[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

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                     COMMITTEE ON NATURAL RESOURCES

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

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

                       Todd Young, Chief of Staff
                      Lisa Pittman, Chief Counsel
                Jeffrey Duncan, Democrat Staff Director
                 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:
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \7\ Western received more than 200 responses to its Request for 
Interest.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \8\ H.R. 2915 does not repeal Bonneville Power's authority even 
though it was also granted under the Recovery Act.
---------------------------------------------------------------------------
    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.]

                                 
