[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
    AMERICAN ENERGY SECURITY AND INNOVATION: THE ROLE OF A DIVERSE 

                              ELECTRICITY

                          GENERATION PORTFOLIO
=======================================================================


                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 5, 2013

                               __________

                           Serial No. 113-12


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov




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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania             GENE GREEN, Texas
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
  Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia                JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             ANTHONY D. WEINER, New York
ROBERT E. LATTA, Ohio                JIM MATHESON, Utah
CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi            JOHN BARROW, Georgia
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin 
BRETT GUTHRIE, Kentucky                  Islands
PETE OLSON, Texas                    KATHY CASTOR, Florida
DAVID B. McKINLEY, West Virginia     JOHN P. SARBANES, Maryland
CORY GARDNER, Colorado               JERRY McNERNEY, California
MIKE POMPEO, Kansas                  BRUCE L. BRALEY, Iowa
ADAM KINZINGER, Illinois             PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida            PAUL TONKO, New York
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
                    Subcommittee on Energy and Power

                         ED WHITFIELD, Kentucky
                                 Chairman
STEVE SCALISE, Louisiana             BOBBY L. RUSH, Illinois
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois               JERRY McNERNEY, California
JOSEPH R. PITTS, Pennsylvania        PAUL TONKO, New York
LEE TERRY, Nebraska                  EDWARD J. MARKEY, Massachusetts
MICHAEL C. BURGESS, Texas            ELIOT L. ENGEL, New York
ROBERT E. LATTA, Ohio                GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington   LOIS CAPPS, California
BILL CASSIDY, Louisiana              MICHAEL F. DOYLE, Pennsylvania
PETE OLSON, Texas                    JOHN BARROW, Georgia
DAVID B. McKINLEY, West Virginia     DORIS O. MATSUI, California
CORY GARDNER, Colorado               DONNA M. CHRISTENSEN, Virgin 
MIKE POMPEO, Kansas                      Islands
ADAM KINZINGER, Illinois             KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia         JOHN D. DINGELL, Michigan
JOE BARTON, Texas                    HENRY A. WAXMAN, California (ex 
FRED UPTON, Michigan (ex officio)        officio)
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     1
    Prepared statement...........................................     3
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................     4
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     5
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     6
    Prepared statement...........................................     8

                               Witnesses

Mark C. McCullough, Executive Vice President, Generation, 
  American Electric Power........................................    10
    Prepared statement...........................................    12
William M. Mohl, President, Entergy Wholesale Commodities........    33
    Prepared statement...........................................    35
Benjamin G.S. Fowke, III, President and CEO, Xcel Energy.........    45
    Prepared statement...........................................    47
Marc S. Gerken, PE, President and CEO, American Municipal Power, 
  Inc............................................................    50
    Prepared statement...........................................    52
Robert Gramlich, Interim Chief Executive Officer, American Wind 
  Energy Association.............................................    76
    Prepared statement...........................................    78
    Answers to submitted questions...............................   125
John C. McClure, Vice President, Government Affairs, and General 
  Counsel, Nebraska Public Power District........................    82
    Prepared statement...........................................    84

                           Submitted Material

Statement of the American Public Power Association, submitted by 
  Mr. Whitfield..................................................   111
Statement of the American Chemistry Council, submitted by Mr. 
  Whitfield......................................................   115
Article entitled, ``California Girds for Electricity Woes,'' Wall 
  Street Journal, February 26, 2013, submitted by Mr. Whitfield..   117
Article entitled, ``In New England, a Natural Gas Trap,'' The New 
  York Times, February 15, 2013, submitted by Mr. Whitfield......   119
Charts on Virgin Islands, submitted by Ms. Christensen...........   122
Map of fuel diversity regions....................................   124


                      AMERICAN ENERGY SECURITY AND

   INNOVATION: THE ROLE OF A DIVERSE ELECTRICITY GENERATION PORTFOLIO

                              ----------                              


                         TUESDAY, MARCH 5, 2013

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:04 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Ed 
Whitfield (chairman of the subcommittee) presiding.
    Members present: Representatives Whitfield, Scalise, 
Shimkus, Pitts, Terry, Latta, Cassidy, Olson, McKinley, 
Gardner, Pompeo, Kinzinger, Griffith, Barton, Rush, McNerney, 
Green, Doyle, Barrow, Christensen, and Waxman (ex officio).
    Staff present: Nick Abraham, Legislative Clerk; Charlotte 
Baker, Press Secretary; Allison Busbee, Policy Coordinator, 
Energy and Power, Annie Caputo, Professional Staff Member; 
Patrick Currier, Counsel, Energy and Power; Andy Duberstein, 
Deputy Press Secretary; Tom Hassenboehler, Chief Counsel, 
Energy and Power; Heidi King, Chief Economist; Ben Lieberman, 
Counsel, Energy and Power; David McCarthy, Chief Counsel, 
Environment and the Economy; Mary Neumayr, Senior Energy 
Counsel; Chris Sarley, Policy Coordinator, Environment and the 
Economy; Tom Wilbur, Digital Information Technology; Jeff 
Baran, Democratic Senior Counsel; Greg Dotson, Democratic Staff 
Director, Energy and Environment; Kristina Friedman, Democratic 
EPA Detailee; and Caitlin Haberman, Democratic Policy Analyst.

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

    Mr. Whitfield. I would like to call the hearing to order 
this morning, and certainly want to thank our witnesses for 
being with us, and after opening statements, of course, I will 
be introducing each one of you. We certainly look forward to 
your testimony.
    At today's hearing, we are going to be focusing on the role 
of a diverse source of fuel for electricity generation. We 
frequently all hear a vocal chorus about the need for ``all of 
the above'' to meet our Nation's demand for electricity at an 
affordable cost so that we can be competitive in the global 
marketplace, create a strong economy, and create jobs.
    But I think it is also important that we be realistic, and 
we know that there are people in the administration, that are 
political leaders around the country, that there are national 
and international environmental groups, that there are 
nonprofit groups and others who really do have a desire to stop 
the use of fossil fuel and production of electricity. Just 
yesterday, for example, Mayor Michael Bloomberg of New York--
and I didn't say this, but the article said that he was 
gleefully writing the obituary for coal, and he was quoted as 
saying ``It used to be said that coal is king, and regrettably, 
coal remains king in Nations like India and China.'' But then 
he went on to say ''Here in the United States, I am happy to 
say that the king is dead. Coal is a dead man walking.''
    Now, the mayor says that he supports natural gas, but he 
gives millions of dollars to groups that want to reduce the use 
of hydraulic fracturing. And of course, he made his money and 
he can spend his money any way that he wants to, but I think it 
is important that we have a national discussion about the 
reality of trying to eliminate fossil fuel as a source for 
electricity generation.
    Robert Mann, the Sierra Club President, was quoted as 
saying ``Fossil fuels have no part in America's energy future. 
Coal, oil, and natural gas are poisoning us. The emergence of 
natural gas as a significant of our energy mix is particularly 
frightening, because it dangerously postpones investment in 
clean energy at a time when we should be doubling down on wind, 
solar, and energy efficiency.''
    The EPA, without question, has established an unmistakable 
trend line. Coal is being taken out of the national fuel mix 
and EPA is methodically establishing a regulatory framework to 
dramatically reduce fossil fuel use throughout the economy. 
EPA's regulatory framework is taking fuel choice decisions away 
from the private sector, while it bases those decisions on a 
single determinate, the environment, climate change, so forth, 
but ignoring equally important national goals and energy 
security, economic growth, lower consumer costs, and electric 
reliability, I believe, will lead to serious problems in 
America. In fact, we already see signs of it. A few days ago, 
there was an article--which I have a copy here--that said 
``California is weighing how to avoid a looming electricity 
crisis that could be brought on by its growing reliance on wind 
and solar power. Even though California has a lot of plants, it 
does not have the right mix. Many of the solar and wind sources 
added in recent years have actually made the system more 
fragile.'' Those are not my words, those are the words of the 
author. And then in the New York Times, ``Electricity prices in 
New England have been four to eight times higher than normal as 
the region's reliance on natural gas for power supplies has 
collided with a surge in demand for heating.''
    This is a little harbinger of things to come. The Northeast 
is littered with coal plants that have been retired. Gas 
pipeline capacity is inadequate, and without nuclear power 
plant at Indian Point, New England would have been toast. And 
then we have the energy bill 2007 that prohibits the use of 
fossil fuel for providing electricity to government buildings 
new and modified by the year 2030. We have greenhouse gas 
regulations that will not allow you to build a new coal-powered 
plant in America if they are finalized, and now they are 
thinking about applying that to existing.
    So I think this hearing is a great place to have an honest 
discussion about the reality of trying to meet the electrical 
needs of America without fossil fuels, nuclear power, and those 
fuels that provide our base load needs. I, for one, believe we 
do need all of the above, but I think that it is wrong that 
people in America and groups in America are trying to 
absolutely stop the use of fossil fuels.
    I see my time is expired. At this time, I recognize the 
gentleman from Illinois, Mr. Rush, for his opening statement.
    [The prepared statement of Mr. Whitfield follows:]

                Prepared statement of Hon. Ed Whitfield

    American electricity is like the American people--our 
strength is in our diversity. And that is the topic of 
discussion for today's hearing, which is entitled ``American 
Energy Security and Innovation: The Role of aDiverse 
Electricity Generation Portfolio.''
    Americans are fortunate to have a variety of electricity 
sourcesavailable to us. Each source brings its own unique mix 
of assets and liabilities. Some are inexpensive, while others 
are not. Some are reliably available 24 hours a day and seven 
days a week and ideal for baseload power, while others are not. 
Some can be quickly ramped up or down to match quick changes in 
demand, while others cannot. Some can be located almost 
anywhere, while others are geographically limited. Some can be 
easily integrated into the existing electric grid, while others 
would necessitate costly new infrastructure investments.
    As a result, there is no one ideal means of generating 
electricity. The best approach for affordability and 
reliability is a broad mix of generation sources, be it coal, 
natural gas, nuclear, or renewables. Each source can serve a 
purpose in the electricity mix, and each has strengths that can 
compensate for the other's weaknesses. And the best way to 
strike the right balance is through market forces--not 
government mandates or other market distorting policies.
    Of course, Washington State is not Kentucky, and Kentucky 
is not Texas. The best generation mix will vary significantly 
from region to region, which is why Congress needs to be 
cautious about imposing onesize- fits-all measures such as 
federal renewable portfolio standards, and the EPA should be 
considering the impacts of its regulations on fuel diversity, 
especially as it relates to baseload power.
    The ideal electricity mix will also vary over time. That is 
why we need the flexibility to allow the mix to change with the 
times and with the inevitable fluctuations in the price of 
various electricity sources. This is becoming increasingly 
important as EPA regulations limit the options of resources and 
technologies available for utilities.
    The best way to deal with the electricity challenges of 
today and tomorrow is to expand the options available, not to 
reduce them. That is why I believe that EPA's regulatory 
assault on coal is bad policy. Coal is the leading source of 
electricity generation in the U.S., and it certainly remains 
the fastest-growing source of energy for China and many of our 
other global competitors. We gain nothing when we foreclose the 
option of new coal-fired generation by regulating it out of 
existence.
    Government should not tilt the playing field against coal, 
nor should it tilt it in favor of other sources like wind and 
solar. The reality is that these non-hydro renewables are 
neither cheap nor reliable at the present time, which is why 
they are so heavily reliant on federal subsidies. The 
government should not be intervening on behalf of wind and 
solar or any other fuel source for that matter. Sound energy 
planningmeans that you don't rely on one energy source, in 
essence putting all of your eggs into one basket.
    Federal policies should encourage an all-of-the-above 
approach to electricity production that takes advantage of all 
affordable domestic energy resources. Rather than pursuing 
policies that could limit the diversity of energy resources, 
the U.S. instead should be pursuing opportunities to transition 
to the most advanced generation fleet in the world, inclusive 
of all affordable and reliable resources and technologies.

                                #  #  #

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

    Mr. Rush. I want to thank you, Mr. Chairman, for holding 
today's hearing, and Mr. Chairman, I commend you for allowing 
the Minority side to invite witnesses who have had success in 
renewables so that today's panel actually reflects the title of 
this hearing, and we are hearing from a diverse energy source 
base, besides just coal and nuclear.
    Mr. Chairman, I believe in a truly ``all of the above'' 
energy policy, and fortunately, Mr. Chairman, we are indeed 
seeing more diversity in the Nation's electric generation 
portfolio, as we move towards more natural gas and renewable 
energy and away from our heavy reliance on carbon-intensive 
coal.
    In 1993, Mr. Chairman, coal was responsible for 50 percent 
of the electric generation in the U.S., while natural gas 
accounted for less than 15 percent. However, the Energy 
Information Agency reports that in 2012, there was indeed a 
shift in electricity generation away from coal-fired 
generation, which declined by 12.5 percent, and towards cleaner 
sources of electricity, including natural gas, which increased 
by 21 percent, wind generation, which increased by 16 percent, 
and solar generation, which increased by over 138 percent in 
just a single year. Mr. Chairman, due to this shift in 2012, 
coal accounted for 37 percent of the Nation's electric 
generation. Natural gas accounted for 30 percent. Nineteen 
percent came from nuclear, and 12 percent of the Nation's 
electric portfolio came from renewable sources, including 
solar, hydropower, and wind. In fact, Mr. Chairman, the wind 
industry experienced rapid growth in 2012, and for the first 
time, wind was responsible for the largest increase of adding 
capacity, with 12,600 megawatts of added generation. Wind power 
is very important to my home State of Illinois, and in fact, 
there are up to 13 international wind companies headquartered 
in the city of Chicago alone. So I am very pleased to have 
witnesses here today who can discuss the importance of 
investing in renewable sources of energy, whose costs continue 
to fall and capacity continues to rise.
    Mr. Chairman, the EIA also notes that U.S. energy-related 
combustion emissions was expected to decrease by 3.4 percent in 
2012 to the lowest levels since 1994. This is as a result of 
the increased use of renewable energy, the transition from coal 
to natural gas, and also due to the slow economic growth. While 
energy-related carbon emissions have declined 11.5 percent 
since 2005, they are still 5.4 percent above 1990 levels, and 
Mr. Chairman, without significant policy action, the EIA 
expects U.S. carbon pollution emissions to increase by 6 
percent between 2012 and 2020.
    This is precisely why the new source performance standards 
are so very, very critically important. These standards, which 
are mandated by law, will require new facilities to install the 
best demonstrating technologies while also taking into account 
cost and allowing States to show flexibility. Implementing 
these proposed standards will ensure that the power generation 
industry has regulatory certainty and will avoid penalizing 
companies who have made significant investments into their 
future, while not allowing the can to constantly be kicked down 
the road.
    So Mr. Chairman, I look forward to today's hearing, and I 
look forward to the challenges and opportunities that are 
before us of maintaining fuel diversity in the Nation's 
electricity generation portfolio. With that, I yield back the 
balance of my time.
    Mr. Whitfield. Thank you, Mr. Rush.
    At this time, I recognize the gentleman from Texas, Mr. 
Barton, for 5 minutes.

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

    Mr. Barton. Thank you, Mr. Chairman. I won't use that 
entire time.
    I have served in Congress and on this committee for over a 
quarter of a century, and when I first got elected, we had 
wellhead prices on natural gas, we had the Fuel Use Act that 
said you couldn't use natural gas for new power plant 
electricity generation. The general economic model was that 
electricity generation was a natural monopoly and had to be 
regulated very heavily at the State and federal level. That has 
evolved in the last 25 years, and we are now at a point where 
we still allow States that wish to, to regulate their 
electricity markets, but we also accept that a true market can 
function, and in Texas, we have deregulated the wholesale 
generation of electricity. We still regulate the wholesale 
transmission and the retail distribution, but we have a 
thriving wholesale generation market in which we have power 
plants, independent power plants that are owned by companies 
all over America generating and selling electricity. We also 
have the largest wind generation capacity in the country, and 
as a consequence of that, with the subsidies that we have been 
providing to wind power, which I support to some extent, have 
had the situation where wind generators have priced their 
product negatively into the market simply to get the subsidy to 
keep their wind turbines turning.
    So economic theory for electricity generation is a big 
deal, and we have an excellent panel today to discuss where it 
is today. I look forward to hearing that, and now would like to 
yield 1 minute to Mr. Scalise of Louisiana.
    Mr. Scalise. I want to thank my colleague from Texas for 
yielding, and first, before we talk a little bit about ``all of 
the above'' energy, I want to welcome Mr. Mohl for being here, 
speaking on behalf of Energy Wholesale Commodities, which is a 
Fortune 500 company based in Louisiana. We are proud to have 
them there. Appreciate the work you are doing in nuclear power 
specifically, which you are going to be talking about, I 
believe, today.
    You know, when we talk about ``all of the above,'' what we 
mean is truly all of the different sources of energy, and when 
you look at the portfolio that this country uses today, the 
things that actually run America, that help us not only enjoy 
our daily lives and increase our standard of living, but also 
to produce things. If we are going to be able to be a 
manufacturing country and actually create jobs here, it is 
going to take energy to do it, and under the current breakdown 
we have today, roughly 87 percent of the electricity that is 
generated in this country comes from coal, from nuclear power, 
and from natural gas, and unfortunately, all three are under 
attack by this administration. The war on coal has been duly 
noted, you know, you see so much coal being exported because 
you can't even use it in this country today, yet it represents 
over 37 percent of the electricity that is generated. How you 
can continue to enjoy the standard of living we have as a 
country today when the administration is attacking 37 percent 
of that resource, and then in addition, it is all of the other 
things that are produced in this country. You can't just do it 
on wind and solar. We support the advancement of those 
technologies, but when 87 percent of your electricity comes 
from the other sources and you are going after them, that is 
truly the government picking winners and losers and ultimately, 
the losers are families who are paying higher electricity costs 
when this kind of policy goes into effect.
    So we are going to continue to push an ``all of the above'' 
energy strategy. It is not only good for America, it helps 
families and it helps the ability for our economy to create 
jobs and compete. So I appreciate all the panelists today, 
especially you, Mr. Mohl, for what you have to say as well, and 
with that, I would yield back to my colleague from Texas, Mr. 
Barton.
    Mr. Barton. I am going to yield the remaining time to Mr. 
Shimkus of Illinois.
    Mr. Shimkus. Thank you, Joe, for giving me the time.
    The ``all of the above'' should be all of the above. I 
think my friend, Mr. Scalise, said it well.
    You know, the State of Illinois is a 50 percent nuclear, 50 
percent coal, so we have the benefits, but we are both being, I 
think, disenfranchised in both those generating sectors. 
Natural gas, there is going to be a big natural gas plant in my 
State. It is going to be very, very helpful, but that commodity 
product is going to go where that commodity product can be 
used. I will just end with high electricity prices hurt 
everybody. They hurt jobs and the economy, they hurt the poor 
rural folks, expensive gas and the like, so an ``all of the 
above'' strategy should be a lower cost fuel for everybody, 
whether electricity generation or liquid transportation fuels.
    Thank you, Joe, and I yield back.
    Mr. Barton. Yield back, Mr. Chairman.
    Mr. Whitfield. Thank you.
    At this time, I recognize the gentleman from California, 
Mr. Waxman, for 5 minutes.

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

    Mr. Waxman. Thank you very much, Mr. Chairman.
    Today the subcommittee is going to look at the electric 
utility industry and America's evolving electricity generation 
portfolio. There is no question that a significant transition 
is underway, and today's hearing is the first in a series.
    Cheap natural gas is also helpting to transform our 
electricity sector. This market reality is driving a shift away 
from the use of polluting coal to generate electricity. Even 
boosters of coal acknowledge that it is not cost effective to 
build new coal plants today.
    State and federal renewable energy policies are paying off. 
We have doubled our capacity to generate renewable electricity 
from wind and solar in just 4 years. This has cut pollution and 
invigorated clean energy manufacturing. The cost of renewable 
energy is rapidly declining. Wind power is already cost 
competitive with fossil fuel generation in some parts of the 
country. Last year, for the first time, wind power added more 
electricity generation capacity than any other resources. 
Nearly half of all new generation capacity came from wind.
    These changes are positive developments, but we will hear 
today that controlling carbon pollution would reduce the 
diversity and resilience of our energy supply.
    I have exactly the opposite view. In this committee, we 
like to pretend that there is no connection between how we 
generate our energy and climate change. But the fact is, 
climate change is the biggest energy challenge we face as a 
country. We can't have a conversation about America's energy 
policy without also having a conversation about climate change.
    In November, the International Energy Agency concluded that 
if the world does not take action to reduce carbon pollution 
before 2017, that it will be impossible to prevent the worst 
effects of climate change because of the carbon dioxide 
emissions that would be locked in by the energy infrastructure 
existing at that time.
    That means the energy policy decisions that we make today 
will have a real and direct impact on whether we can prevent 
the worst impacts of climate change in the future. Every 
decision to build a new fossil fuel-fired power plant poses 
climate risks. We need to understand and weigh those risks.
    Otherwise, we are going to be locking in infrastructure 
that will produce carbon pollution for decades to come, or 
creating stranded investments that must be shut down before 
they have served their useful life.
    Ideally, this committee would listen to the scientific 
experts and enact a responsible energy policy that recognizes 
the reality of climate change. But as the President said in his 
State of the Union Address, he will act if we don't. EPA's 
proposed carbon pollution standard for new power plants is a 
good first step. It is a fuel-neutral standard that requires 
new plants to keep their pollution below a specified level.
    The proposed standard provides compliance flexibility and 
incentives for the deployment of carbon capture and 
sequestration technologies. Both natural gas and clean coal can 
meet this standard, which creates a level playing field for 
fossil fuel-fired generation.
    Some utilities don't like this proposed rule. The question 
we should ask them is how can they reconcile unrestrained and 
ever-increasing carbon pollution with the scientific reality of 
climate change?
    I am glad we are providing a forum to hear from the 
electric utilities today. I know we are going to have a second 
hearing to hear from federal and State electricity regulators. 
That will help us get another valuable perspective on the 
issues facing the electricity sector.
    But we also need to hear from the scientists who can 
explain to us why EPA should take action to address climate 
change. Chairman Whitfield, I would like to make a request at 
this time that you schedule such a hearing as a third in this 
series to ensure that the subcommittee hears all sides of the 
issue.
    If you want an ``all of the above'' portfolio, well, we 
have got to have policies that will encourage alternatives to 
fossil fuels. And by denying the tax breaks for wind and solar 
energy, by subsidizing oil, by ignoring the full consequences 
of fossil fuels and the impact they have and the cost they have 
on public health and the environment, we are not giving a level 
playing field. We are skewing our policies to more fossil fuel 
pollution that will cost us in the climate problems for years 
to come.
    I yield back my time.
    [The prepared statement of Mr. Waxman follows:]

               Prepared statement of Hon. Henry A. Waxman

    Today, the Subcommittee is going to look at the electric 
utility industry and America's evolving electricity generation 
portfolio. There is no question that a significant transition 
is underway and today's hearing is the first in a series.
    Cheap natural gas is also helping to transform our 
electricity sector. This market reality is driving a shift away 
from the use of polluting coal to generate electricity. Even 
boosters of coal acknowledge that it is not cost-effective to 
build new coal plants today.
    State and federal renewable energy policies are paying off. 
We have doubled our capacity to generate renewable electricity 
from wind and solar in just four years. This has cut pollution 
and invigorated clean energy manufacturing. The cost of 
renewable energy is rapidly declining. Wind power is already 
cost competitive with fossil fuel generation in some parts of 
the country. Last year, for the first time, wind power added 
more electricity generation capacity than any other resource. 
Nearly half of all new generation capacity came from wind.
    These changes are positive developments, but we will hear 
today that controlling carbon pollution would reduce the 
diversity and resilience of our energy supply.
    I have exactly the opposite view. In this Committee, we 
like to pretend that there is no connection between how we 
generate our energy and climate change. But the fact is, 
climate change is the biggest energy challenge we face as a 
country. We can't have a conversation about America's energy 
policy without also having a conversation about climate change.
    In November, the International Energy Agency concluded that 
if the world does not take action to reduce carbon pollution 
before 2017, then it will be impossible to prevent the worst 
effects of climate change because of the carbon dioxide 
emissions that would be locked-in by energy infrastructure 
existing at that time.
    That means that the energy policy decisions that we make 
today will have a real and direct impact on whether we can 
prevent the worst impacts of climate change in the future. 
Every decision to build a new fossil fuel-fired power plant 
poses climate risks. We need to understand and weigh those 
risks.
    Otherwise, we are going to be locking in infrastructure 
that will produce carbon pollution for decades to come or 
creating stranded investments that must be shut down before 
they have served their useful life.
    Ideally, this Committee would listen to the scientific 
experts and enact a responsible energy policy that recognizes 
the reality of climate change. But as the President said in his 
State of the Union Address, he will act if we don't. EPA's 
proposed carbon pollution standard for new power plants is a 
good first step. It is a fuel-neutral standard that requires 
new plants to keep their pollution below a specified level.
    The proposed standard provides compliance flexibility and 
incentives for the deployment of carbon capture and 
sequestration technologies. Both natural gas and clean coal can 
meet this standard, which creates a level playing field for 
fossil fuel-fired generation.
    Some utilities don't like this proposed rule. The question 
we should ask them is how they can reconcile unrestrained and 
ever-increasing carbon pollution with the scientific reality of 
climate change.
    I am glad we are providing a forum to electric utilities 
today. I know we're going to have a second hearing to hear from 
federal and state electricity regulators. That will help us get 
another valuable perspective on the issues facing the 
electricity sector.
    But we also need to hear from the scientists who can 
explain to us why EPA should take action to address climate 
change. Chairman Whitfield, I would like to make a request at 
this time that you schedule such a hearing as the third in this 
series to ensure that the Subcommittee hears all sides of the 
issue.
    If you want an all-of-the-above portfolio, we've got to 
have policies that will encourage alternatives to fossil fuels. 
And by denying the tax breaks for wind and solar energy, by 
subsidizing oil, by ignoring the full consequences of fossil 
fuels and the impact they have and the cost they have on public 
health and the environment, we are not giving a level playing 
field. We are skewing our policies to more fossil fuel 
pollution that will cost us in the climate problems for years 
to come.
    I yield back my time.

    Mr. Whitfield. Thank you very much.
    At this time, I would like to introduce our witnesses. We 
have a distinguished panel of witnesses. I am going to 
introduce all of them except for one, and then I am going to 
call on----
    Mr. Waxman. Mr. Chairman, may I just comment that I wish I 
could stay here to hear all the witnesses. I did get a chance 
to review your testimony, but we have several subcommittees 
meeting at the same time, so I will be back and forth.
    Mr. Whitfield. OK, thank you.
    First of all, we have Mr. Mark McCullough, who is the 
Executive Vice President, Generation, at American Electric 
Power. We have Mr. William Mohl, who is the President of the 
Energy Wholesale Commodities that Mr. Scalise referred to. We 
have Mr. Benjamin Fowke, who is President and CEO, Xcel Energy. 
We have Mr. Marc Gerken, President and CEO, American Municipal 
Power. We have Mr. Robert Gramlich, who is the Interim Chief 
Executive Officer of the American Wind Energy Association.
    At this time, I would like to recognize the gentleman from 
Nebraska, Mr. Terry, for the introduction of our last witness.
    Mr. Terry. Thank you. I want to introduce someone I 
consider a friend, and I pick his brain on electrical 
generation issues as they come up, and that is John from 
Nebraska Power, John McClure, Nebraska Public Power District. 
He is the VP and General Counsel of Nebraska Public Power, a 
very diverse energy group. I yield back.
    Mr. Whitfield. That was a wonderful introduction, Mr. 
Terry. Thank you.
    Once again, welcome to all of you. I am going to call on 
you and each of you will be given 5 minutes. There is a little 
box on the table that will turn red when your time is up, and 
obviously, we will let you go over a little bit, maybe, but not 
too far. But Mr. McCullough, thanks for being here, and we look 
forward to your testimony.

  STATEMENTS OF MARK C. MCCULLOUGH, EXECUTIVE VICE PRESIDENT, 
     GENERATION, AMERICAN ELECTRIC POWER; WILLIAM M. MOHL, 
PRESIDENT, ENTERGY WHOLESALE COMMODITIES; BENJAMIN G.S. FOWKE, 
   III, PRESIDENT AND CEO, XCEL ENERGY; MARC S. GERKEN, PE, 
   PRESIDENT AND CEO, AMERICAN MUNICIPAL POWER, INC.; ROBERT 
GRAMLICH, INTERIM CHIEF EXECUTIVE OFFICER, AMERICAN WIND ENERGY 
 ASSOCIATION; AND JOHN C. MCCLURE, VICE PRESIDENT, GOVERNMENT 
  AFFAIRS, AND GENERAL COUNSEL, NEBRASKA PUBLIC POWER DISTRICT

                STATEMENT OF MARK C. MCCULLOUGH

    Mr. McCullough. Good morning, Chairman Whitfield, Ranking 
Member Rush, and distinguished members of the Subcommittee on 
energy and Power. Thank you for inviting me here today, and for 
this opportunity to offer the views of American Electric Power 
on this very critical issue. We applaud your efforts to examine 
energy diversity, and are encouraged that you have identified 
the importance of innovative technology as part of the 
solution.
    AEP has long been an industry leader in technology 
development and fuel diversity planning, which has led to 
dramatic improvements in the reliable, efficient, and clean 
production and delivery of our product. Recent AEP initiatives 
include Mountaineer Plant's 2009 startup of the world's first 
carbon capture and storage demonstration at a coal power plant, 
and the commissioning of an ultra-supercritical John W. Turk 
coal power plant, one of the world's most efficient coal power 
plants. AEP has also demonstrated industry leading technologies 
in energy efficiency and grid intelligence.
    Energy diversity plays an important role in reducing the 
potential exposure of our company and our customers to major 
fluctuations in markets, costs, regulations, and electric 
demand. This allows for the use of the lowest cost resources 
possible while enabling rapid response to demand changes. 
However, policies that could prevent the construction of new 
base load generating units or force the retirement of existing 
capacity could lead to significant shifts to this balanced 
energy mix and reduce capacity diversity.
    For example, the proposed CO2 NSPS for new 
sources effectively prohibits the construction of any new coal-
fired power plant because of a lack of commercially available 
CO2 control technology. Due to these regulations, as 
well as numerous other challenges facing nuclear energy, our 
Nation's electric grid will become increasingly reliant on a 
single fuel for new base load generation capacity, likely 
eliminating both diversity and flexibility in new power plant 
builds. Federal policy should support fuel diversity, not 
preclude it.
    The importance of fuel diversity cannot be overstated 
given. Too great a reliance upon any one energy source creates 
a significant risk of exposure to electricity price spikes and 
supply disruptions. Among other benefits, coal and nuclear 
plants buffer against fuel supply disruptions because they can 
inventory months of fuel on site, a fundamental value to any 
energy security solution with national security benefits.
    Over the past 12 years, AEP has added more than 5,000 
megawatts of natural gas fuel diversity, enabling our company 
to switch between fuel sources based on price fluctuations. 
While we recognize the value that natural gas brings to the 
diversity equation, AEP is concerned that a prolonged ``dash'' 
to gas will lead to over reliance on one fuel and have adverse 
consequences for the balance and diversity of the power sector 
and the economy.
    With the current low cost of natural gas, coal, and 
uranium, now is the ideal time to look to the future and adjust 
the focus of technology development to truly innovative, 
revolutionary paradigms for energy conversion and use. We 
support commercialization of Small Modular Reactor, or SMR, 
technology for the next generation of nuclear power. For fossil 
fuels, the United States must invest in technologies that show 
promise of a step change move of the needle regarding cost, 
fuel efficiency, and environmental performance. With success, 
technologies like chemical looping and other new revolutionary 
technologies will enable our next generation of power plants to 
use coal with extremely high efficiency and ultra-low 
emissions, while producing a pure stream of CO2 with 
no added energy penalty. These technologies can open a vast, 
yet untapped, oil reserves in this country to enhanced oil 
recovery production by making enormous quantities of low-cost 
CO2 available for EOR purposes, bringing an even 
higher level of energy security.
    However, these technology innovations require attention now 
to enable industry to overcome the high cost of 
commercialization. Encouragingly, as stated in the CURC-EPRI 
Technology Roadmap, the necessary funding to develop and 
commercialize these concepts is not beyond the levels invested 
in recent years with DOE's Fossil Energy clean coal programs. 
This funding just needs to be focused on the proper 
technologies. Similarly, SMR development could address nuclear 
risk that prevents its broad deployment today.
    In summary, AEP urges the development of federal polices 
that promote fuel diversity to use gas, coal, nuclear, and 
renewable energy in revolutionary ways that minimize volatility 
and environmental impacts, while increasing energy efficiency. 
This not only addresses energy and economic security in the 
U.S., but brings technology solutions to the globe, where real 
emission impacts can be realized. It is important, as U.S. is 
now less than 12 percent of global carbon emissions and is 
getting less every year.
    Thank you, chairman and members, for the opportunity to 
participate in this important hearing.
    [The prepared statement of Mr. McCullough follows:]
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    Mr. Whitfield. Thank you, Mr. McCullough, and now Mr. Mohl, 
you are recognized for 5 minutes.

                  STATEMENT OF WILLIAM M. MOHL

    Mr. Mohl. Good morning, Chairman Whitfield, Ranking Member 
Rush, Vice Chairman Scalise, and members of the committee. My 
name is William Mohl and I am the President of Entergy 
Wholesale Commodities. I appreciate the opportunity to discuss 
the importance of nuclear generation to a diverse electricity 
generation portfolio. My company's view and my personal 
perspective is that all fuel sources have something to offer, 
and a diverse portfolio is key to a reliable electric grid. 
This general approach to national energy policy is consistent 
with the supply planning principles of many electric utilities 
where generation portfolio decisions reflect the consideration 
of numerous factors and numerous risks.
    Entergy is one of the largest nuclear operators in the 
United States. We currently operate 11 nuclear power facilities 
in New York, Vermont, Michigan, Massachusetts, Arkansas, 
Louisiana, and Mississippi. Entergy was the first U.S. utility 
to voluntarily stabilize greenhouse gas emissions, and has 
earned local, national, and international recognition for its 
leadership on a wide range of issues, including those related 
to environmental policy and corporate governance.
    Nuclear plants are an essential part of this Nation's 
energy portfolio. Regional electric grids require a mix of base 
load, load-following, and peaking facilities. While each 
regional electric system has its own unique characteristics, in 
general, coal and nuclear plants have long supplied base load 
power, while natural gas-fired units have been used as the 
predominant source of load-following and peaking capacity.
    There are 103 operating nuclear power plants in the United 
States, generating approximately 20 percent of the Nation's 
electricity. Those nuclear plants operate as base load, high 
capacity factor units that power and help stabilize the 
electric grid in or near many major American cities. Throughout 
the Nation, nuclear generators help keep wholesale electricity 
prices lower than they otherwise would be.
    A simple way of looking at the economic value of the 
existing nuclear generation fleet is to consider the potential 
cost of replacing it. Using data from the Energy Information 
Administration, we have calculated that replacing the 100,000 
megawatts of nuclear capacity with new combined cycle 
technology gas plants would cost more than $110 billion. To put 
that number in perspective, in 2011, American utilities 
invested slightly more than $30 billion in transmission and 
distribution facilities, less than 1/3 of the nuclear for 
combined cycle replacement cost. Moreover, this replacement 
cost estimate does not include any costs of expanding pipeline 
capacity to serve new gas-fired plants. The adequacy of 
pipeline capacity is a key consideration, as was recently 
demonstrated in New England.
    Nuclear power is also a crucial contributor to maintaining 
America's air quality. Nuclear generation produces virtually no 
carbon emissions. Since 1995, nuclear plants in the U.S. have 
prevented the release of over 11 billion metric tons of carbon 
dioxide into the atmosphere. As reliable sources of base load 
generation, nuclear plants provide a foundation in the power 
supply portfolio to support emerging wind and solar power 
projects, which are characterized by intermittent availability.
    Safe operation of our facilities is our top priority. 
Entergy has made capital investments of more than $300 million 
to upgrade safety and security systems at its Northeast and 
Midwest merchant nuclear plants. We ensure safety and security 
through a defense-in-depth approach that integrates constant 
training, robust design, multiple layers of redundant safety 
systems, comprehensive plant security, and detailed emergency 
planning.
    We believe the fuel diversity, economic, reliability, and 
environmental benefits of nuclear power are clear, but every 
source of energy has advantages and disadvantages. The bottom 
line is that America needs a balanced portfolio that includes 
all existing generation technologies while continuing to focus 
on the development of new technologies for power supply 
resources. Nuclear plants are a critical part of that diverse 
portfolio and provide critical reliability, economic, and 
emissions benefits to the United States. To preserve those 
benefits for the public, we have to maintain our primary focus 
on safety while engaging with policy makers, and especially 
regulators, to ensure that market rules foster open competition 
and that regulation is rational and evidence-based.
    Thank you for the opportunity to testify today. I look 
forward to answering your questions.
    [The prepared statement of Mr. Mohl follows:]
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    Mr. Whitfield. Thank you, Mr. Mohl.
    Mr. Fowke, you are recognized for 5 minutes.

             STATEMENT OF BENJAMIN G.S. FOWKE, III

    Mr. Fowke. Thank you, Chairman Whitfield, Ranking Member 
Rush, and members of the subcommittee for the opportunity to 
testify at today's hearing. My name is Ben Fowke, and I am 
Chairman, President, and Chief Executive Officer of Xcel 
Energy. We are a public utility holding company headquartered 
in Minneapolis, Minnesota. We serve 3.4 million electric 
customers and 1.9 million gas customers in eight States 
throughout the upper Midwest, Colorado, panhandle of Texas, and 
New Mexico.
    The topic of today's hearing could not be more important at 
this critical juncture for the energy sector. We all share the 
goal of satisfying the country's growing energy demands in the 
least expensive, most reliable, and cleanest way possible. Xcel 
Energy has been successful in pursuing a strategy that has 
reduced customer risk and promoted clean energy while 
maintaining reliable service at a competitive price. Fuel 
diversity is an important part of that strategy. Our system is 
a strong example of an ``all of the above'' strategy.
    Xcel Energy owns a power generation fleet that includes 
more than 17,000 megawatts of electrical capacity from sources 
including coal, natural gas, nuclear, wind, hydro, biomass and 
solar. We are unique among utilities in our commitment to 
renewable energy.
    Today, we have about 4,900 megawatts of wind on our system. 
We are also leaders in energy efficiency and innovative State 
emission reduction and fleet modernization programs.
    Our strategy has put us on track to reduce our carbon 
dioxide emissions over 20 percent from 2005 levels by 2020. At 
the same time, we have been able to maintain power prices at or 
below the national average.
    We are achieving these remarkable results by maintaining a 
robust, diverse system. Although clean energy plays an 
important role in our electric system, we do continue to rely 
on coal and nuclear power to provide the low-cost base on which 
our system depends.
    These reliable energy sources have not stood in the way of 
our environmental achievements: Our company has been able to 
achieve significant emissions reductions despite the recent 
addition of Comanche 3, a large coal plant in Colorado. We are 
also in the process of extending and uprating our three nuclear 
plants for another 20 years of service. Coal and nuclear energy 
remain critical to the efficiency and reliability of our 
system.
    For that reason, we have been proactive in seeing the need 
either to invest in coal fleet improvements or to retire and 
repower aging coal plants through programs like the Colorado 
Clean Air-Clean Jobs Act and the Minnesota Emission Reduction 
Program. Like many utilities, we have taken advantage of low 
natural gas prices to serve growing customer demand and allow 
replacement of aging coal plants. However, because of our 
renewable portfolio, we have been able to avoid becoming too 
reliant on natural gas. Wind energy acts as a natural hedge 
against fuel price risk, reduces our emissions and meets our 
customers' interest in clean energy.
    In fact, wind is key to our strategy. We recently 
contracted for wind power in Colorado at a price that is 
competitive with natural gas-fired generation even at today's 
low gas prices. As a result, we're now integrating wind at 
levels that we never before imagined--up to 57 percent of our 
energy in Colorado in the peak hour. Our annual average wind 
energy will reach 20 percent this year in Colorado and 14 
percent in Minnesota. Now, the integration of these renewables 
is manageable, but it is not free. At the penetration rates we 
have achieved, and look to expand, our customers bear 
increasing costs of ensuring system reliability.
    With the help of the wind development community, we are 
working to modify federal renewable policy to ensure some 
benefits flow directly to utilities responsible for integrating 
wind on their systems and, by extension, their customers. 
Importantly, these changes, which we call the Customer 
Renewable Credit, would constitute just a small fraction of the 
current cost of federal incentives flowing to renewable energy.
    Much of our diversification strategy results from our long-
standing desire to prepare for federal regulation of carbon 
dioxide emissions. Without passing judgment as to the wisdom of 
such regulation, we do believe there are principles that should 
guide government action in this regard. These principles 
include the belief that legislation is better than regulation; 
State flexibility is key; and Early Action Credit is essential. 
Because future legislation is uncertain, we are preparing for 
EPA's regulation of carbon dioxide from existing power plants. 
We hope that the EPA will allow States to develop diverse 
emission reduction strategies like those that have been 
successful in Colorado, Minnesota, and elsewhere.
    For my company, it is most critical that carbon dioxide 
regulation gives credit to States and energy companies that 
have already acted early to address carbon issues. Many 
customers are already are paying for clean energy programs and 
should be rewarded for having done so.
    We believe with these approaches to policy, the Nation can 
assure continued diversity of its energy resources and achieve 
what Xcel Energy has been working towards in our States for 
more than a decade: clean energy and environmental improvement 
at a competitive price.
    Thank you for the opportunity, and I am happy to take any 
questions you may have.
    [The prepared statement of Mr. Fowke follows:]
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    Mr. Whitfield. Thanks, Mr. Fowke.
    Mr. Gerken, you are recognized for 5 minutes.

                  STATEMENT OF MARC S. GERKEN

    Mr. Gerken. Good morning, Chairman Whitfield, Ranking 
Member Rush, and the subcommittee members. I am Marc Gerken, 
CEO of American Municipal Power, and I am pleased to have the 
opportunity to appear before you to discuss the importance of 
the electric sector's fuel diversity. My remarks will focus on 
the role hydropower can play in these diverse resource 
portfolios, and also the challenges that are faced in the 
development process.
    Ohio-based AMP is a wholesale power supplier and service 
provider for 130 municipal electric systems in seven States. 
Collectively, AMP serves more than 625,000 meters and has had a 
system peak in 2012 of 3,500 megawatts. Last year, AMP had 
power sales revenue of about $775 million and total assets of 
about $5.5 billion.
    AMP is currently constructing four hydro projects on the 
Ohio River at existing U.S. Corps of Engineers locks and dams. 
These projects total more than 300 megawatts and a $1.6 billion 
investment, which represents the largest deployment of new run-
of-the-river hydropower in the country today.
    One of our projects is the Smithland project in Chairman 
Whitfield's district. Another is the Willow Island project in 
Representative McKinley's district. The power from these 
projects will benefit our members in districts of dozens of 
Members of Congress, including Representatives Griffith, Latta, 
and McKinley. Importantly, AMP's projects are resulting in 
around 1,200 jobs through a period of 4 years, as well as 
contracts with major vendors in over 12 States in this country.
    Our hydro projects are part of AMP's overall ``all of the 
above'' energy strategy, which embodies the importance of fuel 
diversity. AMP works with the nationally recognized firm of 
SAIC to develop strategic long-term power supply resource plans 
for each one of our members, and that is a key component in our 
ability to undertake generation investments, and that our 
members are able to take a longer term look at these 
investments because they care about the long-term future of 
their customers.
    AMP has long used the term ``diversified'' to describe our 
portfolio, which includes to own, operate, and then purchase 
output from natural gas, coal, hydropower, wind, solar, diesel, 
and landfill gas generating facilities, as well as strategic 
wholesale market purchases and a robust energy efficiency 
program. Our projects represent fuel technology and geographic 
diversity, and will yield long-term risk-balanced portfolio 
with predictable rates.
    Run-of-the-river hydro projects are capital-intense, but 
have many positive attributes, as I listed on pages 7 and 8 of 
my written testimony. I would ask you to look at those, because 
I think as a renewable, hydro does set itself apart from wind 
and solar when it comes to load dispatch and other things.
    Of the more than 80,000 dams in the United States, the more 
than 78 gigawatts of hydropower available today are provided by 
just 3 percent of these dams. In an April, 2012, report by 
DOE's Oak Ridge National lab, found that adding power to the 
national non-powered dams has a potential to add 12 gigawatts 
of new capacity. Additionally, the National Hydropower 
Association job study shows that between 230,000 and 700,000 
jobs could be created through the development of new 
hydropower.
    Despite hydropower's positive attributes, the role as a 
diverse energy portfolio in the process from inception to 
construction for the new facilities is extremely challenging. 
Most developers don't enter the regulatory process with 
unreasonable expectations. We understand the need to balance 
the environmental protection with development. One of the key 
challenges is to keep costs down and stay on schedule, which 
makes the regulatory process very critical. Developers must 
carefully time the required modeling studies, the site 
assessments, because the studies have seasonal and weather 
limitations. A hydropower developer must also have significant 
capital, millions of dollars for larger projects to cover the 
costs through permitting. Of the regulatory process, we found 
that the critical path sometimes is strictly the PJM 
interconnection, in our case, that could take 24 months and 
commonly is filled with delays in that process.
    AMP's experience has been--with hydropower projects on non-
powered core dams, key regulatory approvals are FERC license 
and the Corp's 404 and 408 permits. Some of these studies 
required--are required in the FERC process are repeated in the 
Corps process.
    In order to obtain a 404 permit, applicants must 
demonstrate that the discharge of dredged and fill material 
would not significantly impact or degrade the national waters, 
and there is no--and also that there is no practical 
alternatives to damaging the aquatic environment. Prior to the 
issuance of the 404 and 408 permits, approvals must be provided 
by the Corps to ensure that the locks and dams are not 
compromised. AMP was the first entity required to obtain a 408 
permit in lieu of--as well as a 404 permit. We saw considerable 
delays. We witnessed delays in financing, which cost us 
significant dollars, and we see the need to streamline that 
process.
    What can be done to improve the process and bring more 
hydropower online is to help diversify the national energy 
portfolio. AMP is pleased that a bipartisan legislation 
sponsored by Representative McMorris Rodgers has been favorably 
considered in the House. The Hydropower Regulatory Efficiency 
Act will improve the process for smaller hydropower projects 
and require study of additional improvements to a broader 
scale.
    I believe that fuel diversification is paramount to our 
Nation's energy security. This includes ensuring that 
reliability and affordability are considered in rulemakings, 
impacting existing generation resources, and that more 
efficient regulatory processes are in place to help facilitate 
the development of new infrastructure to meet our Nation's 
energy capacity and reliability needs. I commend the 
subcommittee for reviewing this topic, and I wish to thank you 
very much, and will be happy to respond to questions.
    [The prepared statement of Mr. Gerken follows:]
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    Mr. Whitfield. Thank you, Mr. Gerken.
    Mr. Gramlich, you are recognized for 5 minutes.

                  STATEMENT OF ROBERT GRAMLICH

    Mr. Gramlich. Thank you, Chairman Whitfield, Ranking Member 
Rush, members of the subcommittee. I appreciate the opportunity 
to be here today to represent the views of the American Wind 
Energy industry.
    As you have heard today from the electric utilities on the 
panel, diversity is a crucial issue for the electric industry. 
As you have also heard, when utilities seek to diversify, wind 
power is a natural choice. Wind power tends to be the next 
least cost source of new electric generation capacity behind 
natural gas. It serves as a natural hedge, or insurance policy, 
because fuel price risk is zero.
    Wind energy production has grown dramatically in the last 
decade. Today wind projects in 39 States and Puerto Rico offer 
enough energy to power nearly 15 million American homes. At 
least 66 electric utilities bought or owned new wind power 
installed in 2012, up by 50 percent from just a year ago. Last 
year alone, $25 billion in private investment went into 
building new U.S. wind projects. Wind projects in the U.S. have 
brought economic growth to rural communities; roughly $400 
million in property taxes or similar payments to communities; 
and annual lease payments to farmers and ranchers of around 
$120,000 per turbine over the turbine's lifetime. Already, Iowa 
and South Dakota produce enough wind energy to meet more than 
20 percent of their electricity needs, and wind energy produces 
more than 10 percent of the electricity in 9 States.
    Grid reliability benefits greatly from fuel diversity. Just 
like the Mississippi River takes water from many States and 
tributaries and keeps a steady flow into the Gulf of Mexico, 
the grid takes power from many sources to meet total demand. 
The grid can provide reliable energy as long as enough power is 
available from the diverse generation sources across the wide 
geographic areas of our power grids. Wind power has been an 
important part of that diverse portfolio, providing energy at 
many geographic points around the grid, helping grid operators 
meet demand.
    Diversity promotes reliability because there is operational 
risk for all resources on the system, whether it is from a 
mechanical failure or natural causes. In many cases, what 
affects other resources does not affect wind energy. Wind 
turbines continued to operate after Hurricane Sandy, the 
Japanese tsunami, and the freak cold snap in Texas in February 
2011. During the Texas cold snap, some 50 conventional power 
plants abruptly shut down due to the cold weather, contributing 
to rolling blackouts. But wind turbines continued to produce as 
expected. Water savings from wind energy are another important 
benefit for utilities and policy makers, especially with large 
parts of the country still facing a persistent drought.
    Fuel diversity requires continued attention and support 
from Congress, utilities, and state regulatory commissions. 
Without that attention, there would be a tendency to rely on a 
single resource and effectively put all of the Nation's 
electric resource ``eggs in one basket.'' At the federal level, 
the primary means of supporting fuel diversity has been tax 
credits. Tax credits played a major role in bringing down the 
cost of shale gas, and they are rapidly bringing down the cost 
of both wind and solar energy. The U.S. wind energy industry is 
now getting back to work building turbines and projects after 
the recent extension of the production and investment tax 
credits. The primary challenge is that renewable tax incentive 
support has been sporadic and unpredictable. With more policy 
certainty, like that enjoyed by other energy sources, the wind 
energy industry could invest in the remaining cost and 
performance improvements needed to finish the job of becoming 
fully cost-competitive.
    Diversity through wind power development has held rates 
down for homes and businesses across the country. Wind energy 
costs have fallen by \1/3\ in the last 4 years, and the 
technology continues to improve. Over the long term, wind 
energy's zero fuel cost protects consumers from fluctuations in 
the price of other fuels. Wind power is an important component 
of a diverse domestic energy portfolio that promotes economic 
growth, energy security, and a clean environment.
    Again, thank you for the opportunity to be here today. I 
look forward to answering your questions.
    [The prepared statement of Mr. Gramlich follows:]
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    Mr. Whitfield. Thank you very much.
    Mr. McClure, you are recognized for 5 minutes.

                  STATEMENT OF JOHN C. MCCLURE

    Mr. McClure. Good morning, Chairman Whitfield----
    Mr. Whitfield. Be sure and turn your microphone on if it is 
not.
    Mr. McClure. Good morning, Chairman Whitfield, Ranking 
Member Rush, members of the committee. I am John McClure, Vice 
President and General Counsel with Nebraska Public Power 
District. I am here today substituting for our CEO, who 
unfortunately broke a bone on Sunday and was unable to travel. 
I appreciate being able to appear before you today to discuss 
some of the significant challenges facing the electric utility 
industry.
    Everything we do in society, whether it involves commerce, 
communication, comfort, or convenience, has one or more crucial 
ties to the electric system. Consequently, it is imperative to 
understand the consequences of policies and regulation, since 
electricity usage impacts everything we do.
    I am here today on behalf of the Alliance for Fuel Options, 
Reliability, and Diversity, or AFFORD, as we call ourselves. We 
are a group of consumer-owned electric utilities serving in 14 
States, and have recently published a white paper which details 
our concerns. Our message is simple: there is no single option 
for producing electricity, and due to regional differences and 
other considerations, public policy should encourage electric 
utilities to pursue diverse fuel mixes that account for local, 
regional and national circumstances. A ``one size fits all'' 
energy policy will not work in the electricity sector. The 
chart in the back of the room does a great job describing how 
different the regional mixes are around the country, and that 
is worth 10,000 words that are not in my testimony in terms of 
educating us about the diversity around the country.
    NPPD is primarily a wholesale power provider, and we have a 
diverse generation mix, especially compared to those in our 
region. Due to the proximity of low cost Wyoming low-sulfur 
coal, coal is a popular choice for fuel. Several large and 
small utilities in the region receive 75 percent or more of 
their electricity from coal-fired generation. At NPPD, we get 
approximately 60 percent from coal, with the remaining mix 
being nuclear, hydro, wind, and natural gas.
    During the past 2 years, NPPD has been planning for the 
future. We began a customer and stakeholder process designed to 
promote dialogue about the choices and consequences of power 
supply and demand side options. We found customers expect the 
following from their power supplier: affordability, high 
reliability, fast outage restoration, and environmental 
stewardship. Achieving all of these is no simple task, as some 
choices may serve one or more of the criteria, but may 
challenge others.
    The final product of our effort will be a new integrated 
resource plan, and must consider numerous areas of uncertainty 
facing our industry. Some of the key drivers of uncertainty 
include future regulatory requirements for fossil fuel, nuclear 
and renewables. One specific uncertainty involves the future 
price of carbon emissions. As you well know, a number of 
utilities have decided to close older, smaller coal plants 
because the known cost of more stringent environmental 
regulations and the unknown cost of future carbon restrictions 
is deemed either too high or too uncertain to continue with 
coal.
    You also know that natural gas is the current fuel of 
choice for new generation. Its environmental characteristics 
are superior to coal and its widespread development has created 
a plentiful near term supply with attractive pricing.
    While the supply and price of natural gas has been a game 
changer and is a critical part of a diverse fuel mix, it is not 
a silver bullet. What many do not realize is that coal remains 
a more competitively priced fuel for certain regions of the 
country due to the proximity of supply, especially in the 
central and western U.S. Natural gas may be a great option if 
your power plant is located near a robust network of gas 
pipelines, but unfortunately many of the existing coal plants 
do not have access to pipeline capacity to convert from coal to 
natural gas.
    As was mentioned earlier, we have been through other period 
of major changes. At one time, gas was taken out as a fuel 
option. Now, many of us are concerned coal is going to be taken 
out as a fuel option. We need all of the above. As the owner 
and operator of a nuclear power plant, we believe this, too, 
must be part of our Nation's mix. Nuclear remains an important 
part of a carbon free generation mix, but significant expansion 
is now less likely and again reinforces the need for diversity.
    Wind and solar receive considerable attention, and like 
many other fuels, are significantly impacted by natural 
regional attributes and infrastructure availability. Some of 
the areas with the greatest wind potential are relatively 
remote and have limited transmission.
    In summary, as you work through these challenging issues, 
it is critical that policies be developed that promote 
reliability and affordability through fuel diversity. Thank you 
for the opportunity to testify today.
    [The prepared statement of Mr. McClure follows:]
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    Mr. Whitfield. Mr. McClure, thank you, and thank all of you 
for your testimony.
    At this time I will recognize myself for 5 minutes of 
questions.
    Mr. McCullough, you had mentioned the Turk plant in 
Texarkana, Arkansas, and I would ask you from the time you 
obtained the first permit or applied for the first permit, how 
long did it take to complete the construction of that plant and 
begin operation?
    Mr. McCullough. We applied for the first permit in the fall 
of 2006, and the unit went commercial in December of 2012, so 
over 6 years.
    Mr. Whitfield. And now is that technology--would you say 
that is one of the cleanest coal burning plants in America?
    Mr. McCullough. It is.
    Mr. Whitfield. Would you say it is one of the cleanest coal 
burning plants in the world?
    Mr. McCullough. It is.
    Mr. Whitfield. And you know, our carbon emissions in the 
U.S. are at the lowest point in 20 years, and as someone 
indicated in their opening statement, the U.S. today has less 
than 12 percent of global emissions. We are responsible for 
less than 12 percent. With that ability to build a plant that 
clean, if the greenhouse gas regulation--when it becomes final, 
would you be able to build that plant in America today?
    Mr. McCullough. We would not build that power plant.
    Mr. Whitfield. You would not legally be able to meet the 
emissions standards, would you?
    Mr. McCullough. I can't answer that question entirely. That 
may be true. The economics of the overall situation--when you 
add CCS to Turk, because CCS would be required, it is not 
commercially available, so we would not be able to meet----
    Mr. Whitfield. Plus it was the first time that EPA ever 
required one fuel source to meet the emissions standards of 
another fuel source, so coal has the emissions standards of 
natural gas.
    So the thing that bothers me, all of us talk nonstop about 
``all of the above,'' but we do know that there is a concerted 
efforts by groups, individuals, and others in the country to 
eliminate some fossil fuels from being used for generating 
electricity. And of course, I am from an area of Kentucky that 
uses a lot of coal, but it is more than just that. In my 
opening statement, I talk about in New England they are talking 
about how natural gas prices are eight times higher because of 
lack of pipeline capacity.
    Mr. Mohl, you talked about the importance of nuclear 
energy, and yet, they are talking about in New York State they 
are trying to close down the plant--the nuclear plant; that if 
that were not in operation, as they say, New England would be 
toast. And then in California, it talks about California is 
weighing how to avoid looming electricity crises brought on by 
its growing reliance on wind and solar power.
    So when we are out here trying to stimulate the economy, 
create jobs, compete in the global marketplace, I mean, we have 
to have all of the above, and in my humble view, it is 
irresponsible for groups out there trying to deliberately shut 
down the use of fossil fuels, which is one of the base loads of 
our electricity needs.
    One of the comments that you made, Mr. Gramlich, you had 
talked about the increasing costs--you were talking about the 
use of wind is not free--the increasing costs, and you 
specifically mentioned system reliability. Would you just 
elaborate on that a little bit for me, please?
    Mr. Gramlich. Well, we get questions about reliability a 
lot, as everybody does. It is crucial. I used to work for one 
of the largest grid operators in the country, and it always 
sort of seemed to me that the grid could sort of be viewed as 
taking from really a thousand sources or more of energy and 
then trying to meet aggregate supply with--aggregate demand 
with aggregate supply. So wind energy fit very nicely, I 
thought then, and think now, into that portfolio. Not as a 
single bullet, not to run a whole system on, not to be relied 
on by itself, but as part of that diverse portfolio.
    Mr. Whitfield. But what do you mean by increasing the cost 
of the system reliability?
    Mr. Gramlich. I think that comment was about if you have a 
large grid operator like the one I described, you can add wind 
energy, significant amounts of it, without the need for 
significant additional reserves. There are reserves or back-up 
capacity for all resources, because any of the resources you 
have heard about today or on the grid can go down from time to 
time. It does not mean they are unreliable. It does not mean I 
am saying any of those resources are unreliable or wind is. But 
when they are operating, the grid can use them and you need a 
good grid operator with the right tools to keep the system----
    Mr. Whitfield. You know, in the fiscal cliff legislation 
there is $12 billion of production tax credits for wind energy, 
and in your comments, you had mentioned that shale gas would 
not have been successful without equivalent types of production 
tax credits. Would you provide the committee with a detailed 
analysis of what you were referring to with that comment, 
please?
    Mr. Gramlich. I would be happy to.
    Mr. Whitfield. Thank you very much. My time is expired.
    At this time I recognize the gentleman from Illinois, Mr. 
Rush.
    Mr. Rush. Thank you, Mr. Chairman.
    Mr. Gramlich, wind power is very important to my home 
State, and as I mentioned in my opening statement, 13--at least 
13 international wind companies that are headquartered in 
Chicago. Last year, I am sure you witnessed me battling 
Congress at the end of the year to extend the production and 
tax credit, and many arguing that wind is not really a viable 
source of energy and investing in wind is not worth the money. 
It is money wasted.
    For this hearing, can you discuss the benefits of investing 
in wind on both the federal level as well as the private level, 
and what are some of the advantages of investing in wind, 
especially as it relates to job creation, electricity 
diversification and reliability, and implications for 
addressing climate change. I am not sure, I was in India 
several weeks ago, and we had a chance to visit the GE facility 
there in New Delhi, and we--they showed us some technology that 
was dealing with this issue of reliability. I don't know if you 
are familiar with that, but in their technologies that are 
being developed that would address some of the issues of our 
reliability.
    Mr. Gramlich. Sure. Yes, I witnessed that debate about the 
PTC in the last Congress. We are proud to be saying with that 
extension, the industry is getting back to work in creating a 
lot of jobs, 75,000 jobs in the industry. Importantly, we have 
really brought the manufacturing of the wind turbines to this 
country. Nearly 70 percent of the 8,000 parts in a turbine are 
made here. We have nearly 500 manufacturing facilities around 
the country, including in Illinois. So we are very proud of the 
jobs that we are creating in our industry, as well as the rural 
economic development that our projects are creating in the 
communities where wind is being developed, rural Illinois and 
much of the rest of----
    Mr. Rush. Are we exporting that technology?
    Mr. Gramlich. I am sorry--oh, exporting. Not so much, but 
in some cases, yes. One of the great strategic advantages of 
wind energy is these parts are very big, if you have seen them 
on the highway, which means we have a great opportunity to 
produce here what we deploy here. That is a large reason why we 
have so much domestic production of this technology, compared 
to other manufacturing sectors that maybe are shipping abroad, 
and wind energy--it is most of--if we keep deploying it here, 
we are going to be making most of it here.
    Mr. Rush. How has the wind industry grown in terms of both 
generation capacity, as well as private investment, and why is 
it important for policy makers to understand the trajectory of 
wind power and its potential for the future?
    Mr. Gramlich. As I said in my testimony, the industry is 
responsible for about $25 billion in private investment in this 
country. Last year, that is investment that would not have 
otherwise occurred, and there are significant jobs, as I 
mentioned before, that are resulting from that. The tax credits 
have been critical to keeping that investment going, and 
hopefully they will continue.
    Mr. Rush. Mr. Fowke, in the brief period of time that I 
have left, in your testimony you noted that your facilities are 
on track to reduce carbon emissions by over 20 percent from the 
'05 levels by year 2020, while in the same time, you have been 
able to maintain power prices at or below the national average. 
What kind of strategies have you implemented to achieve these 
goals and are these measures measures that can be replicated at 
other facilities?
    Mr. Fowke. I think so. I mean, first, we are very fortunate 
to be in a very rich wind area, so that helps us with bringing 
in wind at a basically very competitive price. Our average wind 
portfolio is at $40 a megawatt hour, which is very close to 
parody with natural gas as an energy source.
    The second thing we did is we got started early. We started 
repowering older coal plants that were relatively small, and we 
realized that the additional capital improvements wouldn't make 
sense in the long term. That said, we also built a new coal 
plant at the same time a few years ago. It came online in 2010, 
which is a supercritical coal plant, very efficient, and it 
allowed us then to retire those other, older coal plants, go to 
natural gas in some of them, and still have a good balance of 
fuel.
    So if you get started early--and we have been working on 
this since 2002--you can do things typically at a better price 
point than trying to do everything all at once, which is one of 
the concerns we see with some of the regulations, is that if 
you try to do everything at once, you can't find the labor, you 
can't find the materials, et cetera. So the combination of 
effectively deploying an ``all of the above'' strategy is how 
we maintain our competitiveness.
    Mr. Whitfield. Gentleman's time is expired.
    At this time I recognize the gentleman from Texas, Mr. 
Barton, for 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman. I want to make a brief 
comment before I ask questions.
    I think it is important--not necessarily for this panel, I 
think they get it, but maybe for the audience that will review 
the record--how important it is to have a robust energy market 
in America because we have based our energy policy generically 
on markets in this country. Today, we have got a situation 
where America is literally being reindustrialized in front of 
us. Companies are moving back to America. Manufacturing plants 
are moving back to America. Jobs are being created in America. 
I think the principal reason is because our energy markets are 
so robust and so diversified that we have got the lowest 
overall energy prices in the world. This committee can take 
credit for that. We have consistently, you know, sometimes up, 
sometimes down, but overall, supported a market-based energy 
policy.
    With regards to electricity generation, this panel shows 
the diversity of the electricity gen. We have people that are 
proponents of nuclear power, coal power, hydro power, natural 
gas power. We have got independent merchants, we have got 
regulated utilities, we have got municipal power. We don't have 
co-ops, that I am aware, today but other than that, we have got 
it and we have got the alternative energy market, the renewable 
energy market. So Mr. Chairman and Mr. Rush, Ranking Member, 
you have all done a great job of putting this panel together.
    Now my first question is to the gentleman from American 
Electric Power. The ranking member of the full committee in his 
opening statement said that the new source power plant 
regulations that are being proposed by the EPA are fuel and 
neutral. Do you agree with that?
    Mr. McCullough. No, sir, I do not. They are prejudiced 
towards a fuel and against another.
    Mr. Barton. Let us be honest. You are not going to build a 
coal plant with those regulations, and you will build, 
probably, almost all natural gas. I am in the Barnett Shale, so 
I am not anti-natural gas, but I also have lignite coal plants 
and I support nuclear power and wind power. So I think it is a 
little bit disingenuous to say that they are fuel neutral. They 
are not.
    The gentleman from Entergy, you are a big proponent of 
nuclear power. Do you think it is possible in today's market 
environment to build a base load nuclear power plant in 
America?
    Mr. Mohl. It is very challenging in this environment to be 
able to build a new nuclear plant. Currently there is a handful 
of them being developed down South.
    Mr. Barton. Yes, where they still have the regulated 
markets and you can roll in the prices. But is the challenge 
for new nuclear, is it more still regulatory and licensing, or 
is it just the simple fact that because of the competition from 
coal and natural gas, and to some extent, wind power possibly, 
that it is just not cost effective right now? It is not 
economically possible?
    Mr. Mohl. Well really, there are three challenges as it 
relates to merchant nuclear. Low gas prices obviously have 
depressed the markets. Regulation, we need fact-based 
scientific approach that is based on cost benefit, and we need 
fair and competitive wholesale markets. And so you are exactly 
right, that trying to build a new nuclear plant in a wholesale 
market is just not feasible.
    Mr. Barton. I want the record to show that we had a witness 
say I was exactly right. If you all will make a note of that.
    I want to go to our friend that is recommending the wind 
industry. Texas is a big wind state. I am a big proponent 
historically of wind power. What is base load wind generation 
costs these days? What is the per kilowatt price?
    Mr. Gramlich. Price does vary by region. We have great wind 
resource in your State. It can be--there are published contract 
prices at FERC for wind power contracts. They----
    Mr. Barton. I am not talking--I just want--this is not a 
trick question. I mean, you can build--you can generate coal 
and natural gas, I would say, 3, 4, maybe 5 cents a kilowatt 
hour. What would be an equivalent cost for wind power in a 
perfect situation? Is it below 10 cents, 5 cents?
    Mr. Gramlich. There are 3 and 4 cent contracts in your 
State and in the middle of the country.
    Mr. Barton. But in the right situation, is it fair to say 
that wind power can be cost competitive with other commercial 
base load sources? Is that a fair statement?
    Mr. Gramlich. Can be in certain locations.
    Mr. Barton. OK. My time is expired, but I would like for 
the record an answer--the comments on bidding negative into a 
competitive market simply to get the tax credit. My coal 
producers and merchant natural gas plant producers in Texas say 
some of the wind producers bid negative simply to keep the 
windmills turning because of the wind tax credit basically 
gives them a reason to give the power away. And my time is 
expired, but I would like an answer for that, if you would, 
sir. I yield back.
    Mr. Whitfield. Thank you.
    At this time, I recognize the gentleman from California, 
Mr. McNerney, for 5 minutes.
    Mr. McNerney. Thank you, Mr. Chairman. You know, I really 
think this is great testimony this morning. I filled my note 
sheet with every one of your testimony, which is very unusual 
in a hearing, so congratulations and thanks for coming this 
morning.
    Before coming to Congress, I spent years in the wind 
industry, which does make me somewhat biased, but I agree 
wholeheartedly with the ``all of the above'' strategy, 
including nuclear. I love to see small modular reactors come 
online. It is a very good concept, and I did have the 
opportunity in my career to work with Xcel, with AWEA, and with 
the Nebraska Public Power, so it was a great opportunity to get 
to know some of your businesses.
    We often hear about the war on coal, but withstanding some 
regional differences that were pointed out by Mr. McClure and 
Mr. Mohl, the war on coal was really about natural gas under-
pricing coal in most parts of the country. So I hear that 
refrain often, but I have a hard time swallowing it.
    I have some questions, though. Mr. Fowke, would you comment 
on the assistance stability impacts of wind and solar energy in 
your utilities?
    Mr. Fowke. Yes, the reliability issues increase, obviously, 
the more renewables you have on system. I mentioned in my 
testimony at one point earlier this year, we had 57 percent of 
our energy coming from wind. So when that happens, you have to 
quickly back down your generation, and typically you want that 
to be a gas-fired generation versus nuclear or coal, because 
they are designed better for those sorts of things. So you have 
to ramp up and ramp down, and you have to follow the load 
accordingly. And that does--as you get higher levels of 
penetration, increase the cost of having that much renewables 
on your system.
    Mr. McNerney. You mentioned that Xcel is on track to reduce 
carbon emissions by 20 percent with price stability. Would you 
describe how that is possible?
    Mr. Fowke. Well as I said before, I mean, it is really 
getting started early. It is taking advantage of the very rich 
wind resource in our backyard. It is retiring all aging coal 
plants that are probably beyond their service life, 
particularly with the environmental regulations ahead. So I 
would say it is an ``all of the above'' strategy to do that, 
but you could start it early and it is steady and flow.
    Mr. McNerney. Good. I like your answers. They don't last 
too long, so I still have a little time left. I could ask 30 
minutes of questions if I had the time.
    How would you--Mr. Fowke, how would you--how does wind 
energy form a hedge against price spikes?
    Mr. Fowke. You know, that is a great question. Wind, as we 
all know, is interruptible, so we view it--while it has a 
capacity factor for planning, we put a very small capacity 
factor on it. So it is fuel. So you can build it and you can 
determine how long it is going--what it is going to cost over a 
20-year period. For us, that is about $40 a megawatt hour. Then 
you compare that to other fuel sources, natural gas 
specifically. Sometimes at $40 a megawatt hour it is in the 
money, as it was when natural gas was at 8 and $10. Sometimes 
it is a little bit out of the money, as it is today in a very 
low natural gas environment. But it is still a hedge.
    Mr. McNerney. So are you investing in storage?
    Mr. Fowke. At this point with a low natural gas 
environment, storage is not competitive.
    Mr. McNerney. OK. Mr. Gramlich, would you elaborate on your 
statement that shale has benefitted from reliable credits, 
whereas wind energy hasn't?
    Mr. Gramlich. Sure. I think shale gas is a success story. I 
know this committee has been interested in bringing new options 
into the electric portfolio, and shale gas, people can say a 
lot about it but certainly, it has increased dramatically and 
changed the game in the industry. And also, certainly, the tax 
credit was--played a key role in that. There was, I believe, 
over 20 years of stability in that credit which helped a lot 
with investors. Our problem with investors, we have many 
investors who would, as you know--and you have the wind patent, 
I don't--but as you know, investing in these technologies, you 
could make a lot of cost-reducing investments and performance-
improving investments if you knew what the market might be like 
a few years down the road. But if you only know a year or two 
at a time, it is very hard to justify those investments. So the 
stability of the credit is as crucial as the value, in terms of 
cents a kilowatt hour.
    Mr. McNerney. Thank you. Mr. McCullough, could you quickly 
explain what SMR development is for nuclear?
    Mr. McCullough. Yes. It is the small modular reactor 
development that you referenced.
    Mr. McNerney. All right, thank you.
    All right, Mr. Chairman, I yield back. Thank you.
    Mr. Shimkus. [Presiding] Gentleman yields back his time. 
Chair now recognizes himself for 5 minutes. My staff is 
bringing--and I agree, I think it was Mr. McClure, you 
mentioned this. This is in our committee memo and the briefing 
chart. It talks about the regional differences. I am in the 
east north central, 63 percent coal, which is a lot different 
than if you go to California, which is 40-some percent hydro, 
and 20-some percent natural gas. So the point being the regions 
are very, very different. And if we don't have a diversified 
portfolio based upon the regions, some big wind areas, some 
areas, they don't have a lot of wind. And if we, in a public 
policy arena, move to really disincentive base load generation, 
people are going to get harmed.
    Illinois is a 50-50 state, 50 percent nuclear pretty much, 
50 percent coal. Although we do have a lot of wind generation, 
it is still very small in the overall portfolio of the 
generation. Missouri, across the line, 85 percent is coal 
generation. Mr. Barton did mention the price. I mean, it is 
still base load generation is the low priced commodity product, 
which--so people get harmed and the economy gets harmed by high 
prices, which is really kind of the initial in my opening 
statement that I wanted to make.
    And just another point before I go to my questions. Mr. 
Gramlich, if you have got a zero fuel cost, how many jobs are 
there that being that commodity product to that generator? My 
point is, none, oK? Coal miners mine coal, take it to the power 
plant. Good paying jobs, good benefits, tough work. In the coal 
regions around the world, they are critical to the southern 
Illinois economy, the West Virginia economy, the Kentucky 
economy. So I like zero cost, but when power is still a high 
cost generation, even though the fuel is no cost, and we do 
lose the jobs.
    Mr. McCullough, the amount of coal used to generate 
electricity is decreasing--we have all admitted that--from 50 
percent to 37 percent. What policy changes are needed to ensure 
that the coal continues to remain a significant part of our 
Nation's diverse generation fuel mix?
    Mr. McCullough. Yes, I think as we reflected earlier--and I 
actually would like to qualify an earlier answer to the 
chairman's question around the legality of NSPS. We would take 
the position it is not legal because it is the first time EPA 
has required a technology that is not commercially available.
    Mr. Shimkus. I want to highlight that. There are three 
people who talked about supercritical power plants, coal, 
cleanest. Thank you for doing that, but if the EPA rules on 
greenhouse gas ability, these brand new power plants, cleanest 
in the world, may not be able to operate. Is that true, Mr. 
McCullough?
    Mr. McCullough. We could not retrofit Turk plant, the 
most----
    Mr. Shimkus. Because there is no technology?
    Mr. McCullough. It is not commercially available. There are 
no vendor----
    Mr. Shimkus. And the other supercritical plants, do you 
agree with that, Mr. Fowke?
    Mr. Fowke. Yes.
    Mr. Shimkus. Mr. Gerken?
    Mr. Gerken. Yes.
    Mr. Shimkus. And that is part of the point that we are 
trying to make from the coal regions. Even though we have the 
best power plant in the world, greenhouse gas--we don't even 
have the technology to even capture it. And if it is, it is 
going to--the build out of the footprint is going to be in the 
billions of dollars, and it is going to take about 30 percent 
electricity generation, if you even had the technology.
    Mr. McClure, let us talk about this shift in natural gas. I 
am all for it, but I think you alluded to--just like an 
electricity grid and a transmission grid, we may have some 
pipeline constraints, and you alluded that in your opening 
statement. Can you talk about that?
    Mr. McClure. Well, there is a recent example, a very real 
example in New England that I think many of you have become 
familiar with where high demand for electricity and a very cold 
snap, high demand for gas for heating created a real spike in 
prices for both natural gas and electricity. There are other 
parts of the country where we simply don't have the gas 
pipeline infrastructure. We could not convert our two coal 
plants to gas because there is no--not an adequate gas line 
infrastructure there.
    Mr. Shimkus. And Mr. Gramlich, that is some of the 
challenges on wind power on the reverse side, just with the 
transmission grid, is it not?
    Mr. Gramlich. Transmission is very helpful----
    Mr. Shimkus. Just trying to wield that power to places that 
it might be used. So those are--I think those are especially 
issues in a bipartisan manner that we can talk about is 
expanding our natural gas pipeline, expanding the transmission 
grid.
    And with that, my time is almost expired. I would just like 
to say we had a very good hearing on nuclear power last week. 
We talked about the NRC and the filter vent issue and how that 
is going to create new challenges. All we are going to ask the 
NRC to do is make sure before they promulgate rules, they go 
through regular order. Those are additional rules and 
regulations that are very, very costly.
    So I yield back my time and now recognize the ranking 
member of the full committee, Mr. Waxman, for 5 minutes.
    Mr. Waxman. Thank you very much.
    First of all, I wanted to comment in his opening statement, 
Chairman Whitfield cited a recent Wall Street Journal article 
that suggested wind and solar power threatened the California 
grid. There are a number of serious flaws with that article, 
but with the San Onofre nuclear generating station offline, the 
State could face some challenges this summer. This is something 
I am monitoring closely.
    Mr. Fowke, my understanding is that for a decade or longer, 
Xcel has been shifting some of its generation from coal to 
natural gas, partly in anticipation of eventual requirements to 
reduce carbon emissions. Can you tell us about the thinking 
behind that strategy?
    Mr. Fowke. Certainly, Mr. Congressman. You are right, we 
have been doing it for a decade. These rules--we saw these 
rules coming and we--at the same time, we had an aging 
generation fleet, natural gas, coal, et cetera. So our decision 
was to put the money into the coal plants that we thought could 
serve customers for another 20 to 30 years, and at the same 
time, retire those that we felt would not justify the 
incremental capital to serve customers for another 20 years. We 
power some of those plants, and then added to that was the--our 
desire and the State mandate to add renewables.
    And so when you put all of that together, it is kind of an 
``all of the above'' strategy. We were able to modernize the 
infrastructure, reduce carbon, and keep prices competitive at 
the same time.
    Mr. Waxman. Would you agree that regulatory certainty is 
vital and the climate legislation would revive that certainty?
    Mr. Fowke. Absolutely, because everybody in my position is 
making decisions on capital that are in the billions that we 
are going to live with for decades. So you are going to--you 
are never going to have perfect certainty, but regulatory 
uncertainty is probably one of the biggest risks we face each 
and every year.
    Mr. Waxman. Do you support a clean energy standard?
    Mr. Fowke. We have advocated--we believe it is inevitable 
there is going to be regulation. It is already here, and we 
think the important thing is that it is sensible and it gives 
time, it gives flexibility, and it gives that certainty that 
you talk about so we can get started on whatever the rules are.
    Mr. Waxman. Thank you. Well, Xcel is not alone in wanting 
Congress to provide regulatory certainty. Other companies 
represented on today's panel have been supporters of a range of 
policies to address climate change. Mr. Mohl, Entergy supports 
a tax on carbon pollution, is that correct?
    Mr. Mohl. We support some type of market-based price signal 
that puts a price on carbon emissions. We believe that makes a 
lot of sense. We believe that is better than a command and 
control structure. We believe that that provides the incentive 
to develop new, cleaner technologies.
    Mr. Waxman. Thank you, and Mr. McCullough, AEP previously 
supported legislation to establish an economy-wide market-based 
system to reduce carbon emissions and continues to support a 
federal legislative approach to climate change. Is that right?
    Mr. McCullough. We do support a legislative approach over a 
regulated approach, and depending upon the details, would be 
very supportive.
    Mr. Waxman. Thanks. There is no question the United States 
will need to address climate change. The threat is not going 
away. Delaying action will only increase the urgency of the 
problem. Entergy, AEP and Xcel are some of the biggest 
utilities in the country. Together, they operate across the 
country. Do you all agree that the best way to address climate 
change is through legislation from Congress?
    Mr. Fowke. Speaking from Xcel, yes.
    Mr. Waxman. OK. Mr. Mohl?
    Mr. Mohl. Again, we believe that whether it is legislative 
or regulatory, that we do need some type of market-based price 
signal in order to address that issue.
    Mr. Waxman. Well, you can only get that from Congress. Mr. 
McCullough?
    Mr. McCullough. And again, with the qualification about the 
details, we would support it.
    Mr. Waxman. OK. Mr. Chairman, when utilities tell us they 
are looking for regulatory certainty, they are not talking 
about bills that delay action. They are looking for real action 
and thoughtful policies. They want Congress to establish the 
rules of the road so they can plan for the future and make the 
appropriate investments. Utilities want Congress to act and I 
want Congress to act, but if Congress doesn't act, the 
President must do everything he can. When future generations 
look back on this time, they won't care whether we enacted my 
preferred approach or your preferred approach. They will simply 
ask whether we acted before it was too late. This is the moral 
imperative of our time, and we must address this challenge for 
the sake of our children and future generations. That is what 
the President said. I support what he said, and I hope we in 
Congress can get together and pass the legislation, rather than 
have action imposed only through regulation at the Executive 
Branch. But if we can't get anything else, I would welcome that 
regulation to make sure that we reduce the carbon emissions.
    I yield back the balance of my time.
    Mr. Whitfield. At this time, I recognize the gentleman from 
Ohio, Mr. Latta, for 5 minutes.
    Mr. Latta. Well thank you very much, Mr. Chairman, and I 
also want to thank you very much for the hearing today. I think 
it is very, very informative and I appreciate all of our 
panelists for being here today.
    As some of you know--who are on the panel know my district. 
I represent northwest, west central Ohio, and I have about--
according to national manufacturers, about 60,000 manufacturing 
jobs. It goes anywhere from light manufacturing to heavy 
manufacturing. I have got small folks out there, big folks out 
there. But when I go out--and I probably, since last August 
have gone through 200 facilities, businesses, schools across my 
district, and when I am talking to my--especially on the 
manufacturer's side, that base load capacity is absolutely 
essential.
    And the two things I hear from the folks when I am back 
home--well, there are four, but the two I am going to mention 
right now--the number one issue that is always brought up is 
regulations. And the things that drive their costs and the 
things that prevent them from going ahead are regulations. And 
then going into that next area is when we talk about energy 
costs, because again, they cannot compete in this market today, 
not just in Ohio or the Midwest, but across the world, if we 
don't have energy costs that are reasonable that they can get 
out there and produce that product. And so it is absolutely 
essential, as Mr. Shimkus pointed out on the map that he held 
out about east north central, Ohio is included in that area, 
along with Illinois, Indiana, Michigan, Wisconsin. And we do--
we are looking at about 63 percent of coal being used in that 
area, and even higher in parts of my area.
    So if I could start, Mr. McCullough, in your testimony, 
because it just jumps right out at me, on page nine you were 
talking about the shutdowns of coal-fired plants, that once 
these additional plant retirements, combined with already 
announced retirements around 20 percent of U.S. coal fuel will 
be shut down within the next few years. And so my first 
question is, are we going to have energy at the same cost, or 
will energy costs go up not only for you to produce, but also 
for the end user, for the manufacturer, for the farmers in my 
district--and again, I represent the largest number of 
farmers--senior citizens, small businesses, grocery store 
owners. What is going to happen to that cost?
    Mr. McCullough. That is a very good question, and one that 
gets misinterpreted quite often. The coal plants that we will 
retire are largely running today, and they are running because 
they are very competitive. As they move out of the generation 
stack, it does mean, naturally, that those units higher in the 
stack are now going to generate power and then any replacement 
capacity obviously involves capital costs and new cost of 
energy associated with that. So energy costs will go up as 
units retire.
    Mr. Latta. Well, and again, I think it is important right 
there because I think as you mentioned, a lot of folks out 
there think we can switch over to something that is going to 
be, all of a sudden, voila, we are going to throw a switch and 
something else is going to happen. We are very fortunate in the 
State of Ohio with the Utica shale that has been found and we 
are all for an ``all of the above'' strategy which we have been 
pushing since 2008.
    As was mentioned a little bit earlier in the testimony, is 
it economical or can you even convert a coal-fired plant over 
to a natural gas plant?
    Mr. McCullough. We will be converting just a few plants to 
natural gas, but that will be for capacity reserve reasons, not 
for, you know, overall energy economics. You lose some 
efficiency, as these units are designed to burn coal and gas 
can't get steam temperatures to the same efficiency levels that 
it was designed for, so it is not going to be a very efficient 
use of natural gas, as you try to meet the energy needs of your 
jurisdiction.
    Mr. Latta. Thank you. I am going to switch briefly and 
quickly to Mr. Gerken with AMP, especially in my area, out my 
back door I can see the four wind turbines that were first in 
operation in Ohio, and then with the solar field over Napoleon, 
the gas plant over in Freemont. If I could just ask you 
quickly, despite the many benefits behind hydro, building the 
new projects is increasingly difficult due to new upfront 
costs. What are the reasons for some of these costs, and can 
Congress do anything to alleviate that, on an economic scale?
    Mr. Gerken. The hydro projects are very capital-intense, as 
I said. One of the problems is we started the permitting on 
the--all of these plants in 2005, and they will come online in 
2014 and 2015. And so the regulatory process is in need of 
reform. If you ask anybody, even big investor owners are saying 
they need the licensing and permitting streamlined.
    We were in this process. I talked a little bit about the 
404 permit and the 408 permit. We were the guinea pigs on the 
408 permit. We were the first ones out of the block. We had 
four projects. Needless to say, it took--and each district 
handled it different and you had to go from the district to the 
division and then headquarters and then back and back and back 
and back. To give you an idea, we were permitting the last 
phase of the Prairie State coal plant in June of 2010, and then 
we were delayed on being able to get the permit--excuse me, we 
were financing the Prairie State project in June of 2010. We 
were waiting for the 404 permit to finalize the financing for 
the hydro projects, which was $1.3 billion. We didn't get that 
permit until December 13. If you remember, 2010 was when Build 
America bond were available, and we were trying to get to 
market. We actually financed three days later. It cost us 60 
basis point difference in that spread on a $1.3 billion bond 
sale.
    And so we need to streamline it. The Corps are good 
operators. When you operate these plants, the Corps does not 
have a priority and it is not their mission to develop hydro. I 
think with NHA and a lot of other interested parties, we are 
trying to streamline that process, but there--we would like to 
have some help there.
    Mr. Latta. Thank you.
    Mr. Whitfield. Gentleman's time is expired.
    Mr. Latta. My time is expired and I yield back.
    Mr. Whitfield. At this time I recognize the gentleman from 
Texas, Mr. Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman, and thank our panel for 
being here.
    In February of 2012, the Federal Energy Regulatory 
Commission initiated a number of efforts to coordinate the fuel 
transition and minimize concerns from both electric and gas 
industries. FERC received stakeholder comments and hosted five 
regional technical conferences in 2012 to discuss gas/electric 
interdependence in relation to scheduling communication and 
electric resource adequacy and reliability. Did any of you 
participate in any of these technical conferences, and if you 
did, do you have any feedback? Was FERC responsive to some of 
your concerns? Did anybody participate?
    Mr. McCullough. I did not participate personally, but 
someone from my staff did, and we are happy that FERC is 
hearing the concerns. We await strong action toward the 
harmonization of the electric and gas industries.
    Mr. Green. OK. Anybody else that has comment on that?
    Mr. Mohl. Same comment for Entergy. We believe that is 
definitely headed in the right direction and something that is 
critical in the long run.
    Mr. Green. OK. Mr. Fowke, you testified that Xcel recently 
added a large coal plant in Colorado, and that you are also in 
the process of extending and updating three nuclear plants for 
another 20 years of service, yet several of your colleagues on 
the panel testified as to the market conditions that are making 
it difficult for coal or nuclear plants to come online. What is 
the secret of Xcel's success?
    Mr. Fowke. Well, I--let me just--to be sure. I don't think 
that same plant today would be permissible under the rules and 
the political realities, but we had it approved----
    Mr. Green. Are you saying coal plants or the nuclear?
    Mr. Fowke. The coal plants.
    Mr. Green. Coal plants.
    Mr. Fowke. Yes. So we basically--we started that process, I 
believe, around the 2004 timeframe. We started construction 
around the 2008 timeframe. We were able to get that plant sited 
and permitted and avoid some protracted litigation, because we 
also were able to commit to do some things to clean up the 
environment. And so it was a good package and it went forward 
in our State, and that was in Colorado. I don't think that same 
deal could be done today.
    I forgot the second part of your question.
    Mr. Green. Oh, just that if those--what is different about 
your company that you are doing compared to the other witnesses 
we have?
    Mr. Fowke. The only thing I would add, and I think 
everybody is trying to do the right job, but we have worked 
really close with our States and we have been very proactive at 
trying to anticipate regulation and other issues early so we 
can get started early.
    Mr. Green. And I know my experience in Texas is doing the 
same thing. We try to do that, and of course, I am also more 
familiar--you know, we are in the middle of the natural gas 
boom, and there is fuel shifting and obviously benefits, but I 
also know in our expansion with our south Texas nuclear plant, 
I would love to get more electricity out of nuclear power in 
Texas. We only have two, and the one that we lost because of 
one of the investors is Tokyo Power, and we know that story, 
but you know, for our country--and I know it is difficult with 
the low price of natural gas--whether it is hydro or nuclear, 
it is upfront investments, and it is just difficult to make 
that work, even with the loan guarantees. It is difficult. But 
although I have to admit, I read just over the weekend that in 
Europe, we are exporting a lot of coal and it is displacing the 
natural gas that they are importing predominantly from Russia, 
because natural gas is so expensive in Europe. But again, 
location, location, location.
    Mr. Mohl, you talked at length about the market conditions 
are threatening nuclear power in our country, and you testified 
preserving the many benefits of nuclear generation depends more 
on--rational and evidence-based regulation, and I agree. Like I 
said, even though we are in a natural gas boom, for long-term 
and the most carbon friendly is either windmills, solar, or 
nuclear, and as much as I love natural gas and the success we 
are having, specifically what regulations or impediments to new 
nuclear generation?
    Mr. Mohl. Well, one of the challenges we have right now 
is--that we are looking at is the filtered vents discussion. 
What is required for the BWR technology? Our point of view is 
that that should be looked at on a plant-by-plant basis, and we 
don't need--it is probably not necessary to have something that 
is just kind of a rubber stamp that every plant needs to do.
    Mr. Green. And I agree, and I think I have signed a letter 
expressing----
    Mr. Mohl. Yes, sir.
    Mr. Green [continuing]. Concern. It ought to look on a 
case-by-case basis.
    Mr. Mohl. Absolutely.
    Mr. Green. We may not need to change the filter on every 
plant, but it--is there anything else other than that?
    Mr. Mohl. Nothing specifically, I mean----
    Mr. Green. Because the long timeframe is just frustrating.
    Mr. Mohl. It takes a long time to, you know, work through 
the relicensing issues, as we are experiencing on several 
plants. Again, the three challenges we have are low natural gas 
prices, we need reasonable regulation, and we need fair and 
competitive wholesale markets so that we can continue to, you 
know, participate. And you know, we have to be financially 
viable with these facilities to participate in these markets.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Whitfield. At this time I recognize the gentleman from 
West Virginia, Mr. McKinley, for 5 minutes.
    Mr. McKinley. Thank you, Mr. Chairman.
    I want to go back to Mr. Gerken. You made some remark 
about--actually it was in your testimony that only 3 percent of 
the dams, 80,000 dams across America produce electricity. Could 
you explain that a little bit? What is holding that up?
    Mr. Gerken. Well, one issue is it is very capital intense 
projects, and they take such a long time to develop. And a lot 
of these are not your big--dams or obviously run-of-the-river 
where we are at, so they have smaller capacity name plate. Our 
projects are, example, 105 megawatts, 82 megawatts, 72 
megawatts, and 48 megawatts. And so from that perspective, our 
business model fits it pretty well. Also I will say in defense 
of some of the investor owns, some of these projects have 
municipal preference on them, so if there is competing license 
and they are equal, they are going to go to a municipal system, 
the municipal preference. But for the most part, it is that 
capital intense issue.
    What we have been able to do, what sets us apart--and I am 
not sure we would build these projects today, you know, in 
today's natural gas markets it would have been tough to justify 
this, because quite frankly, our run-of-the-river hydro are 
very similar to the nuclear when it comes to cost. But we look 
at that component from we don't have a fuel to buy and a waste 
stream on the other side----
    Mr. McKinley. Thank you.
    Mr. Gerken [continuing]. So I think that is the key.
    Mr. McKinley. On some other matters, I would like to hear--
coming from a coal State and seeing the pushback, I chuckle 
over the people that say there is no war on coal. They just 
live under a rock if they don't understand that, and maybe we 
need to talk more slowly for them. But as it relates to natural 
gas, eventually--and we are going to see natural gas rise in 
its price. We know that. Right now with the--three and a 
quarter something. Where does it reach a point--at what price--
many of you burn natural gas, but when does it reach a price--
what is that level, $6, $7 when you have to go back to Public 
Service Commission and ask for a rate change? What would be--
what is a reasonable expectation when we should become 
concerned about the price of natural gas?
    Mr. McCullough. I will take a shot at that. All of our fuel 
costs typically is pass through.
    Mr. McKinley. I know that, precisely, that is what I am 
saying. So the consumer is ultimately going to pay for using 
this, so I am curious, what will that level be? What is the 
level that becomes----
    Mr. McCullough. Yes, so our average coal cost in 2012 at 
AEP was about $2.40 a million, so if gas were double or more 
than that, we probably would be called in to justify why we 
chose a certain scenario for building and serving the 
jurisdictions. I mean, that is kind of hypothetical, but 
certainly when you are passing through that much increased 
cost, it raises awareness at the commissions and they would 
like to understand what----
    Mr. McKinley. What is the--I know in the timeframe we don't 
have enough of it, but I am hoping--and we have been discussing 
about global warming and having climate change, so that is 
probably a worthwhile venture of time, but I am just curious 
from the two of you at the end, Mr. Mohl and Mr. McCullough, do 
you believe that--I believe there is global warming going on. 
As an engineer in Congress, I believe there is global warming 
and climate change occurring. But my question to you though is, 
is it manmade?
    Mr. Mohl. I guess I will take a shot at that.
    Mr. McKinley. I don't want to let McCullough off the hook 
there, but we will go back to you.
    Mr. Mohl. That is fine. We have utilities in the Gulf Coast 
and you know, I think you could argue whether what is creating 
the issues associated with climate change, but the risks are 
real. I mean, we have seen a substantial increase in the number 
of hurricanes, the intensity of the hurricanes and the damage 
to the Gulf Coast. And so really, the way we look at it is it 
is a reality, and we need to manage that risk, just like we 
manage any other risk in our portfolio. So we look for 
opportunities to mitigate----
    Mr. McKinley. My question, Mr. Mohl, is it manmade? Did we 
cause it?
    Mr. Mohl. As I said, I am not the one to argue that point 
nor do I have the scientific background to answer that 
question.
    Mr. McKinley. OK, Mr. McCullough, do you think--have we 
caused this?
    Mr. McCullough. Well, great question. Again, I am not a 
climatologist, but the incremental part of CO2 
emissions created by man is in the minority of overall 
CO2 emissions. And when you look at it from a global 
perspective, as I mentioned in my opening remarks, here in this 
country we are less than 12 percent of global CO2 
emissions and getting smaller all the time. So whatever is 
offered up as a solution needs to be global in nature and 
market-based.
    Mr. McKinley. Thank you very much, I appreciate it. Yield 
back my time.
    Mr. Whitfield. At this time I recognize the gentlelady from 
Virgin Islands, Mrs. Christensen, for 5 minutes.
    Mrs. Christensen. Thank you, Mr. Chairman. I wonder if I 
could get a slide up on the monitor, because before I ask any 
questions, I wanted to just share what the pie for the Virgin 
Islands would look like, compared to the map in the corner, and 
it is pretty much the same for all the smaller territories, 
Guam, America Samoa, and Northern Mariana Islands. And we are 
working--you can put the other slide up. We are working towards 
diversifying our sources of energy, but small size, distance, 
and other factors make it very difficult compared to the 
States, and we don't have a grid that supplies electricity from 
other areas, so it is very difficult for us.
    But my first question, and it will be a little bit 
different. We don't have nuclear energy, we don't have 
hydropower, and not likely to be able to move in those 
directions. Mr. McClure, I see in your testimony that NPPD has 
been doing some planning over the last 2 years, and we have 
been talking about an integrated resource plan in the Virgin 
Islands, which is something that I believe is really needed. 
Could you speak a little about the process that you have gone 
through, and describe some of the key components that the plan 
would consider?
    Mr. McClure. Every utility up here goes through an 
integrated resource planning process. It involves developing a 
number of scenarios. There is a lot of computer modeling that 
takes place, and obviously, we have to make assumptions about 
the future--the future of fuel prices of various types of fuel, 
other things, and what you are trying to develop is looking 
both at the supply side and the demand side, how do you get the 
best result for your customers for the long-term reliable, 
affordable price of energy? And again, it has a lot of regional 
aspects to it, but it also has national aspects as you look at 
various policies.
    Mrs. Christensen. Thank you. We are looking at wind energy. 
We have it--we are doing some solar, but haven't really moved 
towards wind yet, and so Mr. Gramlich and Mr. Fowke--Mr. 
Gramlich, you had said that good operators have been able to 
reliably add large amounts of wind energy to the systems, and 
Mr. Fowke, wind represents a large part of your portfolio. But 
for a place that doesn't have a grid that supplies energy from 
diverse areas, like the Virgin Islands, do you think that we 
could reach that same reliability from wind or would we need 
additional reserve capacity? I am thinking that we couldn't 
rely on it.
    Mr. Fowke. You know without specifics, the smaller the grid 
and the larger the one single source of wind would be, I think 
the more problems you would have making sure that it is 
integrated efficiently and reliably.
    Mrs. Christensen. Right, because Mr. Gramlich, I believe in 
answering another question you did say that having that grid 
backup is really what makes sure that you have the reliability.
    Mr. Gramlich. The grid helps a great deal. It makes it a 
lot easier.
    Mrs. Christensen. Thank you.
    I don't think I have any other questions right--oh yes, I 
do have one. I am sorry.
    Hurricane Sandy, and I guess this was Mr. Gramlich, you 
talked about Hurricane Sandy and the fact that when you had 
that cold spot in Texas, the wind turbines continued to work. 
But I was wondering about--again, we live in a hurricane-prone 
area, so I was wondering if the fact that you were able to 
continue to provide wind--electricity from the wind from wind 
power in the Sandy-hit areas was because the wind turbines in 
those areas were still operating, or did they come from a grid 
from the outside?
    Mr. Gramlich. Well, both in the area affected, but I was 
making the point that diversity is critical, and what diversity 
brings you is whatever may affect one resource may not affect 
the other, and you rely on this portfolio of diverse sources of 
generation so that hopefully you can rely on one if you cannot 
rely on the other.
    Mrs. Christensen. So both the wind sources in the Sandy-hit 
areas worked and also it was supplied from the other?
    Mr. Gramlich. Right.
    Mrs. Christensen. And I just want in closing to agree with 
what our Ranking Member, Mr. Waxman, said in the opening 
statement on the importance of climate change being a part of 
any energy conversation. We always focus on the cost, of 
course, of electricity production in these discussions, but it 
is also important to consider the cost of not reducing carbon 
emissions, the cost to the public health, the cost in the 
storms. And when you factor all of those in, really, the cost 
of electricity from fossil fuels with high emissions if we are 
not able to control those, the cost is really much higher than 
what we usually represent is the cost.
    Thank you, Mr. Chairman.
    Mr. Whitfield. At this time I recognize the gentleman from 
Colorado, Mr. Gardner, for 5 minutes.
    Mr. Gardner. Thank you, Mr. Chairman, and thank you to the 
witnesses for being here today. Mr. Fowke, welcome to the 
committee. Thank you so much for taking your time.
    As you know, my district in Colorado is a very diverse 
energy district. It spans from the Mexico, Oklahoma, Kansas, 
Nebraska, Wyoming borders, so it is a district that has 
tremendous land area and a State that has a great deal of 
energy diversity. My district alone has one of the Nation's 
most promising oil and gas resource place. It has ethanol 
plants, about four ethanol plants, a number of biofuel--
biodiesel plants. It has solar manufacturing. It has wind 
manufacturing. It has a coal mine, and so it really does 
present a truly ``all of the above'' strategy. I think I have 
at least one Xcel power plant in the district as well.
    Over the past several years, though, the State legislature, 
along with Governor Ritter, Governor Hickenlooper, the 
congressional delegation has worked on the Colorado SIP, and I 
believe the Colorado SIP has bipartisan support. The entire 
Colorado congressional delegation supports the SIP, the 
governor supports the SIP, the great bipartisan appeal. But 
recently, the National Parks Conservation Association and Wild 
Earth Guardians have filed a notice to appeal EPA's approval of 
Colorado's State Implementation Plan regarding regional haze, 
and Xcel has been a great player in this, and Xcel continues to 
support the SIP. Is that correct?
    Mr. Fowke. We absolutely continue to support it.
    Mr. Gardner. What do you think ends up happening? I mean, 
this is an idea that has such tremendous bipartisan support in 
Colorado. What ends up happening with States like Colorado that 
truly do come together, creating a SIP that is recognized by 
both sides as a step forward, and then you have this litigation 
that happens? What do you think the end game is around the 
country for SIP?
    Mr. Fowke. I think it is a model for how you can accomplish 
responsible and cost effective environmental leadership, and 
you know, the fact that the EPA agreed with that SIP program--
and by the way, we are facing the same thing in Minnesota and 
have the same kind of lawsuits as well. I think it shows that--
--
    Mr. Gardner. Same bipartisan support?
    Mr. Fowke. You have bipartisan. You can get something done 
at the State level, you can get EPA to buy off on it and you 
still are not going to make everybody happy, and that is just 
the way that works. But it has been, I think, a model that we 
could look at going forward.
    Mr. Gardner. And we have seen tremendous development of 
natural gas in my district as well, and Xcel Energy, you are 
using that energy within the State of Colorado, is that 
correct?
    Mr. Fowke. That is correct.
    Mr. Gardner. I wanted to talk to some of the other 
panelists. I heard the mention of hydropower as well. Colorado 
has a renewable portfolio standard, but however, hydropower is 
considered not to be a part of that. I think micro hydro is 
considered to be a part of it, but nothing beyond on a large 
scale. If we were to see the inclusion of hydropower at a 
larger scale, would we increase the opportunity to use hydro as 
part of a renewable portfolio standard, Mr. McCullough?
    Mr. McCullough. Yes, I think we would. Any incentive or 
motive to move forward with hydropower would be helpful in 
moving it along.
    Mr. Gardner. Mr. Mohl?
    Mr. Mohl. Absolutely.
    Mr. Gardner. Mr. Fowke?
    Mr. Fowke. Yes, I think so.
    Mr. Gardner. Mr. Gerken?
    Mr. Gerken. Yes, I do, and to give an example is we have 
members in Michigan and Michigan was moving forward with an RPS 
standard, and we had five municipals in Michigan that 
actually--the State carved out specifically their participation 
in these projects we had, so I think you will see some movement 
there, most definitely.
    Mr. Gardner. Very good. Mr. Gramlich, if you want to answer 
that question or not? Mr. McClure?
    Mr. McClure. Yes.
    Mr. Gardner. Very good. The other question I would have is 
to Xcel Energy. You have been working on the customer 
renewables credit. Can you give me--I only have a minute left--
maybe a little explanation for the committee of that idea?
    Mr. Fowke. Yes, it basically incents and recognizes that 
utilities that have specific amount of renewables on their 
system do incur some ancillary costs, and the more you have, he 
more you incur. It is to help those utilities and their 
customers bridge some of those costs, and it really is a 
fraction of what the PTC is now.
    Mr. Gardner. Very good.
    Mr. Chairman, I yield back my time.
    Mr. Whitfield. Thank you.
    At this time I recognize the gentleman from Texas, Mr. 
Olson, for 5 minutes.
    Mr. Olson. I thank the chairman.
    Welcome to the witnesses. Good afternoon by about 2 minutes 
here. I appreciate your time and expertise.
    In my home State of Texas, we say Texas is like a whole 
other country, and we are. We are the microcosm of America's 
diversity electricity generation. And like Texas, each region 
of the United States uses a mix of fuels to generate 
electricity, ranging from coal, gas, nuclear, hydropower, and 
renewables like wind and solar. In taking a page from the 
former chairman, Mr. Dingell from Michigan, from his way he 
works here in the committee, I am going to ask all of you a 
question. Pleas answer yes or no.
    Start with you, Mr. McCullough. Is fuel diversity important 
to keeping energy prices low? Yes or no?
    Mr. McCullough. Yes.
    Mr. Olson. Mr. Mohl?
    Mr. Mohl. Yes.
    Mr. Olson. Mr. Fowke?
    Mr. Fowke. Got to go with yes.
    Mr. Olson. Got to go yes. Mr. Gerken?
    Mr. Gerken. Yes.
    Mr. Olson. Mr. Gramlich?
    Mr. Gramlich. Yes.
    Mr. McClure. Yes.
    Mr. Olson. OK, six yeses. OK, here we go with question two. 
Is fuel diversity important for reliable electric service? Yes 
or no?
    Mr. McCullough. Absolutely, yes.
    Mr. Mohl. Yes.
    Mr. Fowke. A qualified yes.
    Mr. Gerken. Yes.
    Mr. Gramlich. Yes.
    Mr. McClure. Yes.
    Mr. Olson. OK, 5.9 yeses. Is fuel diversity important for 
keeping lights on or storing electricity quickly during major 
weather events or natural disasters? Yes or no?
    Mr. McCullough. Yes.
    Mr. Mohl. Yes.
    Mr. Fowke. Yes.
    Mr. Gerken. Yes.
    Mr. Gramlich. Yes.
    Mr. McClure. Yes.
    Mr. Olson. Oh, 6.0, all right. And the final yes or no 
question, to ensure affordable, reliable electricity, should 
federal policies support fuel diversity? Yes or no?
    Mr. McCullough. Yes.
    Mr. Mohl. Absolutely, yes.
    Mr. Fowke. Yes.
    Mr. Gerken. Absolutely, yes.
    Mr. Gramlich. Yes.
    Mr. McClure. Yes.
    Mr. Olson. Wow, 6.0 again, a total of 23.9. Thank you, 
gentlemen.
    The Lone Star State is the fastest growing State in the 
country. In a stat that matters in this town, last census, the 
2010 census, we picked up four new congressional districts 
because of our growth. We all know more people means more 
homes, more commerce, more industry, more need for electricity 
generation. ERCOT is the agency in our State that regulates 
most of the electricity in the State, about 90 percent of it, 
and they did a recent study that says we may have a power 
crisis by 2014 unless we have new power generation brought up 
online. We will be short 2,500 megawatts is their estimate. If 
we have a heat wave like the August before last, we were over 
100 degrees in every part of the State for over a month. If 
that happens again, we will have brownouts or blackouts. We 
need more capacity. And yet, any time my State has tried to 
take steps to address this shortage with coal, the Federal 
Government, through EPA, coordinated with the environmental 
groups, has stopped these projects dead in their tracks. One 
such project is a proposed pet coke plant in Texas called the 
Las Brisas Energy Center that has been stopped dead again by 
EPA after they slow-walked the project for more than 3 years. 
Pet coke is a byproduct from the firings right there in the 
Gulf Coast. I am going to have an op-ed in tomorrow's Hill that 
details the setbacks Las Brisas endured. EPA blocked the 
permitting process, even though the Texas State agency 
authorized by federal law to enforce the Clean Air Act granted 
the permit to Las Brisas. Las Brisas would have been a state-
of-the-art facility, featuring a ``poshing scrubber'' to limit 
sulfur dioxide emissions, a mechanism to collect particulate 
matter, and an activated carbon ejection system to remove 
mercury, which would have ensured better air quality than some 
of the older plants on the Texas power grid. And yet, the 
environmental groups and EPA blocked it, putting reliability at 
risk for Texans.
    A very short question for you, Mr. McCullough, and you, Mr. 
McClure, Mr. Gerken. In your opinion, is this treatment typical 
of President Obama's EPA?
    Mr. McCullough. We do see very harsh regulatory action 
against fossil fuels, yes.
    Mr. Olson. Mr. McClure?
    Mr. McClure. I would agree that fossil fuels are----
    Mr. Olson. And finally, Mr. McCullough--I had Mr. 
McCullough. Mr. Gerken.
    Mr. Gerken. Yes, I believe so.
    Mr. Olson. OK, I don't want to put any words in anybody's 
mouth, but it is pretty clear to me that President Obama is 
keeping a campaign promise. He is keeping his word that he said 
with the San Francisco Chronicle interview in the summer of 
2008--and this is a quote--``If somebody wants to build a coal-
powered plant, they can. It is just that it will bankrupt them 
because they are going to be charged a huge sum for all the 
greenhouse gas that is being emitted.''
    I yield back the balance of my time. Thank you.
    Mr. Whitfield. Thank you. At this time I recognize the 
gentleman from Illinois, Mr. Kinzinger, for 5 minutes.
    Mr. Kinzinger. Thank you, Mr. Chairman. Thank you to the 
witnesses for being here today. We appreciate it.
    Mr. Mohl, I want to thank you for being here, and I want to 
echo some of the comments that I have heard from power 
companies in Illinois.
    It is interesting to me--who would have imagined that 10 
years ago we would be discussing the negative impacts that an 
oversupply of natural gas would have on our electrical grid. My 
district is home to eight nuclear units, and Illinois gets 1/2 
of its power from nuclear.
    Mr. Mohl, if the price of natural gas stays at its current 
market price of $4 a unit, will nuclear maintain its 20 percent 
share, and if not, why not, and what can be done to ensure 
diverse energy supply?
    Mr. Mohl. Well as I mentioned, the three challenges we face 
from merchant nuclear, which you have in Illinois, the low gas 
prices, which are suppressed market prices, we need reasonable, 
fact-based, scientific regulation that uses cost benefit 
analysis, and we need fair and competitive wholesale markets. 
So there are a number of things that really have to happen for 
these plants to be able to continue to operate.
    Mr. Kinzinger. What can we do--so I mean, do you have any 
ideas offhand? So you are going to continue to have natural gas 
at that price?
    Mr. Mohl. Well, I mean, natural gas prices are what they 
are. We have to deal with that situation. I mean, that is part 
of the market. Where we have opportunities is to make sure that 
when we look at imposing additional costs for whatever reason 
that may be----
    Mr. Kinzinger. Regulations, requirements, stuff like that?
    Mr. Mohl. Yes, right, that that--you know, we take a 
scientific approach, it is fact-based, and we use cost benefit. 
And when I say cost benefit, I don't mean doing things on the 
cheap.
    Mr. Kinzinger. Sure.
    Mr. Mohl. What I mean is we are looking at the best 
alternatives.
    Mr. Kinzinger. And we would like to see the NRC, for 
instance, implement cost benefit rules and analyses. That would 
be nice.
    Mr. Mohl. And then lastly is, you know, we need competitive 
wholesale markets, and they need to be free markets so people 
have the opportunity to earn a return on their investment.
    Mr. Kinzinger. Now let me ask you, too. You state in your 
written testimony that throughout the Nation, nuclear 
generators help keep wholesale electricity prices lower than 
they otherwise would be. Can you further explain that?
    Mr. Mohl. Well sure. We talked about nuclear generation 
operates at a 90 percent capacity factor. It is high capital 
investment, low incremental fuel, so they are one of the first 
resources in a stack, and so they operate very efficiently and 
they operate a significant portion of the time. And so that is 
what makes them attractive.
    Mr. Kinzinger. And that is what is keeping companies like 
yours competitive in this environment?
    Mr. Mohl. Yes, I mean, it does. Keep in mind the challenges 
that I mentioned. Those are still challenges, even though they 
are base load resources.
    Mr. Kinzinger. Understood.
    And for everybody, is having a diverse fuel mix ranging 
from fossil fuels to renewables critical for long-term 
planning? Do you need diversity to protect against unforeseen 
fuel shortages or disruptions? We will start over there, sir.
    Mr. McCullough. Unequivocal yes.
    Mr. Mohl. Absolutely.
    Mr. Fowke. Very helpful.
    Mr. Gerken. Yes.
    Mr. Gramlich. Yes.
    Mr. McClure. Yes.
    Mr. Kinzinger. That is not a big surprise. Is having a 
diverse fuel mix important for keeping electricity affordable?
    Mr. McCullough. Yes.
    Mr. Mohl. Yes.
    Mr. Fowke. Yes.
    Mr. Gerken. Yes.
    Mr. Gramlich. Yes.
    Mr. McClure. Yes.
    Mr. Kinzinger. Everybody has got their yes hats on. That is 
good. When electricity rates rise, are the impacts likely to be 
greatest for lower income consumers or those on a fixed income, 
or higher income consumers?
    Mr. McCullough. When you look at the percentage of 
discretionary spending that people have, it is obviously a 
bigger impact on lower income.
    Mr. Mohl. It has a huge impact.
    Mr. Kinzinger. And I think you would all agree. We just 
wanted to get that out there.
    When electricity rates rise, can it also affect 
manufacturers and other businesses that are large energy 
consumers? We talk about manufacturing in this country. It is 
very important in my district. Does a higher energy cost, 
energy price--and when we talk about EPA regulations, nuclear 
regulations, will that affect our business climate here?
    Mr. McCullough. I think it absolutely could and will if we 
don't have the diverse portfolio that supports balance and 
stability in the future of energy prices.
    Mr. Kinzinger. Don't you wish I was your teacher in high 
school? It would be easier to pass every class.
    With that, Mr. Chairman and the witnesses, I want to say 
thank you and I will yield back.
    Mr. Whitfield. Gentleman yields back the balance of his 
time.
    The gentleman from Louisiana--at this time I recognize for 
5 minutes the gentleman from Louisiana, Dr. Cassidy, for 5 
minutes.
    Mr. Cassidy. Hey, gentlemen, I am sorry to be coming at the 
very end. Just when you thought, man, it is over. I apologize. 
It is like a bad day that won't end.
    Mr. McClure, you mentioned removing fossil fuel as a fuel 
source will increase costs. Clearly, there is a move by a 
variety of mechanisms to decrease our use of coal, our most 
plentiful fossil fuel, and saying that will have negative 
effects on electric reliability costs and the economy. I see 
increased utility costs as decreasing manufacturing jobs, if 
you will, energy intensive manufacturing jobs. Can you comment 
on that, because I think there is a push either through carbon 
tax or through EPA regulation or through a variety of other 
mechanisms to remove fossil fuel from its relative portion of 
our balance, almost kind of agnostic or inconsiderate of the 
impact it would have on the overall economy.
    Mr. McClure. Well in our system, one of our largest coal 
plants--we have two coal plants--is our lowest cost generating 
resource. And we have a Nucor steel plant in our system. They 
came to our system because of low cost energy, and they are 
very much concerned as energy prices go up, they become less 
competitive, and they are competing at a global market.
    Mr. Cassidy. So there has been a consideration of a carbon 
tax. Obviously that is a way to price electricity from fossil 
fuel at a higher level relative to whatever other source you go 
to. Now, is it fair to say that would have a negative impact 
upon Nucor's ability to hire blue collar middle class workers?
    Mr. McClure. If their costs go up, it affects--I am sure it 
affects their operations and their decisions and who they can 
hire.
    Mr. Cassidy. And by definition, energy intensive 
enterprises are energy intensive.
    Mr. McClure. Yes, they are.
    Mr. Cassidy. OK. And do I know that Nucor is actually a 
European firm?
    Mr. McClure. No, Nucor is an American firm. I think they 
are headquartered in North Carolina.
    Mr. Cassidy. Is it? I think I recall once, they were 
considering building either in Brazil or the United States, and 
I am sure energy cost must have played a role there.
    Mr. McClure. My understanding is they have 60 facilities in 
the United States.
    Mr. Cassidy. Got you. OK.
    And then you speak of the diversity of fuel sources 
provides lower electric rates. I think that is in your 
testimony. When you say diversity, I have always been concerned 
that if you look at the premium the taxpayer pays to subsidize 
some renewables, we are actually paying a heck of a lot for 
things like wind and solar. Not saying that we shouldn't 
encourage their use, but at the same time, the cost per 
megawatt is almost exponentially higher than that from fossil 
fuel sources. Can we really build a grid based upon such 
expensive electricity?
    Mr. McClure. Again, I would come back to the notion of 
diversity. There are certain parts of the country where wind is 
very competitive because of great wind conditions, and so those 
can be very low cost--that can be a low cost source of 
generation. And as has been mentioned earlier, it can help 
stabilize future costs because the fuel cost really doesn't 
change, but it is regional, like so many other issues we have 
discussed today. In some areas, wind can be a very valuable 
asset. In other areas, it is not even a viable possibility.
    Mr. Cassidy. Now, when you say that, obviously there is 
incredible subsidies involved with--per megawatt hour involved 
with, say, wind. So when you say it is total life cycle cost, I 
am just asking--I don't know the answer. I am asking to learn. 
Total life cycle cost, if you factor in those subsidies, is it 
still a good bargain?
    Mr. McClure. I think we are learning a lot in wind. The 
price is coming down and the early wind projects we put in, we 
decommissioned, but the equipment today is much better and I 
think they will continue to be--the newer equipment, I believe, 
in the right locations will be valuable over the long haul with 
the subsidies.
    Mr. Cassidy. Got you. I yield back. Thank you.
    Mr. Whitfield. Thank you, Dr. Cassidy.
    That concludes today's hearing. I want to thank the panel 
of witnesses. We appreciate your expertise and your time for 
joining us today, and I would also ask unanimous consent that 
the following materials and statements be entered into the 
record: a statement for the record from the American Public 
Power Association, and a statement for the record from the 
American Chemistry Council. Mr. McClure, certainly I want to 
thank your company for their involvement in the Alliance for 
Fuel Options, Reliability, and Diversity report, and also, the 
Wall Street Journal article on the California grid, and the New 
York Times article on the New England gas price situation as 
well.
    [The information appears at the conclusion of the hearing.]
    Mr. Whitfield. The record will remain open for a period of 
10 days, and Mr. Gramlich and others, we will be in touch with 
you all about some additional information that we asked that 
you all provide.
    But thank you once again. Our next hearing will be on this 
subject relating to the RTOs, and that will be maybe in a 
couple of weeks, but thank you again, and we look forward to 
working with all of you as we move forward to try to keep 
America competitive in the global marketplace. Thank you.
    [Whereupon, at 12:19 p.m., the subcommittee was adjourned.]
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