[Senate Hearing 112-7]
[From the U.S. Government Publishing Office]


                                                          S. Hrg. 112-7
 
               NATURAL GAS SERVICE OUTAGES IN NEW MEXICO 

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                                   TO

 RECEIVE TESTIMONY REGARDING RECENT NATURAL GAS SERVICE DISRUPTIONS IN 
    NEW MEXICO AND THE RELIABILITY OF REGIONAL ENERGY INFRASTRUCTURE

                               __________

                   ALBUQUERQUE, NM, FEBRUARY 21, 2011


                       Printed for the use of the
               Committee on Energy and Natural Resources

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

65-733 PDF                       WASHINGTON : 2011 

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

















               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

RON WYDEN, Oregon                    LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana          JOHN BARRASSO, Wyoming
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
BERNARD SANDERS, Vermont             MIKE LEE, Utah
DEBBIE STABENOW, Michigan            RAND PAUL, Kentucky
MARK UDALL, Colorado                 DANIEL COATS, Indiana
JEANNE SHAHEEN, New Hampshire        ROB PORTMAN, Ohio
AL FRANKEN, Minnesota                JOHN HOEVEN, North Dakota
JOE MANCHIN, III, West Virginia      BOB CORKER, Tennessee
CHRISTOPHER A. COONS, Delaware

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel

























                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator From New Mexico................     1
Cauley, Gerry, President and Chief Executive Officer, North 
  American Electric Reliability Corporation......................    43
Corman, Shelley A., Senior Vice President, Commercial & 
  Regulatory Transwestern Pipeline Company, LLC, Houston, TX.....    31
Dasheno, Hon. Walter, Governor, Pueblo of Santa Clara, NM........     9
Dumas, John, Director of Wholesale Market Operations, Electric 
  Reliability Council of Texas, Taylor, TX.......................    39
Fuhlendorf, Steve, Chief Executive Officer, Taos County Chamber 
  of Commerce....................................................    20
Heinrich, Hon. Martin, U.S. Representatives From New Mexico......     4
Lucero, Hon. Alice, Mayor of Espanola, Espanola, NM..............    14
Lujan, Hon. Ben Ray, U.S. Representative From New Mexico.........     5
McClelland, Joseph, Director, Office of Electric Reliability, 
  Federal Energy Regulatory Commission...........................    48
Parker, Janice, Vice President, Customer Service, El Paso Western 
  Pipeline Group, Colorado Spring, CO............................    34
Schreiber, George A., Jr., President and Chief Executive Officer, 
  Continental Energy Systems, LLC and Member of the Board of 
  Directors of its Subsidiary, New Mexico Gas Company, Troy, MI..    25
Stevens, David W., Chief Executive Officer, El Paso Electric 
  Company........................................................    64
Torres, Hon. Jack, Mayor of Bernalillo, Bernalillo, NM...........    16
Udall, Hon. Tom, U.S. Senator From New Mexico....................     2

                                APPENDIX

Responses to additional questions................................    69


                    NATURAL GAS SERVICE OUTAGES IN 
                               NEW MEXICO

                              ----------                              


                       MONDAY, FEBRUARY 21, 2011

                               U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                   Albuquerque, NM.
    The committee met, pursuant to notice, at 10 a.m. in the 
Vincent E. Griego Chambers, Albuquerque/Bernalillo County 
Government Center, Concourse Level B, One Civic Plaza, 400 
Marquette NW, Albuquerque, New Mexico, Hon. Jeff Bingaman, 
chairman, presiding.

         OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. 
                    SENATOR FROM NEW MEXICO

    The Chairman. Why don't we start the hearing?
    Thank you all very much. This is a hearing of the Senate 
Energy and Natural Resources Committee that we're having in 
Albuquerque today.
    The hearing is devoted to gathering information regarding 
the natural gas service outages that befell much of New Mexico 
earlier this month. These outages caused severe hardship for 
many New Mexico families and businesses. I'd note that we're 
not far removed from the event that we're talking about which 
occurred about 2 and a half weeks ago.
    Therefore this hearing is not intended or expected to 
definitely identify the cause or causes of the outage. In fact 
the events of early February will be examined by a variety of 
agencies and authorities. These inquiries and analyses will 
extend across state boundaries and will approach the events 
from different angles. It's my hope that the record that we 
create here today will contribute to those efforts and will 
highlight the questions and issues that need to be addressed.
    In addition to our problems in New Mexico there does appear 
to be a regional character to the events that occurred in early 
February. Multiple state and Federal authorities are examining 
service disruptions across Texas and much of the Southwest. 
With that in mind I'd just like to highlight a few important 
things.
    First, our energy infrastructure and energy markets are 
highly interconnected. That should be obvious, I'm sure, to all 
of us. Ensuring the reliability and efficient functioning of 
that infrastructure is a regional and a national 
responsibility.
    Second, in use utility consumers rely greatly on these 
energy systems. Ultimately it's these customers who bear the 
heaviest burden and pay the heaviest costs of long lasting 
service disruptions. That's certainly what happened in this 
case. That's often lost in discussions on national energy 
policy that we have in Washington. I hope that we can keep a 
focus on that.
    Third, our energy infrastructure plays a critical role in 
supporting our national defense facilities. Preserving and 
enhancing the security of that infrastructure and ensuring its 
reliability needs to be among our highest priorities. We need 
to ensure that in the future both natural gas and electricity 
will be reliably available to families and businesses who 
depend upon them throughout the state.
    With that let me particularly thank Senator Udall for being 
here with me today and Representative Heinrich and 
Representative Lujan for being here to give us their views on 
this important set of issues. Let me call on Senator Udall for 
any comments he would like to make before calling on 
Congressman Heinrich and Congressman Lujan.

           STATEMENT OF HON. TOM UDALL, U.S. SENATOR 
                        FROM NEW MEXICO

    Senator Udall. Thank you. Thank you very much, Senator 
Bingaman. Thank you for allowing me to participate in this 
hearing and be involved. I think it's very important that you 
have done this so quickly and that you have organized this in a 
way to have panels that I think are really going to get to the 
bottom of many of the issues that are circulating out there.
    This is also the first time since I've been in public with 
Senator Bingaman since he announced that he wasn't going to run 
again. I just want to say that he has given incredible public 
service to New Mexico, dedicated and committed public service. 
He's a remarkable mentor and friend of mine and colleague. 
Senator Bingaman, I know that you were never one to want to be 
hauled out as they say in Washington from the Senate feet 
first. So you----
    The Chairman. Thank you. Thank you very much.
    Senator Udall. So I just----
    [Applause.]
    The Chairman. I'll have plenty of chance to kick me around 
some more, contrary to what Richard Nixon says.
    [Laughter.]
    The Chairman. But thank you at any rate.
    Senator Udall. Thank you. I was going to say that he is 
going to be here for 2 years and we're going to be working side 
by side protecting New Mexico. Let's give him another round of 
applause. I just think for your remarkable service to New 
Mexico.
    [Applause.]
    Senator Udall. Over 28,000 people lost natural gas home 
heating across our state. These outages range from Silver City 
to Alamogordo to Bernalillo, Placitas, Espanola, Dixon, Taos, 
Questa, and Red River. This happened at a time of record cold 
temperatures in New Mexico from near zero in the south to 30 
below in the north. People lost service early morning Thursday, 
February 3rd and many were not restored until late Tuesday, 
February 8th in the coldest northern areas of our State, 5 
nights and 6 days without heat.
    First New Mexico Gas Company needs to improve their 
emergency planning, communication and service restoration. The 
response was unacceptable and New Mexicans deserve better 
public safety.
    We received dozens of calls and emails about burst pipes, 
loss of water, very cold nights, lost business and wages and 
disabled people at risk.
    After the event my staff and I toured affected areas with 
local residents and officials along with FEMA, who was 
evaluating Federal assistance.
    We heard from first responders like Aletha Trajheo in Taos, 
who heads up the Incident Command Center and who informed me 
that New Mexicans would have been better prepared with more 
warning time and more information.
    Governor Lovato of Ohkay Owingeh Pueblo reported that New 
Mexico Gas did not work well with them to locate rural pueblo 
residences.
    First responders in Taos, Red River and Questa also 
reported that the gas company underestimated the time it would 
take to re-light rural residences rather than 10 minutes it 
would be 30 minutes or as Governor Lovato said in some of the 
more difficult residences it could be an hour or more.
    Second, we need to improve our interstate gas reliability 
in the southwest. While New Mexico Gas Company should have done 
better here at home the root cause was across the border. Our 
testimony here today states that rolling blackouts in Texas 
caused critical natural gas supply infrastructure in the 
Permian Basin to fail.
    According to the Texas grid operator power generators in 
Texas failed to provide their committed generation when it was 
needed the most. Rolling blackouts then resulted without 
consideration for the impact on gas infrastructure and the 
impact that would have on New Mexicans. Texas states that its 
electricity market is intrastate and thus they are exempt from 
many Federal electricity regulations such as those that require 
interconnections with other states. This may have been their 
Achilles heel during this severe winter storm.
    Recent reports from Texas show that over 100 power plants 
went down during the crisis. There are serious questions about 
whether proper maintenance and winterizations procedures were 
followed. Unlike New Mexico where electricity rates are 
regulated, Texas is a deregulated market that allows 
electricity trading and market pricing.
    In 2003, Texas issued a $210 million fine for manipulating 
the market during a winter storm which was reduced to $15 
million in a settlement. Just prior to the event in New Mexico, 
Texas increased the maximum allowable price for power from 
$2,250 per megawatt an hour to $3,000 an hour. One public 
interest group in Texas, Public Citizen, estimates that 
electricity trading may have made $385 million during this 
incident.
    No man is an island. No state except Hawaii is either. 
Texas and New Mexico need to work together to improve regional 
reliability. With that, Senator Bingaman, I'm finished with my 
opening statement. Thank you.
    The Chairman. Thank you very much for your good statement 
there.
    We're in Congressman Heinrich's district here. We welcome 
him. Why don't you go right ahead.
    I know you've been involved in this issue as has 
Congressman Lujan since the crisis first began. Be anxious to 
hear your perspective on it.

            STATEMENT OF HON. MARTIN HEINRICH, U.S. 
                 REPRESENTATIVE FROM NEW MEXICO

    Mr. Heinrich. Thank you, Senator Bingaman and Senator 
Udall, thanks for having us here. It feels like old times to be 
back in this chamber.
    I want to thank you first and foremost for the opportunity 
to testify before the Senate Energy and Natural Resources Field 
Committee Hearing today.
    I think today's hearing provides us an opportunity to both 
zero in on what happened during New Mexico's recent gas outage 
crisis but much more importantly to get to some of those 
answers so that we make sure this never happens again.
    I certainly start by thanking the many New Mexicans who 
responded to the outage with concern for their neighbors across 
the State. In one illustration of that effort more than 50 
Albuquerque police officers were dispatched in an emergency 
response team to northern New Mexico to join the National 
Guard. I spent the day on the phone with the Public Regulation 
Commission and also with many of the large scale energy users 
in the central part of the State urging them to take all steps 
possible to reduce their use.
    Like many others across New Mexico my wife and I cut our 
own use. We spent about 2 days on wood heat at home to reduce 
the overall demand on our system. Like many others in this 
room, I would guess, we had the broken pipes to show for it.
    Our experience pales in comparison to what my constituents 
in places like Placitas and Bernalillo went through not to 
mention what Congressman Lujan's constituents went through. 
It's most likely that the crisis was not the result of one 
breakdown. We know that.
    That being said, there are those who have more to answer 
than others. Today we need to hear those answers about 
emergency plans, about steps taken in the face of the storm, 
the magnitude that we underwent 2 weeks ago. Those answers are 
critical not for the sake of pointing fingers or assigning 
blame, but as I said before to make sure that we never 
experience this kind of disruption again.
    The gas outage in New Mexico revealed some key holes in our 
State's energy reliability, our interstate utility system and 
the very interruptible nature of our system. We've been told 
that the problem originated in a disrupted supply from Texas. 
That those systems also failed because of the extraordinarily 
cold weather. But that absence of reliability necessitates an 
examination of the contracts between our utility and their 
suppliers.
    New Mexicans deserve answers about their compressor 
controls, their reliability and what backup systems exist. 
Those are significant infrastructure inadequacies. New Mexicans 
across this State deserve answers.
    There also remains a lack of clarity concerning the 
contingency plans that were set in motion. When a crisis of 
this magnitude happens immediate steps should be taken rather 
than postponing those steps for the first critical 24 hours. As 
an entity Albuquerque public schools, for example, is much more 
difficult to close down in the middle of the day than the 
evening before or the early morning before school starts in our 
city. Our constituents deserve information about those 
contingency plans and when and how they will be activated.
    Many New Mexicans are recovering from burst pipes and other 
consequences incurred from a loss of heat in some cases, as you 
said, up to 6 days and 5 nights of sub freezing temperatures. 
Numerous businesses were forced to shutter their doors for the 
same amount of time. They along with every other New Mexican 
has every right to have questions answered about corrective 
measures to eliminate service disruptions due to future weather 
related emergencies.
    New Mexicans deserve to know what early warning signs, 
contingency measures, decisionmaking processes and emergency 
communication plans are going to be implemented to prevent this 
kind of crisis from ever happening again. We deserve to know 
what back up storage capabilities exist and what strategies 
there are to keep New Mexico's operating system independent of 
the failure of suppliers in other States. Those constituents 
who underwent the harshest consequences of this crisis deserve 
answers about why the procedures took 6 grueling days to 
restore heat to their homes.
    Crises like this can be devastating. But they also reveal 
something more powerful in our New Mexico communities. In this 
instance it was in the collected effort of so many to come to 
the rescue with shelters, to work toward gas restoration and to 
turn down their thermostats so that others could stay warm. 
That concern for one another unites us as New Mexicans. I have 
no doubt that we will maintain that spirit as we work together 
toward the steps necessary to, as I said before, make sure this 
never happens again.
    Thank you.
    The Chairman. Thank you very much for your excellent 
statement.
    Congressman Lujan, thank you for being here and thank you 
for your leadership on this issue since the crisis began.
    Go right ahead.

     STATEMENT OF HON. BEN RAY LUJAN, U.S. REPRESENTATIVE 
                        FROM NEW MEXICO

    Mr. Lujan. Mr. Chairman, thank you and Senator Udall, thank 
you for allowing us to be here.
    Chairman Bingaman for your leadership and hard work on 
behalf of New Mexico, our State and Nation are better for your 
service and we thank you very much, not only for holding this 
important hearing to determine what caused catastrophic natural 
gas outages throughout New Mexico leaving our communities 
without heat, families vulnerable during record low 
temperatures.
    I want to thank all of those who came together as a 
community to do their part to help New Mexico endure this 
crisis whether it was volunteering at shelters, checking on an 
elderly neighbor to make sure that they had everything they 
needed to get through the night or turning down the thermostat 
to conserve gas.
    I want to thank all of those at our national laboratories 
for their help as well for modeling, reducing their energy 
consumption, to providing support to those that needed to get 
back to their homes to get their heat on. The tremendous 
efforts I saw firsthand, efforts by so many in the community 
during this challenging time are a testament to the resiliency 
of the people of New Mexico. Many of these homes and businesses 
are in my northern New Mexico district, mainly those that were 
last to be turned on.
    This hearing is an important first step to ask the tough 
questions that will allow us to identify and fix problems that 
led to the outages so that New Mexicans never have to face this 
again. At a time when many regions of the country were 
experiencing freezing temperatures the increased demand for 
natural gas in New Mexico and the additional strain on the 
system in Texas should not have come to a surprise to anyone.
    We need to know why natural gas was cutoff to entire 
regions of New Mexico.
    To what extent these problems were caused by a shortage of 
supply verses failed or compromised distribution 
infrastructure.
    How decisions were made to distribute or cutoff natural gas 
available in the pipeline or storage facilities to customers in 
New Mexico, Texas, Arizona and California.
    How are winners and losers determined?
    One item mentioned by a local news outlet and I quote, One 
interesting fact presented was not questioned. The decision to 
shut the auto-e valve made was made before the company 
contacted public service company of New Mexico to request that 
the Cobisa Power Plant, south of Rio Bravo, be switched to oil. 
We needed to get blocks of 10,000 dekatherms shut off quickly.
    The gas company said the auto-e valve supplies 20,000 
dekatherms and services the northern communities of Espanola, 
Taos, Questa, Angel Fire and Red River. He said the Cobisa 
demand is 17 to 20,000 dekatherms. The Cobisa Plant produces 
electricity exported to California.
    Why was there not better communication and coordination 
both in and out of New Mexico? Decisions were made to cutoff 
entire communities putting families at risk. It seems clear 
that decisions made by Texas utility entities did impact New 
Mexicans.
    What can be done to ensure that backup power is available 
at natural gas compression stations or to include compression 
stations that are critical to natural gas deliverability to New 
Mexico and other western States as essential before electricity 
interruption?
    Were necessary actions and communications taken by the 
utilities responsible for deliverability of electricity and 
natural gas to prevent cutting off natural gas to families and 
entire communities?
    Early in the crisis I sent a letter to the Federal Energy 
Regulatory Commission requesting review of the natural gas 
outage. I am pleased that FERC is beginning its inquiry. I look 
forward to their findings.
    Furthermore, it's my hope that this hearing sheds light on 
what went into the decision to shut off natural gas to these 
vulnerable communities in New Mexico, many in areas where the 
coldest temperatures were felt including options evaluated 
before they were shut off. I am concerned that the New Mexico 
Gas Company did not have a sufficient plan in place to 
communicate with impacted communities including tribes, small 
businesses, government entities, but especially families. This 
event reminds us of the interdependence throughout our 
infrastructure system and the need to identify the vulnerable 
communities that face a similar threat.
    During this ordeal I had constituents talk to me in tears. 
Worried about how they would make it through the night and how 
long they would be without heat and water. They were scared.
    I heard from an elderly man who got sick from enduring 
night after night in the cold because he was told the only way 
heat would be turned on was if someone was home. Now he has 
additional medical costs. Other seniors had to stretch their 
social security checks to purchase electric heaters. Now face 
skyrocketing electric bills that they will receive in the near 
future, an infrastructure that's been compromised.
    While I appreciate the hearing today on the causes of the 
gas outage, I want to take a moment to remind our constituents 
that my office is here to offer any support we can and help 
them navigate the process of obtaining available resources as 
they work to fix broken pipes, make costly repairs and pick up 
the pieces in the aftermath of the crisis.
    Again Chairman Bingaman, a sincere thank you for bringing 
this field hearing to New Mexico to get answers for so many 
here in New Mexico. Thank you.
    The Chairman. Thank you very much for your excellent 
statement as well.
    Of course, we also invited Congressman Pearce to be here if 
he was able. He was not able to be here, but he had another 
scheduling commitment. But he asked if a statement by him could 
be put in the record. Of course we will do that following the 
statements that Congressman Heinrich and Congressman Lujan have 
just given.
    [The prepared statement of Mr. Pearce follows:]

     Prepared Statement of Hon. Stevan Pierce, U.S. Representative 
                            From New Mexico
    Chairman Bingaman, thank you for holding this hearing to ask the 
important questions of natural gas operators. I ask that my statement 
be submitted into the official record. Like you, I hope to determine 
just where the system broke down and what operational actions our 
natural gas providers must take to avoid another system-wide breakdown 
in the future.
    Early this month, New Mexico was transformed by snow and sub-
freezing temperatures. Exceptionally low temperatures and lack of wind 
stopped wind turbines from generating energy, resulting in rolling 
blackouts on the Texas power grid. Across state lines, subzero 
temperatures froze gas wellheads. This, combined with increasing demand 
for natural gas, lowered pressure in transmission pipes. The pre-packed 
transmission lines were no match for the cumulative effects of subzero 
temperatures, idle turbines and rolling blackouts in Texas, frozen 
wellheads, increased demand, and low pressure in the natural gas 
pipeline system.
    Now, the studies have begun, and investigations have started. It 
could be years before official decisions are handed down, but the New 
Mexicans who lived through the shortage firsthand demand solutions. Now 
is the time to ask tough questions and find thoughtful answers that can 
lead to the strategic changes needed to avoid this sort of crisis in 
the future.
    I am pleased that those New Mexico communities hit the hardest by 
the cold are represented here today, as well as the natural gas 
providers and their regulators. I use the term ``regulator,'' loosely, 
as the bulk of the Texas wind corridor operates largely ``off-grid.'' 
Furthermore, the delivery system to New Mexico is so closely 
intertwined with the Texas market that a blackout in Texas, as we 
learned this month, has staggering results in Southern New Mexico. If 
there is one thing I hope you take away from this hearing, it is that 
we need more planning and better communication between Texas, New 
Mexico and the other states that are dependent on the Texas delivery 
system.
    I have heard the term ``perfect storm'' used to describe what we in 
New Mexico experienced. A once-in-50-year storm knocked out 82 power 
plants in Texas. Freezing temperatures suspended equipment and shut 
down gas compression stations, reducing pressure in the pipelines. Like 
a blocked artery, the movement of natural gas slowed to a dribble. At 
the same time, the freezing weather increased demand. With the 
Southwest's abundant supply of natural gas blocked, we faced an 
unprecedented shortage. Supply could have remained steady-we had the 
natural gas, but the pressure was missing.
    I acknowledge the quick actions taken by the major natural gas 
providers who prepared and targeted resources to combat the approaching 
weather. In a briefing from the New Mexico Gas Company (NMGC), they 
believed that ``its system was fully capable of meeting the increased 
demand. However, it could not have anticipated that gas delivery from 
Texas would be significantly reduced and gas production in the San Juan 
and Permian basins would be so severely impacted.'' NMGC was tracking 
the weather, and made several significant preparations for this 
extraordinary storm. The front-end preparations had been made. But on 
the back-end, NMGC was crippled by powerless gas processing plants and 
frozen wellheads, all owned by other entities.
    While we cannot control the weather, there must be certainty when 
it comes to preparation and response. Adequate planning and 
communication by gas service providers and the Texas power delivery 
players will enable us to prevent system-wide lockdown of the natural 
gas transmission chain. While we do not know when, it is inevitable 
that New Mexico will face another episode of freezing weather. Today, 
let us prepare for tomorrow's storm. To find solutions, we must ask 
questions, and I look forward to hearing from the panel on the 
following:

    To the gas service providers, electric companies, processing 
plants, and wellhead operators:

   My constituents have described their living conditions 
        during the outage as ``third-world.'' How will they be 
        compensated for their losses and expenses? What steps have you 
        taken to repair damage to homes and businesses?
   I note that a ``compensation fund'' has been established. 
        Have all providers contributed? If not, why? What is the 
        process for one to receive compensation? What measures are in 
        place to ensure that New Mexican's are compensated fairly and 
        quickly?
   How are you preparing for the next 50-year-storm so that 
        natural gas is delivered to the people of New Mexico during 
        freezing and sub-zero temperatures?
   What new preparations have you already implemented?

    To the regulators:

   How should this experience change energy policy moving 
        forward? How should this storm change the way we react to 
        outages in the future?
   The Texas power grid is heavily reliant on alternative 
        energy. Would the same disruption in service have occurred if 
        that state's energy system was less reliant on alternative wind 
        power as opposed to clean coal, nuclear or other forms of 
        traditional electricity generation?
   Why did the Texas energy corridor implement a rolling 
        blackout plan in place of strategic power grid controls that 
        would not have severed natural gas delivery? What alternatives 
        are available in place of the traditional ``rolling blackout'' 
        approach? What are the obstacles that prevent this from being 
        in place?

    The Chairman. So thank you both very much for being here.
    Let me also acknowledge that Jason Marks from the Public 
Regulation Commission is in the audience. We very much 
appreciate his being here today. He has a very important role 
in trying to get to the bottom of this and putting in place 
policies to avoid this in the future. We want to acknowledge 
that.
    We have 10 witnesses today. We've broken it into Panel One 
and Panel Two. Why don't we have the folks in Panel One come 
forward right now.
    That's the Honorable Walter Dasheno, who is the Governor of 
Pueblo of Santa Clara.
    The Honorable Alice Lucero, who is the Mayor of Espanola.
    The Honorable Jack Torres, who is Mayor of Bernalillo.
    Mr. Steve Fuhlendorf, who is the Chief Executive Officer 
with the Taos County Chamber of Commerce.
    We have all of these individuals to speak to the issues as 
they experienced this problem in their own communities and 
thoughts they have about what needs to be done to avoid this in 
the future and to deal with the aftermath.
    Why don't we start with Governor Dasheno, who is here not 
only representing, as I understand it, the Pueblo of Santa 
Clara, but also the Pueblos in northern New Mexico? Is that 
correct?
    Mr. Dasheno. Yes, Senator, that's correct.
    The Chairman. Alright. Why don't you go ahead first and 
then after that I'll call on the others on the panel.

  STATEMENT OF HON. WALTER DASHENO, GOVERNOR, PUEBLO OF SANTA 
                           CLARA, NM

    Mr. Dasheno. First of all, thank you very much, Senator 
Bingaman for this opportunity to present our testimony.
    Senator Udall, Congressman Heinrich and Congressman Lujan, 
thank you for this opportunity to come before all of you to 
address our concerns that we have this morning.
    Thank you Senator Bingaman for the opportunity to testify 
before you on the natural gas outage that occurred here in New 
Mexico earlier this month during a period of some of the 
coldest weather in our State's recent history.
    Additionally I also wish to thank Senator Udall, 
Congressman Lujan and Congressman Heinrich for their support 
and presence at this hearing today.
    My comments are directed to the magnitude of this calamity, 
the wide variety of measures implemented by Santa Clara to deal 
with it and our suggestions going forward.
    The Pueblo of Santa Clara is a federally recognized Indian 
tribe situated in northern New Mexico where much of the gas 
outage occurred. The outage affected my pueblo beginning on 
Thursday, February 3rd and ended with the restoration of 
natural gases to the homes of tribal members in the Lamacita 
area on Monday evening, February 7th. There are 600 pueblo 
member households and over 12,000 non-member households in what 
we refer to as the exterior boundaries of the Santa Clara 
reservation. Which reservations run from the northern area of 
Fierro to the western area of La Loma in Espanola, the southern 
area to San Ildefonso Pueblo and La Mesilla and the eastern 
boundary run into areas of San Brio, San Pedro, Santa Cruz and 
Riverside, New Mexico.
    It is our understanding that the outage was caused by the 
loss of power at a compressor located in Texas which was 
followed by decisions made by the New Mexico Gas Company to cut 
service on some, but not all, natural gas transmission lines in 
the State. As a result the decisions made by the New Mexico Gas 
Company the burden of the cutoff was shifted to and borne by 
people less able to bear the cost of it, tribes and the poor 
communities throughout the State. In northern New Mexico our 
Pueblo and the Pueblos of Taos, Ohkay Owingeh and San Ildefonso 
and many communities located from San Ildefonso in north of 
Questa and to the south the communities of Bernalillo, parts of 
Santa Anna and Zuni were cutoff while Santa Fe, Los Alamos, 
Albuquerque and Rio Rancho were not cutoff.
    We were informed of the outage during a tribal council 
meeting. But the council was not made aware of its true impact 
at that time. We found out later that the outage was not--only 
be resolved within 8 hours.
    We immediately took steps to address the problems caused by 
the outage, but were unable to entirely insulate the community, 
its residents or our businesses from the consequences of the 
outage. The consequences for our people and other residents of 
the area were severe. Many families were completely without 
heat in their homes and were unable to cook on their gas fired 
stoves.
    Many homes, businesses and offices had water lines freeze 
and burst.
    Businesses including the Pueblo of Santa Clara hotel, Santa 
Clarion hotel and casino in other areas experienced significant 
interruptions that caused substantial financial losses.
    Governmental offices including but all of the most 
essential of the Pueblo offices had to shut down causing a 
major interruption of vitally needed services to our people 
because of the complexities of re-pressurizing the natural gas 
lines. Moreover it took several days to restore service.
    Santa Clara has had more than its share of experiences with 
emergency situations having sustained major losses in the Oso 
complex fire in 1998 and the disastrous zero ground fire in 
2000. For that reason we have developed protocols for emergency 
preparedness that we think serve as well in this instance. I 
would like to summarize the measures that we were able to put 
into place as soon as we had word of the gas outage and some of 
which continued right up through February the tenth.
    We immediately turned our Youth/Senior Citizen center into 
an emergency shelter for our people who needed assistance. The 
center was staffed 24 hours a day with approximately 30 to 50 
Pueblo employees. We served 3 hot meals a day at the Senior 
Citizen center serving 150 to 200 persons at each meal.
    Our community health representative worked around the clock 
conducting daily visits and sometimes several visits per day to 
approximately 300 of our elders and handicap members who were 
unable to come to the senior center and took meals to many of 
these persons.
    We provided blankets to those who needed them. We were able 
to obtain shipments of electric heaters totaling at least 300 
from Las Vegas and Albuquerque, New Mexico and as far away as 
Phoenix, Arizona that we distributed to persons to lacked other 
heating resources.
    For those who had wood stoves and fireplaces the tribe 
distributed approximately 210 cords of firewood.
    We brought in 3 contract plumbers who were employed full 
time for a week to go house to house addressing individual 
plumbing and heating problems.
    Throughout the crisis we maintained a fully staffed 
emergency operation center that was in constant communication 
with all of our various tribal agencies engaging emergency 
services.
    Our tribal police department brought in 3 additional 
officers and kept the full force on overtime to help handle the 
situation.
    As a result of these efforts we believe that the impact of 
the Santa Clara members, although severe, was considerably less 
than it could have been. We are proud of the way in which our 
staff rose to the occasion and those that were in need of 
assistance. But this effort was very costly and came at a time 
when the Pueblo has been undergoing some major financial 
stress. We are still trying to determine the full cost 
undertaken while we currently estimate that we spent more than 
$100,000 on the services that I have described and there are 
some items of damage such as cracked pumps on our fire engines, 
the cost of which have not yet been determined.
    Additionally the Santa Clara Development Corporation, a 
wholly owned economic development entity has estimated that it 
incurred added cost and lost revenue in its various entities 
including the Santa Clara hotel, the Big Rock Casino, the Puye 
Travel Center and others of approximately $265,000. That 
results in net loss to the Pueblo in itself of that amount. As 
that amount comes off to the corporation's bottom line and thus 
directly reduces the revenues that would otherwise be paid to 
the Pueblo.
    We at Santa Clara very much want to be a part of the 
process to develop preparedness on the part of our communities 
so that if the unthinkable should occur, the lifeboats are in 
place and sufficient to save all those affected. We think we 
have much to offer that process. I'm sure there is much we 
could learn as well that would improve our own response.
    We specifically propose the following suggestions.
    One, preventative measures need to be in place so that this 
disaster never happens again. Auxiliary power supplies ought to 
be required at all compressor stations. The New Mexico Gas 
Company should be required to devise pipeline interconnections 
to provide backup supply while pressure fails in a segmented 
system.
    Two, poor communities should not bear the full brunt of any 
cutoff. The New Mexico Gas Company made the decision on its own 
as to which areas would get cutoff when pressure began to fall 
in the system. They should not have such direct discretion.
    B, there ought to be some agreed on plan perhaps approved 
by the New Mexico Public Regulation Commission as to how much 
decisions are made and how to notify affected users in a timely 
manner and including advance notice to governmental and social 
service agencies. The plan, moreover, ought to take into 
account the relative disabilities of different areas to bear 
the cost and the burden of gas cutoff.
    Three, improve the efficiency of procedures for bringing 
areas that have been cutoff back into service. In tribal 
communities including and involving tribal governments could 
improve communication.
    B, technicians apparently went from house to house in some 
arbitrary numerical sequence rather than simply going door to 
door which would have been quite faster. There should be some 
public discussion and approved protocol in place for gas 
service restoration.
    Four, Congressional funds to assist Pueblo and other people 
and business damage by the outage. Many people suffered serious 
damage by way of broken pipes, interrupted business and others 
that should be compensated. The New Mexico Gas Company is 
providing $1 million but that may be insufficient to cover all 
of them at this point. Congress can provide funds to assist 
such people and businesses.
    Five, Federal grants to tribes and other entities to 
research alternative energy sources. This would be a good 
occasion to institute a program of moderate sized grants to 
find alternative energy sources in order to reduce impacts of 
any future outage.
    Senator Bingaman, we hope that this type of incident will 
never be repeated. While it is too early to say with any 
assurance, we suspect that pending inquiries may well show that 
this incident could have been avoided had appropriate 
preventative measures been in place. We look forward to Federal 
support to implement any such preventative measures.
    Thank you on behalf of the Pueblos of Santa Clara, Ohkay 
Owingeh, San Ildefonso and Taos Pueblo, Santa Anna and Zia 
Pueblo.
    Thank you for this opportunity to present our views.
    [Native American language spoken.]
    [The prepared statement of Mr. Dasheno follows:]

      Prepared Statement of Hon. Walter Dasheno, Governor, Pueblo 
                           of Santa Clara, NM
    Thank you Senator Bingaman, for the opportunity to testify before 
you on the natural gas outage that occurred here in New Mexico earlier 
this month, during a period of some of the coldest weather in our 
state's recent history. Additionally, I also wish to thank Senator 
Udall, Congressman Lujan and Congressman Heinrich for their support and 
presence at this hearing today.
    My comments are directed to the magnitude of this calamity, the 
wide variety of measures implemented by Santa Clara Pueblo to deal with 
it, and our suggestions going forward.
    The Pueblo of Santa Clara is a federally recognized Indian tribe 
situated in Northern New Mexico, where much of the gas outage occurred. 
The outage affected my Pueblo beginning on Thursday, February 3rd and 
ending, with the restoration of natural gas to the homes of Tribal 
Members in the La Mesilla area, on Monday evening. February 7th. There 
are 600 Pueblo-member households and over 12,000 non-member households 
in what we refer as the exterior boundaries of the Santa Clara 
Reservation, which boundaries run from the northern area of Fairview to 
the western area of the La Loma and Espanola, the southern area to San 
Ildefonso Pueblo and La Mesilla, and the eastern boundary running in 
the areas of Sombrillo, San Pedro, Santa Cruz, and Riverside. New 
Mexico.
    It is our understanding that the outage was caused by the loss of 
power at a compressor located in Texas, which was followed by decisions 
made by the New Mexico Gas Company (``NMGC'') to cut service on some. 
but not all, natural gas transmission lines in the state. As the result 
of the decisions made by NMGC. the burden of the cut-off was shifted to 
and borne by people least able to bear the costs of it--tribes and 
poorer communities throughout the state. In northern New Mexico. our 
Pueblo, and the Pueblos of Taos, Ohkay Owingeh, and San Ildefonso. and 
many communities located from San Ildefonso north to Questa and to the 
south the communities of Bernalillo, parts of Santa Ana and Zia were 
cut off, while Santa Fe and Los Alamos, Albuquerque. and Rio Rancho 
were not cut-off.
    We were informed of the outage during a Tribal Council meeting, but 
the Council was not made aware of its true impact at that time. We 
found out later that the outage would not be resolved within eight 
hours. We immediately took steps to address the problems caused by the 
outage. but were unable to entirely insulate the community, its 
residents, or our businesses from the consequences of the outage.
    The consequences for our people and other residents of this area 
were severe. Many families were completely without heat in their homes 
and were unable to cook on their gas-fired stoves. Many homes. 
businesses and offices had water lines freeze and burst. Businesses. 
including our Pueblo's Santa Clara Hotel and Casino and hotel, 
experienced significant interruptions that caused substantial financial 
losses. Governmental offices, including all but the most essential of 
the Pueblos offices, had to shut down. causing a major interruption of 
vitally needed services to our people. Because of the complexities of 
re-pressurizing the natural gas lines, moreover, it took several days 
to restore service.
    Santa Clara has had more than its share of experiences with 
emergency situations, having sustained major losses in the Oso Complex 
Fire in 1998, and the disastrous Cerro Grande Fire in 2000. and for 
that reason we have developed protocols for emergency preparedness 
that, we think, served us well in this instance. I would like to 
summarize the measures that we were able to put into place as soon as 
we had word of the gas outage, and some of which continued right up 
through February 10th:

   We immediately turned our new senior center into an 
        emergency shelter for people who needed assistance, and the 
        center was staffed 24 hours/day by approximately 30 to 50 
        tribal employees.
   We served three hot meals a day at the senior center, 
        serving 150-200 persons at each meal.
   Our Community Health Representatives worked around the 
        clock, conducting daily visits (and sometime several visits per 
        day) to approximately 300 of our elders and handicapped members 
        who were unable to come to the senior center, and took meals to 
        many of those persons.
   We provided blankets to those who needed them, and we were 
        able to obtain shipments of electric heaters, totaling at least 
        300 in all, from Las Vegas and Albuquerque, New Mexico. and as 
        far away as Phoenix. Arizona. that we distributed to persons 
        who lacked other heat sources.
   For those who had wood stoves and fireplaces, the tribe 
        distributed approximately 210 cords of firewood.
   We brought in 3 contract plumbers, who were employed full-
        time for a week, to go house to house, addressing individual 
        plumbing and heating problems.
   Throughout the crisis, we maintained a fully staffed 
        emergency operations center that was in constant communication 
        with all of our various tribal agencies engaged in emergency 
        services.
   Our tribal police department brought in three additional 
        officers and kept the full force on overtime, to help handle 
        the situation.

    As a result of these efforts, we believe that the impact of the 
outage on Santa Clara members, although severe, was considerably less 
than it could have been, and we are very proud of the way in which our 
staff rose to the occasion and helped those in need of assistance.
    But this effort was very costly, and came at a time when the Pueblo 
has been undergoing some major financial stress. We are still trying to 
determine the full cost of the undertaking. but we currently estimate 
that we spent more than $100.000 on the services I have described. And 
there are some items of damage, such as a cracked pump on one of our 
fire engines, the cost of which has not yet been determined.
    Additionally, Santa Clara Development Corporation. our wholly owned 
economic development entity, has estimated that it incurred added costs 
and lost revenues in its various entities, including the Santa (Ivan 
Hotel, the Big Rock Casino, the Puye Travel Center and others, of 
approximately $265,000. That results in a net loss to the Pueblo itself 
of that amount. as that amount comes off of the corporation's bottom 
line, and thus directly reduces the revenues that would otherwise be 
paid to the Pueblo.
    We at Santa Clara very much want to be a part of a process to 
develop preparedness on the part of all of our communities, so that if 
the unthinkable should occur. the lifeboats are in place and sufficient 
to save all who arc affected. We think we have much to offer that 
process. and I am sure there is much we could learn as well. that would 
improve our own response.
    We specifically propose the following suggestions:

          1. Preventive measures need to be in place so that this 
        disaster never happens again.

                  a. Auxiliary power supplies ought to be required at 
                all compressor stations.
                  b. NMGC should be required to devise pipeline 
                interconnections to provide hack-up supply when 
                pressure fails in a seument of the system.

          2. Poor communities should not bear the brunt of a cut-off.

                  a. NMGC made decisions on its on as to which areas 
                would get cut off, when pressure began to fall in the 
                system. They should not have such discretion.
                  b. There ought to be some agreed-on plan, perhaps 
                approved by the New Mexico Public Regulation 
                Commission, as to how such decisions are made, and how 
                to notify affected users in a timely manner, and 
                including advance notice to governmental and social 
                service agencies. The plan moreover ought to take into 
                account the relative abilities of different areas to 
                hear the cost and the burden of gas cut-offs.

          3. Improve the efficiency of procedures fur bringing areas 
        that have been cut off back into service.

                  a. In tribal communities, involving tribal 
                governments could improve communication.
                  b. Technicians apparently went to houses in some 
                arbitrary numerical sequence, rather than simply going 
                door to door. which would have been faster.
                  c. There should he a publicly discussed and approved 
                protocol in place for gas service restoration.

          4. Congressional funds to assist people and businesses 
        damaged by the outage.

                  a. Many people suffered serious damage, by way of 
                broken pipes. interrupted businesses. and others. that 
                should be compensated. NMGC=s $1 million fund may be 
                insufficient to cover them all.
                  b. Can Congress provide funds to assist such people 
                and businesses?

          5. Federal grants to tribes and other entities to research 
        alternative energy sources.

                  a. This would he a good occasion to institute a 
                program of modest-sized grants to fund alternatives 
                energy sources in order to reduce the impacts of any 
                future outage.

    We hope that this type of incident will never he repeated. and 
while it is too early to say with any assurance, we suspect that 
pending inquiries may well show that this incident could have been 
avoided, had appropriate preventive measures been in place. We look 
forward to federal support to implement any such preventive measures.
    Thank you for the opportunity to present our views.

    The Chairman. Governor, thank you very much for your 
statement, your excellent statement there. We appreciate it. 
Before we ask any questions of any of the panel let me call on 
the other panel members for any statement they have.
    Mayor Lucero, why don't you go ahead next?

STATEMENT OF HON. ALICE LUCERO, MAYOR OF ESPANOLA, ESPANOLA, NM

    Ms. Lucero. Senator Bingaman, Senator Udall, Congressmen 
Lujan and Heinrich, thank you for allowing me to testify before 
you today on behalf of the people of the Espanola Valley.
    On the morning of Thursday, February third, we were 
notified by New Mexico Gas that natural gas was going to be 
shut down to our city for a period of between 2 hours to 2 
days. By the time we were informed valves supplying natural gas 
to our area had already been shut off. Two hours later 
approximately 11,000 households and businesses within the 
Espanola Valley were without service for 5 days, some up to 7 
days, others still who experienced damages were without service 
for a longer period.
    This took place during an Arctic storm when temperatures 
dropped below zero. In the village of Questa temperatures 
dipped to 28 degrees below zero. New Mexico Gas made a decision 
to shut off the valve that serviced northern cities, towns, 
counties and pueblos. These are some of the coldest communities 
in the State, communities that pay large amounts to New Mexico 
Gas to heat their homes each winter.
    The city of Espanola had an immediate staff meeting to 
engage an emergency preparedness plan. We took preventive 
measures to prepare our facilities and coordinated with the Red 
Cross to establish an emergency shelter. With the cooperation 
of Rio Arriba County we established an emergency operation 
center.
    The Red Cross and the National Guard manned the shelter 
while the Espanola public schools, several businesses and 
restaurants provided food and water. We housed 10 to 21 persons 
each night. People who could not cook at home came to eat at 
the shelter. We also fed volunteers, police and fire personnel. 
Additionally some meals were taken to homes where there were 
elderly that could not come out.
    The governing body declared an emergency so that we could 
procure materials needed to prepare our facilities. We ensured 
that our water wells and waste water treatment plant continued 
to operate. The costs thus far incurred by the city were 
approximately $45,000 plus over $16,000 in overtime pay.
    Due to the slow economy revenues have been declining. 
Businesses shut down from 5 to 7 days will have an adverse 
impact on our gross receipts revenue. Additionally there were 
hundreds of employees of these businesses who were unable to 
work thus experiencing a loss of income to support their 
families.
    Many of our residents are elderly and poor. Some wouldn't 
leave their homes. They huddled in their beds with electric 
blankets, if they could afford them. Others were cared for by 
family members.
    Electric heaters were used non-stop which will cause an 
increase in electric utility bills. Many are on fixed incomes 
and cannot afford the repairs that need to be made to their 
homes due to damages. Some of our elderly became ill. One 
suffered frostbite on her toes. Some of the poor who had to 
seek medical help do not have health insurance and cannot 
afford the medical bills that they incurred.
    We had several fires within the Espanola Valley. One 
individual is now homeless. Other families have been displaced. 
These are poor people who in many cases do not have home 
insurance and cannot afford the cost of repairs.
    We learned that New Mexico Gas did not have an effective 
emergency preparedness plan. They had problems communication 
with the affected areas. We were not given adequate notice of 
the loss of service. The question as to why these communities 
in the north were selected has not been satisfactorily 
answered. The complexity of rural areas did not seem to be 
considered.
    Respectfully we request that you require energy 
distributors such as New Mexico Gas to implement effective 
plans to provide for these types of emergencies. New Mexico Gas 
failed us. They need to be held accountable and pay for 
damages. We look to you to establish policies that require them 
to prevent this type of crisis in the future.
    Last year because of funding provided by the American 
Recovery and Reinvestment Act the city of Espanola was able to 
retrofit city hall with a geothermal energy system to provide 
heat and air conditioning. This facility was the only facility 
in the entire Espanola Valley that had heat during this crisis. 
Thank you for providing these funds that made it possible for 
us to take advantage of an alternative energy source.
    We urge you to invest in alternative sources of energy.
    We ask that you fund programs to retrofit facilities with 
geothermal or solar energy that is abundant in our area.
    Grants should be made available to low income families, the 
elderly and the disabled for the purpose of converting their 
systems to an alternative energy source.
    Alternative energy sources in facilities and homes will 
free Americans from being solely dependent on natural gas.
    In closing I want to express our appreciation to you, 
Senator Bingaman for holding this hearing in New Mexico and for 
listening to us, allowing us to inform you how this affected 
each of our communities. Thank you.
    The Chairman. Thank you very much for your statement.
    Mayor Torres, why don't you go right ahead?

STATEMENT OF HON. JACK TORRES, MAYOR OF BERNALILLO, BERNALILLO, 
                               NM

    Mr. Torres. Thank you, Senator.
    Chairman Bingaman, Senator Udall, Congressman Heinrich, 
Congressman Lujan, I also appreciate the opportunity to be 
before you and testify. Probably the greatest challenge I have 
right now is taking the 4 or 5 days that we went through and 
trying to condense a report or testimony into 5 minutes. But 
I'll do my best to highlight
    Again I want to thank you for this opportunity and just 
state that we still need your help. The crisis really isn't 
over for any of our communities. I'll start with Thursday, 
February third and really focus on the communication issues or 
problems that the Town of Bernalillo had from the onset with 
New Mexico Gas Company.
    We received a call approximately 8:15 essentially notifying 
us that the gas to the community was shut off. Again, there was 
no prior notification. It was essentially you have no gas.
    At that point we got no explanation of the cause. No 
estimate of restoration times nor a contact person or phone 
number that we could get in touch with with our questions as 
this process unfolded. Again essentially what we heard was, 
your natural gas has been shut off to your community.
    Our frustration began with a lack of communication.
    Who were we to speak to?
    Who could we ask questions of?
    Could we get any sort of clarification?
    I have to publicly thank Mayor Berry of the city of 
Albuquerque who I called in a bit of panic saying do you have 
someone that I might be able to speak to. Thankfully he was 
able to get me a phone number because up until that point all 
we got was voice mail. We needed someone to speak to. We needed 
some answers.
    As with everyone else we were stunned, especially in 
retrospect at the lack of any apparent emergency response plan 
from New Mexico Gas Company. Just to reiterate, we were told 
gas was shut off and that was basically it at the beginning. We 
were left to fend for ourselves.
    The critical questions that we have and still have is why 
was there no advance warning to municipalities or to the State 
of New Mexico?
    Why weren't there established clear lines of communication?
    Why wasn't there any plan for dealing with the response?
    Again as we were left to fend for ourselves we went to work 
quickly. We established our emergency command center utilizing 
Town of Bernalillo staff. Put together everything we needed to 
begin addressing the emergency. We had coordination with the 
Sandoval County emergency command, support of the Red Cross, 
New Mexico National Guard.
    I also want to thank the delegation for their calls of 
concern and offer of support because we weren't getting that 
from New Mexico Gas to be candid. I also want to commend the 
Town of Bernalillo staff for their professional efficient 
response and actions taken to address the issue locally. We 
were on our own. We did what we needed to do.
    We mobilized all of our staff to first deal with the most 
vulnerable citizens in our community and make sure that they 
were taken care of and weren't at too much risk. As in probably 
most communities, most of our seniors chose to stay in their 
homes. They didn't want to leave their homes. But we did 
everything we could to make sure they were safe and not at too 
much risk.
    Again we coordinated services with the Sandoval Senior 
Program, our police and fire department and workers from every 
single one of our departments assisted. We also had to handle 
hundreds of phone inquiries because people didn't know what was 
going on. They didn't know what to expect. We did our best to 
try to put them at ease and give them whatever limited 
information that we had available to us.
    The positive side in our communities, as I think in each of 
our communities, were the people stepping forward. We had 
private citizens that came to city hall and said, How can I 
help?'' We put them to work.
    We had neighboring communities such as Sandoval County, New 
Mexico National Guard, the city of Albuquerque and Mayor Berry 
who stepped up and offered their support as well. Local 
businesses went out of their way to donate or offer any help 
that they could. Again, we heard calls of support from all of 
you.
    I also want to commend Governor Martinez for actually 
calling me back. I didn't expect that to happen. But I called 
her office looking for support, looking for action. I say that 
I didn't expect her to call me back.
    The Senator is smiling at me. I don't mean that facetiously 
I just assume with everything she must be dealing with that we 
might be a little bit low on her priority list. But she 
actually called back, offered support and assistance. I 
appreciate that.
    Secretary of Homeland Security Michael Duvall also 
contacted me and kept in communication throughout the crisis. 
We appreciate that support. He set up a meeting for myself with 
the Governor at 7:15 that first day, Thursday evening. Actually 
unawares to me a VP from New Mexico Gas Company attended as 
well.
    Throughout the day all we had heard was that it was a 
complex issue because we wanted to know why we were chosen. We 
even heard that it was a matter of simple physics. It was our 
location on the transmission line. At that meeting about 7:30 
for the first time we heard from New Mexico Gas Company the 
words that our community was chosen to be shut off.
    Our interaction with New Mexico Gas Company. Day one 
essentially the issue was our gas service was off. Through the 
day we were told that it was simply a matter of our location on 
the transmission line until the end of the day, as I noted. We 
had our communications established through the assistance of 
Mayor Berry. However my frustration increased through the day 
and through this process because information, answers to our 
questions remained vague. The answers to the questions 
constantly changed. Frankly I felt like I was in a war zone and 
had to insist, demand or beg for any sort of response for my 
community.
    I really feel that was understandable at the onset, but the 
pattern of pure communication has just continued up until this 
point. Just a quick example, when we were talking about the re-
light process which was underestimated in our community. I was 
told personally that there were 400 to 500 technicians. About 
an hour later I was told that that number would be 25 
technicians. When I questioned the first response, I was told I 
had misunderstood what was told to me.
    At that point I was angry, disappointed, frustrated and 
again, felt like I was in a war zone and had to negotiate and 
do everything I possibly could to protect my community. 
Eventually was told we'd have about 100 technicians. I think 
the actual number ended up being about 80.
    The town offered staff to assist with the re-light, not to 
re-light pilots or turn on meters, but to act as guides because 
Bernalillo is an old community that's not in a simple grid or a 
logical grid. There's a lot of dead ends. There's a lot of 
roads where you wouldn't expect roads. But we were told that 
that was not necessary and were turned down.
    The process took longer than anticipated. Most of the 
community was eventually restored by Sunday, late PM. Many 
homes were missed through the process for some reason. Again, 
we simply feel that our offer was turned down and could have 
helped the process go much smoother.
    We have no confidence in New Mexico Gas Company partially 
due to the shut off, but more so due to the poor communication 
which has worsened throughout the crisis. We could not get 
reliable information. Frankly, worse than the lack of reliable 
information has been what I think is a stunning attitude toward 
my community.
    Initially I naively believed that I could accept what I was 
told as truth and repeatedly answered changed. Again, I felt 
like I had to question every response and fight for every 
concession I could for my community so Bernalillo would not 
continuously be overlooked, set as a low priority or repeatedly 
abused. I was talked down to by their staff, chastised and even 
verbally berated.
    I felt their attitude toward the Town of Bernalillo was 
condescending and aggressive at times. I felt as if I was seen 
as overbearing and a burden to them. Our town was stepped on by 
New Mexico Gas Company. I strongly believe that if I had not 
done my job as Mayor that we would have fared even worse.
    I am hopeful that this Committee can help us get to the 
truth and get complete answers. At one point the CEO from New 
Mexico Gas agreed to a meeting with my town council to address 
our unanswered questions. Shortly after that I was told by 
their council that there would be no public meeting, no meeting 
with my council.
    We were offered a compromise meeting which included a 
number of mayors. We were allowed one guest, no public, no 
press. That was at their insistence contrary to our desire to 
have a public meeting to address issues openly and with people 
hearing all the answers.
    Questions that we have, have had for some time, that remain 
are why was our community chosen and what were the other 
options that were available? For instance, who else could have 
been chosen and would have that made more sense?
    When and if the next crisis arises will we be chosen again? 
We have asked that question but not received a satisfactory 
answer and hope that you can help us with that.
    We've asked and still not received details on their claims 
process perhaps that will come in a few minutes. Our offer to 
house one of their staff or more of their staff at our city 
hall to help people has been declined. Several communities, as 
we've been told recently, were chosen to save the balance of 
the system, the balance of the State. It seems that there 
should be some recompense to those communities that were 
chosen.
    We've heard about individual suffering, the same thing in 
my community, financial burdens. People trying to buy whatever 
they could to keep their homes safe, to keep themselves safe, 
frozen pipes. Businesses that were forced to close in my 
community, primarily small businesses, no receipts for those 
days they were closed, staff sent home with no pay and again 
the lower gross receipts to our community.
    Bernalillo public school suffered significant damage. The 
most recent estimate I heard is in the hundreds of thousands of 
dollars. Town of Bernalillo had staff overtime, additional 
expenditures, loss of gross receipts and actually we were 
fortunate there were only a few fires that were quickly 
extinguished.
    I'm also worried and in a cynical way about what my next 
gas bill will look like. Will I be paying and my constituents 
paying and our constituents paying for the gas that was purged 
from the lines? I would have never believed to ask that 
question before this crisis, but I have to ask it today.
    I'll close by repeating some of the words of the CEO of the 
parent company of New Mexico Gas, who at our meeting last week 
stated, ``There was no gas shortage.'' I almost died when I 
heard those words. I suppose technically that's accurate. But I 
really feel that that's symbolic of what we've heard from the 
gas company. I think it's a manipulation of language and a 
technical interpretation of the facts. I would ask him if he 
would go through each of our communities and tell each of the 
people impacted that there was no gas shortage.
    I began by stating that we still need your help. We 
certainly do. I hope that I've provided a glimpse of what our 
community has gone through and continues to go through. I 
certainly offer the Town of Bernalillo support in any way that 
we can so we can get clear, complete and honest answers to all 
these issues that remain.
    Thank you, sir.
    The Chairman. Thank you for your excellent statement.
    Our final witness in this panel is Mr. Steve Fuhlendorf, 
who is the Chief Executive Officer with Taos County Chamber of 
Commerce. Steve, why don't you go ahead?

 STATEMENT OF STEVE FUHLENDORF, CHIEF EXECUTIVE OFFICER, TAOS 
                   COUNTY CHAMBER OF COMMERCE

    Mr. Fuhlendorf. Thank you, Senator Bingaman and Senator 
Udall, Congressman Heinrich, Congressman Udall--Congressman 
Lujan, thank you all for having us here and to talk to the 
Energy and Natural Resources Committee.
    I'm going to provide a little bit of a different 
perspective on the gas outage as I'm representing the business 
community in Taos County. We, just to set the stage a little 
bit for the situation that arose a couple of weeks ago.
    First of all Taos is about twice the national average on 
entrepreneurial businesses. I think this is certainly to be 
applauded on our business community. However it also puts a lot 
of businesses in a vulnerable position. They've been put in a 
vulnerable position over the last couple of years because 
according to economic reports that we produce on a quarterly 
basis through the Taos County Chamber of Commerce.
    The recession actually started in Taos County in 2007. So 
the recession started earlier as defined by 2 consecutive 
quarters of downward numbers in economic development. What this 
has put us in a position is that these entrepreneurial 
businesses have essentially gone through their resources.
    Mom and Pop owned this store. They hire someone to run the 
store for them. As the economy started to slide, their 
resources started to slide along with it including their 
savings. It put them in a position where then they had to let 
go of that person that was running the store for them. Mom and 
Pop ended up back behind the counter again. So, it puts them in 
a vulnerable position for anything that impacts them 
negatively.
    What we experienced a couple of weeks ago was that we had a 
good snowstorm which in Taos County is always reason to 
celebrate because that means the ski resorts are going to be 
busy. The restaurants are going to be busy. The lodging 
establishments are going to be busy.
    Unfortunately we ended up in a situation on Thursday coming 
into a weekend which would generally be very busy for all of 
the businesses concerned where restaurants which principally 
cook with gas had to close. Lodging establishments which 
principally either heat or have restaurants that cook with gas, 
hot water was non-existent. Not only did they lose customers 
over that period of time because people were canceling their 
reservations. The people that were already there were leaving 
their establishments.
    The repercussions from this could be fairly long term. 
Because as we know people get an idea in their head and it 
tends to stick with them. So they are actually feeling lost 
reservations now in the lodging community even a couple of 
weeks afterwards just because of the negative publicity that 
occurred during this event.
    Basically 6 days of lost business impacted our community in 
many ways. Although we do have economic reports that we've put 
out we have not been able to gather the exact numbers of how 
this affected our community overall economically. We will 
continue to gather those. As soon as we have them we will 
certainly forward them on to you.
    [The prepared statement of Mr. Fuhlendorf follows:]
 Prepared Statement of Steve Fuhlendorf, Chief Executive Officer, Taos 
                       County Chamber of Commerce
   Taos has twice the national average of entrepreneurial 
        enterprises.
   Mom & pop once had someone else minding the store. With the 
        economic downturn, they have depleted their resources and are 
        now running the store themselves.
   Landlords are lowering rent to keep their tenants businesses 
        from folding.

    The four year average growth rate is 3.1%. The third and fourth 
quarters of 2005 and second quarter of 2006 all experienced double 
digit growth rates. 2007 suffered four consecutive quarters of negative 
growth. When adjusted for inflation by applying the Consumer Price 
Index (Urban) fourteen of the past sixteen quarters experienced a 
negative growth rate. A negative percentage change over the same time 
in the previous year for two consecutive quarters defines a 
``recession''.

   We began to see an upturn in the Taos economy in the third 
        and fourth quarters of 2010, but with resources gone it takes 
        time to recuperate from loses incurred since 2007.
   Six days of lost business with these factors can and will be 
        devastating to some businesses. Lodgers experienced 
        cancellations and early departures. Restaurants were closed so 
        no revenues. Retail businesses had to close due to the cold. 
        Plus these business owners and their employees were told to 
        stay home so they would be there when New Mexico Gas Company 
        came to relight.
   Many business owners had business interruption insurance. 
        What they are finding out now is the gas outage is not 
        necessarily covered by that insurance.

    --One restaurant owner was closed for five days. That is revenue 
            that can not be recuperated.
    --Another restaurant owner was planning an event to assist a 
            charitable organization, but had to cancel because of lost 
            revenue.
    --A bed and breakfast owner is available 24/7/365, but was empty 
            because he had no heat or hot water in his rooms.
    --A retail fabric store had pipes burst in the apartment above his 
            business soaking merchandise and the floors, but could not 
            dry the products or the carpet, because there was no heat.

    Mr. Fuhlendorf. But anecdotally I think we can get some 
idea of what the actual impact was. I'm going to give you a 
couple of examples of business owners that I talked to and the 
repercussions from this event on them.
    A restaurant owner that I talked to had said he lost in the 
neighborhood of $20,000 over the period of those 6 days that 
his business had to be closed. He has business interruption 
insurance. So this is something that I had assumed that would 
cover an event such as this.
    Quite frankly I was counting on that for many of our 
businesses that they would have that. Many of them do. 
Unfortunately what he found out was when he submitted his claim 
to the insurance company they told him that a gas outage was 
not covered under his business interruption insurance. So he 
had to go other means to recuperate the losses that he 
received.
    Another restaurant, the owner said that he lost 
approximately $25,000 during the period of time that he had to 
be closed. But the ripple from that--and he was going to--next 
week have a charitable event for one of our non-profit 
organizations in Taos. He decided to cancel that because he had 
experienced such losses during this period. So the ripple 
extends to the non-profit organizations also in Taos because 
they rely on the businesses to support them.
    One of our bed and breakfast inns said that they lost 
approximately $6,000 during that period. Now that may not seem 
like a huge amount in the big scheme of things but when you 
look at a bed and breakfast inn that has eight rooms, that's a 
big chunk of their income. So it's very unfortunate that they 
had to experience that because it's definitely a hardship on 
them.
    One of the things that I think we are very aware of is that 
the communications were somewhat lacking during this period. 
The Town of Taos, the public relations offices there, Kathy 
Connelly was forwarding information. Then I was taking that 
information and forwarding to our business community.
    What we were told through the entire weekend was stay home. 
Wait for the gas company to show up. They're going to turn you 
back on.
    What that happened was that businesses felt like they had 
to be close to stay home so that they could have heat at home. 
They had to send their employees home. They had to be home to 
get their gas turned back on.
    Finally on Monday, the Mayor of Taos, Mayor Cordova, made 
what I think is a bold move. He said if you have the resources, 
turn on your own. Light your own pilot light. Turn on your own 
gas because we're not sure when New Mexico Gas Company is going 
to be able to turn you back on. So most people did that. 
Consequently a lot of people were back on by Monday.
    But obviously we do have substantial ripples from this 
event. As I stated earlier it is a business community that was 
already severely weakened by the economy. This was a burden 
that many businesses are not going to be able to overcome. So I 
thank you for allowing me to make my testimony this morning.
    The Chairman. Thank you very much. Thank all of you for 
your testimony. Let me just make a comment.
    Obviously the human toll and the hardship that was 
experienced by families and communities was enormous. Then 
you've done a good job of describing that in your individual 
communities. I sort of heard 3 main themes from what I heard 
here.
    No prior notification or inadequate notification that this 
was happening.
    Inadequate communication throughout the period of this 
crisis.
    Third, a lack of inadequate emergency response plan.
    Obviously there's still a lot of questions many of you 
alluded to about the claims process and what can be expected in 
that regard. The extent of the economic impact is still being 
determined as I understand it. Not only the economic impact on 
businesses as you were describing, Steve, but also the economic 
impact on families that experience--these are all very serious 
issues that we need to address at of course, our next panel is 
able I think, to address some of these. That's the reason we 
ask them here today. I do not think I'll try to question each 
of you again at this point about these problems. But let me 
call on Senator Udall to ask any questions that he would have 
of this panel before----
    Senator Udall. I just thought it might be helpful for Mayor 
Torres. I think you used the term, you said, the crisis is 
still not over. If you would could you elaborate on that a 
little bit? I think you did in your testimony but do you have 
the same kinds of things going on that Steve talked about in 
terms of your business people. You didn't mention small 
business----
    Mr. Torres [continuing]. Furnaces that now need to be fixed 
because of the loss of gas, broken pipes that need to be fixed 
and people on fixed incomes trying to decide how they're going 
to come up with the money to do that. We have the same 
situation with businesses that were impacted. One popular 
restaurant estimated the three and a half days they were closed 
they lost receipts anywhere from $6 to $13,000 per day. That 
doesn't include sending their staffs home and the loss of the 
paychecks there, so absolutely.
    The other thing that I think that we're still waiting to 
hear, I believe that the crisis continues because when the next 
perfect storm should hit and we know that it will eventually. 
Are we going to be the convenient communities that are chosen 
again to save the system? So I think that's a question that 
remains in my community and in all the meetings I just haven't 
been able to hear anything that I can take back to say we'll be 
spared the next time.
    We've got so many economic factors that we're trying to 
deal with, even at the municipal level. All of us are dealing 
with that loss of revenue and increased cost that we're going 
to have to figure out how we're going to cover municipalities 
as well.
    Senator Udall. Thank you very much.
    I had the opportunity of going up to northern New Mexico as 
the gas was starting to get on and meet with some of the mayors 
in Taos that had come in for the meeting with first responders. 
I was struck by the pulling together of the community. I think 
several of you described this.
    I mean the way we really got through this was that people 
stepping forward. People offering that were better off to be 
able to go out and do things, the kind of thing that you talked 
about in terms of re-lighting. We had the Governor bring the 
National Guard in to help with some of that.
    It really seemed to me the thing that kind of pulled it all 
together and got us through this was the volunteer effort with 
the emphasis on the people, the more vulnerable people. 
Governor Dasheno, you mentioned disabled people in your pueblo 
that needed help. Once again I think as I've seen these crises 
whether it's a forest fire, a flood or whatever it is. It's 
that wonderful spirit of New Mexicans kind of pulling together 
to help out that I think really, really made a difference. I 
thank all of you being key leaders in your area for what you 
have done in that respect.
    Thank you, Senator Bingaman. I don't have any further 
questions.
    The Chairman. Thank you all very much for being here and 
your testimony. We will try to follow up and we'll try to get 
answers to many of the questions that you raised. That's the 
purpose of this hearing and purpose of the various 
investigations going on. Why don't we dismiss this panel, take 
a very short break and invite the second panel to come forward 
and we will startup again in 5 or 10 minutes, and hear from the 
second panel.
    [Recessed.]
    [Reconvened.]
    The Chairman. Our County Commission Chairperson is Maggie 
Hart Stebbins. She is here. We appreciate her being here and 
also the willingness of the county and the city to allow us to 
use these facilities for this hearing.
    County Commissioner Art De La Cruz is also here. We 
appreciate him being here very much. So thanks to all of them.
    I'll go ahead and introduce all 6 of our panel members. I 
guess, I think there's supposed to be 6. We've got 5 of them 
that I see. So we'll introduce them all and then hear from them 
in this order, I guess.
    First would be George Schreiber, who's President and CEO of 
Continental Energy Systems. George, thank you very much for 
being here.
    Miss Shelley Corman, who is Senior Vice President with 
Transwestern Pipeline in Houston, Texas. Thank you for being 
here.
    Miss Janice Parker, who is Vice President of Customer 
Service with El Paso Western Pipeline Group out of Colorado 
Springs, Colorado. Thank you very much for being here.
    Mr. John Dumas, who is, I believe, still going to be here, 
is the Director of Wholesale Market Operations with ERCOT, the 
Electric Reliability Council of Texas. We appreciate him being 
here today.
    Mr. Gerry Cauley is the President and Chief Executive 
Officer with NERC, the North American Electric Reliability 
Corporation in Washington, DC. Thank you for being here.
    Mr. Joseph McClelland, who is the Director of the Office of 
Electric Reliability with FERC, the Federal Energy Regulatory 
Commission in Washington, DC. Thank you very much for being 
here.
    Why don't we just have you proceed in that order? Starting 
from my right and going all the way to the left. Each of you 
take 5 minutes or so and give us your, the main points we need 
to understand.
    The full statements that you have prepared for this hearing 
will be made part of the record. Then following all of your 
statements, Senator Udall and I will have some questions of 
you.
    George Schreiber, go right ahead.

  STATEMENT OF GEORGE A. SCHREIBER, JR., PRESIDENT AND CHIEF 
EXECUTIVE OFFICER, CONTINENTAL ENERGY SYSTEMS, LLC, AND MEMBER 
  OF THE BOARD OF DIRECTORS OF ITS SUBSIDIARY, NEW MEXICO GAS 
                       COMPANY, TROY, MI

    Mr. Schreiber. Thank you, Mr. Chairman. Senator Udall, 
Congressman Heinrich, Congressman Lujan, thank you very much 
for the opportunity to present this statement this morning.
    So people are not confused I just want to explain that 
while I am with Continental Energy Systems, I am a member of 
the Board of Directors of New Mexico Gas. I'm here with 10 of 
my colleagues from New Mexico Gas. I'm very much involved with 
the company on a day to day basis not only from an operations 
point of view, but also because Albuquerque is my hometown.
    As we have heard in earlier panels, the disruption of 
service to our customers caused hardships, inconvenience and 
expense. A lot of we also heard was about our communications 
plan, our emergency response plan and we fully agree that we 
could have done things better. OK?
    We have changes that are currently underway. We are 
participating and look forward to a full review of all of these 
various factors by the Public Utility Commission. I believe 
that we'll be filing testimony in that proceeding on March 
17th. We look forward to the involvement in those regulatory 
proceedings.
    These interruptions would not have happened if upstream 
sources of natural gas had met their commitments. Customers 
depend on a reliable natural gas delivery network. The fact 
that New Mexico Gas was required to curtail to its customers 
was and is unacceptable. As an industry we need to work with 
regulators and policymakers to ensure that this does not happen 
again.
    It is clear that we have a problem with the reliability of 
the regional energy infrastructure. This is an issue of 
national importance. We must address it immediately.
    This statement basically summarizes my pre-filed testimony 
which goes into this situation in much more detail. We plan our 
business operations and manage our gas deliveries to meet the 
demand for natural gas by our customers including having enough 
gas on peak usage days. As I said, this is an interdependent 
network. It is essential that there be reliable, available, 
sufficient amounts of electricity to move natural gas from well 
head production to gathering, to processing, to interstate 
transmission pipelines and finally to New Mexico Gas Company's 
500,000 residential, commercial and industrial customers.
    We learned that regional infrastructure cannot get the job 
done at least under the combination of conditions that the 
industry faced 3 weeks ago. As the loss of electric service in 
Texas and the effects of weather on gas production and delivery 
systems, we were forced to interrupt service to 28,707 of our 
customers in order to save the entire New Mexico Gas delivery 
system. Had we lost the entire system, the re-lighting process 
would be continuing today.
    Let's step back for a moment to Monday, January 31, 2011. 
Our Operations Control Center was monitoring a storm which the 
National Weather Service called a ``winter storm of historic 
proportions.'' They were not kidding. The extremely low 
temperatures brought to New Mexico by this storm had been 
experienced on only 2 other occasions over the last 100 years.
    We started preparing for this storm early in anticipation 
of a significant increase in the use of natural gas by our 
customers. For February 1st, 2nd and 3rd, New Mexico Gas pre-
purchased and scheduled for delivery additional quantities of 
natural gas in excess of forecasted amounts by 36 percent, 55 
percent and 62 percent, respectively. In other words we 
purchased significantly more gas than our forecasting models 
predicted we would need believing that the usage would spike 
during the storm.
    As the storm approached we were highly confident we could 
manage things well so that natural gas would reach our 
customers as they needed to heat their homes and businesses. 
The problem was that these additional supplies of natural gas 
were never delivered. Never before in the history of New Mexico 
Gas or its predecessors have scheduled deliveries of natural 
gas not been delivered on this scale. At the same time our 
system demand was nearly doubled the average peak day demand 
over the last 10 years.
    Our customers didn't get the gas they needed because 
electric service disruptions in Texas prevented sufficient 
production to meet the demand for natural gas. Gas fields 
experienced the effects of frigid weather. 28,707 of our 
customers were without natural gas for up to 6 days, in very 
cold temperatures, a completely unacceptable situation.
    When the gas need of our customers did not arrive we took 
steps necessary to save our system by curtailing service in 
several areas of the State. I will add that we are currently 
analyzing exactly how our system operates and looking for ways 
where we can isolate segments of our system better than we 
currently have. That process is going on and we will be making 
changes in that--in the way we operate our business as well.
    But we did do our level best to restore service to our 
customers. But furnace and appliance re-lights are man power 
intensive, time consuming undertakings, especially in rural 
areas of New Mexico. Neither our customers nor New Mexico Gas 
should ever have to go through that service restoration process 
again.
    This discussion then brings me to the reason that we are 
all here today. On a policy level there are questions that need 
to be addressed.
    First that comes to mind, should critical areas such as gas 
producing basins be exempt from rolling blackouts because of 
their importance to the safety and well being of citizens?
    Should critical facilities, including processing plants be 
required to have back up generation, electric generation?
    Do all well head and gathering systems have the proper 
dehydration equipment in place to keep freezing from occurring 
at the well head?
    What is the best approach to ensure that segments of the 
industry, critical to the natural gas infrastructure, achieve 
an enhanced level of reliability?
    An improved approach to the critical interdependence of the 
electric grid and natural gas industry needs to be developed. 
Quite frankly it is outrageous that the electric supply system 
and regional natural gas infrastructure problem would cause 
28,707 of my customers to lose natural gas service when record 
low temperatures hit the region.
    Thank you again, Mr. Chairman, Senator Udall, for allowing 
me to make this statement.
    [The prepared statement of Mr. Schreiber follows:]

  Prepared Statement of George A. Schreiber, Jr., President and Chief 
 Executive Officer, Continental Energy Systems, LLC, and Member of the 
      Board of Directors of its Subsidiary, New Mexico Gas Company
    Mr. Chairman, Senator Udall, Members of the Committee, and 
Congressmen Heinrich and Lujan:
    Thank you for the opportunity to address the Committee today about 
the recent natural gas service disruptions in New Mexico, and more 
broadly the reliability of our regional energy infrastructure, in light 
of the events during the week of January 31, 2011, during which 
twentyeight thousand, seven hundred and seven (28,707) customers of New 
Mexico Gas Company (NMGC) in communities throughout the state lost gas 
service. In my testimony, I will first discuss the storm, the gas 
supply shortages in the interstate pipelines and the gas service 
curtailment and System Emergencies initiated and declared by on 
February 1st, 2nd and 3rd 2011.
    I will first discuss NMGC's pre-curtailment planning, curtailment 
decision making, and the performance of our distribution system. In the 
middle section of my testimony, I will address the recovery effort. By 
that, I mean the steps taken to restore service to our customers once 
our distribution system stabilized. I will also share some lessons 
learned and actions NMGC will take in the coming months to better serve 
our customers should New Mexico face an event of this magnitude again. 
Finally, my testimony will address matters beyond our control. We would 
like to know more about the specific upstream events in Texas that 
prevented the interstate pipelines from delivering gas on February 2nd 
and 3rd 2011, that NMGC had ordered and paid for. There are questions 
that need to be addressed about the reliability of well head 
production, and natural gas gathering lines and processing plants. Our 
concern is that the necessary investigation and analysis will not occur 
absent oversight by this Committee and a concerted fact finding 
investigative effort by federal regulators. Our goal as a company is 
that NMGC will be able, later this year, to provide assurances to our 
customers that steps have been taken to prevent this kind of event in 
the future. If we achieve that goal, it will be in large part because 
of the initiative this Committee is demonstrating today. We thank the 
Committee for its efforts and pledge our cooperation.
I. Background
    The majority of NMGC's gas supply comes from New Mexico and is 
received into our system either directly from the San Juan Basin, near 
Farmington, or through the Transwestern and El Paso Interstate 
Pipelines. The balance comes from suppliers and producers in Texas 
which is also transported through the Transwestern and El Paso 
pipelines. This includes gas from our contracted geological storage 
facility in Texas.
    NMGC operates two primary segments of its system. The South segment 
primarily receives gas fed off the El Paso south pipeline, and serves 
the communities of Silver City, Alamogordo, Tularosa and La Luz that 
experienced outages. The North segment is primarily fed off the El Paso 
north and Transwestern pipelines and serves the northern communities 
and Native American pueblos that were affected by outages, including 
Bernalillo, Placitas, Taos, Espanola, Red River and Questa, and 
surrounding communities.
    During the week of January 31, 2011, the delivery of natural gas to 
NMGC from West Texas was severely limited by a once-in-50-year event 
that the National Weather Service characterized as ``a winter storm of 
historic proportions.'' The storm and rolling electrical blackouts in 
Texas significantly reduced vital gas field operations and gas 
processing facilities. Pressure on the interstate pipelines which 
transport gas to New Mexico and three other states, California, Arizona 
and Texas dropped significantly. Gas outages were reported in New 
Mexico, Arizona and Texas. NMGC experienced a dramatic loss of gas 
supply, and significant pressure reductions from the interstate 
pipeline system. In contrast, our direct suppliers in New Mexico 
continued processing and delivering approximately 90% of scheduled gas.
    The facility specific facts and circumstances that caused these 
losses in the interstate pipelines are best addressed by the producers, 
gas processing plant owners and operators, and interstate pipeline 
companies. Gas delivery off these facilities to the New Mexico Gas 
Company system was severely limited. Without these disruptions in 
supply of gas, NMGC would not have had to curtail or interrupt service 
to its customers. Thus, while this event has been described as a local 
gas supply matter, it is more accurate to describe it as a disruption 
in the interstate gas delivery system which we understand was caused by 
electricity disruption and/or weather conditions in Texas.
II. The Events at NMGC on February 1-3, 2011
    NMGC routinely monitors long-and short-term weather forecasts. In 
the long-term forecast, NMGC saw an emerging weather system that had 
the potential to affect demand for gas as early as January 31, 2011. As 
with all storms, NMGC preparations commenced early. Our system 
transmission lines were safely packed with extra gas, and NMGC 
confirmed that our gas storage facility was positioned for withdrawals 
when needed. Additional gas was purchased for the anticipated surge in 
demand by our customers. For February 1st, 2nd, and 3rd, NMGC had pre-
purchased 36%, 55%, and 62%, respectively, more gas than our forecasted 
need. In other words, NMGC had bought significantly more gas than our 
forecasting models had predicted we would need considering this type of 
storm--correctly anticipating how severe it would be.
    These steps were intended to ensure supplies were ready when our 
customers' use reached its peak.
    Given the severity of the anticipated storm, at 9:00 a.m. on 
Wednesday, February 2, 2011, NMGC requested that large industrial and 
commercial customers throughout the state voluntarily reduce or curtail 
their gas usage. In total, NMGC contacted 39 customers asking for 
voluntary curtailment.
    Throughout the work day on Wednesday, NMGC monitored gas supply and 
pipeline pressures as is our normal practice. Pressures and supply 
remained within operational limits. NMGC had purchased and was 
anticipating an incremental delivery of gas at 9 p.m. on Wednesday.
    At 9:00 p.m. Wednesday, the pre-ordered gas was not delivered from 
the interstate pipelines as scheduled. As a result, throughout the 
night and into Thursday morning, NMGC repeatedly contacted suppliers 
and pipeline operators in an effort to secure additional gas for 
customers. At 2:36 a.m. on Thursday morning, because of low pressures 
on the South segment of the NMGC system, the Company declared a System 
Emergency on the South segment and began the process of curtailing 
customers. During the night, we were coordinating with the Otero County 
Emergency Coordinator, the Otero County Sheriff and Tularosa Police 
Department as service was being curtailed.
    Despite the problems on the South segment, NMGC, monitoring the 
North segment in the pre-dawn hours, believed it to be stable, with 
adequate line pack and that NMGC would be able to meet the anticipated 
morning surge in demand. Additionally, NMGC was scheduled to receive an 
incremental delivery of gas at 8 a.m. Thursday. Never in the history of 
gas operations at NMGC, or its predecessors, had the regional gas 
infrastructure failed to deliver purchased incremental gas on two 
consecutive occasions, and therefore NMGC reasonably expected this 
morning delivery.
    By 7:30 on Thursday morning, NMGC was experiencing a significantly 
increased demand for gas--70% greater than peak day demand, and 
therefore was experiencing a decline in line pack at an extraordinary 
rate. By 7:30, NMGC declared a System Emergency on the North segment of 
its operations. This situation triggered preparations for reducing 
system demand in the event the anticipated 8:00 a.m. incremental 
delivery of gas did not materialize, including immediately initiating 
mandatory curtailment of service to large commercial and industrial 
customers. In total, NMGC curtailed service to 9 large customers during 
Thursday.
    At 8:00 Thursday morning, NMGC learned that the pre-ordered gas 
scheduled for delivery at 8:00 a.m. was not being delivered. Given this 
development, as pressure on the Taos Mainline began to drop 
precipitously, NMGC shut off the Ottowi valve to curtail service to the 
Taos Mainline. This curtailment was an effort to safely control this 
portion of the system as it lost pressure and to reduce demand 
throughout the system and in order to preserve the remainder of the 
system. Shortly after this, NMGC, working with PNM, curtailed service 
to the Cobisa power plant in Albuquerque. Further action was taken to 
reduce customer demand by closing valves to curtail service to 
Bernalillo and Placitas. Altogether, these actions reduced demand on 
the North segment and preserved the remainder of the North segment. Had 
NMGC not closed valves in the North, including Bernalillo and Placitas, 
NMGC risked losing its entire system.
    Regarding these actions, the design of NMGC's distribution system 
alone dictated that NMGC move quickly to identify critical valves that 
were easily accessible by crews that would, once shut down, reduce 
customer demand and increase pressure throughout the system. By 
``easily accessible,'' we mean valves that could be reached and closed 
within 20 to 30 minutes.
    In addition, we had to close valves to those portions of the system 
already experiencing the lowest pressures. The system design and valve 
configuration in communities such as Albuquerque and Santa Fe are too 
complex to complete a shut down in the time required to provide support 
for the remainder of the system.
III. Recovery and Post-Response Efforts
    Following the difficult decisions in the pre-dawn and early morning 
hours of Thursday, pressures on both segments of the system--North and 
South--began to stabilize. The South segment stabilized quickly, and by 
10:34 a.m. the North segment had achieved a balance between supply and 
demand. Throughout Thursday, line pack increased. At the same time, 
NMGC remained concerned about its ability to handle anticipated 
customer demand on Friday morning. NMGC, working with cities and the 
state government, renewed efforts for voluntary curtailment, including 
closing non-essential services, schools and businesses. As a result of 
all these efforts, plus moderating temperatures, the line pack was 
restored throughout Thursday and by Friday morning, with reduced 
customer demand, the Company could turn its attention and its full 
resources to restoring the service to its customers that had been 
curtailed.
    In order to restore service, the following procedures were set in 
motion: First, NMGC has to physically shut off each individual meter in 
order to be able to purge the lines of air. After the lines are purged, 
each individual meter must be turned on and the appliances relit. The 
second step, re-lighting, could not commence until all customers in an 
area that had their meters shut off and the lines in that area had been 
purged of air. The act of relighting a home required customers to be 
home.
    Among its efforts to bring all resources to bear in this effort, 
NMGC, enlisted the service of utility workers from across the country 
to come to New Mexico to assist, including 69 from its sister company 
in Michigan. NMGC also utilized the services of Plumbers and 
Pipefitters Local 412, many private contractors from the affected 
areas, and National Guardsmen, fire personnel, and state and local 
police. At the height of the effort, over 1,100 individuals 
participated in the recovery process.
    Despite the application of all of these resources to re-
establishing service, our initial estimate as to when service would be 
up and running was overly optimistic. Our goal was Sunday February 6th, 
but service was not restored to all of our customers until Tuesday, 
February 8th. Some customers--less than 50--were ``red-tagged'' because 
appliances were unsafe. On February 12th and 14th our crews went back 
to those customers and undertook the necessary repairs to restore 
service at no charge.
IV. Lessons Learned: Review of NMGC Operations and System
    While NMGC is not responsible for the production, processing or 
interstate transmission of gas to our system, we have learned from this 
situation and accept responsibility for the things we could have done 
better. In addition to participating in the numerous investigations 
that will result from these events, NMGC is independently undertaking 
the following actions.
    First, NMGC established a $1 million relief fund to assist 
customers with their needs arising from the outage. A claims form and a 
process for evaluating claims have been set up. NMGC continues to seek 
additional contributions to this fund from others in the industry.
    Second, in the coming months, NMGC will conduct a complete review 
of its processes and procedures and will retain outside consultants as 
necessary to conduct an independent assessment of our actions.
    Third, NMGC will institute completely revamped communications plans 
and processes, including:

          A. Developing a dial-out early warning system capable of 
        alerting customers of emergency situations.
          B. Developing a customer communications plan outlining steps 
        to be taken, including more aggressive pre-emergency 
        communications and the use of social media, where appropriate.
          C. Additional use of local radio and television.
          D. Enhancing direct communications with state and local 
        elected officials and government agencies, Native American 
        pueblos, and the state's Emergency Operations Center and the 
        State's Department of Homeland Security.

    Fourth, NMGC has already retained an independent consultant to 
conduct a thorough evaluation of its entire emergency operating 
procedures and policies and make recommendations for improvements.
    Fifth, NMGC will review and revise its customer curtailment and 
service restoration procedures including better ways to sectionalize 
areas of our system to make sure that system operation is better 
situated to minimize the impact on the areas that suffered during this 
event.
    Sixth, NMGC will evaluate all physical system improvements 
including the feasibility of establishing back-up supply measures, 
including LNG, propane air systems, above and underground storage; 
methods to loop lines or building new lines so that branches of the 
system are less susceptible to pressure loss.
V. Industry-Wide Improvements Needed
    In the last two weeks, the root causes of the failure of the 
regional gas supply infrastructure have received little public 
scrutiny. This is understandable for several reasons. First, as this 
testimony is prepared, the storm and the gas curtailments occurred only 
two weeks ago. Second, the facts are difficult to gather. Third, there 
is no single regulatory body that has jurisdiction over all of the 
industry segments.
    The gas industry is no longer vertically integrated. There are many 
parties involved in our industry including gas producers, suppliers, 
gathering systems, processing plants, pipeline owners and operators and 
natural gas storage providers. The importance of a reliable electricity 
supply cannot be overstated. Each company in the gas and electric 
industries plays a critical role in delivering gas to customers. Each 
can undoubtedly make important contributions to the fact finding 
effort, and each should be involved. Industry involvement can also help 
develop system wide improvements that will be needed to accomplish this 
Committee's goal of improving the reliability of the regional energy 
infrastructure.
    Mr. Chairman, NMGC very much appreciates the chair's initiative in 
scheduling this hearing today. The New Mexico Public Regulatory 
Commission and the Federal Energy Regulatory Commission have initiated 
inquiries into the events of February 1, 2, and 3. NMGC is looking 
forward to participating in these hearings. We pledge our cooperation. 
We note that FERC in its February 14, 2011 order commented on the 
investigations that have commenced in Texas, New Mexico and Arizona. 
FERC stated that it ``would seek to coordinate efforts with those 
states and their regulatory authorities, and exchange relevant 
information so that we are mutually able to determine quickly what went 
wrong and how to prevent a recurrence.'' Mr. Chairman, New Mexico Gas 
Company concurs. Cooperation and coordination will be key to 
accomplishing this Committee's objectives. There are various models for 
effectuating this cooperation including the multi jurisdictional task 
force approach, under the auspices of the Department of Energy, that 
was used to convene the investigation, and author the definitive report 
on the 2003 blackout in the northeastern United States and Canada.
    With respect to fact finding, there is a consensus that the bad 
weather, frozen pipes, and rolling blackouts in the electric grid in 
Texas hampered the ability of producers and processing plants to push 
gas into the interstate pipelines. The details of and the 
interrelationship between these events must be developed.
    On a policy level, there are issues that should be explored. Should 
critical areas, such as gas producing basins, be exempt from rolling 
blackouts because of their importance to the safety and well-being of 
citizens? Should all critical facilities, including processing plants, 
be required to have back-up generation? Do all wellheads and gathering 
systems have the proper dehydration equipment in place to minimize 
freezing? What is the best approach to ensure that segments of the 
industry critical to the natural gas infrastructure achieve a greatly 
enhanced level of reliability?
    Clearly, there should be increased real time information sharing 
among all parties in the natural gas delivery system. An improved 
approach to the critical interdependence between the electric grid and 
the natural gas industry needs to be developed. This recent crisis 
clearly demonstrates that a failure in the electric grid can disrupt 
natural gas supplies, which can impact thousands of natural gas 
customers.
    To conclude, and bring this matter and testimony back home to New 
Mexico, NMGC is determined to do what it can to insure that we are in a 
better position to minimize service interruptions, to communicate more 
effectively, and in the aftermath of an event to do everything we can 
to expedite the restoration of service to all of our customers. To 
achieve this goal and to improve the regional infrastructure, we pledge 
NMGC's full cooperation.
    Thank you again for this opportunity to present New Mexico Gas 
Company's perspective and insight into the system failures that 
occurred on February 1, 2, and 3, 2011. This concludes my testimony.

    The Chairman. Thank you very much.
    Ms. Corman, go right ahead.

    STATEMENT OF SHELLEY A. CORMAN, SENIOR VICE PRESIDENT, 
  COMMERCIAL & REGULATORY TRANSWESTERN PIPELINE COMPANY, LLC, 
                          HOUSTON, TX

    Ms. Corman. Chairman Bingaman, Senator Udall, Congressman 
Lujan and Congressman Heinrich, thank you very much for the 
opportunity to testify today.
    My name is Shelley A. Corman. I am the Senior Vice 
President of Commercial and Regulatory Affairs for Transwestern 
Pipeline Company. I am here to offer my knowledge of the facts 
concerning Transwestern's transportation service and our 
pipeline system operating conditions during the recent period 
of winter weather.
    Transwestern recognizes the importance of gas service 
reliability. I want to assure this Committee that our personnel 
did everything in our control to facilitate deliveries to New 
Mexico customers. Because natural gas service has historically 
been so reliable, Transwestern agrees that we must ensure that 
even in the exceptional conditions that we've experienced that 
the natural gas deliveries----
    During the recent winter weather Transwestern allowed--to 
make up--Transwestern is an interstate natural gas company that 
transports natural gas from San Juan Permian Basin to market in 
the Midwest, Texas, Arizona, New Mexico, Nevada and California. 
We have 28 delivery points in the State of New Mexico including 
10 delivery points to New Mexico Gas Company.
    Transwestern is a transportation only pipeline. We don't 
buy or sell gas for resale. Shippers purchase their own 
supplies and contract with Transwestern to receive, transport 
and re-deliver the gas at specified delivery points.
    We own and operate compression with the gas from receipt 
point to delivery point and to maintain an operating pressure.
    Approximately 75 percent of Transwestern compression runs 
on gas while 25 percent of the compression is driven by 
electric motors with power provided by local utilities. Recent 
extreme weather conditions reduced the supplies flowing into 
Transwestern. At the very same time shippers requested 
dramatically increased volumes of gas.
    On February 2, substantially more gas was drawn out of the 
pipeline at delivery points than was being put into the 
Transwestern system at receipt points. For several hours during 
February 2nd nearly 400,000 MMBTU more gas volume was being 
delivered out of Transwestern than was being received into the 
system. As a result the pressures in the pipeline were lowered 
and the ``line pack,'' that is the volume of gas in the 
pipeline was reduced.
    Despite these operating changes Transwestern kept its 
pressure above our contractual minimum operating pressures. 
Transwestern had more than enough of pipeline capacity to meet 
our shipper delivery requests. There was no compression or 
pipeline outage on the Transwestern system that impeded our 
ability to receive or deliver gas to shippers in New Mexico. We 
operated our compression to maximize the pressures in New 
Mexico given the quantities of gas in the pipeline. Our gas 
control personnel worked around the clock through the critical 
periods with their counterparts at New Mexico Gas Company to 
maximize deliveries.
    Beginning on February 2nd and through the extreme weather 
we issued critical operating notices where supplies were not 
being received. We also issued operating notices to our 
shippers informing them of low ``line pack'' conditions. 
Transwestern gas control personnel maintained continuous 
communication with shippers and operators to keep all parties 
up to date.
    We do not have firsthand knowledge of why particular 
supplies were not received as planned. Nor do we fully 
understand whether there were any downstream operating 
conditions that prevented shippers from taking gas at lower 
line pressures. The extreme cold conditions created unique 
difficulties for many segments of the natural gas industry and 
the industries that support it.
    We are proud of the manner in which we managed our system.
    We believe Transwestern used all the tools in our control 
to maximize the gas available at New Mexico delivery points.
    We believe that participants in the natural gas supply 
chain should have the opportunity to meet and review data and 
gain a better understanding of each other's systems during this 
extreme weather. We understand that the Federal Energy 
Regulatory Commission has initiated an inquiry on this issue. 
That could be the forum for interested parties to exchange 
information, have dialog and form recommendations for future 
weather events.
    Thank you for this opportunity to testify. I look forward 
to your questions.
    [The prepared statement of Ms. Corman follows:]

    Prepared Statement of Shelley A. Corman, Senior Vice President, 
Commercial & Regulatory Transwestern Pipeline Company, LLC, Houston, TX
    Chairman Bingaman, Ranking Member Murkowski and members of the full 
Committee, thank you for the opportunity to testify today.
Introduction
    My name is Shelley A. Corman and I am the Sr. Vice President, 
Commercial & Regulatory for Transwestern Pipeline Company, LLC 
(``Transwestern''). I am here to offer my knowledge of the facts 
concerning Transwestern's transportation service and pipeline system 
conditions during the period of recent winter weather. Transwestern 
recognizes the importance of gas service reliability, and I assure this 
Committee that Transwestern personnel did everything in their control, 
and our facilities were ready, willing and able, to receive and move 
all supplies delivered to Transwestern and redeliver those supplies to 
our customers in New Mexico. Transwestern went so far as to allow 
significant depletion of Transwestern's ``line pack,'' gas within its 
system, to facilitate deliveries to New Mexico customers.
Background of Transwestern's transportation system
    Transwestern is an interstate natural gas company operating 
pursuant to a certificate of public convenience and necessity issued by 
the Federal Energy Regulatory Commission. Transwestern transports 
natural gas from the San Juan, Anadarko, and Permian Basins to markets 
in the Midwest, Texas, Arizona, New Mexico, Nevada, and California via 
approximately 2,700 miles of pipeline. Transwestern's mainline capacity 
flowing west from the Permian Basin to the California border is 
approximately 1.2 Bcf/day. Additionally, our San Juan Lateral allows 
San Juan Basin supplies to flow South into the mainline. Transwestern 
has 28 delivery points in the state of New Mexico, including 10 
delivery points to New Mexico Gas Company. Attached is a map* of the 
Transwestern system. Also attached is another map* showing 
Transwestern's New Mexico delivery points.
---------------------------------------------------------------------------
    * All maps have been retained in committee files.
---------------------------------------------------------------------------
    Transwestern is a transportation-only pipeline. Shippers purchase 
their own gas supplies and contract with Transwestern to receive, 
transport, and redeliver the gas at specified delivery points. In 
theory, shippers arrange to put an amount into the pipeline equal to 
the amount that they want to have delivered. In reality, more or less 
gas may be actually received on a given day and the shipper may take 
more or less gas at the delivery point than scheduled.
    Natural gas moves through pipelines and from one system to another 
based on pressures maintained in the lines. Transwestern owns and 
operates approximately 330,000 horsepower of compression at 18 mainline 
compressor station locations along the mainline and on laterals. 
Compression is utilized to move the gas from receipt points to delivery 
points and to maintain operating pressures. Approximately 75% of 
Transwestern's compression runs on gas, while 25% of the compression is 
driven by electric motors with the power provided by local utilities. 
Gas supply will only flow into a pipeline if the interconnecting 
facility pressure exceeds the receiving pipeline pressure. Similarly, 
gas will flow onto downstream facilities at a delivery point so long as 
the pipeline's pressure remains higher than the downstream operating 
pressure.
Natural gas receipts and deliveries on gas day Feb 2-4, 2011
    Extreme weather reduced supplies delivered into Transwestern. At 
the very same time, shippers requested dramatically increased volumes 
of gas. On the gas day of February 2nd, substantially more gas was 
drawn out of the pipeline at delivery points than was being delivered 
to Transwestern at receipt points. As a result, the pressures on the 
pipeline were lowered and ``line pack'' (the volume of gas in the 
pipeline) was reduced as compared to operating conditions on the prior 
day. I also attach a chart showing hourly receipts, deliveries and 
pressures.
    Despite these operating changes, Transwestern's line did not, at 
any delivery point, fall below contractual minimum operating pressures, 
which are intended to indicate the line pressure required to allow 
shippers to receive required quantities. However, operating conditions 
on the downstream facilities may have limited the ability to take the 
gas away from Transwestern at these contract pressures.
    Transwestern had pipeline capacity to meet shipper delivery 
requests. There were no compression or pipeline outages on the 
Transwestern system that impeded Transwestern's ability to receive or 
deliver gas to shippers in New Mexico. Transwestern's compressor 
stations remained operational with sufficient horsepower to transport 
gas towards the areas of increased demand and maintain required 
pressures. Transwestern operated its compression to maximize the 
pressures in New Mexico given the quantities of gas in its pipeline. 
Transwestern's gas control personnel worked throughout the critical 
periods with their counterparts at New Mexico Gas Company to maximize 
deliveries to New Mexico Gas Company.
    Transwestern declared and issued critical notices of 
underperforming receipt points, where nominated supplies were not 
delivered to Transwestern, and delivered such notices to receipt point 
operators and affected shippers. We also issued Alert Day critical 
notices to all shippers informing shippers of lower line pack, where 
gas volumes in the pipeline were depleted because volumes delivered 
significantly exceeded volumes received by Transwestern. In addition, 
Transwestern gas control personnel maintained continuous communication 
with shippers and operators to keep such parties up to date on line 
pack conditions.
    Transwestern does not have first-hand knowledge of why particular 
supplies were not delivered to its receipt points when scheduled, nor 
do we know whether there were any downstream operating conditions or 
limitations that prevented shippers from taking gas at the delivery 
points at the prevailing line pressures. The extreme cold conditions 
created unique difficulties for many segments of the natural gas 
industry and the industries that support it.
Transwestern's View of the Path Forward
    Transwestern believes that the most productive response to the 
weather events is to allow time and an environment for pipelines and 
their shippers and interconnecting parties to review operating data and 
develop protocols to better address future extreme weather events based 
on this experience.
    Thank you for this opportunity to testify. I look forward to 
answering any questions at this time.

    The Chairman. Thank you very much.
    Ms. Parker, please go right ahead.

 STATEMENT OF JANICE PARKER, VICE PRESIDENT, CUSTOMER SERVICE, 
      EL PASO WESTERN PIPELINE GROUP, COLORADO SPRING, CO

    Ms. Parker. Thank you. Good morning, Chairman Bingaman, 
Senator Udall, Congressmen Heinrich and Lujan. Thank you for 
the opportunity to be here. We really appreciate that.
    As you said earlier I'm Vice President of Customer Service 
and that includes the gas control function for delivery of 
natural gas on our pipeline system of El Paso Natural Gas. We 
appreciate the opportunity to testify and share any information 
we have that could help you as part of your inquiry and also to 
talk about the reliability that we did see in some of our 
infrastructure during this period of time.
    As Ms. Corman said, just like Transwestern, El Paso Natural 
Gas is an interstate pipeline company. We're regulated by the 
Federal Energy Regulatory Commission. Ever since 1993 we have 
been a transportation only pipeline.
    We receive natural gas from the suppliers where our 
customers purchase their supplies. We transport that natural 
gas. Then we deliver it where our customers have instructed us 
to make physical deliveries to them. We neither sell gas to our 
customers as Ms. Corman said.
    Our customers purchase natural gas from third parties. 
Actually where it's put into our system, our pipeline system is 
downstream of both the production, the gathering, the treating 
and the processing of natural gas, so all those activities 
happen before it enters our pipeline. So that it is then 
pipeline quality for delivery to customers like New Mexico Gas. 
It can be delivered to homes. The gas that may also come from 
other pipelines or storage facilities also connect into our 
pipeline system.
    I hope you have in your packet, I did provide a map earlier 
that gives a little schematic of our pipeline and shows you 
where the Permian Basin and Anadarko Basin is. Do you need any 
extra copies?
    The Chairman. I think I have that.
    Ms. Parker. OK. Thank you, sir. I thought that might be 
helpful as we talk about the different supply basins.
    We primarily receive natural gas from 2 supply basins. One 
is called the Permian Basin. It's in West Texas and Southern 
New Mexico and the San Juan Basin which is in Northern New 
Mexico and the very edge of Colorado. Our pipeline then 
transports and delivers the gas to the customers in various 
States including West Texas, New Mexico, Arizona, Nevada, 
California and down to the border with the country of Mexico.
    In New Mexico one of our customers is New Mexico Gas 
Company as well as other municipalities, electric utilities and 
industrials. We have a north pipeline system that comes from 
the San Juan and serves New Mexico Gas near the Albuquerque 
area. Then our south pipeline system picks up gas from the 
Permian and delivers it to New Mexico Gas in the Alamogordo 
areas.
    We own about 2,800 miles of pipe, 20 compressor stations, 
all in New Mexico. Then we have about 110 employees located 
throughout our system in the State of New Mexico to provide 
quick maintenance of our facilities.
    Today I'm going to review the operations as we saw them 
from January 31st to February 4th, just to help you provide 
some information. I think one of the things you'll see as many 
panelists have touched on is that everyone seems to have their 
piece of information and not the whole picture. So I think 
these inquiries that are coming up will help us maybe provide 
more comprehensive service.
    On the night of January 31st, temperatures were predicted 
to be very cold. We packed up our pipeline. As Ms. Corman said, 
line pack is basically the gas you already have in your 
pipeline system because our responsibilities are to provide 
real time delivery. So as our customers are putting natural gas 
supplies into our pipeline in the San Juan and Permian areas 
our responsibility is to let them go ahead and take it out real 
time or simultaneously even though it takes a day or more for 
that gas supply to move across our pipeline system. So we do it 
with line pack.
    We had a heavy day of demand on February 1st, but 
everything went fine. We packed our system back up the night of 
February 1st for even colder temperatures on February 2nd. 
However early that morning of February 2nd, about 6AM, we 
noticed that we were not getting the supplies from the Permian 
Basin that we expected and that our customers had ordered from 
those suppliers.
    We immediately started making phone calls to those 
suppliers to find out what was going on. Was this a temporary 
shortfall or was it longer shortfall? We, at that point in 
time, is when we learned there were some rolling blackouts 
occurring and some freeze offs and mechanical issues in the 
supply basin. Because of the cold weather, unfortunately, the 
customers were taking out a lot more natural gas than was 
coming into our pipeline system, again that second day. As a 
consequence of that what we saw is starting with the El Paso, 
Texas area and then the Alamogordo, New Mexico area and later 
the Tucson, Arizona area, our line pack and system pressures 
were being depleted at a rate much quicker than it was being 
replaced by the supplies coming into the system.
    On that same morning of February 2nd within a couple of 
hours of or within an hour of finding out that information we 
started putting out notices on our public website about 
conditions on our system, the severity. As things unfolded we 
communicated with customers that way and of course as they 
called us or we called them. Laid out the actions that we 
needed customers to take to make sure that the system was able 
to perform the deliveries of the gas that we had and the 
potential consequences if that did not occur.
    We also proactively listed out our website on the supply 
locations that were not providing the gas that they should 
have. That was twofold.
    One so customers would be aware where we were seeing issues 
of gas not coming into our system.
    Second, so that they could find other locations at which to 
buy natural gas to be delivered to our system.
    We did see customers, you know, try to find additional 
natural gas, but it was not, with the freeze offs in the 
Permian, it was not as available to them as what they were used 
to in the past. We did see market demand continue to increase. 
So supply continued to go down. Market demand continued to go 
up.
    One thing I can say that we were able to do in addition to 
providing the line pack in our system to hold up deliveries at 
least on February 2nd is that we were able to offset some of 
the lack of supply through our Washington Ranch storage 
facility. It's located near Carlsbad, New Mexico. It operated 
very well during this cold period. We were able to withdraw at 
the maximum rate during the whole period of time. Unfortunately 
it was not enough to offset the total supply deficiency that we 
were seeing in the production areas.
    By the afternoon of February 2nd, as you can see, things 
deteriorated pretty quickly on our south system with the 
Permian supply not coming in at the rate customers needed. 
Basically we saw pressures on our south system, which I mention 
again, serves the Alamogordo area of New Mexico, start to fall. 
So right after lunch we were starting to see pressure problems 
in El Paso.
    Then that progressed across the system. By the morning of 
February the 3rd which was a Thursday, we were below our 
typical operating pressures at all locations on our south 
system. There were supply freeze offs in the San Juan basin 
that we experienced from February 1 to February 2. But after 
that it stabilized and our pressures on our north system that 
serve the Albuquerque area did stabilize slightly lower than 
what customers were used to, but above the contract pressure 
was.
    Unfortunately the pressures on our south system, our 
customers depend on a certain pressure to then operate their 
facilities or distribute natural gas to the far ends of their 
system. So that lower pressure did impact their ability to 
fully distribute the gas that they received. We finally started 
seeing recovery during the day, late in the afternoon of 
February 3rd, that Thursday. Customers were able to start 
finding some additional gas supplies to help and demand was 
starting to lessen just a little bit in some areas of the 
system.
    We were back to normal operating pressures to New Mexico 
Gas the afternoon of February 3rd. They could then start their 
re-light strategy and process. By midday of February 4th, which 
was Friday of that week, pressures were back to normal 
everywhere on our pipeline system.
    The main things I'd like to point out on your question of 
reliable infrastructure that did work well on our system is we 
did re-deliver all of the natural gas supplies that our 
customer's suppliers put into our pipeline system, plus almost 
another 20 percent that we were able to deliver through our 
line pack and our storage facility. However it was still not 
quite enough to keep the pressures up on the pipeline without 
sufficient gas coming in to replace those deliveries.
    We did lose some power from some of our local utilities at 
some of our compressor stations. But we immediately put staff 
out at each critical compressor station 24 hours a day during 
this period. We had 2 shifts going at all times to make sure we 
could overcome any cold weather issues. We had backup 
generators at some of the critical facilities and we were able 
to maintain service through those compressor stations to move 
what gas we did have available on the system.
    We were in constant communication with our customers. I 
will tell you that New Mexico Gas, in particular, was very 
proactive in their outreach to us. As we were all seeing the 
pressure and supply issues on the system they gave us advice on 
where to best deliver natural gas to their north system so that 
they could effectively, you know, maximize whatever gas supply 
was coming to them. We appreciated that opportunity to work 
closely with them.
    To conclude basically what we think the State of New Mexico 
experienced at that first week of February was a highly 
unusual, but widespread winter weather event. It involved both 
temporary natural gas supply shortages from the cold weather 
and extremely high demand also due to the cold weather. That 
imbalance basically meant that we received not enough gas into 
our pipeline to satisfy the demand going out of the pipeline.
    I will commit to you that although the natural gas supply 
function is not our role or something we can control. We're 
very committed in working closely with our customers to 
evaluate the system performances and to improve the reliability 
to the more distant part of their systems in any way that we 
can assist.
    Appreciate the opportunity to testify. I look forward to 
answering any questions you may have at the moment.
    [The prepared statement of Ms. Parker follows:]

Prepared Statement of Janice Parker, Vice President, Customer Service, 
          El Paso Western Pipeline Group, Colorado Spring, CO
    Good Morning, Chairman Bingaman. My name is Janice Parker, and I am 
the Vice President of Customer Service for El Paso Natural Gas Company 
(EPNG). Thank you for the opportunity to testify today before the 
Senate Energy and Natural Resources Committee regarding the recent 
natural gas service disruptions in New Mexico and the reliability of 
regional energy infrastructure as it relates to El Paso Natural Gas 
Company's pipeline system.
    EPNG is an interstate natural gas pipeline company regulated by the 
Federal Energy Regulatory Commission. As an interstate natural gas 
pipeline company, our role, since 1993, is to receive, transport and 
deliver to our customers the natural gas supplies that they purchase 
from third parties. We do not sell natural gas to our customers. 
Instead, our customers purchase natural gas from third parties who then 
cause the natural gas supplies to be delivered into our pipeline system 
at a variety of locations. All of these locations where we receive gas 
from our customers' suppliers are after the gas has been produced, 
gathered, treated, and processed by other companies. The gas may also 
come from other pipelines or storage facilities.
    Our pipeline system primarily receives gas that our customers 
purchase from the Permian Basin in West Texas and Southern New Mexico, 
and the San Juan Basin in Northern New Mexico and Colorado. Our 
pipeline then transports and delivers the gas to our customers located 
in West Texas, New Mexico, Arizona, Nevada, California and at the U.S. 
border with Mexico. In New Mexico, one of our customers is New Mexico 
Gas Company, along with other municipalities, electric utilities and 
industrials. EPNG has a north pipeline system with delivery locations 
to New Mexico Gas in the Albuquerque area and a south pipeline system 
with delivery locations to New Mexico Gas in the Alamogordo area. In 
New Mexico, EPNG owns and operates approximately 2,800 miles of 
pipelines and 20 compressor stations, and we have over 110 employees 
who maintain our facilities in New Mexico.
    Today, I am here to testify about our pipeline operations from 
January 31-February 4, 2011:

   On January 31, temperatures were cold across the EPNG system 
        and the demand for natural gas was growing. Colder temperatures 
        were predicted for the next couple of days and on the night of 
        January 31, we made sure our pipeline was packed with natural 
        gas for a heavy morning demand. EPNG keeps gas in the pipeline 
        (``linepack'') to allow us to deliver gas to our customers on a 
        real-time basis while the customers' suppliers put their 
        natural gas into the system to replace the linepack.
   Early on the morning of February 2, we saw that the natural 
        gas our customers had arranged for delivery into our pipeline 
        from the Permian Basin was not materializing. Later that 
        morning we found out that this lack of supply was due to 
        problems at third party processing plants and well freeze-offs 
        in the production area. Because of the cold weather, however, 
        customers continued to take deliveries of significantly more 
        volumes of natural gas from EPNG's system than was being 
        delivered into our pipeline by their suppliers. As a 
        consequence, our linepack on the south system serving cities 
        such as El Paso, Texas, Alamogordo, New Mexico, and Tucson, 
        Arizona, was being depleted at a rapid rate and was not being 
        replaced.
   On February 2, EPNG issued operational notices to our 
        customers at 7:24 a.m. Mountain Time (MT), 9:31 a.m. MT, 10:07 
        a.m. MT, 10:20 a.m. MT, and then at 11:51 a.m. MT as conditions 
        worsened. The Notices laid out the severity of the situation, 
        provided action items that customers should take, and potential 
        consequences if customers continued to take more gas off our 
        system than was delivered on their behalf. We also posted a 
        list of all third-party supply locations that were delivering 
        insufficient gas into our system, so that our customers could 
        try to find other locations with natural gas available for them 
        to purchase. Market demand for natural gas continued to 
        increase.
   To offset the lack of supply, EPNG was operating its 
        Washington Ranch storage facility near Carlsbad, New Mexico, on 
        its south system to withdraw as much gas as we could from the 
        storage field. This facility performed well during the outage 
        and was on maximum withdrawal. The gas withdrawn from our 
        storage field helped to replace some, but not all, of the 
        produced gas that was not being delivered to our pipeline. We 
        also used the available linepack to support deliveries on 
        February 2.
   By the afternoon of February 2, the lack of sufficient 
        supply to meet the high level of market demand for natural gas 
        on the EPNG south system caused the pressure in our south 
        system to start falling. Customers continued to try to purchase 
        gas, but the processing plant outages and well freeze-offs in 
        the Permian Basin continued to limit the availability of supply 
        to meet the market demand on the south system. There were also 
        some supply freeze-offs in the San Juan Basin from February 1 
        to February 2 but the pipeline pressures on our north system 
        serving the Albuquerque area did not experience any significant 
        change.
   By the morning of February 3, pressures on our south system 
        were lower than normal in most locations. There were some 
        locations where our customers needed a specific pressure to 
        allow them to deliver the natural gas to the far ends of their 
        systems.
   EPNG did not start seeing recovery until late in the day of 
        February 3 when customers were able to locate some additional 
        supply at pipeline interconnects and demand started to lessen. 
        Normal operating pressures to New Mexico Gas in the Alamogordo 
        area returned the afternoon of February 3 which allowed them to 
        start their relight strategy. By mid-day February 4, pressures 
        were back to normal everywhere on the EPNG system.

    Specific to the question of reliable infrastructure, I would like 
to point out the following highlights:

   EPNG redelivered all of the natural gas supplies that its 
        customers purchased that were received into our pipeline system 
        during this event. In fact, through the use of our linepack and 
        our Washington Ranch storage facility, we were able to deliver 
        significantly more gas than we took into our system from third-
        party suppliers. Available pipeline capacity on EPNG's system 
        was not an issue.
   While we lost power supplied by our local utility at some 
        compressor stations for a short time, we were able to restore 
        operations at the critical units through back-up generators and 
        the expertise of our maintenance and reliability team. We did 
        experience issues caused by the cold weather but we staffed the 
        critical compressor stations 24 hours per day during this event 
        to ensure that the units continued to run as needed.
   We were in constant communication with our customers. New 
        Mexico Gas, in particular, was very proactive in its outreach 
        to us to ensure that the locations where we delivered their gas 
        were the best locations for them operationally.

    To conclude, what New Mexico experienced in the first week of 
February 2011, was a highly unusual, weather-driven event involving 
both natural gas supply shortages and extremely high natural gas 
demand. That significant supply-demand imbalance resulted in too little 
natural gas being delivered into our system and too much gas being 
taken out. While the natural gas supply function is not within our 
control, we are very committed to working closely with our customers to 
evaluate system performance and to improve reliability to the more 
distant parts of their systems.
    Thank you for opportunity to testify and I look forward to 
answering any questions.

    The Chairman. Thank you very much.
    Mr. John Dumas, who is Director of Wholesale Market 
Operations with ERCOT, the Electric Reliability Council of 
Texas. Thank you for being here.

     STATEMENT OF JOHN DUMAS, DIRECTOR OF WHOLESALE MARKET 
 OPERATIONS, ELECTRIC RELIABILITY COUNCIL OF TEXAS, TAYLOR, TX

    Mr. Dumas. Thank you for allowing me to testify, Senator 
Bingaman and Senator Udall, Congressmen. I have prepared a 
short presentation I'd like to go over with you that covers the 
emergency event that occurred in ERCOT. I have extra copies if 
anyone needs a copy.
    The Chairman. Alright, does everyone have a copy of this? 
OK, go right ahead.
    Mr. Dumas. ERCOT is an independent or a single interconnect 
transmission grid that covers about 85 percent of the load in 
the State of Texas. There are areas in East Texas that are not 
part of ERCOT. There's areas in the panhandle and El Paso that 
is not part of ERCOT. We are connected through DC ties in the 
East region, top right hand corner of the State in the north 
and we do have some DC ties with Mexico as well.
    A couple of points to note on this graph. Our winter peak 
was 57,282 megawatts. That was experienced on February 10th, 
approximately 1 week after the rolling blackouts that we 
experienced on February the 2nd. We set a summer peak in August 
23rd of last year of 65,776 megawatts.
    As it was mentioned earlier this was a very extreme cold 
weather event. These were some of the headlines that were in 
the newspapers leading up to the event. Major winter storm 
expected. Very cold temperatures were expected.
    We go through a process whenever we have winter weather 
approaching. We take a look at the transmission outages, the 
planned outages that we have in place. To the extent that we 
can cancel those transmission outages and put the grid as many 
lines in service as possible to maintain the expected high 
loads during that period. We do that.
    We had ten 345 KV lines that were put back in service. 
2,738 KV lines that were put back in service. 345 is the 
highest KV level that we have in ERCOT. We also put back in 
service some transformers. So we were preparing January 28th 
through the 31st for higher loads due to this cold weather.
    Then on January 31st leading into February the 2nd, rolling 
blackout event, we ordered online some of our longer lead time 
generation. We have a unit there that has a longer lead time so 
we ordered it online. We ask it to be online and available on 
February 1st.
    Then we had a unit that can burn oil. We asked it to start 
burning oil. This is a unit that is in the Dallas region.
    This was not, for ERCOT, this was not a gas supply issue to 
the power plant. So I'm going to talk about the number of power 
plants that tripped off due to the severe cold weather in a 
minute. But this was not due to shortage of gas supply in the 
ERCOT system.
    There were some isolated areas. Lake Hubbard is one area 
that does have isolated issues with getting gas. But we did 
have that plant on 100 percent oil.
    We issued operating condition notices that as the cold 
weather was approaching to notify the transmission companies 
and the generating companies that weather was expected to be 
very, very cold. That the metropolitan areas would be affected 
as well and starting around February 1st at 9AM. As we 
progressed through that period on February 1st, we did have a 
day ahead market in which people come and schedule and plan 
generation to be online. They also have the opportunity as 
loads to buy supplies bilaterally so that they are not 
dependent upon the spot market prices. They're able to hedge 
themselves. We did have a lot of our loads that were able to do 
that.
    But we also have reliability tools. We have a reliability 
unit commitment program that we are able to start any available 
generation through essentially it's command and control. We're 
able to start those units up and are able to move on. We 
started 13 generators in preparation for the cold weather.
    As you can see on the next slide a couple lines to note. 
The expected or the planned committed generation that we had 
available going into--and this is a view from midnight February 
the 1st going into the cold weather event on February the 2nd. 
You can see that we had approximately 63,000 megawatts of 
generation that was planned to be online and generating to 
serve approximately forecasted load of 57,000 megawatts of 
load. So we had enough generation planned to cover what we 
expected the peak load to be on that day.
    As we move through midnight the next graph, the red line 
shows the planned megawatts that are adjusted due to unit 
failures or unit trips. So you can see as we progress from 
midnight through the morning hours that there were a number of 
units that came off line. Throughout the day there was 
basically 82 units that either tripped off line or failed to 
start. So our planned generation which is the blue line was 
adjusted due to those outages by the red line. There were 
approximately 8,000 megawatts of generation that was 
unexpectedly off line simultaneously.
    The next graph is a plot of our frequency in ERCOT. Because 
we are a single interconnect. This frequency represents the 
frequency that was observed across all of ERCOT.
    You can see that at 5:20 in the morning we had responsive 
reserves that we were able to utilize and fully deploy. Those 
load resources that are providing that responsive reserve were 
asked to come off line at 5:20. Then at 5:44, approximately 
5:44 in the morning, we began firm load shedding.
    Then we started the rolling blackouts at 5:43, 5:44 in the 
morning. That was the first 1,000 megawatts. Then at 
approximately between 6 and 6:10 we--or 6:04 we issued another 
1,000 megawatts. Then at 6:23AM, February the 2nd, we issued 
another 2,000 megawatts of firm load shedding. This is a total 
of 4,000 megawatts of firm load shedding.
    The way those instructions go out from ERCOT we make a 
hotline call to all of our wires companies, all of our 
transmission companies. We give them a number that we need them 
to shed 1,000 megawatts. They have a percentage based upon 
their service area. They get a percentage of that number. They 
have procedures that they go through and start opening the 
breakers that are pre-designated to start the rolling 
blackouts.
    Now this timeline doesn't show it but beginning at 11:39 in 
the morning we were able to start restoring that firm load. We 
restored it in 500 megawatt blocks. By 1:07 PM that afternoon 
we had completely restored, we'd issued the order to completely 
restore the load that we had shed that began the rolling 
blackouts. So at that point, at 1:07 PM on February the 2nd, we 
had completed the rolling blackouts and had restored the firm 
load. So it was approximately 7 1/2 hours.
    The next slide gives you an indication of where the 
generation that we lost was located in the State. As you can 
see it was a widespread event. It wasn't isolated to just North 
Texas or down in the Houston area or the West Texas area.
    The generation that we lost, we lost several large coal 
plants. We lost gas. Every fuel type with the exception of 
nuclear was affected. Our nuclear generation was not affected 
on this day.
    There was a lot of interagency cooperation that we 
experienced during this time of the event in the cold weather. 
The Public Utilities Commission which governs us and the power 
industry worked very closely with the railroad commission and 
staff. They were cooperating looking for any issues with the 
natural gas. They were, like I said earlier, there were a 
couple of areas where they worked to try to get some more gas 
for units in those areas.
    Also our Public Utilities Commission and the Texas 
Commission on Environmental Quality worked together to develop 
and encourage any additional generation that possibly was 
limited due to emissions. The TCEQ was able to allow those 
generators to produce more power if necessary due to 
enforcement. They basically relaxed some of the enforcement 
during that period to get more power from those generators.
    We're continuing to review the actions leading up to the 
event and the handling of the event itself. We've spoken with 
the FERC staff. They're opening up an inquiry.
    We're working very closely with the independent market 
monitor who is reviewing the information available in the 
market and looking at how generators were operating. Also the 
Texas Regional Entity which is our NERC Regional Entity is 
also. We've also provided information to that entity as well. 
We're actively participating with the generators looking at 
weatherization and those particular issues.
    We're also reviewing our communication policies. This is 
primarily in an effort to get the word out to the public as 
soon as possible of what's going on, how much load is being 
curtailed and allow the first responders from the fire 
department/police department and agencies like that to respond 
as quickly as possible. We're setting up internal phone banks 
to be able to answer questions from these agencies on exactly 
what the situation is. We will be looking at working with our 
transmission providers. Looking at if there's any opportunities 
to use some of the advanced meters that we've deployed in Texas 
and how that possibly could be done during this event as well.
    There are, I guess, a number of questions that have come up 
about which customers are on those load shedding circuits. The 
wires companies designed those load shedding plans to avoid 
what are considered critical customers. There are some 
guidelines that are at the PEC that identify, you know, nursing 
homes, hospitals, things of that nature that would be 
considered critical care customers.
    Gas compressing stations are not on that critical list at 
the moment. I think that is something that will be reviewed by 
our agency, State agencies, as we go through evaluating lessons 
learned and what could possibly be improved. I don't know the 
history of that plan when it was first developed. I think at 
the time possibly a lot of your gas compressions were not 
electric they were utilized more from a gas perspective, but 
that's an area I'm not familiar with. I'm more familiar with 
the power system and the power grid.
    Looking forward to your questions. Thank you for the 
opportunity----
    [The prepared statement of Mr. Dumas follows:]

    Prepared Statement of John Dumas, Director of Wholesale Market 
     Operations, Electric Reliability Council of Texas, Taylor, TX
    My name is John Dumas. I am Director of Wholesale Market Operations 
at the Electric Reliability Council of Texas, Inc. (ERCOT). On behalf 
of ERCOT, I have been asked to describe the grid emergency events 
affecting the ERCOT system on February 2, 2011. ERCOT appreciates the 
opportunity to address the Committee as it reviews issues regarding 
system reliability.
    On February 2, 2011, ERCOT experienced outages across the state of 
approximately 82 generating units representing more than 8,000 MW of 
generation. This included generating units that were online that 
tripped offline and units that unsuccessfully attempted to come online.
    In many cases, the extremely cold ambient temperatures combined 
with high winds causing problems with plant control systems such as 
plant transmitters, transducers, or valves. Many of the outaged 
generating units returned to service in time for the next morning's 
peak. In addition, ERCOT deployed other emergency tools at its disposal 
as grid operator, including responsive reserves and emergency 
interruptible load service. Nevertheless, ERCOT was required to order 
rolling outages throughout its region to address the situation.
    During the morning and afternoon of February 2, ERCOT issued 
appeals for energy conservation. ERCOT also provided instructions to 
restore firm load as generating capacity became available and the loads 
moderated. By the early afternoon, ERCOT had recalled all curtailed 
firm load. To ensure it could maintain system stability, ERCOT remained 
on alert due to freezing temperatures that continued throughout Texas 
into February 3-4, 2011.
    Due to the cold weather, ERCOT set a new winter peak record of 
56,493 MW at 7:15 P.M. on February 2, 2011. ERCOT again set a new 
winter peak the next week: the peak on February 10, 2011 hit 57,282 MW. 
Notably, ERCOT set a new peak record of 65,776 MW in the summer of 
2010.
    On February 3, 2011, ERCOT experienced significant instability in 
the electrical system in the South Texas region. Because several 
generating units at a combined cycle facility tripped off line in the 
South Texas region, low voltage conditions resulted in rolling outages 
in communities in South Texas. South Texas transmission operators 
managed the situation with controlled rotating outages until they were 
able to retain balanced load and generation by the early morning hours 
of February 4, 2011.
    The ERCOT region experienced another freezing weather event during 
the week of February 7, 2011, but operations on the ERCOT system were 
normal.
    ERCOT has expressed its appreciation for the sacrifices of Texas 
residents who were without power during the rotating outages, and we 
also appreciate the conservation efforts by consumers during this 
emergency situation as well as load resources in our demand response 
program. We also want to thank the media for their assistance in 
getting information out to the public about the need to conserve.
    I also want to note the support and assistance ERCOT received from 
the transmission providers and generation owners in our region, the 
Public Utility Commission of Texas, the Railroad Commission and the 
Texas Commission on Environmental Quality.
    ERCOT is very proud of the great work by the ERCOT operators in 
handling what could have been a disastrous situation for the entire 
state if they had not taken the quick action necessary to preserve the 
security of the grid.

    The Chairman. Thank you very much for being here. Thank you 
for your testimony.
    Why don't we go on to Mr. Cauley, who is President of NERC 
out of Washington, DC, President and Chief Executive Officer? 
Thank you for being here.

   STATEMENT OF GERRY CAULEY, PRESIDENT AND CHIEF EXECUTIVE 
    OFFICER, NORTH AMERICAN ELECTRIC RELIABILITY CORPORATION

    Mr. Cauley. Morning, Chairman Bingaman, Senator Udall, 
Congressman Lujan and Congressman Heinrich.
    My name is Gerry Cauley and I'm President and CEO of the 
North American Electric Reliability Corporation. I'm a graduate 
of the U.S. Military Academy at West Point and a former officer 
in the U.S. Army Corps of Engineers. I have more than 30 years 
experience in the areas of nuclear and electric power safety 
and reliability including as a lead investigator for the 2003 
Northeast blackout.
    NERC's mission is to ensure the reliability of the bulk 
electric system of North America and to promote reliability 
excellence. The bulk electric system includes generation and 
transmission facilities operated at greater than 100,000 volts 
in contrast to the local distribution of electricity to homes 
and businesses.
    In 2006 NERC was designated as the electric reliability 
organization by the Federal Energy Regulatory Commission in 
accordance with the Energy Policy Act of 2005. NERC's 
reliability standards then became mandatory in mid 2007.
    NERC oversees more than 1,900 organizations that produce or 
delivery bulk power including investor owned utilities, 
Federal, State and municipal utilities, member owned 
cooperatives, independent generators, power marketers and 
regional operators. NERC membership represents diverse 
interests of all reliability stakeholders including large and 
small electricity customers, State regulators and Canada with 
whom we share the North American bulk power grid.
    In early February extreme cold weather conditions across 
multiple States in the Southwest led simultaneously to high 
customer demand for electricity and a significant unexpected 
loss of generation especially in the Texas area. As a result 
operators in Texas issued energy emergency alerts and public 
appeals for the reduction of electricity use and ultimately 
implemented load shedding as a necessary step to maintain 
overall grid reliability. Throughout the event NERC's Situation 
Awareness Team monitored conditions and coordinated with 
representatives from the Federal Energy Regulatory Commission, 
the Department of Energy and the Department of Homeland 
Security.
    In addition to enforcing compliance with our mandatory 
standards NERC has a rigorous program to analyze electric 
system disturbances to determine what happened and root causes 
to uncover lessons learned and to issue relevant findings to 
industry as advisories, recommendations or essential actions.
    On February 7, 2011 NERC announced that we examined the 
bulk electric system performance during the extreme weather 
conditions to determine the adequacy of preparations and 
potential improvements.
    On February 11, we issued a letter providing formal notice 
of our intent to conduct an analysis and notified the 
applicable registered entities to secure and maintain all 
documents and data associated with the event. We plan to 
determine the causes of various generation and transmission 
issues that occurred on the bulk electric system and what steps 
need to be taken to minimize the risk of these scenarios 
occurring in the future. As warranted by our findings, NERC may 
at some point open compliance enforcement proceedings in these 
matters.
    I'm most concerned that the industry has experienced cold 
weather issues in the past. NERC will be evaluating what we can 
do to ensure the institutional memory needed to avoid such 
incidents in the future. For example, in January 2007 there was 
a cold weather event impacting Arizona's Salt River Project. 
Extreme cold weather, loads greater than forecasted and the 
loss of 8 critical generating resources created a shortage.
    In February 2006, Public Service Colorado experienced 
electric generation plant failures due to the combination of 
cold weather, high humidity and other mechanical issues. During 
the event a total of 18 generators tripped off line or were 
capacity limited.
    In January 1994 an Arctic deep freeze hit the Midwest and 
Mid Atlantic States. Utilities faced unusually high demands for 
electricity and cold weather related problems with generators 
and fuel supplies.
    Although it is too early to conclude the causes of the 
events of early February 2011, we need to ensure that our 
electricity generation and delivery equipment are adequately 
winterized to operate dependently when needed.
    We will also be reviewing the impacts of interdependencies 
between the electric system and natural gas supplies and 
pipelines including the extent to which reduced gas supplies 
may have impacted generator availability or the extent to which 
rotating blackouts may have affected gas pipeline compressors. 
Our review will be conducted in close coordination with FERC's 
inquiry into these matters and our results will be made 
available to FERC. FERC's review is much broader and includes 
many areas beyond NERC's jurisdiction as you will hear from Mr. 
McClelland.
    NERC views the cold weather impacts of February 2011 as 
significant. We are acutely aware of the impacts and 
frustrations that occur when the electric system does not 
provide a reliable service to end use customers. I am further 
concerned that these issues are not new. Severe weather has 
happened before and will happen again. We must ensure the 
industry is learning and that institutional knowledge is 
retained.
    Thank you. I look forward to your questions.
    [The prepared statement of Mr. Cauley follows:]

   Prepared Statement of Gerry Cauley, President and Chief Executive 
        Officer, North American Electric Reliability Corporation
    Good morning Chairman Bingaman, fellow panelists and those joining 
us in the audience. My name is Gerry Cauley and I am the President and 
CEO of the North American Electric Reliability Corporation (NERC). I am 
a graduate of the U.S. Military Academy, a former officer in the U.S. 
Army Corps of Engineers, and have more than 30 years experience in the 
bulk power system industry, including service as a lead investigator of 
the August 2003 Northeast blackout and coordinator of the NERC Y2K 
program.
Background
    NERC's mission is to ensure the reliability of the bulk power 
system of North America and promote reliability excellence. NERC was 
founded in 1968 to prevent cascading outages like the one that occurred 
in November 1965 and overall to ensure reliability of the bulk power 
system. The bulk power system is defined as generation and transmission 
of electricity greater than 100kV, in contrast to the distribution of 
electricity to homes and businesses at lower voltages.
    In 2006, NERC was designated the Electric Reliability Organization 
(ERO) by the Federal Energy Regulatory Commission (FERC) in accordance 
with the Energy Policy Act of 2005, and NERC's reliability standards 
were approved by FERC and became mandatory across the bulk power system 
in mid-2007. In carrying out its activities, NERC works with and 
through its regions and stakeholders, which include large and small 
customers and state regulators in addition to investor-owned utilities, 
municipal utilities, co-ops, independent generators, power marketers, 
ISOs and RTOs, and federal entities like TVA, Bonneville and the 
Western Area Power Administration. Equivalent entities from Canada are 
also a part of NERC's stakeholders.
    As part of NERC's mission to ensure the reliability of the bulk 
power system in North America, NERC conducts detailed analyses of 
system disturbances to determine root causes, uncover lessons learned, 
and issue relevant findings as advisories, recommendations and 
essential actions to the industry. Through the analysis by NERC and the 
Regional Entities, possible violations of standards may be revealed. If 
such violations are identified, they are addressed through NERC's 
Compliance Monitoring and Enforcement Program.
    The bulk power system in North America is one of the largest, most 
complex, and most robust systems ever created by man. It provides 
electricity to more than 334 million people, is capable of generating 
more than 830 gigawatts of power, moves that electricity across more 
than 211,000 miles of high voltage transmission lines and represents 
more than $1 trillion in assets. The electricity being used in this 
room right now is being generated and transmitted in real time over a 
complex series of lines and stations from possibly as far away as 
Montana or British Columbia.
    The knowledge that disturbances on the grid can impact operations 
and customers thousands of miles away has influenced the electric 
industry's culture of coordinated planning, operations and protecting 
the bulk power system.
    NERC's event analysis process reviews numerous events that occur on 
the bulk power system. These events can range from loss of a single 
component to loss of large amounts of load or generation. The events 
analysis process provides us with a path to learn from what happened 
with the goal of sharing those lessons with others to prevent it from 
happening again.
    The key ingredients of an effective event analysis program are to:

   Identify what transpired-sequence of events;
   Understand the causes of events;
   Identify and ensure timely implementation of corrective 
        actions;
   Develop and disseminate recommendations and valuable lessons 
        learned to the industry to enhance operational performance and 
        avoid repeat events;
   Develop the capability for integrating risk analysis into 
        the event analysis process; and
   Distribute key results to facilitate enhancements in and 
        support of the various NERC programs and initiatives (e.g., 
        performance metrics, standards, compliance monitoring and 
        enforcement, training and education, etc.)

    As a learning organization, NERC's event analysis serves an 
integral function of providing insight and guidance by identifying and 
disseminating valuable information to users, owners, and operators of 
the bulk power system that enable improved, enhanced and more reliable 
operation. As such, event analysis is one of the pillars of a strong 
ERO.
NERC's February 2011 Inquiry
    Ice, snow, and extreme cold weather severely affected multiple 
regional entities and multiple states in early February which led to 
high customer demand for electricity and the significant unexpected 
loss of generation capacity. As a result, operators issued Energy 
Emergency Alerts (EEA), public appeals for reduction of electricity 
use, and ultimately implemented extensive load shedding to maintain 
grid reliability
    Throughout the event, NERC's situation awareness group, in 
coordination with the Regional Entities and reliability coordinators 
who direct grid operations, received information on the current state 
of reliability and the impact to the bulk power system in the affected 
areas. This information was shared through established communication 
processes with representatives from FERC, the Department of Energy 
(DOE) and the Department of Homeland Security (DHS). On February 7, 
2011, NERC announced it would examine the bulk power system impacts 
from the recent extreme weather conditions to determine the adequacy of 
preparations and potential improvements. On February 11, 2011 NERC 
issued a letter providing formal notice of its intent to conduct an 
Event Analysis on the preparation and performance of the system during 
these cold weather events. As part of this notice, NERC requires 
applicable registered entities impacted by the February event to secure 
and maintain all documents and data associated with the event to 
support the event analysis.
    The NERC inquiry encompasses two efforts to meet both short-term 
and long-term objectives related to the event.
    The first is a formal analysis to identify the causes of the 
various generation and transmission issues that occurred on the bulk 
power system related to the February event, determine what steps need 
to be taken, and communicate lessons learned from the event to minimize 
the risk of these scenarios recurring in the future. The Texas 
Reliability Entity, Inc., and the Western Electricity Coordinating 
Council, along with affected entities and system operators, are already 
working with NERC on analysis of the events. While controlled rotating 
interruptions are deployed by system operators as a means to maintain 
bulk power system reliability by providing adequate levels of operating 
reserves, further review is underway to determine what happened in 
these specific circumstances, and to identify lessons learned and 
improve future operations.
    Secondly, for a longer term outlook, NERC's Reliability Assessment 
and Performance Analysis group will review the projected electric and 
gas interdependencies and vulnerabilities given the shift toward 
greater reliance on natural gas to produce electricity in certain 
areas. This assessment will be a broad look at areas in North America 
where extreme cold weather or loss of a major gas supply could impact 
electricity production, review existing procedures for coordination 
between planners and operators in both industries and input into NERC's 
standards if needed. Building upon NERC's 2010/2011 Winter Reliability 
Assessment, which noted the long-term outage of gas pipelines or import 
paths could lead to the loss of significant amounts of generating 
capacity, NERC will identify the reliability affects of gas/electricity 
interdependencies through multiple scenarios, including extreme cold 
weather scenarios, pipeline interruption, and overall vulnerability 
identification across North America. Further, NERC will develop an 
industry reference guide in coupled workings of the bulk power and 
natural gas systems.
Past cold weather events
    While the depth and pace of the severe cold temperatures were an 
unusual event, cold weather events have occurred before. It is 
important for the NERC analysis to review what was done correctly in 
this event, as well as what can be improved upon so other users, owners 
and operators of the bulk power system facing cold waves in the future 
can learn from the impacts of this event. It is essential to identify 
what changes can be made from a process-perspective to appropriately 
anchor these learnings to preclude similar future events. For examples, 
some past cold weather events include:

   In January 2007, there was a cold weather event impacting 
        Arizona's Salt River Project SRP). The extreme cold weather, 
        loads greater than forecasted, and the loss of eight critical 
        generating resources forced adjacent control areas into a 
        ``capacity limited'' condition. Backup generation failed to 
        start, which exacerbated the situation.
   In February 2006, Public Service Colorado (PSCO) began to 
        experience electric generation plant failures due to the 
        combination of cold weather, high humidity and other mechanical 
        issues. During the event, 18 generators tripped off line or 
        were capacity limited. The controlled load shedding conducted 
        by PSCO involved approximately 100,000 customers for 
        approximately 30 minutes each.
   In 1994, a major cold wave swept across the Midwest and Mid-
        Atlantic states. Utilities were faced with unusually high 
        demands for electricity and cold weather related problems with 
        generators and fuel supplies. Two control areas had to resort 
        to manual curtailment of firm customers resulting in rotating 
        outages to ensure the reliability of the bulk power system. 
        Significant amounts of electricity were transferred to the 
        Midwest and East that were running short of generation 
        capacity.

    Assembly of the basic facts, including load, resources, reserves, 
generator availability, fuel supply and delivery problems, the 
effectiveness of public appeals, curtailment of interruptible loads and 
rotating outages were all reviewed. These issues resulted in 
recommendations and lessons learned. In 1994, use of NERC's Operating 
Criteria and Guidelines, along with industry's own practices and 
procedures were found to contribute positively to the resolution of 
this event.
    This history is not presented as an exact comparison to what 
occurred in February 2011. It is offered to emphasize a number of 
questions that must be answered. We need to understand the unique 
circumstances of the cold weather event that impacted much of New 
Mexico and Texas, and determine why lessons from the past were either 
unable to be applied or were not applied in this event. Were there 
problems with the electric/gas interfaces? Why were coal plants 
affected? Was this an issue solely about winterization of equipment? 
Why was this not addressed? What was the timing? In answering these 
questions, NERC will look at all regions affected by this event to 
identify those steps that may not have been taken, as well as steps 
that were taken to protect the reliability of the bulk power system.
NERC's Events Analysis Process
    Working with teams in each of NERC's eight regions, NERC experts 
have analyzed numerous events. System owners and operators are required 
to report the occurrence of defined bulk power system disturbances and 
unusual occurrences to the applicable Regional Entity and NERC in 
accordance with various NERC and Regional reliability standards and 
other requirements. Each of these standards specifies timeframes within 
which initial and final Event Reports are required. Additional 
reporting requirements may also be required.
    Operators of the system, Regional Entities and NERC need to become 
aware quickly of events and disturbances that take place throughout the 
bulk power system. This `initial impression' information and insight 
needs to be produced and delivered quickly and made available to 
personnel with planning and operations responsibilities across the 
system. This initial information sets forth a workable structure for 
very short-term analyses and reports, which can be followed by more 
intensive studies.
    During the event triage process, NERC's events analysis staff and 
the involved Region(s) collaboratively determined the appropriate level 
of any event analysis that should be conducted. Most single-Region 
analyses are conducted by the Regions or, for less significant events, 
the registered entity with overview by the Region and NERC. Multi-
regional events such as this recent event fall under the direction of 
NERC events analysis.
    The ERO enterprise-wide event analysis program is based on the 
recognition that bulk power system events that occur, or have the 
potential to occur, have varying levels of significance. The manner in 
which system owners and operators and NERC evaluate and process these 
events is intended to reflect the significance of the event or specific 
system conditions germane to the reliability of the bulk power system 
and the circumstances involved.
The role of NERC and its coordination with other organizations
    Numerous organizations have indicated their interest and concern 
over the February 2011 events. As noted, NERC and the Regions review 
these events, and have an established process for the analysis of the 
event and the issuance of lessons learned. Successful event analysis 
relies on effective coordination through which registered entities, 
Regional Entities, and NERC work together to achieve a common goal. The 
process requires clarity, certainty, and consistent adherence to 
reliability principles by bulk power system operators that perform a 
wide array of reliability functions.
    FERC provides oversight and in most cases, closely participates in 
these efforts, including whether aspects of those events constitute 
possible violations of reliability standards. FERC and NERC have 
different areas of responsibility. As the economic regulator, FERC has 
the responsibility for wholesale electric markets and oversight of 
interstate gas transmission as well as oversight of NERC for bulk power 
system reliability. NERC's responsibilities are directly focused on 
analysis of the specific system conditions and their impact to the 
reliability on the bulk power system.
    On February 14, FERC issued an order directing its staff to 
initiate an inquiry into outages and disruptions of service in Texas 
and the Southwest. The FERC order recognized the importance of NERC's 
analysis and also FERC's jurisdiction under the Natural Gas Act and the 
Natural Gas Policy Act. Per FERC's order, FERC's broader inquiry is to 
be coordinated with NERC's efforts, as well as inquiries by affected 
States. We expect the coordination of this process between FERC and 
NERC will be similar to what was used for the 2003 Northeast blackout. 
During that effort, FERC performed an inquiry; while NERC performed 
events analysis and submitted it to FERC for their use as needed. Both 
FERC and NERC share a commitment to ensure the reliability of the bulk 
power system.
Conclusion
    I want to reemphasize that NERC views the cold weather impacts of 
February 2011 as significant. We are acutely aware of the impact and 
frustration that occurs when the electric infrastructure does not 
provide reliable service to end-use customers. While NERC is focused on 
the impacts to the bulk power system, when events such as this occur on 
a multi-state, multi-regional level, it is clear there are numerous 
lessons to be learned. The events of February 2011 give me cause for 
significant concern. These are not new issues. We've had severe weather 
before. We must continue to ensure industry is learning from the past, 
and must not allow institutional knowledge to fade. These issues must 
be kept at the forefront.

    The Chairman. Thank you very much.
    Mr. McClelland, with the Federal Energy Regulatory 
Commission, thank you for being here.

 STATEMENT OF JOSEPH MCCLELLAND, DIRECTOR, OFFICE OF ELECTRIC 
       RELIABILITY, FEDERAL ENERGY REGULATORY COMMISSION

    Mr. McClelland. Mr. Chairman, Senator Udall, Congressman 
Lujan and Congressman Heinrich, thank you for this opportunity 
to appear before you to discuss natural gas service disruptions 
in New Mexico and the large scale disruptions of both electric 
and natural gas services in the broader Southwest region of the 
United States.
    My name is Joe McClelland. I'm the Director of the Office 
of Electric Reliability at the Federal Energy Regulatory 
Commission. I'm accompanied here today by my colleague Jeff 
Wright, Director of the Office of Energy Projects.
    During the first week of February unusually cold weather 
spread across much of the United States. For instance 
temperatures were 20 degrees below normal throughout the 
Southwest. Large parts of Texas experienced sub freezing 
temperatures for 70 consecutive hours.
    Deliveries of natural gas were disrupted in New Mexico, 
Texas and elsewhere in the Southwest, the supply from the San 
Juan and Permian Basins declining by as much as 33 percent. 
Roughly 28,000 customers in New Mexico were without service 
during this period. Approximately 19,000 customers lost 
service, gas service in Arizona. In addition the power system 
in Texas and Arizona experienced a loss or partial loss to as 
many as 82 generating facilities during a period of high demand 
for electricity from customers.
    These outages and disruptions of service affected many 
customers throughout the region. Approximately 1.5 million 
electricity customers experienced an outage during this time. 
When we were at the very early stages of data gathering 
preliminary information from ERCOT indicates that within ERCOT 
as many as 80 generating units tripped, could not start or loss 
partial capability on February 2nd, including several large 
coal fired units totaling approximately 4,800 megawatts. 
Approximately 70 gas fired units totaling 9,200 megawatts and 
an undetermined amount of wind and other sources.
    Outside of ERCOT preliminary reports state that the El Paso 
Electric lost several generating units which coupled with high 
demand required the shedding of load of approximately 50 to 100 
megawatts on several occasions. In total there were 
approximately 350,000 customers out at varying times between 
February 2nd and February 4th. Also on February 2nd, the loss 
of several generating units in Arizona required rolling outages 
affecting 65,000 customers.
    In New Mexico 80 megawatts of generation was lost. Between 
February 3rd and 4th the California Independent System Operator 
had to reduce 1,000 megawatts of generation and initiate public 
appeals for conservation in the Imperial Valley area. Although 
no firm service electric customers were interrupted. It would 
be premature at this time to make definitive statements about 
the causes of the outages and disruptions in service. Although 
the winterization of the generators, generation capacity and 
fuel procurement and a gas pipeline scheduling arrangements are 
certainly subjects of interest.
    On February 14, 2011 the Commission initiated an inquiry 
into these matters. The inquiry has 2 objectives.
    First, the Commission seeks to identify the causes of the 
disruptions.
    Second, it seeks to identify any appropriate actions for 
preventing a recurrence of these disruptions.
    The Commission's priority at the moment is to gather the 
relevant facts, identify the problems and fix them to the 
extent possible. Under section 215 of the Federal Power Act the 
Commission has oversight authority over the reliability of a 
bulk power system through mandatory and forceful standards 
developed by the Electric Reliability Organization which is the 
North American Electric Reliability Corporation. As the ERO, 
NERC independently initiated its own analysis of the problems 
in the bulk power system relating to these events. The 
Commission has broad responsibilities and authorities under the 
Natural Gas Act and the Natural Gas Policy Act as well as 
jurisdiction over the reliability of the bulk power system.
    We plan to ascertain how disruptions or reductions in 
service by natural gas pipelines as well as interruptions to 
the bulk power system under our jurisdiction occurred. The task 
force has invited NERC and its regional entities from Western 
Electricity Coordinating Council and the Texas Regional entity 
to participate in our efforts and hopes to be able to call upon 
all of their resources during this inquiry. Similarly we 
understand that the affected States have initiated or may 
initiate their own inquiries.
    The Commission recognizes that some of the natural gas 
service disruptions and electric outages affected facilities 
that are not within the Commission's jurisdiction. That is 
disturbances on intrastate pipelines performing purely 
intrastate service on natural gas or electric distribution 
facilities which are within the State's authority. The 
Commission staff task force will be most effective if it can 
coordinate our efforts closely with the States and their 
regulatory authorities and exchange relevant information. This 
will enable all interested authorities to timely and 
efficiently determine what went wrong and how to prevent a 
returns.
    In view of the wide ranging circumstances to the 
disruptions to the bulk power system and to the provision of 
natural gas described above, the Commission will designate a 
staff task force to conduct this inquiry. A staff task force 
has been directed to report its findings and recommendations to 
the Commission as soon as practical. Once the Commission 
receives this report the Commission will determine the 
appropriate course of action to pursue.
    Although I do not have enough information to state what 
actions are recurrent to these problems today this will be a 
primary objective of our initiative. Thank you again for the 
opportunity to testify today. I would be happy to answer any 
questions you might have.
    [The prepared statement of Mr. McClelland follows:]

 Prepared Statement of Joseph McClelland, Director, Office of Electric 
           Reliability, Federal Energy Regulatory Commission
    Mr. Chairman and Members of the Committee:
    Thank you for this opportunity to appear before you to discuss 
natural gas service disruptions in New Mexico and the large-scale 
disruptions of both electric and natural gas services in the broader 
southwest region of the United States. My name is Joseph McClelland. I 
am the Director of the Office of Electric Reliability (OER) of the 
Federal Energy Regulatory Commission (FERC or Commission).
    During the first week of February, unusually cold weather spread 
across much of the United States. For instance, temperatures were 20 
degrees below normal throughout the Southwest, and large parts of Texas 
experienced sub-freezing temperatures for 70 consecutive hours. 
Deliveries of natural gas were disrupted in New Mexico, Texas, and 
elsewhere in the Southwest, with supply from the San Juan and Permian 
basins declining by as much as 33 percent. Roughly 32,000 gas customers 
in New Mexico were without service during this period. Approximately 
19,000 gas customers lost gas service in Arizona.
    In addition, the power system in Texas and Arizona experienced a 
loss or partial loss of as many as 80 generating facilities during a 
period of high demand for electricity from customers. These outages and 
disruptions of service affected many customers throughout the region. 
Approximately 1.5 million electricity customers experienced an outage 
during this time.
    While we are at the very early stages of data gathering, 
preliminary information from ERCOT indicates that within ERCOT as many 
as 80 generating units tripped, could not start, or lost partial 
capability on February 2, including several large coal fired units 
totaling approximately 4,800 MW, approximately 70 gas fired units 
totaling 9,200 MW, and an undetermined amount of wind and other 
sources.
    Outside of ERCOT, preliminary reports state that El Paso Electric 
lost several generating units which, coupled with high demand, required 
the shedding of between 50-100 MW of firm load on several occasions. In 
total, there were approximately 350,000 customers out at varying times 
between February 2 and 4.
    Also, on February 2, the loss of several generating units in 
Arizona required rolling outages affecting 65,000 customers. In New 
Mexico, 80 MW of generation was lost. Between February 3 and 4, the 
California Independent System Operator had to reduce 1,000 MW of 
generation and initiate public appeals for conservation in the Imperial 
Valley area, although no firm-service electric customers were 
interrupted.
    It would be premature at this time to make definitive statements 
about the causes of the outages and disruptions in service although the 
winterization of the generators, generation capacity and fuel 
procurement, and the gas pipeline scheduling arrangements are certainly 
subjects of interest.
    On February 14, 2011, the Commission initiated an inquiry into 
these matters. The inquiry has two objectives. First, the Commission 
seeks to identify the causes of the disruptions. Second, it seeks to 
identify any appropriate actions for preventing a recurrence of these 
disruptions. The Commission's priority at the moment is to gather the 
relevant facts, identify the problems and fix them, to the extent 
possible.
    Under section 215 of the Federal Power Act, the Commission has 
oversight authority over the reliability of the Bulk-Power System 
through mandatory and enforceable reliability standards developed by 
the Electric Reliability Organization (ERO), the North American 
Electric Reliability Corporation (NERC). As the ERO, NERC independently 
initiated its own analysis of the problems on the Bulk-Power System 
relating to these events. The Commission has broad responsibilities and 
authorities under the Natural Gas Act and the Natural Gas Policy Act, 
as well as jurisdiction over effects on the reliability of the Bulk-
Power System. We plan to ascertain how disruptions or reductions in 
service by natural gas pipelines as well as interruptions to the Bulk-
Power System under our jurisdiction occurred. The task force has 
invited NERC and its regional entities, the Western Electricity 
Coordinating Council and the Texas Regional Entity to participate in 
our efforts and hopes to be able to call upon all of their resources in 
our efforts.
    Similarly, we understand that the affected states have initiated or 
may initiate their own inquiries. The Commission recognizes that some 
of the natural gas service disruptions and electric outages affected 
facilities that are not within the Commission's jurisdiction, i.e., 
disturbances on intrastate pipelines performing purely intrastate 
service or on natural gas or electric distribution facilities, which 
are within the states' authority. The Commission's staff task force 
will be most effective if it can coordinate our efforts closely with 
the states and their regulatory authorities, and exchange relevant 
information. This will enable all interested authorities to timely and 
efficiently determine what went wrong and how to prevent a recurrence.
    In view of the wide-ranging circumstances of the disruptions to the 
Bulk-Power System and to the provision of natural gas described above, 
the Commission will designate a staff task force to conduct this 
inquiry. This staff task force has been directed to report its findings 
and recommendations to the Commission as soon as practicable.
    Once the Commission receives this report, the Commission will 
determine the appropriate course of action(s) to pursue. Today, 
however, I do not have enough information to state what actions would 
help prevent a recurrence of these problems.
    Thank you again for the opportunity to testify today. I would be 
happy to answer any questions you may have.

    The Chairman. Thank you very much. Thank you all for your 
testimony. Let me start with a few questions and then refer to 
Senator Udall for his questions.
    One obvious question that is embedded in all that went on 
here is the whole issue of to what extent did the failure of 
gas supply here in New Mexico result from a loss of electrical 
power in Texas?
    To what extent did the loss of electrical power in Texas 
result from a loss of gas production, I guess, in Texas or New 
Mexico, in the San Juan Basin or the Permian Basin or anywhere 
else? I don't know, Mr. Dumas, you might be the right person to 
ask that question to.
    As you understand the situation was--were the rolling 
blackouts that you folks ordered in Texas a cause, approximate 
cause, of the loss of natural gas here in New Mexico?
    Mr. Dumas. I do not know the answer to that question. We 
ordered firm load shedding that goes out to the wires companies 
who have certain breakers that they open and certain loads that 
they put on the rolling blackout. It's usually the rolling 
blackouts are typically 20 to 30 minutes in length when they 
rotate through your breakers.
    I don't know what circuits are on those designated circuits 
that they trip. To your earlier--well and I will say that the 
outages that we ordered began at 5:44AM. We were able to end 
those rolling blackouts at 1:07PM. So that was the timeframe.
    I'm not familiar with the outages in New Mexico so I don't 
know how those timeframes correspond, so.
    The Chairman. So am I right that you, in the 7 and a half 
hours that you had these rolling blackouts going in Texas, the 
gas compressor stations that were dependent upon electricity 
were in fact experiencing those blackouts?
    Mr. Dumas. It is possible. I'm not familiar with the 
Permian Basin area. I do know that we did receive some calls in 
the Dallas area that there some compressors that had went off 
and on call was working to restore those in that area. But I'm 
not familiar with the Permian Basin area.
    The Chairman. OK, let me ask the folks here representing 
the 2 pipeline companies that are involved here. As I 
understand what I think I heard from both of you. The 
compressors that you folks own and operate were not in fact 
impacted by the rolling blackouts.
    Was that what you said or do you not know that?
    Ms. Corman. No, that is correct, Chairman and Senator. We 
did not experience any power outages on our compressors on the 
Transwestern pipeline system. The folks that put the supply gas 
into the pipeline, the processing plants, interconnected 
facilities, they may have had power outages that influenced 
their ability to put gas into the system. But we do not have 
firsthand information about that.
    The Chairman. Let me ask Mr. Dumas, just--and then I'll get 
to El Paso. But I was asking about compressor stations. How 
about processing plants? They're also subject to the blackouts 
as you understand it?
    They're not on any priority for avoiding blackouts in 
Texas, is that right?
    Mr. Dumas. I'm not aware of any priority there. The 
priorities and like I said earlier, there's some guidelines 
that are part of the Public Utilities Commission. Those 
guidelines define critical circuits which tend to be more the 
hospitals and the nursing homes and those types of circuits.
    We reviewed that and gas compressors are not on that list 
of critical circuits. So I think that's----
    The Chairman. Gas compressors are not.
    Mr. Dumas. Right.
    The Chairman. Processing plants are not either as far as 
you know.
    Mr. Dumas. Far as I know they're not.
    The Chairman. Yes. Let me ask about El Paso. Did you 
experience any interruption of electrical service on any of the 
facilities that you operate?
    Ms. Parker. Mr. Chairman and Senator Udall, we did on a 
handful of units. As far as we can tell and we're still 
investigating it, it wasn't a result of any of the rolling 
blackouts that the ERCOT organization initiated. We did have 
some interruptions from El Pas Electric, EXCEL Energy and a 
company called Continental.
    The Chairman. These were interruptions to the power at your 
compression stations?
    Ms. Parker. Yes, sir.
    All of our compressor stations are gas driven compressor 
stations. But you have electricity to auxiliary equipment like 
cooling fans or controls. At many of our compressor stations we 
have gas fired back up generators in case things go down.
    Unfortunately at one of our stations I know of our 
generator was damaged through surges in the electricity because 
the electricity was going off and on for a period of 2 days. 
However I'll say with respect to our service, the outages were 
fairly limited in nature and things that we could overcome 
through our backup generators. What we primarily saw, and this 
is anecdotal information we got through telephone calls to the 
processing plants is that they were the primary parties 
affected early in the morning of the second, either by El Paso 
Electric's outages or the rolling blackouts.
    We can't tell and don't have any firsthand knowledge which 
of those were the electricity issues that then allowed freeze 
ups to happen or it could have been just cold weather 
mechanical issues.
    The Chairman. But you believe that the interruption of 
supply that you described for us earlier was gas coming from 
the processing units. The processing units were affected by the 
loss of electrical power. Is that what I'm understanding?
    Ms. Parker. Yes, Mr. Chairman. That's what we understood 
from the processing plants we talked to.
    The Chairman. So you think there was a connection between 
the loss of electrical power at the processing units and 
processing plants and their ability to get gas to you for 
delivery to New Mexico?
    Ms. Parker. Yes, sir, Mr. Chairman, I do. Again that's 
based on the plant communication, verbal communications to us, 
not any analysis or in depth information that we have. 
Unfortunately what happened and nobody knew the extent of 
either the loss of electrical power to these processing plants, 
when it was going to be restored, if it had been restored in a 
few hours I think, you know, things would have been OK.
    But unfortunately with the cold temperatures and the gas 
just sitting in the line then they started becoming ice plugs 
in the gathering lines. So when some of the processing plants 
tried to come back up and we contacted them every few hours to 
see what the status was of some of the bigger ones. 
Unfortunately some of them couldn't come up for as much as 2 
weeks because of damage they had. Some of them----
    The Chairman. So they just came up in the last few days 
you're describing?
    Ms. Parker. A couple of them did, yes, sir. Some of them 
were ready to come up within a day or so, but then the gas 
freeze offs were worse and they didn't have any gas to put 
through the plant. So it was a variety of combinations that we 
heard of in our conversations with those plant operators.
    The Chairman. Let me ask Transwestern. Did you have any 
knowledge of this issue of some of the supply that you were 
expecting or normally would get into your system was also 
impeded by the fact that these processing plants didn't have 
electrical power?
    Ms. Corman. Yes.
    Similarly to what El Paso stated we have notes and--of 
records of telephone conversations and what not where we were 
discussing with the processing plant why the gas wasn't coming 
into the system. They would report that they had power 
problems. But also they had problems with their equipment given 
the cold temperatures.
    I think the only other point that I would make is that on 
the day of February 2nd, the supply shortfalls on our system 
about half of it was in San Juan. Half of it was in the Permian 
Basin, so certainly not all of the supply shortage related to 
Texas power outages and weather conditions in Texas. Quite a 
bit of it also related to weather conditions in the San Juan 
Basin.
    The Chairman. OK. The shortages or the supply disruption in 
the San Juan Basin was not a result of any electrical failure 
but was a result of just general cold weather? The processing 
plants were not, are not equipped to handle cold weather.
    Is that what you're saying?
    Ms. Corman. I don't know the answer to that, Mr. Chairman. 
I would only be speculating.
    The Chairman. OK. Let me ask any of our other witnesses if 
they have some wisdom to give us on any of these questions that 
I've been asking questions about here?
    Yes, go right ahead, Mr. Cauley.
    Mr. Cauley. Chairman Bingaman, we're obviously are still 
early in our data gathering and assessment and analysis. I 
think there are many stories to be told in this one. I think 
even the testimony this morning throws into question that the 
preplanning in terms of the electric supplies to processing 
plants and compressors.
    However, most of the information that I have received to 
date does not point to that as the primary culprit. Even though 
it's a practice that we've known for many years, at least 10 
years that I'm aware of, that we would give priority to gas 
pipeline processing and compressors. But I think the primary 
culprit from at least what I've heard initially is just purely 
the cold weather affecting the auxiliary equipment at the power 
plants as well as the well heads for the gas supply and as well 
as the processing plants.
    I think to some extent the electric and gas systems share a 
lot of common features of pipes and tubes and equipment that's 
exposed to the cold weather. It just throws into question what 
weather that equipment was adequately winterized for the severe 
temperatures that we saw. So at this point, for me, from a NERC 
perspective, the jury is still out in terms of the actual 
impacts between electric and gas.
    If we haven't learned a lesson by now making sure that the 
gas infrastructure has a high priority for electric supply than 
I certainly intend to make that a priority coming out of this 
incident.
    The Chairman. Mr. McClelland, do you have anything to--and 
let me just ask you to just address the issue of whether or 
not--I mean, NERC has authority or responsibility for the 
reliability of the electrical system in the country, the 
electrical grid. Does FERC consider itself to be the agency 
with responsibility for the reliability of the natural gas 
distribution system in the country?
    Mr. McClelland. Let me back up just for a second as far as 
the relationship between FERC and NERC. NERC is the Electrical 
Reliability Organization. FERC is the Regulatory Agency that 
oversees NERC's efforts.
    FERC also has 3 types of jurisdiction. It has original, 
concurrent and also appellate. In this particular case, FERC is 
exercising its original jurisdiction into the inquiry.
    So we are using and coordinating with NERC and their 
regional entities. But we're by no means stepping aside as far 
as the electric reliability because it does tie to your 
question. It does tie to the natural gas.
    There were at this point it's very dangerous to draw 
conclusions. But there are strong indications that as Mr. 
Cauley mentioned, the winterization of plants, the electric 
plants, was a culprit, but also the gas supply. So if for 
instance in the Permian Basin and not in the San Juan Basin, 
but in the Permian Basin if there were electrical outages and I 
could see from the chart here that it does look like there were 
facilities or there were pockets of generation that were 
implicated in that basin.
    If they affected the production then the line pack would 
have been depleted. Supply would not have been put into the 
line. That then affects the generator.
    In some ways it's a vicious cycle because the generators 
weren't winterized. They didn't startup the generators that 
would have been starting up or called into action may not have 
been able to start because of low gas supplies. Additional 
generation may have been tripped off and was not a result of 
the electrical interruptions in the Permian Basin.
    That's an important question. My colleague, Mr. Wright may 
have something to add to this. But he also passed a note to me 
to explain that FERC does not have jurisdiction over the 
processing plants. There are eight gas fields and 2 gathering 
pipes and they are not FERC jurisdictional.
    So the inquiry, the structure of the inquiry is 
particularly important because we'll need the State's 
assistance to pull information about those facilities.
    The Chairman. So there is no Federal oversight or 
regulatory authority over gas processing plants? Is that 
correct?
    Mr. McClelland. Yes.
    The Chairman. Let me defer to Senator Udall for some 
questions.
    Senator Udall. Thank you, Senator Bingaman. That was an 
excellent line of questions and I think very revealing there.
    Mr. Schreiber, could you talk a little bit, I see at least 
one of the mayors here and I know Governor Dasheno is here, 
about the issues that they raised in terms of their 
communities? They raised a number of questions about 
notification and could this have been done better. People on 
the ground, the first responders if they'd been told as early 
as possible that they were going to have a 5-day/6 day loss of 
natural gas they would have done things completely differently.
    I think some of them feel, you know, why them? Why a 
community in Questa? Why a community in Taos? Why the Santa 
Clara Pueblo?
    I think as I described to you at one point these are very 
rural communities. It's very hard to locate individuals. The 
gas company people, my understanding, were circulating asking 
the street addresses.
    Many of the places don't function on street addresses. 
You'd have to have somebody that really knows and apparently 
the actual natural gas meter people were someplace else. You 
weren't utilizing the same people.
    Then I think they also raised the question they offered 
help. They had people in their community. I think the chamber 
of commerce witness, many people were saying we want to help 
you and their sense was you didn't need their help. So could 
you try to answer some of those?
    Mr. Schreiber. Yes, certainly. I think to start off on your 
point on communication. We need to improve that. OK? Let me 
start right there.
    We did send out some notice early in the morning on 
February 3rd. Obviously it wasn't extensive enough. Obviously 
we did not have the right processes in place to have a blast 
type of broadcast to emergency responders to local communities 
to that kind of thing.
    So that is very high on our agenda to be able to make sure 
that we contact the local authorities, the local first 
responders as well as the Governor's office and the State 
resources to be able to get the word out as quickly as 
possible. We were laboring under the assumption early in the 
morning on February 3rd that we were going to get a second 
delivery of gas. Now, that being said, we probably should have 
been out and in more detail in touching all the bases that 
needed to be touched.
    We did get out in the--around 8:15 on the morning of 
February 3rd to contact the Pueblo leadership. We had been out 
the night before at about 3AM. The Otero County emergency 
coordinator we had been contacting.
    But during that timeframe when we thought we were going to 
be getting gas. Hindsight is 20/20. As we look back we probably 
should have been talking to other communities.
    To your question as to why the communities and where we 
curtailed and where we didn't. We basically had to move very 
quickly. We basically had between 20 minutes and 30 minutes to 
try to shed load.
    We saw the pressure on the Taos main line which leads up to 
the areas that was most affected. That the pressure at around 
8AM or very shortly thereafter was dropping dramatically. We 
had to act to see if we could shed load because we had to 
stabilize the system.
    In other words we had to put the amount of demand on the 
system and the amount of supply we had to get them back into 
equilibrium. Because what was happening at that point on the 
morning of the 3rd was that demand was so extraordinary and the 
gas was not coming in that we had to shed load. It is extremely 
unfortunate that we had to do that.
    It was probably the toughest decision our operating people 
have ever had to make. But we had to find valves that we could 
turn quickly to try and reduce that load. The 2,000 Bernalillo, 
the one on the Taos main line we could get to within the 
timeframe we needed to get to. Because what was in jeopardy was 
a loss of the entire system.
    As I said in my statement if we had lost the Bland to Santa 
Fe corridor in addition to Bernalillo and Placitas we'd be re-
lighting people probably for the next month and a half. So what 
we're trying to do is preserve as much as we could.
    Senator Udall. Can I just stop you there for 1 minute?
    Mr. Schreiber. Yes.
    Senator Udall. In hindsight looking at it and looking at 
what you know about these sparsely populated areas and the 
ability of the people to go out and find and shut off and then 
re-light and all of that. Is that the decision you had to make 
was the decision for that area of Northern New Mexico along 
that line or could have it been other areas that you could have 
taken that action where it would have resulted in fewer people 
without gas for that lengthy period of time?
    Mr. Schreiber. Unfortunately the way the system is 
currently designed and again this is what I mentioned in my 
statement. We are looking at how we are better able to isolate 
our system. OK?
    The system that we had on February 1st, 2nd and 3rd did not 
have isolation points in the urban areas where you could take 
out a block quickly but then be able to re-light that block 
quickly. When I'm talking about a block it might be, you know, 
5,000 customers or 10,000 customers. So what we were faced with 
with the system that we purchased that did not have the 
isolation ability which would have been able to promote exactly 
what you're suggesting.
    We are looking at that right now. We are going to put in 
valves around the system so that we are able to isolate other 
parts of our system and not have to isolate like the valve on 
the Taos main line which allows us to try and get the system in 
balance at that point. So yes, we know that that is something 
that needs to be addressed. That is definitely in our planning 
as we look out forward to make sure that we minimize the amount 
of re-light.
    Senator Udall. How about this whole issue of offers of 
assistance in that?
    Mr. Schreiber. We've, as you know, and I think everybody 
knows we have put together a relief fund. We are the only 
utility that has done that. In any other outage whether 
electrical or gas there has been no other utility that we've 
been able to find to my understanding and the research that 
we've done to this point that has ever done any kind of 
voluntarily relief effort.
    We are addressing this relief fund to those who were the 
hardest hit. As you and I have spoken before, we are very 
sensitive to the economic situation in the northern part of the 
State. We know that for a lot of our customers if they get a 
$50 or $100 plumbing bill that is a big deal. OK?
    We had voluntarily tried to put money into this fund to 
help those kinds of folks that are most in need.
    Senator Udall. My understanding is that you've put in a 
million dollars to try to take care of these personal and 
individual losses. Is that correct?
    Mr. Schreiber. That's correct.
    Senator Udall. You have asked Transwestern and El Paso to 
also match, each of them, to match you. Is that correct?
    Mr. Schreiber. Yes. I think we have been asking. Yes, sir.
    Senator Udall. Yes. The reason you're doing that is because 
based on past kinds of situations you believe the amount will 
actually be closer to $3 million than to $1 million.
    Mr. Schreiber. We're getting the process going right now, 
Senator. We have about 800 claims at this point. We're starting 
to work through those.
    We've already worked through--we had over 50 red tag 
claims. In other words, when we got into re-light we found we 
couldn't re-light. It was not safe.
    So we sent on our own cost back into these 50 or 55. I'll 
have to get the exact number for you. But it's in that 
neighborhood. Licensed folks to go in, fix the appliance that 
was unsafe so that the customer was back on line. We've already 
taken care of that.
    Yes, we're just, as I said, it's a relief fund that we're 
trying to, you know, provide for the folks that really are the 
most in need to help them try to get through this whole 
situation.
    Senator Udall. Now the chamber official raised the issue of 
a small business that is not going to be covered by business 
interruption insurance. Are you hearing that testimony today? 
Are they going to be allowed to apply to this fund? If they can 
show that they don't have insurance are they going to be able 
to recover?
    Mr. Schreiber. We have split the process into a residential 
process and a commercial process. Yes, we will be accepting 
claims from those people.
    Senator Udall. I hope that Transwestern and El Paso would 
be receptive to your appeals especially to match you in terms 
of the dollars. Because as this moves along and you're not able 
to satisfy the claims out there with the money that's up there 
it would make sense to me to have them or others try to help 
you help you out.
    Now on offers of assistance and I'm going to turn back to 
Senator Bingaman now. Others, the mayor said they offered you 
also assistance in terms of re-lighting or anything like that. 
Why didn't you take them up on that?
    Mr. Schreiber. We tried to take up as much assistance as we 
can. We had 1,100 folks on the ground in the re-light process 
which included National Guard, local police, State police, fire 
departments. Part of the issue is the safety requirements of 
our business, Senator, dictate that the folks that are handling 
meters, re-lights and those kinds of operations have to be 
licensed and qualified to have been trained and the safety 
requirements of our business say that that's a fact.
    So while we had a whole lot of folks show up, we didn't 
have licensed folks to pair them up with. I mean we had 
licensed technicians in here, in the State of New Mexico from 
ten different States. SUNCO Energy, our Michigan company sent 
69 people down here to help on the re-light process.
    But what we had to do is we tried to build on local 
knowledge and match them up with our technicians to try and be 
as productive and efficient as possible in this re-light. Did 
we underestimate it? Yes, we did.
    But I think, you know, while it is unacceptably long, there 
is no question about that. We had a lot of folks that were 
working 14, 16, 20 hour days. The 19,000, we've heard that it 
was 15,000. But 19,000 gas customers that were out in Arizona 
they were re-lit by Tuesday the 7th. Our 28,707 were re-lit 
by--I mean on Monday. Our 28,000 were re-lit on Tuesday.
    So we had a whole lot of folks that were working very hard 
to get our customers back on because we knew what they were up 
against. We were very sympathetic to that and we were trying 
like the devil to get them back on.
    Senator Udall. Thank you. I assume we're
    Mr. Schreiber. Senator, could I just make----
    Senator Udall. Yes, please.
    Mr. Schreiber. OK. Just one comment and Ms. Parker 
mentioned an electricity supplier named Continental, OK? It has 
nothing to do with my business or New Mexico Gas. I don't know 
who that Continental Company is, but it is not my company. I 
just wanted the record to reflect that.
    Thank you, Senator.
    Senator Udall. Thank you. Thank you very much.
    The Chairman. Let me ask a couple more questions. Then 
Senator Udall, I think, has a few more as well.
    You know we spent a lot of time in Washington talking about 
the Strategic Petroleum Reserve. The obvious question is why 
wasn't there more storage of natural gas available to deal with 
this problem when the inadequate supply was coming into these 
pipelines? Now you indicated that El Paso Natural had a storage 
unit down by Carlsbad which is called Washington Ranch Storage 
Facility?
    Ms. Parker. Yes, Mr. Chairman.
    The Chairman. But that's the only storage that I've heard 
discussed here today. Let me ask does Transwestern have any 
storage of natural gas that they could have brought on line to 
deal with the shortfall of supply?
    Ms. Corman. Mr. Chairman, Senator, Transwestern does not 
own any gas storage facilities. We are interconnected with a 
gas storage facility in Texas. In fact many of our customers 
ordered gas from that storage facility during these winter 
weather events.
    However, that storage facility was one of the 
underperforming supply locations on our system. Much of the gas 
shortfall on the gas day of the 2nd and the 3rd of February was 
because we were not getting the volumes out of the storage 
field that we expected.
    The Chairman. Let me just ask again from El Paso's point of 
view. You had no problem getting gas out of your storage 
facility. You just ran out of stored gas. Is that right?
    Ms. Parker. We didn't have any problems, Mr. Chairman, 
getting gas out of our storage field throughout the event. We 
didn't run out of gas. There's always a maximum withdrawal 
capability that the storage field is designed for. We ran at 
the maximum every day until it----
    The Chairman. So you were taking it out of your storage 
facility as fast as you could.
    Ms. Parker. Yes, sir.
    The Chairman. But that was not enough to keep the gas 
supply that you needed in your pipeline.
    Ms. Parker. It wasn't enough to offset the shortfalls we 
experienced in the Permian supply or the San Juan supply 
completely.
    The Chairman. Let me ask Mr. Schreiber. Just from a logical 
point of view it would seem to me that a utility might consider 
storage facilities for natural gas. Is that something that you 
contemplated or is that not done by utilities or what's your 
view on that?
    Mr. Schreiber. No, Senator. It is done by utilities. In 
fact, New Mexico Gas Company contracts with Chevron for 2.2 
billion cubic feet of storage which is in the Permian Basin.
    That storage was impacted on the morning of the 2nd of 
February for about 3 hours. But then the----
    The Chairman. By impacted you mean?
    Mr. Schreiber. An electric shortage.
    The Chairman. So they were unable to provide anything from 
that storage facility.
    Mr. Schreiber. Make a withdrawal, to withdraw. But then it 
performed well after it got past the first rolling blackout. We 
believe it was from El Paso Electric.
    To your general question about storage for utilities. Yes, 
it is something, in fact our sister company in Alaska is 
investing in an 11 BCF storage facility. It's $180 million 
investment.
    One of the things that we're going to be doing in New 
Mexico Gas is looking to see if there is geology available in 
the State of New Mexico, like a depleted reservoir or a salt 
dome formation where we could create, own and operate our own 
storage facility depending on, you know, for just these kinds 
of circumstances.
    The Chairman. Alright. Let me call on Senator Udall for any 
additional questions he has.
    Senator Udall. I would want to turn to our 2 witnesses with 
NERC and FERC. Ask the issue here and I think Senator 
Bingaman's done a very good job in his questioning of 
emphasizing reliability and reliability of the system. We all 
know from the witnesses we've heard here today how important it 
is to have reliability.
    If the system fails we hurt business. We hurt small 
business. We hurt people, the disabled people and you know, you 
heard all of the stories.
    What, from what you have heard today at the testimony. I 
don't want to get into your investigations and where you're 
headed. But I think Mr. McClelland you talked a little bit 
about things that needed to be looked at.
    From the testimony today what does this tell you about 
reliability? What does this say about what we need to do in 
terms of the system? Should there be new Federal reliability 
standards to cover the interdependency of electricity in the 
natural gas supply infrastructure?
    Mr. McClelland. I think from the testimony I heard today I 
didn't hear that the electric compressors on the pipelines were 
impacted. That's not really a surprise. That seemed to be what 
was coming back to us from preliminary information.
    I also heard somewhat of a validation that the Permian 
Basin was impacted by the blackouts or by electrical outages or 
maybe perhaps winterization of the facilities themselves, lack 
of winterization that caused gas production to decline.
    Prior to that and it's something that Mr. Cauley made the 
point about and I'll second again here is that the 
winterization of the electric generation facilities is of 
particular importance. There were scheduled outages of about 
12,000 megawatts, but there were forced outages in excess of, 
well, there was about 4,000 megawatts of coal fired power 
plants for instance that were out and 9,000 megawatts of gas 
powered facilities that were out. The primary causes that we're 
hearing at this point were not because of gas shortages. They 
were because of lack of winterization.
    There are--I'm sorry.
    Senator Udall. Yes. No, just to stop you a second.
    When you say winterization we mean something as simple as 
with the outage being caused by a pipe bursting and not having 
thermal tape on that pipe because if you'd had thermal tape or 
something along that line, the pipe would have been able to 
continue to function. You would have been able to then get the 
electricity out that was needed. Simple things like that, 
right?
    Mr. McClelland. That's exactly correct.
    Senator Udall. Yes.
    Mr. McClelland. Typically I mean, I asked staff to put 
together a dirty dozen of the winterization items that we know 
at this time. We fell short on time. We have about 9 right now.
    But it is primarily water systems, you know, the systems 
that pipe water and then a lack of insulation or heat tape or, 
you know, some sort of anti-freezing mechanism associated with 
it. So we saw failures of the power plants in mass. Those 
failures may have then impacted the Permian Basin which then 
impacted the line pack which then impacted the gas pressure and 
the downstream results where it interrupted customers, those 
distribution customers.
    There are winterization requirements and standards. They're 
not specific, but they're there. So one of the places that we 
will look at what did the folks and how did they interpret 
those standards. What winterization measures did they take?
    Another important point and it's in Mr. Cauley's testimony. 
I'll point this out as we move toward single source fuel 
dependency and Mr. Chairman, you touched on this when you spoke 
of the storage facilities. But as we move toward single source 
fuel dependency for these electric generators once they're 
onsite storage mechanism if they're bidding firm power into the 
market, but they're buying interruptible gas is it really firm 
power?
    If they need the firm power perhaps they should have onsite 
storage. Perhaps there should be distillate onsite, 3 day 
supply of distillate dual fuel facilities in order to 
facilitate continuance of operation, a continuity of operation 
to keep the natural gas supply from interrupting. So there's a 
lot of pieces at this point.
    I'm not here to draw conclusions. Happily answer any of the 
pieces at this time. I think what we really need to do is get 
the comprehensive inquiry.
    It needs to span more than the electric and more than gas. 
It needs to explore the interdependencies. It needs to look at 
what the communication protocols were, what the arrangements 
were for buying the natural gas.
    Was it bought in interruptible basis or was bought on a 
firm basis? Then how did that transpire the next day? What were 
the root causes of the interruptions? Who affected who as we 
move down the line for this interruption?
    Mr. Cauley may want to add to this.
    Mr. Cauley. Senator Udall, I would concur with Mr. 
McClelland's response.
    The 2 things I take away principally the first being the 
winterization of equipment. When we bring in a lot of new 
generation and looking at competitive markets, winterizing a 
plant is probably one of the places where you can save money 
and be more efficient cost wise. But in my view it's a low cost 
thing that can be done to the plant to assure that it's 
available during extreme cold weather. So I think we'll be 
looking at that. I would extent that beyond just the electrical 
plants though to the gas well heads and refineries and the 
storage to ensure that all essential infrastructure performed 
in extreme cold weather.
    The second issue which has been raised which is clear is 
the interdependency. There may be an opportunity to improve our 
standards in that area to obviously the practice has been well 
known for a number of years. But evidently there's an 
opportunity to do much better in terms of assuring that we 
don't cutoff electrical supply to processing plants and storage 
facilities.
    Senator Udall. Thank you very much. Just one additional 
question to Mr. Schreiber.
    Mr. Schreiber, you mentioned in your testimony I think on 
page 2 you're talking about once in a 50 year event, I believe 
and a winter storm of historic proportions. Then on the next 
page you talk about half way down that you routinely, the New 
Mexico Gas Company, routinely monitors long and short term 
weather forecasts. I assume as part of that that you're 
monitoring what all the scientists are telling us in terms of 
climate change that we are going to get more severe winter 
incidents in the future.
    Is that correct? Is that something you're also looking at? 
I mean because we've had here in New Mexico over 100, you know, 
100 year events in terms of floods, catastrophic fires that 
people that have been looking at forest fires for 30, 40 years 
say we've never seen anything like this.
    I would assume in this situation, the winter weather, where 
from what the scientists are telling us we're going to see 
things like that. Is that something you're looking at in terms 
of these short term and long term weather forecasts and putting 
that into the equation?
    Mr. Schreiber. I'm afraid, Senator, we're a little more 
myopic than that, you know. We're not at this point as 
concerned of the impact of the global climate change on our 
delivery weather. When I say long term, you know we may be 
looking out a month or 2 and trying to determine whether La 
Nina--and now I'm getting into things I don't really know a 
whole lot about but the La Ninas and El Ninos and all that 
business and how it's going to impact weather patterns.
    Then on a short term basis, as I said, January 30/31 we 
were studying that storm. We could see that this storm was 
going to be something like we haven't seen in a long, long 
time. But in terms of the huge picture of global climate 
change, you know, we don't, you know, individually I'm sure 
some of my colleagues do and I do. But we're much more focused 
on how we're going to keep 500,000 customers with gas in their 
homes when they most need it, so.
    Senator Udall. I want you to do that. But I think what 
scientists are telling us is that, you know, this 50 year 
event, we may see 50 year events much more frequently.
    Mr. Schreiber. Right.
    Senator Udall. We want the system, as I was talking to 
these gentlemen here to be reliable in those kinds of 
circumstances. That's really the point, I think.
    Mr. Schreiber. Right.
    From a business point of view, Senator, we are doing that. 
We are looking at storage. We're looking at propane air. We're 
looking at possibly LNG. We're looking at other ways that we 
can provide greater operational capability to minimize the 
risks that we have in delivering gas. So that is all part of 
the equation. If the weather is going to be much more volatile 
and much more extreme we're going to have to start planning our 
businesses to be able to undertake, to operate in those kinds 
of conditions.
    Now I will also tell you that if we were to have the system 
capable of withstanding the kind of event that occurred there 
on the first of February, you are talking about millions and 
millions of dollars of capital expenditures to get the system 
to where we had redundancies in pipelines, where we had storage 
facilities, where we had more valves, where we had more supply, 
you know. It would be a huge undertaking on the part of New 
Mexico Gas to try and get the risk down to zero on that kind of 
event. So there is judgment on what our plant and our 
operations need to be to withstand those kinds of storms. We 
thought we were in pretty good shape. But we couldn't get the 
gas.
    Senator Udall. Thank you to all the witnesses.
    The Chairman. Let me just ask one other question.
    Now Mr. Dumas, you were, as you're well aware, whenever 
there's a crisis people try to use it to make a point that they 
were trying to make before the crisis occurred. One of the 
allegations that I heard right after the rolling blackouts 
occurred in Texas was that the EPA regulations were what were 
causing these rolling blackouts. That generators were not able 
to generate power as they would otherwise be generating it 
because of excessive regulation by the Environmental Protection 
Agency. Is there anything to that?
    Mr. Dumas. No, Mr. Chairman, we didn't see any evidence of 
that being a factor. All the planned outages so far that the 
reports that we've gotten are related to frozen instrumentation 
and weather related.
    The Chairman. Let me ask one other question. There was also 
an allegation thrown around that Texas' heavy reliance on wind 
energy generation was part of the problem here. That if Texas 
just didn't have so many wind farms there wouldn't have been 
any problem.
    Have you analyzed that?
    Mr. Dumas. We have, Mr. Chairman. Wind was actually 
producing pretty well during this event. I have a chart and I 
regret that I didn't put it in the presentation, but I'd be 
glad to give you a copy.
    It produced between 3,000 and 2,500 throughout the event.
    The Chairman. So rather than being part of the problem it 
was trying to help avoid the problem? Is that what you're 
saying?
    Mr. Dumas. It was producing very close to the expected 
forecast for wind. So the megawatts that it produced were 
utilized during the capacity shortage situation. So it 
performed pretty well during this event.
    The Chairman. Alright. I appreciate that, and I appreciate 
all of you testifying.
    I think it's been a useful hearing. It's gotten a lot of 
questions raised. Obviously we don't have the answers to the 
questions, but I'm encouraged by the fact that we have some 
studies and investigations going forward and we look forward to 
the results of those.
    We look forward to putting in place the procedures and 
precautions to prevent this from ever happening again. So thank 
you all very much. That will conclude our hearing.
    [Whereupon, at 12:57 p.m. the hearing was adjourned.]

    [The following statement was received for the record.]
    Statement of David W. Stevens, Chief Executive Officer, El Paso 
                            Electric Company
    Chairman Bingaman and Senator Udall, thank you for the opportunity 
to submit a written statement to the Committee on behalf of El Paso 
Electric Company (EPE). My name is David Stevens, and I am the Chief 
Executive Officer of EPE.
    EPE is a vertically integrated electric utility that provides 
electric service to parts of far west Texas and southern New Mexico. 
EPE is one of three investor-owned utilities providing electric service 
in the State of New Mexico. EPE operates within the southwestern corner 
of the Western Electricity Coordinating Council (WECC), a regional 
reliability entity of the North American Electric Reliability 
Corporation (NERC). In light of the heat typically experienced in this 
part of the nation, EPE, like its neighboring electric utilities, is a 
summer-peaking utility.
    For the Committee, I would like to address the series of abnormal 
weather events that occurred in this part of the country during the 
first week of February 2011, the impact of those events on EPE, and 
EPE's response to those events. By way of overview, it appears this 
weather event was the worst in at least 45 years. Based upon the 
information known at this time, the phenomenally cold weather (over 60 
continuous hours at temperatures below 18 degrees Fahrenheit) and 
severe wind effects negatively impacted a generation fleet that is 
primarily designed to withstand excruciating summer temperatures, and 
not prolonged subfreezing temperatures in the low teens and single 
digits. Like those of EPE, many generating plants in Texas, New Mexico, 
Arizona, and in the northern Mexican cities of Juarez and Chihuahua 
(our neighbors to the south), experienced difficulties with generation. 
To maintain system stability, EPE was required to undertake controlled 
load shedding during peak usage times to help compensate for the loss 
of our local generation. Fortunately, the weather did not cause any 
loss in transmission. Our backbone 345 kV transmission system, which 
connects us to our remote generation in Arizona (Palo Verde) and New 
Mexico (Four Corners) and to the rest of WECC, weathered the storm 
without incident, thereby allowing us to maintain system integrity 
throughout this unprecedented severe weather event.
    Although EPE is a summer-peaking utility, each year EPE winterizes 
its generating plants prior to the beginning of the winter season. This 
winterization process encompasses, among other things, verifying that 
heat tracing and heat strips are properly functioning as well as making 
sure that insulation is properly installed at all of EPE's local 
generation facilities. EPE also verifies that equipment in its 
substations, the element of the transmission and distribution systems 
historically most susceptible to cold temperature extremes, can 
withstand projected winter temperatures. During the final weekend of 
January 2011, EPE was monitoring the actual weather and the forecast, 
as is our standard procedure. The weather forecast indicated 
significantly colder weather than normal for this time of year. Thus, 
on January 31, 2011, prior to the onset of this weather event, EPE 
initiated its severe weather preparations, which included verifying 
winterization of generation and identification of transmission and 
distribution facilities that could be impacted by ice and high wind 
loading; reviewing system operations plans; contacting the operator of 
EPE's Palo Verde generating facility to make sure the units were not 
experiencing any issues; reviewing the availability of natural gas for 
use in our gas-fired generating facilities; preparing for potential 
constraints in the gas pipelines that serve EPE; and putting employees 
on call as needed during the weather event. EPE's System Operations 
group requested that EPE's Power Marketing & Fuels group keep 
additional generation on-line. The Power Marketing & Fuels group 
complied with that request as early as January 31 for projected loads 
for Wednesday, February 2, when the anticipated severe weather was 
forecasted to begin. In addition, they contacted natural gas pipeline 
personnel at El Paso Natural Gas (EPNG)\1\ and WesTex Gas (Westex) for 
status updates of their efforts to maximize line-pack in their 
pipelines in preparation for cold weather. On Monday, the operator at 
EPE's Newman generating plant was told to prepare for the possible need 
to burn fuel oil in the event natural gas supply was interrupted. We 
also increased natural gas nominations on the Westex pipeline, as a 
back-up measure, to ensure sufficient supply and pipeline pressure in 
the event of EPNG gas curtailments. On Monday, EPE personnel developed 
plans to procure daily natural gas from Keystone and Waha basins to 
avoid potential curtailments due to wellhead freezes in the San Juan 
basin.
---------------------------------------------------------------------------
    \1\ Despite the similarity in names, El Paso Electric Company and 
El Paso Natural Gas Company are not, and have never been, affiliated.
---------------------------------------------------------------------------
    Unfortunately, not only did the temperature drop to record levels 
and much lower than forecasted on January 31, but the wind was blowing 
at average speeds of 10 to 20 mph, with wind gusts at much higher 
speeds, creating very low wind chills--and hazardous conditions for the 
employees working outside. The strong wind rapidly dissipated heat 
around key power plant components and accelerated the temperature drop 
of those components. Because of our climate, most generating plants in 
this region, including those in EPE's service territory, are not 
enclosed and are designed primarily to withstand extremely hot summer 
temperatures but not extreme levels of sustained subfreezing 
temperatures. Thus, as the temperature rapidly fell into subfreezing 
levels, equipment at our generation facilities began to freeze. Not 
only did critical water lines freeze, but instrumentation that controls 
the generation froze as well. Facing wind chills as low as minus 17 
degrees and battling single digit temperatures and harsh wind, EPE's 
employees worked around the clock during the entire event in an effort 
to thaw and repair equipment and to bring the generation plants back 
on-line. Yet, the success of thawing one piece of equipment was met 
with the freezing of another component. Even the backhoes needed to dig 
out broken pipes would not operate because their hydraulic components 
were frozen.
    During the afternoon and evening of February 1, the weather 
deteriorated significantly, with temperatures dropping from 31 degrees 
at 4 p.m. to 18 degrees at 10 p.m. Temperatures remained below 18 
degrees for the next two and a half days, with a low temperature of 1 
degree recorded on February 3, 2011, and 3 degrees on February 4, 2011. 
The maximum air temperature of only 15 degrees on February 2, 2011, was 
the coldest maximum (high) temperature ever recorded in our service 
territory. Records were set on February 2, 3 and 4. The low temperature 
each of those days was the lowest temperature ever recorded in our 
region on that particular day in El Paso and southern New Mexico 
history.
    As a result of the almost unprecedented conditions, EPE lost most 
of its local generation fleet over a period of hours beginning Tuesday 
evening and into early Wednesday, thereby reducing EPE's load-serving 
capability. EPE did have approximately 55 MW of local generation from 
its combustion turbine, Copper (63 MW rated capacity), running 
throughout the severe weather event and even during the worst portion 
of the weather. Copper, combined with purchases from generation 
resources in south-central and southwestern New Mexico, provided 
dynamic reactive voltage support. That voltage support made it possible 
for EPE to import power for delivery over its 345 kV transmission 
system--most notably, power from EPE's remote generation at Palo Verde 
and Four Corners--and to successfully maintain system integrity.
    On February 2, 2011, EPNG issued an Operational Flow Order (OFO) 
for an Emergency Critical Operating Condition (COC). The OFO was issued 
to direct EPNG customers to stop taking more gas off of the pipelines 
than they had scheduled. EPE had properly maintained its natural gas 
schedules on EPNG's pipeline in the event local generation was returned 
to operation. Thus, with the weather's continued impact on EPE's local 
generation, EPNG was able to make use of the approximately 130,000 
MMBtu of natural gas in the pipeline from February 2 through the end of 
the COC on February 5. If EPE's local generation had remained 
operational and able to burn natural gas throughout the severe weather, 
EPE would not have been able to provide this benefit to the pipeline.
    On Wednesday, our Power Marketing & Fuels group directed a portion 
of EPE's natural gas supply to Tri-State's Pyramid generating station 
to replace Tri-State's fuel oil supply that was being used to produce 
energy for delivery to EPE. We also communicated closely with Texas Gas 
Service and made arrangements in the event EPE needed to supply natural 
gas to Texas Gas Service on an emergency basis. We worked with Public 
Service Company of New Mexico (PNM) to implement a natural gas 
agreement so that, if needed, natural gas could be directed to PNM's 
Afton and Luna generating stations.
    During February 2 and 3, and part of February 4, EPE continued to 
struggle against extreme weather conditions to return more local 
generation to service. EPE employees and contractors, working in 
extraordinarily harsh weather conditions, sought to protect critical 
equipment and sensors from freezing by working throughout the emergency 
to thaw out and repair the frozen equipment and sensors.
    When it became apparent that the Company's local generation would 
not be quickly returned to service, and as load increased coincident 
with peak usage, we began to reduce load in order to maintain system 
stability. First, we curtailed our interruptible customers who, as part 
of their contract with us and in exchange for a lower rate, allow EPE 
to interrupt them for up to a certain number of hours per year. In 
addition, between the hours of 7 a.m. to 12 p.m. and 6 p.m. to 10 p.m. 
on February 2, 5:30 p.m. to 10:30 p.m. on February 3, and 6:30 a.m. to 
12 p.m. on February 4, the Company executed controlled load shedding to 
further reduce the strain on the system and to help protect the health 
and safety of our customers and avoid the risk of system collapse. This 
was undertaken consistent with EPE's Electric Service Emergency 
Operations Plan (Plan).
    EPE's Plan was adopted to comply with the Public Utility Commission 
of Texas (PUCT), Substantive Rule (SR) Sec. 25.53, Electric Service 
Emergency Plans. The PUCT rules define, among other things, ``critical 
loads.'' These are loads that are considered crucial for the protection 
or maintenance of public health and safety, including, for example, 
hospitals and fire stations. The PUCT rules require electric utilities 
such as EPE to maintain a registry of such critical loads and customers 
and to have emergency load shedding procedures, which EPE had in place 
and executed in this instance. EPE's Plan is on file with the PUCT. 
Pursuant to the Plan, EPE updates its registry of critical loads as 
needed and at least annually. EPE applies its Plan to its entire system 
in Texas and New Mexico.
    Consistent with federal and state reliability regulations and to 
preserve the integrity of its system, EPE maintains the capability to 
manually drop customer loads. This is done at a ``feeder level'' and 
the number of customers dropped at any given time depends on how many 
are served from the feeder. (The granularity required to drop 
individual customers is not available on EPE's system.) Customer load 
shedding occurs during Emergency Conditions only after other measures 
have been attempted or completed.
    EPE's manual load shedding protocol is designed so that electrical 
feeders are grouped into 35 ``blocks'' that contain about 50 MW of load 
based on summer peak demand. EPE's System Operations Department 
utilizes pre-defined and prioritized protocols to shed load blocks in a 
controlled manner, beginning with the first group and then rotating 
into the next group, and so on, where feasible. When the system is 
operating at its limit, and all other authorized avenues of relief have 
been utilized, shedding customer load is a last resort to avoid a more 
severe and widespread disturbance. The goal of controlled load shedding 
is to keep the entire electrical system stable so that it does not go 
into an uncontrolled blackout under the loss of a critical transmission 
element.
    EPE's Plan contains a list not only of the critical load customers 
but also of what feeders serve them. There are currently 109 such 
feeders, up from 85 in 2008. Feeders that are identified as serving a 
critical loads are given high block numbers (blocks 18 and above.) This 
list of feeders and customers has been developed, refined and updated 
over the years to identify (and to add to or replace) those customers 
for whom continued service is considered crucial to the maintenance of 
public health and safety. There are five general categories of such 
customers: Hospitals, Dialysis Centers, Radio and TV Stations, certain 
Government Agencies (for example, fire departments, police dispatchers, 
airports, prisons), and certain Water Utility Stations and Plants. 
Other customers can contact the Company if they believe they qualify 
for treatment as ``critical'' to the maintenance of public safety.\2\ 
For example, an industrial customer might qualify as a critical load 
customer under the PUCT's rules if it could show that an interruption 
would create a dangerous or life-threatening condition on the 
customer's premises. A review of our records reveals no request made by 
a natural gas pipeline or utility for a facility in our service 
territory to be classified as critical load. Thus, none were classified 
as such.
---------------------------------------------------------------------------
    \2\ Even though EPE has placed these critical facilities at the 
bottom of the manual load shedding list, they will be shed if required 
by the severity of the Emergency Conditions.
---------------------------------------------------------------------------
    During emergency conditions, blocks number 1 through 17 will each 
be dropped by EPE System Controllers in a rotating fashion for about an 
hour or less at a time to lower and balance the load on EPE's system 
and enhance the stability and security of the entire EPE system. In 
carrying out the controlled load shed, EPE operators cycle the areas 
being dropped across the EPE system to minimize the overall impact on 
individual customers. This controlled load shedding is done (and was 
done during this severe weather event) on a non-discriminatory basis 
across the entire system in both New Mexico and Texas, with the 
exception of those circuits identified as containing critical 
customers. On February 4, EPE was able to return 300 MWs of generation 
to service and eliminate all controlled load shedding. On February 5, 
the Company was able to allow most customers that are served on 
interruptible rates to return to their normal operations, and all such 
customers were allowed to return to their normal operations by February 
6.
    As a result of the advance planning of the various EPE departments, 
and the effort and extraordinary support of EPE employees and 
contractors, as well as the cooperation of public and private 
organizations, businesses and individuals, EPE was able to maintain 
system integrity by using our transmission lines connecting us to the 
rest of WECC to bring in power from EPE's own remotely located 
generation as well as purchased power. The Company received tremendous 
cooperation from all of our neighbors including, but not limited to, 
PNM, Southwestern Public Service Company (SPS), Arizona Public Service 
Company (APS), Tri-State Generation & Transmission, and Tucson Electric 
Power Company (TEP). In addition to these parties, WECC, the States of 
New Mexico and Texas, and all of our counties and cities quickly 
mobilized as requested to assist EPE and our customers. Working through 
the various emergency management systems and the media, we were able to 
communicate with the various constituencies.
    We understand the concern from the Committee, regulators, the 
public, and our customers. Clearly, we never want to interrupt electric 
service to a customer when it can be avoided. On this occasion, we 
fortunately were able to maintain the integrity and stability of the 
electrical system so that any disruptions due to events beyond EPE's 
control, and resultant public safety impacts, were minimized. 
Nonetheless, EPE is committed to finding out what we and the industry 
can learn from this unprecedented weather event.
    Chairman Bingaman and Senator Udall, these are the chain of events 
that occurred. Our purpose in the near-term is to address what actions 
we can take in the future to minimize such impacts to our customers 
when such severe weather occurs.
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

   Responses of Joseph McClelland to Questions From Senator Bingaman
    Question 1. NERC was designated the Electric Reliability 
Organization (ERO) by the FERC in accordance with the Energy Policy Act 
of 2005. In that role, NERC works with all stakeholder segments of the 
electric industry to develop standards for reliability planning and 
reliable operation of the bulk power systems. Are there similar 
standards applicable to reliability planning and reliable operation of 
the interstate natural gas pipelines? If not, how is reliability 
planning and reliable operation of the interstate natural gas pipelines 
established and by whom?
    Answer. In the Energy Policy Act of 2005 (EPAct 2005), Congress 
conveyed a major new responsibility to oversee mandatory, enforceable 
reliability standards for the Nation's bulk power system (excluding 
Alaska and Hawaii). This authority is in section 215 of the Federal 
Power Act (FPA). Section 215 requires the Commission to select an 
Electric Reliability Organization (ERO) that is responsible for 
proposing, for Commission review and approval, reliability standards or 
modifications to existing reliability standards to help protect and 
improve the reliability of the Nation's bulk power system. The 
Commission has certified the North American Electric Reliability Corp. 
(NERC) as the ERO. The reliability standards apply to the users, owners 
and operators of the bulk power system and become mandatory in the 
United States only after Commission approval.
    The Commission may approve proposed reliability standards or 
modifications to previously approved standards if it finds them ``just, 
reasonable, not unduly discriminatory or preferential, and in the 
public interest.'' The Commission itself does not have authority to 
modify proposed standards. Rather, if the Commission disapproves a 
proposed standard or modification, section 215 requires the Commission 
to remand it to the ERO for further consideration. The Commission, upon 
its own motion or upon complaint, may direct the ERO to submit a 
proposed standard or modification on a specific matter but it does not 
have the authority to modify or author a standard and must depend upon 
the ERO to do so.
    Currently, the Commission's jurisdiction and reliability authority 
is limited to the ``bulk power system,'' as defined in the FPA. This 
term excludes facilities used for local distribution as well as any 
facilities located in Alaska and Hawaii. The interpretation of ``bulk 
power system'' in effect at this time also excludes certain 
transmission facilities. Under this interpretation, the ``bulk power 
system'' excludes virtually all of the grid facilities in certain large 
cities such as New York, thus precluding Commission action to mitigate 
cyber or other national security threats to reliability that involve 
such facilities and major population areas.
    In contrast, the interstate natural gas pipeline industry that is 
under FERC's jurisdiction does not have a reliability organization that 
is similar to the ERO. The industry does, however, have the North 
American Energy Standards Board (NAESB) which develops certain 
industry-wide standards for the interstate natural gas pipeline 
industry, but those standards mostly pertain to business practices such 
as nominations, scheduling, penalties, billing, capacity release, and 
what information needs to be posted on a pipeline's electronic bulletin 
board. These standards must be approved by the Commission and are then 
incorporated by reference into the Commission's regulations governing 
jurisdictional gas pipeline tariffs. The tariffs are only applicable to 
those entities that engage in jurisdictional transactions covered by 
these tariffs.
    For the interstate pipeline system, we rely primarily on the 
experience and expertise of pipeline operators to maintain and manage 
their pipelines in a manner that will promote system reliability for 
the customers. The pipelines determine what facilities are required to 
serve their customers, and they decide when a facility needs repair or 
upgrade.
    Although FERC does not directly oversee pipeline reliability as it 
does for the bulk electric system, it does promote system reliability 
through its oversight of interstate pipeline tariffs and service 
agreements. Each interstate pipeline under FERC's jurisdiction operates 
under a FERC-approved open access tariff, which is a document that 
delineates what services the pipeline offers, what rates it may charge, 
and other operational parameters. Under Part 284 of the Commission's 
regulations, interstate pipelines are required to offer both firm 
transportation and interruptible transportation services. Together the 
pipeline tariffs and service agreements delineate the limits ofeach 
shipper's service as well as their mutual rights and obligations. The 
numerous terms and conditions of service set forth in a pipeline's 
tariff are implemented to assure a reliable service to the shipper. 
These include scheduling requirements, the establishment of hourly flow 
restrictions and implementation of operational procedures should system 
integrity of a pipeline be compromised. These terms and conditions of 
service are necessary because the pipelines do not own the natural gas 
they transport, and to the extent a shipper violates these terms and 
conditions, it can have service implications for the pipeline's other 
shippers. In a sense, even though FERC does not have direct 
jurisdiction over system reliability for interstate gas pipelines, it 
regulates and oversees pipeline tariffs and service agreements in a 
manner that promotes system reliability.
    Question 2. Are there any regulatory requirements that direct 
communications between interstate gas pipeline operators, natural gas 
processing facilities and the ultimate recipients of natural gas 
shipments?
    Answer. Yes, certain regulations require or govern communications 
between these entities. As stated above, NAESB is a non-profit 
standards development organization that serves as an industry forum for 
the development of business practice standards. NAESB has developed a 
number of business practice standards that the Commission has 
incorporated by reference into its regulations, thus making compliance 
with these standards an enforceable and mandatory Commission 
requirement for jurisdictional transportation service under the gas 
pipeline tariffs. NAESB has established standards for interstate 
natural gas pipeline business practices and electronic communications 
and has periodically updated the standards. The currently effective 
version is 1.9, which the Commission incorporated by reference in May 
2010.
    The NAESB business practice standards establish uniform practices 
and standards governing the format and content of communications 
between the pipelines, producers, and wholesale gas customers. While 
the standards apply only to pipelines, they, of course, control the 
communications from the pipelines to all parties. For example, the 
standards contain a dictionary of terms, and prescribe how gas is 
nominated for transportation and delivery, including timeframes for 
nominations, confirmations, responses and scheduling. They also 
prescribe information to be posted on gas quality, billing, delivery 
mechanisms, and capacity releases. In addition, NAESB has adopted 
specific standards regarding communications between the pipelines and 
electric transmission and generation utilities, which the Commission 
has incorporated by reference in both its natural gas and electric 
regulations.
    Question 3. Can FERC discuss how, generally, plans for firm load 
curtailment are crafted? How often are these plans updated? Are they 
reviewed by the state regulatory commissions or any other regulatory 
bodies? How are critical facilities identified and prioritized for the 
purposes of such plans?
    Answer. FPA section 215 provides that, in the event of system 
emergencies, Transmission Operators and Balancing Authorities 
(Balancing Authorities balance electric load and resources, mainly 
generation, in an assigned area) on the bulk power system are required 
by reliability standard EOP-001 (Emergency Operations Planning) to have 
emergency plans. (EOP-001 was developed by NERC's standards development 
process and approved by FERC.) This standard also requires that in 
developing these emergency plans, entities consider, among other 
things, fuel supply and inventory, load management and voltage 
reductions, and load curtailment. Attachment 1-EOP-001-0 to EOP-001 
describes load curtailment as ``A mandatory load curtailment plan to 
use as a last resort. This plan should address the needs of critical 
loads essential to the health, safety, and welfare of the community. 
Address firm load curtailment.'' There is no further direction in the 
standard about ``critical loads.'' The standard requires Transmission 
Operators and Balancing Authorities to review and update each emergency 
plan annually. The emergency plans are provided to the area's 
Reliability Coordinator and to neighboring Transmission Operators and 
Balancing Authorities. Compliance with the requirements of standard 
EOP-001 is primarily monitored and enforced by the Regional Entity for 
that area (there are 8 Regional Entities that cover the contiguous 48 
states). NERC and FERC oversee the regional compliance and enforcement 
activities. In the majority of cases, the affected entities identify 
loads at the retail level that will be curtailed in the event of system 
emergencies. FERC does not generally require submission of information 
on these plans for curtailing firm load and does not track whether each 
state reviews these emergency plans, and in particular the treatment of 
``critical loads.'' Finally, apart from FPA section 215, the Commission 
has certain authority over curtailment plans under FPA section 202(g). 
The latter's requirements appear to overlap significantly the 
requirements of EOP-001 as proposed by NERC and approved by the 
Commission, but the Commission has not reevaluated its pre-existing 
authority since approving EOP-001.
    Question 4. What are the connections between FERC's inquiry and 
NERC's event analysis and natural gas study?
    Answer. Although NERC has initiated an analysis of the problems on 
the bulk power system relating to the weather events in question, 
FERC's jurisdiction is broader than that of NERC, and includes 
oversight of NERC in its role as the ERO. Moreover, FERC has 
responsibilities and authorities under the Natural Gas Act and the 
Natural Gas Policy Act that apply here, beyond issues solely related to 
the bulk power system. To avoid duplication of efforts, we are 
coordinating with NERC but our inquiry is broader and addresses not 
only the reliability of the bulk power system, but also examines the 
roles and responsibilities of natural gas pipelines under our 
jurisdiction. Both NERC and FERC are examining the interplay between 
the natural gas and bulk power segments ofour energy infrastructure.
   Responses of Joseph McClelland to Questions From Senator Tom Udall
    Question 1. Are water utilities usually classified as critical 
infrastructure and protected from blackouts?
    Answer. As explained in response to question 3 above, the 
Commission does not generally require submission of information on 
plans for curtailing firm load or ``critical loads.'' The vast majority 
of water utilities receive service at the retail level. Classification 
of retail loads as critical infrastructure is not jurisdictional to 
FERC and should be resolved between the water utility, the electric 
utility, and the applicable state public utilities commission.
    Question 2. Are you going to consider classifying natural gas as 
critical infrastructure to be protected from rolling blackouts, at 
least during winter?
    Answer. As part of the Commission's inquiry into this outage, it 
will identify and examine the factors that caused this incident, 
including the interdependency of the Bulk Power System and natural gas 
pipelines. The purpose of this work will be to produce recommended 
actions to prevent a recurrence of this problem. As part of this 
initiative, we plan to consider how natural gas facilities were 
considered, and subsequently treated, during this system emergency. In 
this respect, I would highlight two sections in the reliability 
standards relevant to the designation of natural gas facilities as 
either critical loads or critical infrastructure.
    First (as was detailed earlier), reliability standard EOP-001 
requires the applicable entities to have emergency plans. This standard 
also requires that in developing these emergency plans, entities 
consider, among other things, fuel supply and inventory, load 
management and voltage reductions, and load curtailment. Attachment 1-
EOP-001-0 to EOP-001 describes load curtailment as ``A mandatory load 
curtailment plan to use as a last resort. This plan should address the 
needs of critical loads essential to the health, safety, and welfare of 
the community. Address firm load curtailment.'' There is however, no 
further direction in the standard about ``critical loads,'' including 
whether or not natural gas facilities should be designated as such.
    Second, the group of Critical Infrastructure Protection (CIP) NERC 
standards address the identification of assets by defining them as 
``facilities, systems, and equipment which, if destroyed, degraded, or 
otherwise rendered unavailable, would affect the reliability or 
operability of the Bulk Electric System.'' Additionally, to identify 
which facilities are critical assets, the reliability standards 
implement a risk-based assessment that requires entities to consider 
the following assets: certain control centers and backup control 
centers, certain transmission substations, generation resources, 
systems and facilities critical to system restoration, certain systems 
and facilities critical to automatic load shedding, certain special 
protection systems, and any additional assets that support the reliable 
operation of the Bulk Electric System that the Responsible Entity deems 
appropriate to include in its assessment. These are not applicable to 
facilities outside the Bulk Power System, however, as each responsible 
entity must identify. ``its Critical Assets,'' which implies that the 
only critical assets to be identified are the ones under the ownership 
or control of that entity.
    It is important to note here, that although the standards can be 
modified to require that natural gas infrastructure be included as 
critical loads, the Commission does not have the authority to either 
author or modify these standards. By statute, the Commission depends 
upon the ERO to accomplish this objective, which is subject to 
stakeholder vote through its reliability standards development process.
    Question 3. This incident shows that the reliability of electricity 
and natural gas systems is intertwined. Is this a trend in the U.S. 
energy system?
    Answer. Yes, there has been a trend for over a decade of more 
reliance by the electric industry on generation fueled by natural gas. 
Influences contributing to this trend include the lower emissions of 
natural gas-fired generation, less difficult siting and permitting of 
natural gas-fired generation, increased supplies of natural gas, and 
lower up-front capital cost to construct natural gas-fired generation. 
This singlesource fuel dependency can present challenges such as larger 
generation losses through single-mode failures (i.e., gas pipelines), a 
lack of on-site fuel storage (if dual-fuel generation is not 
installed), constrained fuel infrastructure, and higher 
interdependencies between the generators and the gas pipelines.
    Question 4. Do you have full authority for reliability within Texas 
electricity system and are you able to fully conduct investigations 
involving Texas?
    Answer. Subject to the limitations of section 215 of the FPA that 
have been previously detailed, the Commission has electric reliability 
authority for the Bulk-Power System within Texas. Sections 215(b)(1) 
and section 215(k) of the FPA, 18 U.S.C. Sec.  824o(b)(l) and 824o(k) 
(2006), provide that the Commission shall have jurisdiction, within the 
United States, except for Alaska and Hawaii, over the ERO (i.e., NERC), 
each Regional Entity, and all users, owners and operators of the Bulk-
Power System, for purposes of approving reliability standards and 
enforcing compliance. Although the part of Texas that lies within the 
footprint of the Electric Reliability Council of Texas (ERCOT) 
generally is not subject to the Commission's jurisdiction over the sale 
for resale and transmission of electric energy in interstate commerce 
under Part II of the FPA, the Commission has section 215 authority over 
reliability of the Bulk-Power System within ERCOT as well as in the 
rest of Texas.
    The Commission has full authority under section 215, other FPA 
provisions, and its regulations to investigate issues relating to 
reliability of the Bulk-Power System within Texas as well as in other 
states for purposes of its Southwest Inquiry. In particular, section 
39.2(d) of the Commission's regulations, 18 C.F.R. Sec.  39.2(d) 
(2010), requires all users, owners and operators of the Bulk-Power 
System, as well as NERC and the relevant Regional Entities, to provide 
the Commission with all information necessary to implement section 215.
    Question 5. Does FERC have authority to look into market 
manipulation in Texas?
    Answer. Section 1283 of the Energy Policy Act of 2005, as 
implemented by 18 C.F.R. Sec.  lc.2 (2007), makes it unlawful to engage 
in market manipulation in connection with the purchase or sale of 
electric energy or the purchase or sale of transmission service subject 
to the jurisdiction of the Commission. The transmission grid that the 
ERCOT independent system operator administers is located solely within 
the State of Texas and is not synchronously interconnected to the rest 
of the United States. As a consequence, absent a jurisdictional nexus, 
the Commission generally does not have authority to prosecute market 
manipulation over the portion of Texas within the footprint of the 
ERCOT.
    Question 6. As a general matter, if a state or electric grid system 
that is relatively isolated, like Texas, adds more interconnections to 
other grids, does that make them more resilient in the event of local 
power plant failures?
    Answer. I believe that the answer to the question as stated is yes. 
However, a key phrase is ``local power plant failures.'' There may be 
no benefit and in fact, there will be a detriment to reliability if a 
neighboring grid is experiencing similar or worse failures at the same 
time.
                                 ______
                                 
     Responses of Gerrry Cauley to Questions From Senator Bingaman
    Question 1. NERC's mission is to ensure the reliability of the bulk 
power system of North America and promote reliability excellence. Are 
there industry standards, requirements, or guidelines for weatherizing 
electric generating units? If no, how would NERC and stakeholders from 
within electric industry the industry go about creating new reliability 
standards to address weatherization, if necessary? If yes, how would 
those same entities go about revising them, if necessary?
    Answer. Currently, there are no NERC reliability standards for 
weatherizing electric generation units. As noted in my testimony on 
February 21 in Albuquerque, the February 2011 extreme cold weather 
event analysis process may identify the need for such a standard. The 
development of any such standard, however, would need to be coordinated 
with other ANSI-accredited standards development organizations (such as 
the American Gas Association, the Institute for Electrical and 
Electronics Engineers, the Society for Mechanical Engineers, and the 
North American Energy Standards Board) and with the manufacturers of 
and companies providing service to generating units to avoid the 
creation of conflicting requirements related to weatherization of 
electric generation units. Additionally, Section 215 of the Federal 
Power Act, which is NERC's enabling legislation, limits the scope and 
purview of what may be addressed in a NERC Reliability Standard to 
those matters necessary to provide for the reliable operation of the 
bulk power system.
    NERC develops Reliability Standards using NERC's Reliability 
Standard development process, which is an ANSI-accredited process, and 
is outlined in NERC's Standard Processes Manual\1\. NERC's standard 
development process is coordinated to avoid conflict with other ANSI-
accredited standard development organizations and may entail developing 
standards jointly with another standards setting organization. For 
example, a NERC Reliability Standard may require generators to be 
installed to meet a range of predicted weather patterns, while another 
standard-setting organization may develop a construction standard 
identifying how to weatherize a generating unit.
---------------------------------------------------------------------------
    \1\ NERC's Standard Processes Manual was approved by the Federal 
Energy Regulatory Commission on September 3, 2010. NERC's Standard 
Processes Manual is available at: http://www.nerc.com/docs/standards/
sar/Appendix_3A_Standard_Processes_Manual_20100903_2_.pdf.
---------------------------------------------------------------------------
    A proposal to develop a new or revised reliability standard can be 
initiated at the request of any entity or individual. Some standards 
are proposed as a result of event analyses, some are proposed as a 
result of regulatory directives, and some are proposed as a result of 
other findings, such as an audit team finding that an existing standard 
needs revision.
    The first step in developing a new or revised standard is to 
establish a technical basis for the new or revised requirements. In the 
case of generator weatherization, this could include analysis of the 
data from the recent cold weather events to assist in establishing the 
criteria generators would need to meet to remain connected under 
specific low temperatures. Once there is a technical basis for the 
development of the requirements, a proposal for the standard is 
submitted to the Standards Committee (with or without a set of proposed 
requirements) and then posted for stakeholder review.
    If stakeholders agree on the scope of the proposed standard, a 
standard development project is initiated and, if not already in place, 
the Standards Committee will appoint a drafting team of experts to 
develop the standard. Upon development of the proposed standard, a 
ballot pool is formed from interested members of its registered ballot 
body. Approval of any standard action requires:

   A quorum, which is established by at least 75% of the 
        members of the ballot pool submitting a response with an 
        affirmative vote, a negative vote, or an abstention; and
   A two-thirds majority of the weighted segment votes cast 
        shall be affirmative. The number of votes cast is the sum of 
        affirmative and negative votes, excluding abstentions and non-
        responses.

    Proposed standards are reviewed and approved by the NERC Board of 
Trustees, and are then submitted to the U.S. Federal Energy Regulatory 
Commission, Canadian provincial regulators, and the Canadian National 
Energy Board. Once approved by FERC, the standards become legally 
binding on all owners, operators and users of the bulk power system in 
the United States.
    Question 2. Can NERC discuss how, generally, plans for firm load 
curtailment are crafted? How often are such plans updated? Are they 
reviewed by the state regulatory commissions or any other regulatory 
bodies? Does NERC have a role in crafting guidelines or standards for 
such plans? How are critical facilities identified and prioritized for 
the purposes of such plans?
    Answer. Load shed plans have traditionally been the responsibility 
of the Load Serving Entity [utility] and developed in conjunction with 
coordinated emergency planning performed by state and local government 
agencies. This allows for local management and decision making on how 
to best plan for and implement emergency procedures if rotating 
blackouts are required. NERC's only role with regard to load shedding 
is to require that each Transmission Operator and Balancing Authority, 
working in conjunction with its Load Serving Entities, develop, 
maintain, and implement a set of plans for load shedding to be used as 
a last resort in managing electricity supply shortages in the event 
that becomes necessary. [Reliability Standard EOP-001-1, Requirement 
R2.3]
    Electric utilities typically identify the circuits available for 
use in rotating outages in accordance with policies developed by state 
and local government agencies. Distribution circuits (overhead or 
underground electrical lines that supply power to a combination of 
customers within a given geographical area) are classified by disaster 
importance and placed into groups that represent all customer types 
(i.e., residential, commercial and industrial) and are dispersed 
throughout a utility's service area. Each group includes a number of 
circuits that comprise a given number of megawatts of electricity usage 
per group (say 50 or 100 megawatts per group), with each circuit 
generally serving between 1,000 to 2,000 customers, depending on the 
nature of the utility's service territory and customer mix.
    Most of an electric utility's distribution circuits are subject to 
firm load shedding (rotating outages) when a serious supply emergency 
arises. Under state public utility commission or local government rules 
or policies, only those circuits that serve specifically designated 
classes of customers who provide essential public health, safety, and 
security services (such as large hospitals, fire and police stations, 
911 emergency control rooms, energy pumping stations, water and sewage 
treatment facilities, generating station auxiliary loads, TV/radio 
broadcast sites, key government sites, etc.) are exempted from rotating 
outages. Some of these circuits may also be interrupted if the supply 
emergency is serious and long-lasting enough. In those cases, circuits 
serving facilities that have their own independent back-up generators 
could be interrupted.
    Plans for rotating outages are typically reviewed annually, and in 
some cases more frequently, by the distribution arm of each utility, 
with high level changes filed with the appropriate state or local 
government agencies. Some states have a mandatory utility disaster/
major event/major weather plan requirement. In some cases, the 
governmental authority may set the criteria for what must be considered 
highly critical loads. Also, anytime a switching procedure moves a 
critical load to an adjacent circuit, the ``new'' feeder is added to 
the exempt list.
    Question 3. What lessons were learned from cold weather events that 
impacted energy production in Arizona and Colorado in 2007 and 2006 
respectively? Were changes required and implemented?
    Answer. In January 2007, there was a cold weather event impacting 
Arizona's Salt River Project (SRP). The extreme cold weather, loads 
greater than forecasted, and the loss of eight critical generating 
resources forced adjacent control areas into a ``capacity limited'' 
condition. Backup generation failed to start, which exacerbated the 
situation.
    In its review of the event, SRP determined its Valley plants 
experienced freezing of instrument sensing lines as a result of the 20-
year freeze that occurred. SRP developed and implemented plans to 
insulate and heat trace all critical plant instrumentation to avoid 
this situation recurring in the future.
    In addition, because dispatchers were not aware of the California 
Independent System Operator (CISO) Emergency Assistance procedure or 
impact to CISO System, they did not notify the Reliability Coordinator 
of the seriousness of the situation. Protocols were subsequently put in 
place and conveyed to SRP marketing and dispatching to notify the 
Reliability Coordinator prior to emergency energy requests.
    In February 2006, Public Service Colorado (PSCO) began to 
experience electric generation plant failures due to the combination of 
cold weather, high humidity and other mechanical issues. During the 
event, 18 generators tripped off line or had their output limited. The 
controlled load shedding implemented by PSCO involved approximately 
100,000 customers for approximately 30 minutes each.
    PSCO and the Western Electricity Coordinating Council (WECC), 
separately and together, studied the event and developed 
recommendations in a number of areas, including: weather forecasting; 
protocols for gas control/supply, economic dispatch, energy trading, 
reserve levels and planning criteria; communications protocols between 
and among gas and electric arms of PSCO as well as with the Reliability 
Coordinator; power plant equipment modifications; procedures for 
identifying and communicating information regarding fuel-restricted 
generation resources; possibility of additional gas storage facilities; 
effect of the gas trading cycle on ability to procure additional gas 
supplies; and impact of air quality regulations during electricity 
supply emergencies.
    It appears that the individual entities involved in these events 
identified the problems that led to the event and made appropriate 
changes. One focus of the current NERC inquiry will be to identify ways 
to share that learning more broadly, so that all entities subject to 
extremely low temperatures can take appropriate preventive action.
    Question 4. What are the connections between NERC's event analysis 
and natural gas study and FERC's inquiry?
    Answer. Operational coordination, communication, and cooperation 
between electric utilities and gas suppliers and pipelines is important 
during all conditions, especially when extreme weather has the 
potential to affect either or both electric and gas infrastructures. In 
1994, NERC and the Interstate Natural Gas Association of America 
(INGAA) recommended that electric and interstate natural gas pipelines, 
through NERC and INGAA, jointly review the reliability of electric 
supply to critical interstate gas pipeline facilities, such as 
compressor stations. Specifically, the recommendation stated that 
interstate gas pipelines should contact the electric utilities that 
supply electricity to these critical gas facilities and review 
cooperatively with them how that supply might be adversely affected 
during an electricity supply emergency; e.g., a rolling blackout or 
other emergency electricity interruption. The Natural Gas Council 
(NGC), on behalf of its member organizations--INGAA, the Natural Gas 
Supply Association, the American Gas Association, and the Independent 
Petroleum Association of America--has asked to work with NERC to gain a 
fuller understanding of what transpired during the cold snap in early 
February in the southwestern U.S. and to evaluate any and all measures 
that could be applied to prevent similar issues in the future.
    NERC will perform a special reliability assessment that takes a 
broad view for the upcoming 10 years across all areas of North America. 
The assessment will include vulnerability studies where extreme cold 
weather or loss of a major gas supply could impact electricity 
production, review existing procedures designed to mitigate the 
reliability impacts from such events, identify opportunities for 
improved coordination and cooperation between planners and operators in 
both industries, and provide input into NERC's Reliability Standards, 
if required. Additionally, this reliability assessment will review the 
recommendations from the 2004 NERC study on gas and electric 
interdependencies provide an update and status on these 
recommendations, determine follow-on actions to fulfill 
recommendations, and present guidance to reduce potential 
vulnerabilities.
    The study will be divided into two parts:

    Part I: A qualitative assessment and primer on gas and electric 
interdependencies, including: review of the 2004 recommendations; 
assessment of natural gas supply and transportation issues; comparison 
of electricity generation operation and planning versus gas pipeline 
operation and planning; electric industry coordination challenges; 
contribution to vulnerabilities; assessment of existing Regional 
practices and operational procedures for managing gas pipeline and fuel 
delivery vulnerabilities; discussion of modeling requirements to 
simulate severe pipeline failures; and discussion of potential best 
practices for coordination between the electric and gas pipeline 
industries.
    Part II: A quantitative analysis representing gas pipeline 
vulnerabilities through contingency simulations, including: determining 
areas most vulnerable to gas pipeline disruptions; modeling pipeline 
dynamics to determine leading indicators of catastrophic pipeline 
disruption and associated timing for industry reaction; detailed 
analysis of compressor station failures and their contribution to 
reduction in pipeline throughput; evaluation of historical events and 
lessons learned; and recommendations for improving gas-fired generation 
reliability and reducing vulnerabilities associated with the 
interdependencies of the electric and gas pipeline industries.

    NERC is working closely with FERC in their inquiry as FERC has much 
broader jurisdiction, including portions of the natural gas 
infrastructure. All information we gather and conclusions we draw from 
our analysis will be shared with the FERC.
    Question 5. Has the NERC undertaken an event analysis before? If 
so, how long did that analysis last and how did NERC transfer lessons 
learned and best practices across users, owners and operators of the 
bulk power system?
    Answer. Yes, NERC frequently undertakes event analyses, typically 
working with the relevant Regional Entity. NERC led two bulk power 
system event analyses following recent major events. First, NERC was 
the technical lead for the U.S. and Canadian Task Force that conducted 
an event analysis of the Northeast Blackout of August 14, 2003. As part 
of that effort, NERC established a Steering Group of industry experts. 
Second, NERC led an event analysis of the Eastern Interconnection 
Frequency Excursion (Rockport Event) of August 4, 2007. Information 
regarding these two event analyses is provided below.

          A. Northeast Blackout of August 14, 2003

                  1. The initiation and close date

                          a. Start date of August: 15, 2003
                          b. Date of interim report: November 19, 2003
                          c. Date of final report: April 5, 2004

                  2. The length of time it took to complete the event 
                analysis

                          a. Time to preliminary report: 3 months
                          b. Time to final report: 7.5 months

                  3. Method of Communicating Lessons Learned and Best 
                Practices

                          a. The NERC Steering Group developed a public 
                        report, entitled Technical Analysis of the 
                        August 14, 2003, Blackout: What Happened, Why 
                        and What Did We Learn?, dated July 13, 2004.
                          b. Technical Conferences were held by the 
                        Task Force, in which NERC participated.
                          c. Recommendations to users, owners and 
                        operators of the bulk power system were set 
                        forth in the final report. In addition, 
                        specific corrective actions for certain 
                        entities were included in Appendix D of the 
                        final report, entitled NERC Actions to Prevent 
                        and Mitigate the Impacts of Future Cascading 
                        Blackouts.
                          d. The Task Force issued a report one year 
                        after the event, entitled One Year Later: 
                        Actions Taken in the United States and Canada 
                        to Reduce Blackout Risk, August 13, 2004.
                          e. NERC issued Final Blackout 
                        Recommendations, dated July 14, 2004.
                          f. NERC issued a Status Report of the August 
                        14, 2003 Blackout Recommendations, dated July 
                        14, 2005.

          B. Eastern Interconnection Frequency Excursion (Rockport 
        Event) of August 4, 2007

                  1. The initiation and close date

                          a. Start date of: August 28, 2007
                          b. Date of final report: December 19, 2008

                  2. The length of time it took to complete the event 
                analysis

                          a. Time to final report: 15.5 months

                  3. Method of Communicating Lessons Learned and Best 
                Practices

                          a. Recommendations to specific users, owners 
                        and operators of the bulk power system were set 
                        forth in the final non-public report.

    NERC and the Regional Entities have worked together on other 
significant Regional Entity-led event analyses. Two of these recent 
efforts are identified below.

          A. MRO separation event of September 18, 2007 (led by MRO)

                  1. The initiation and close date

                          a. Start date of: October 5, 2007
                          b. Date of interim report: March 26, 2008
                          c. Date of final report: December 11, 2008

                  2. The length of time it took to complete the event 
                analysis

                          a. Time to preliminary report: 5.5 months
                          b. Time to final report: 14 months

                  3. Method of Communicating Lessons Learned and Best 
                Practices

                          a. NERC published a public Advisory entitled, 
                        Power Flow and Dynamics Modeling, issued March 
                        10, 2008.
                          b. Recommendations to users, owners and 
                        operators of the bulk power system were 
                        included in the final report. In addition, 
                        specific recommendations for certain entities 
                        were included in the final report.

          B. South Florida Disturbance of February 26, 2008 (led by 
        FRCC)

                  1. The initiation and close date

                          a. Start date of: March, 2008
                          b. Date of interim report: May 29, 2008
                          c. Date of final report: October 30, 2008

                  2. The length of time it took to complete the event 
                analysis

                          a. Time to preliminary report: 3 months
                          b. Time to final report: 8 Months

                  3. Method of Communicating Lessons Learned and Best 
                Practices

                          a. NERC published three advisories as a 
                        result of this event analysis.

                  1. Relay Maintenance Practices, issued June 26, 2008
                  2. Unexpected Loss of Generation due to Low Voltage 
                on the System, issued June 26, 2008
                  3. Turbine Combustor Lean Blowout, issued June 26, 
                2008

                          b. Recommendations to users, owners and 
                        operators of the bulk power system were 
                        included in the final report.
     Responses of Gerrry Cauley to Questions From Senator Tom Udall
    Question 1. Are water utilities usually classified as critical 
infrastructure and protected from blackouts?
    Answer. Water utilities are generally considered higher in the 
ranking of critical loads for utilities. It is our understanding there 
may be cases in extreme electricity supply emergencies where circuits 
that serve water utilities and other critical customers could be 
interrupted if those customers have their own backup supply systems, 
such as emergency generators.
    Question 2. Are you going to consider classifying natural gas as 
critical infrastructure to be protected from rolling blackouts, at 
least during winter?
    Answer. NERC is keenly aware of gas-electric interdependencies, and 
the events of early February in the Southwest underscore the need to 
address some unresolved issues. Cooperation and assistance from the 
natural gas industry and its member organizations will be particularly 
helpful in a review of these interdependencies, given the shift 
nationwide toward greater reliance on natural gas to produce 
electricity. In addition, this review will provide a broad look at 
areas across North America where extreme cold weather or loss of a 
major gas supply or delivery element could impact electricity 
production. NERC's event analysis process will include a review of 
existing procedures designed to mitigate the reliability impacts from 
such events as well as identify if rotating outages of electric 
distribution circuits could adversely impact the operation of electric 
powered gas compressors, gas processing facilities, and other equipment 
needed to maintain gas quality and throughput on gas delivery systems. 
We need to understand the unique circumstances of the cold weather 
event that impacted much of New Mexico and Texas, and determine why 
lessons from the past were either unable to be applied or were not 
applied in this event. Were there problems with the electric/gas 
interfaces? Was this an issue solely about winterization of equipment? 
Fuel sources do not have to be identified as critical infrastructure in 
order for NERC to issue lessons learned or to begin a process to 
identify and disseminate valuable information to users, owners, and 
operators of the bulk power system to improve its reliable operation.
    The recent events in Texas may show the need for utilities to 
classify some natural gas pumping stations with higher criticality for 
ranking in load shedding plans. However, we must be mindful that the 
more loads exempted from load shedding, the more it will hinder the 
response to protect the reliability of the overall network and burden 
remaining customers. A higher ranking cannot guarantee a load will not 
be shed. Classifying more load as highly critical also challenges 
under-frequency and under-voltage protection schemes which must act 
swiftly and automatically.
    Question 3. This incident shows that the reliability of electricity 
and natural gas systems is intertwined. Is this a trend in the U.S. 
energy system?
    Answer. Yes, but this is not a new trend. NERC has been examining 
gas-electricity interdependencies since at least 1994 when NERC and the 
Interstate Natural Gas Association of America (INGAA) jointly 
recommended that electric utilities and interstate natural gas 
pipelines, through NERC and INGAA, review the reliability of electric 
supply to critical interstate gas pipelines facilities, such as 
compressor stations. With growing supplies and lower prices resulting 
from the growth of unconventional gas production in North America, gas-
fired generation appears to be the premier choice for new generating 
capacity in the near to mid-term future. However, increased use of 
natural gas for generating capacity can increase the bulk power 
system's exposure to interruptions in gas supply and delivery.
    Several drivers are contributing to the growth in gas-fired 
generation, and as a result, growth in natural gas demand and pipeline 
infrastructure. Natural gas-fired plants are typically easier to 
construct, require little lead-time, emit less CO2, and are generally 
cheaper to construct when compared to coal and oil-fueled generation 
facilities. Certain states have placed or plan to place a moratorium on 
building new coal plants, citing environmental and emissions concerns 
as justification.\1\ These trends are expected to continue over the 
next several years, further increasing the number of new-build natural 
gas-fired generating plants in areas with already high dependence on 
gas for electricity generation.\2\
---------------------------------------------------------------------------
    \1\ California's SB 1368 created the first de facto governmental 
moratorium on new coal plants in the United States. Other states with 
pending proposals include Arkansas, Georgia, Idaho, Maine, New Jersey, 
Texas, Utah, Washington, and Wisconsin--though some are temporary. 
Additionally, Ontario and British Columbia have also begun initiatives 
to not only halt new coal-fired generation, but also reduce coal-fired 
generation.
    \2\ A detailed fuel assessment int he 2009 Long-Term Reliability 
Assessment: http://www.nerc.com/files/2009_LTRA.pdf
---------------------------------------------------------------------------
    The importance of maintaining bulk power system reliability through 
strong coordination with the gas pipeline industry is magnified as 
increased system variability materializes. On the supply side, 
increased variable generation (primarily wind and solar) will require 
more fast-acting and responsive resources to provide ancillary 
services. Today, gas-fired generation is largely used to provide 
ancillary services for supporting the variability in wind generation. 
Unexpected events, such as pipeline disruptions, unit outages, and 
extreme weather impacts, must be effectively coordinated between all 
stakeholders. Increased communication and information sharing will be 
essential in maintaining the reliability of both systems.
    A 2004 report by NERC's Gas/Electricity Interdependency Task Force 
concluded:

   Gas pipeline reliability can substantially impact electric 
        generation.
   Electric system reliability can have an impact on gas 
        pipeline operations.
   In general, pipeline and electric system operators do not 
        understand each other's business very well.
   Pipeline planning and expansion are substantially different 
        from the electric equivalent.
   Communications between pipeline operators and electric 
        reliability coordinators are generally weak.
   Pipeline tariffs for firm delivery service are not 
        compatible with peaking generation economics in many 
        electricity markets.
   Modern combustion turbines have stringent fuel delivery and 
        fuel quality requirements.

    Mitigating strategies, such as storage, firm fuel contracting, 
alternate pipelines, dual-fuel capability, nearby plants using other 
fuels, or additional transmission lines from other regions, can help 
manage this risk.
    NERC is currently developing a Special Reliability Assessment on 
natural gas and electric systems interdependencies. To address these 
concerns, this reliability assessment will take a broad view for the 
upcoming 10 years of areas within North America where extreme cold 
weather or loss of a major regional gas supply could impact electricity 
production, review existing procedures designed to mitigate the 
reliability impacts from such events, required coordination between 
planners and operators in both industries, and provide input into 
NERC's Reliability Standards, if required. NERC will identify the 
reliability impacts that natural gas/electricity interdependencies 
could have across North America.
    Additionally, this reliability assessment will review the 
recommendations from the 2004 NERC study on gas and electric 
interdependencies, provide a status update on these prior 
recommendations, determine follow-on actions to fulfill those 
recommendations, and present guidance to reduce potential 
vulnerabilities.
    Question 4. Do you have full authority for reliability within Texas 
electricity system and are you able to fully conduct investigations 
involving Texas?
    Answer. NERC has jurisdiction and authority over the bulk power 
system within the State of Texas, both for the portions of the bulk 
power system within the Electric Reliability Council of Texas (ERCOT) 
and for the portions of the State of Texas that are outside ERCOT. NERC 
does not have jurisdiction or authority over the local distribution 
portion of the electricity system within the State of Texas. NERC 
believes it has all the authority it needs to conduct a full inquiry 
into the events and circumstances surrounding the extreme cold weather 
that severely affected multiple regional entities and multiple states 
in early February, including within the State of Texas.
    Question 5. As a general matter, if a state or electric grid system 
that is relatively isolated, like Texas, adds more interconnections to 
other grids, does that make them more resilient in the event of local 
power plant failures?
    Answer. While additional interconnection capacity adds to the 
resiliency of any interconnected grid, as a grid becomes larger the 
relative benefits of such additional interconnection capacity becomes 
less significant. Further, simply adding additional interconnection 
capacity at the border of a grid system does not guarantee that all 
imported electricity can be delivered from that point of 
interconnection to all areas within the grid due to internal 
transmission constraints. In general, a small isolated electric grid 
needs a larger percent installed resource margin (installed resources 
minus forecast demand as a percent of forecast demand) to achieve the 
same level of supply adequacy (reliability) as a system that is part of 
a larger interconnected grid.
                                 ______
                                 
   Responses of Shelley A. Corman to Questions From Senator Bingaman
    Question 1. It appears that ERCOT issued various Energy Emergency 
Alerts between 5:00 a.m. and 6:00 a.m. on Wednesday February 2nd. Was 
Transwestern Pipeline aware of these emergency alerts? If not, when was 
Transwestern Pipeline aware of the rolling electricity blackouts in the 
ERCOT service territory?
    Answer. Transwestern was not contacted by ERCOT informing 
Transwestern of these ERCOT Energy Emergency Alerts. Transwestern 
personnel became aware of rolling electricity blackouts on Wednesday, 
February 2nd at the same time that the general public was made aware 
through television reports.
    Once aware of the publicly announced rolling electricity outages in 
Texas, Transwestern checked with the building manager about any 
potential outages affecting its Houston office, which includes its gas 
control center. The building manager told Transwestern that no power 
outages to the Houston office building were expected. Transwestern also 
verified that its back-up generator was available to maintain power to 
its gas control center and made preparations for conducting its gas 
control operations from Transwestern's back-up gas control site if 
necessary. In fact, Transwestern's Houston office building did not 
experience any power outages, and Transwestern did not have to utilize 
its back-up generator or relocate gas control operations.
    Transwestern did not experience any power outages at its compressor 
stations which impeded its ability to receive or deliver gas to 
shippers in New Mexico. Transwestern did experience some power outages 
to certain auxiliary field facilities (i.e., field office building 
power and telecommunications equipment). One of these field locations 
(Kermit, TX) is located within ERCOT. Transwestern has back-up 
generators for many of these locations. Auxiliary power issues did not 
impede Transwestern's ability to receive or deliver gas to shippers in 
New Mexico.
    Question 2. Did Transwestern Pipeline Company communicate with 
ERCOT, natural gas processing plants and/or suppliers of natural gas in 
anticipation of the severe weather conditions of early February? Are 
there any regulatory requirements or industry practices requiring 
communications with your customers?
    Answer. Transwestern does not communicate directly with ERCOT. 
Transwestern communicates directly with its utility providers for 
electricity supplied to its field office buildings and electric 
compressor units. If power to any of these facilities is disrupted, the 
utility provider would communicate with Transwestern's local field 
office.
    Transwestern communicates with the gas processing and supplier 
facilities that are directly connected to its pipeline. Several times a 
day these parties verify the expected quantities of gas supply that 
they will put into Transwestern's pipeline. To the extent actual gas 
supply flows differ from the planned quantities, Transwestern gas 
control contacts the gas processing or supply facility operators to 
discuss these differences and determine the appropriate plan of action.
    Transwestern provides notices to its shippers on its Internet 
website. Transwestern's FERC gas tariff describes the timing and types 
of communication notices to be made to operators and shippers in the 
event of adverse operating conditions.
    Question 3. Has Transwestern Pipeline Company had discussions with 
electric utilities that serve its facilities regarding the inclusion of 
its assets in their blackout operations plans?
    Answer. Not directly. Transwestern is generally aware of public 
comments from ERCOT and FERC about the need to address the priority of 
gas facilities in electric curtailment plans. Transwestern is also 
generally aware that this matter has been discussed in proceedings at 
the Public Utility Commission of Texas.
    Question 4. According to a Transwestern Critical Notice (posted on 
February 2nd), it appears that low gas volumes on the Transwestern 
Pipeline system were due, in part, to less gas than scheduled being 
injected at a receipt point. Do you know why these supplies were not 
received? What processes do you follow for maintaining delivery service 
during these events?
    Answer. Transwestern does not have independent knowledge of why 
less gas than scheduled was being input. Transwestern gas controllers 
received comments from third-party operators about power outages, 
freeze offs, and difficulties starting and keeping equipment running.
    Transwestern's FERC gas tariff describes the steps that it is 
permitted to take during low line pack conditions, including the right 
to issue underperformance notices, reduce scheduled quantities when 
supplies are not being received, and issue Alert Day notices advising 
operators to adhere to scheduled quantities.
    Before and during this winter weather event, Transwestern operated 
compression to move gas to the areas of greatest demand and maintain 
pressures as high as possible given the amount of natural gas in the 
pipeline. Transwestern continued to support deliveries by using its 
line pack (its own gas in the pipeline) to make up for gas not being 
received into the pipeline.
    Question 5. Even if New Mexico Gas Company had Found suppliers to 
inject natural gas at a delivery point, would New Mexico Gas Company 
have been able to withdraw gas on February 3rd, given the lower line 
pack in your system?
    Answer. Transwestern did not prevent New Mexico Gas Company from 
withdrawing gas from the pipeline on February 3 or at any time during 
the winter weather. Although mainline pressures on February 3 were 
lower than prior days, the pressures at all time remained above 
contractual minimum pressures. If suppliers had been able to physically 
put more supply into Transwestern's pipeline, then pressures would 
likely have remained higher.
    Question 6. Has Transwestern identified steps and measures it can 
implement immediately, on its own, that would mitigate the severity of 
these kinds of events?
    Answer. Transwestern cannot control the underperformance of 
supplies into its system. Transwestern used the tools within its 
control to maximize the gas available for delivery to New Mexico 
delivery points during the recent winter weather, while not adversely 
affecting service to the other portions of its system. Before and 
during the February extreme winter weather, Transwestern operated 
compression to maximize pressures in New Mexico given the quantities of 
gas in its system. Transwestern also used its line pack gas to offset 
to the extent possible customer supplies that were not being received 
into Transwestern. Transwestern also took steps pursuant to its FERC 
gas tariff to address the situation, including posting operational 
alert notices.
    Additionally, Transwestern plans to meet with interconnected 
parties, including New Mexico Gas Company, to review operating 
pressures and determine whether any facility modifications are 
warranted.
   Responses of Shelley A. Corman to Questions From Senator Tom Udall
    Question 1. It is my understanding that the gas processing plants 
that went down in the Texas blackouts feeds gas into your systems. Do 
you have an idea of how many gas processing plants were lost?
    Answer. Transwestern does not know how many processing plants were 
impacted by freeze offs, power outages or production outages. 
Transwestern is aware which supply facilities connected to Transwestern 
were underperforming and posted many notices of underperforming 
receipts, including processing plants. A review of operating data 
indicates that 7 directly connected gas processing plants gave 
Transwestern less gas than scheduled on either February 2, 3 or both 
days. These plants are located in both New Mexico and Texas.
    Question 2. Would it help you to provide gas to your customers if 
critical natural gas infrastructure was not subject to rolling 
blackouts? Is that a good policy?
    Answer. Yes, it would be a helpful policy if natural gas 
infrastructure (including processing plants, gas compression 
facilities, and gas control centers) was not subject to rolling 
blackouts. Transwestern welcomes the opportunity to work with this 
Senate Committee to ensure natural gas infrastructure is recognized as 
a priority in any future policy discussions.
    Question 3. Your testimony states that both of your systems did not 
experience any major failures. Are you subject to federal regulation on 
this issue?
    Answer. Transwestern is an interstate natural gas pipeline 
operating pursuant to a certificate of public convenience and necessity 
issued by the FERC and under a FERC gas tariff containing the terms and 
conditions of service for its shippers. The operation of Transwestern's 
system is also subject the federal Natural Gas Act and related rules, 
regulations and policies of the FERC.
    Transwestern did not experience any power outages at its compressor 
stations which impeded its ability to receive or deliver gas to 
shippers in New Mexico. Transwestern did experience power outages to 
certain auxiliary field facilities (i.e., field office building power 
and telecommunications equipment). However, in many cases Transwestern 
has back-up generators and these auxiliary power outages did not impede 
Transwestern's ability to receive or deliver gas to shippers in New 
Mexico.
    Question 4. Did you seek reductions from large, non-residential 
utility customers to help conserve gas during the crisis? What was the 
response?
    Answer. As noted above, Transwestern is an interstate natural gas 
pipeline that provides transportation-only service to its customers, 
Transwestern does not own the gas that its shippers purchase and put 
into the pipeline for transportation. Accordingly, Transwestern does 
not have a supply curtailment plan in its FERC gas tariff.
    In the event of supply shortfalls, Transwestern's FERC gas tariff 
allows it to issue underperformance notices and reduce scheduled 
quantities related to the underperformance. Its tariff also provides 
that Transwestern can issue an Alert Day notice advising shippers to 
adhere to scheduled quantities. Transwestern took both of these steps 
during the early February winter weather.
    Question 5. Did gas processing plants or gas suppliers notify you 
when their assets failed and stopped sending your customers gas into 
your system?
    Answer. In some cases, interconnected processing plants and 
suppliers notified Transwestern of reduced supplies and facility 
outages. In other cases, Transwestern gas control personnel contacted 
the gas processing plant operators and other supply facility operators 
when quantities were not being received as scheduled.
    Question 6. NM Gas Company is seeking industry contributions to the 
compensation fund. Have you been approached and what has been your 
response?
    Answer. Yes, Transwestern has been approached by New Mexico Gas 
Company regarding a contribution to its compensation fund.
    Transwestern and its parent company, Energy Transfer Partners, 
participate in a number of community outreach programs. When the 
Company receives a request to provide funding, the Company's internal 
review board reviews the request and the possible level of prospective 
funding from the Company. The Company's review board is currently 
evaluating the request from New Mexico Gas Company.
    Although the Company is undergoing its evaluation of New Mexico Gas 
Company's contribution request, Transwestern believes that it has 
already undertaken important actions in support of its customers in New 
Mexico. Before and during the February extreme winter weather, 
Transwestern operated compression to maximize pressures in New Mexico 
given the quantities of gas in its system. Transwestern also used its 
line pack system gas to offset to the extent possible customer supplies 
that were not being received into Transwestern. Transwestern also took 
steps pursuant to its FERC Gas tariff to address the situation, 
including posting operational alert notices. Transwestern used the 
tools within its control to maximize the gas available for delivery to 
New Mexico delivery points during the recent winter weather, while not 
adversely affecting service to the other portions of its system. 
Transwestern is proud of the manner in which it managed its system 
during this time and the efforts of its dedicated employees during this 
extreme weather event.
                                 ______
                                 
   Responses of George A. Schreiber, Jr., to Questions From Senator 
                                Bingaman
    Question 1. Does the New Mexico Gas Company follow specific 
operating procedures in the anticipation of extraordinary operating 
conditions? Do these procedures require it to communicate with 
suppliers, gas pipeline companies, agencies or people?
    Answer. Yes, New Mexico Gas Company (``NMGC'' or the ``Company'') 
has numerous policies and procedures in its Gas Operations Manual (GOM) 
for extraordinary operating conditions, including communications with 
suppliers, gas pipeline companies, agencies and or other people during 
such conditions. As indicated by the plan names, these documents 
address various aspects of dealing with extraordinary operating 
conditions.
    Specifically, the Company has a Company-wide Operations and 
Maintenance (O&M) Plan (GN-009) and separate O&M Plans for each 
operating location throughout the state for operations and 
communications during extraordinary operating conditions. The Company 
has Engineering/Design Policies during Emergencies, Interruptions, 
Curtailments (ED-012) and Engineering/Design Procedures for Emergency 
Plan Maintenance (ED-P05). The Company has Emergency Plan Policies as 
follows: General (EP-000); Pre-Emergency Plans (EP-001); Reviewing and 
Updating Emergency Plans (EP-002); Telephone Numbers (EP-003); Media/
Communications (EP-004); Plan of Action for Emergencies--Summary (EP-
005); Plan of Action for Gas Outage (EP-009); Plan of Action for 
Abnormal Operating Conditions and Transmission Systems (EP-010); Plan 
of Action for a Potential Incident(EP-011); Plan of Action for 
Disasters (EP-013), with Exhibits and Training Information(EP-014 
through 016); an Isolation Plan (EP-018); and a procedure for Meter 
Turn On, Turn Off, Set, Change or Outage (SI-P05).
    Additionally, for interruptions, curtailments and capacity 
allocations, as occurred during the week of January 31, 2011, NMGC 
operates pursuant to Original Rule No. 21, which was approved by the 
New Mexico Public Regulation Commission (``Commission''). A copy of 
Rule 21 is attached as *Exhibit 1. Rule 21 has provisions for notifying 
on-system transportation end-users prior to any interruption or 
curtailment of service under circumstances that do not constitute a 
system emergency. An on-system transportation end user is physically 
located on the NMGC system, but these end-users purchase their gas from 
a shipper, marketer or other third party, i.e. they do not purchase 
their gas from NMGC.
---------------------------------------------------------------------------
    * All exhibits have been retained in committee files.
---------------------------------------------------------------------------
    Different provisions of Rule 21 govern a system emergency. During a 
system emergency, NMGC is required to notify each transportation 
shipper of the system emergency as quickly as possible, but Rule 21 
does not require notification in advance of the system emergency 
curtailment. NMGC complied with the provisions of Rule 21 during the 
week of January 31, 2011. NMGC's general operating procedures provide 
for emergency notifications to key stakeholders. NMGC followed its 
emergency communications procedures during the week of January 31, 
2011.
    Section 17.10.650.14G(3) of the New Mexico Administrative Code 
(``NMAC'') requires that the Company notify the Commission by telephone 
of, and confirm by letter, any interruption to the service of a major 
portion of any single distribution system. This requirement was met 
with on February 3, 2011, when the telephonic notification was made, 
and on February 16, 2011, when a confirmation letter was filed.
    17.10.660.10E(6) NMAC requires that the Company provide to the 
Commission within 60 days of the end of an interruption, curtailment or 
system emergency actual volumes and time periods of the event for each 
transportation customer and the reasons for the interruption, 
curtailment, or system emergency. NMGC will file this report with the 
Commission on or before April 2, 2011.
    Question 2. Please detail the extent of your communications with El 
Paso Natural Gas Pipeline, TransWestern Pipeline and the Electric 
Reliability Council of Texas (ERGOT) between January 31st and February 
3rd.
    Answer. The communications are detailed in Exhibit 2, which is 
attached to this response.
    Question 3. Given that the New Mexico Gas Company provides natural 
gas services to Department of Defense facilities, are there formal 
communications protocols with those facilities in anticipation of 
extraordinary operating conditions?
    Answer. Yes. These installations are treated in the same way as all 
other customers under the Rule 21 procedures.
    Additionally, on February 4, 2010 (1 year prior to the recent 
outage), NMGC meet with Utility Managers and Contracting Officers at 
Kirtland AFB and Sandia labs to discuss the risk of service 
interruptions during extraordinary operating conditions. In particular, 
this group discussion was focused on the risk of curtailment and 
possible utilization of propane-air backup systems to supplement short-
term gas demands. This meeting and subsequent discussions were 
requested by KAFB and Sandia shortly after the decommissioning of their 
physical plant, which was capable of operating on alternate fuels. An 
expert on propane-air backup systems who has extensive experience with 
DOD facilities accompanied NMGC to the meeting. Based on the group 
discussion and analysis of redundant gas supplies available to the base 
and surrounding areas, the risk of interruption was characterized as 
relatively low. The final decision to invest in propane air back-up 
systems, however, was left with KAFB personnel and Sandia Energy 
Managers.
    Question 4. Did the New Mexico Gas Company cut off gas service to 
customers based on a formal or established service curtailment plan? If 
yes, how and when was that plan created? Was it reviewed and/or 
approved by the New Mexico Public Regulation Commission? If no, how did 
New Mexico Gas Company decide which communities to shut off over 
others?
    Answer. As identified above, for interruptions, curtailments and 
capacity allocations, NMGC operates pursuant to Original Rule No. 21. 
Rule 21 was initially adopted by the Commission when the gas utility 
assets were owned by NMGC's predecessor, Public Service Company of New 
Mexico. In January 2009, when NMGC acquired the gas utility assets, 
Rule 21 was adopted and approved by the Commission for use by NMGC.
    On February 2, 2011, pursuant to the provisions of Section VI of 
Rule 21, NMGC contacted its large industrial and commercial customers 
for voluntary curtailments of gas usage or to switch to alternate 
fuels. NMGC also asked residential customers to voluntarily conserve 
gas. On February 3, 2011, when system emergencies were declared first 
on the south segment of the NMGC system and then on the north segment 
of the NMGC system, consistent with Section V of Rule 21, communities 
were curtailed ``to ensure, to maintain the ability of the system to 
deliver natural gas to maintain the integrity of as many segments of 
the system as possible''. Because time was of the essence, the system 
segments and communities curtailed were those where the curtailment of 
gas service could occur quickly or those that were already experiencing 
pressure loss. In the south, this included portions of Alamogordo and 
all of Tularosa and La Luz. In the north, this included the towns of 
Bernalillo and Placitas and portions of Santa Ana Pueblo, Espanola and 
surrounding communities, including all of Santa Clara Pueblo, Ohkay 
Owingeh Pueblo, and portions of San Ildefonso Pueblo, and Taos and 
surrounding communities, including Taos Pueblo, Questa, and Red River.
    Question 5. Did the New Mexico Gas Company sell any gas to entities 
other than customers during the week of the outage or the week prior?
    Answer. NMGC did not enter into any off-system sales between 
January 31 and February 4, 2011--the week of the outage.
    As described below, NMGC entered into a baseload sale in December 
for each day in January, and there were two additional periods of 
incremental off-system sales in January, including during the week and 
weekend prior to the outage. In general, as described below, NMGC 
enters into gas sales when it has gas supply on its system in excess of 
demand and needs sales to balance system and storage levels. These 
baseload and incremental sales in January were consistent with this 
practice and did not contribute to the outages which occurred on 
February 3, 2011.
    Baseload Sale in December 2010 for January 2011--On December 22, 
2010, NMGC entered into a baseload sales contract providing for a 
baseload sale of 15,000MMBtu of gas for each day starting January 1' 
and ending January 31st. A sale of this nature is typically made based 
on long-term weather projections in order to maintain consistent 
storage inventories. This particular baseload sales contract was 
entered into in December for January based on unseasonably warm 
temperatures experienced in November and December, which had resulted 
in reduced NMGC storage flexibility, and on projections for a warm 
January. On December 22, 2010, NMGC's storage inventory stood at 
1,918,858MMBtu, and NMGC was averaging an injection of 10,000MMBtu per 
day of excess system supply gas. As of December 22, if this trend 
continued at the same rate (10,000 units per day), NMGC only had 28 
days of injection remaining before reaching its storage capacity. 
Because long-term weather forecasts were predicting January weather to 
be similar to December and November weather and January baseload 
volumes were expected to increase by 6,000MMBtu per day statewide in 
comparison to December baseload volumes, a decision was made to enter 
into a baseload sales contract for 15,000MMBtu per day throughout 
January 2011.
    Incremental Sales in January 2011--In addition to the baseload sale 
described above, twice in January 2011, NMGC entered into additional 
incremental sales: the first occurred between January 18 and 21; and 
the second occurred between January 27 and 31. Each was the result of 
excess storage injections resulting from warm weather periods.
    During the four-day period from January 15 to January 18, because 
of warm weather, NMGC had experienced reduced demand and had injected a 
total of 163,597MMBtu of excess supply into its storage facility near 
Andrews, Texas. As a result, on January 18, 2011, NMGC contracted to 
sell 6,500MMBtu for January 18th, 35,000MMBtu for January 19th, 
25,000MMBtu for January 20th, and 25,000MMBtu for January 21st. These 
sales were entered into in an effort to maintain proper system and 
storage levels.
    On January 27, 2011, coming off another period of warm weather, 
NMGC entered into a contract to sell 5,000MMBtu excess system supply 
for January 28th. On January 28th, for the same reasons, NMGC 
contracted to sell 10,000MMBtu for January 29th, 10,000MMBtu for 
January 30th, and 10,000MMBtu for January 31st. Typically, weekend 
contracts such as the one on the 28th are entered into on Friday for 
the entire weekend, or the weekend plus Monday, and again are common in 
the industry to maintain proper system and storage levels. The weather 
profile for the week ending January 28, 2011, and the projections for 
the weekend of the 29th through 31st were similar to the weather 
pattern for the weekend of January 15th through the 18th. As before, 
the sales during the period from January 27th though the 31st' were an 
effort to maintain system and storage levels following a warm period 
and were made to protect against a large injection into the storage 
facility.
       Responses of George A. Schreiber, Jr., to Questions From 
                           Senator Tom Udall
    Question 1. What is the status of your compensation efforts--how 
many claims have been filed, for how much, and what types of decisions 
are you making?
    Answer. As of March 14, 2011, 1540 claims for assistance have been 
filed. As for the amount claimed, many claims do not list a specific 
amount, so it is difficult to say what the total dollar amount of 
claims is or will be. NMGC has six teams working on contacting the 
claimants to discuss their claims. The Company is committed to handling 
these claims promptly and fairly, on an individualized basis. The 
claims vary widely A key goal of the relief fund is to provide help and 
financial assistance to those who most need it. In evaluating the 
claims, the team members are attuned to the particular circumstances of 
the customers, particularly if there are situations where the gas 
supply shortage and resulting outage has resulted in hardships. Checks 
and balances are in place to ensure consistency and fairness in the 
treatment of all claims.
    Question 2. Were you aware of the Texas blackouts on Wednesday, 
February 2, and their possible impacts on your gas supply?
    Answer. NMGC first learned of some rolling blackouts in Texas early 
on the morning of Wednesday, February 2, 2011. At that time, Company 
personnel were informed by Transwestern gas control that the NMGC 
contract storage facility near Andrews, Texas, was not delivering 
storage gas to Transwestern. Transwestern control room personnel 
indicated that they had been told that the storage facility had been 
knocked off line by rolling blackouts. NMGC called the Operations 
Supervisor of the storage facility, and it was confirmed that the 
storage facility had been knocked off line by rolling blackouts. They 
were off line for a few hours returning to service by mid-morning on 
February 2nd.
    At 10:20 am on the February 2nd, El Paso Natural Gas issued a 
Critical Operating Condition notice. This notice stated that ``EPNG has 
been informed that rolling blackouts in the West Texas area are 
impacting performance out of the Permian Supply basin.'' The document 
makes no reference to the existence or effect of rolling blackouts 
throughout the remainder of Texas.
    NMGC was otherwise not aware of the severe impact of the rolling 
blackouts on the remainder of supply into the interstate pipelines 
until sometime around 6 am on Thursday February 3, 2011, when the 
Company again heard that blackouts were causing disruption in the 
natural gas infrastructure.
    Question 3. Did you consider mandatory cutoffs of large industrial 
users on Wednesday to prevent the need for residential cutoffs on 
Thursday?
    Answer. Yes, all options were considered at the time. On Wednesday, 
February 2, 2011, NMGC elected to proceed with voluntary curtailments 
and at 12:24 pm issued a press release statewide asking all customers 
to voluntarily conserve gas. During Wednesday, most of the large 
industrial and commercial customers contacted by the Company 
voluntarily switched to alternative fuels or curtailed their loads 
significantly. Mandatory curtailment of large industrial and commercial 
customers on February 2, 2011, however, would not have avoided the 
curtailment of residential customers, because industrial and commercial 
customers are only a small percentage of our overall customer demand.
    Question 4. Your testimony stated that you are considering moving 
to a system that does not rely on interstate pipelines and would be 
more self-sufficient in New Mexico. Could you describe that in more 
detail?
    Answer. NMGC is evaluating physical system changes, including the 
feasibility of establishing back-up supply measures such as LNG, 
propane air systems, CNG and underground storage. This evaluation also 
includes looking at the feasibility of installing new pipeline(s) feeds 
or looping existing lines so that the ends of the system are less 
susceptible to pressure loss given a supply shortage scenario as the 
Company faced in this event. NMGC has retained outside consultants to 
assist in evaluating the different options. That said, the Company does 
not believe that severing relationships with the interstate pipelines 
altogether is a viable or likely option, because, among other things, 
of the diversity of resources those out-of-state options offer.
                                 ______
                                 
     Responses of Janice Parker to Questions From Senator Bingaman
    Question 1. It appears that ERCOT issued various Energy Emergency 
Alerts between 5:00 am and 6:00 am on Wednesday February 2nd. Was El 
Paso Western Pipeline aware of these emer,crency alerts? If not, when 
was El Paso Western Pipeline aware of the rolling electricity blackouts 
in the ERCOT service territory?
    Answer. El Paso Natural Gas Company (EPNG) was not aware of the 
Energy Emergency Alerts issued by ERCOT on Wednesday February 2, 2011. 
On February 2, 2011, between 5:00--6:00 a.m. Mountain Time (MT), EPNG 
first became aware of power outages when EPNG contacted some of the 
third-party processing plant operators who were not delivering their 
scheduled quantities of gas to the EPNG system. At that time, EPNG was 
informed by the plant operators that their operations had been affected 
by a loss of power. Between 8:00--9:00 a.m. MT, EPNG was first informed 
by some plant operators, and later able to confirm, that rolling 
blackouts were occurring in Texas. Shortly thereafter, EPNG also became 
aware of power plant outages reported by El Paso Electric (a third-
party electric utility in El Paso, Texas not related to our company) 
due to the cold weather.
    Question 2. Did El Paso Western Pipeline communicate with ERCOT, 
natural gas processing plants and/or suppliers of natural gas in 
anticipation of the severe weather conditions of early February? Are 
there any regulatory requirements or industry practices requiring 
communications with your customers?
    Answer. EPNG is not aware of any communications to or from ERCOT 
during the weather event in question. Our understanding from ERCOT is 
that while ERCOT manages the bulk transmission grid and may order load 
sheds or rolling blackouts under emergency conditions, each local 
electric distribution provider has an emergency response plan that 
determines which of its customers will be affected by rolling 
blackouts. We are investigating what public sources of information we 
can subscribe to for advanced warning of any electric grid issues in 
our area.
    With respect to communication with processing plants and gas 
suppliers, EPNG electronically sends information seven times per day to 
each third-party facility connected to its system and supplier to show 
the quantity of gas that each customer has requested for delivery into 
EPNG's pipeline for the current or following day. The third-party plant 
and/or gas supplier will then confirm whether it agrees to provide that 
quantity of natural gas at the location indicated. EPNG then 
electronically sends the final scheduled quantity to each customer, the 
customer's suppliers, and interconnected third-party facility 
operators. This is also done seven times per day. The expectation is 
that the customers and their suppliers will ensure the gas is received 
by EPNG at the agreed-upon time. If the processing plant or other 
third-party facility operator continues to confirm more gas supply than 
EPNG has received, or has an expectation to receive based on current 
flow, EPNG then reflects such underperformance at that supply location 
in what is scheduled for the customers and communicates such 
underperfomaance to the affected customers and interconnecting facility 
operators.
    Question 3. Has El Paso Western Pipeline had discussions with 
electric utilities that serve its facilities regarding the inclusion of 
its assets in their blackout operations plans?
    Answer. EPNG has recently started discussions with the electric 
utilities that supply power to its facilities regarding the inclusion 
of EPNG's compressor facilities on the utilities' critical 
infrastructure lists. Until the cold weather events of February 2011, 
EPNG was not aware of the existence of such lists. Nor was the 
possibility of being added to such lists ever brought to EPNG's 
attention by its electric utility providers.
    Question 4. It appears that El Paso Natural Gas declared Strained 
Operating Conditions on February 2nd. A declaration notice indicated 
the San Juan supply basin was experiencing underperformance issues 
related to the cold weather. Does El Paso Natural Gas have processes 
for communicating with suppliers of natural gas under these 
circumstances? Does El Paso Natural Gas have processes for 
communicating with customers under these circumstances? What are your 
processes for preserving and maintaining service under Strained 
Operating Conditions?
    Answer. EPNG uses multiple methods of communication to interact 
with its customers and other interested parties. EPNG posts information 
on its electronic bulletin board (EBB), as required by the Federal 
Energy Regulatory Commission, where the information is available 
publicly. Al] notices are also emailed immediately to all subscribers 
to the EBB, which includes customers, suppliers, plant operators, 
producers, other pipelines, regulators, industry information providers, 
and any other interested person. EPNG also contacts third-party 
facility operators connected to its pipeline system when it observes 
any significant underperformance at supply locations to determine if 
the supply shortfall or facility outage is short-term or long-term. If 
it is uncertain when the supply underperformance will he corrected, 
EPNG then posts a notice of underperforming supply locations on its 
EBB. This is a quick signal to affected customers that they should 
arrange for supply from other locations capable of tendering sufficient 
supplies of natural gas into EPNG's pipeline system to support their 
demand.
    With respect to maintaining service under Strained Operating 
Conditions, EPNG will first utilize its Washington Ranch Storage 
facility near Carlsbad, New Mexico, to withdraw gas from the 
underground storage caverns to support deliveries on the system until 
the customers and their suppliers can perform. EPNG will also use 
available gas already in the pipeline system (commonly known as 
``linepack'') to try to backstop its customers experiencing supply 
shortfalls and to help make deliveries. Linepack has to be replenished, 
however, generally within 12-24 hours because it is necessary to ensure 
operational stability and manage pipeline operating pressures. Finally, 
there are a limited number of delivery points on which EPNG has the 
ability to use flow control, either remotely or manually, to limit the 
quantity of natural gas being taken by customers. EPNG does set flow 
control at deliveries to other interstate pipelines on a daily basis, 
but prior to using flow control on deliveries to customers, e.g., a gas 
utility, electric utility or industrial customer, EPNG typically would 
call and solicit voluntary reductions by that customer. From the 
standpoints of safety, facility and consumer protection, it is best for 
EPNG's customers to decide voluntarily how and where to limit their 
takes of gas from the system to match the quantity of supply they have 
been able to secure.
    Question 5. On February 2, EPNG issued operational notices to 
customers at 7:24 a.m. Mountain Time (MT), 9:31 a.m. MT, 10:07 a.m. MT, 
10:20 a.m. MT, and then at 11:51 a.m. The Notices laid out the severity 
of the situation, provided actions that customers should take, and 
potential consequences if customers continued to take more gas from 
EPNG's system than was delivered on their behalf. What were recommended 
actions for customers? What are the potential consequences if customers 
took more gas off the system than was delivered on their behalf?
    Answer. Copies of these notices are attached for your reference as 
Attachment 1.* Recommended actions included asking customers to balance 
receipts and deliveries (i.e., taking from EPNG only the quantities of 
gas actually tendered to EPNG on the customer's behalf). EPNG suspended 
making loans of gas from its system or providing interruptible storage 
service in order to support higher priority service needs. EPNG also 
asked customers who could provide assistance to the system to contact 
EPNG's Gas Control Department. Potential consequences for taking more 
gas from the EPNG system than the customers had tendered include 
financial penalties or having EPNG use flow control. As was seen during 
February 2-4, 2011, customers taking significantly more gas out of the 
EPNG pipeline system than was supported by the supplies being put into 
the pipeline by the customers' suppliers caused pipeline operating 
pressures to drop and impact some customers' operations.
---------------------------------------------------------------------------
    * All attachments have been retained in committee files.
---------------------------------------------------------------------------
    Question 6. Even if New Mexico Gas Company had found suppliers to 
inject natural gas at a delivery point, would New Mexico Gas Company 
have been able to withdraw gas on February 311, given the lower line 
pack in your system?
    Answer. EPNG was able to deliver all of the natural gas supplies 
received on behalf of its customers plus additional gas sourced from 
EPNG's Washington Ranch storage facility and linepack. EPNG believes 
that it could have delivered additional gas supplies acquired by its 
customers. However, due to the integrated nature of EPNG's pipeline 
system and the extent of supply shortages, it is difficult to know 
whether additional supplies acquired by New Mexico Gas Company alone 
would have been sufficient to increase the pipeline operating pressure 
on EPNG's south system to the level needed by New Mexico Gas Company to 
make all deliveries in the Alamogordo area of its system.
    Question 7. El Paso Natural Gas began to see recovery on February 3 
when customers were able to locate some additional supply at pipeline 
interconnects. Where were these pipeline interconnects? Does El Paso 
Natural Gas know why the additional supply was available?
    Answer. The pipeline interconnects at which EPNG began to 
experience meaningful increases in receipts late on February 3 and 
February 4 were located in the San Juan Basin in New Mexico, at the 
western end of EPNG's system near California, and in the Permian Basin 
of Texas. Since EPNG is a transporter (arid not a supplier) of natural 
gas, it does not know the exact reasons for the ability to increase 
supplies on February 3-4, but it can state that many of the pipeline 
interconnects at which it experienced increased receipts of gas into 
its system have access to Rockies natural gas supplies or pipeline-
operated storage.
    Question 8. Has El Paso Natural Gas identified steps and measures 
it can implement immediately on its own that would mitigate the 
severity of these kinds of events?
    Answer. EPNG is committed to working with its customers and their 
suppliers to implement a tabletop mock emergency, using the early 
February supply outages and heavy demand as the mock scenario, to share 
lessons learned and determine if there are alternative steps that could 
or should be taken by EPNG or the other parties to better withstand a 
significant loss of supply, regardless of the reasons.
    EPNG is also committed to reviewing its winter preparedness plans 
for its assets and people to implement any identified improvements, 
including working with its electric service providers to have critical 
compressor stations added to their list of critical infrastructure. 
EPNG will meet with all affected customers to do a thorough facility-
by-facility performance review and determine if there are any future 
enhancements that would have mitigated the effect of the lower pipeline 
pressures caused by the supply shortages. EPNG will also participate in 
and, as appropriate, take a leadership role in any industry initiatives 
to address a similar situation in the future, including improving the 
electric and gas grid coordination.
    Finally, EPNG is prepared to re-initiate proposed storage 
development projects in Arizona and/or New Mexico if customers are 
interested in pursuing additional natural gas storage directly 
connected to the EPNG system. It is important to note that since EPNG 
does not have responsibility for or control over the gas supply 
function, it is not possible for EPNG to overcome the magnitude of 
shortages that were experienced the first week of February with its 
current tools of linepack and Washington Ranch storage. Therefore, 
customers may want to assess the feasibility of adding storage to the 
EPNG system in which they can store their gas supplies for withdrawal 
on demand.
     Responses of Janice Parker to Questions From Senator Tom Udall
    Question 1. It is my understanding that the gas processing plants 
that went down in the Texas blackouts feeds gas into your systems. Do 
you have an idea of how many gas processing plants were lost?
    Answer. EPNG does not know which processing plants had operating 
problems due to rolling blackouts or due to other cold weather issues. 
Attachment 2 is a list of the locations where EPNG issued notices of 
supply underperformance for February 2-4, 2011, including the operator 
and the type of facility.
    Question 2. Would it help you to provide gas to your customers if 
critical natural gas infrastructure was not subject to rolling 
blackouts? Is that a good policy?
    Answer. EPNG believes it is a good policy for critical natural gas 
infrastructure not to be subject to rolling blackouts especially in the 
winter season. This would be the case whether it is EPNG's pipeline 
compression equipment or third-party facilities that support natural 
gas production or processing.
    Question 3. Your testimony states that both of your systems did not 
experience any major failures. Are you subject to federal regulation on 
this issue?
    Answer. EPNG is subject to the comprehensive jurisdiction of the 
Federal Energy Regulatory Commission (FERC) for the sale of its 
pipeline capacity, its transportation services, and its rates. If EPNG 
had a pipeline or equipment failure that affected its contracted firm 
transportation capacity, the tariff EPNG has on file with and approved 
by the FERC governs the manner in which it would prorate the use of the 
remaining available firm pipeline capacity. As stated in my testimony, 
EPNG had sufficient pipeline capacity to transport the customers' gas 
supplies plus make additional deliveries from its Washington Ranch 
storage field and linepack. The U.S. Department of Transportation also 
intensively regulates the safety of EPNG's operations.
    Question 4. Did you seek reductions from large, non-residential 
utility customers to help conserve gas during the crisis? What was the 
response?
    Answer. Large, non-residential utility customers are customers of 
New Mexico Gas Company and they would best be able to answer this 
question. As noted above, with respect to EPNG's customers, EPNG did 
solicit assistance from its customers through its EBB notices and 
received one offer of assistance for February 2, 2011, but this 
assistance did not occur as anticipated by the customer due to the 
significant shortfall of supplies on that day. Also, EPNG called other 
interconnecting pipelines to see if they could assist, and did receive 
modest amounts of assistance from those operators. Unfortunately, the 
widespread nature of the cold weather limited the ability of other 
parties to assist.
    Question 5. Did gas processing plants or gas suppliers notify you 
when their assets failed and stopped sending your customers gas into 
your system?
    Answer. No. EPNG's Gas Control Department had to call the operators 
with which it had interconnecting facilities to determine why it was 
receiving less gas than was confirmed by those parties for delivery 
into the EPNG system. This is an area of communication where EPNG would 
like to see improvements. EPNG will work with its customers and their 
suppliers to determine what they can do to improve proactive 
communication back to the pipeline.
    Question 6. NM Gas Company is seeking industry contributions to the 
compensation fund. Have you been approached and what has been your 
response?
    Answer. New Mexico Gas Company has requested that EPNG consider a 
contribution. EPNG has over 70 years of service history in New Mexico, 
and we know that some citizens in the State may have a need during 
these difficult economic times. One of EPNG's company values is to be a 
good neighbor where we do business. We will certainly consider helping 
in a manner similar to what we have done in other situations where a 
community need exists.
                                 ______
                                 
       Responses of John Dumas to Questions From Senator Bingaman
    Question 1. How are the electric generating units located within 
the ERCOT service territory protected against the effects of sustained 
severe cold conditions?
    Answer. ERCOT market rules call on operators of electric generating 
units to ``establish and maintain internal procedures for monitoring 
actual and forecasted weather and for implementing appropriate measures 
when the potential for adverse weather or other conditions (which could 
threaten ERCOT System reliability) arise.'' See ERCOT Protocols Sec.  
6.5.9.3.1(5)
    The details surrounding the weatherization requirements of electric 
generating units can be found in the Public Utility Commission of 
Texas' (PUCT) substantive rules. Specific sections of interest are 
identified below:

   Section 25.53, Electric Service Emergency Operations Plans, 
        requires power generation companies to file with the PUCT 
        copies of its emergency operations plans, and any revisions to 
        those plans no later than 30 days after such changes take 
        effect. As part of these emergency operations plan submissions, 
        power generation companies must include a summary of power 
        plant weatherization plans and procedures (Sec.  
        25.53(c)(2)(A)).
   Section 25.94, Report on Infrastructure Improvement and 
        Maintenance, requires annual reports to be submitted by all 
        electric utilities to the PUCT. Areas that are susceptible to 
        damage during severe weather are required to be identified in 
        this report (Sec.  25.94(c)(1)).
   Section 25.95, Electric Utility Infrastructure Hardening, 
        requires annual report to be submitted by all electric 
        utilities to the PUCT. As part of this filing, any actions 
        before, during, or after extreme weather events are required to 
        be identified.

    Question 2. ERCOT issued instructions for firm load curtailment to 
address outages across of approximately 82 generating units. Was ERCOT 
aware of the location of natural gas facilities (e.g. production, 
processing, and transmission) within its operating territory when it 
issued those instructions? What are the roles of the member 
transmission owners during such firm load curtailments? Are natural gas 
facilities (e.g. production, processing, and transmission) in the ERCOT 
territory assigned any particular priority in the firm load curtailment 
process?
    Answer. ERCOT's interface as grid operator is with electric 
transmission and generation providers. The instructions ERCOT issues 
regarding firm load curtailment are issued to transmission operators, 
and the transmission operators determine the locations subject to load 
curtailment. ERCOT communicates with Qualified Scheduling Entities 
(QSEs) and Resource Entities who represent, among others, owners of 
natural gas-fired electric generating units. QSEs are required to 
reflect any anticipated de-rating of capability due to fuel in their 
current operating plans (COP), which are hourly capacity schedules 
submitted to ERCOT. ERCOT does not currently have visibility into the 
location of natural gas production, processing, and transmission 
facilities.
    The roles of the member transmission owners during firm load 
curtailments are outlined in Section 4.5 Energy Emergency Alert (EEA) 
of the ERCOT Operating Guides. When ERCOT directs firm load shedding, 
the member transmission owners reduce their load by their load ratio 
share, as documented in Section 4.5.3.4 Load Shed Obligation of the 
ERCOT Operating Guides. ERCOT's instructions to shed a specific number 
of megawatts are executed by the transmission owners based on 
previously determined shares among the region's transmission owners, so 
there is no doubt that sufficient load is curtailed to meet system 
demands. The location of the specific load that is curtailed is 
determined by the transmission owners, based on their individual plans, 
which are informed by regulatory requirements regarding service to 
critical loads.
    ERCOT does not assign priority of load to be shed as part of the 
firm load curtailment process, but simply the quantity of load to be 
curtailed. It is up to transmission owners operating in the ERCOT 
region to designate priority and to carry out the curtailment of load 
as appropriate. Section 25.497 of the PUCT substantive rules define 
guidelines for the transmission owners to follow when giving priorities 
to customers during load shedding events. The rule defines ``Critical 
Load Public Safety Customers'' as customers for whom electric service 
is considered crucial for the protection or maintenance of public 
safety, including but not limited to hospitals, police stations, fire 
stations, and critical water and wastewater facilities. Within those 
guidelines, transmission owners determine the priorities of loads shed 
during a firm load curtailment directed by ERCOT. The requirements do 
not currently assign a ``critical load'' priority to natural gas 
facilities.
    Question 3. Under what circumstances does ERCOT communicate with 
pipeline operators, natural gas processors and/or natural gas producers 
in its service territory?
    Answer. ERCOT has no authority to direct entities in the natural 
gas industry to take particular actions in emergency situations. 
Intrastate natural gas regulation in the ERCOT region is managed by the 
Texas Railroad Commission. ERCOT operators understand, based on past 
experience, how weather may affect natural gas availability in certain 
parts of Texas. There is no systematic method in place, however, for 
ERCOT to take actions based on the location of natural gas facilities. 
As part of its response to the February 2011 weather events, ERCOT is 
taking steps to coordinate with natural gas regulators and industry 
participants to address natural gas impacts of electric load 
curtailment.
    Question 4. ERCOT system set a new record for peak winter power 
demand on February 10th, a little over a week after ERCOT was forced to 
implement rolling blackouts. How were ERCOT' s system preparations and 
operations different on February 10th from those on February 2nd? Are 
there any preliminary observations ERCOT can make with respect to 
reforms it may have implemented in system operations, communications or 
in any other area?
    Answer. While the weather was nearly the same with regard to 
temperature on February 10 as it was on February 2, the wind speed was 
significantly lower on February 10. Wind speed and wind chill appear to 
have had an important effect on the generation outages experienced on 
February 2. Additionally, it appears that those generators who had 
experienced freezing equipment on February 2 had the opportunity to 
correct issues, or perform additional winterization after the first 
event. For both the February 2 and February 10 events, ERCOT procured 
additional capacity through the ERCOT Reliability Unit Commitment (RUC) 
process. The additional capacity procured on both occasions allowed 
many larger generators to be warm and on-line. However, a large number 
of generating units that were on-line February 2 tripped, whereas on 
February 10 the generators called to come on line performed as planned.
    ERCOT would also like to note that it sponsored a ``Lessons 
Learned'' meeting with electric generators on February 8, 2011. In the 
meeting, ERCOT explained the reasons for the Energy Emergency Alert 
(EEA) and firm load shed as being related specifically to the large 
number of forced outages and failure to start of several generators.
    As a result of the lessons learned from the events during the cold 
weather events between January 31 and February 6, 2011, ERCOT 
implemented the following before its new winter peak was set on 
February 10, 2011. These initial changes primarily addressed 
communications shortcomings related to the February 2 events:

   The phone numbers of several people outside ERCOT (selected 
        members of the DUCT the ERCOT Board of Directors) were added to 
        the emergency communication (NXT Notification) system. This 
        notification system sends pre-recorded voice messages if a 
        Watch is issued, if an EEA level is implemented, and if firm 
        load shed is ordered.
   The responsibility to activate the NXT Notification system 
        was moved from the ERCOT Shift Supervisor to the Shift 
        Engineer. This helps to free up some of the Shift Supervisor's 
        time during an emergency.
   To correct an inadvertent error with the email system, all 
        Board members were added individually to the 
        [email protected] email list.

    ERCOT is also working with the PUCT and market participants to 
ensure that appropriate weatherization standards are met, to address 
both extreme cold and hot weather situations in the ERCOT region. In 
addition, ERCOT is making efforts to improve coordination with 
regulators and market participants in the natural gas industry to 
effectively maintain reliability of electric and gas systems during 
future challenges.
    Fortunately, the peak demand on February 10 was met without ERCOT 
having to resort to emergency procedures. ERCOT believes that the new 
role for Shift Engineers in the ERCOT control room, as well as the new 
communications procedures, will improve ERCOT's response to future 
emergency events.
    Question 5. ERCOT has said that it experienced issues with its 
external communications that highlight the need for improved 
communication with a variety of audiences, including the Texas Public 
Utility Commission, market participants and the public. Where in that 
list would entities like neighboring states, gas producers and gas 
pipelines fall?
    Answer. Section 4, Emergency Operations, of the ERCOT Operating 
Guides outlines the steps taken by ERCOT and its member transmission 
and generation companies during system emergencies. Section 4.5 Energy 
Emergency Alert (EEA), provides for issuance of an ERCOT-wide appeal 
through the public news media for voluntary energy conservation 
(4.5.3(3)). Additionally, this section states that QSEs (Qualified 
Scheduling Entities that represent generation owners) and TOs 
(transmission owners who operate the transmission facilities, including 
distribution feeders) will notify all the Market Participants they 
represent of each declared EEA level (4.5.3(1)). Section 6.5.9.4 Energy 
Emergency Alert of the ERCOT Protocols has similar language regarding 
issuance of public media appeals to conserve energy (6.5.9.4(4)). 
Through these various forms of public communication, ERCOT endeavors to 
provide broad notice of the events in its region.
    ERCOT also files daily reports with the North American Electric 
Reliability Corporation (NERC) that profile ERCOT's forecasts for the 
day, as well as identify EEA conditions. When emergency events are 
developing, ERCOT also notifies Reliability Coordinators in neighboring 
states through the electronic ``Regional Coordinator Information 
System'' (RCIS). In addition, ERCOT provides specific notice to the 
Southwest Power Pool (SPP), its neighboring electric grid operator. 
ERCOT also files notices of emergency events to the U.S. Department of 
Energy, almost immediately after such events occur.
    As noted above, ERCOT does not have direct communications with gas 
producers or gas pipelines during EEA events. As part of its response 
to the February 2011 weather events, ERCOT is taking steps to 
coordinate with natural gas regulators and industry participants to 
address the electric/natural gas interface during extreme weather 
events.
      Responses of John Dumas to Questions From Senator Tom Udall
    Question 1. I understand that ERCOT says that Texas is an infra-
state electric market. How do we square that with the reports that 
blackouts in Texas caused around 30,000 New Mexicans to lose home 
heating?
    Answer. The ERCOT Protocols (Section 6.5.9.4 Energy Emergency 
Alert) and Operating Guides (Section 4.5 Energy Emergency Alert (EEA) 
establish rules related to the Energy Emergency Alert (EEA) action 
plan. Part of this action plan is to shed load in order to match demand 
and supply (maintain 60Hz frequency). When load shed is ordered, the 
member transmission owners reduce their load by their load ratio share 
as indicated in Section 4,5.3.4 Load Shed Obligation of the ERCOT 
Operating Guides. ERCOT's role is to direct the quantity of load to be 
curtailed during emergency conditions. ERCOT does not direct the 
location of the load to be curtailed; this is up to the discretion of 
the member transmission owners that serve the load.
    ERCOT does not have access to information detailing the New Mexico 
gas curtailments. If New Mexican natural gas industry participants 
would provide ERCOT with documentation that identifies the specific gas 
facility outages in the ERCOT region that allegedly impacted New Mexico 
customers, ERCOT will ask transmission owners in the ERCOT region to 
review their records for the times that these facilities were 
interrupted during the February events.
    Question 2. Why did ERCOT permit blackouts of critical natural gas 
infrastructure in the Permian Basin that keeps New Mexicans warm during 
the winter?
    Answer. ERCOT's role is to direct the quantity of load to be 
curtailed during emergency conditions. ERCOT does not direct the 
location of the load to be curtailed; this is up to the discretion of 
the member transmission owners that serve the load.
    Question 3. How much money did the companies trading electricity 
during the period around the blackout make? Could it be in the tens of 
millions, or hundreds of millions of dollars, as claimed by Public 
Citizen in Texas?
    Answer. ERCOT does not have access to specific information 
documenting how much individual companies made or lost in the ERCOT 
market. The ERCOT market is designed to allow customers to buy and sell 
power bilaterally weeks and months in advance. Customers also have the 
ability to buy and sell power in the ERCOT Day Ahead Market and avoid 
being exposed to real-time spot market prices. Generators that have 
sold their power in the forward bilateral market or in the Day Ahead 
Market are exposed to real-time spot market prices if they are not able 
to physically cover the forward schedules that they have committed to 
cover in the bilateral and Day Ahead Markets. This means that some 
generators that were unable to generate on February 2, 2011 were forced 
to buy energy at real-time spot market prices during a time of 
extremely high market prices. It is clear from public reports that this 
exposed some companies to large losses due to the events of February 2 
in the ERCOT region--and that no market segments were immune from 
losses. For example, Luminant (a generation company) disclosed that it 
lost approximately $30,000,000 when two of its large coal plants (Oak 
Grove and Sandow) came off-line due to the cold weather, resulting in a 
capacity loss of nearly 2,700 MW. See Dallas Morning News, Feb 14, 
2011.
    Question 4. What happened during the 2003 severe winter storm that 
led one large power producer in Texas to be fined $210 million, which 
was reduced to $15 million? Is Texas doing enough to prevent market 
manipulation?
    Answer. There were no findings by the PUCT or the PUCT's 
Independent Market Monitor (``IMM'') of market manipulation, nor were 
there any administrative penalties assessed against any market 
participants related to the 2003 severe winter storm. Although 
referencing the 2003 severe winter storm, this question appears to be 
in reference to the investigation initiated in 2007 by the PUCT and 
prepared by Potomac Economics (in its role as the IMM for the ERCOT 
wholesale markets) related to the wholesale market activities of 
Luminant Power Generation Company, LLC\1\ from June 1 to September 30, 
2005. Additionally, the activities of Luminant that were the subject of 
this investigation were not the result of a severe weather event.
---------------------------------------------------------------------------
    \1\ The IMM investigation and subsequent enforcement action brought 
by the PUCT Staff involved TXU Corp. and several of its affiliated 
companies. After the enforcement actions were filed, TXU Corp. and its 
affiliates were merged with Texas Energy Future Holdings Partnership. 
As a result of this merger, TXU Corp. changed its name to Luminant 
Power Generation Company, LLC. The TXU Corp. affiliates were also 
renamed. For ease of reference, the name Luminant is used in this 
response to include all of the companies involved in the PUCT 
enforcement action.
---------------------------------------------------------------------------
    The PUCT Staff enforcement action against Luminant was based on a 
2007 investigation by the IMM. In the enforcement action filed on March 
28, 2007, PUCT Staff alleged that Luminant had engaged in market power 
abuse as defined in Sec.  39.157(a) of the Texas Public Utility 
Regulatory Act\2\ and Sec.  25.503(g)(7) of the PUCT's substantive 
rules.\3\ In its March 28, 2007 filing, PUCT Staff recommended that 
Luminant be ordered to pay $210 million, which consisted of an 
administrative penalty of $140 million and refunds of $70 million.
---------------------------------------------------------------------------
    \2\ Public Utility Regulatory Act, TEX. UTIL, CODE ANN. Sec.  
39.157(a) (Vernon 2007 and Supp. 2008) (PURA).
    \3\ P.U.C. SUBST. R. 25.503(g)(7).
---------------------------------------------------------------------------
    On September 14, 2007, PUCT Staff filed a revised enforcement 
action that corrected an error in the calculations and simulations 
underlying its original enforcement action and recommended an 
administrative penalty of $171 million. On July 22, 2008, the 
Administrative Law Judges (of the independent State Office of 
Administrative Hearings) assigned to Docket No. 34061 issued an order 
which concluded as a matter of law that the appropriate methodology for 
calculating separate violations under PURA Sec. 15.023 in this 
proceeding would have resulted in a maximum penalty range of between 
$7.9 million and $15.4 million. A copy of the *ALJ's order is attached.
---------------------------------------------------------------------------
    * ALJ's order has been retained in committee files.
---------------------------------------------------------------------------
    On November 26, 2008, Staff and Luminant filed a joint settlement 
agreement in which Luminant agreed to pay an administrative penalty of 
$15 million. In the settlement agreement, Luminant expressly denied any 
admission of liability for the allegations set forth in Docket No. 
34061.
    The PUCT has informed ERCOT that it believes it has ample legal 
authority to address market manipulation issues, and that the IMM and 
the Commission have taken and will continue to take appropriate actions 
to address market manipulation issues in the ERCOT market. 
Significantly, when the alleged market power abuse violations which 
were the subject of Docket No. 34061 took place, the maximum 
administrative penalty allowed under PURA was $5,000 per violation per 
day. Effective September 1, 2005, the Texas Legislature increased the 
maximum administrative penalty amount to $25,000 per violation per day.
    Question 5. Could you explain the electricity price cap changes 
before the storm?
    Answer. The electricity price cap change that occurred on February 
1, 2011 was scheduled years in advance in PUCT rules adopted in 2007. 
In the PUCT rules, specifically Section 25.505(g) of the Commission's 
substantive rules, the increase to $3,000 was to be implemented two 
months after the implementation of the new nodal market in the ERCOT 
region, which occurred on December 1, 2010. The specific language from 
the PUCT rules reads, ``Beginning two months after the opening of the 
nodal market, the HCAP shall be $3,000 per MWh and $3,000 per MW per 
hour.'' (Sec.  25.505(g)(6)(D)) The timing in the change of the pricing 
rules was therefore set well before the weather events in February 
2011.
    Question 6. Would more interstate interconnections like Tres Amigas 
near Clovis make Texas electricity more reliable and prevent rolling 
blackouts?
    Answer. An increase in the number of interconnection points would 
only improve the reliability of the ERCOT grid during a capacity 
shortage event if: spare generating capacity was available on the other 
side of the tie(s) and was not being used to serve customers on that 
side of the tie(s) during the event; and, sufficient transmission 
capacity is available on both the sending or receiving side of the 
tie(s) to allow energy to be moved from the spare generating capacity 
to the tie (on the sending side) and from the tie to loads in ERCOT. 
Additional interconnection(s) would not, per se, improve the 
reliability of the Texas grid. The existing Direct Current (DC) Ties 
into the ERCOT Interconnection are subject to curtailment when 
emergency situations exist in the other interconnections, even during 
comparatively mild operating conditions. ERCOT is monitoring the 
development of the Tres Amigas project and its various ramifications.
    Question 7. How many power plants in Texas went down during the 
storm? The reports we see keep rising, first it was 50, then 83, then 
over 100.
    Answer. The numbers referenced in Question 7 are drawn from reports 
prepared by ERCOT that are based on different time periods during the 
February 2011 extreme weather events. To clarify the data, ERCOT offers 
the following:

   The numbers are associated with generating ``units.'' An 
        electric ``power plant'' may be made up of numerous ``units,'' 
        particularly in large generating facilities. In addition, a 
        combined-cycle facility may be composed of more than one unit.
   The data provided by ERCOT regarding the units that ``went 
        down'' are based are the number of units that experienced a 
        ``forced outage,'' as defined in ERCOT's market rules, during 
        the relevant time period. The units involved may have 
        experienced outages for a significant period of time, or may 
        have tripped off briefly and returned to service sometime 
        during the day of the weather events.
   The data gathered by ERCOT, on its initiative and in 
        response to data requests from the PUCT and the Federal Energy 
        Regulatory Commission (FERC), address several time periods. 
        These include the period leading to and during the rotating 
        outages ordered by ERCOT, the full operating day of February 2 
        (the day of the rotating outages), and the time period 
        extending from February 1-4, 2011 (the full time period of 
        unusually cold weather conditions in the ERCOT region).
   ERCOT has developed its data on generation outages through 
        review of its internal operator records, Outage Scheduler 
        information, telemetry data received from generators, and 
        responses to information requests sent to generators. The data 
        has been more thoroughly vetted through this process than it 
        could be in the days immediately following the February events.

    Based on these criteria, ERCOT has identified the following forced 
outages during the time periods identified:


------------------------------------------------------------------------
            Time Period              Number of Units with Forced Outages
------------------------------------------------------------------------
February 2, 2011: Midnight to 5:43                                   50
 AM (time of declaration of EEA3
 and rotating outages)
------------------------------------------------------------------------
February 2, 2011: Midnight to 1:00                                   91
 PM (ERCOT concluded rotating        (originally estimated at 82 units)
 outages at 1:07 PM)
------------------------------------------------------------------------
February 2, 2011: Midnight to 11:59                                 102
 PM (the full operating day of
 February 2)
------------------------------------------------------------------------
February 1-4, 2011: The full period                                 151
 of the winter storm (data for this
 period was developed in response
 to PUCT request)
------------------------------------------------------------------------



    ERCOT notes that there were also outages on February 2, 2011 in 
parts of Texas outside the ERCOT region. Both El Paso Electric Company 
and Xcel Energy experienced outages, and the outages in those 
companies' territories also involved generation problems. The data for 
areas outside the ERCOT region are not included in ERCOT data provided 
above.

                                    

      
