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

      THE AMERICAN ENERGY INITIATIVE, PART 12: IMPACTS OF THE ENVIRONMENTAL
       PROTECTION AGENCY'S NEW AND PROPOSED POWER SECTOR REGULATIONS ON
                              ELECTRIC RELIABILITY

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

                                    HEARING

                                   BEFORE THE

                        SUBCOMMITTEE ON ENERGY AND POWER

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   ----------

                               SEPTEMBER 14, 2011

                                   ----------

                               Serial No. 112-83

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

     THE AMERICAN ENERGY INITIATIVE, PART 12: IMPACTS OF THE ENVIRONMENTAL
       PROTECTION AGENCY'S NEW AND PROPOSED POWER SECTOR REGULATIONS ON
                              ELECTRIC RELIABILITY

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

                                    HEARING

                                   BEFORE THE

                        SUBCOMMITTEE ON ENERGY AND POWER

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                               SEPTEMBER 14, 2011

                                   __________

                               Serial No. 112-83

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

                                    _____

                      U.S. GOVERNMENT PRINTING OFFICE

    75-772 PDF                WASHINGTON : 2012
    -----------------------------------------------------------------------
    For sale by the Superintendent of Documents, U.S. Government Printing
    Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
    area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC
    20402-0001

                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman

    JOE BARTON, Texas                    HENRY A. WAXMAN, California
      Chairman Emeritus                    Ranking Member
    CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
    ED WHITFIELD, Kentucky                 Chairman Emeritus
    JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
    JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
    MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
    GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
    LEE TERRY, Nebraska                  ANNA G. ESHOO, California
    MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
    SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
      Vice Chairman                      DIANA DeGETTE, Colorado
    JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
    TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
    MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
    MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
    BRIAN P. BILBRAY, California         JAY INSLEE, Washington
    CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
    PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
    STEVE SCALISE, Louisiana             JIM MATHESON, Utah
    ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
    CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
    GREGG HARPER, Mississippi            DORIS O. MATSUI, California
    LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin
    BILL CASSIDY, Louisiana              Islands
    BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
    PETE OLSON, Texas
    DAVID B. McKINLEY, West Virginia
    CORY GARDNER, Colorado
    MIKE POMPEO, Kansas
    ADAM KINZINGER, Illinois
    H. MORGAN GRIFFITH, Virginia

                                     _____

                        Subcommittee on Energy and Power

                             ED WHITFIELD, Kentucky
                                     Chairman
    JOHN SULLIVAN, Oklahoma              BOBBY L. RUSH, Illinois
      Vice Chairman                        Ranking Member
    JOHN SHIMKUS, Illinois               JAY INSLEE, Washington
    GREG WALDEN, Oregon                  KATHY CASTOR, Florida
    LEE TERRY, Nebraska                  JOHN D. DINGELL, Michigan
    MICHAEL C. BURGESS, Texas            EDWARD J. MARKEY, Massachusetts
    BRIAN P. BILBRAY, California         ELIOT L. ENGEL, New York
    STEVE SCALISE, Louisiana             GENE GREEN, Texas
    CATHY McMORRIS RODGERS, Washington   LOIS CAPPS, California
    PETE OLSON, Texas                    MICHAEL F. DOYLE, Pennsylvania
    DAVID B. McKINLEY, West Virginia     CHARLES A. GONZALEZ, Texas
    CORY GARDNER, Colorado               HENRY A. WAXMAN, California (ex
    MIKE POMPEO, Kansas                      officio)
    H. MORGAN GRIFFITH, Virginia
    JOE BARTON, Texas
    FRED UPTON, Michigan (ex officio)

                                      (ii)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Ed Whitfield, a Representative in Congress from the
      Commonwealth of Kentucky, opening statement....................     1
        Prepared statement...........................................     3
    Hon. Henry A. Waxman, a Representative in Congress from the State
      of California, opening statement...............................     5
    Hon. Pete Olson, a Representative in Congress from the State of
      Texas, opening statement.......................................     6
    Hon. Joe Barton, a Representative in Congress from the State of
      Texas, opening statement.......................................     7
    Hon. John Shimkus, a Representative in Congress from the State of
      Illinois, opening statement....................................     7
    Hon. Bobby L. Rush, a Representative in Congress from the State
      of Illinois, opening statement.................................     8
    Hon. Lee Terry, a Representative in Congress from the State of
      Nebraska, prepared statement...................................   477

                                   Witnesses

    Jon Wellinghoff, Chairman, Federal Energy Regulatory Commission..    26
        Prepared statement...........................................    28
        Answers to submitted questions...............................   479
    Philip D. Moeller, Commissioner, Federal Energy Regulatory
      Commission.....................................................    38
        Prepared statement...........................................    40
        Answers to submitted questions...............................   491
    Marc Spitzer, Commissioner, Federal Energy Regulatory Commission.    59
        Prepared statement...........................................    61
        Answers to submitted questions...............................   499
    John R. Norris, Commissioner, Federal Energy Regulatory
      Commission.....................................................    65
        Prepared statement...........................................    67
        Answers to submitted questions...............................   509
    Cheryl A. LaFleur, Commissioner, Federal Energy Regulatory
      Commission.....................................................   206
        Prepared statement...........................................   208
        Answers to submitted questions...............................   517
    Jeff Davis, Commissioner, Missouri Public Service Commission.....   270
        Prepared statement...........................................   272
    Stan Wise, Chairman, Georgia Public Service Commission...........   279
        Prepared statement...........................................   281
    Jon W. McKinney, Commissioner, West Virginia Public Service
      Commission.....................................................   306
        Prepared statement...........................................   308
    Mark L. Shurtleff, Attorney General, Utah........................   341
        Prepared statement...........................................   343
    H.B. ``Trip'' Doggett, President and CEO, Electric Reliability
      Council of Texas...............................................   353
        Prepared statement...........................................   354
    Susan F. Tierney, Managing Principal, Analysis Group.............   363
        Prepared statement...........................................   365
        Answers to submitted questions...............................   525
    John Hanger, President, Hanger Consulting, LLC...................   403
        Prepared statement...........................................   405

                               Submitted Material

    Letter, dated September 12, 2011, from Robert C. Flexon,
      President and Chief Executive Officer, Dynegy, to Mr. Rush,
      submitted by Mr. Rush..........................................    10
    Letter, dated September 14, 2011, from Hon. Tim Scott, a
      Representative in Congress from the State of South Carolina, to
      Mr. Upton, submitted by Mr. Gardner............................    14
    Editorial, ``An EPA Moratorium,'' published August 29, 2011, in
      The Wall Street Journal, submitted by Mr. Shimkus..............   219
    Article, ``Energy Regulatory Chief Says New Coal, Nuclear Plants
      May Be Unnecessary,'' by Noelle Straub and Peter Behr,
      published April 22, 2009, in The New York Times, submitted by
      Mr. Shimkus....................................................   222
    Letter, dated September 8, 2011, from Dave Heineman, Governor of
      the State of Nebraska, to Lisa Jackson, Administrator,
      Environmental Protection Agency, submitted by Mr. Terry........   241
    Article, ``New EPA regulations could be costly to G.I. power
      consumers,'' by Robert Pore, published September 7, 2011, in
      The Grand Island Independent, submitted by Mr. Terry...........   243
    Article, ``New EPA rules for coal plants could cost millions;
      lawsuit in works by attorney general,'' by Algis J. Laukaitis,
      published September 12, 2011, in The Lincoln Journal Star,
      submitted by Mr. Terry.........................................   246
    Statement, dated September 14, 2011, of Gerry Cauley, President
      and CEO, North American Electric Reliability Corporation,
      submitted by Mr. Whitfield.....................................   256
    Letter, dated August 4, 2011, from Michael L. Krancer, Secretary,
      Pennsylvania Department of Environmental Protection, to
      Environmental Protection Agency, submitted by Mr. Murphy.......   434
    Corrected comments, dated August 4, 2011, of PJM Interconnection,
      LLC, submitted by Mr. Murphy...................................   439

     THE AMERICAN ENERGY INITIATIVE, PART 12: IMPACTS OF THE ENVIRONMENTAL
       PROTECTION AGENCY'S NEW AND PROPOSED POWER SECTOR REGULATIONS ON
                              ELECTRIC RELIABILITY

                                  ----------

                         WEDNESDAY, SEPTEMBER 14, 2011

                      House of Representatives,
                      Subcommittee on Energy and Power,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 9:19 a.m., in
    room 2322 of the Rayburn House Office Building, Hon. Ed
    Whitfield (chairman of the subcommittee) presiding.
        Members present: Representatives Whitfield, Shimkus,
    Walden, Terry, Burgess, Bilbray, McMorris Rodgers, Olson,
    McKinley, Gardner, Barton, Rush, Inslee, Castor, Markey, Green,
    Capps, Doyle, and Waxman (ex officio).
        Staff present: Charlotte Baker, Press Secretary; Ray Baum,
    Senior Policy Advisor/Director of Coalitions; Anita Bradley,
    Senior Policy Advisor to Chairman Emeritus; Maryam Brown, Chief
    Counsel, Energy and Power; Patrick Currier, Counsel, Energy and
    Power; Garrett Golding, Professional Staff Member, Energy and
    Power; Cory Hicks, Policy Coordinator, Energy and Power; Heidi
    King, Chief Economist; Mary Neumayr, Senior Energy Counsel;
    Katie Novaria, Legislative Clerk; Jeff Baran, Democratic Senior
    Counsel; Greg Dotson, Democratic Energy and Environment Staff
    Director; Caitlin Haberman, Democratic Policy Analyst; and
    Alexandra Teitz, Democratic Senior Counsel, Energy and
    Environment.

      OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
               CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

        Mr. Whitfield. This hearing will come to order. This is the
    12th day of our American Energy Initiative hearing, and today
    we are going to focus on the impact of the EPA's new and
    proposed power sector regulations and the reliability of the
    electric power grid.
        The Energy Information Administration projects that
    electricity demand will increase 31 percent by 2035. That means
    new electric power plants will more than likely have to be
    built, and that includes all kinds of power plants. But getting
    EPA approval to do so was already enough of a challenge before
    utility MACT, new source performance standards for greenhouse
    gases, interstate transport, cooling towers, coal combustion
    residuals, and all the other new and pending regulations were
    added to the mix. As it is, this Administration has brought
    construction of new coal-fired generation to a near standstill,
    and things are only going to get harder as additional
    regulations take effect.
        At the same time, existing facilities are under threat.
    EPA's regulations are likely to force accelerated retirements
    of many coal-fired plants that are still badly needed. Studies
    from the North American Electric Reliability Corporation and
    several others estimate serious risks to reliability from these
    retirements.
        Add to that the units facing significant downtime as they
    are retrofit to comply with the host of new regulations, and
    there is genuine concern whether there will be enough electric
    generating capacity to meet the Nation's growing demand. The
    impacts of more expensive electricity are bad enough, and alone
    are reason to closely scrutinize the many new regulations
    likely to raise them. But the potential consequences of
    unreliable electricity, on the economy, on the military and on
    the lives of the American people, are even more disturbing.
        We need to know the cumulative impact on reliability of all
    the rules that are in the works in the pipeline, which is
    precisely why the TRAIN Act, in our view, is so important. This
    is a very serious problem, but I have yet to see serious
    treatment of it by EPA. The agency has shown insufficient
    concern over the cumulative burden of its regulations as it
    moves ahead to implement them. This attitude of ``regulate
    first, ask questions later'' needs to end.
        Nor is the EPA coordinating with the Federal Energy
    Regulatory Commission as well as other federal and State-level
    organizations responsible for the reliability of the grid.
    Needless to say, for EPA to embark on a regulatory agenda that
    threatens reliability without working closely with FERC and
    other federal agencies is simply unacceptable.
        I know that 14 different entities have examined the
    potential loss of energy-producing power, and they range
    anywhere from almost 80 gigawatts down to 10 gigawatts, and on
    the preliminary assessment, the lowest prediction of retired
    capacity was EPA, but the mere fact that we have so many
    different agencies with such different views on the capacity
    impact certainly would illustrate that we need better
    coordination on this issue.
        And so I look forward today to learning more from the
    leadership at FERC who are responsible for reliability on
    precisely what their views are on this issue and how
    comfortable they feel in assuring the American people that
    reliability will not be an issue.
        [The prepared statement of Mr. Whitfield follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. At this time I would like to recognize the
    gentleman from Illinois.
        Mr. Rush. I want to yield, Mr. Chairman, to the ranking
    member.
        Mr. Whitfield. OK. I will recognize the ranking member, Mr.
    Waxman of California, for his opening statement.

    OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. Waxman. Thank you, Mr. Chairman, and thank you, Mr.
    Rush, for the opportunity to make this opening statement.
        This Republican House has been the most anti-environment in
    history. And today's hearing builds on that unfortunate record
    with yet another attack on EPA's efforts to reduce air
    pollution.
        The rules under assault today will improve the health of
    millions of Americans. The first rule, the mercury and air
    toxics rule, will prevent up to 17,000 premature deaths each
    year. The benefits of this rule sharply exceed the costs by as
    much as 13 to one.
        The second rule, EPA's cross-state air pollution rule, is
    also a tremendous victory for public health. Each year, this
    rule will prevent up to 34,000 premature deaths. In 2014, this
    rule will cost $800 million but will produce annual health
    benefits to Americans of between $120 billion and $280 billion.
    That is an outstanding return on investment for the American
    people.
        Earlier this year, when Republicans wanted to block EPA's
    climate rules, they said they wanted to clean up other air
    pollution, just not greenhouse gases. Yesterday, when our
    committee voted to block air toxics rules for boilers and
    cement kilns, they said they care about air pollution but
    denied the health benefits from reducing air toxics such as
    mercury. Now, they are attacking the cross-state air pollution
    rule, which controls fine particulates. They ignore the severe
    effects of particulates on health documented in reams of peer-
    reviewed studies, and they claim that the rules will force so
    many coal plants to shut down that the reliability of our
    electric grid will be threatened.
        Well, EPA examined this question and found that its rules
    will result in only a modest level of retirements, of older,
    dirtier, less efficient power plants, and that these
    retirements are not expected to have an adverse impact on the
    adequacy of electric generation. EPA's conclusions have been
    confirmed by several independent studies.
        In August 2010, the Analysis Group concluded that ``the
    electric industry is well positioned to comply with EPA's
    proposed air regulations without threatening electric system
    reliability.'' And they reaffirmed this finding in a June 2011
    report.
        The Bipartisan Policy Center's June 2011 analysis of the
    rules also found that ``scenarios in which electric system
    reliability is broadly affected are unlikely to occur.'' In a
    December 2010 study, Charles River Associates found that
    ``implementing EPA air regulations will not compromise electric
    system reliability.''
        The Congressional Research Service and others have also
    examined the issue. The stack of independent studies agrees on
    the key points. First, there is currently a substantial amount
    of excess generation capacity from natural gas plants built
    during the last decade. The Analysis Group found that the
    electric sector is expected to have over 100 gigawatts of
    surplus capacity in 2013. That is much more capacity than
    anyone has suggested might retire as a result of EPA's rules.
        Second, the electric industry has a proven track record of
    rapidly installing large amounts of new capacity when it is
    needed. From 2000 to 2003, utilities added over 200 gigawatts
    of new capacity, and energy efficiency can often reduce the
    amount of needed generation even faster.
        Third, the potential retirements are of old, small,
    inefficient, less-used coal plants that lack pollution
    controls. On average, these units are 55 years old. According
    to CRS, the main threat to these plants is cheap natural gas.
    Regardless of EPA's rules, these old plants are being replaced
    by more efficient natural gas plants.
        Today, we will hear a lot about an informal assessment by
    FERC's staff that 81 gigawatts of generation are likely to
    close as a result of EPA's rules. Citing this assessment is a
    mistake, as we will hear today from FERC's chairman. This
    assessment was based on inaccurate assumptions and inadequate
    data, and it is out of date. It does not reflect the final EPA
    rules, as FERC has acknowledged.
        The NERC and industry studies are also based on inaccurate
    assumptions of what EPA rules would require. The results are
    unreliable because they assumed standards far more burdensome
    than those EPA adopted.
        The reliability of the electric grid is a serious topic,
    and it should not be used as an unfounded excuse to block
    important public health protections.
        Thank you, Mr. Chairman.
        Mr. Whitfield. Thank you.
        At this time I recognize the gentleman from Texas, Mr.
    Olson, for his opening statement.

       OPENING STATEMENT OF HON. PETE OLSON, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF TEXAS

        Mr. Olson. Thank you, Mr. Chairman. Thank you for your
    leadership in hosting the 12th hearing of the American
    Initiative.
        When the Obama Administration's Environmental Protection
    Agency blindsided Texas by including in its cross-state
    pollution rule at the last minute, Texas utility companies
    warned that the decision would lead to a shortage of
    electricity, layoffs and higher energy prices. That was over 2
    months ago. The EPA went full steam ahead with its rulemaking
    despite these concerns, and now we have learned that Luminant,
    the largest power generator in Texas, will close Texas lignite
    mines, idle two power plants and lay off 500 people. Luminant
    is one of the latest victims of an agency that is out of
    control. I hear it from my constituents, other Members of
    Congress and even President Obama himself when he withdrew a
    poorly drafted EPA ozone rule that was bad for the economy.
        Today, we will hear from public utility commissioners and
    independent system operations. They are not here to make a
    political statement. They are here to tell us that there is no
    realistic way to even partially mitigate the substantial losses
    of available operating capacity that will result from this
    rule. Hopefully, members on both sides will heed their message
    and work together to find a more sensible solution.
        I thank you, and yield to my colleague from Texas, the
    chairman emeritus, Mr. Barton.

       OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
                    CONGRESS FROM THE STATE OF TEXAS

        Mr. Barton. Thank you, Mr. Olson.
        I want to welcome the FERC commissioners. I think it has
    been a while since we have had all five of you, so we are glad
    to have you.
        It was interesting to me listening to Ranking Member
    Waxman. His assessment seems to be that we just overreact to
    all these EPA rules, that they are really not going to have
    much of an impact and we just need to hug each other and things
    will work out. Well, you folks are an independent agency, and
    EPA says all their rules might require 10-megawatt retirement.
    I think they say 10. You say 131. Well, that is quite a
    difference. Even if you split the difference, it is still
    approximately 70 megawatts. That is a lot of power. As my
    friend, Mr. Olson, just pointed out, this cross-state air
    transport rule that the EPA popped on us a month or so ago is
    going to cost a minimum of 500 jobs in my district, probably
    another 2,000 jobs that are directly impacted, and EPA's
    reaction to that was, the company that announced the layoffs
    yesterday just doesn't understand.
        Well, my good friends at the FERC, today we want to hear
    your honest assessment, whatever it is, pro or con. This
    subcommittee wants the facts. You are all appointed by the
    President and your job is to give the best assessment as you
    can. We need to build a lot of power plants in this country in
    the next 10 years. It doesn't look like anybody is going to
    build a coal plant. It is almost impossible to permit a nuclear
    plant. That kind of leaves it to natural gas and perhaps wind
    power in certain areas of the country.
        So Mr. Chairman, I will put my formal statement in the
    record, but I am delighted to have the FERC commissioners and
    the panelists that are going to follow them, and I look forward
    to an interesting hearing.
        Mr. Shimkus. Would the gentleman from Texas who originally
    had the time, Mr. Olson----
        Mr. Barton. I yield to the gentleman from----
        Mr. Shimkus. Would you yield?
        Mr. Barton. If I am allowed to.

      OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Shimkus. Thank you. I also want to just welcome the
    commissioners, and having the EPA make a determination of the
    reliability of the generating capacity of this country and the
    transmission grid is like asking you to make an analysis of
    nitrous oxide emissions or asking you to make a Safe Drinking
    Water Act. We look forward to your analysis. I would let
    Chairman Waxman know that it is not only your own analysis, and
    I will have this up on the screen when we go to questions, but
    FERC is at 70 for moderate restriction, Bernstein and
    Associates 65 gigawatts. EPA is the lowest analysis of the loss
    of power than any either industry-selected or non-industry-
    selected evaluation of this. This is critical for the cost of
    energy and jobs in this country, and I agree with Mr. Barton
    that we really need your forthright and honest testimony the
    effect it is going to have on our consumers and jobs in this
    country.
        Mr. Whitfield. The gentleman's time is expired. At this
    time I will recognize the gentleman from Illinois, Mr. Rush,
    for his 5-minute opening statement.

     OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Rush. I want to thank you, Mr. Chairman, and I want to
    thank all the commissioners as well as your other expert
    witnesses for appearing before this subcommittee today.
        Mr. Chairman, today we are holding a hearing to determine
    whether or not there is a need to further delay critical Clean
    Air Act rules including the Air Toxics Rule and the Cross-State
    Air Pollution Rule in order to address reliability issues.
        Mr. Chairman, in my opinion, this is yet another all-out
    assault, attack on the EPA. It is, as I might borrow my friend
    from Illinois's phraseology, yet another Republican jihad,
    assault on the EPA. When will it end? I guess not until after
    the elections in November of 2012.
        There has been much debate and widely divergent estimates
    over grid reliability issues stemming from the number of power
    plants that would need to be retired once these rules go into
    effect. As a matter of fact, some earlier reports speculated
    that a larger number of power plants up to 80 gigawatts or more
    may be retired as a result of EPA's regulations. However, Mr.
    Chairman, it must not go unsaid that these reports were based
    on the worst-case scenarios and the erroneous assumptions about
    what EPA might propose. More recent independent reports which
    look at what EPA actually proposed, including the Bipartisan
    Policy Center's entitled ``Environmental Regulations and
    Electric System Reliability'' only project 15 to 18 gigawatts
    of incremental coal plant retirements by 2015. This represents
    less than 6 percent of total coal-fired capacity and less than
    2 percent of total generating capacity.
        Additionally, many independent studies predict that these
    rules, including the Air Toxics Rule and the Cross-State Air
    Pollution Rule, will not threaten the economic health of the
    Nation but instead will in fact stimulate job growth while
    protecting the public health.
        Under these new EPA air regulations, a small percentage of
    the oldest power plants will need to install pollution-control
    equipment to continue operations. The capital investments in
    pollution controls and new generation will create an estimated
    1.46 million jobs or an average of 290,000 year-round jobs
    between 2010 and 2015. It is job stimulation in any way you
    want to look at it.
        Due to abundant low-priced domestic natural gas supplies
    and reduced electricity demand, some electricity generators may
    elect to retire the old inefficient plants rather than invest
    capital to install pollution controls. This is not a bad thing;
    it is a good thing.
        A new report from PJM Interconnection, the Nation's largest
    transmission operator, says since the reliability is not
    threatened by coal-fired power plant retirements spurred by new
    EPA rules despite the coal industry's claims that the impacts
    could be severe.
        I have, Mr. Chairman, and I want to insert into the record
    a letter from Dynegy, a Houston-based coal-fired power company
    which supplies the Midwest Independent System Operator in
    Illinois and who is supportive of the EPA's rule.
        Mr. Whitfield. Without objection.
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Rush. The Congressional Research Service found no
    evidence of the majority's predicted train wreck but instead
    found that the primary impacts that the EPA rules will be on
    the coal-fired power plants more than 40 years old that have
    not installed pollution controls. Many of these plants are
    inefficient and they should be replaced and they are being
    replaced regardless of EPA's rules.
        Additionally, a Charles River Associates' report concluded
    that the electric system reliability can be maintained while
    improving public health through coal-to-gas conversion, new
    gas-fired generation, expansion of load management programs and
    established market and regulatory safeguards.
        So Mr. Chairman, I join with you and the rest of the
    Republican jihadists. I am very eager to hear the testimony
    from the FERC commissioners as well as other witnesses here
    today over whether the EPA and other federal and State agencies
    have taken practical steps to plan for the implementation of
    these rules and have adopted approaches to ensure the
    electricity industry can comply without threatening electric
    system reliability.
        Mr. Chairman, I thank you and I yield back the balance of
    my time, all of it.
        Mr. Whitfield. At this time before we go to the testimony,
    I would like to recognize Mr. Gardner for the purpose of
    requesting putting into the record some documentation.
        Mr. Gardner. Thank you, Mr. Chairman. I would ask the
    letter from Tim Scott regarding this hearing be submitted for
    the record with unanimous consent.
        Mr. Whitfield. Without objection. Thank you.
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. At this time I also want to welcome the FERC
    commissioners. We appreciate very much your taking time to be
    here. We are sorry for the delay this morning.
        We have with us today the Chairman of the Federal Energy
    Regulatory Commission, the Honorable Jon Wellinghoff. Also,
    Commissioner Phillip Moeller, Marc Spitzer, John Norris and
    Cheryl LaFleur, and at this time, Chairman Wellinghoff, we will
    recognize you for your 5-minute opening statement and then we
    will just go down the line.

        STATEMENTS OF JON WELLINGHOFF, CHAIRMAN, FEDERAL ENERGY
    REGULATORY COMMISSION; PHILIP D. MOELLER, COMMISSIONER, FEDERAL
       ENERGY REGULATORY COMMISSION; MARC SPITZER, COMMISSIONER,
         FEDERAL ENERGY REGULATORY COMMISSION; JOHN R. NORRIS,
    COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION; AND CHERYL
     A. LAFLEUR, COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION

                      STATEMENT OF JON WELLINGHOFF

        Mr. Wellinghoff. Thank you, Mr. Chairman and members of the
    committee. I appreciate the opportunity to be here and testify
    before you today.
        Electric reliability and environmental protection are both
    important to this country's future. The issues are related as,
    for example, regulations that the EPA recently finalized or is
    considering will affect the operation of some electric-
    generating units.
        With sufficient information and time, the electric industry
    can plan to meet both its reliability and environmental
    obligations. Most notably, existing planning authorities with
    developed modeling capabilities have or could obtain all the
    necessary data and tools to analyze the potential local and
    regional reliability impacts stemming from the EPA regulations.
    These planning authorities provide the appropriate forums for
    addressing this issue. Some are already taking steps to account
    for implementation of these EPA regulations. For planning
    authorities to conduct these analyses, they need early notice
    of retirements to accurately identify and address reliability
    issues.
        The Commission also has a role to play with respect to
    electric reliability. In general, the Commission has used its
    existing authority in the past to protect reliability. To this
    end, the Commission has overseen the establishment of mandatory
    and enforceable standards that protect the reliability of the
    bulk power system. Looking forward, the Commission does and
    will, for example, review studies to determine the changes that
    occur due to changes in mix and location of resources in a
    region as well as planning-related proposals that account for
    implementation of these EPA regulations.
        The Commission also can and will share our staff's
    expertise with the EPA when appropriate. Commission staff has
    had numerous consultations with EPA staff on issues related to
    these EPA regulations including informal assessments that each
    has conducted. Commissioner staff's informal assessments of
    generator retirements are inadequate to be used as a basis for
    decision making. More generally, it is important to recognize
    that although the Commission is well suited and able to perform
    its statutory duties including those with respect to
    reliability, it does not possess the data nor the models
    necessary to replace the industry's individual and collective
    planning processes in addressing the potential local and
    regional impacts of these EPA regulations on electric
    reliability.
        That completes my summary of my testimony. Thank you, Mr.
    Chairman.
        [The prepared statement of Mr. Wellinghoff follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you.
        Mr. Moeller, you are recognized for 5 minutes.

                     STATEMENT OF PHILIP D. MOELLER

        Mr. Moeller. Thank you, Mr. Chairman and Ranking Member
    Rush, members of the committee. It is a pleasure to be here
    today. Thank you for inviting us to testify and your interest
    in this matter because it is of great importance to the Nation.
        At FERC, our statutory interest in this is primarily having
    to with bulk system electric reliability as that is the
    responsibility that you gave us in 2005 under Section 215 of
    the Federal Power Act but we also have an interest in policies
    that can affect rates because of our statutory direction there
    as well.
        I believe this Nation can retire a significant amount of
    existing generation. In fact, nearly all of our existing
    generation will be retired and replaced within the next 40
    years. The key questions are which plants are going to be
    retired, where are they and what is a manageable time frame in
    which to retire them.
        In retiring a significant amount of existing generation
    within a short period of time, though, does have cost impacts
    and so while there will be health benefits to closing certain
    plants, there are also consequences to rising electricity
    rates.
        Now, one common assumption is that many of these coal-fired
    plants, especially the baseload ones, will be replaced with new
    generation fueled by natural gas. But that assumption is based
    on the fact that we have new domestic supplies of natural gas,
    largely from shale deposits, that have been keeping prices in a
    moderate level, that appear to be a moderate level going out in
    the futures markets. But if there are legislative or regulatory
    efforts to restrict this new supply of gas, the price of
    shutting these coal plants will rise significantly, and in
    addition, the Nation's natural gas pipeline network will need
    to be expanded to meet this increased demand to keep prices
    reasonable. At a minimum, this will take a few years.
        Now, the suite of proposed EPA rules and the timelines
    associated with each of these proposed rules impact different
    regions in different ways, and this adds to the complexity of
    developing solutions. Although some regions do have excess
    generating capacity and can absorb retirement, the laws of
    physics dictate that analyzing the impact must be done on a
    granular level down to the specific load pockets that are
    affected. In my letter to Senator Murkowski that I attached to
    my testimony, I provide a case study of the successful
    retirement of four plants in the Philadelphia area, but there
    were challenges and costs associated with those retirements.
        Now, I have called for FERC to be more involved in
    analyzing the EPA rules from a reliability standpoint and a
    more open process for public input. Given the dynamic nature of
    the rulemaking process, we can't expect to have a perfect
    analysis of the impacts but we can make our best effort
    involving EPA, DOE, NERC, regions. The State utility
    commissions would be essential.
        In addition, there have been some other ideas and some
    other measures that have been suggested to minimize the
    disruption to the electric sector. Clarifying the conflict
    between the Clean Air Act and the Federal Power Act when
    reliability is at stake is one idea. Determining each agency's
    statutory authorities for reliability conditions is another,
    and requiring more advance notice of plant retirements could be
    helpful.
        Again, I appreciate the chance to testify before you, your
    interest in this issue, and I look forward to answering any
    questions you may have.
        [The prepared statement of Mr. Moeller follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you, Mr. Moeller.
        Mr. Spitzer, you are recognized.

                       STATEMENT OF MARC SPITZER

        Mr. Spitzer. My name is Marc Spitzer and I am a member of
    the Federal Energy Regulatory Commission. I thank you for the
    opportunity to appear before you today to discuss my views on
    the potential impacts of the Environmental Protection Agency's
    new and proposed power sector regulations on electricity
    reimbursement.
        In the Energy Policy Act of 2005, Congress assigned FERC
    authority with respect to the reliability of the bulk power
    system. I remain committed, as do each of my colleagues, to
    ensuring the reliable operation of our Nation's electric grid.
    Reliable service of electricity is essential to the health,
    welfare and safety of the American people and necessary to
    serve our economy. However, I recognize that environmental
    protection laws and regulations are important to the well-being
    of our Nation as well. The United States has superb records in
    both environmental protection and electric reliability.
        The issue before us today is how to best address the
    potential impacts of the EPA's new and proposed power sector
    regulations on the reliability of the Nation's bulk power
    system. I have several suggestions regarding the concerns
    raised.
        First, FERC and the EPA need to be proactive to ensure
    reliability concerns are considered and addressed in any
    analysis by the EPA of its environmental regulations affecting
    utilities. To this end, I recommend that FERC and EPA continue
    their dialog but in a more formalized and expansion fashion.
    Given the potential impacts of EPA's proposed rules on the bulk
    power system, such coordination is critical to ensuring that
    EPA does not enforce its rules in a vacuum.
        Second, the electric industry recognizes its obligation to
    comply with both environmental regulations as well as FERC-
    approved reliability standards and to plan their systems to
    reliably serve customers while complying with environmental
    requirements. It is the regulated entity, whether an individual
    utility or an independent system operator regional transmission
    organization, with better knowledge of its operations, needs
    and requirements that is in the best position to determine
    through its planning process how it will meet the various
    regulatory requirements that it faces. Decisions as to whether
    a unit is retired or retrofitted are typically made at the
    local or State level and State utility regulators generally
    play a significant role in resource adequacy decisions as well
    as compliance with EPA's proposed regulations. My concern is
    that regulated entities must have adequate time to plan their
    systems to comply with the rules that the EPA promulgates and
    with the FERC-approved reliability standards. Inadequate time
    to comply with the EPA's proposed regulations may result in
    users, owners and operations of the bulk power system being
    compelled by their government to choose between compliance with
    environmental laws or with FERC-approved reliability standards
    and then a face a penalty from one of these agencies. Regulated
    entities should not be put in a position of having to elect
    which agency's penalty they would rather face. Requiring public
    utilities to make such a Hobson's choice does not serve
    consumers and frankly is not good government.
        As an example of one way to address this timing concern, in
    comments to the EPA certain of the ISO/RTOs propose a
    reliability safety valve that would permit a case-specific
    extension of time for compliance by a retiring generator needed
    to implement reliability solutions to replace the resource. I
    suspect it will be a rare situation when a regulated entity
    finds itself after having adequate time for planning in a
    position of having to choose between compliance with one
    regulator's rules over another's. It should be the duty of the
    regulators to work together and with the regulated entity to
    find a resolution that best assures reliable operation of the
    electric grid and compliance with environmental standards
    without violation of either regulator's rules.
        Mr. Chairman, I thank you for the opportunity to provide my
    views on these important matters and I would be pleased to
    answer your questions.
        [The prepared statement of Mr. Spitzer follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you, Mr. Spitzer.
        Mr. Norris, you are recognized for 5 minutes.

                      STATEMENT OF JOHN R. NORRIS

        Mr. Norris. Thank you, Mr. Chairman, Representative Rush
    and members of the subcommittee for inviting me here today. My
    name is John Norris and I am a commissioner with the Federal
    Energy Regulatory Commission.
        As I stated in my written testimony submitted for today's
    hearing, I am sufficiently satisfied that the reliability of
    the electric grid can be adequately maintained as compliance
    with EPA's regulations is achieved.
        Why do I say ``sufficiently''? Because, frankly, I don't
    think we can ever be totally satisfied. Situations occur every
    day that impact the reliability of the electric grid. I believe
    the key is to be vigilant in protecting the grid from a myriad
    of vulnerabilities while being cognizant of the costs, while
    maintaining a reliable grid, and being able to promptly address
    new and emerging threats to reliability.
        Nearly every decision involving reliability involves
    choices, choices between competing variables like cost, like
    level of reliability, environmental protections and more. The
    situation we face with the EPA rules is no different. That is
    why we have tools developed for meeting reliability and
    electricity supply challenges. So my colleagues have already
    cited the tool that you gave us with EPACT 2005 with the tools
    regarding reliability standards and the enforcement and penalty
    provisions that we have to oversee those standards with
    reliability. That is a tool we have going forward to address
    reliability concerns.
        FERC has other places in place as does the DOE, as does the
    EPA and even the President to deal with reliability concerns
    going forward. Specifically under our jurisdiction at FERC,
    there are markets in place under our jurisdiction to provide
    market signals to the upcoming rules and costs associated with
    them can produce the most effective solutions to meet the
    resource needs for implementing these rules. These markets have
    fostered the development of new capacity resources, demand-side
    resources, new technologies like energy storage and more that
    currently are meeting our needs and will in the future. I have
    confidence these same markets will enable us to address the
    resource needs as a result of the EPA rules. That is not say
    there will not be challenges, and we may need to adopt new
    market rules to deal with situations that arise for
    specifically addressing the impact of these EPA rules but that
    is not new or a reason to delay the rules. The transmission
    planning regions and processes under FERC's jurisdiction that
    we have established with Rule 890, Order 890, and recent Order
    1000 have put in place tools needed for transmission planning
    so that resources are there to address these types of
    challenges.
        There have been numerous studies conducted regarding the
    impact of the EPA rules and the impact they have on resource
    adequacy and reliability. The biggest takeaway I have from
    these studies is there is a wide range of potential outcomes
    and a wide range that is driven by many different scenarios the
    studies have studied for the many possible rules EPA may
    determine or may make final.
        But all of these studies reached the conclusion that there
    will adequate resources available. The challenge is, how do we
    make sure we apply the tools we have which we do every day in
    addressing reliability? These studies also revealed there area
    number of factors outside the EPA rules that are changing the
    makeup of our electric generation today largely driven by the
    market and largely driven by low natural gas prices as multiple
    studies have indicated. There is a transition occurring. We
    have a tremendous amount of our generation fleet today.
    Unfortunately, I would like to say unlike you and I, we can
    handle being members of AARP but I am not sure our electric
    fleet should be. We have an opportunity in this country to make
    a more efficient electric generation fleet to serve our needs
    going forward. This just presents another challenge of how we
    change that fleet out but it is happening right today
    irrespective of these EPA rules. With a marketplace as we have
    in place to make this transition most efficiently than what is
    already happening in the marketplace with natural gas and the
    change out of our generation, this is an opportunity to address
    health concerns and make our energy system more efficient for a
    more efficient economy in the future. We should not shy away
    from it. I don't think another study about potential outcomes
    or different scenarios will add to our ability to address
    reliability. We have tools in place today that if we use those
    tools, we continue to be diligent, we will be able to
    accommodate the impact of these EPA regulations.
        So thank you for the opportunity to share with you today.
        [The prepared statement of Mr. Norris follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you.
        Ms. LaFleur, you are recognized for 5 minutes.

                     STATEMENT OF CHERYL A. LAFLEUR

        Ms. LaFleur. Thank you very much, Mr. Chairman, Ranking
    Member Rush and members of the subcommittee. I also very much
    appreciate the opportunity to testify today.
        My name is Cheryl LaFleur. In July 2010, I was confirmed as
    a commissioner of the Federal Energy Regulatory Commission. In
    my past career, I had the privilege of serving electric and
    natural gas customers in New England and New York. That
    experience taught me firsthand how important electric
    reliability is to real people and real communities. Since
    joining the Commission a little over a year ago, I've made
    reliability one of my top priorities.
        For some time now, we have been hearing about the EPA's
    proposed air and water regulations and their potential to
    affect our energy supply. Although not all of the regulations
    are final, I believe it is important to consider them as a
    package when assessing their potential affect on reliability.
    This is because the owner of a power plant will appropriately
    consider all of its EPA regulations, among other factors, in
    determining whether it is economically feasible to retrofit or
    repower a unit or whether it makes economic sense to retire the
    unit.
        Should the owner of a power plant decide to retire a unit
    because the unit cannot be economically retrofitted to meet the
    new EPA regulations, it must notify the State and regional
    planning authorities of its decision. Those authorities must
    then determine whether there is enough available generation or
    transmission to allow the unit to retire without affecting
    reliability or whether the retirement will create the need for
    new generation, new transmission or other resources in order to
    maintain reliability. Like an owner's decision whether to
    retrofit a replace a unit, the reliability consequences of a
    retirement will be dependent on the specific facts of each
    case, each locality and each region.
        While the EPA regulations are not expected to affect our
    overall resource adequacy as a Nation, they may be present
    reliability issues in particular localities or regions. In some
    regions, conditions may be such that a retirement or several
    retirements related to the new regulations will not create a
    reliability concern. In other areas, the retirement of even a
    single unit may create the need for an alternative. In this
    regard, I believe that for studies about the potential effects
    of the EPA regulations to have the most accuracy and predictive
    value, they must be conducted after the regulations are final
    and unit owners have decided whether to retrofit or retire.
    Studies under these conditions don't necessarily require the
    extensive number of assumptions required for nationwide
    analysis that are driving all the different numbers we have now
    and are more likely to really drill down on the local and
    regional issues that we really need to face.
        If a retirement does create a potential reliability issue,
    the owners and the planning authorities must determine what
    resources will replace the unit and how long it will take to
    bring the new resources online. Given the long lead time for
    certain types of resources, there may be a gap of time when a
    replacement facility is not yet available but the retiring unit
    is no longer compliant with the new regulations. In such cases,
    a time-limited waiver of EPA regulations may be needed. In
    other cases, a reliability must-run contract under the
    authority of the Commission may also be needed to allow the
    power plant to operate within certain discrete parameters for a
    defined period of time.
        I believe that any waivers or flexible solutions must be
    targeted and discrete. Specific reliability analyses at the
    local and regional level are much more meaningful than all the
    nationwide estimates that are floating around. The
    circumstances of each retirement and the need for replacement
    are fact-specific. I do not support a blanket delay of EPA
    regulations but I will certainly champion specific extensions
    where needed for reliability. I believe that the EPA should and
    that the EPA does understand the need to be flexible in
    specific cases.
        Because of our jurisdiction over regional transmission,
    utility rates and reliability standards, FERC should be
    actively involved in these issues when they arise. I believe we
    can play an important role in discussions among regional
    planners, NERC and the regional reliability entities,
    utilities, States and the EPA. I think it would helpful for
    FERC to sponsor a workshop or series of workshops that bring
    together all these stakeholders to discuss the regulations, as
    Commissioner Norris said, the tools we have at our disposal to
    meet them. For example, FERC can examine and approve market
    rules designed to facilitate reliability and designed to
    increase the notice that planners get when retirements are
    happening. I am confident that we as a Nation can ensure that
    the EPA's proposed air and water regulations do not adversely
    affect reliability provided there is coordination and
    flexibility in their implementation.
        Thank you.
        [The prepared statement of Ms. LaFleur follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you, and thank all of you for your
    testimony.
        Ms. LaFleur, you made the comment that you thought it would
    be useful to have a workshop and bring in interested parties to
    maybe better coordinate or look at this issue of reliability in
    a more comprehensive way. Is that correct?
        Ms. LaFleur. Yes, and to look at the tools to make sure we
    have all the right tools in our tool chest.
        Mr. Whitfield. Mr. Wellinghoff, do you have any plans to
    have a workshop like Ms. LaFleur is discussing?
        Mr. Wellinghoff. I don't have any plans at this point in
    time. We have had a number of discussions with the planning
    authorities that come into FERC all the time and have
    discussions with them about the tools that they have available
    to adequately address the EPA proposed regulations. I actually
    talked to David Owens the other day from EEI about this issue
    of a workshop. He didn't feel that that was something that
    would be necessary from an industry perspective. So I haven't
    seen the need for it at this point in time.
        Mr. Whitfield. Are there any other commissioners that
    believe that a workshop like Ms. LaFleur is talking about would
    be useful? Mr. Moeller?
        Mr. Moeller. Well, I have been in favor of it because I
    think we can get some of these issues out there, we can talk
    about some of the reliability implications that need to be
    drilled down. I can go into more detail if you would like.
        Mr. Whitfield. Mr. Spitzer?
        Mr. Spitzer. Mr. Chairman, I am certainly respectful of
    Commissioner LaFleur's effort to get more discussion. My view
    would be, I would rather have that take place before the rules
    become final so that we are not dealing with a done deal that
    is able to--makes it more difficult to deal with a final rule
    as opposed to during the planning process of the promulgation
    of the rule.
        Mr. Whitfield. Mr. Norris?
        Mr. Norris. Thank you. As I said, another meeting, another
    study with multiple scenarios on the table really doesn't, in
    my mind, get us anywhere. The analysis should be, do we have
    the tools available. I believe we have tools available now.
    Once we know what the rules are, we see what the impact is
    going to be and see what the impact is in fact in motion, then
    a workshop would be useful to say is that tool right or do we
    need to change that based on what we are seeing happening in
    the marketplace, what we are seeing happening with plant
    retirement decisions. But to have a meeting now would be, in my
    mind, like another one of the studies. We need to have--I think
    a workshop following the implementation of rules to make sure
    we are watching this, we are being vigilant about how
    reliability is being impacted may be a very productive outcome.
        Mr. Whitfield. You say that you have the tools available
    and yet Mr. Wellinghoff in his testimony talked about that he
    felt like the best entities to really look at reliability
    because he said he did not have adequate resources was the
    utilities and other entities. But you say you have the tools
    necessary to look at reliability.
        Mr. Norris. I believe that is right because I think we have
    tools, we oversee the marketplace in those independent system
    operations/regional transmission organizations, so if they
    identify a problem out there, they can come to us and we can
    look at market rules and make adjustments. The States have
    tools through their oversight of generation and their
    integrated resource planning processes to address situations. I
    didn't mean to imply that we have the only tools. We have
    tools. There are multiple tools throughout this situation at
    DOE, at the EPA with the possibility for consent decrees. Also,
    the time I have already given to comply with these rules.
        Mr. Whitfield. Mr. Wellinghoff, does FERC intend to update
    its preliminary assessment in light of the new information and
    proposals issued by EPA?
        Mr. Wellinghoff. No.
        Mr. Whitfield. I noticed back in October, the FERC staff
    was recommending to conduct additional reliability studies.
        Mr. Wellinghoff. I am sorry. What are referring to, Mr.
    Chairman?
        Mr. Whitfield. In October, the Office of Electric
    Reliability at FERC said that the staff will continue to
    conduct reliability studies relating to this issue, but from
    your perspective, there is no need for additional assessment, I
    take it?
        Mr. Wellinghoff. No specific assessment. Those studies
    would relate to the interface between EPA and the planning
    regions and those studies would in fact look at the assurances
    that there is proper information sharing between the planning
    authorities that have the tools. And when we talk about the
    tools that Commissioner Norris was talking about, we have tools
    as well. Our tools are regulatory tools. The planning
    authorities are planning modeling tools and actually do drill
    down and do the discrete analysis that is necessary to really
    determine what are the mitigation strategies and activities at
    the planning level to ensure reliability. Those are the tools
    they have. The tools we have are things like our Order 1000
    which we recently issued. We explicitly set forth for the
    planning authorities the requirement that they look at public
    policy as part of their planning. That is the tool we have.
        Mr. Whitfield. Let me just ask one other question. I know
    that in March you all came out with an order relating to demand
    response, which was supposed to address problems at peak
    periods, and can all of you say very comfortably that you are
    really not concerned about reliability, the impact on
    reliability that the environmental regulations that EPA would
    have?
        Mr. Wellinghoff. That particular order on demand response
    actually was for using demand response in the energy markets as
    opposed to the capacity markets, which would have been the peak
    periods.
        Mr. Whitfield. OK. Mr. Moeller?
        Mr. Moeller. I am not exactly sure of your question, Mr.
    Chairman.
        Mr. Whitfield. Actually, I have gone a minute over anyway
    so we will get back to it.
        Mr. Rush, you are recognized for 5 minutes.
        Mr. Rush. I want to thank you, Mr. Chairman.
        Chairman Wellinghoff, recently Senator Murkowski issued a
    press release stating, and I quote, ``The Commission staff has
    preliminarily estimated that up to 81 gigawatts of existing
    generation are 'likely' or 'very likely' to be retired as a
    consequence of new EPA rules.'' Based on subsequent statements,
    however, you clarified that this estimate was way high because
    it included significant assumptions about the rules that were
    ultimately found to be incorrect. Would you please comment on--
    --
        Mr. Wellinghoff. Well, as Mr. Waxman indicated in his
    opening statement, that back-of-the-envelope analysis was just
    a preliminary one to set the stage for us to enter into some
    discussions with EPA to determine the appropriateness of EPA's
    interaction with the planning authorities to determine
    ultimately how these rules could impact their planning
    requirements in each individual region. There was no intent for
    the use of that particular number to be used in any way for
    planning. It is not a planning number. It should not be used
    for planning. It is not appropriate to do that. And I believe
    in fact that number as the EPA's number of 10 is irrelevant
    because what is relevant are the numbers that will be developed
    by the planning authorities in each region determined
    discretely what the impacts are and how those impacts can best
    be mitigated in the time frames necessary.
        And I want to add to that that I think Commissioner LaFleur
    has mentioned, and I know that Commissioner Spitzer in his
    extended testimony has mentioned, you know, this flexibility
    that we need to put into the process. For example, the ISOs and
    RTOs have recommended a discrete safety valve that could be put
    in for particular locational plants that may have problems that
    are revealed in this planning process. We need some level of
    flexibility for those. But we do not need to, you know, stop
    these rules going forward. I think these rules are appropriate.
    These rules in fact do what needs to be done in this country,
    and that is, internalize the external costs that we have with
    respect to electricity, and once we start internalizing those
    costs, we will start giving the right market signals to
    consumers and the people who are consuming the energy, and
    those market signals can make us all more efficient and more
    prosperous and more economic.
        Mr. Rush. Well, Chairman Wellinghoff, I hear you saying
    that State or regional planning processes to identify future
    required infrastructure and resources are the appropriate
    vehicle for addressing EPA rules reliability impact. Give us a
    little bit more of the, say, intimate details. How will this
    process really work?
        Mr. Wellinghoff. Well, I think you will actually get some
    of the details from your next panel because there will be
    representatives from PJM. That is one of the planning
    authorities. There will also be representative from ERCOT,
    which is another planning authority, and they will describe for
    you how they go through their planning process, and in fact,
    they have a planning process that is either every year or every
    other year that looks forward on a 5-, 10- or 20-year basis,
    depending upon the--actually, it is a 10-, 15- or 20-year
    basis, depending upon the planning authority itself, and so
    they are very well equipped with discrete models that are
    specific to their region, that take data from all the resources
    in the region including the power plants, transmission lines
    and the demand-side resources and determine through that
    analysis on an ongoing rolling basis what is needed with
    respect to ensuring reliability in their particular regions.
    Now, we oversee that but it is not our job to do----
        Mr. Rush. My time----
        Mr. Wellinghoff [continuing]. Central planning. We don't
    think we should be in the business of central planning.
        Mr. Rush. Sorry for interrupting, but my time has come to a
    close. I have a question for all the commissioners. Are all of
    you aware or familiar with the recent bipartisan CRS report
    concluding that the primary impact of EPA's rules will
    primarily impact smaller, older, inefficient coal plants, many
    of which are uneconomic regardless of EPA's rules? Can you
    comment on the report's conclusion that the Nation has enough
    excess generation capacity that retirement of 45 gigawatts of
    capacity by 2014 will have little effect on reserve margins?
        Mr. Wellinghoff. I know, for example, Mr. Rush, in my
    State, Nevada, the Nevada utility has a 60 percent excess
    capacity above its reserve margin so they have huge amounts of
    excess capacity in my particular State, and as Congressman
    Waxman indicated, there is at least 100 gigawatts of excess
    capacity above the existing capacity. Plus if we look at the
    amount of new resources that we need to put in, even if it is
    80 megawatts, say, I think Commissioner Norris indicated in his
    testimony, in his full testimony, between 2002 and 2003 we put
    in over 200 gigawatts of new capacity in this country. So it is
    not unprecedented. It is something that has happened before and
    something that we certainly can take care of with respect to
    proper planning, proper analysis and review by the planning
    authorities.
        Mr. Rush. Anybody else?
        Mr. Moeller. Congressman Rush, I am familiar with both
    studies and their conclusions, but here is my concern from a
    reliability perspective. Smaller plants are typically dirtier
    and older but there are advantages in the system to smaller
    plants. They ramp up and down faster. They might be in
    locations where the voltage support is key, and I can go
    through a variety of other examples where where they are
    located can make a lot of difference, and that is why I think
    we need to dig down deeper into the impacts here because there
    will be a disproportionate number of smaller, older, dirtier
    plants affected but their role in the overall electric grid
    needs to be better analyzed.
        Mr. Spitzer. Congressman, the aggregate studies aren't
    helpful on the question of reliability. They have some merit in
    determining potentially wholesale power prices across the
    country and across the grid. But as my colleagues have all
    pointed out, location matters in electricity, and a substantial
    excess capacity in Nevada may not help the folks in Arizona,
    where I come from, if three coal plants that have issues
    disappear from the grid. So it is the local impacts that are
    serious, and that is why we are so interested in working with
    the local planning authorities because FERC doesn't have the
    authority with regard to demanding retirement or construction
    of plants, and it was expressively reserved away from us in
    EPACT 2005 Section 215. So we are more concerned with the local
    impact on reliability as opposed to some of these aggregate
    macro studies.
        Mr. Whitfield. Mr. Rush, your time is expired.
        At this time I will recognize the gentleman from Illinois,
    Mr. Shimkus.
        Mr. Shimkus. Thank you, Mr. Chairman. I am going to be
    quick. I have got tons I want to cover.
        First of all, I want to submit for the record the Wall
    Street Journal editorial that basically says calling for an EPA
    moratorium. The second line says ``immediately suspend the
    Environmental Protection Agency's bid to reorganize the U.S.
    electricity industry.''
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Actually, I would argue that some of you would like to do
    the same thing and impose a moratorium on EPA rules, at least
    until hiring and investment rebound for the extended period.
        We are in an economic crisis. We need jobs. Put the first
    slide up, please. For 1,000 gigawatts, these are the jobs in
    these industrial sectors. Five hundred jobs in the nuclear
    power industry, 220 jobs in the coal industry, 90 in the wind,
    60 in natural gas when we shutter these plants based upon these
    EPA rules, and I am going to argue, your negligence, we lose
    those jobs. And when these locations are in poor, rural
    southern Illinois, they are the primary tax base for local
    government. So you have a lot on your plate, and I think you
    all are being pretty negligent.
        You are the reliability folks based upon Section 215 of the
    power act, your own mission statement, your Office of Energy
    Reliability, recent actions that you have taken--put up the
    next slide. This isn't the fight against EPA's projections and
    your projections. These are the other industrial sectors that
    says these are the powers that are going to be offline if we
    allow these rules to go, and on average, you are at 60
    gigawatts of power, 60. EPA is at 10. They are doing the
    analysis of what the reliability and the production of the bulk
    generating plants. Just give me a break.
        Chairman, do you still believe as you were quoted, and I
    would like to submit this for the record, that we may never
    need any more coal or nuclear power in this country, that we
    can do this all on green and that will be our baseload
    production for the future?
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Wellinghoff. That particular statement in context was
    this: I believe that going forward, the resources that we have
    in this country include wind, solar, geothermal, natural gas--
    --
        Mr. Shimkus. And your statement----
        Mr. Wellinghoff. Excuse me.
        Mr. Shimkus. Reclaiming my time, Chairman.
        Mr. Wellinghoff. I wasn't done. That was only half my
    answer.
        Mr. Shimkus. I know your statement.
        Mr. Wellinghoff. If that is all you want, that is fine.
        Mr. Shimkus. I understand who your loyalties lie to, and it
    is to the environmental left and it is to Harry Reid and this
    green agenda that can't produce the power needed for
    reliability and destroys all those jobs I just put up on the
    slide. Now, you were quoted as saying no more coal, no more
    nuclear. That is fine but you also have your own--your own
    staff said you can't have a one-to-one replacement. So that was
    the question of the chairman: Can you have a one--your own
    staff says you can't have a one-to-one replacement on power
    generation solely on green power.
        Now, let me go to the EPA.
        Mr. Rush. Mr. Chairman.
        Mr. Shimkus. Where I am really concerned on the negligence
    here is the EPA in their rule says in addition EPA itself has
    already begun reaching out to key stakeholders. You all are
    included in that. This is their rule. You are included. But you
    are saying, no, we are not going to determine this until after
    EPA promulgates these rules. Now, EPA is asking you to be
    involved. Actually, the rule says you, NERC, FERC, the public
    utility commissions, but your own testimony here, and
    especially Mr. Wellinghoff's, Mr. Norris's, Ms. LaFleur's says
    we are going to do it afterwards. Where does that leave us with
    after the fact on this debate on reliability? Do you reject
    that this is in the EPA in their rule?
        Mr. Wellinghoff. Mr. Congressman, with all due respect, my
    testimony is not that we are going to do it afterwards. My
    testimony is that----
        Mr. Shimkus. Your statement is that you are going to do it
    afterwards.
        Mr. Wellinghoff. No, it is not. My statement is that the
    planning authorities are doing it now. In fact, PJM was in my
    office the other day----
        Mr. Shimkus. I am not talking about planning. I am talking
    about you.
        Mr. Rush. Point of order, Mr. Chairman.
        Mr. Shimkus. What is the matter, Mr. Rush? Am I getting too
    close to home?
        Mr. Rush. No, point of order. You aren't allowing the
    witness to answer----
        Mr. Shimkus. I have got the questions.
        Mr. Rush. You are badgering the witness.
        Mr. Shimkus. I hope I get my time recovered, Mr. Chairman.
        Mr. Whitfield. You will.
        Mr. Rush. This is not within the established decorum of
    this subcommittee.
        Mr. Whitfield. Now listen, Mr. Rush. He has the opportunity
    to ask questions. He is asking questions.
        Mr. Rush. But he----
        Mr. Whitfield. Let me just say something else. You used the
    word ``jihadist'' in your opening statement.
        Mr. Rush. I only borrowed that term----
        Mr. Whitfield. And I tell you what, I think that is----
        Mr. Rush. I only borrowed that term from your side, Mr.
    Chairman. I only borrowed that term from my friend from
    southern Illinois who used it yesterday, and you----
        Mr. Whitfield. Who was that?
        Mr. Rush. He knows exactly who it is, my friend from
    southern Illinois.
        Mr. Shimkus. I would check the transcript, Mr. Rush.
        Mr. Rush. I heard you say it.
        Mr. Whitfield. Let me just say, these issues are quite
    contentious. We have very strong feelings about them. But we
    don't need to use----
        Mr. Rush. Just be courteous to the witness. That is I all I
    am saying.
        Mr. Whitfield. Let us not use these words ``jihadist'' any
    more on either side. Now, Mr. Shimkus has 30 seconds left so
    let him----
        Mr. Shimkus. I am glad we have kept the slide up here. For
    my friend from Chicago, those job statistics are per generation
    per 1,000 megawatts are those are the jobs that are going to be
    lost, and look at where coal and look at where natural gas is
    and look where wind is. And I would just ask this question. It
    is clear in your testimony provided here today in the materials
    provided by FERC detailing the meetings between EPA, FERC, DOE
    that the level of coordination suggested by EPA has not
    occurred. That is based upon your testimony and your documents.
    Why has this not happened? And Mr. Chairman, if I could ask
    each member of the Commission to answer that, I would
    appreciate it.
        Mr. Whitfield. Yes, go ahead and answer, please.
        Mr. Wellinghoff. Thank you. I believe the level of
    coordination that has occurred between our agency and EPA has
    been sufficient. I believe that we are continuing to coordinate
    with EPA and will do so to ensure that EPA can work with the
    planning authorities, provide them with the data that is
    necessary to have those planning authorities to take into
    account the EPA regulations and incorporate that into their
    final determinations to mitigate any impacts with respect to
    reliability.
        Mr. Moeller. Congressman, I believe there has been some
    informal discussions between the staffs and there have been a
    few meetings, one of which I was involved in between
    commissioners and EPA officials, but I have called for a more
    open process or transparent process so that we can get these
    issues in a higher spotlight.
        Mr. Spitzer. Mr. Chairman, Congressman Shimkus, I wasn't
    invited to the EPA meetings but I am of the strong believe that
    all five FERC commissioners are committed to reliability as is
    the case often----
        Mr. Shimkus. You weren't invited?
        Mr. Spitzer. Well, there were quorum issues and other
    reasons for that, and I was----
        Mr. Shimkus. So they only invited Democrat commissioners?
        Mr. Spitzer. I believe Commissioner Moeller was invited,
    and the chairman did advise me and notified me of these and has
    advised me of the progress of these, and all five FERC
    commissioners are committed to reliability. I would suggest to
    you five points. I will try to be quick running through them.
    Granularity--it is at the local level that these decisions are
    made. Power plant operators, State regulators who will follow
    us and FERC share responsibility for providing reliable power
    at reasonable prices to the ratepayers of the United States and
    it is that granularity that is essential, and FERC doesn't have
    the authority to mandate that a utility build a power plant nor
    does have FERC have the authority to require a utility to
    retrofit or retire a plant, and that was specifically decided
    by the Congress in 2005, and my friends who are going to
    testify next would be very angry in fact if FERC were to
    trespass on that authority.
        There are many variables. There are three plants in Arizona
    that are threatened with regional haze, which is not part of
    this suite of EPA regulations. It goes to a visibility issue
    over the Grand Canyon. And there are also economic issues apart
    from EPA. There are timing issues, and I try to discuss in my
    testimony the need for a safety valve to give more time. And
    then the fact that there are iterative processes. A one-time
    freeze frame doesn't do the job and the planning agencies look
    in some cases every year in some cases every 6 months. And then
    finally, I like all fuels, Mr. Chairman, members. I think there
    is room for all fuels. I would like to see fair and equitable
    rules so that market forces determine ultimately what power
    plants get constructed.
        Mr. Whitfield. We have gone 3 minutes over, so I am going
    to stop this and recognize Ms. Castor for 5 minutes of
    questions.
        Ms. Castor. Thank you, Mr. Chairman and Ranking Member
    Rush, and thank you to the witnesses for your testimony today.
        Opponents of EPA's public health rules raise questions over
    the potential for the retirements of the old, inefficient coal
    plants which I believe raises further questions about the
    electric industry's ability to address those retirements should
    they occur. First, several independent studies point to the
    current availability of excess generation capacity, what the
    chairman and Mr. Rush have discussed previously. The
    Congressional Research Service explained that there is a
    substantial amount of excess capacity, mostly from natural gas
    plants built during the last decade, and the Analysis Group
    also calculated that the electric sector is expected to have
    over 100 gigawatts of surplus generating capacity in 2013.
        Chairman Wellinghoff, you discussed this a little bit. Do
    you agree with these independent analyses that everyone should
    consider plant retirements and the existing excess capacity as
    we move forward?
        Mr. Wellinghoff. Well, certainly I agree that the planning
    authorities in considering the resource need for the future in
    those planning exercises need to look at not only potential
    retirements from the EPA regulations but also the amount of
    existing capacity that may be in excess in those particular
    regions as well as other resources that we are now depending
    upon including demand response, energy efficiency, distributed
    generation are all resources that are available within those
    planning regions, and in fact, resources that we require in our
    rules now, in our Order 890 and in our Order 1000 that the
    planning authorities consider in doing their overall
    assessments.
        Ms. Castor. I think you are right, because the focus in
    this resilient energy, the electric energy sector is not simply
    on what is happening with the retirement of old, inefficient
    coal plants. It is so much larger than that. In addition to
    building, monitoring the excess existing capacity, we can
    also--I think the sector can build additional capacity. The
    independent analysts also point to the electric industry's
    proven track record of quickly building new capacity when it is
    needed. For example, the Congressional Research Service noted
    that between 2000 and 2003, electric companies added over 200
    gigawatts of new capacity, and that is far more than anyone has
    suggested will be needed to offset any retirements resulting
    from EPA's rules, and as you mentioned, other options are
    demand response, energy efficiency measures that could lower
    the amount of generating capacity that the grid would need.
        Commissioner Wellinghoff, do you think that this resilient
    electric energy sector has the ability to respond to potential
    retirements by building new capacity? You mentioned reducing
    demand through energy efficiency and demand response but what
    do you think?
        Mr. Wellinghoff. It has the ability to respond in many
    ways, and that is ultimately why it is so important for us to
    get the market signals right, and that is why EPA is doing the
    right thing by getting the market signals right, by
    internalizing what are now external costs. If we can
    internalize those costs in the price, in the ultimate price,
    then we can find the lower-cost alternatives to compete and
    come into the market and make appropriate substitutes
    economically.
        Ms. Castor. Commissioner Norris, you indicated in you
    testimony that you have reviewed an array of studies and
    reports that analyze the potential impacts of EPA rules and
    steps that can be taken to cope with any retirements. What do
    you think? Do you believe that we have many options available--
    excess capacity, energy efficiency, demand response--for the
    industry to respond to any retirements and maintain
    reliability?
        Mr. Norris. Yes, that is what I maintained in my testimony.
    I can't remember, I think it was Commissioner Spitzer that made
    the point, I think most of the studies indicate we will not
    have a resource adequacy problem across the country. There
    could be localized concerns, and that is why I maintain that we
    have tools to address those local concerns. But we have, and as
    you noted, the 2002-2003 data, the adding of 2,000 gigawatts of
    new capacity in this country was done in 3 years. That is
    double, more than double what the projected retirements might
    be.
        I think it is also important to note--in fact, I will give
    you this example. When I was chairman of the Iowa Public
    Service Commission, I believe it was 2007, it might have been
    2008, I voted to approve a generation certificate for a new
    coal plant but I rejected in the rationale for that argument
    that we should build this plant because it produced X amount of
    new jobs. Here is why I rejected it. If we take away jobs in
    old and inefficient plants, those jobs don't go away; they
    shift to more efficient production. That is not a bad thing for
    our economy. I am sensitive to the local concerns but the
    energy is still needed. It has just moved the jobs to generate
    that energy are done in a more efficient way and a more
    productive way for our economy.
        Ms. Castor. Thank you very much.
        Mr. Whitfield. I am going to just make one comment, Mr.
    Norris. This argument about, we have got new jobs over here,
    but for the people who lose their jobs, they are gone and it
    has the impact on them and their families. So somebody may be
    able to pick up a new job in one part of the country but these
    people lose their jobs.
        Mr. Norris. I am entirely sensitive to that, but most of
    these will be local reliability concerns, so it is my hope we
    can build new gas plants or build transmission at other
    facilities that help address the reliability concerns that may
    result from that. I am totally sensitive to people losing their
    jobs. Our economy changes a lot, that we shouldn't hold back
    efficiency.
        Mr. Whitfield. Ms. McMorris Rodgers, you are recognized for
    5 minutes.
        Mrs. McMorris Rodgers. Thank you, Mr. Chairman, and thank
    you, everyone, for your testimony and for being here today.
        I come from eastern Washington, the Pacific Northwest,
    where the majority of our baseload is reliable, renewable
    hydropower, and I recognize that a lot of the rest of the
    country does not have the hydropower facilities and relies
    heavily on traditional fuels such as coal for their baseload. I
    am concerned about the EPA regulations and the potential to
    eliminate 131 gigawatts of baseload power with the assumption
    that there will be a one-for-one replacement with renewable
    sources, and what we are trying to work on is amending the
    implementation timeframe for many of these EPA job-crushing
    regulations and give energy producers the ability to meet the
    achievable standards in a reasonable timeframe.
        What I would like to ask, where I would like to start is
    with Commissioner Moeller and Commissioner Spitzer. I think
    back to when I was first elected to Congress in 2004, and the
    cost of natural gas at that time, there was a concern that it
    was going to be going up in cost, and I would like to just ask,
    are there reliability concerns associated with becoming over-
    dependent on natural gas to generate electricity and what are
    the advantages to having a diversified source of energy?
        Mr. Moeller. Thank you, Congresswoman. As Commissioner
    Spitzer said and as I said in my written testimony, I am fuel-
    neutral. I think we need all fuels. I am a particular believer
    in hydropower, as you know. And we have to be concerned about
    becoming dependent on any source of fuel. The key is that 3
    years ago we wouldn't have been having this kind of discussion
    because natural gas prices were three times what they are now.
    They are down for two reasons. To some extent, economic output
    it down, but we have also had come on the system this
    incredible resource of domestic shale gas, and that has had
    worldwide implications, and if you look at the futures markets,
    which could be wrong, we are looking at a decade or so of
    moderate natural gas prices. Of course, that can change. But
    for this gas to take the place of coal in baseload generation,
    you are making the assumption that it will stay at a moderate
    price and we will also have to expand the pipeline network in
    this country. That is not done overnight. It can be done. I
    think our staff in the Office of Energy Projects does an
    excellent job of certificating projects in a safe manner but it
    takes time, and I think you will have utilities and other
    entities testify to that effect.
        Mr. Spitzer. Mr. Chairman, Congresswoman, natural gas is a
    wonderful success story for the ratepayers in the United States
    and it happened when the market signals sent price signals and
    new technology emerged, the horizontal drilling and the
    fracturing. That was a wonderful technological innovation. But
    we needed transmission to get the natural gas to the load
    centers, and FERC during my tenure has sited more miles of
    interstate natural gas pipelines than any time in the history
    of this country as well as natural gas storage facilities. So
    it was a combination of government working to put in
    infrastructure, steel in the ground, market signals and
    technology that created a great resource. I share your concern
    about overreliance on one particular fuel. I think we need all
    fuels, and obviously there is concern among those in the gas-
    producing sector that there may be potential political or
    regulatory backlash towards their fuel but there is room for
    all fuels.
        A final point. The reason I am so concerned about the issue
    of forcing a generator to serve two masters, FERC's authority
    under Section 215 of the Federal Power Act to impose
    reliability penalties and potential EPA penalties. I share a
    trait in common with a former Member from your district who
    represented your district. For 25 years I was a tax lawyer
    representing taxpayer against the IRS, and there are some
    entities that are quite capable of conducting litigation
    against the federal government but for other entities it is a
    very daunting task, and it fills many with trepidation. And so
    I think for the reasons I stated in my testimony, it behooves
    both regulators to do everything they can to avoid creating
    this Hobson's choice where you will find yourself in violation
    of one rule or another. I am confident that we can do that.
        Mrs. McMorris Rodgers. Thank you. I have another question.
    Would the two of you describe some of the sunk transmission
    costs consumers are left paying when a power plant retires
    prematurely?
        Mr. Moeller. Some transmission costs would probably be
    determined on a very locationally specific matter but I think
    another concern would be that if again you have a smaller
    plant, say, between two larger towns that is needed for voltage
    support of the system, it doesn't put out a lot of energy but
    it puts the right amount of voltage support in, that would have
    to be replaced perhaps by more expensive and expansive
    transmission build-outs or another power plant in another
    place. That I think may even be a more significant cost than
    the sunk transmission costs.
        Mr. Spitzer. Mr. Chairman, Congresswoman, Congress has
    recognized the need for transmission and authorized FERC to
    pursue transmission aggressively in many forms, and that is
    certainly--steel in the ground is important but the
    hypothetical you allude to about potential sunk costs, I think
    highlights the need for granular and iterative analysis by the
    State commissioners, who you will hear from, from the planning
    authorities and from the generators who through various
    opportunities to retrofit or repower power plants can make
    economic decisions based upon market forces.
        Mr. Whitfield. At this time I will recognize the gentleman
    from Washington, Mr. Inslee, for 5 minutes.
        Mr. Inslee. Thank you. I am concerned about this GOP
    effort, not just for issues of public health but because I
    think it will adversely impact job creation in the United
    States, and this is a job-killing effort by the GOP and an
    effort to hang on to some old, inefficient economic activity
    rather than to create thousands of new jobs that would be
    associated with making our economy more efficient and more
    healthy, and I think the evidence is quite powerful in that
    regard.
        I would point to a study that our next witness, Dr. Susan
    Tierney, will talk about suggesting that between 2010 and 2015,
    capital investments in pollution controls and new generation
    will create an estimated 1.46 million jobs, or about 291,577
    year-round jobs on average for each of these 5 years.
    Transforming to a cleaner, modern fleet through retirement of
    older, less-efficient plants, installation of pollution
    controls and construction of new capacity will result in a net
    gain of over 4,254 operation and maintenance jobs across the
    eastern interconnection. The largest estimated job gains are in
    Illinois, 122,695; Virginia, 123,014; Tennessee, 113,138; North
    Carolina, 76,976; and Ohio, 76,240. Every single one of those
    jobs is at risk because of this wrongheaded, archaic, backward
    thinking of the GOP to think that we live in a static economy
    that doesn't create jobs when we go through transition, and
    this transition to a healthier United States is not just based
    on breathing or cardiovascular activity. It is based on job
    creation for thousands of new jobs. And this is an attack on
    jobs in my district, in my State. I will just mention some of
    them.
        In Moses Lake, Washington, we make the substrate for solar
    cells, the largest manufacturer in the western hemisphere in
    Moses Lake, Washington. This bill is an attack on those jobs.
    In Seattle, Washington, we are making efficiency improvements.
    In Spokane, we have a company called Itron that is making
    products for the smart grid that is more efficient so we don't
    waste as much electricity. This bill is an attack on those jobs
    because it allows the continued pollution that damages our
    health and retards the creation of thousands of new jobs in
    these new industrial sectors.
        So this bill is a job-killing job on a net basis. Yes,
    there is dislocation associated with any transition but we have
    got to understand that we have as many jobs to gain as we have
    to lose if we play our cards right, and some of these rules, as
    contentious as they are, recognize the value of new
    technologies. So I want to note, there seems to be some
    discussion that the only jobs that count are one coal plant in
    a Midwestern State. There are jobs all over the country that
    are at stake in this regard that will be lost if this bill
    becomes law and we stop the creation of all of these jobs.
        And by the way, it is not just in the high-tech field. In
    my State, we have steel workers, iron workers, carpenters,
    laborers and longshoremen in the production of these new jobs.
    Just look at one wind turbine that goes up, and we have had a
    huge expansion of wind power in the State of Washington. One
    wind turbine, we ship stuff in, a longshoreman has got a job.
    Driving it up to eastern Washington, a Teamster has a job.
    Putting it up, a laborer, a carpenter and an iron worker have a
    job. Stringing the wire to the wind turbine, an IBEW member has
    a job. Those jobs are at risk when we say that we are going to
    leave these old, dirty, polluting, unhealthy things at risk,
    and that is what is at risk and that is why I am opposed to
    this effort, besides the fact that we have got folks that want
    to be able to breathe.
        Now, that is much more of a statement than a question, but
    if any of our panel would like to comment or criticize that
    statement, I would be happy to allow them to do so. There are
    no takers, and thank you for your agreeing totally with my
    position.
        Mr. Whitfield. Thank you for that wonderful statement.
        Mr. McKinley, you are recognized for 5 minutes.
        Mr. McKinley. The Congressman sure left the door wide open.
    There are just so many things to go on in these 5 minutes. Let
    me just address that one issue that was just brought up. Gina
    McCarthy was here just last week on this panel, and that
    question was raised to her, that very study I think that he is
    referring to that talked about 1-1/2 new jobs for every $1
    million in environmental pollution controls put in effect, and
    she was asked about that, and she repudiated the study, said
    that was done independently and it doesn't wash. We used the
    example of a sawmill plant that was under the boiler MACT that
    it is going to cost them $6 million, and we asked her if she
    was going to create nine jobs, and she just laughed. She said
    that is the silliness of some of this, some of these reports
    that come out. They don't create new jobs; they destroy jobs.
        And as far as the IBEW, it is my understanding, I have got
    correspondence from them that they oppose a lot of these, even
    though it does create short-term construction jobs. They
    understand the long-term impact of higher utility bills, what
    it is going to do to the American economy if we do place all
    these and raise our utility bills. It is one of the things we
    have very effectively--we have powerhouses throughout West
    Virginia, very effective with AEP, First Energy. These are some
    of the leaders in the Nation in what they have done in
    producing very effective power.
        But my question back to the chairman, Mr. Wellinghoff, has
    to do with--it is my understanding--I am just 8 months into
    this job, and I saw the--it absolutely is accurate that there
    is a mindset here in Congress that I have come to understand
    attacking coal. Coal is the backbone of West Virginia, and it
    is crucial, but it wasn't until I came to Congress, Mr.
    Chairman, that I realized how much there was this attack on
    coal, and what I saw was the power plants were not shutting
    down. These powerhouses were not shutting down until the EPA
    started raising the regulations. They were meeting the
    standards currently but then when they raised the standards,
    these powerhouses said maybe they are going to shut down. There
    have been announcements of three to five plants in West
    Virginia that are going to shut down because of these
    regulations, but they were meeting the current standards until
    the new standard came into effect, and a new standard at a time
    when we have no jobs created whatsoever last month, 14 million
    people out of work. I think that is all that we are asking for,
    is this the time to be implementing new standards.
        So my question to you is, if it comes down to health
    issues, saving a person's health of saving a person's job, what
    would you recommend specifically?
        Mr. Wellinghoff. Thank you for that question, Congressman
    McKinley. It is my purview to recommend either. My purview is
    to recommend that we have a more efficient electric system and
    that markets in this country, I think we can rely on markets in
    this country to determine how that electric system should
    operate, and so what I advocate is that we do everything we can
    to make sure that those markets are structured properly and
    they are not jerry-rigged. If we can structure the market
    properly, that means we need to incorporate all the costs of a
    particular product in that market.
        Mr. McKinley. That is just about as evasive as all the
    other panels have been when I have asked those questions, but I
    appreciate it. It is not your responsibility but it something
    we face.
        I am not in the health industry; I am not in the coal
    industry. But the job that has been thrown to me is to try to
    make a decision. You hear the things that we are challenged
    with, the remarks earlier today that this is a jihad. That kind
    of incendiary language has no place in this. This is why
    America is rejecting the discourse here we have in Congress
    when those kinds of comments are getting made. I don't want us
    to be portrayed as being pro-pollution, that I am polluting the
    water, I am putting mercury in the water and the air, that I am
    trying to kill children. I want us to have an open dialog where
    we can have these kinds of discussion because that is the
    decision we have to make, not emotional but a scientific basis.
    I happen to be an engineer in Congress, and I hope we can use
    our science to make these decisions rather than emotion.
        Thank you very much for your testimony.
        Mr. Wellinghoff. Thank you.
        Mr. Whitfield. Thank you.
        At this time I recognize the gentleman from California, Mr.
    Waxman.
        Mr. Waxman. Thank you, Mr. Chairman, and I want to thank
    Mr. McKinley for his last comments. I fully agree with him and
    I look forward to working with him to reduce some of the
    rhetoric and see if we can work together.
        Chairman Wellinghoff, some members of the committee and
    several of the witnesses in their written testimony are citing
    the FERC's staff's informal assessment of the potential impacts
    of EPA rules as evidence that 81 gigawatts of coal generation
    is likely or very likely to retire. It is important for members
    to understand that the FERC staff is trying to do, how they did
    it, and the serious limitations of the informal assessment.
        The FERC staff who worked on this informal assessment
    briefed the committee staff. They told our staff that the
    informal assessment was intended as a back-of-the-envelope
    calculation to produce a ballpark estimate of potential
    retirement that could result from the EPA's rules. They said it
    was never intended as information for the FERC commissioners or
    to be relied on for decision-making.
        Chairman Wellinghoff, does this description match your
    understanding?
        Mr. Wellinghoff. It does, and I actually mentioned earlier
    that that number should in no way be used as a planning number.
    The planning determinations will be those that will be
    ultimately done by the planning authorities and so all the
    range of numbers that we have thrown out there and floating
    around out here are really irrelevant. What is really relevant
    is the actual work that each planning authority will do, and
    you will hear from a couple in the next panel. The actual work
    that the planning authorities will do and they do on an ongoing
    basis, it is not that they are going to start it all of a
    sudden because EPA has done this. They have been doing it for
    years and year and years. We have now put in place some rules
    that actually require them to incorporate into those planning
    activities considerations of things like federal and State
    regulations that in fact could impact their planning, and many
    of them have been doing it already despite our rules. We wanted
    to make sure that it was something that was actually being
    done. And so we have given them that tool and they are now--I
    expect fully that they will use it.
        Mr. Waxman. I appreciate your putting that in perspective.
    The FERC staff started this project in the summer of 2010
    before EPA had proposed or finalized certain rules so the FERC
    staff made assumptions about what the EPA rules would require.
        Chairman Wellinghoff, did these assumptions turn out to be
    accurate?
        Mr. Wellinghoff. No, they weren't accurate.
        Mr. Waxman. For example, FERC staff assumed that EPA would
    require closed-loop cooling systems under one rule but EPA's
    proposed rule did not require this approach. FERC staff
    explained how they actually did their assessment. They relied
    on publicly available information about existing coal plants.
    They came up with factors they thought could affect the cost of
    compliance at these plants and then assigned those factors
    subjective weights. For example, if a plant has no mercury
    controls, that was worth two-tenths of a point. If it was an
    anti-coal State, whatever that means, it got another tenth of a
    point. The FERC staff told our staff that this weighting was
    ``completely arbitrary.'' Then the staff added up all of the
    weighted factors that applied to a plant and placed the plant
    in a category such as very likely or unlikely to retire. The
    total scores that would lead a plant to be placed in one of
    these categories was also just arbitrarily made up. This
    description isn't meant as a criticism. The staff was just
    trying to do a back-of-the-envelope estimate.
        Mr. Wellinghoff, is this your understanding how the FERC
    staff did their informal assessment?
        Mr. Wellinghoff. They did, and I do want to make clear, it
    had nothing to do with the level of competency of my staff.
    They used the information that they had at the time to do a
    very informal assessment to start discussions with the EPA so
    then EPA could be better informed about who they needed to talk
    to in more specificity, that is, the planning authorities with
    respect to the potential impacts of what they were doing.
        Mr. Waxman. The first time they did this assessment in July
    2010, the estimate was that 81 gigawatts of coal generation
    were likely or very likely to retire, but as the staff obtained
    more information about what EPA's rules actually required,
    later calculations produced lower estimates. In October 2010,
    the estimate was down to 72 gigawatts. By early 2011, the
    estimate had dropped to between 54 and 59 gigawatts of likely
    or very likely retirements. Isn't that right, Mr. Wellinghoff?
        Mr. Wellinghoff. That is correct. Actually, the February
    2011 range is 54 to 59 gigawatts. Again, these are----
        Mr. Waxman. Let me just, because I am running out of time.
    Even for these lower estimates, there was no estimated
    timeframe for retirements. FERC staff never examined how the
    industry could compensate for any retirements with new
    generation capacity, retrofits, demand response or energy
    efficiency measures. To make sure everyone is clear on this
    point, is the FERC staff informal assessment something that
    members of the committee or witnesses should be relying on or
    citing when assessing the potential impacts of EPA's rules?
        Mr. Wellinghoff. No.
        Mr. Waxman. Thank you very much, Mr. Chairman.
        Mr. Whitfield. At this time I recognize the gentleman from
    Texas, Mr. Barton, for 5 minutes.
        Mr. Barton. Thank you. I was hoping in my absence, Mr.
    Chairman, that you all worked all this out.
        Mr. Whitfield. It has been very pleasant.
        Mr. Barton. There is still hope.
        My first question to the distinguished chairman of FERC is
    that several times in answer to questions, you have used the
    term ``irrelevant.'' Do you consider the FERC staff to be
    irrelevant?
        Mr. Wellinghoff. No, sir, I don't.
        Mr. Barton. Do you assume them to be honest, hardworking
    professionals who when asked to do something give it their best
    effort?
        Mr. Wellinghoff. Yes, sir, I do.
        Mr. Barton. OK. I agree with you, that to my knowledge the
    FERC staff is hardworking and very professional. In fact, I
    would say of all the agencies we deal with, the FERC staff is
    probably the least politically motivated or impacted. They tend
    to be very straightforward and professional, in my assessment,
    anyway. Are you aware that we have got a list of 14 different
    organizations that have looked at the impact of the EPA's rules
    on the power market and 12 of the 14 are basically in the
    general range of the FERC staff assessment? Are you aware of
    that?
        Mr. Wellinghoff. Yes, and again, I would indicate that
    those assessments are irrelevant as well, and I am not saying
    that there is----
        Mr. Barton. There is no assessment that is relevant?
        Mr. Wellinghoff. There is one, yes. The assessments that
    will be done by the individual planning authorities like ERCOT
    in your State, for example, PJM, the other RTOs and the
    planning authorities, those assessments that the planning
    authorities conduct are ones that in fact will be most informed
    at a local level based upon actual data with respect to actual
    specific resource requirements and resource needs and resource
    availability within those regions. Those are the critical----
        Mr. Barton. I would respectfully interrupt you, Mr.
    Chairman, and respectfully disagree with you that I think for
    whatever reason these groups that have looked at this issue are
    trying to give it their best estimate, if that is the right
    term, and I think they are relevant. I think it is odd, to be
    as mild as possible, that EPA consistently underestimates the
    impact of their rules, and, you know, I took probability in
    college, and I would say the probability is that EPA is going
    to be the most off in terms of realistically estimating what
    their impact is of all the groups because they have a bias
    against realistically evaluating their rules. And just in one
    of the rules that they proposed last year, their analysis, they
    admitted eventually was only off by a factor of 1,000, which is
    pretty off.
        I want to ask Mr. Moeller, Commissioner Moeller if you
    share the chairman's assessment about the irrelevancy of these
    estimates.
        Mr. Moeller. Well, I think the estimates are all
    informative but I probably share his opinion that what really
    matters is how they impact operations and reliability at the
    local level because of the specifics of load pockets and the
    physics of electricity flow, and I actually thought the FERC
    staff study was pretty good because it went into a lot of the
    variable factors. It was an estimate. It was done with what
    they knew at the time. Things have changed. But I commend our
    staff for what I thought was a very good document.
        Mr. Barton. I have only got about a minute. My last
    question, again, back to our distinguished chairman, you state
    in the letter that you think your organization lacks the data
    and the tools to fully assess the reliability impact of EPA
    regulation. What additional tools and data would you need, in
    your opinion, for the FERC to have that ability?
        Mr. Wellinghoff. Well, we would have to have the capability
    of the modeling that is done by all the regional planning
    authorities, and their modeling is extremely extensive with
    very sophisticated computer models and lots of computer
    equipment. PJM alone has 500 employees, I believe, and that is
    just one planning authority in and of itself. So again, we are
    not a central planner. We are not set up to be a central
    planner, and to do that would take a great deal of
    appropriations from this Congress that I don't think they
    really want to do.
        Mr. Barton. My time is expired, but is there any reason
    then that the FERC couldn't send a letter or make a request of
    the folks that have this modeling capability if you gave them
    the data sets that they couldn't do the modeling and report
    back to you? Is that allowed or not allowed?
        Mr. Wellinghoff. No, they have the data sets. We don't have
    it. They have it. They do the modeling already all the time,
    and you will hear from two of them. You will hear from ERCOT
    and PJM in your next panel.
        Mr. Barton. If the FERC staff under the direction of the
    Commission were to request certain models be run, then you have
    the authority to do that and they would have to comply. Is that
    correct?
        Mr. Wellinghoff. We could ask them to do modeling. That is
    correct.
        Mr. Barton. I have got some other questions. If I could
    have one non-related question. The former chairman of the FERC,
    Mr. Kelleher, called me this week, and the Department of Energy
    is floating an idea to give the delegate its authority under
    the Energy Policy Act to do transmission siting. Under current
    law, the DOE has to determine the corridor, but once the DOE
    determines that it is a high-priority, high-impact corridor,
    then the FERC can put together a plant to site transmission.
    There is a court case in Virginia that invalidated or at least
    called into question the ability of the Department of Energy to
    site these corridors, and the current Secretary is considering
    delegating his authority under the Energy Policy Act to the
    FERC. Do you have a position on that, Chairman?
        Mr. Wellinghoff. Yes, Mr. Barton. I think actually that
    would be an appropriate delegation. I think it would in fact
    make the current statute work more efficiently.
        Mr. Barton. Do all the commissioners share the chairman's
    position on that?
        Mr. Moeller. Congressman, I favor the proposal generally
    but I had a little bit of an issue with the dual siting track
    that was part of the details. So generally, yes, some of the
    specifics I don't fully----
        Mr. Barton. I will follow up with that.
        Thank you, Mr. Chairman, because I am the author of that
    section and I have been asked to take a position on it, and I
    see both sides of it, so I appreciate the information.
        Mr. Whitfield. Mr. Olson, you are recognized for 5 minutes.
        Mr. Olson. I thank the chair, and thanks to all the
    witnesses for coming today, for giving us your expertise and
    your time, and we are in the home stretch here, so I will get
    my 5 minutes done here.
        My first question is for you, Mr. Moeller, and this may be
    an understatement, but you seem to view FERC's role in
    addressing potential impacts of EPA regulations on electric
    reliability very differently from Mr. Wellinghoff and some of
    your colleagues at FERC. You note in your testimony that
    legislation clarifying the role of EPA and FERC in the event of
    a conflict over air policy electric reliability could be
    helpful, and my colleague, Mr. Shimkus, showed this graph which
    illustrates the disparity between EPA and all the other groups
    that are taking a look at the capacity loss resulting from
    EPA's power sector rules, and I know this is a small graph here
    but you all can see this little green line here, the very small
    one is what EPA's predictions are. FERC is right here, the
    first line. That is a big disparity.
        My question is, is there a conflict between FERC and EPA
    over any of EPA's new rules affecting the utility companies?
        Mr. Moeller. Well, Congressman, I haven't been involved all
    of the discussions. There have been staff discussions. Some of
    the individual commissioners have met with officials from EPA.
    I have had one such meeting, and I have called for a more open
    process so that we can discuss the ramifications from a
    reliability perspective of these rules because there are a
    number of them. The timelines differ. They will affect
    different markets differently. For instance, in a Texas market
    where it is a competitive market, the costs to, say, retrofit a
    plant cannot be passed on to ratepayers. They have to be
    absorbed by shareholders. In another area of the country that
    is vertically integrated, those costs can be passed on. That is
    going to make a difference as to the investment decision
    involved as to whether to keep a plant or not. I just think
    that the level of detail and the complexity of this Nation's
    electric system calls for a more open process to determine some
    of the ramifications of these rules.
        Mr. Olson. Thank you for that answer. I will just kind of
    follow up on that question, and this would be all for the
    commissioners. I posed this question to Mr. Joseph McClelland
    of FERC during his testimony here on May 31st on the grid
    reliability and infrastructure defense but he was unable to
    give me an accurate answer, so I will ask again, but I wanted
    to preface it but since that time I visited the power plant in
    the district I represent, the WA Parish plant there outside of
    Meadville, Texas. It is one of the largest power generation
    plants in the country, the largest one in Texas, obviously. It
    has four coal generating units, four natural gas generating
    units, and I was out there talking with them about some of the
    problems we could face in Texas in the future with this
    drought, it looks like another El Nino, La Nina effect and, you
    know, extended heat waves, and I talked to them about we have
    got the fastest growing population in America. I asked them if
    they have some plans to cover the generation capacity that they
    might have to cover, and they do say that they have kind of
    mothballed two plants there in Texas, two coal-burning plants,
    that they could bring up online in a couple of weeks if so
    needed. My question is, if FERC had to require or order a
    generating unit to operate for reliability purposes and doing
    so would result in the unit exceeding environmental permit
    level, would FERC indemnify the operator from any and all
    agency actions for private citizen lawsuit liability?
    Commissioner LaFleur, you are first, ma'am.
        Ms. LaFleur. I don't believe we would indemnify but I think
    that we would try to work out in advance with the other
    agencies to make sure that if we ordered a plant to operate
    that they would not face compliance violations, and I know
    there also have been legislative proposals, surgical proposals
    to remove individual liability to individuals for operating in
    response to a FERC order, and if there is a need for clarity, I
    would suppose those, but we would certainly try to work out
    that there was no compliance violation.
        Mr. Olson. Thank you.
        Commissioner Norris?
        Mr. Norris. I believe it is a situation Mr. Spitzer has
    addressed a couple times during the hearing here, and that is,
    it is an unfair situation to put a utility company where they
    have to abide by two different agencies' rules, FERC's and
    EPA's, and while I don't know if we can--we can't protect them
    from that agency suing them. I think there is some proposed
    legislation--I can't think of the name of it--to address that
    situation and I think it would be a positive outcome.
        Mr. Olson. Mr. Spitzer, I am sorry I didn't hear our
    testimony before, sir, but it sounds like, did Commissioner
    Norris give an accurate summary of your feelings?
        Mr. Spitzer. Yes, correct, Congressman. In my testimony, I
    discussed a safety valve proposal proposed by some of the
    entities including ERCOT, and we can supply you with this. It
    is comments they filed before EPA on May 3, 2011, that I would
    support that resolves this potential Hobson's choice of
    complying with--violating either an EPA rule or FERC
    reliability standard, and I suggest that proposal could solve
    that problem.
        Mr. Olson. Commissioner Moeller?
        Mr. Moeller. I agree. It is a problem, and I think if you
    talk to entities who had to face this situation in the past,
    they won't do it again because it is too risky having two
    agencies, choosing to violate one set of rules or the other.
        Mr. Olson. That was my experience with Parish. They are
    willing to do it but they won't do it if they can't be covered
    legally.
        And Mr. Chairman, I am sorry, last but certainly not least.
        Mr. Wellinghoff. Thank you, and I agree with the safety
    valve solution that Commissioner Spitzer discussed. I think
    that is a remedy that in fact would take care of the issue.
        Mr. Olson. Thank you, Mr. Chairman.
        Mr. Whitfield. Mr. Terry, you are recognized for 5 minutes.
        Mr. Terry. Thank you, Mr. Chairman.
        To start off, I have three documents I would like to enter
    into the record.
        Mr. Whitfield. Without objection.
        Mr. Terry. The first is a letter from our Governor to
    Administrator Jackson expressing his concerns with the number
    and substance of the regulations. The second is an article from
    the Grand Island Independent discussing the now-expected
    closure of the Grand Island coal-fired plant as a result of
    CSAPR. And the last is an article from the Lincoln Journal Star
    that just ran yesterday regarding the same issue. Thank you,
    Mr. Chairman.
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Terry. It is interesting, I know that this issue has
    been beat to death, but just as a comment, I thought one of
    FERC's responsibilities was gathering data and providing models
    so that entities could make the right decisions, that FERC
    could make the right decisions, so learning that that is--you
    don't have the data or you don't have the modeling techniques,
    and I am kind of confused why you have 120 employees in a sub-
    agency or sub-department called modeling. So Mr. Chairman, I
    think we have an area that we can save money. We should provide
    that information to the chairman who is part of the super
    committee. I don't think those 120 employees--I don't know what
    they do but they obviously aren't doing what the title says, so
    we could probably save money by eliminating that.
        Next, getting back to the issue of the news stories and our
    State Attorney General, who hosted a regional event based on
    the CSAPR rule, this newest version certainly is more stringent
    than the proposed rule, the Clean Air Transport Rule, so as
    CSAPR becomes effective in 3-1/2 months--and this is for Mr.
    Wellinghoff and Mr. Moeller, and we will let Mr. Wellinghoff,
    the chairman, be first. As CSAPR becomes effective in just 3-1/
    2 months, are you concerned that States like Nebraska may not
    have enough time to adequately prepare for CSAPR's substantial
    increased requirements?
        Mr. Wellinghoff. Congressman Terry, thank you. I would
    first clarify your previous discussion. We don't have any
    division called modeling so I am not sure where you are getting
    that information from.
        But with respect to the CSAPR rule, I believe again that
    the planning authority that would encompass Nebraska and the
    State commissioners in Nebraska as well ultimately would have
    full authority and ability with respect to their modeling
    capabilities and their resource planning capabilities to plan
    for these contingencies.
        Mr. Terry. You are right, and I should have said the title
    of it correctly but I think the one that we can eliminate is
    the Office of Electric Reliability.
        Mr. Moeller. Congressman, to answer your question, yes, I
    am concerned because of the timeline of CSAPR and I think you
    will hear an articulate description of Texas's concerned from
    the ERCOT representative on the next panel.
        Mr. Terry. Thank you.
        Now, hearing those answers then, would it be justified in
    your opinion to delay the implementation of this rule so the
    States and entities can have a better grasp of its impact, Mr.
    Wellinghoff?
        Mr. Wellinghoff. I do not believe it to be appropriate to
    delay the rule.
        Mr. Moeller. I frankly don't know the implications enough
    to know where it is worth delaying or not but I know I would
    like to be a lot more comfortable about the reliability
    implications of it.
        Mr. Terry. Thank you.
        Mr. Whitfield. Thank you.
        At this time I recognize the gentleman, Mr. Gardner from
    Colorado, for 5 minutes.
        Mr. Gardner. Thank you, Mr. Chairman, and thank you for
    joining us today.
        Commissioner Norris, you stated in your testimony that you
    believe, and this is a quote, you believe that the ``EPA had
    adequately addressed reliability concerns.'' You base this
    conclusion not on FERC's own analysis but various studies, in
    your words, ``numerous studies by multiple entities that
    attempt to assess the reliability impact of EPA's proposed and
    final regulations.'' You have talked about those and you claim
    that you found those publicly available assessments and
    analyses the most informative for reaching your conclusions.
    Specifically, you cite in your testimony reports done by,
    amongst other, the Bipartisan Policy Center, M.J. Bradley and
    Associates.
        Mr. Norris, I don't think any of those organizations work
    for FERC or work within FERC but yet you are relying upon them
    and you are statutorily tasked with the responsibility of
    ensuring the reliability of the bulk power system. Do you
    believe, do you agree with members of this committee that
    perhaps FERC should be--that we should be concerned that a
    commissioner of FERC, the agency that has a prominent role in
    assuring reliability of the grid, is basing conclusions with
    respect to EPA's power sector rules on reports completed not by
    FERC but by outside interest groups with zero accountability to
    FERC or the American people?
        Mr. Norris. Let me start with saying I think those reports,
    they told us some consistent feedback on the situation. One is
    that there is not likely to be a resource adequacy problem
    nationwide. We have supplies or we can build supplies or build
    generation in time to address the overall generation needs of
    this country. I think that is consistent throughout all those
    reports. I think there are a lot of very knowledgeable folks of
    our electric system that work on those reports and provide
    information that I found valuable. I like to seek outside input
    when I come to a conclusion, and I did extensive research and
    reading multiple reports. I point at those as the most
    informative, and I think they represent a cross-section. There
    are differences in those reports but the consistent theme I saw
    in them was, we can meet our Nation's electric supply needs
    under the many different scenarios run.
        Secondly, the other consistent thing in that report as I
    stated earlier is the natural gas impact is having on the
    marketplace in general in terms of retiring old, inefficient
    plants. So, yes, I rely on those reports and I will continue to
    rely on those and other knowledgeable reports and how the
    proposed EPA rules may impact our system.
        Mr. Gardner. Do you think it is wise to rely on outside
    reports so heavily, though?
        Mr. Norris. Well, I probably erred in not putting our own
    report in there because I read that extensively as well. Yes.
        Mr. Gardner. And a question based on Ms. LaFleur's
    testimony. She stated in her second paragraph, third paragraph
    of her opening statement, ``Although not all these regulations
    are final, I believe it is important to consider them as a
    package when assessing their potential effect on reliability,''
    talking about the effect of the rules together. There has been
    legislation introduced in Congress that talks about the effect
    of EPA regulations on energy costs and prices. Do you think
    that those ought to be looked at together as well in addition
    to reliability, what it does for cost? And Mr. Moeller, I will
    start with you.
        Mr. Moeller. Well, it is kind of society's choice as to the
    costs of health regulations versus the increases in electricity
    prices, but I think most studies would indicate that prices are
    going to rise and there is a variety of studies as to how much
    they will rise in different areas, depending on how dependent
    they are on certain fuels, particularly coals, but----
        Mr. Gardner. Do we have a mechanism to look at the costs
    cumulatively, as Ms. LaFleur says, on reliability, just as we
    do on reliability that she is suggesting that we do?
        Mr. Moeller. Yes.
        Mr. Gardner. Mr. Spitzer?
        Mr. Spitzer. Mr. Chairman, Congressman, my view, and this
    goes back to my serve in the State legislature and at the State
    commissioner and now at FERC, is government is about balancing
    competing interests, and you have air quality, health issues
    balanced against the costs and the Congress doubtless considers
    that as does EPA, as do the State commissions. In the narrow
    issue of reliability, that is why the aggregate numbers
    certainly have an impact on wholesale power prices but there
    are many other variables with wholesale power. The natural gas
    revolution that I discussed earlier, concern over nuclear power
    in the wake of Fukushima may have an impact on our fuel supply.
        Mr. Gardner. Should we, though, have a system in place that
    takes a look at the cost of regulations comprehensively,
    cumulatively as they are added to our energy sector?
        Mr. Spitzer. I hope this is not gratuitous, but I think
    government at all levels has an obligation to continually
    revisit the circumstances which change over time. FERC has a
    serious mission and all five of us are very serious about the
    authority granted by Congress in 2005 in Section 215 of the
    Federal Power Act, which is why we are so zealous with regard
    to our space in terms of the reliability.
        Mr. Gardner. Ms. LaFleur, would you take that same approach
    that you take on reliability to the cost that regulations have
    on energy production?
        Ms. LaFleur. Well, the point of my comment, I think, was
    that the only way to really assess reliability is at the local
    level. You know, my former Massachusetts fellow citizen in this
    body, Tip O'Neill, said all politics is local. I would say all
    reliability is local. So in order for a plant to decide whether
    to stay open, they can't just look at MACT, they have to look
    at the transport rule and they have to look at the cost of
    retrofitting totally. I think that for a plant deciding whether
    to stay open, they should look at all the costs, whether some
    kind of macroanalysis of all the costs would be meaningful
    across the country, I think you would get the same kind of
    modeling issues that we have for all the macroanalyses that go
    from, you know, 30 to 80 of how many retirements there would be
    because the costs will depend on what decisions people make how
    to comply. So I am not sure I think a big macro cost number is
    going to be meaningful but I think the individual units have to
    look at the costs.
        Mr. Whitfield. The gentleman's time has expired. I
    recognize Mr. Markey for 5 minutes.
        Mr. Markey. Thank you, Mr. Chairman.
        Mr. Chairman, thank you all for being here. How many of you
    believe that the threat of a cyber attack on the electric grid
    is the top threat to electric reliability in our country? Is
    that your belief, Mr. Wellinghoff?
        Mr. Wellinghoff. I certainly believe that both cyber and
    physical security are major issues that we need to be concerned
    with respect to maintaining our electric grid.
        Mr. Markey. Is it at the top of your list of concerns?
        Mr. Wellinghoff. Yes.
        Mr. Markey. Are there any on the panel that do not have
    that at the top of their list of concerns? No. So you all have
    that.
        Well, I agree with you, and last year this committee
    unanimously passed the GRID Act, which was co-authored by
    myself and Mr. Upton, and that bill gave the FERC the authority
    to quickly issue grid security orders or rules if
    vulnerabilities have not been adequately addressed through
    existing reliability standards or other industry efforts. Do
    you believe that giving FERC this authority would increase
    America's ability to appropriately respond to threats and
    vulnerabilities facing our electric grid, Mr. Chairman?
        Mr. Wellinghoff. Yes, I do, Mr. Markey.
        Mr. Markey. Yes or no, each member.
        Mr. Moeller. I have come around to support FERC having more
    authority.
        Mr. Markey. Thank you.
        Yes?
        Mr. Spitzer. Yes, Congressman.
        Mr. Norris. Yes. I would give you a little bit more if you
    would take it.
        Mr. Markey. Very briefly.
        Mr. Norris. OK. That is because the cyber attacks have
    orders of magnitude on reliability. It can wipe out a whole
    interconnect. We are talking about in this situation very
    localized reliability situations that we currently have the
    tools to deal with but we need the tool you are talking about
    to deal with cybersecurity.
        Mr. Markey. And the FERC needs that authority. Do you all
    agree with that?
        Mr. Wellinghoff. Yes.
        Mr. Markey. OK, yes.
        Ms. LaFleur. Yes, I do.
        Mr. Markey. Based on what industry has done thus far, do
    you think that industry is likely to quick move, Mr. Chairman,
    to take all necessary steps to secure itself if FERC is not
    given the authority contained in last year's GRID Act?
        Mr. Wellinghoff. Well, just to be a little fair to
    industry, they are setting up a group called the Transmission
    Forum and they are trying to move, but I don't know how quickly
    they are going to be able to move independently on their own
    with a voluntary group.
        Mr. Markey. Do you think that the FERC has to have this
    authority in order to make sure that the voluntary becomes
    real? They can work together but in the absence of FERC having
    that capacity to mandate a solution, do you think it will
    happen?
        Mr. Wellinghoff. Yes, they can work together but I do think
    FERC should have this authority.
        Mr. Markey. Do you all agree with that? OK. Well, that is
    very important for us to hear because ultimately it is just not
    enough in the absence of the FERC having that authority.
        Is there a reason to believe that we will be able to solve
    this problem in the absence of legislation passing, Mr.
    Wellinghoff?
        Mr. Wellinghoff. I don't see a solution in the absence of
    legislation.
        Mr. Markey. That is very, very helpful to us, so let us
    just hope that this year we can pass that legislation and then
    get it passed through the Senate as well, giving that
    authority.
        Now, the argument here today is that we have some kind of
    tension here between the air quality and air conditioning, and
    we have to pick one or the other in our country, but let us
    focus here on the fact that there are already 13 States--
    Connecticut, New Jersey, Delaware, Illinois, Massachusetts,
    Maryland, Michigan, Minnesota, Montana, New York, Oregon, Utah
    and Wisconsin--who have already required their coal-fired
    plants to remove as much or more of their mercury emissions as
    has been proposed at the federal level by the EPA and about 70
    percent of coal-fired boilers that submitted data to EPA
    already meet the standards for particulate matter and
    hydrochloric acid. So it seems that this is possible. In fact,
    one example, Illinois receives 46 percent of its electricity
    from its 31 coal-fired power plants and has also reduced its
    mercury emissions by 90 percent, a level more stringent than
    EPA's proposal.
        Chairman Wellinghoff, have there been any reliability
    problems in Illinois due to their efforts to take the poison
    out of the air?
        Mr. Wellinghoff. To my knowledge, there have not been, and
    I assume that is because the planning authority that
    encompasses Illinois has taken this into account when they have
    done planning.
        Mr. Markey. Thank you. Now, Massachusetts required an 85
    percent reduction in mercury emissions in 2008, a level that is
    also more stringent than EPA's proposal. Were utilities in
    Massachusetts able to keep the lights on even thought this
    standard was being met, Commissioner LaFleur?
        Ms. LaFleur. Yes, they were, and there is an example in
    Massachusetts of a plant that they are planning to close right
    now through gradual planning and transmission reinforcement
    just a kind of replacement for old plants that we are talking
    about.
        Mr. Markey. The technology is there----
        Ms. LaFleur. Yes.
        Mr. Markey [continuing]. In an affordable way. Health gets
    protected. Air conditioning gets protected. All we have here
    are a certain small number of utilities that are in a sit-down
    strike against technological progress. We should just continue
    to keep that in mind.
        Thank you, Mr. Chairman.
        Mr. Whitfield. At this time I recognize the gentleman, Mr.
    Walden from Oregon.
        Mr. Walden. Thank you very much, Mr. Chairman. I want to
    follow up on what my colleague and friend from Massachusetts
    was talking about because he referenced Oregon, and in the case
    of the lone coal plant in Oregon, the cost to ratepayers was
    going to be roughly $520 million, so instead they are closing
    down that plant over a 10-year frame and will replace it with
    either two natural gas plants or some other alternative. So
    when they were trying to address the SOx, NOx, and mercury
    issues, the cost to ratepayers was so high to meet these
    requirements that instead they are going to close that plant,
    which really raises the question about reliability. And Section
    215 of the Federal Power Act permits FERC to direct NERC to
    conduct periodic assessments of the reliability and adequacy of
    the bulk power system in North America.
        And I think what we are trying to get at here, at least I
    am, is just as we make policy and watch policy being made, do
    we have a good basis of information upon which to make our
    decisions, and it strikes me that in the EPA's own rule on
    whatever page this is, 25,054, it says it is EPA's
    understanding that FERC and DOE will work with entities whose
    responsibility it is to ensure an affordable, reliable supply
    of electricity including State PUCs, RTOs, the NERC to share
    information and encourage them to begin planning for compliance
    and reliability as early as possible this effort to identify
    and respond to any projected local and regional reliability
    concerns will inform decisions about the timing of the
    retirements and other compliance strategies to ensure energy
    reliability, which is what we all want.
        Now, Mr. Wellinghoff, so in this initial look at the
    potential retirement of coal-fired generation, its effect on
    system reliability preliminary results, it talks in here on
    page 29 of this handout, which I am sure you are familiar with,
    that the industry must be directed to openly assess the
    reliability and adequacy impacts of retirement of at-risk
    units. Such studies should include frequently response, voltage
    profile, bulk power loading, stability loss, load probability
    calculations, deliverability of resources through planning
    studies.
        My question is, given what Mr. Barton just asked about
    whether FERC had the authority to request the information it
    needs and wants from the regional transmission organizations,
    in fact, in the FERC staff presentation, which I think you
    referred to as irrelevant, there is this slide I just
    referenced which talks specifically about this information.
    Have you solicited that information?
        Mr. Wellinghoff. I want to make very clear that I didn't
    suggest, Congressman, that the FERC staff presentation was
    irrelevant. What I said was irrelevant was the 80-gigawatt
    number would be irrelevant for planning purposes. Let us make
    it very clear. For planning purposes, what that number is again
    is a back-of-the-envelope number for the purpose of starting a
    dialog with EPA as to how EPA can interact with the planning
    authorities and those planning authorities can ultimately
    continue to do the work that they have done and will continue
    to do to ensure that we have a reliable system in the country.
        With respect to all those parameters that you referenced in
    that particular presentation, those planning authorities in
    fact have been directed by FERC to engage in those activities
    under Order 890 and under Order 1000. So we specifically with
    respect to those orders ensure that the planning authorities--
    --
        Mr. Walden. Related to those EPA rules specifically?
        Mr. Wellinghoff. Yes. In fact, in Order 1000, we very
    specifically say that they must consider both federal and State
    public policies which would include the EPA rules. So yes, we
    absolutely have done that in Order 1000.
        Mr. Walden. So you have asked for information, all these
    points related to these rules?
        Mr. Wellinghoff. We haven't asked for information. We have
    directed them to in fact incorporate that information into
    their planning processes to ultimately conduct their planning
    processes that in fact when they conduct those planning
    processes take account for things like the EPA rules.
        Mr. Walden. Right. So let me try and understand this. So I
    would think FERC would play a more direct role in this.
        Mr. Wellinghoff. We don't do central planning, and we don't
    do planning. It is not our function. You haven't given us that
    function. We are not planners. The planners are----
        Mr. Walden. So----
        Mr. Wellinghoff [continuing]. The specific regional
    planning authorities----
        Mr. Walden. So what was the purpose of this preliminary
    report?
        Mr. Wellinghoff. The purpose of the preliminary report was
    to start the dialog with EPA with respect to informing them of
    the planning activities that the planners conduct and ensure
    that the planning activity was one that could be well informed
    by----
        Mr. Walden. So what has happened----
        Mr. Wellinghoff [continuing]. The EPA rules.
        Mr. Walden [continuing]. Since then?
        Mr. Wellinghoff. What has happened since----
        Mr. Walden. Why would----
        Mr. Wellinghoff. We are continuing the dialog with EPA.
    What has happened is that we are directing EPA to in fact
    interface directly with the planning authorities like PJM, like
    ERCOT and others, and to provide them all the data that EPA has
    to help those planning authorities have an adequate handle on
    what they need to do to do their job to ensure reliability in
    this country.
        Mr. Walden. But I thought your testimony said you basically
    stopped that effort in May.
        Mr. Wellinghoff. We haven't stopped the effort of talking
    to EPA, no.
        Mr. Walden. All right. My time has expired, Mr. Chairman.
        Mr. Whitfield. I think everyone has had the opportunity to
    ask questions, and I want to thank the commissioners for taking
    time to be with us this morning. I know it has been a rather
    lengthy session, and the next time you come we will try to be a
    little more----
        Mr. Rush. Mr. Chairman?
        Mr. Whitfield. Yes.
        Mr. Rush. Mr. Chairman, it seems to me that, and I wanted
    to say this in the presence of the commissioners here, that
    this subcommittee should hold a hearing on the Cross-State Air
    Pollution Rule specifically. We have not done so yet, and I
    believe that the conversation that we have heard today really
    merits such a hearing and I would just ask on the record that
    we do conduct a hearing on the Cross-State Air Pollution Rule.
        Mr. Whitfield. Well, thank you very much.
        Mr. Walden. Mr. Chairman?
        Mr. Whitfield. Yes?
        Mr. Walden. Can I just--because I have got a conflict going
    on here on an answer. Can I ask just----
        Mr. Whitfield. Sure.
        Mr. Walden. Mr. Wellinghoff, in your submission back to the
    subcommittee on a question that was asked about continuing
    communications, your answer, and I am quoting here, is ``Other
    than the discussion between Assistant Administrator McCarthy
    and I on August 26th, which was described in supplemental
    responses to the committee's May 9th information request,
    communications between FERC staff and EPA staff have not been
    ongoing.'' That is your answer to our question. Now, that is--
    --
        Mr. Wellinghoff. Not ongoing, that is true, but that
    doesn't mean they are not continuing. I mean----
        Mr. Walden. Oh, I have to get a Webster's out.
        Mr. Wellinghoff. Since that period of time that we
    discussed there, there was no--nothing happened there in that
    particular period of time. I had a conversation with Lisa
    Jackson yesterday. I mean, we continue to have discussions all
    the time.
        Mr. Walden. OK. So I have to look up ongoing versus
    continuing. I am confused. I understand based on your written
    answer here that the staff have not been going, conversations
    have not been ongoing, communication between FERC staff and EPA
    staff have not been ongoing is your written response here.
        Mr. Wellinghoff. Congressman, perhaps that was a poor
    choice of words. It meant during that--in that interim period
    of time, there were no other meetings. That is simply all that
    meant.
        Mr. Whitfield. I am also going to enter into the record
    without any objections a statement from the North American
    Electric Reliability Corporation who wanted to testify but they
    were unable to do so, so they submitted their testimony for the
    record.
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. And once again, thank you all very much for
    being with us. It is also a great privilege to have the entire
    Commission here, and we look forward to continued dialog with
    you as we move forward, so thank you.
        At this time I would like to call up the second panel, The
    Honorable Jeff Davis, who is the Commissioner of the Missouri
    Public Service Commission; the Honorable Stan Wise, who is
    Commissioner of the Georgia Public Service Commission; the
    Honorable Jon McKinney, Commissioner of West Virginia Public
    Service Commission; and Mr. H.B. Doggett, the President and CEO
    of Electric Reliability Council of Texas; and then the
    Honorable Mark Shurtleff, Attorney General of Utah; Mr. John
    Hanger, President and CEO of Hanger Consulting; and Ms. Sue
    Tierney, Managing Principal of the Analysis Group. So if you
    all would take a seat.
        Well, thank you all for joining us this morning, and we
    appreciate your patience. So I am going to call on each one of
    you to give an opening statement. You will have 5 minutes to do
    that, and Mr. Davis, we will recognize you first for your
    opening statement.

    STATEMENTS OF JEFF DAVIS, COMMISSIONER, MISSOURI PUBLIC SERVICE
        COMMISSION; STAN WISE, CHAIRMAN, GEORGIA PUBLIC SERVICE
    COMMISSION; JON W. MCKINNEY, COMMISSIONER, WEST VIRGINIA PUBLIC
      SERVICE COMMISSION; MARK L. SHURTLEFF, ATTORNEY GENERAL OF
      UTAH; H.B. DOGGETT, PRESIDENT AND CEO, ELECTRIC RELIABILITY
        COUNCIL OF TEXAS; SUSAN F. TIERNEY, MANAGING PRINCIPAL,
    ANALYSIS GROUP; AND JOHN HANGER, PRESIDENT, HANGER CONSULTING,
                                  LLC

                        STATEMENT OF JEFF DAVIS

        Mr. Davis. Chairman Whitfield, Ranking Member Rush and
    members of the committee, thank you for allowing me this
    opportunity to testify here today. As a Missouri Public Service
    Commissioner, I am acutely aware of the potential impacts of
    EPA's pending regulations because it is my job to set the rates
    on customer bills, and I applaud this committee for reviewing
    the impacts those regulations are going to have on our citizens
    and on our Nation's economy.
        To summarize my testimony, I feel like my ratepayers are
    being attacked. Can we keep the lights on? Sure, we will do
    whatever it takes. That being said, it won't be easy. Nobody
    knew there was a problem in Arizona or southern California last
    week until 1.5 million Americans were left in the dark.
    Reliability is definitely going to be impacted because less
    generation equals less reliability.
        Also, replacing these old coal-fired units will cost more
    money. They will drive up rates because natural gas plants are
    still more expensive to operate than coal. Sure, we have got
    better than 20 percent reserve margins in both the Southwestern
    Power Pool and MISO footprint but the law of supply and demand
    says decreased supply increases price and the cumulative effect
    of these regulations will be to significantly reduce those
    reserve margins, the capacity, over the next decade by forcing
    the closure of many coal plants that are smaller than 300
    megawatts as well as a significant number of those coal plants
    between 300 and 500 megawatts of capacity.
        To put this in perspective, in Missouri, I have almost
    600,000 households, 1.5 million people approximately that make
    less $25,000 per year. That is according to the U.S. Census
    statistical abstract. I depend on these old coal plants to
    generate electricity almost every day for more than 2 million
    households. Why? Because they are still cheaper to operate and
    cheaper to dispatch than natural gas plants. Replacing them
    with renewables creates more of a reliability problem, and
    replacing them with gas will undoubtedly lead us back to the
    gas affordability crisis that we faced two or three times in
    the last decade.
        I submit to you that if you want the price of natural gas
    to go back up, all we have to do is have our utilities plan and
    build resources based on the premise that natural gas will be
    cheap and plentiful for the next 10, 20 or 30 years, and that
    is where we are headed.
        From a transmission perspective, by forcing the closure of
    a coal plant or small clusters of coal plants, these
    regulations are going to create pockets on the grid that have
    an increased risk of reliability issues because the grid was
    designed and built on the premise that those plants are going
    to be there providing voltage support to satisfy local load
    requirements throughout the country. I haven't plotted out
    where these plants are on a map but I can assure you that the
    absence of these plants will change the flow of power on the
    grid and create reliability issues in some areas.
        Turning to the actual effect of the EPA regulations on my
    State, these costs are going to be a significant burden. We all
    like clean air but the people I have need jobs. For example,
    the scrubbers used to remove particulates and gases cost
    anywhere between $250 million to $300 million per unit. We just
    spent $528.1 million to retrofit one coal plant to put
    scrubbers on. EPA has got more than a dozen regulations that
    are currently working their way through the pipeline. When you
    figure a 10 percent return on that investment, gross that
    number up for taxes and amortize the costs over 30 years, it is
    ultimately going to cost my ratepayers approximately $1
    billion. If you assume that utility has 1.2 million customers
    and divide the costs out on a per-customer basis, you are
    looking at close to $1,000 per customer over the next 30 years.
    It is that cost to a residential consumer as well as the impact
    it will have on small business and industry that I am concerned
    about.
        In Missouri this year already, we have an estimated 26
    heat-related deaths this year. Eighteen are still pending a
    final determination. In some cases and in certainly past cases,
    there was evidence that those customers actually had
    functioning air conditioners, they just weren't using them
    because in all likelihood they were afraid they couldn't pay
    their bills.
        In all honesty and in conclusion, I am just not sure how
    much more of this help my ratepayers can afford.
        [The prepared statement of Mr. Davis follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you, Mr. Davis.
        Mr. Wise, you are recognized for 5 minutes.

                         STATEMENT OF STAN WISE

        Mr. Wise. Thank you, Mr. Chairman. Thank you, Ranking
    Member Rush. My name is Stan Wise. I am a publicly elected
    commissioner of the Georgia Public Service Commission, and I
    currently serve as its chairman.
        As a utility regulator, I am responsible for ensuring that
    retail electricity customers in Georgia receive reasonably
    priced and reliable electric service, and like the rest of the
    United States economy, the economy of Georgia has suffered and
    our unemployment rates are above the national average. I worry
    that the cost and the reliability impacts of the new
    environmental rules will only further slow our recovery and
    cost jobs.
        During most of the last 10 years, Georgia was growing and
    we added 1.5 million new residents. Electricity generation
    increased by 40 percent and job growth increased by 140,000. At
    the same time, Georgia has been active in addressing power
    plant emissions with significant reductions including mercury
    through the State rules with reasonable compliance schedules.
    The cost of these emission reductions are already borne by the
    citizens of the State of Georgia. Customers of Georgia Power
    see an environmental line item on their bills currently
    averaging over $7 a month for household customers.
        My two principal concerns with this fleet of new
    regulations are this. First, I am concerned that there have
    been no comprehensive studies by the EPA to assess the impact
    of all of these rules on the price of electricity, on jobs, on
    the reliability of supply and the overall economy in our State.
    EPA only evaluates each rule in isolation, that is, the impact
    of one rule independent of all other regulatory actions. This
    is a very real issue for me because my Commission and Georgia
    utilities must consider the effect of all regulations in
    deciding how to comply cost-effectively while maintaining
    reliability. The EPA has not looked at these regulations in a
    comprehensive manner. Independent groups have examined the
    rules and they report double-digit increases in electricity
    rates over the next 10 years, job losses in the Southeast in
    the hundreds of thousands, and single-digit reserve margins. To
    me, the EPA's approach in analyzing the impact of these rules
    appears to be shortsighted and simplistic. It just doesn't make
    sense.
        My second concern with these fleet of regulations is the
    impact on reliability. How do they affect reliability? First,
    our reserve margins mentioned above in several studies
    represents actual assets that are available to provide
    electricity if demand increases or a plant fails. Without
    sufficient reserve margin, there is a highly increased risk of
    outages and blackouts. The assessment of future reserve margin
    is a critical component of my Commission's examination of
    future power needs and decisions on generation. This is key.
    The rules don't provide sufficient time for an orderly,
    deliberate technology installation program as has been the case
    with past environmental rules, nor do they allow time for
    construction of replacement generation.
        The emphasis on this point is, we just don't know how much
    technology is required or the potential requirements. We don't
    have sufficient time to install controls, do not have time to
    build new generation. This is what causes me and my colleagues
    great concern on reliability. It is not a responsible approach
    to managing our energy supply.
        I have other issues discussed in my written testimony where
    utilities have been forced to guess at compliance strategies,
    and the EPA's failure to engage State agencies such as mine in
    the development of these new rules. I am concerned about both
    the power industry that I regulate and the Georgia customers
    that I am entrusted to protect. These environmental rules have
    large impacts and the EPA has not studied the cumulative impact
    of the rules aimed at air emissions, coal ash and water issues.
    This hearing is focused on reliability, and I am concerned that
    for my State where we have already proposed the retirement of
    569 megawatts of coal capacity and deferring action on another
    2,600 megawatts of coal capacity until these regulations are
    final. The impossibly short time frame for compliance is also a
    concern that affects electricity reliability, not to mention
    the downrange jobs and community impacts associated with power
    plant retirement.
        Congress could aid in making this situation manageable by
    insisting upon a comprehensive study, preferably by an agency
    other than the EPA, on the impacts of these rules and by
    providing more realistic time frames for compliance that would
    both increase reliability and reduce cost. Thank you, Mr.
    Chairman.
        [The prepared statement of Mr. Wise follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you.
        Mr. McKinney, you are recognized for 5 minutes.

                      STATEMENT OF JON W. MCKINNEY

        Mr. McKinney. Thank you, Mr. Chairman and Ranking Member
    and members of the subcommittee, and thank you for the
    opportunity to appear before the committee.
        I am used to being on the other side of the bench listening
    to the many different perspectives. You asked for my
    perspective on the impact of a number of new EPA regulations
    affecting the power sector, so I would like to share with you
    what I know about these impacts and the environmental
    regulations that have already taken place in West Virginia and
    my overreaching concern that the pace of these additional
    requirements does not allow sufficient time to evaluate their
    potential impacts on reliability or for cost-effective
    implementation.
        I am an economic regulator, and it is my sworn duty to
    balance the interests of ratepayers, utility companies and the
    State. That is a tough assignment. We regularly hear many
    passionate pleas from industrial customers and residential
    customers who have to live on fixed incomes. We have heard
    these arguments recently from power companies as they installed
    new equipment to comply with existing environmental
    requirements. According to EPA's Acid Rain database, 1990 power
    plants in West Virginia emitted 970,000 tons of SO2. In 2010,
    the emissions were reduced to 110,000 tons, an 89 percent
    reduction.
        To make these improvements, our electric industry has spent
    some $4 billion on environmental controls and the costs had to
    be passed on to our ratepayers. Even though West Virginia has
    relatively low electric rates, those rates have increased by 40
    percent in recent years. And although I am concerned about cost
    of compliance, I am equally concerned about reliability. The
    plants that have been equipped with modern controls are
    generally the largest and newest plants but there are many
    smaller plants in West Virginia, and those plants provide not
    only generation but make the grid more stable. As a result of
    the EPA's proposal, many of these plants are expected to
    retire. One utility has already announced three plants in West
    Virginia totaling over 1,800 megawatts will retire by 2014.
        My concern with both reliability and ratepayer costs will
    be negatively impacted by the new EPA rules led me to introduce
    a resolution at the July NARUC meeting that promotes increased
    flexibility for implementation of EPA rulemakings. That
    resolution was passed and is now the official policy of the
    National Association of Regulatory Utility Commissioners.
    Briefly, the resolution recognizes that by providing great
    flexibility, closer coordination with State and federal
    partners, EPA programs can achieve the same environmental goals
    at a lower cost to customers and without compromising
    reliability. Flexibility in the schedule of implementation of
    EPA regulations can lessen rate increases because of improved
    planning, selection of correction design to address multiple
    requirements, greater use of energy efficiency and demand-side
    resources, and orderly decision-making. Recently, several
    regional reliability organizations submitted comments to EPA
    echoing these concerns. Their comments are attached to my
    written testimony.
        The impact of these rules goes far beyond the utility
    sector itself and could threaten the recovery of the broader
    economy. The American Coalition of Clean Coal Electricity
    recently asked NERA to model economic impacts of the Transport
    and MACT Rule. Overall, the analysis shows that in 2016
    electric rates will increase by 11.5 percent in the United
    States and 12.9 percent in West Virginia. Moreover, net job
    losses are projected to be 1.44 million jobs in the total
    United States and 38,500 in West Virginia.
        Cost feasibility and reliability impacts of EPA regulations
    have not been thoroughly examined and consequences of
    implementing these requirements without adequate review could
    be irreparable. Greater flexibility could preserve both
    electric reliability and mitigate additional rate increases.
    With these challenges in mind, I urge you to consider
    legislation such as the TRAIN Act and to include pertinent
    portions of the NARUC resolution in the bill. Thank you.
        [The prepared statement of Mr. McKinney follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you.
        Mr. Shurtleff, you are recognized for 5 minutes.

                     STATEMENT OF MARK L. SHURTLEFF

        Mr. Shurtleff. Thank you, Chairman Whitfield, Ranking
    Member Rush, members of the subcommittee. It is an honor to be
    here today with you, and my name is Mark Shurtleff. I am the
    Attorney General for the State of Utah. It is a pleasure to be
    with all these great experts on this panel. I want to just
    focus if I may my brief remarks on one rule that is imminent,
    and that is the Utility MACT which the EPA seems intent on
    proposing or adopting before November 16th.
        As I heard Commissioner Spitzer say in the prior panel, the
    best time for analysis is before a rule becomes final. Time is
    running out clearly on this rule. Eighteen Attorneys General
    including, Mr. Chairman, my friend, the Attorney General of
    Kentucky, Mr. Conway, have sent letters to the EPA
    Administrator asking that they withdraw the proposed MACT rule.
    As the chief legal officers of our States, we are most
    concerned with the rule of law. The EPA has clearly failed to
    assess the impact of that rule on a cumulative basis in light
    of its other promulgated, proposed and pending regulations
    governing electric power generation, and without the cumulative
    analysis, neither the EPA, FERC, Congress nor the public can
    truly understand the effect of all these regulations and the
    reliability of the electric grid and indeed on the economy, on
    jobs and electricity rates to consumers.
        The law requires cumulative analysis. Under Executive Order
    13563 signed by President Obama in January of this year,
    federal agencies must assess the cumulative impact of their
    proposed regulations including costs and they must tailor them
    to impose the least burden on society. The EPA has failed to do
    so.
        A cumulative impact analysis is extremely important from a
    practical perspective. If it is adopted, the Utility MACT Rule
    will clearly not operate in isolation. Instead, there are a
    large number of related regulations that EPA has already
    adopted or has proposed for adoption and is currently
    considering. Yet Congressman Waxman and Chairman Wellinghoff
    had this interaction about whether FERC staff was reliable or
    unreliable and what they had to rely on in order to make their
    recommendations. The EPA should do this. They can do it. The
    private sector has done cumulative analysis and the results are
    very disturbing.
        As just mentioned by Commissioner McKinney, the American
    Coalition for Clean Coal Electricity, ACCCE, commissioned the
    highly regarded National Economic Research Association to
    prepare a report, and they just looked at just two regulations,
    the Cross-State Air Pollution Rule, which Ranking Member Rush
    mentioned ought to be something studied, but they looked at
    that and the Utility MACT Rule and said it would be a serious
    blow to the economy, as mentioned, a net loss. Now, this takes
    into consideration--I think Mr. Inslee earlier in the prior
    panel mentioned jobs created. They said there would be 430,000
    jobs created but 1.8 million lost, so the net loss would be 1.4
    million jobs by 2020. The combination of those two regulations
    would also be a substantial increase in costs, in some places
    as much as 23 percent increase in the cost of electricity
    prices, could be a total of $184 billion in the next 20 years.
        So last week's cascading blackout in the southwestern
    United States clearly shows what we all know already, and that
    is, the grid if very interdependent, that these disruptions in
    one location can have far-reaching consequences. So the EPA
    should not proceed with the whole suite of regulations designed
    to restructure the utility industry without that careful and
    complete analysis as required by law.
        Now, the EPA is claiming that it has to move forward with
    these proposed utility MACT rules under a federal consent
    decree. Listen, I understand, we have been under federal
    consent decrees and we can't get out from under them. I get
    that. But they--and that consent decree says they have to do
    this by November 16th, 2 months away. However, you need to know
    that the EPA agreed to that deadline. They proposed that
    deadline. So I think it is wrong for a federal agency to avoid
    its legal responsibilities by hiding behind a deadline of its
    own creation, that consent decree, and you have to understand,
    the consent decree is not hard and fast, either. They can
    clearly seek an extension for good cause shown. Clearly, this
    is a case of good cause for extending the deadline as required
    by law.
        Unfortunately, it seems like they are going to go forward.
    They will take action with this ill-advised regulation that is
    proposed, and so I would urge Congress to take whatever action
    it can. If EPA goes forward on November 16th and adopts the
    utility MACT, whatever you can do, to enact legislation that
    would defer that rule and other major power sector regulations
    at least and until they fulfill their responsibility under the
    law to perform a cumulative impact analysis. You know, State
    officials, we protect not only interests of local jobs and the
    economy and electric reliability but what the law mandates, and
    we would ask you to hold the EPA to that requirement as well.
        Thank you, sir.
        [The prepared statement of Mr. Shurtleff follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you.
        Mr. Doggett, you are recognized for 5 minutes.

                       STATEMENT OF H.B. DOGGETT

        Mr. Doggett. Good morning, Chairman Whitfield, Ranking
    Member Rush and members of the subcommittee. I am Trip Doggett,
    the CEO of the Electric Reliability Council of Texas. I have a
    brief footprint above you on the slip of the ERCOT territory.
    We are the independent system operator that manages the flow of
    electric power to around 23 million Texans representing about
    85 percent of our electric load in the State and 75 percent of
    the land area. You have asked me to come before the
    subcommittee today to discuss our report on the impacts of the
    Cross-State Air Pollution Rule on the ERCOT system.
        I will start by saying that I am not here to take a
    position on the merits of the rule. I am here to express my
    reliability concerns with the implementation timeline of the
    rule. As Mr. Terry mentioned earlier, in the proposed Clean Air
    Transport Rule, Texas was only included in the peak season NOx
    program and in the final rule, which is now known as the Cross-
    State Air Pollution Rule, which I will refer to as CSAPR, Texas
    is included in the annual SO2 and annual NOx programs as well
    as the peak season NOx program, and in Texas, the annual SO2
    limits appear to be the most restrictive.
        In July, our Public Utility Commission of Texas asked us to
    review the impacts of the final rule, and I will highlight the
    rules effective on January 1, 2012, so our analysis was focused
    on the near-term reliability implications. We consulted with
    the owners of our coal-fired generating resources to determine
    their plans for rule compliance. The individual resource owner
    compliance strategies were reviewed and aggregated to determine
    the implications for overall ERCOT system reliability. It is
    important to note that our analysis did not include a
    calculation of the cost for compliance for resource owners or
    the impact on electricity market prices.
        Based on the information provided by the resource owners,
    we developed three possible scenarios of impacts. In what I
    will refer to as kind of the best case, our first scenario
    models successful implementation of their compliance plans. In
    this scenario, the incremental capacity reductions due to CSAPR
    are expected to be approximately 3,000 megawatts in the off-
    peak months and approximately 1,200 to 1,400 megawatts in the
    peak months. You heard earlier today that Luminant announced
    this week that they would shut down 1,200 megawatts of their
    generation to comply with the rule, and that 1,200 megawatts
    was included in our analysis that reflects 1,200 to 1,400 in
    the peak months. What happens is, capacity reductions in the
    off-peak months are expected to occur so that they can save
    their allowances until the peak months. We have a healthy
    reserve margin within Texas. However, I will highlight that
    with our reserve margin of over 17 percent, during this past
    month of August, if ERCOT had experienced the incremental
    reductions in available generation that we expect to occur from
    CSAPR, customers in our region would have experienced rotating
    outages during the month of August.
        We also examined two other risks in scenario two. We
    recognized daily dispatching of units that were designed for
    baseline would increase potentially that impact to 5,000
    megawatts in off-peak, scenario three, up to 6,000 in the off-
    peak months. Scenario three is related to the availability of
    low-sulfur coal.
        I will summarize by saying when the final CSAPR rule was
    announced in July, it included Texas in some compliance
    programs that ERCOT and our resource owners had reasonably
    believed would not apply to Texas. In addition, the
    implementation timeline by January 2012 does not provide ERCOT
    or our resource owners enough time to analyze the impacts. If
    the implementation deadline for CSAPR were significantly
    delayed, it would expand our options for maintaining system
    reliability. I think you have heard consistently from the FERC
    commissioners that this is not a one-size-fits-all issue of
    reliability and certainly within Texas we do have reliability
    issues with the implementation timeline.
        Thank you for inviting me.
        [The prepared statement of Mr. Doggett follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you.
        Ms. Tierney, you are recognized for 5 minutes.

                     STATEMENT OF SUSAN F. TIERNEY

        Ms. Tierney. Good afternoon, Mr. Chairman, Ranking Member
    Rush and members of the subcommittee. I very much appreciate
    the invitation to testify today on this issue.
        I want to focus my testimony on issues relating to the
    recent air regulations being proposed by the EPA for two
    reasons, and that is principally because those are the
    regulations with the most immediate impact on the power sector.
    I want to focus on two questions: can the Nation get the
    benefits of both public health and reliable electric supply,
    and will there be jobs and positive economic activity that flow
    from the issuance of these rules and their implementation by
    the industry.
        I believe the answer to both of those questions is yes and
    that the rules can proceed to implementation without a concern
    that in the end there will be reliability issues, and I am
    going to give you several reasons why. These are facts and
    conditions in the marketplace that give me confidence that we
    are in a manageable situation with regard to these rules.
        Number one, the electric industry has a very proven track
    record of addressing reliable power supplies and doing what it
    takes at the end of the day to make sure that the lights stay
    on. These are a group of people with a very strong mission
    orientation. Every person on my right fits that category as do
    all of the people in this industry, and they have ensured that
    we have reliable electricity supply as a priority.
        Number two, the new air rules are not a surprise. These are
    not coming at us in the last few months. These have been
    underway for over a decade of notice and they allow for more
    technology options and approaches than originally expected in
    prior versions of these rules. EPA's rules are technically and
    economically feasible.
        Number three, the owners of a portion, a substantial
    portion of affected plants, have already taken steps to
    modernize their facilities so that the companies are ready to
    comply with the new air regulations. As we heard previously
    today, many States have already had mercury rules that are
    tighter than what EPA is proposing. Many companies with
    facilities affected are under court order to address the issues
    that are coming forward. In fact, some of the recent
    announcements we have heard in the industry are coming from
    violations of current rules and not future rules of the EPA.
    And finally, we see that the CEOs owning a substantial portion
    of the power plants affected by these rules have indicated to
    securities analysts under the Sarbanes-Oxley requirements that
    they are ready to comply with these regulations.
        Number four, current fuel market conditions are already
    putting economic pressure on the least efficient coal plants.
    Since 2006, coal prices have gone up 30 percent. Natural gas
    prices have gone down by a third. These older plants are not
    operating very much. The relatively attractive outlook for
    natural gas prices which results from the abundant supply of
    gas including unconventional gas will enable the Nation to
    support modernization of the grid in affordable ways. Even so,
    every analyst that we have seen coming out with estimates of
    coal plant retirements and future electricity supply indicates
    that over 50 percent of our electricity supply will eventually
    come from coal even with these changes underway.
        Number five, there are many studies, you have heard about
    them today, about the amount of capacity that will retire. The
    more reasonable estimates are the ones that have been prepared
    recently. These are reflective of the actual rules that are
    being proposed. The most recent one is the Bipartisan Policy
    Center's, and that indicates 15 to 18 gigawatts across the
    country.
        Number six, and this is really the most important reason,
    at the end of the day, you can rely on the industry and its
    tools to make sure that the lights stay on. We have heard today
    about system planning. We have heard about least-cost planning
    from transmission companies and utility companies under the
    supervision of regulators. There are wholesale power markets
    where there is underutilized capacity. We have State and
    federal and grid operators who have an extremely strong record
    of taking action when necessary to make sure that they meet the
    obligation to provide reliable supply. Perhaps the most
    important one is at the end of the day, Congress has already
    given to the EPA, the U.S. Department of Energy and the Federal
    Energy Regulatory Commission tools that enable emergency
    conditions to allow for plants to keep open. The most recent
    example of this is across the river, the generating station in
    Potomac was required to stay on under an emergency order from
    the Department of Energy to keep the lights on for the District
    of Columbia.
        My time is up, and I am happy to answer any other
    questions.
        [The prepared statement of Ms. Tierney follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you, Dr. Tierney.
        Mr. Hanger, you are recognized for 5 minutes.

                        STATEMENT OF JOHN HANGER

        Mr. Hanger. Thank you, Mr. Chairman, Ranking Member Rush
    and members of the subcommittee. Again, good afternoon. And I
    have had the privilege to serve Pennsylvania as both a public
    utility commissioner and more recently as the Secretary of
    Environmental Protection. The Department of Environmental
    Protection in Pennsylvania also regulates the oil and gas
    industry and is responsible for the production numbers that are
    really rather extraordinary.
        The recent discoveries of natural gas from shale formations
    in Pennsylvania and other States will allow us to tap into a
    domestic cleaner fuel that can power America into the future. I
    am proud to have played a role in making Pennsylvania a major
    producer of natural gas and ensuring strong rules for its
    production. I think that the promise of this abundant fuel
    provides an important backdrop to our discussions today and in
    particular the concern about replacement power generation.
        From 2000 to 2008, just in Pennsylvania, 8,000 megawatts of
    new gas capacity was built. Pennsylvania is located in the
    middle of the region known as PJM, which spans 13 States and
    provides electric service to over 58 million people. This past
    May, PJM conducted an electric generation auction for the 2014-
    2015 delivery year, which is the first time period in which
    both the Cross-State Air Pollution Rule and the Mercury and Air
    Toxics Rule will be in effect. The results of the auction speak
    for themselves. As a result of the auction, PJM knows that it
    will have sufficient resources to meet demand during the
    delivery year and also that it will have a reserve margin of
    19.6 percent, which is in excess of the target 15.3 percent
    installed reserve margin for the region.
        Some regulators and companies from other States say the
    grid cannot manage the retirement of a significant amount of
    coal generation but I am here to tell you that it can be
    managed. In Pennsylvania, we have already faced the retirement
    of some of our coal-fired power plants, and it was done in a
    responsible, orderly fashion, and the lights stayed on. Back in
    December 2009, one of our generator operators, Exelon, decided
    to retire four coal- and oil-fired units with a combined
    capacity of 933 megawatts at two stations in southeastern
    Pennsylvania. When they were built, they were state of the art,
    but they were built during the Eisenhower Administration. They
    do not produce energy as efficiently as newer technologies and
    therefore waste energy while they emit dangerous pollutants
    that sicken and indeed kill people. The EPA was also enforcing
    rules concerning thermal discharges from these plants.
        When Exelon notified PJM of its intention to retire the
    units by May 2011, PJM said transmission upgrades would first
    be required to protect reliability. As a result, the EPA, PJM
    and Exelon worked together to execute a consent order that had
    two units retire on the original schedule while two others were
    allowed to run for reliability reasons only for up to another 7
    and 12 months, respectively. The Cromby Eddystone example
    represents a workable model for EPA to follow in resolving
    similar situations in other States that may arise as it
    implements its air quality regulations in the coming years.
    Indeed, five RTOs have informed EPA that they are willing to
    assist EPA in identifying where certain plants needed for
    reliability should be eligible for an extension of time to
    achieve compliance. These five RTOs have proposed a safety
    valve or reliability safeguard, and I have attached those
    comments to my testimony. The RTOs also asserted that they
    anticipate the reliability safeguard, and this is their
    language, ``would not need to be invoked often, if at all.''
        In conclusion, I would like to end with a quote from an
    August 26, 2011, PJM report. The report says, ``Newer, more
    efficient generation resources that replace retiring generation
    may have lower forced outage rates and thus are more dependable
    than older generation resources that may be nearing the end of
    their useful lives. Additionally, new entry generation demand
    response and energy efficiency resources may also provide
    lower-cost alternatives to achieve resource adequacy and local
    reliability.''
        Mr. Chairman, across this country, we have some very good
    news. There is a lot of new generation being built. We focus a
    lot on retirement of old plants that are inefficient and highly
    polluting but there are tens of thousands of megawatts of new
    generation under construction and many more in the planning
    phase. It is time to get on with this and protect the people's
    health of this country as well as ensuring that the lights stay
    on. Thank you, Mr. Chairman.
        [The prepared statement of Mr. Hanger follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you, and thank you all for your
    testimony.
        Mr. Wellinghoff in his testimony made it very clear that
    while FERC had responsibility for reliability, the planning and
    the detailed analysis of impacts of regulations really occurred
    at the planning levels and at the State level, the public
    utility commission levels and so forth. And so we have
    representatives here today from Georgia, Missouri, West
    Virginia, Utah and Texas, and every one of you has said that
    you are concerned about the reliability, you believe there is
    going to be an increase in cost, and my view, reliability is
    also an issue when people cannot afford to pay for electricity
    because they in effect are not receiving electricity, and I
    think, Mr. Davis, you touched on that yourself because you said
    there were certain number of deaths in Missouri during the heat
    spell, and one of the reasons was, people could not afford the
    additional cost of electricity. Is that correct?
        Mr. Davis. Yes, it is. Certainly everything points to the
    fact that they had air conditioning and that they made a
    conscious decision not to use their air conditioning.
        Mr. Whitfield. You know, so Mr. Wellinghoff, while I am not
    going to say he is not concerned about reliability because I am
    sure he is, but he did not leave us with the impression that
    this, I am going to call it the Air Transport Rule and Utility
    MACT, he did not leave us with the impression that he thought
    it would have a dramatic impact on reliability, but from your
    testimony, you five, who have responsibility for this, am I
    correct in that you have great concerns about reliability? Mr.
    Davis, do you have concerns about reliability as a result of
    these regulations?
        Mr. Davis. Absolutely, in certain areas.
        Mr. Whitfield. Mr. Wise?
        Mr. Wise. Mr. Chairman, in our State, we have an integrated
    resource plan that we do every 3 years, do a 20-year look. We
    have always been right. That doesn't mean that we couldn't be
    wrong, but we are concerned about it because of reliability. We
    heard comments about being able to fire up gas-fired
    generation. We don't have underutilized gas generation in our
    State and it does take time to design, build and construct new
    gas-fired generation. So nothing happens in a vacuum.
        Mr. Whitfield. Right.
        Mr. Wise. So, yes, sir, it is a concern.
        Mr. Whitfield. Mr. McKinney?
        Mr. McKinney. Yes, it definitely is a concern. I talked
    about overreaching concern about compliance deadlines, and that
    is really--we just don't have time to make the changes
    necessary.
        Mr. Whitfield. Mr. Shurtleff?
        Mr. Shurtleff. Yes, Mr. Chairman, and what is amazing is
    that while, as I mentioned, federal law requires the EPA to do
    this, they have all these tools and all these experts so it
    really becomes even a federalism issue as far as I am concerned
    in that they are not--it is not like they are being told to do
    it alone, they have help, but they are not taking advantage of
    that, and they could.
        Mr. Whitfield. Right. And Mr. Doggett, I think you said
    that you could expect blackouts as a result of this. Is that
    correct?
        Mr. Doggett. Yes, sir. We are one of the central planners
    that the chairman was referring to, and I have concern with
    this implementation timeline that there will be problems in the
    near term.
        Mr. Whitfield. Now, comments were made that EPA is reaching
    out to States and planning groups to discuss the impact of
    these regulations. Did EPA reach out to you, Mr. Davis, and
    talk about these issues?
        Mr. Davis. No, sir.
        Mr. Whitfield. Mr. Wise?
        Mr. Wise. No, sir.
        Mr. Whitfield. Mr. McKinney?
        Mr. McKinney. No, sir.
        Mr. Whitfield. Mr. Shurtleff?
        Mr. Shurtleff. I checked with our agency, and they said no,
    they have not.
        Mr. Whitfield. Mr. Doggett?
        Mr. Doggett. Yesterday afternoon.
        Mr. Whitfield. Yesterday afternoon? Before the hearing,
    right?
        Now, Mr. Inslee, who is a conscientious, very effective
    legislator, in his comments earlier today talked about all the
    job gains that we were going to have because of all this new
    technology. Now, Mr. McKinney, you and Mr. Shurtleff referred
    to an analysis conducted of the anticipated job gains or losses
    as a result of the Air Transport Rule and Utility MACT, and I
    believe that you said the net loss--that is including gains and
    losses--the net loss would be something like 1.4 million jobs.
    Is that right?
        Mr. McKinney. That is correct.
        Mr. Whitfield. Is that what you said also, Mr. Shurtleff?
        Mr. Shurtleff. Yes, Mr. Chairman. I have the chart before
    me, a negative 1.88 million, a positive 450,000, so negative
    1.4 million.
        Mr. Whitfield. So, you know, people make comments that we
    are going to have all these jobs because of new green energy.
    Yes, there is going to be new jobs but there is going to be
    lost jobs as well, and particularly in the area--it depends on
    what area of the country you are living in. And then we have a
    case like Solyndra where they received a $538 million loan
    guarantee, they were going to create 1,500 jobs. They got that
    loan guarantee from the federal government relating to solar
    panels and now they are in bankruptcy, and the taxpayers are
    out $538 million.
        Well, my time is expired, but Mr. Rush, I will recognize
    you for 5 minutes.
        Mr. Rush. Thank you, Mr. Chairman.
        I want to ask Dr. Tierney, first of all, just a quick
    question on the unfortunate death of the individual in Georgia.
    Would you say that that is a problem of reliability or
    inability to pay rates, and would the LIHEAP program have had
    an effect, a positive effect on that?
        Ms. Tierney. Based on my experience not only as a public
    utility commissioner, a head of an energy office in a State, a
    former secretary of the environment in a State and the
    assistant secretary for policy at DOE, I have experience in the
    LIHEAP program, and while I don't know the particulars at all
    about this person's unfortunate--or several people, I am not
    sure, in Missouri, I do know that the LIHEAP program is
    designed especially to deal with low-income issues relating to
    winter and summer, cooling and heating.
        Mr. Rush. I might add that some of my friends on the other
    side have been in opposition to LIHEAP and want to really kill
    the LIHEAP program off.
        But let me move to another area. You have been
    extraordinary in your conversation relating to job creation,
    and in your testimony you indicated two reports, and I just
    want to give you some time to expound on this whole--your item
    eight on your summary about job creation. What was the overall
    impact on jobs and investment and technologies from your
    perspective? Just give us a real thorough evaluation and
    assessment of job creation.
        Ms. Tierney. I am happy to do that, and I want to start by
    talking realistically about the fact that when people are
    talking about spending money on hardware for pollution control
    equipment and spending money on building new power plants to
    replace very old ones, we are talking about infrastructure
    jobs. We are talking about construction, we are talking about
    equipment manufacturing. This is heavy industry activity. These
    are job-creating activities, not to mention issues surrounding
    green energy jobs. I am not talking about those. What I am
    talking about is the job creation associated with replacing the
    kind of capacity that the estimates have said. Now, one of the
    estimates that I described in terms of my report, I provide
    information in detail of two studies, one by the Perry Group at
    the University of Massachusetts that looked at the national
    estimates as well as one by Professor Charlie Giachetti, and
    both of these indicate billions and billions of dollars of new
    investment that goes into jobs in heavy industry and in energy
    efficiency. As Representative Inslee said, energy efficiency is
    workers in communities putting on insulation in people's homes.
    Those are local jobs. And one of the things that we observed in
    the energy area is that the parts of the country that are very
    dependent on coal, 98 percent dependent on coal, 90 percent
    dependent on coal, have had not as much opportunity, let us
    say, to go after energy efficiency actions in insulating homes
    of consumers, and the jobs that can be created in those
    communities associated with putting in energy efficiency and
    buttoning up the buildings so that people's bills go down,
    their electricity bills go down, is a real opportunity here.
        Mr. Rush. In August of 2010, you co-authored a report on
    the electric system reimbursement in the face of impending EPA
    air pollution rules. You recently updated that report. Can you
    summarize your new findings?
        Ms. Tierney. Yes. The most important findings were that
    there are so many companies that have indicated out loud that
    they are ready to manage these. We updated it also to indicate
    that the regulations as proposed are more flexible. They allow
    for more available pollution control technology than people
    previously thought, and that led us to conclude that the more
    recent estimates about the impacts of these regulations are the
    ones that are more credible for understanding where we stand
    today.
        Mr. Whitfield. At this time I recognize Mr. Olson from
    Texas for 5 minutes.
        Mr. Olson. I thank the chair and I thank the witnesses for
    coming today. I greatly appreciate your time and expertise.
        I am from Texas, so I am going to focus on some of the
    challenges that we are facing in Texas, and my first question
    is going to be for you, Chairman Doggett. Thank you for leaving
    the Lone Star State and coming to Washington, D.C. I know
    people back home say you are crazy. They say that about me all
    the time, but we are fighting for Texas.
        I want to talk about the Luminant issue, and we have talked
    about it in the previous panel and we have talked about it
    here, but because of the CSAPR rules, we are going to lose at
    least two coal-fired plants in our State, 500 jobs, and I just
    want to make the panel aware and the committee aware of a
    letter that was sent from EPA. This is Deputy Administrator
    Bob, and I am going to mess up his last name, Perciasepe. He
    sent this to Luminant CEO David Campbell on September 11, 2011,
    just last Sunday, and the letter says, ``We will share with you
    data that illustrates how Texas Luminant can comply with CSAPR
    cost-effectively while keeping levels of lignite coal use near
    current levels, thus avoiding the need to idle plants or shut
    down mines in response to requirements of the rule.'' And
    Luminant's response is: ``We are very eager to receive this
    information. EPA has not yet laid out any specific alternatives
    that do not involve job losses and facility closures.'' I mean,
    shouldn't they have had that discussion with Luminant before
    CSAPR was being implemented? Mr. Doggett, do you care to
    respond?
        Mr. Doggett. I would prefer not to respond relative to job
    loss but certainly for reliability purposes, I think in
    discussions with EPA yesterday afternoon, they at this point
    are willing to sit and look at our numbers that generated the
    results from our report and let us try to determine why there
    are differences in the data that they used in preparing the
    rule versus the data that we are presenting so certainly that
    dialog would have been helpful.
        Mr. Olson. You would hope they have would that dialog
    beforehand, before the company announces that they are going to
    have to close two power plants. I mean, that is absolutely
    wrong.
        Again, to the public utility commissioners, same
    experience? Mr. Davis? Did the EPA not give you any warning,
    not consulting you or making promises it is not keeping.
        Mr. Davis. To my knowledge, to the best of my knowledge,
    our agency has not received any communications from the
    Environmental Protection Agency at all.
        Mr. Olson. Commissioner Wise?
        Mr. Wise. Yes, we have not, and we are just trying to
    figure out what the end rules are going to be and how we shoot
    at a target that we don't know where it is.
        Mr. Olson. And Commissioner McKinney?
        Mr. McKinney. To be fair to EPA, there has been several,
    from a NARUC perspective, several webinars and several
    discussions, but as far as reaching out individually and trying
    to understand what the local issues might be and what the real
    impact is going to be on both reliability and customers, no.
        Mr. Olson. And Attorney General Shurtleff?
        Mr. Shurtleff. My discussions with my clients over at PUC
    say they have not had that discussion, although I will point
    out that Utah has some of the cleanest coal in the world with
    very little mercury, and we would be able to share with all
    these folks if President Clinton in 2000 hadn't locked up the
    Kaiparowits Plateau designation, so we do have clean coal. It
    is not as big of an impact for us. We are concerned about the
    nationwide impact.
        Mr. Olson. And so just the committee members know and the
    American public knows how this decision came about, I mean, and
    this is in response to that EPA letter, but they based their
    inclusion of Texas in the final rule on a prediction of a very
    small contribution from Texas generation to a single air
    quality monitor, only one, in an Illinois town 500 miles away
    from Texas. In this location, the EPA established itself that
    has concluded that it is in air quality attainment based on
    actual monitored results, but because of EPA, they concede that
    whatever downwind Texas might cause, it is small and barely
    meets the statutory threshold and yet they have taken this
    action that is at least right now going to close two coal-fired
    power plants.
        Dr. Tierney, I want to ask you a question. I greatly
    appreciate your comments about natural gas and how that is the
    future of our energy generation in a lot of ways, but I am
    concerned about EPA because right now they are attacking some
    of the modern techniques we are using to recover natural gas,
    and we have got a great example in our home State of Texas
    where the EPA took over two wells in the Barnett Shale Play and
    took them from the railroad commission and the operator based
    on some sort of alleged contamination of drinking water. We did
    the tests and determined positively that there was no
    contamination from any sort of natural gas recovery operations
    near those wells.
        If the EPA is able to somehow curtail these techniques,
    does your model fall apart? Don't we have to have some other
    source of energy other than natural gas? We have to go back to
    coal because the wind and the solar, they are not baseline
    power loads. We have to have some alternative.
        Ms. Tierney. As you know very well, I am sure, most of the
    regulation that affects the extraction of natural gas is under
    State jurisdiction and State law, and so the terms and
    conditions under which extraction occurs in Texas is under the
    Railroad Commission. There are environmental issues. I have not
    heard anything in the past year and a half that I have been
    working on the National Petroleum Council study in the last 6
    months in which I have been working on the Department of Energy
    shale gas committee in which I have heard EPA is going to shut
    things down on shale gas extraction.
        Mr. Olson. I will get you some information on the two wells
    they took over in the Barnett Shale Play. EPA took it over.
        I yield back the balance of my time. Thank you.
        Mr. Whitfield. At this time I recognize the gentleman from
    Pennsylvania, Mr. Doyle, for 5 minutes.
        Mr. Doyle. Thank you, Mr. Chairman, and I just want to say,
    I was listening to your remarks and I am sympathetic to the
    concern about jobs. I think a lot of us feel the same way about
    some of these trade agreements. I know many Republicans support
    trade agreements, and where I am come from, NAFTA didn't feel
    very good in terms of whether it was jobs for Pittsburghers but
    apparently it created jobs in other parts of the country, and
    it just seems this is the same kind of issue where there is
    obviously going to be displacement in certain parts of the
    country and opportunities in others. So I am sensitive to that.
        With regards to your comment about Solyndra, we had
    administrations in Pennsylvania too that did loan guarantees
    for an auto company and a television manufacturer that both
    went belly up and left our State too, but I think we can all
    agree that we still want to encourage these types of
    opportunities. They don't always pan out and everyone isn't a
    winner, but I don't think we should stop trying to bring
    opportunity and jobs to all parts of the country. I think that
    is what we all want to do here in the committee.
        I want to thank both panels. I am sorry I missed all the
    fun earlier. I had another meeting and I couldn't get here for
    the first panel.
        Mr. Whitfield. It was a little boring.
        Mr. Doyle. Yes, that is what I understand.
        But I am especially pleased to see John Hanger here. I want
    to tell you, Pennsylvania has benefited from his many years
    both as a public utility commissioner and secretary of our DEP,
    and we are fortunate to have someone like John here to share
    his expertise with us.
        I was listening a little bit to the earlier panel, and I
    was rather surprised to see that on the broader issue of
    reliability, there seemed to be nearly unanimous agreement,
    which is a rare thing on this committee, that when these EPA
    regulations go into effect, that the lights are going to stay
    on. I have been reading some of the comments filed by the RTOs
    that point out while reliability at large doesn't seem to be a
    major concern, there is some potential for more localized
    reliability issues that are going to need to be addressed in a
    targeted manner.
        Mr. Hanger, I would like to ask you, I was looking at PJM's
    comments to the EPA, and they said specifically PJM proposes
    that EPA include in its final rule a reliability safety valve
    for specific units deemed reliability-critical units where an
    individual unit shutdown would adversely impact local
    reliability. In your testimony, you seemed to suggest that this
    may not be needed and you cite your experience with the consent
    decree with Exelon. Do you believe that similar outcomes,
    consent decrees, would be expected across the country when
    needed, or could you expand a little bit on why maybe you think
    this reliability safety valve isn't necessary?
        Mr. Hanger. Well, I agree that the safety valve idea is a
    good idea. My testimony embraces the point that we already have
    that kind of authority under current law. We have at least four
    provisions in the Clean Air Act and the Federal Power Act that
    allow environmental regulators working with planning
    authorities like PJM and State public utility commissions, if
    that is appropriate, to enter into consent decrees, and so I
    absolutely agree that whenever you retire an individual plant,
    there is a local reliability analysis that must happen. That is
    true whether or not we have these rules. There are some plants
    that are retiring today and we don't have the rules, and I am
    sure wherever that happened or is in the process of happening,
    they have gone through a detailed reliability analysis. And we
    did that at Eddystone Cromby and we found--well, PJM found a
    problem and they then brought it to me and we worked out with
    the existing authority a consent order that ensured that the
    environment was protected and the lights stayed on.
        Mr. Doyle. Very good. So you don't necessarily oppose this
    idea of a reliability safety valve?
        Mr. Hanger. No, I don't oppose the idea.
        Mr. Doyle. Thank you, John.
        Mr. McKinney, PJM oversees a portion of the grid that
    serves 58 million in 13 States including your State and my
    State. It has a forward capacity market that allows it to know
    that it has capacity that it is going to need for the future,
    and recently PJM conducted its auction for the 2014-2015
    period. The cross-state and mercury air toxic rules will both
    be in effect by then. This auction showed that PJM will have
    more than enough capacity to maintain reliability. More than 4
    gigawatts of new capacity will come to the market, mostly
    demand response, and the reserve margin will be 19.6 percent,
    which is in excess of the target of 15.3 percent. So based on
    this auction and additional analysis, PJM stated in its August
    2011 report that resource adequacy does not appear to be
    threatened. West Virginia is in the PJM footprint, and I am
    just curious, does your Commission have any modeling or
    analysis that disputes PJM's finding or auction results?
        Mr. McKinney. What we do have is, I think if you listened
    earlier to the FERC commissioners, they talked about local
    impacts, and local impacts is really many of the issues, and we
    can reach back just to D.C. recently who chose to shut down two
    coal plants and have waited a significant number of years to be
    able to replace those with some other source of generation or
    some source of transmission. So the issue really gets down to
    local issues. Yes, there may be--if you have got 10 gigawatts
    someplace but you can't get it to where it needs to be, it
    doesn't help.
        Mr. Doyle. Sure. I think we all realize that there is going
    to be local reliability issues in certain segments.
        Mr. McKinney. And that is what I am asking for. I am asking
    for some sort of flexibility, an ability to be able to move
    things and allow plants that don't need or you can't justify
    from an economic point of view to be retrofitted but allow them
    some safe harbor.
        Mr. Doyle. But you support this concept of reliability
    safety valve also?
        Mr. McKinney. Yes, I do.
        Mr. Doyle. Mr. Chairman, you are generous with your time as
    always, and I thank you.
        Mr. Whitfield. Thank you.
        Mr. McKinley, you are recognized for 5 minutes.
        Mr. McKinley. Thank you, Mr. Chairman.
        Mr. Hanger, you had referenced, I think you said in your
    remarks, I read through your printed remarks but in your oral
    statement you said that there were two plants or a couple
    plants that shut down in Pennsylvania. Am I correct on that,
    something about some plants in Pennsylvania?
        Mr. Hanger. Yes, there were two plants, four units, a total
    of 930 gigawatts.
        Mr. McKinley. And did they meet at one time the EPA
    standards?
        Mr. Hanger. They were built----
        Mr. McKinley. Yes or no.
        Mr. Hanger. At one time in the 1950s and 1960s and 1970s
    but they were very old plants.
        Mr. McKinley. OK. Old plants. I understand. But then you
    went on, which really caught my ear, you said that they
    sickened and killed people. Do you have a list of the people
    they killed?
        Mr. Hanger. I can't identify individuals but I----
        Mr. McKinley. But you said they killed people.
        Mr. Hanger. We can provide you----
        Mr. McKinley. That is said around here an awful lot.
    Everything is pretty loose about these remarks, about it causes
    asthma, it kills people, but no one gives us names of the
    people. I don't see the trial lawyers lining up at the doors to
    chase these people like ambulances. If they really have killed
    people, I would think someone would have pursued that, don't
    you think?
        Mr. Hanger. They do kill people, and unfortunately, we
    don't actually know their names. They kill, EPA data shows, up
    to 34,000 a year.
        Mr. McKinley. Thank you very much. You are just like so
    many other people here.
        Mr. McKinney, you have heard a lot of the testimony here,
    particularly from Dr. Tierney. I know often some of the other
    panelists would like to respond to some of the comments that
    have been made, so would you like to respond to Ms. Tierney's
    comments, her facts and conditions?
        Mr. McKinney. And respectfully, I do disagree with Dr.
    Tierney, and in fact, I have looked at the eight points and I
    can agree on one point and partially agree on another, but the
    rest I disagree, so that is two out of eight that I agree on,
    and I will go on a little background. One of the things we
    talked about, EPA has had years or decades of notice. Well,
    these rules are still not totally finalized, and until you see
    the final rule, there is no way you can make any judgment about
    what the impacts are going to be, and the second thing is that
    a substantial portion of affected plants have already taken
    steps to modernize. That is just not true. There are many
    plants out there. There are some plants that we have spent $4
    billion in West Virginia, and none of those plants meets the
    new rules. I mean, we have spent money after money trying to
    make adjustments in SO2, trying to lower and do the right
    thing. Those obviously have been just not enough.
        One of the things I really disagree with is the fact--and I
    ran--from my former life, I ran coal generation facilities and
    a chemical, and I recognized, we made study after study trying
    to decide whether to replace those coal generation facilities
    with natural gas, and when natural gas was much lower, and it
    was always what you did is, you took jobs out of the--and
    replaced that with a lower cost of natural gas at that
    particular time. We couldn't make it work. But in every case,
    we showed significant job loss. It was a four to one ratio
    there, at least, and I think Congressman Shimkus put a slide up
    that really shows you what that really is about.
        Mr. McKinley. Just in closing in the few seconds that I
    have left, you have heard a lot of folks from the other side
    try to make this a partisan matter throughout this day, but
    your registration, how are you registered?
        Mr. McKinney. I am a Democrat.
        Mr. McKinley. Thank you.
        Mr. Whitfield. Thank you, Mr. McKinley.
        Mr. Green, you are recognized for 5 minutes.
        Mr. Green. Thank you, Mr. Chairman.
        Mr. Doggett, I want to thank you for being here to testify
    today. The 100-plus-degree temperatures you are experiencing
    across Texas and then the extreme cold weather we had in
    February are reminders of how important the role that ERCOT
    plays in Texas, and I appreciate your working to ensure Texas
    has the electricity they need to get through the extreme
    temperatures. For members, in Texas, we have our own grid, and
    although parts of southeast Texas and parts of north Texas are
    not part of it, but ERCOT is our agency that controls it.
        Mr. Doggett, you are here today to testify about the recent
    analysis ERCOT conducted on what the CSAPR rule would mean for
    Texas, the cross-state rule. In doing so, I noticed you did not
    include how natural gas infrastructure would affect the three
    scenarios you discussed at length, and I know it may not be
    feasible for all the plants to switch from coal to natural gas
    but again, with some of our rich resources we are developing in
    Texas on the land side, it seems like some of those could be
    possible. Why didn't you or ERCOT account for natural gas in
    your analysis?
        Mr. Doggett. We interviewed each of our resource owners and
    identified their plans to comply, and in those interviews, that
    was not presented as a viable compliance option.
        Mr. Green. If you had accounted for natural gas, how would
    this have changed your numbers?
        Mr. Doggett. It would be hard for me to estimate that
    impact. I did talk to the Luminant owners and we confirmed that
    switching from coal to natural gas for those units was not an
    option, but I am unaware of whether that was even an option for
    the other plants.
        Mr. Green. I have been told, and I know recently with our
    heat wave in Houston, there was some natural gas plants taken
    out of mothballs. I have been told that only 40 percent of
    those natural gas plants are running. Is that a correct
    percentage?
        Mr. Doggett. Forty percent?
        Mr. Green. I have been told that natural gas plants in
    Texas only run 40 percent of the time.
        Mr. Doggett. Natural gas delivers a little over 40 percent
    of our energy, I am sure off peak because they are not
    necessary with baseload generation. I am not sure if 40 percent
    is the number but we economically dispatch the units, so it is
    likely that they are not running at off-peak times.
        Mr. Green. Is there any discussion on trying to make the
    baseline natural gas with prices now at $3.90 per MCF? Because
    I know baseload, particularly our nuclear power plants, we have
    two in Texas, and also with coal plants. Is there discussion on
    trying to do natural gas as a baseload?
        Mr. Doggett. We had a hearing in Texas yesterday where one
    entity outside of ERCOT in east Texas highlighted that they
    were going to reverse their fleet and make their gas units
    their baseload resources and let the coal units provide the
    variability. It was really presented as a concern because of
    the increased cost. I am not here to talk about the increased
    cost but that was their point, and they also highlighted the
    concern with increased maintenance and decrease in reliability
    when you use a unit that was designed for baseload cyclically.
    That creates maintenance problems.
        Mr. Green. I understand ERCOT has the authority to utilize
    reliability must-run contracts with companies. Can you explain
    what these contracts are and how they can used to mitigate some
    of the generation capacity we have experienced? I know you have
    at ERCOT. Is there a way that those contracts can be utilized
    at ERCOT?
        Mr. Doggett. There is a possibility. I mentioned earlier
    that EPA reached out to us yesterday to discuss some options
    moving forward, and that was one option that they mentioned.
    The challenge there is that we have to have a method for the
    resource owner to have some assurance that they will be given a
    variance from EPA. We certainly can't require a resource owner
    to break the law.
        Mr. Green. Texas was included both in the SOx and the NOx
    and the CAIR program that was rolled out in 2008. while I am
    incredibly frustrated not only with how the EPA handled the
    possibility of including Texas but frankly their entire
    assumption used to justify its inclusion, what do you say to
    the critics who say that these companies should have been
    working toward these reductions all along since they were
    supposed to be stricter standards under CAIR and the Texas
    ERCOT should have been better prepared for this. How do you
    respond to that?
        Mr. Doggett. Well, we analyzed the preliminary rule, and
    from our analysis of the preliminary rule, it did not appear
    likely that Texas would be included.
        Mr. Green. And believe me, I share your opinion on that,
    and we have had this discussion with EPA for a number of months
    on both a partisan and bipartisan basis, and it is frustrating.
        Bernstein Research examined the issue, finding that if
    Texas utilities would simply run their existing scrubbers
    continuously and switch unscrubbed units to lower-sulfur coal,
    Texas would likely comply with its SO2 budget under the rule in
    2012, and do you think that is correct?
        Mr. Doggett. We have been told by the resource owners that
    that is incorrect.
        Mr. Green. Thank you.
        Thank you, Mr. Chairman.
        Mr. Whitfield. At this time I recognize the gentlelady from
    California, Ms. Capps, for 5 minutes.
        Mrs. Capps. Thank you, Mr. Chairman.
        We know that numerous independent studies conclude that any
    retirements of old, inefficient coal plants can be offset by
    large amounts of excess generating capacity, by new capacity
    that can be quickly built, and third, by demand response and
    energy efficiency measures that can reduce the amount of
    generating capacity that is needed at all, but it is always
    possible that there will be localized reliability challenges
    caused by retiring power plants, and I want to thank you, Mr.
    Hanger, for your answers and your responses to Mr. Doyle's
    questions. You noted a real-life situation that our Republican
    colleagues are often very worried about. You have demonstrated
    that the State and the utility and the grid operator were able
    at least in this instance to work together to keep the lights
    on while protecting the environment, so I thank you.
        Mr. Hanger. You are welcome. Thank you.
        Mrs. Capps. And I want to turn to you, Dr. Tierney, because
    Mr. Hanger's response is one approach to dealing with the
    potential localized reliability challenges, but hopefully there
    are some other flexibilities available as well to address
    situations where a plant needed more time and oftentimes this
    is the question that arises in a local community. They don't
    have time to assure reliability and the confidence that it
    engenders.
        Ms. Tierney. Well, thank you very much for the question,
    Representative, and there are quite a few instances of
    situations where a plant was going to retire for economic
    reasons or for environmental reasons, and it was found in the
    local reliability studies to be a problem if there were a
    retirement. I can think of an example in Massachusetts where
    there was a consent decree negotiated between the environmental
    regulators and the owner of the plant in conjunction with a
    must-run contract, very similar to what happened in
    Pennsylvania, kept the plant operating while there were
    remedies put in place. Transmission upgrades were put in place.
    Demand management was put in place to reduce the demand in the
    area.
        Another example is one that I mentioned previously across
    the river at the Potomac River Generating Station where
    Virginia, the State regulators were interested in having that
    polluting plant be shut down. The company wanted to shut it
    down. There were applications made to the Department of Energy
    to use its emergency authority under existing law to find a
    condition under which the plant could not be retired, and PJM
    came up with studies of transmission and transmission was put
    in place along with other alternatives besides just shutting
    down the plant to keep that plant operating during the period
    of the other remedies. Those are now in place, and the plant
    looks like it will be shutting down by voluntary action of the
    owner.
        Mrs. Capps. So there are some varieties of localities where
    the remedies have been put into place that satisfy the local
    people. Would you like--you might want to take a minute to
    comment on Mr. McKinney's statements in this regard to local
    reliability.
        Ms. Tierney. I could not agree with him more than local
    reliability issues are fundamental and important, and as one of
    the other panelists, John Hanger, said when there are--when
    there is an addition to the grid in terms of a new power plant
    or removal of a power plant from the grid, there are always
    local reliability studies. Those have to be done. And if there
    were to be a problem, the existing authorities will allow these
    varieties of tools in place to make sure that the lights stay
    on.
        Mrs. Capps. Thank you. And finally, I think this is the
    last question here, and this is fundamental to me, opponents of
    the EPA's public health and environmental protections are often
    essentially arguing that we have to choose between public
    health protections and the reliability of our electric grid. I
    have to give away too that I am a public health nurse in my
    background. There is only a minute left, but Mr. Hanger and Dr.
    Tierney, my question, are these goals really in tension? Do we
    have to choose at the local level between reducing toxic
    pollution and keeping the lights on?
        Mr. Hanger. I will go first, since I am afraid the
    Congressman took offense to my language. The language I am
    afraid reflects the truth. Old coal-fired power plants do emit
    pollution that can cause health damage. That is why we have
    these rules. We are not doing this just to harass the coal
    industry or any other industry. This is about human health. And
    they are not in tension. That is what has been demonstrated in
    Pennsylvania. It has been demonstrated in many States. We have
    ways to clean up the coal plants so they can continue to
    operate. We can build new coal plants that don't cause that
    damage and we have alternative fuels, and we just should get on
    with it.
        Mrs. Capps. Thank you.
        Any further comments from you?
        Ms. Tierney. He said exactly what I would have said.
        Mrs. Capps. And also from my background, the cost of
    damaged health to employees, to neighborhood families, we
    haven't really stopped to figure out exactly how that fits into
    this balance as well so that when we assess the cost, we need
    to look at a wide circumference, and maybe some of the rest of
    you would agree. I have 29 seconds--oh, no, I am over. Thank
    you.
        Thank you, Mr. Chairman.
        Mr. Whitfield. Thank you very much, and I want to thank----
        Mr. Rush. Mr. Chairman, before we conclude, I have a
    unanimous consent request.
        Mr. Whitfield. OK.
        Mr. Rush. I can't help but just notice this young lady, I
    think this is Mr. Davis's daughter.
        Mr. Davis. That is correct.
        Mr. Rush. She has been so well mannered and so attentive to
    this proceeding that I just think that we should just give her
    a round of applause.
        Mr. Whitfield. What is her name?
        Mr. Davis. Micah Davis.
        Mr. Whitfield. And has she always been this interested in
    environmental issues?
        Mr. Davis. For the last 2 or 3 years, she has been
    following me around.
        Mr. Whitfield. I also have a unanimous consent request on
    behalf of Mr. Murphy, who is a member of this committee. He
    wants to submit for the record the Pennsylvania Department of
    Environmental Protection's comments regarding the Utility MACT
    rule and also PJM's comments on this rule as well, so I will
    admit that into the record.
        [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. I want to thank the witnesses. Thank you for
    your patience. We appreciate your taking time to give us your
    thoughtful comments, and we look forward to working with you as
    we move forward to help solve these issues. Thank you.
        And the record will stay open for a minimum of 10 days for
    any additional comments or documents to be presented.
        With that, the hearing is adjourned.
        [Whereupon, at 12:52 p.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]