Well, one is a mandate--I mean, a mandate to
    sell power at cost, whereas one----
        Mr. Markey. But would you change that mandate so that we
    avoid the moral hazard?
        Mr. Yeatman. Well, I mean, with respect to the utility
    industry as a whole, I have a number of ideas as to how to open
    it up----
        Mr. Markey. No, I am only speaking about this one
    particular--if we could cure this problem so that the moral
    hazard is removed, would you support removing the moral hazard
    of having the taxpayers give a false signal to the marketplace,
    which then incentives use where perhaps otherwise it would not?
        Mr. Yeatman. Well, I don't necessarily agree that it is a
    moral hazard per se. But I will say that, yes, generally
    speaking, pricing things at market rates will, indeed----
        Mr. Markey. Well, I think you and I may disagree.
        Mr. Yeatman.--is the most efficient allocation of
    resources--or results in the most efficient allocation----
        Mr. Markey. Right. Well, I don't see it as being any
    different than----
        Mr. Yeatman.--of natural resources and whatnot.
        Mr. Markey. I don't see it as any different than Freddie or
    Fannie, where you create that moral hazard for people to, you
    know, take a public entity and start to think the taxpayers are
    behind it and then you just, you know, do things that perhaps
    you wouldn't do. So you maybe haven't thought it through, but I
    think it is pretty similar.
        Do you challenge the notion that Power Marketing
    Administrations were created to serve a public purpose?
        Mr. Yeatman. Oh, indeed, that is the codified purpose
    within the law, yes, sir.
        Mr. Markey. OK. So why isn't building new transmission for
    wind and solar also a valid public purpose?
        Mr. Yeatman. Well, I mean, I would--a public purpose--I
    mean, as the testimony of the CEO, Ed Rahill, the largest----
        Mr. Markey. No, I understand that. I am saying----
        Mr. Yeatman. He did indicate that there is no issue, I
    guess, that there is not necessarily----
        Mr. Markey. No, we are not talking about not----
        Mr. Yeatman.--the need for a public purpose if you can
    already access--if you can already provide these services, if
    they can already raise capital to invest in these transmission
    lines independent of having the government finance them or
    provide preferential rates, if the market can do it on its own.
    Indeed, I believe the----
        Mr. Markey. Ms. Azar, can you respond to that?
        Ms. Azar. Yes. First of all, I would be very interested to
    hear where ITC has been building transmission lines outside of
    the service territory. This is not an open market. Indeed, in
    my opening statement, I indicated there are lots of problems
    with regards to merchant transmission developers trying to
    develop outside of their service territories. So we don't have
    competition in this area.
        And, in fact, this borrowing authority allows WAPA to serve
    over a number of States throughout their service territories.
    It brings more than its purse.
        Mr. Markey. OK, thank you.
        Mr. Yeatman, you know, the Federal Government is talking
    about, under these programs, these Solyndra-type programs, $8.3
    billion in loan guarantees to the Southern Company to build
    nuclear power plants after Fukushima, after the North Anna
    plant accident. Do you think that that should be re-evaluated
    and----
        Mr. Yeatman. Indeed, yes, sir. No, I am against all such--
    --
        Mr. Markey. So you oppose those loan guarantees?
        Mr. Yeatman. Indeed, yes, sir. I will note----
        Mr. Markey. Well, can I just tell you something?
        Mr. Yeatman. Yes, sir.
        Mr. Markey. Out of this Republican Congress this year, they
    took away the loan guarantees for wind and solar but left them
    in for nuclear power.
        Mr. Yeatman. I am not a Republican. I am a Libertarian,
    sir.
        Mr. Markey. Would you oppose that? Pardon me?
        Mr. Yeatman. Indeed, any----
        Mr. Markey. You would take them off for both.
        Professor, would you take them off for both, nuclear and
    wind and solar, the loan guarantees?
        Dr. Michaels. No loan guarantees for any.
        Mr. Markey. No loan guarantees for anyone, is that what you
    said?
        Dr. Michaels. Correct.
        Mr. Markey. So when they keep in the nuke loan guarantees,
    that is a mistake, huh?
        OK. Thank you.
        Mr. McClintock. Perhaps we can reach bipartisan agreement
    on that, Mr. Markey.
        Mr. Markey. We have tripartisan down here.
        Mr. McClintock. We have just been joined by Mr. Garamendi,
    for 5 minutes.
        Mr. Garamendi. I am trying to figure out what the heck is
    going on here.
        Mr. Markey. It is a Massachusetts guy trying to figure out
    the West Coast, is what it is.
        Mr. Garamendi. Well, I can understand the quandary that you
    are in. But are we trying to not provide additional lending
    authority for the Western Power Administration to build things?
    Is that what this is all about?
        Mr. Markey. You got it. Yes, that is it.
        Mr. Garamendi. Why would we do that? A very successful
    program that is providing service power, is it--what is going
    on here? I thought maybe I wound up in some other strange
    committee. Why would you not want----
        Mr. Markey. Same old strange committee.
        Mr. Garamendi. What is the point?
        We will start over here, just quickly, you know, 15
    seconds. What is the point?
        Ms. Azar. Yeah, I mean, I can't speak for the proponents of
    this bill, but they are attacking the development of renewable
    generation. And that is not what this borrowing authority is
    about. This borrowing authority is about transmission. And so
    they have created a straw man, and it is difficult, obviously,
    to attack straw men.
        Dr. Michaels. I am only here testifying on the matter of
    renewables and not on the matter of WAPA's administration per
    se.
        Mr. Garamendi. Well, then it is not relevant to this? Then
    why are you testifying? Because if we are doing away with the
    power to borrow money to build transmission lines and you are
    only talking about renewables, why are you testifying?
        Dr. Michaels. Because the question of whether renewables
    should have priority or not, the question of dedicating lines
    for renewables is one that should be rethought.
        Mr. Garamendi. So you are opposed to renewables?
        Dr. Michaels. Yes, I am, generally. Not all.
        Mr. Garamendi. That is another question, but let's continue
    on.
        Mr. Glotfelty. First of all, as the only transmission
    developer up here, we are using the free market. This authority
    that the Congress has given Western is absolutely critical if
    we are going to build interstate transmission lines. Congress
    has not developed an interstate transmission siting regime like
    they have in pipelines and in railroads. And this is the only--
    one of the two, but primarily the only one that will allow for
    us to site interstate transmission lines in the West.
        Mr. Garamendi. This bill does that?
        Mr. Glotfelty. Yes, it does. This bill would repeal that
    authority.
        Mr. Garamendi. So you are opposed to the bill?
        Mr. Glotfelty. I am opposed to this bill.
        Mr. Yeatman. Yes, sir. I believe the Western Area Power
    Administration's transmission infrastructure program--I oppose
    it because I believe it is unnecessary. As was indicated in
    previous testimony, 13 of the States within the WAPA service
    territory have renewable energy mandates that are, in essence,
    renewable energy production quotas. So you have a guaranteed
    demand.
        As I intimated in my testimony, the market is ready and
    willing to meet that demand. In particular, this one gentleman
    who testified before this Subcommittee in March of 2009, the
    Chairman of ITC Holdings, the largest transmission company in
    the country, indicated that raising finance----
        Mr. Garamendi. So why are you opposed to supporting the
    bill?
        Mr. Yeatman. Oh, I am sorry, I support the bill. I
    apologize.
        Mr. Garamendi. You support the bill. Because?
        Mr. Yeatman. Because the program is unnecessary. The
    transmission infrastructure program itself----
        Mr. Garamendi. Somebody else will build the transmission
    lines without the loan guarantees?
        Mr. Yeatman. Oh, it is not a loan guarantee; it is actually
    direct borrowing authority from the Treasury Department. But,
    indeed, yes, sir----
        Mr. Garamendi. So, who----
        Mr. Yeatman.--the owner of the largest transmission company
    in the country----
        Mr. Garamendi. Who have you lined up----
        Mr. Yeatman.--before this Subcommittee, indicated that they
    were willing to build the lines.
        Mr. Garamendi. Excuse me. Who have you lined up to build
    the transmission lines without--I guess it is not WAPA going--
    who is going to build them?
        Mr. Yeatman. Well, given that there is a guaranteed source
    of demand for this renewable energy----
        Mr. Garamendi. No. No, no----
        Mr. Yeatman.--given that the renewable energy must be
    delivered, I trust the market to deliver that power.
        Mr. Garamendi. Do you know of any organization that wants
    to build these power lines?
        Mr. Yeatman. Well, again, in testimony before this
    Subcommittee, the chairman of the country's largest
    transmission company indicated that, indeed, they were willing
    to build such power lines to deliver green energy, that
    financing was not an issue, that raising capital was not an
    issue. So, in light of that, why do we need a government
    program to do so?
        Mr. Garamendi. Now, the next question is, are they able to
    do it cheaper to the consumer than the Western power group?
        Mr. Yeatman. Certainly more efficiently. Well, I mean, I
    suspect that the money has to come from somewhere. So be it
    from the taxpayer or be it WAPA customers, I mean, ultimately
    we are dealing with America's money, we are dealing with a
    finite resource.
        Mr. Garamendi. That argument doesn't fly. I don't think
    that flies at all. I asked, will they be able to do it at less
    cost than an organization that has delivered power for 70 years
    at the lowest rate in--one of the lowest rates, if not the
    lowest rate, in America?
        Mr. Yeatman. They can do it cheaper to the extent that it
    is subsidized by the taxpayer as a whole, indeed, yes, sir. But
    I don't necessarily think that is saving the country money or
    saving----
        Mr. Garamendi. I am out of time.
        And, Mr. Chairman, I thank you. I am still a bit confused
    as to why we are doing this.
        Mr. McClintock. Well, if the Chair could offer a
    recommendation, maybe the Member would want to attend the
    hearing prior to weighing in on the subject. And we thank you
    for your----
        Mr. Garamendi. That is a smart-ass remark----
        Mr. McClintock. Well, I don't mean----
        Mr. Garamendi.--and unnecessary.
        Mr. McClintock. I apologize. You are right.
        Mr. Garamendi. Thank you.
        Mr. McClintock. You are right, and I apologize.
        Mr. Garamendi. Accepted.
        Mr. McClintock. I want to thank the witnesses for their
    valuable testimony.
        The members of the Subcommittee may have additional
    questions for witnesses, and we ask you to respond to these in
    writing.
        The Ranking Member has a request.
        Mrs. Napolitano. Yes. Mr. Chair, for the record, I have two
    letters in opposition to 2915 from TransWest LLC and American
    Wind Energy Association.
        Mr. McClintock. And, without objection, those will be
    entered into the record.
        [The documents submitted for the record by Mrs. Napolitano
    follow:]

                     Statement submitted for the record by
               The American Wind Energy Association, on H.R. 2915

        The American Wind Energy Association (AWEA) writes to oppose the
    House Natural Resources Water and Power Subcommittee Chairman Tom
    McClintock's recently introduced H.R. 2915, the American Taxpayer and
    Western Area Power Administration Customer Protection Act of 2011. The
    proposed legislation would repeal the Western Area Power
    Administration's (WAPA) borrowing Authority under section 301 of the
    Hoover Power Plant Act of 1984, which provides borrowing authority to
    WAPA for purposes of construction of certain transmission facilities.
    We believe that taxpayers will be fully protected without eliminating
    one of the most important authorities enacted in recent years to
    encourage the upgrading of our aging electric grid and, in turn, create
    jobs.
        The United States is in dire need of new electric transmission
    lines. Many of the transmission lines in the United States are decades
    old, and were built when generating resources and electric demand were
    much different than they are today. A number of studies have found that
    investing in our transmission grid will save homeowners and businesses
    billions of dollars per year by providing them with access to lower
    cost sources of electricity and protecting them from volatility in the
    price of fossil fuels. Our congested grid further harms consumers by
    reducing competition on the electric grid. New transmission is also
    needed to increase reliability in all areas of our grid, helping to
    avert major blackouts of the type we have seen in recent years as well
    as the more frequent smaller-scale outages that are also very costly
    for business and industry. Finally, transmission allows us to put
    America's vast untapped renewable energy resources to use, providing
    consumers with low-cost, job-creating, clean, domestic energy
    resources.
        Continuing the successful public/private concept begun with a
    transmission line upgrade in central California (Path 15), which
    alleviated significant transmission congestion, and embodied in the
    2005 Energy Policy Act, Congress gave WAPA $3.25 billion in borrowing
    authority for new or upgraded electric power transmission lines,
    including transmission for renewables. Pursuant to that authority, WAPA
    may permit other entities, including private parties, to participate in
    the funding, construction, or ownership of transmission projects
    financed under this section. It also provides for WAPA to repay the
    Federal Treasury for funds borrowed using revenues derived from the use
    of the projects financed under that authority.
        The use of borrowing authority by Federal utilities to finance
    transmission construction is not at all unprecedented. For instance,
    the Bonneville Power Administration (BPA) has consistently used Federal
    borrowing authority to finance transmission facilities in the Pacific
    Northwest. The risks to taxpayers associated with BPA's borrowing
    authority--to the extent there are any--are similar to the risks
    associated with the borrowing authority granted WAPA. BPA is also under
    no penalty if it fails to pay back the Treasury. Yet, BPA has managed
    its transmission program to ensure that it has sufficient revenues to
    make its payments. WAPA is doing the same.
        The genesis for H.R. 2915 appears to be Chairman McClintock's
    concern that the Treasury might be required to ``forgive'' advancements
    made by WAPA if there is a balance owed to it at the end of the useful
    life of a project. For the reasons discussed above, it is highly
    unlikely that any balance will remain unpaid to the Treasury and,
    therefore, WAPA's borrowing authority does not need to be altered.
    Nevertheless, if others are troubled by the forgiveness provision,
    Congress should amend the provision of the Hoover Bill to remove the
    offending portion (treating WAPA the same as BPA), rather than repeal
    the entire program for WAPA.
        At a time when we want to increase America's energy security,
    improve electric reliability, and provide access to clean,
    domestically-produced energy and the associated job creation, now is
    not the time to repeal WAPA's borrowing authority, which will continue
    to help meet all those goals.
                                     ______

                             TRANSWEST EXPRESS LLC

                             555 Seventeenth Street

                                   Suite 2400

                                Denver, CO 80202

                                Tel 303.299.1000

                                Fax 303.299.1356

    VIA E-MAIL ELIVERY

    September 21, 2011

    The Honorable Doc Hastings, Chairman
    The Honorable Edward Markey, Ranking Minority Member
    Committee on Natural Resources
    U.S. House of Representatives
    1324 Longworth House Office Building
    Washington, D.C. 20515

    The Honorable Tom McClintock, Chairman
    The Honorable Grace Napolitano, Ranking Minority Member
    Subcommittee on Water and Power
    Committee on Natural Resources
    U.S. House of Representatives
    1324 Longworth House Office Building
    Washington, D.C. 20515

    Dear Congressmen Hastings, Markey and McClintock and Congresswoman
    Napolitano:

        H.R. 2915--the American Taxpayer and Western Area Power
    Administration Customer Protection Act of 2011--would repeal Western
    Area Power Administration's borrowing authority, which was designed to
    stimulate development of much-needed transmission in the West. Western
    currently is using that borrowing authority to partner with Trans West
    Express LLC (TWE) and jointly develop the TransWest Express
    Transmission Project (TWE Project), among other transmission
    infrastructure efforts.
        TransWest Express LLC submits the attached statement in opposition
    to H.R. 2915. See Attachment A. The statement addresses how Western's
    leveraging of its borrowing authority for the TWE Project represents
    exactly the type of private/public partnership Congress should
    support--not the kind that Congress should seek to dissolve.
        The document describes the TWE Project; highlights the project's
    economic benefits including job creation; and addresses the sensibility
    and safety of TWE's partnership with Western, including multiple
    measures and provisions that protect federal interests.
        Western chose to split its commitment to the TWE Project into two
    phases--the development phase and the construction/ownership phase--to
    protect taxpayer dollars. The development agreement between Western and
    TWE eliminates any risk to the U.S. taxpayer. Should Western decide not
    to proceed to the second construction/ownership phase of the TWE
    Project, Western's development costs will be fully refunded, with
    interest, by TWE. Ironically, had Western committed to the TWE Project
    in its entirety upfront, then Western's participation in the TWE
    Project would have been grandfathered under the language of the bill.

    ATTACHMENT A

    Contents

            A.  Executive Summary
            B.  TWE Project Overview
            C.  Estimates of Jobs Created
            D.  Westem Area Power Administration's Borrowing Authority
            E.  TWE's Partnership with Western
            F.  H.R. 2915 to Repeal Western's Borrowing Authority
            G.  Conclusion

    TRAHSWEST
        Further, Western's decision to participate in the development of
    the TWE Project comes not in a matter of months but after nearly 2'/2
    years of comprehensive due diligence, project scrutiny and
    certification that the TWE Project's purpose, benefits and financial
    model comport with the stringent principles set forth in Western's
    Transmission Infrastructure Program. TWE responded to Western's Request
    for Interest process in April 2009. TWE and Western signed a non-
    binding agreement for Western to pursue ownership of half of the TWE
    Project in January 2010. And it was not until September 2011 that the
    first phase of the partnership was finalized following project reviews
    by Western, its peer power marketing agency Bonneville Power, the U.S.
    Department of Energy, and the Office of Management and Budget.
        Finally, this is not a case where the U.S. government grants money
    and goes away without a stake in the project's success. Western will
    have the option to own 50% of the TransWest Express Transmission
    Project, just like it owns and operates thousands of miles of other
    transmission lines across the West, from Nebraska to California. This
    is a practical, essential long-term investment that will benefit
    electricity users in the West for decades to come. There is a long
    history in this country of energy infrastructure projects being solely
    funded by federal government funds. In the case of Western's proposed
    collaboration with a private-sector partner like TransWest Express LLC,
    however, Western has the opportunity to significantly leverage borrowed
    federal funds, which will be repaid, to build a project critical to
    developing our nation's renewable energy resources at a scale that
    would not be possible if only federal dollars were used.
        Sec. 402 of the American Recovery and Reinvestment Act (ARRA)
    provides clear protection for customers of Western that do not utilize
    projects developed in that section. ``Revenue from the use of projects
    under this section shall be the only source of revenue for--(A)
    repayment of the associated loan for the project; and (B) payment of
    expenses for ancillary services and operation and maintenance.''
        The need for large-scale, multi-state investments in the Western
    U.S. electric grid goes well beyond connecting renewable electricity
    supplies to the cities that need the power. Congress has recognized for
    years--and sought to address the matter in the 2005 Energy Policy Act--
    that transmission development simply has not been occurring at the pace
    needed to meet load growth and to ensure the reliability and stability
    of the electricity supply that our nation depends on for its success.
    Why has this development not been occurring? Permitting is complex,
    construction is extremely costly, and the current regulatory regime is
    ill-suited to provide adequate incentives to private enterprise.
        By combining their respective strengths and common vision for a
    better, stronger, safer U.S. electric grid, Western Area Power
    Administration and TransWest Express LLC can make the 725-mile, 600
    kilovolt, 3,000 megawatt, $3 billion TransWest Express Transmission
    Project a strategic, sensible, valuable reality. The whole partnership
    is greater than either partner.
        Should Western's responsibly managed, well-vetted borrowing
    authority be repealed by this Congress, the successful development of
    the TransWest Express Transmission Project in the timeframe and with
    the energy resources that the nation needs will be at risk--as will the
    thousands of union construction jobs and operations jobs, the millions
    of dollars in local tax revenue that will support rural counties in the
    West, and the gigawatt-hours of cost-effective electricity that Wyoming
    is poised to provide to help its neighbors in the West, like Arizona,
    Nevada and California.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

       C. Estimates of Jobs Created
        The TransWest Express Transmission Project will create, sustain and
    influence thousands of jobs across the country--not only through its
    construction and operation but also through the energy generation jobs
    it will help facilitate in Wyoming. No new generation projects are
    likely to be built in Wyoming unless transmission paths exist to get
    the electricity to the markets that need it.
    TWE Project jobs
        The owner's engineer estimates that up to 1,000 construction-
    related jobs will be created for the duration of the three-year
    construction phase of the TWE Project, jobs that will follow the
    transmission line as it is built. Approximately 3,000 to 5,000 indirect
    jobs will be created nationwide because of the demand for materials and
    services to build the power line itself.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Additional jobs will be created to build the terminals/
    substations in Carbon County, Wyo., and Clark County, Nev. The owner's
    engineer estimates these are the job totals for both terminal
    facilities over an approximate two-year construction period.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Overall economic impacts of transmission development
        The Wyoming Infrastructure Authority commissioned a study from the
    National Renewable Energy Lab about the economic benefits of new
    transmission development for Wyoming. According to the study results,
    which were released June 14, 2011:
            The development of 9,000 MW of new power transmission lines in
            Wyoming for export to California and other states would add $12
            billion to $15 billion in total economic output in the State of
            Wyoming (construction plus 20 years of operation). An estimated
            average of 4,000 to 5,900 jobs would be supported from
            construction of infrastructure between 2011 and 2020 and a
            total of 2,300 to 2,600 permanent jobs were estimated during
            operation. New infrastructure considered includes high voltage
            interstate transmission (required to export new electricity
            generation from the state); wind and natural gas-fired
            generation; and a collector system. The premised operating life
            of the generation facilities is 20 years following
            construction; however, transmission lines are expected to be
            operational well beyond the economic life of generation
            facilities.
        With a planned capacity of 3,000 MW, the TWE Project alone could
    deliver approximately one-third of the economic benefits projected by
    this study.
        Local communities in Wyoming, Colorado, Utah and Nevada will
    benefit from tax revenues. TWE, as a 50% owner of the TWE Project, will
    pay property taxes in every state and county that the transmission line
    traverses, augmenting state and local government budgets. As an
    example, the cost of the approximately 55 miles of transmission line
    planned for Carbon County, Wyoming, is about $68.5 million. Based on
    local tax rates, in year one with TWE owning 50% of the TWE Project,
    TWE would pay about $259,000 in property taxes (not including the
    substation/terminal property taxes). The TWE Project will cross at
    least 15 counties, and a complete tax analysis is not yet available,
    but nearly $10 million in additional funding would be contributed to
    mostly rural counties in Wyoming, Colorado, Utah, and Nevada in just
    the first year of the complete TWE Project.
        There are also economic benefits to states like California where
    there is increasing demand for renewable power. Studies by regional
    transmission planning and analysis groups (including the WEIL Group and
    WECC) indicate that substantial savings can be achieved for utilities
    and their customers by accessing higher-quality, lower-cost renewables
    outside of California, such as Wyoming wind.
        According to WECC studies as part of the DOE-sponsored 10-Year
    Regional Transmission Plan, taking 12,000 GWh/year of the lowest-
    ranking California renewable resources currently planned to meet the
    state's 33% RPS, and replacing this block of resources with an equal
    amount of energy from high-quality Wyoming wind resources such as those
    delivered by the TWE Project, would reduce the cost of this block by
    approximately $600 million every year.
    D. Western Area Power Administration's Borrowing Authority
        Western Area Power Administration is a power marketing
    administration witliin the U.S. Department of Energy that markets and
    delivers clean, renewable, reliable, cost-based hydroelectric power and
    related services within a 15-state region of the central and western
    United States. Western owns,
    Barriers
        It has been widely recognized that the regulatory regimes in this
    country that determine investment returns from privately funded
    electric transmission projects are generally geared to intra-state and
    single-service-territory transmission projects with shorter time
    horizons, and do not generally provide adequate incentive for
    developers to build large-scale multistate projects that will take many
    years to develop. \1\ In addition, for large-scale multi-state projects
    in the West, where much of the land is owned by the federal government,
    a developer must clear regulatory hurdles involving multiple federal,
    state and local agencies, where any one government entity can
    effectively have veto authority over an entire project. For this
    reason, private development of multistate large-scale electric
    transmission projects in the West has been almost nonexistent. \2\
    ---------------------------------------------------------------------------
        \1\ This hurdle has been overcome to some degree within organized
    regional transmission markets in the North East and Midwest, but it
    remains a significant problem in the West.
        \2\ See Green Power Superhighways, a joint publication of the
    American Wind Energy Association and the Solar Energy Industries
    Association, http://seia.org/galleries/pdf/GreenPower
    Superhighways.pdf
    ---------------------------------------------------------------------------
        Congress has recognized for years that transmission development has
    not been occurring at the pace needed to meet load growth and ensure
    reliability for our country's security and stability and in particular
    that there is an increasing need for large, long-distance transmission.
    Thus, in the Energy Policy Act of 2005 (EPAct 2005), Congress directed
    the Department of Energy to identify critical transmission-constrained
    areas, referred to as National Interest Electric Transmission
    Corridors, and it gave FERC the authority to issue permits to construct
    or modify transmission facilities in a DOE-designated corridor if it
    found: (1) the state in which the facility is located lacks authority
    to approve the siting of the facility or to consider the interstate
    benefits of the facility; (2) the applicant does not qualify for state
    siting approval because it does not serve end-use customers in the
    state; or (3) the relevant state agency denies or otherwise withholds
    approval for more than one year or conditions its approval so as to
    make the proposal economically unfeasible. \3\
    ---------------------------------------------------------------------------
        \3\ See Regulations for Filing Applications for Permits to Site
    Interstate Electric Transmission Facilities, Dkt. No. RM-06-12, Order
    No. 689 (2006), at P 4. Congress further required that, before issuing
    a permit, FERC must find that the proposed facility: (1) will be used
    in interstate commerce; (2) is in the public interest; (3) will
    significantly reduce transmission congestion to the benefit of
    consumers; (4) is consistent with sound national energy policy and will
    enhance energy independence; and (5) will maximize the transmission
    capabilities of existing towers or structures. Id
    ---------------------------------------------------------------------------
        One of DOE's first designations of a National Interest Electric
    Transmission Corridor was in Western's territory, an area in southern
    California and Arizona, from just north of Los Angeles to the Mexican
    border south of San Diego, and then east to three counties in Arizona.
    DOE is scheduled to begin a second round of national interest
    designations, but a judicial decision has sharply curtailed the value
    of the designation, by declaring that FERC's backstop siting authority
    cannot be exercised when a state has specifically refused to approve a
    project. \4\ Thus, states that act within a year can continue to
    exercise veto authority over the siting of new transmission even in
    declared national interest corridors.
    ---------------------------------------------------------------------------
        \4\ Piedmont Envtl. Council v. FERC, 558 F.3d 304 (4th Cir. 2009),
    cert, denied sub nom. Edison Electric Institute v. Piedmont Envtl.
    Council, U.S. (2010).
    ---------------------------------------------------------------------------
    Western's Transmission Infrastructure Program
        The Western and BPA borrowing authority provided in ARRA was
    intended to help overcome these barriers. Notably, the statute provides
    for Western to partner with private investors in developing
    transmission projects. As noted in the testimony from Western's
    Administrator Tim Meeks in March, Western has established a
    Transmission Infrastructure Program (TIP) to implement its borrowing
    authority. \5\ One of the primary goals of the TIP is to ensure
    repayment of funds for any projects built under the program. Project
    and program principles guide Western's funding of partnerships to
    develop transmission infrastructure that delivers renewable energy to
    markets across the West. Western's participation in individual projects
    is based on these criteria:
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        \5\ http://www.wapa.gov/recovery/programs.htin
    ---------------------------------------------------------------------------
              Facilitates delivery to market of power generated by
            renewable resources constructed or reasonably expected to be
            constructed.
              Is in the public interest.
              Will not adversely impact system reliability or
            operations, or other statutory obligations.
              Reasonable expectation that the project will generate
            enough transmission service revenue to repay the principal
            investment; all operating costs, including overhead; and
            accrued interest.
              Have at least one terminus within Western's service
            territory.
              Provides economic development benefits, including job
            creation.
              Satisfies Western's Open Access Transmission Tariff.
              Technical merits and feasibility.
              Financial stability and capability of potential
            project partners.
              Project readiness.
              Participation in region-wide or interconnection-wide
            planning groups or forums.
        Of particular relevance, in implementing TIP, Western has required
    that, before Western draws funds from Treasury pursuant to its ARRA
    borrowing authority, the project must demonstrate demand, key project
    documents must be executed, and tariffs must be developed with rates
    designed to ensure repayment of borrowed funds. \6\
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        \6\ See, e.g.. http://www.wapa.gov/fedreg/FRNpdfs/frn2010/
    75FRN63826.pdf (Notice of request for Statements of Interest from
    entities interested in purchasing transmission service over TransWest
    Express Transmission Project).
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    E. TWE's Partnership with Western
        Western's partner in the TWE Project, TWE, is a wholly owned
    affiliate of The Anschutz Corporation (TAC), a privately held company
    headquartered in Denver, Colorado. TAC was founded by Philip F.
    Anschutz in 1965, initially as an oil and gas exploration company.
    Today, TAC is a multibillion-dollar diversified company with worldwide
    investments in the fields of energy, ranching and agriculture, real
    estate, lodging, transportation, sports and entertainment,
    entertainment venues, film production, movie theaters, and newspaper
    and internet publishing. TAC supports the TWE Project both financially
    and strategically.
        In April 2009, TWE submitted a response to Western's request for
    proposals under TIP. \7\ Western's evaluation concluded that the TWE
    Project met the TIP criteria and provides Western with an opportunity
    to participate in a viable, large-scale interstate transmission
    project. The TWE Project will deliver a significant amount of economic
    renewable resources to the largest renewable energy markets in the West
    and may link two of Western's regional service territories.
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        \7\ Western received more than 200 responses to its Request for
    Interest.
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        Significantly, TWE has agreed to reduce Western's risk by
    contracting to purchase 1,250 MW of the 1,500 MW of capacity that
    Western would own. These steps all but guarantee that revenue from the
    TWE Project will be there to pay back the U.S. Treasury for any funds
    borrowed in connection with Western's ownership of the TWE Project. In
    addition, the results from Western's Request for Statements of Interest
    published in the Federal Register in October 2010 establish that there
    is overwhelming interest from generation developers in Wyoming in the
    remaining 250 MW to justify Western's potential ownership in the TWE
    Project and its participation in the development phase.
    F. H.R. 2915 to Repeal Western's Borrowing Authority
        On September 14, 2011, U.S. Representative Tom McClintock (CA-4)
    introduced H.R. 2915, which would repeal Western's borrowing authority
    to build electric transmission under section 301 of the Hoover Power
    Plant Act of 1984. \8\
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        \8\ H.R. 2915 does not repeal Bonneville Power's authority even
    though it was also granted under the Recovery Act.
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        The justification for H.R. 2915 relies upon the recent bankruptcy
    of Solyndra, which as discussed above was a loan guarantee for a solar
    company gone bad--a situation that is not comparable to Western's use
    of its borrowing authority, along with significant private capital, to
    build transmission. Although the bill's repeal would not apply to
    projects funded pursuant to this authority that have been approved by
    the Secretary or Deputy Secretary of the U.S. Department of Energy
    before September 15, 2011, or projects deemed ``projects in execution''
    in Western's May 17, 2011, Quarterly Report on Borrowing Authority
    Projects, Western's partnership with TransWest Express LLC would be
    impacted by the repeal.
        Under the current language in H.R. 2915, Western could go forward
    through the development phase, but the bill would, in effect, render
    the Development Agreement with TWE moot. Under the terms of the DA, if
    Western does not go forward to the second phase of ownership and
    construction for any reason including lack of funding, then TWE has to
    repay all the monies expended by Western up to that date with interest.
    So, there would be no point in Western participating in the development
    stage if there is no possibility of it participating in the second
    phase.
        Western chose to split its commitment to the TWE Project into the
    two phases to protect taxpayer dollars. By requiring TransWest Express
    to refund all monies paid by Western in phase one should Western choose
    not to participate, Western was guaranteeing that the loan forgiveness
    provision--a provision also relied upon as justification for H.R.
    2915--that would apply to funds expended to ``study'' projects would
    not be used. Ironically, had Western combined the two phases and
    committed to the project in its entirety, then Western's participation
    in the TWE Project would have been grandfathered under the language of
    the bill. Instead, Western was more cautious, mindful of its duty to
    protect taxpayer funds.
        Western's participation in the TWE Project--one of the most
    important transmission projects in the country--will be a major
    contributor to its success. The elimination of Western's funding
    authority under H.R. 2915 would dissolve this public/private
    partnership based on an unfortunate but incomparable default by
    Solyndra. The attention of Congress should be focused on areas where
    there is a true risk of taxpayers being stuck footing the bill for bad
    investments, not on solid, well-vetted projects backed by solid private
    capital and solid project planning and economics.
                                     ______

        Mr. McClintock. The hearing record will be open for 10
    business days to receive these responses.
        Mr. McClintock. And if there is no further business,
    without objection, the Subcommittee stands adjourned.
        [Whereupon, at 3:55 p.m., the Subcommittee was adjourned.]