[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
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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
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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:]
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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:]
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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:]
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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:]
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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:]
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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.''
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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?
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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:]
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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:]
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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:]
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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:]
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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:]
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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:]
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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.
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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.]
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