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



 
                   AMERICAN ENERGY SECURITY AND INNOVATION:
                    GRID RELIABILITY CHALLENGES IN A SHIFTING 
                    ENERGY RESOURCE LANDSCAPE
=======================================================================

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 9, 2013

                               __________

                           Serial No. 113-40


      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             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana                  Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
CORY GARDNER, Colorado               BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas                  PETER WELCH, Vermont
ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
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
RALPH M. HALL, Texas                 JERRY McNERNEY, California
JOHN SHIMKUS, Illinois               PAUL TONKO, New York
JOSEPH R. PITTS, Pennsylvania        EDWARD J. MARKEY, Massachusetts
LEE TERRY, Nebraska                  ELIOT L. ENGEL, New York
MICHAEL C. BURGESS, Texas            GENE GREEN, Texas
ROBERT E. LATTA, Ohio                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. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     5
    Prepared statement...........................................     6
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7
    Prepared statement...........................................     8

                               Witnesses

Gary Sypolt, CEO, Dominion Energy, on behalf of Interstate 
  Natural Gas Association of America.............................     9
    Prepared statement...........................................    12
John Shelk, President and CEO, Electric Power Supply Association.    24
    Prepared statement...........................................    26
    Answers to submitted questions...............................   144
Paul Cicio, President, Industrial Energy Consumers of America....    40
    Prepared statement...........................................    42
    Answers to submitted questions...............................   146
Daniel Weiss, Senior Fellow and Director of Climate Strategy, 
  Center for American Progress...................................    49
    Prepared statement...........................................    51
Robert Gramlich, Interim CEO, American Wind Energy Association...    78
    Prepared statement...........................................    80
    Answers to submitted questions...............................   157
Jonathan Lesser, President, Continental Economics, Inc...........    86
    Prepared statement...........................................    88
    Answers to submitted questions...............................   163

                           Submitted Material

Letter of May 8, 2013, from the Natural Gas Council to the 
  Subcommittee, submitted by Mr. Whitfield.......................   137
Letter of May 9, 2013, from the American Public Power Association 
  to the Subcommittee, submitted by Mr. Whitfield................   139


AMERICAN ENERGY SECURITY AND INNOVATION: GRID RELIABILITY CHALLENGES IN 
                  A SHIFTING ENERGY RESOURCE LANDSCAPE

                              ----------                              


                         THURSDAY, MAY 9, 2013

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:05 a.m., in 
room 2123, Rayburn House Office Building, Hon. Ed Whitfield 
(chairman of the subcommittee) presiding.
    Present: Representatives Whitfield, Hall, Shimkus, Pitts, 
Burgess, Latta, Cassidy, Olson, McKinley, Gardner, Pompeo, 
Kinzinger, Griffith, Barton, Upton (ex officio), Rush, 
McNerney, Tonko, Green, Capps, Barrow, Christensen, Castor, and 
Waxman (ex officio).
    Staff Present: Nick Abraham, Legislative Clerk; Charlotte 
Baker, Press Secretary; Sean Bonyun, Communications Director; 
Matt Bravo, Professional Staff Member; Allison Busbee, Policy 
Coordinator, Energy & Power; Patrick Currier, Counsel, Energy & 
Power; Tom Hassenboehler, Chief Counsel, Energy & Power; Jason 
Knox, Counsel, Energy & Power; Mary Neumayr, Senior Energy 
Counsel; Tom Wilbur, Digital Media Advisor; Jeff Baran, 
Minority Senior Counsel; Kristina Friedman, Minority EPA 
Detailee; Caitlin Haberman, Minority Policy Analyst.

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

    Mr. Whitfield. The hearing will come to order.
    I certainly want to thank the panel of witnesses for being 
with us today. All of you are experts in your field, and we 
value your testimony, and certainly I will be introducing each 
one of you individually as soon as we finish our opening 
statements, but the hearing this morning is entitled ``American 
Energy Security and Innovation: Grid Reliability Challenges in 
a Shifting Energy Resource Landscape.''
    Today's discussion builds on earlier hearings that address 
the challenges posed by changes in the Nation's electricity 
generation portfolio. The proportion of electricity we get from 
coal, natural gas, nuclear, hydroelectric and non-hydro 
renewables has remained relatively constant over the last 
several decades. However, a shift is occurring, and what is 
alarming is how fast the mix has changed during the past few 
years. And it is this rapid transition that presents a number 
of pressing concerns that must be addressed in order to ensure 
a reliable and affordable electricity supply.
    Most significantly, we are seeing a sharp drop in coal use 
and its replacement with natural gas. Part of this is due to 
market forces, namely the increased supply and relatively low 
price of domestic natural gas, but also part is the result of 
policy decisions made in Washington, particularly EPA's 
regulatory bias against coal.
    Policy decisions are also behind the increased use of 
intermittent renewable resources, such as wind and solar power, 
especially the generous federal tax breaks and subsidies that 
favor them, as well as state level renewable electricity 
mandates. There certainly is room for debate of the merits of 
these policies and decisions and their impacts on electricity 
consumers and the American economy.
    I for one am opposed to EPA's regulatory onslaught and will 
continue to oppose anti-coal rules because, like the President, 
I agree that we need all of the above, even though I think he 
wants to omit coal. But the point of this hearing is that these 
changes to the generation mix are occurring, and it is 
important that we think through what must be done to ensure 
that the lights stay on and that electric bills are affordable 
in the years ahead.
    For example, the increased use of natural gas to provide 
electricity cannot go smoothly unless we have the pipeline 
capacity to carry it from where it is produced to the many new 
natural gas-fired power plants that are being built. We will 
need new natural gas pipelines as well as storage facilities to 
be constructed. However, we don't have a lot of time to build 
them, given the reliability challenges we face today, and we 
have already witnessed this scenario in areas like New England.
    In addition, the federal-state policies that have given a 
boost to intermittent power sources could easily backfire if we 
don't address the difficulties of integrating these 
intermittent sources into the electric grid and the additional 
cost that that requires. Homeowners and businesses need 
electricity, whether or not the sun is shining or the wind is 
blowing, and the supply at any moment must meet the demand. 
This is nearly impossible to do with intermittent renewables 
that are not readily and reliably available.
    I might also add that the long-term subsidization of 
certain generation sources, such as wind, can impair 
reliability and drive up electricity prices and increase 
integration costs. The wind PTPC was extended the end of last 
year, much to the disappointment of many of us. That extension 
alone is expected to cost over $12 billion over the next 10 
years. And then, as many of you know, in January, EPA even made 
a decision in a ruling to exempt from the Clean Air Act 
emissions from generators that are used to back up wind power, 
and I recall that when we had our three forums on the Clean Air 
Act, many people said, well, you are out to destroy the Clean 
Air Act. We were not exempting anything from the Clean Air Act. 
We were simply having discussions with local regulators of the 
impact of the Clean Air Act and yet here EPA is exempting from 
the Clean Air Act backup generators for the wind--wind power.
    The electric sector is changing, but one thing that remains 
constant is that homeowners, small business owners, 
manufacturers and others need reliable and affordable 
electricity. If we are going to be competitive in the global 
marketplace, we must do everything possible to ensure 
affordable and abundant electricity.
    With that, at this time, I would like to recognize the 
distinguished gentleman from Illinois, Mr. Rush, for 5 minutes.
    [The prepared statement of Mr. Whitfield follows:]

                Prepared statement of Hon. Ed Whitfield

    This hearing is entitled ``American Energy Security and 
Innovation: Grid Reliability Challenges in a Shifting Energy 
Resource Landscape.'' Today's discussion builds on earlier 
hearings that addressed the challenges posed by changes in the 
nation's electricity generation portfolio.
    The proportion of electricity we get from coal, natural 
gas, nuclear, hydroelectric, and non-hydro renewables has 
remained relatively constant over the last several decades. 
However, a shift is occurring and what is alarming is how fast 
the mix has changed during the past few years. And it is this 
rapid transition that presents a number of pressing concerns 
that must be addressed in order to ensure a reliable and 
affordable electricity supply.
    Most significantly, we are seeing a sharp drop in coal use 
and its replacement with natural gas. Part of this is due to 
market forces, namely the increased supply and relatively low 
price of domestic natural gas. But part is also the result of 
policy decisions made in Washington, particularly EPA's 
regulatory attack on coal.
    Policy decisions are also behind the increase in 
intermittent renewable resources such as wind and solar power, 
especially the generous federal tax breaks and subsidies that 
favor them as well as state-level renewable electricity 
mandates.
    There certainly is room for debate over the merits of these 
policy decisions and their impacts on electricity consumers and 
the American economy. I for one strongly oppose EPA's 
regulatory onslaught and will continue to fight against these 
anti-coal rules. But the point of this hearing is that these 
changes to the generation mix are occurring, and it is 
important that we think through what must be done to ensure 
that the lights stay on and that electric bills are affordable 
in the years ahead.
    For example, the increased use of natural gas to produce 
electricity cannot go smoothly unless we have the pipeline 
capacity to carry it from where it is produced to the many new 
natural gas-fired power plants that are being built. We will 
need new natural gas pipelines as well as storage facilities to 
be constructed. However, we don't have a lot of time to build 
them given the reliability challenges we face today and we have 
already witnessed this scenario in areas like New England. And 
I might add that although Keystone XL is an oil pipeline and 
not directly relevant to this discussion about electricity, the 
fact that Keystone XL has been delayed for over four years by 
this administration is a warning sign that this administration 
is no friend of building new pipeline infrastructure to 
transport fossil energy.
    In addition, the federal and state policies that have given 
a boost to wind and solar power could easily backfire if we 
don't address the difficulties of integrating these 
intermittent sources into the electric grid.
    Homeowners and businesses need electricity whether or not 
the sun is shining or the wind is blowing, and the supply at 
any moment must match the demand. This is nearly impossible to 
do with intermittent renewables that are not readily available.
    I might also add that the long-term subsidization of 
certain generation sources, such as wind, can impair 
reliability and drive up electricity prices. The Wind PTC was 
extended at the end of last year much to the disappointment of 
many of us. That extension alone is expected to cost over $12 
Billion dollars over the next 10 years. To put that in 
perspective, $12 billion is more than 10% of the entire $90 
billion dollar sequester. In fact, $12 billion is six times 
more than the cost of the president's own proposal to create a 
$2 billion dollar Advanced Energy Trust Fund over the next 
decade. And what will the American taxpayer receive in return 
for subsidizing the wind industry for another 10 years? More 
expensive and less reliable energy.
    The electric sector is changing, but one thing that remains 
constant is that homeowners, small business owners, 
manufacturers and others still need reliable and affordable 
electricity. I look forward to learning from our witnesses as 
to how best to accommodate the changes that are underway.

                                #  #  #

 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 on, ``Grid Reliability Challenges in a Shifting 
Energy Resource Landscape.'' Mr. Chairman, my question is, can 
we just come up with an acronym for all these words, this long 
title?
    As the title of this hearing suggests, the country is 
indeed in a period of transition in an area of electricity 
generation away from some of the older, dirtier carbon-
intensive coal-fired power plants and towards a heavy reliance 
on natural gas and renewable source of energy, including wind 
and solar and hydropower to generate electricity.
    Twenty years ago, Mr. Chairman, coal accounted for over 50 
percent of all power generation in this Nation while natural 
gas was responsible for less than 15 percent of electric 
generation. Today, Iowa, due to a combination of technological 
advancement in producing renewable energy, State and Federal 
incentives, environmental policies and market-based realities, 
the U.S. power supply is much more diversified with 37 percent 
of electricity generation coming from coal, 30 percent coming 
from natural gas, 19 percent from nuclear and 12 percent from 
renewable sources, including hydropower.
    Mr. Chairman, this diversification of the Nation's power 
supply is a sign of the times as we move toward the 21st 
Century model, which does not rely too heavily on any single 
carbon-intensive energy source. Instead, by moving forward and 
diversifying our electric power supply to include more natural 
gas and clear renewable forms of energy, the U.S. is leading 
all advanced nations in decreasing our carbon emissions while 
also providing the energy necessary to provide for the needs of 
the American consumers and America's businesses.
    According to the EIA in 2012, U.S. energy-related 
combustion emissions declined 3.7 percent to 1994 levels as a 
result of slow economic growth, the accelerating use of 
renewable energy sources and the transition from coal to 
natural gas. So, Mr. Chairman, while this reduction in carbon 
emissions is commendable, there is still a whole lot more that 
we have to do, more work that needs to be done. U.S. energy 
related carbon emissions is currently 5 percent above 1990 
levels, and without additional policies, the EIA predicts that 
carbon pollution will continue to grow by 7.5 percent between 
2012 and 2040.
    President Obama has pledged to cut carbon emissions by 17 
percent between 2005 levels--below 2005 levels by 2020 in order 
to help combat the devastating effect of climate change that we 
have been experiencing much too frequently. And in order to do 
so, we must continue to integrate renewable forms of energy 
into the electric power supply. Of course, as we continue to 
integrate renewable sources of anything into the power grid, 
natural gas will play a larger role in helping to avoid 
possible reliability issues.
    Additionally, Mr. Chairman, we must encourage and promote 
the development of advanced technologies and best practices to 
help integrate renewable energy sources into the grid while 
maintaining reliability. We must ensure that FERC has the tools 
and the capability to remove barriers to integration.
    Mr. Chairman, order 764 IRERs, which is the Integration of 
Reliable Energy Resources, which was finalized in June of 2012, 
is a clear example of FERC's ability to integrate renewable 
power into the grid while also helping to ensure that American 
families and American businesses have access to reliable and 
affordable energy.
    Mr. Chairman, we must continue on this path of diversifying 
our Nation's power supply with cleaner, renewable sources of 
energy and while also making sure that FERC can and that the 
relevant agencies can and have the authority and the 
capabilities to keep America's lights on.
    Thank you, and I yield back.
    Mr. Whitfield. Gentleman's time has expired.
    At this time, I recognize the gentleman from Michigan, Mr. 
Upton, for 5 minutes.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Well, good morning. Today we are going to 
examine two key emerging issues facing the reliability of the 
Nation's electric grid, gas and electric convergence challenges 
and the integration of intermittent renewable energy resources.
    As we have witnessed over the last couple of years, the 
Nation's electric generation portfolio is undergoing a dramatic 
shift, in part spurred by abundant and low-cost natural gas but 
also driven by environmental regs from the EPA that are forcing 
thousands of megawatts of coal-fired base load power to retire. 
This committee is dedicated to ensure the continued 
availability of affordable and reliable power to American homes 
and businesses, all the while protecting jobs in this rapidly 
changing energy landscape.
    The shale gas revolution that we are witnessing today 
clearly presents enormous economic benefits for the country, 
and it is going to be an important driver of our economic 
growth moving forward. It is also going to set a path toward a 
better future for all of us, providing benefits across numerous 
sectors from manufacturing, residential to commercial uses.
    Generating more electric power from natural gas has many 
benefits as well, especially given that domestic supplies are 
increasing and current prices are relatively low, but we are 
learning that there are also some real challenges to 
integrating more natural gas in the power sector.
    Today's hearing also will focus on the increased 
integration of intermittent renewable resources, such as wind 
and solar, into the electric grid. As I have said on many 
times, many occasions, I support an open, all of the above, 
energy strategy, which includes renewable energy resources. 
However, we have got to be careful with regard to the cost of 
these resources and the taxpayer dollars that continue to 
subsidize them. We must also be mindful of the fact that 
incorporating an increased amount of renewables into the 
electric system presents operational challenges that in fact 
may impair with reliability. These resources are intermittent 
by their nature. The wind doesn't always blow, and the sun 
doesn't always shine. Clearly, there is a role that these 
resources can play and should play, but to suggest that these 
sources alone can meet the power demands of the manufacturing 
technology and consumer sectors of the U.S. economy is a 
stretch of the imagination. Absent the continued use of our 
reliable and consistent base load power workhorses, like coal, 
nuclear, natural gas, the U.S. will not be able to compete 
globally.
    America's newfound abundance of natural gas is a blessing, 
as are technological advances that make renewables more cost 
competitive and reliable. Both of these resources should and 
will play an important role in contributing to our energy 
needs, but we have got to take steps to properly and cost 
effectively integrate those resources into the energy and 
electric portfolio.
    I look for forward to today's testimony, welcome our 
witnesses and would yield to other members on the Republican 
side. Seeing none, I yield back.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Today we examine two key emerging issues facing the 
reliability of the nation's electric grid--gas and electric 
convergence challenges and the integration of intermittent 
renewable energy resources.
    As we have witnessed over just the last few years, the 
nation's electric generation portfolio is undergoing a dramatic 
shift, in part spurred by abundant and low cost natural gas, 
but also driven by environmental regulations from the EPA that 
are forcing thousands of megawatts of coal-fired baseload power 
to retire. This committee is dedicated to ensuring the 
continued availability of affordable and reliable power to 
American homes and businesses, all the while protecting jobs in 
this rapidly changing energy landscape.
    The shale gas revolution we are witnessing clearly presents 
enormous economic benefits for the country that will be an 
important driver of our economic growth moving forward. It will 
set a path toward a better future for all of us, providing 
benefits across numerous sectors from manufacturing, 
residential, to commercial uses.
    Generating more electric power from natural gas has many 
benefits as well, especially given that domestic supplies are 
increasing and current prices are relatively low. But we are 
learning that there are also some very real challenges to 
integrating more natural gas into the power sector.
    Today's hearing also will focus on the increased 
integration of intermittent renewable resources, such as wind 
and solar, into the electric grid. As I have made clear on 
numerous occasions, I support an open, all-of-the-above energy 
strategy, which includes renewable energy resources. However, 
we must be mindful of the cost of these resources and the 
taxpayer dollars that continue to subsidize them.
    We must also be mindful of the fact that incorporating an 
increasing amount of renewables into the electric system 
presents operational challenges that may impair grid 
reliability. These resources are intermittent by their nature--
the wind doesn't always blow and the sun doesn't always shine. 
Clearly there is a role these resources can play but to suggest 
these sources alone can meet the power demands of the 
manufacturing, technology, and consumer sectors of the U.S. 
economy is a stretch of the imagination. Absent the continued 
use of our reliable and consistent baseload power work horses 
like coal, nuclear, and natural gas, the U.S. will not be able 
compete globally.
    America's newfound abundance of natural gas is a blessing, 
as are technological advancements that make renewables more 
cost competitive and reliable. Both of these resources should--
and will--play an important role in contributing to our energy 
needs. But we need to take steps to properly and cost-
effectively integrate these resources into the electricity 
portfolio. I look forward to today's testimony, and learning 
about the best ideas for moving forward.

                                #  #  #

    Mr. Whitfield. Gentleman yields back.
    At this time, 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, Mr. Chairman.
    Today, the subcommittee is holding its third hearing on 
America's evolving electricity generation portfolio, and there 
is no question that a significant transition is under way.
    Renewable energy policies are paying off. We have doubled 
our capacity to generate renewable electricity from wind and 
solar in just 4 years. Cheap natural gas is also helping to 
transform our electricity sector. This market reality is 
causing some utilities to replace their oldest, dirtiest and 
least efficient coal plants with natural gas generation.
    These are positive developments, but these changes also 
create challenges for our electric grid. The testimony from the 
prior hearings showed that these issues are manageable and that 
both regulators and grid operators are focused on them. Yet 
there has been no focus from the Republican Members on the 
bigger challenges posed by climate change, and while they are 
ignoring climate change, they seem to bemoan the transition 
that is occurring. While they call for a market based economy, 
they don't seem to like the fact that the market economy is 
driving natural gas to replace coal. They seem to want to use 
coal no matter what. Don't let the market decide it; let's let 
the coal people decide it. They offer no solutions, no ideas 
for cutting carbon pollution or deploying more clean energy 
generation. Instead, the only thing that seems to unite them is 
attacking EPA. They attack EPA's air quality standards and 
lament the loss of coal's market share.
    There is a confused aspect to these hearings. Some 
Republican Members cannot seem to decide whether they like 
cheap natural gas or see it as a threat that must be overcome 
to protect the coal industry. They seem unsure whether they 
should be celebrating reduced carbon pollution or avoiding the 
issue all together. This confusion is not surprising because 
the subcommittee still hasn't examined why this transition in 
our energy sector must occur.
    Climate change is the biggest energy challenge we face as a 
country. We can't have a meaningful discussion of the 
transition under way in the energy sector without understanding 
the threat of climate change. We have heard a lot lately about 
U.S. carbon dioxide emissions being at their lowest level in 20 
years. The implication is no further action to address climate 
change is necessary, and that is simply not the case.
    As a result of increased renewable energy generation, a 
shift from coal to natural gas generation and the economic 
recession, U.S. emissions from the energy sector have dropped 
in recent years, but U.S.--total U.S. emissions from all 
sources, not just the power sector, actually increased from 
2009 to 2011. What matters most is whether U.S. emissions are 
on track to decline in the future by the amount needed to 
prevent dangerous climate change. No reputable expert believes 
this to be the case.
    Scientists tell us that our emissions need to decline by at 
least 80 percent below 1990 levels by 2015 to avoid a dangerous 
level of warming. The latest projections by the Energy 
Information Administration show that U.S. carbon dioxide 
emissions from fossil fuel combustion actually will be 13 
percent higher than 19 levels in 2040, the last year of the 
EIA's model. There is an enormous gulf between what these 
emissions will be without additional action and what they need 
to be to avert catastrophic warming.
    Today's hearing continues this unfortunate and 
counterproductive trend. The majority appears to have called 
this hearing, in part, to invite attacks on renewable energy. 
If we are going to hear from opponents of renewable energy and 
critics of EPA's proposed standards to reduce carbon pollution 
from new power plants, we should hear from the scientists and 
technical experts who can explain why it is so important for 
the United States to reduce its carbon pollution. We should 
hear from witnesses who can inform the subcommittee about the 
dangers of manmade climate change and the closing window for 
effective action. The threat of climate change is not going to 
disappear if we pretend it doesn't exist. We need to start 
recognizing reality and crafting responsible solutions.
    [The prepared statement of Mr. Waxman follows:]

               Prepared statement of Hon. Henry A. Waxman

    Today, the Subcommittee is holding its third hearing on 
America's evolving electricity generation portfolio. There is 
no question that a significant transition is underway.
    Renewable energy policies are paying off. We have doubled 
our capacity to generate renewable electricity from wind and 
solar in just four years.
    Cheap natural gas is also helping to transform our 
electricity sector. This market reality is causing some 
utilities to replace their oldest, dirtiest, and least 
efficient coal plants with natural gas generation.
    These are positive developments. But these changes also 
create challenges for our electric grid. The testimony from the 
prior hearings showed that these issues are manageable and that 
both regulators and grid operators are focused on them.
    Yet there has been no focus from the Republican members on 
the bigger challenges posed by climate change. They offer no 
solutions . no ideas for cutting carbon pollution or deploying 
more clean energy generation. Instead, they attack EPA's air 
quality standards and lament the loss of coal's market share.
    There is a confused aspect to these hearings. Some 
Republican members cannot seem to decide whether they like 
cheap natural gas or see it as a threat that must be overcome 
to protect the coal industry. They seem unsure whether they 
should be celebrating reduced carbon pollution or avoiding the 
issue all together.
    This confusion is not surprising because the Subcommittee 
still hasn't examined why this transition in our energy sector 
must occur. Climate change is the biggest energy challenge we 
face as a country. We can't have a meaningful discussion of the 
transition underway in the energy sector without understanding 
the threat of climate change.
    We have heard a lot lately about U.S. carbon dioxide 
emissions being at their lowest level in twenty years. The 
implication is that no further action to address climate change 
is necessary. That is simply not the case.
    As a result of increased renewable energy generation, a 
shift from coal to natural gas generation, and the economic 
recession, U.S. emissions from the energy sector have dropped 
in recent years. But total U.S. emissions from all sources--not 
just the power sector--actually increased from 2009 to 2011.
    What matters most is whether U.S. emissions are on track to 
decline in the future by the amount needed to prevent dangerous 
climate change. No reputable expert believes this to be the 
case.
    Scientists tell us that our emissions need to decline by at 
least 80% below 1990 levels by 2050 to avoid a dangerous level 
of warming. The latest projections by the Energy Information 
Administration show that U.S. carbon dioxide emissions from 
fossil fuel combustion actually will be 13% higher than 1990 
levels in 2040, the last year in EIA's model. There is an 
enormous gulf between what these emissions will be without 
additional action and what they need to be to avert 
catastrophic warming.
    Today's hearing continues this unfortunate and 
counterproductive trend. The majority appears to have called 
this hearing, in part, to invite attacks on renewable energy. 
If we're going to hear from opponents of renewable energy and 
critics of EPA's proposed standard to reduce carbon pollution 
from new power plants, we should hear from the scientists and 
technical experts who can explain why it is so important for 
the United States to reduce its carbon pollution. We should 
hear from witnesses who can inform the Subcommittee about the 
dangers of man-made climate change and the closing window for 
effective action.
    The threat of climate change is not going to disappear if 
we pretend it doesn't exist. We need to start recognizing 
reality and crafting responsible solutions.

    Mr. Whitfield. Gentleman yields back. At this time, I would 
like to introduce the members of the panel, and as I said in 
the beginning, we genuinely appreciate all of you being here, 
and we certainly value your input and thought on these 
important issues.

 STATEMENTS OF GARY SYPOLT, CEO, DOMINION ENERGY, ON BEHALF OF 
  INTERSTATE NATURAL GAS ASSOCIATION OF AMERICA; JOHN SHELK, 
  PRESIDENT AND CEO, ELECTRIC POWER SUPPLY ASSOCIATION; PAUL 
   CICIO, PRESIDENT, INDUSTRIAL ENERGY CONSUMERS OF AMERICA; 
 DANIEL WEISS, SENIOR FELLOW AND DIRECTOR OF CLIMATE STRATEGY, 
  CENTER FOR AMERICAN PROGRESS; ROBERT GRAMLICH, INTERIM CEO, 
    AMERICAN WIND ENERGY ASSOCIATION; AND JONATHAN LESSER, 
             PRESIDENT, CONTINENTAL ECONOMICS, INC.

    Mr. Whitfield. First, we have Mr. Gary Sypolt, who is the 
CEO of Dominion Energy, who is going to be testifying on behalf 
of the Interstate Natural Gas Association of America.
    We have Mr. John Shelk, who used to be a part of the Energy 
and Commerce Committee. I was going to say many, many years 
ago, but it wasn't that many years ago.
    Mr. Shelk. Lincoln was the----
    Mr. Whitfield. And John is the president and CEO of 
Electric Power Supply Association.
    We have Mr. Paul Cicio, who is the president of the 
Industrial Energy Consumers of America. We have Mr. Daniel 
Weiss, who has testified here before, and he is the senior 
fellow and director of climate strategy for the Center for 
American Progress.
    We have in Robert Gramlich, who is the interim CEO of the 
American Wind Energy Association.
    And we have Dr. Jonathan Lesser, who is the president of 
Continental Economics, Incorporated.
    So, once again, welcome to all of you. We look forward to 
your testimony. I will be recognizing each one of you and you 
will be given 5 minutes for an opening statement, and then, at 
the end, at the conclusion of that, we will have questions and 
answers.
    So, Mr. Sypolt, you are recognized for 5 minutes.

                    STATEMENT OF GARY SYPOLT

    Mr. Sypolt. Chairman Whitfield, Ranking Member Rush, 
members of the subcommittee, good morning. My name is Gary 
Sypolt. I am CEO of Dominion Energy. Headquartered in Richmond, 
Virginia, Dominion operates a broad portfolio of energy assets, 
including electric generation and transmission, natural gas 
transmission, storage and distribution. Dominion Energy, the 
segment of the company that I oversee, is focused on our 
natural gas assets.
    Today I am testifying on behalf of the Interstate Natural 
Gas Association of America or INGAA. INGAA represents 
interstate pipeline, natural gas transmission pipeline 
operators in the U.S. and Canada. I am a member of the INGAA 
board and the chair of the board's task force on gas electric 
power reliability.
    You are all aware of the shale gas revolution, the new 
opportunities that it has created for the U.S. economy and the 
rapid changes that have occurred as a result.
    One of the principal areas in which this has occurred is in 
the use of natural gas as a fuel for electric power generation. 
There is no question that natural gas and natural gas pipelines 
can serve gas-fired electric power generators reliably. 
Questions about whether and to what extent natural gas is used 
to generate electricity will be resolved by the generators and 
by policymakers. If natural gas continues to be chosen as a 
fuel prepared generation, though, the pipeline industry is 
confident that it can reliably meet the needs of power 
customers, assuming that such customers contract for the 
appropriate level of pipeline services.
    Concerns about natural gas electric power reliability vary 
by region and depend on several factors referenced by my 
written testimony. New England has attracted the greatest 
concern in recent years, but it is not the only region where 
this concern has been raised by grid operators and other 
stakeholders. The problem in New England is that wholesale 
electric market rules do not allow generators to recover the 
cost associated with ensuring electric reliability, and 
electric prices do not reflect these reliability costs.
    While generators in New England are acting rationally based 
on current market rules, the end result may be a reduction in 
electric reliability and a greater risk of blackouts that could 
be very costly to the region.
    The good news is that the interstate natural gas pipeline 
industry has a proven track record for building infrastructure 
in response to market demand. In my written testimony, you can 
see a map of the 12,000 miles of new pipelines placed in 
service over the last decade. If the market provides timely 
signals that it needs additional capacity, that is, in the form 
of firm contractual commitments for that capacity, the industry 
can add new pipeline capacity in a market responsive manner.
    The key point here, pipelines are designed to meet the 
needs of shippers with firm contracts. Unlike electric 
utilities, pipelines typically are designed with little or no 
excess capacity. In other words, there is no reserve margin. 
This is why firm contracts for pipeline service are critical, 
and in fact, the FERC looks at a firm contractual commitment in 
deciding whether to approve a new pipeline in the first place; 
in other words, whether the pipeline meets the public 
convenience and necessity.
    Restructuring of wholesale natural gas markets has been a 
remarkable success. As demonstrated by the robust pipeline 
expansion over the last decade, the natural gas model works. 
This success should not be undermined as policymakers examine 
how to achieve greater natural gas and electric power market 
coordination. Electric market rules must be reformed to value 
investments in reliability and to ensure the ability to recover 
such costs from those who benefit from reliable electricity. 
With such arrangements, necessary natural gas infrastructure 
can and will be built. Without such arrangements, the gas side 
risk, degradation of the quality of service for natural gas 
utilities and traditional gas pipeline customers who pay for 
reliable service, while on the electric side, there would be a 
greater risk if parts of the nation would experience more 
volatile power prices and increasing potential for blackouts.
    Let me thank the subcommittee for the opportunity to 
testify today, and I will be happy to answer questions at the 
appropriate time. Thank you.
    [The prepared statement of Mr. Sypolt follows:]
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    Mr. Whitfield. Thanks, Mr. Sypolt.
    Mr. Shelk, you are recognized for 5 minutes.

                    STATEMENT OF JOHN SHELK

    Mr. Shelk. Thank you. Good morning, Chairman Whitfield, 
Ranking Member Rush and members of the subcommittee. As a 
former committee counsel, it is a particular honor to be back 
today. As noted, I am here on behalf of the Electric Power 
Supply Association. EPSA is the national trade association for 
competitive wholesale electricity suppliers. Our members supply 
electricity across the country with a particular emphasis on 
states and regions with independent grid operators. This means 
their major sources of electricity from Maine down here to 
Virginia and states across from the Mid-Atlantic to my home 
State of Illinois, and particularly in Texas and California.
    The subcommittee is wise to focus on the challenges already 
discussed. Today's headlines focus on natural gas, but we 
should also be asking ourselves, what will be the headlines of 
tomorrow? What will be the game changers next year or over the 
next decade? EPSA believes that competitive electricity markets 
are best able to adapt to these changes, and our written 
testimony focuses on three particular challenges that I will 
summarize now: electric-gas coordination; a new topic that 
Chairman Whitfield referred to called demand response; and 
finally, variable resources.
    First on electric gas coordination, I think it is important 
to point out that gas-fired generators already have as much 
interest and financial incentive as anyone in making sure gas 
could be delivered to their power plants to generate 
electricity. This is because, in competitive markets such as 
New England and Texas and elsewhere, these plants do not earn 
revenue from generating electricity unless they can get gas to 
run. They do not have a regulated rate base.
    The important message we would leave with you is that today 
and going forward, these plants procure fuel many ways, only 
one of which is through a firm long-term transportation 
arrangement that the pipelines just referred to. Instead, power 
plants today serve consumers of electricity reliably as well as 
cost effectively many other options: packaged products from 
producers and gas marketers with packages that include both the 
gas supply and the transportation, interruptible service, 
capacity release, and delivery from gas distribution utilities. 
These generators need continued access to this full suite of 
options to tailor their gas supply arrangements to the type of 
plant, location and market being served. These options 
generally work well, as evidenced by the substantial increased 
utilization of gas-fired power plants that many of you have 
already referred to.
    We are in agreement with INGAA that electric gas issues 
vary by region, and regional solutions are best. And FERC is 
acting accordingly. FERC and grid operators are vigilant, as 
you heard at the hearing last month. New England is 
appropriately seen as the region with the most pressing 
challenges, and our regional trade association there is co-
chairing the regional effort, looking at these issues in depth.
    FERC recently acted to improve the scheduling times for gas 
and electricity, which will help, and active consideration is 
being given at the state level to possibly encouraging gas 
utilities to procure more firm pipeline capacity, but the 
regional market is also looking to actively consider changes to 
electric market rules.
    The second topic I would like to mention is one not often 
considered here but should be, and that is called demand 
response. Demand Response entails programs in which most energy 
consumers, particularly residential and commercial customers, 
pay others, primarily industrial customers, for them to use 
less electricity. In what is called order 745, FERC went beyond 
its authority, in our view and the view of the other national 
electricity associations, to pay this demand response as if it 
were generation, and we and those other associations are 
presently in the Federal court here in the District of Columbia 
and the Court of Appeals challenging that order.
    No amount of demand response can substitute for the 
substantial supplies of actual megawatts from real power plants 
of all kinds needed to continue to serve consumers reliably. 
This year, as Chairman Whitfield mentioned, EPA issued a rule 
exempting behind-the-meter diesel generators from Clean Air Act 
requirements applicable to other generators. This allows owners 
of these unregulated diesel generators to link up as virtual 
power plants to merely shift, not actually reduce their demand, 
and still get paid by other consumers as demand response.
    This diverts consumer dollars away from cleaner generation. 
This has also been flagged as a reliability concern and PJM by 
the independent market monitor. Demand response subsidies and 
policies deserve greater scrutiny as, at present, they 
adversely impact every supply option, gas, coal, nuclear and 
renewables.
    And on the third challenge in terms of intermittent 
resources, the point we would leave with you is really twofold. 
One is that the larger regional markets that we favor because 
they are larger, can handle the intermittent resources better, 
and the natural gas-fired power plants that are needed to back 
up these intermittent resources need to be properly 
compensated.
    And with that, I thank you for the opportunity to be here, 
and we look forward to the questions.
    [The prepared statement of Mr. Shelk follows:]
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    Mr. Whitfield. Thanks very much.
    And Mr. Cicio, you are recognized for 5 minutes.

                    STATEMENT OF PAUL CICIO

    Mr. Cicio. Thank you. Mr. Chairman, Ranking Member Rush, 
members of the subcommittee, thank you for the opportunity to 
be here. My name is Paul Cicio, and I am the president of the 
Industrial Energy Consumers of America. IECA is a trade 
association. Our manufacturing companies have revenues of $1.3 
trillion, over 1,500 major manufacturing facilities across the 
United States, and we employ some 1.7 million people.
    IECA companies are mostly energy intensive trade exposed 
industries. This means that they are substantial consumers of 
natural gas and electricity and that relatively small changes 
in the price of energy can have a significant impact on 
competitiveness and jobs. The industrial sector uses about one-
third of the U.S. natural gas and one-third of the U.S. 
electricity.
    The key message of this testimony to Congress is that 
consumers are not being served by a combination of actions and 
inactions by policymakers, all of which potentially threaten 
electric and natural gas reliability.
    Because the electric reliability is dependent upon natural 
gas pipeline capacity reliability and that no federal agency 
apparently has responsibility for oversight of natural gas 
pipeline reliability means, in general, that no one in 
Washington is in charge of reliability. The U.S. cannot have 
electric reliability without having natural gas pipeline 
reliability.
    Everyone is aware of the northeast corridor pipeline 
constraints and how it increased prices. Thankfully, 
policymakers are working to resolve the problem.
    What IECA is worried about is what we do not know about the 
pipeline constraints in other parts of the country. The 
question that keeps us up at night is, given the momentous 
market changes under way over the next 4 years, at peak natural 
gas demand periods like very hot summer days or very cold 
winter nights, will there be adequate natural gas pipeline 
capacity for all natural gas consumers?
    While the North American Electric Reliability Corporation, 
NERC, has responsibility for overseeing electric reliability 
and appears to be doing a good job, there is no such 
organization for overseeing natural gas pipeline capacity 
reliability. FERC has authority over most aspects of natural 
gas pipelines but not reliability. Their view--they view 
reliability as responsibility of the market. The decision to 
build a pipeline is a market decision, not a regulatory 
decision, and we agree with that premise.
    While the premise of a pipeline decision to build or not 
build has not changed and shouldn't change, the market it 
serves has changed profoundly in several complicated ways that 
greatly increased the potential for reliability problems that 
never existed before, all at the same time and over a 
compressed period of time. And we must be mindful that 
potential solutions in this arena are capital intensive and 
where timely environmental permitting is a huge obstacle to 
speed. These facts make a compelling case for what oversight 
and studies evaluating reliability at future peak demands are 
necessary to prevent future reliability problems.
    In contrast, for electric reliability, NERC is doing 
studies to encompass the country to evaluate and provide vital 
information that supports pre-emptive action by policymakers 
and markets to guard against electric reliability problems.
    The recent study completed by the Midwest Independent 
System Operator, MISO, clearly demonstrates the need for 
greater oversight and study. The MISO study concluded, in the 
short term, more than 65 percent of the pipelines currently 
supplying gas to 13 Midwest states has insufficient capacity to 
fully meet its needs from existing generating units. For the 
period 2016 to 2030, almost 90 percent of the pipelines have 
insufficient capacity. The results of this study should have 
served as a red flag to policymakers, but it apparently has not 
had quite the effect that we would like.
    Lastly, how FERC and the regional markets respond to these 
challenges may result in consideration of policy changes that 
could be of concern to the industrial sector. For example, a 
FERC policy that gives certain rights and priorities to 
electric generators for access to natural gas pipeline capacity 
may provide potential solutions to electric generation 
reliability but creates reliability and cost problems for 
manufacturers.
    Mr. Chairman, in conclusion, reliability is an important 
safety and cost issue. Policymakers should not wait until there 
are rolling brownouts or blackouts to provide oversight of 
natural gas pipeline capacity.
    [The prepared statement of Mr. Cicio follows:]
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    Mr. Whitfield. Thanks very much.
    Mr. Weiss, you are recognized for 5 minutes.

                   STATEMENT OF DANIEL WEISS

    Mr. Weiss. Chairman Whitfield, Ranking Member Rush and 
members of the subcommittee, thank you for the opportunity to 
testify on American energy security and innovation. Discussing 
electricity security while ignoring climate change is like 
discussing personal health while ignoring smoking, diet and 
exercise. We must acknowledge that our electricity generation 
system produces much of the carbon pollution responsible for 
climate change and that the effects of climate change impair 
electricity reliability. These threats include extreme weather 
events, storms, floods, droughts, heat waves and wild fires.
    The Congressional Research Service concluded in 2012 that, 
quote, ``power delivery systems are most vulnerable to storms 
and extreme weather events,'' unquote. Such events also 
threaten American lives, the economy and taxpayers. The 25 most 
severe extreme weather events in 2011 and 2012 caused 1,100 
fatalities and $188 billion in damages.
    A Center for American Progress analysis found that federal 
natural disaster relief recovery efforts cost taxpayers $136 
billion in fiscal years 2011 through 2013, or 400 hours per 
household annually, and the National Climate Assessment Draft 
warns us that we can expect more extreme and severe weather in 
the future.
    Extreme weather interferes with electricity generation. The 
severe 2012 drought interrupted power production in many states 
by shrinking the amount of cooling water available for power 
plants. The drought also disrupted oil and natural gas 
production. Superstorm Sandy and other severe storms also 
disrupted electricity service by downing power lines and 
damaging facilities. We urge the subcommittee to support 
policies to achieve a more secure, reliable electricity system 
by accomplishing the following three goals.
    First, Congress must slow climate change by reducing carbon 
pollution from power plants, the largest uncontrolled source of 
emissions. Failing that, EPA must comply with the Supreme Court 
by setting such standards under the Clean Air Act. American 
Electric Power, Xcel and Entergy all testified before this 
subcommittee earlier this year in favor of legislation to 
address climate change.
    Second, continue to provide financial incentives for energy 
efficiency and renewable electricity technologies, which would 
reduce reliance on the polluting fossil fuels responsible for 
climate change, pay for them by adding tax breaks for big oil 
companies because they have received the most federal support 
over time. The Nuclear Energy Institute in a 2011 study found 
that over the past 60 years, 70 percent of federal energy 
spending went to fossil fuels while only 10 percent went for 
renewables. In addition, in 2013, the North America Reliability 
Corporation found that, quote, ``no significant reliability 
challenges that intermittent electricity exists.''
    And third, reduce the vulnerability of the electricity 
infrastructure to extreme storms, drought, sea level rise and 
other impacts of climate change. Investments in resiliency to 
extreme weather save money. The Federal Emergency Management 
Agency estimates that, quote, ``a dollar spent on pre-disaster 
mitigation saves society an average of $4 in lower damages.''
    Yet even as extreme weather increases, the federal 
government is investing less in community resilience. 
Representative Lois Capps and 39 colleagues have urged that the 
federal government undertake a resilience plan that, first, 
determines the financial support necessary to help communities 
prepare for future extreme weather events and creates a 
dependable revenue stream to provide additional resources for 
these community resilience programs.
    In addition, the Congressional Research Service recommends 
more investment in smart grid and transmission repairs to 
improve electricity reliability. The growing harm from climate 
change requires a prompt transition from dirty to cleaner 
electricity generation, which is begun both here and abroad. 
For instance, Iowa generates 20 percent of its electricity from 
wind. Six years after a devastating tornado, Greensburg, Kansas 
is, quote, ``100 percent renewable energy 100 percent of the 
time,'' unquote. Germany generated one quarter of its 
electricity from renewable sources over six months in 2012, so 
it can be done.
    Congress must adopt policies that speed this transition 
while helping our electricity system become more resilient to 
damages from climate related storms, floods, drought and other 
extreme weather. Thank you very much.
    [The prepared statement of Mr. Weiss follows:]
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    Mr. Whitfield. Thank you, Mr. Weiss.
    And Mr. Gramlich, you are recognized for 5 minutes.

                  STATEMENT OF ROBERT GRAMLICH

    Mr. Gramlich. Thank you, Chairman Whitfield, Ranking Member 
Rush and subcommittee members. It is a pleasure to be here 
today on behalf of America's wind industry. The American Wind 
Energy Association represents over 1,200 member companies, 
including project developers, manufacturers and service 
providers. Wind energy production has grown dramatically in 
recent years, lowering energy costs for consumers while keeping 
the grid reliable.
    Over the past 5 years, wind energy has accounted for more 
than 35 percent of all new electric generating capacity in the 
U.S. Last year alone, $25 billion in private investment went 
into building new U.S. wind projects, providing 80,000 American 
jobs. The wind industry now has 550 manufacturing facilities in 
44 states and wind projects in 39 states and Puerto Rico. 
Nearly 70 percent of the content used in U.S. wind turbines is 
produced here in America now, up from 25 percent just a few 
years ago.
    Last year, wind energy reliably provided more than 20 
percent of the electricity in Iowa and South Dakota, and more 
than 10 percent of the electricity in nine states. At times, 
wind energy has reliably provided more than 55 percent of the 
electricity on the main utility system in Colorado and 35 
percent on the main grid in Texas.
    Dozens of studies by independent grid operators and 
utilities have examined wind energy's impact on electric 
reliability and all have concluded that our use of wind energy 
can increase many times over without any negative impacts on 
reliability.
    Since the days of Thomas Edison, grid operators have had to 
constantly adjust the output of power plants to respond to 
fluctuations in electricity demand and the sudden failures of 
large conventional power plants. All energy sources 
underperform from time to time and no power plant operates 
predictably 100 percent of the time. The lights stay on because 
all power plants have always backed up--been backed up by all 
other power plants. Wind energy follows the same market rules 
as other resources, pays for any costs it causes and only gets 
paid for the services it provides.
    Compared to wind energy, changes in electricity demand and 
failures at conventional power plants are far larger 
contributors to grid variability and the need for the flexible 
reserves or backup that grid operators use to keep supply and 
demand in balance. Grid operators that use efficient practices 
have found that they can reliably add large amounts of wind 
energy with virtually zero need for backup power beyond what is 
already needed.
    Even if power--even if additional reserves are needed, it 
is much cheaper to accommodate the slow and predictable 
variations in wind output than the instantaneous loss of 
conventional power plants that can occur at any time. Data from 
the Texas grid operator indicates that the additional cost of 
reserves for obtaining almost 10 percent of its electricity 
from wind energy accounts for about 6 cents out of a typical 
household's $140 monthly electric bill. A study by utilities in 
Nebraska that the whole region reliably obtained 40 percent of 
its electricity from wind energy at an additional reserves cost 
of around 80 cents per monthly bill. In contrast, data 
indicates that the cost of reliably accommodating instantaneous 
outages at other power plants is 40 times higher, at around 
$2.50 per monthly bill.
    These reserves' costs are a small fraction of the benefits 
wind energy provides for consumers. Wind energy drives down 
electricity prices by displacing higher cost, less efficient 
power plants. Wind energy also provides the stability of a 
long-term fixed energy price, which is offered by very few 
other energy sources. This protects consumers from fluctuations 
in fuel prices, much like a fixed-rate mortgage protects 
homeowners from interest rate spikes.
    Utilities understand that wind energy is a good deal for 
their customers. At least 74 utilities bought or owned wind 
power in 2012, up 50 percent from a year ago. The Southern 
Company recently made its third wind energy purpose, explaining 
that wind energy reduces its customers' electric bills. 
Similarly, Oklahoma Gas and Electric estimates that a single 
wind project will save Arkansas customers $46 million.
    Finally, the Colorado Public Utilities Commission found 
that a single wind purchase by Xcel Energy, quote, ``will save 
rate payers $100 million,'' unquote, while providing the 
opportunity to lock in a price for 25 years. In short, wind 
energy is playing a critical role in providing American homes 
and businesses with reliable homegrown and low-cost energy.
    Thank you for inviting me, and I look forward to answering 
your questions.
    [The prepared statement of Mr. Gramlich follows:]
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    Mr. Whitfield. Thank you.
    Dr. Lesser, you are recognized for 5 minutes.

                  STATEMENT OF JONATHAN LESSER

    Mr. Lesser. Thank you, Chairman Whitfield, Ranking Member 
Rush, members of the subcommittee. My name is Jonathan Lesser. 
I am the president of Continental Economics. I began my 
professional career almost 30 years ago as a load forecaster 
for Idaho Power. Over the years, in my work for government, 
industry, and as a consultant, I have been involved with and 
researched many facets of the energy industry as well as 
corresponding policy issues at both the national and individual 
state levels.
    I appreciate your invitation to be here today to discuss 
the reliability challenges confronting us as we seek to 
integrate intermittent resources onto the grid. I am appearing 
today on my own behalf, and the views expressed in my testimony 
today are mine and mine alone.
    Integration costs can be broken down into two categories. 
The first category includes the cost of ensuring the power 
system is operated safely and reliably from moment to moment.
    The second category includes the cost of connecting 
resources to the power grid, called interconnection cost, 
specifically building new transmission lines and substations to 
deliver electricity from individual generating units to load 
centers like D.C.
    To operate a power system, the supply of electricity must 
continuously match demand. If power supply exceeds demand at 
any time, it can overload the system. If demand exceeds supply, 
you can have brownouts or even rolling blackouts. Because the 
overall demand for electricity changes moment to moment, power 
system operators must continually adjust electric supplies.
    In addition, as has been mentioned, grid operators have to 
plan for contingencies. On those hot sultry August days here in 
Washington, D.C., the demand for electricity peaks because of 
air conditioning, so power system operators have to ensure 
there is sufficient resources to meet those loads.
    Gas generators provide the most quick reserve capacity 
because they can be started, stopped or ramped up and down 
fairly easily and quickly. In contrast, coal and nuclear plants 
are designed to run around the clock, generating the same 
amount of power all times. Starting a nuclear plant, for 
example, can actually take several days. Although the output of 
these plants can be varied up and down, doing so increases the 
wear and tear on them, which increases their operating costs 
and reduces their fuel efficiency.
    It is not surprising that intermittent resources, like wind 
and solar, cannot provide these sorts of operating reserves. In 
fact, intermittent resources actually increase the need for 
reserves. The reason for this is that system operators must 
also cope with the wide swings and output from intermittent 
resources. That, in a nutshell, is what integrating 
intermittent generating resources is all about and why it is 
both challenging and costly.
    Chicago's experience during last July's heat wave provides 
a compelling example. During that heat wave, Illinois wind 
power generated less than 5 percent of its capacity during the 
record breaking heat, producing only an average of 120 
megawatts of power from over 2,700 megawatts of installed wind. 
On July 6, 2012, when the demand for electricity in northern 
Illinois and Chicago hit a record of over 22,000 megawatts, the 
average amount of wind generation that day was a virtually non-
existent 4 megawatts. The potential loss of thousands of 
megawatts of intermittent generation for a short time, which 
has occurred in the past, means that system operators must 
increase the quantity of available reserve capacity. That 
increases cost. It is as if thousands of vehicles have their 
engines idling, waiting to run on the possibility they are 
needed.
    One such study, for example, by the American Tradition 
Institute, found reliability related transmission losses and 
costs for Texas alone are over $1 billion per year.
    In regions with wholesale electric markets, system 
operators use next day forecasts of availability and demand to 
determine how they will operate the power system. Although even 
wind advocates acknowledge wind's inherent intermittency, they 
claim wind generation can be predicted accurately several days 
in advance, allowing system operators to reduce, if not 
eliminate, the impacts of wind's volatility. Forecasts and 
operational data, including--in areas including Texas as well 
as in European countries, show that is not the case.
    The other thing about that that is causing this problem to 
be severe is that subsidies, such as the PTC and renewable 
portfolio standards, plus the socialization of most integration 
costs, have increased reliability concerns. As Commissioner 
Donna Nelson of the Texas Public Utility Commission stated last 
year, the market distortions caused by renewable energy 
incentives are one of the primary causes, I believe, of our 
current resource adequacy issues. This distortion makes it 
difficult for other generation types to recover their cost and 
discourages investment in new generation, and I will leave it 
at that.
    Thank you very much. I look forward to your questions.
    [The prepared statement of Mr. Lesser follows:]
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    Mr. Whitfield. Thank you very much, Dr. Lesser.
    And thank all of you for your testimony.
    At this time, we will begin the questions, and I will 
recognize myself for 5 minutes of questions.
    In your testimony, Dr. Lesser, you had a paragraph or so, 
and basically in which you said that increasing use of 
intermittent generating resources does create obstacles to 
reliability or at least it exacerbates reliability, and it 
increases integration cost to the consumers. Would you 
elaborate on that a little bit for me?
    Mr. Lesser. Sure. The problem with integrating intermittent 
resources, like wind and solar, is that you have to, in 
addition to planning for the ups and downs of demand all the 
time, you have to have additional reserve capacity in case the 
wind stops blowing suddenly, and that has happened. Well, that 
means you have to have additional costs incurred for other 
reserve capacity. As a result, that increases cost.
    Because wind is subsidized, you get more of it, you get 
greater investment in wind power. That is why you have a 
subsidy. That tends to increase the amount of wind capacity 
that exacerbates the reliability issues that grid operators 
have to deal with. Plus when you socialize transmission costs, 
such as building new transmission lines in Texas, which is now 
up to a cost of over $7 billion, that again, you are incenting 
that sort of investment, which raises costs for everyone and 
creates more reliability problems.
    It is true that, you know, the grid operators can handle 
wind reliability at this point. I mean, the lights are on in 
here, that is true, but as you increase, though, that, the 
amount of wind penetration on the system, those costs will keep 
increasing, and it will become more difficult to maintain a 
reliable power system.
    Mr. Whitfield. Now, you know, the production tax credit was 
recently extended for the wind industry, and we hear a lot 
about negative pricing or selling electricity generation at 
less than your cost. There is quite a bit of that going on in 
the wind industry. Would you elaborate on that?
    Mr. Lesser. Yes, Mr. Chairman. Negative pricing sounds 
great. It actually happens--and it sounds very strange because 
why would anyone, why would the market price for any good ever 
be negative? You know, why would someone want to pay you to buy 
what they are selling?
    But because of the production tax credit is negative 23--is 
$23 per megawatt, that translates on a before tax basis of $35 
per megawatt. Well, so wind power producers get in at 
production tax credit, have an incentive to bid in their 
generation into the market as long as the price is greater than 
negative $35. And because other power producers, like nuclear 
and coal plants, which are designed to run round the clock, 
they keep their system operating. They can't just shut the 
plants down. So you end up with excess supply in certain times 
of the year and you end up with negative prices. That the hours 
of negative pricing during the year is actually increasing.
    What you have now is when those prices are negative, so 
those coal nuclear operators are actually having to pay the 
grid to keep operating. That obviously increases their cost, 
reduces their profitability; they are having to shut down.
    In Minnesota, for example, I believe they announced the 
closure of one coal plant because of subsidized wind. 
Therefore, what happens is, you start shutting down those 
plants that are needed for reliability because of wind, 
subsidized wind generation, well, you still have to maintain 
reliability, so you have to have more reserve capacity, which 
again, increases cost.
    Mr. Whitfield. All of us, I think, recognize that the Clean 
Air Act has been a good piece of legislation, and as the 
gentleman from California said, our CO2 emissions 
are the lowest they have been in 20 years.
    Are any of you familiar with EPA providing an exemption to 
a fuel source for the purposes of being a backup, as you 
mentioned in your demand response paragraph, Mr. Shelk, where 
EPA has now exempted diesel fuel engines from the Clean Air 
Act?
    Mr. Shelk. That is correct, Mr. Chairman.
    In a rule, a final rule in January called RICE NESHAPS, 
which it stands for Reciprocal Internal Combustion Engines, and 
this is the important part, this is for the Hazardous Air 
Pollutant Standards, and this is an interesting issue because 
it unites in the litigation pending in the D.C. Circuit and 
before EPA power generators, power health groups, environmental 
organizations, states, everyone but the demand response 
community oppose this, and EPA decided that these backup 
engines should be exempt, these diesel engines.
    Now, to their credit, they did require ultralow sulfur 
diesel, but the problem is we went to EPA and said, look, you 
have to understand how this rule overlays with electric power 
markets. And this is sort of the classic case in government 
that we have all encountered of sort of stovepipe thinking 
where, when FERC acted to pay demand response, as I indicated, 
in 2011, we raised these environmental concerns about the 
backup generators. We said they should be excluded because the 
owner of the engine is not actually reducing demand. It is just 
taking less power from the grid, but they are turning on those 
uncontrolled diesel generators at the industrial facility, and 
FERC said, go talk to EPA. We raised this concern at EPA, and 
in the final rule, you will see EPA said, well, certain 
parties, meaning us and many others, raised this and you should 
go back to FERC.
    So, it is sort of the two agencies really are talking to 
each other, and we are very concerned about this for the 
reasons that I have outlined and you mentioned, and again, this 
unites all of us, whether you are for coal or nuclear, natural 
gas, renewables; what is happening now is these small power 
plants, these backup diesel generators, can be linked together 
in the market. They can bid into the capacity market and the 
energy market where we get our revenue, regardless of what fuel 
source you prefer, and they are backing out those cleaner forms 
of generation, and we are hopeful EPA will reconsider the rule 
or the court will intervene.
    Mr. Whitfield. Thank you. My time has expired.
    I recognize Mr. Rush for 5 minutes.
    Mr. Rush. Again, thank you, Mr. Chairman.
    Mr. Gramlich, you seem to be sitting there wanting to 
respond to some of the statements of Dr. Lesser. Do you have 
any response regarding the performance of the wind industry in 
my windy city of Chicago?
    Mr. Gramlich. Yes. Thank you.
    I mean, I didn't hear anything from Dr. Lesser that 
contradicted the statements I made about many parts of the 
country being able to reliably integrate vastly greater amounts 
of wind energy than we already have on the system.
    We were just in our annual conference in Chicago with about 
10,000 people, and Governor Branstad from Iowa came there and 
spoke, and he was raving about the 20 percent of their 
electricity that comes from wind. And I just saw also this week 
he announced that they are bringing 1,000 more megawatts. And I 
don't think he or MidAmerican Energy want an unreliable power 
grid; in fact, I think they want to further diversify their 
electricity portfolio.
    When we were all here last and I testified before this same 
subcommittee, we were talking about the value of a diverse 
portfolio. And I am not saying we should do 100 percent wind on 
the grid, I am saying, as we all said then, every panelist 
said, yes, we need a more diverse portfolio. Wind would be just 
one part, but an important part, of that diverse portfolio. It 
will keep the lights on. And the costs, I don't disagree that 
there can be some incremental costs with integrating any 
resource, but you have to say, as compared to what? If you 
increase more wind on the grid, you may have, as I indicated, a 
very modest cost. If you put more large conventional plants on 
the grid, you also have an incremental cost.
    Mr. Rush. Thank you so much.
    Mr. Sypolt, in your written testimony you mentioned that 
there are concerns in the Midwest Independent System Operator, 
MISO, region regarding the number of coal-fire-powered 
generators that would need to be retired and replaced with 
natural gas generators. You cited the testimony of MISO's 
executive vice president, Clair Moeller, from her March 19th, 
2013, testimony before the subcommittee that MISO estimated 
that about 11.5 gigawatts of coal-fired generation may need to 
be replaced to comply with the environmental regulations, and 
that MISO was currently identifying potential impediments to 
integrating that amount of gas-fired generation in order to 
plan accordingly.
    Are you aware of what some of those barriers might be? Do 
you have any concerns regarding the natural gas pipeline 
industry's ability to build the capacity or infrastructure that 
is needed in order to keep pace with the market demand in the 
MISO region or any other region?
    Mr. Sypolt. Thank you for the question, Congressman. And, 
you know, as I said earlier, the concerns that INGAA has are 
regionally targeted. MISO is one where a study had been done 
that said there are conversions that are going to occur from 
coal to most likely natural gas. Is there adequate pipeline 
capacity available?
    INGAA is very confident that the pipeline industry is up to 
being able to build that pipeline capacity needed to meet the 
additional demand on the pipelines there. What is required, 
though, is that generators actually sign up for some firm 
transportation to make sure that capacity is built. I am not 
saying that every generating plant built has to have firm 
transportation, but I am saying there needs to be a review, 
which MISO actually did, that said, you know, there are 
situations where there may not be adequate pipeline capacity, 
and the only way that pipeline capacity would be built is if 
there are some long-term contracts signed that allows those 
pipeline builds to be economically built.
    Mr. Rush. Mr. Cicio, do you have any responses?
    Mr. Cicio. I think that the--I would agree that we have a 
very good regulatory approach in how pipelines are built.
    What we are concerned about, as I previously expressed, is 
that there is no entity that is overseeing this ``pipeline 
capacity at peak demand concern.'' There is in the electric 
side of the market, there is the North American Electric 
Reliability Corporation that is evaluating the Nation for 
electric reliability. We are raising the question for a 
conversation that, you know, there is this absence of oversight 
in determining whether or not there is capacity problems in the 
natural gas pipeline, and so that is a concern.
    Mr. Whitfield. At this time----
    Mr. Rush. Yield back.
    Mr. Whitfield. At this time I recognize the gentleman from 
Texas Mr. Hall for 5 minutes.
    Mr. Hall. I thank you, Mr. Chairman.
    And, Dr. Lesser, I notice in your testimony you mentioned 
the myth of green jobs, and I sure agree with you that there is 
a lot of myth involved there. And I guess the question is 
whether or not subsidies for renewables really are creating 
sustainable job and economic growth.
    The meeting today is about examining the challenges and the 
consumer impacts resulting from the increased use of natural 
gas and renewables. And I think sometime I would like to see us 
have a hearing here on really what fossil fuels do for us. And 
2013 is not completed yet, but in 2012 indicates that from coal 
we get 37 percent of the preliminary U.S. electric generation 
and about 30 percent from natural gas. Those are hard, cold 
facts that we can't fight.
    And Mr. Waxman is a wonderful member of this committee, and 
I have sat here with him for 30-something years. He continues 
to warn us, and in closing, about the threat of global warming 
will always be with us. And of course it will as long as he 
keeps putting in the Congressional Record and they keep talking 
about it. But without fossil fuels, we would all have to work 
our way or feel our way out of this building right today, and 
go to a car that wouldn't start, and get to a home that would 
be cold in the winter and too hot in the summertime. So we 
ought to have a hearing sometime on what fossil fuels are 
really still doing for us, but that is not what we are here for 
today.
    We need fossil fuels, and we need to depend on it, and 
certainly I would ask you that. There is a lot of discussion on 
renewables. And do you see this as a realistic expectation? If 
not, why not?
    Dr. Lesser.
    Mr. Lesser. Well, thank you, Representative Hall.
    Mr. Hall. Now, you almost answered in your--you almost 
answered it for me a moment ago, but go ahead and expand on 
that a little for us.
    Mr. Lesser. Thank you, sir.
    In my own view, you will see lots of studies that will show 
that, say, building more wind capacity, renewable generation 
subsidies will increase economic growth. Well, that is true, 
they will increase economic growth as long as the subsidies are 
continued, which is why they want to continue subsidies. The 
problem is those studies never look at the other side of the 
ledger, which is who is paying for it? They assume that the 
money just falls from the sky.
    You simply cannot subsidize your way to long-term, 
sustained economic growth. That is economic free-lunchism. It 
does not work. It would be nice if it worked. We would all be a 
lot happier. We would have a much better economy in the 
country.
    Europe has found this out. In Spain, Germany, Denmark, they 
are cutting back on their subsidies of renewable power because 
it simply doesn't work. They cannot afford it.
    In terms of the sort of--I think you mentioned some of the 
global climate change and emissions, there is a small impact on 
emissions because of renewables, but it is very small, because 
you have to operate the remaining parts of the power grid more 
inefficiently by cycling conventional plants up and down. It is 
like the difference between driving your car in the city, where 
you are in stop-and-go driving, versus driving at a constant 
speed on the highway. It is less efficient; therefore, there 
are more emissions.
    So the real--to the extent climate change is a significant 
issue, and you want to reduce carbon emission, then the 
question is what is the most efficient, what is the cheapest 
way of reducing those emissions? And I would suggest to you 
that subsidizing renewables is not the way. It is by far a very 
expensive way of reducing climate emissions, and there are much 
cheaper ways to do so.
    Mr. Hall. And should Congress, then, permit recipients of 
subsidies, like the PTC, to bid negative prices in power 
markets?
    Mr. Lesser. No, sir. In my view, all subsidies should be 
removed, not only subsidies for renewable resources, but also 
subsidies for conventional resources. You should have a level 
playing field in which all resources can compete.
    It is funny, though, in this week's AWEA meetings that Mr. 
Gramlich referenced, AWEA is now advocating what are called 
master limited partnerships for wind developers. So not only 
will they get the PTC and a tax credit worth $35 per megawatt 
hour on a pretax basis, but you would have a corporate 
structure that doesn't pay income taxes. That is a really good 
deal. You get a tax credit, and you don't have to pay income 
taxes. I would like to have that for my business.
    Mr. Whitfield. The gentleman's time has expired.
    Mr. Hall. And I thank the chair.
    Mr. Whitfield. At this time I recognize the gentleman from 
California Mr. Waxman for 5 minutes.
    Mr. Waxman. Thank you, Mr. Chairman.
    I assume, Dr. Lesser, those same mechanisms are available 
to fossil fuel enterprises, aren't they?
    Mr. Lesser. No, they are not, sir.
    Mr. Waxman. They are not.
    Mr. Lesser. For gas pipelines, you have----
    Mr. Waxman. Well, I think you are wrong.
    Mr. Lesser. You would----
    Mr. Waxman. I think you are wrong, and we could look at it 
very carefully. The REIT and the other tax reductions for 
fossil fuels are available.
    Over the past 4 years, we have doubled our capacity to 
generate renewable electricity from wind and solar resources. 
Five percent of our electricity now comes from renewable 
sources other than hydropower. State and Federal renewable 
energy policies are playing an important role in driving this 
transition. The cost of renewable energy is also rapidly 
declining, and, therefore, wind power is already cost-
competitive with fossil-fuel generation in some parts of the 
country.
    We have made progress, but we need to do much more to 
reduce our carbon pollution and move towards a clean-energy 
economy. Low-carbon, low-cost renewable electricity should 
appeal to all members of this subcommittee, but instead of 
embracing this technology, some are attacking it.
    Mr. Gramlich, we have heard testimony today that wind costs 
too much and impairs the reliability of the electric grid, so I 
am going to ask you some questions about these claims.
    Does wind generation require large amounts of expensive 
backup fossil generation, and how much does the necessary 
backup power cost consumers?
    Mr. Gramlich. Thank you.
    No, it does not require large amounts of backup generation. 
All electricity sources rely on system backup from all other 
resources. And the costs of the wind reserves that are needed 
are about 6 cents out of a typical household's $140 monthly 
electric bill as compared to those costs for other conventional 
resources that are much higher.
    Mr. Waxman. How do the costs of backup generation for wind 
compare to the costs of backup generation for conventional 
power plants?
    Mr. Gramlich. The costs for conventional power is, at least 
in one study cited in my testimony, about 40 times higher, 
about $2.50 per monthly bill compared to the 6 cents that I 
stated a minute ago.
    Mr. Waxman. The backup generation for wind is much cheaper, 
because variations in wind are slow and predictable, while a 
nuclear fossil-fired power plant can go offline instantly; is 
that correct?
    Mr. Gramlich. That is correct.
    Mr. Waxman. We have heard claims that wind is unpredictable 
and can suddenly stop blowing, adversely affecting electric 
reliability. Is that accurate?
    Mr. Gramlich. No. Wind energy can be forecasted now with 
sufficient accuracy so grid operators can operate reliably and 
handle the fluctuations in a very low-cost manner.
    Mr. Waxman. Mr. Weiss?
    Mr. Weiss. Yes, Mr. Waxman. The North American Reliability 
Corporation looked at some of the kinds of claims that Dr. 
Lesser made and found them wanting. In their State of 
Reliability report of 2013, and I am going to read from the 
report, and I quote, ``There were no significant reliability 
challenges reported in the 2012 summer periods resulting from 
the integration of variable generation resources.''
    Mr. Waxman. Thank you. I want to put that whole statement 
in the record.
    Mr. Weiss. OK. Thank you.
    Mr. Waxman. Let me ask about the production tax credit. 
Some argue that the cost of wind is so low, that the tax credit 
allows wind to bid negative prices into the market, and they 
say that these negative bids are undermining the profitability 
of other generation sources.
    How often does this negative pricing occur, Mr. Gramlich, 
and how often is it affecting the market price for electricity?
    Mr. Gramlich. It is extremely rare; far less than 1 percent 
of the time. Moreover, the occurrences have dropped by 60 
percent in Texas, which is the area where this has been 
alleged, and they will be virtually gone as soon as 
transmission lines are put in place into these few localized 
areas in the country.
    Moreover, it doesn't harm consumers. Low prices are a good 
thing. And the market price that is actually received by--if 
some were concerned with, say, fossil and nuclear plants, they 
are actually not receiving, those plants. It is almost never 
actually received by them.
    Mr. Waxman. What about the price for consumers? Does wind 
generation increase utility bills or save consumers money? I 
gather your last statement was that it saves consumers money.
    Mr. Gramlich. Right. It is saving consumers money.
    Mr. Waxman. That is a good thing unless you want consumers 
to pay more money so they can continue to use coal even when 
natural gas would be cheaper, and even when wind may be 
cheaper.
    Mr. Weiss or Mr. Gramlich, do you understand whether the 
REITs mechanisms and other tax mechanisms are available to 
fossil fuel industries, as they may well become available for 
renewable energy?
    Mr. Weiss. As I understand it, Mr. Waxman, the master 
limited partnership is available and being employed now by oil 
companies.
    Mr. Waxman. So it is a good way to raise money?
    Mr. Weiss. Yes, it is.
    Mr. Waxman. And raising money for enterprise, as I 
understand it, is supposed to be a good thing, investment by 
entrepreneurs to advance good business.
    Mr. Weiss. And overall the Nuclear Energy Institute looked 
at subsidies overall over the last 60 years and found 70 
percent go to fossil fuels, 10 percent have gone to renewables.
    Mr. Whitfield. The gentleman's time has expired. And 
without objection, the document that Mr. Weiss referred to will 
be entered into the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Whitfield. At this time I will recognize the gentleman 
from Kansas Mr. Pompeo for 5 minutes.
    Mr. Pompeo. Great. Thank you, Mr. Chairman.
    You know, Ranking Member Waxman this morning said that some 
on our side are confused. He wasn't sure whether we liked cheap 
natural gas or not. Not confused. I like cheap natural gas, 
like cheap coal. Frankly, I like cheap energy. I like consumers 
to have affordable energy. There should be no confusion about 
that.
    Mr. Sypolt, I want to talk to you about pipelines. Today I 
actually introduced a piece of legislation that will for the 
first time tell FERC, you have a deadline; you got to get your 
homework in on time. It will give every agency that has got a 
role in approving pipeline permits the chance to do their work 
and to decide whether or they like it or not. There is no 
requirement that they approve the pipeline, but it says you 
can't sit on it. You can't hang onto it forever. Gives them 12 
months. There is an opportunity for an extension. We have got 
bipartisan support for that. It is being introduced by a lot of 
members of this committee: Mr. Matheson, Mr. Olson, Mr. 
Gardner, Mr. Johnson.
    You know, we saw $30 gas at the Boston citygates in the 
Northeast not too long ago, and I just wanted to get your view 
of whether creating certainty for folks who are investing in 
pipelines and want to build these out will help our electric 
grid reliability.
    Mr. Sypolt. Thank you for the question, Mr. Congressman. 
And INGAA certainly supports your bill. We believe that 
anything that provides certainty and actually moves the process 
along more quickly so the pipelines can be built in the areas 
where they are needed can actually help reduce the cost of 
energy getting delivered into those areas.
    I think FERC does a very good job today with their process, 
but they don't have all the authority they actually need to 
cause all the permits to be issued in a timely fashion. And the 
deadline that you proposed by your bill, we think, would be 
very helpful in assuring that pipelines are built in a timely 
fashion.
    Mr. Pompeo. Mr. Shelk, in your written testimony, you 
talked about, so we have got this shale gas revolution, it is 
exciting. If the Federal Government doesn't mess it up, it will 
be very important to American manufacturing. It will be great 
for grid reliability as well. But you talked about being 
overconfident about anything in terms of the future. It wasn't 
that long ago that we thought we were out of natural gas as 
well.
    Give me a sense of what you think the grid reliability 
implications are for that risk and how we as Federal 
policymakers ought to respond to the things that we might well 
not foresee.
    Mr. Shelk. Thanks for the question.
    I followed the hearing earlier this week and also an 
interview just this week from the former chair of the 
subcommittee, Phil Sharp from Indiana, who is now the president 
of Resources for the Future. And it was a long time ago, I 
think you go back to when I was here in the 1980s and 1990s, 
assumptions were made then, for example, that we were going to 
have to have a surcharge on every consumer to bring a very 
expensive pipeline down from Alaska. We had the Synthetic Fuels 
Corporation. I mean, you can kind of--the list goes on.
    I think it was reassuring to hear the bipartisan testimony 
Tuesday that we are going to have game changers, that we 
couldn't predict then. But I think this committee, for 
example--we wouldn't have the natural gas revolution, the shale 
gas phenomenon, as I said in my written statement, unless this 
committee, again, coming together in the late 1980s saying, you 
know what, we made a mistake in the 1970s by thinking we could 
micromanage this with command-and-control regulation. And 
everybody on the committee, after some contention, to be sure, 
came together and removed the wellhead price controls, 
restructured the pipeline industry, removed the Fuel Use Act 
that said no natural gas could be used in power generation.
    So my advice would be I think you set up the right 
mechanism. At FERC they are very vigilant about this. I would 
respectfully disagree with Mr. Cicio. There may not be 
something called the natural gas reliability entity, but you 
all in this committee created electric reliability organization 
in the form of NERC. NERC is looking at this. DOE is looking at 
this.
    The bottom line is I think what we have seen is we can't 
predict what is going to happen, and therefore, the most 
flexible, adaptable system you can have is what works best. And 
I think market forces ultimately, within the confines of smart 
regulation, are good. What doesn't work is trying to 
micromanage today and say what the fuel mix should be and what 
percentages tomorrow.
    Mr. Pompeo. So things like State RPSs which say ``thou 
shalt'' would be bad policy for any energy source?
    Mr. Shelk. Well, now you are going to get me in trouble. 
Mr. Hall is not here, but Mr. Hall famously said when I was 
here decades ago that my friends are for the bill, and my 
friends were against the bill, and I am going to vote with my 
friends.
    Mr. Pompeo. But, I mean, I think if you are----
    Mr. Shelk. And in my business, if I have members behind me 
that are on one side and members on the other, I am going to 
support my members.
    But to be serious, what we focus on, I think this is 
important, what Mr. Waxman was saying, under the Federal Power 
Act that this committee adopted in 1935, these are state-level 
decisions. And we may or may not agree with them, but what we 
focus on and what our members focus on is if a state wants to 
go down that road, number one, use competitive procurement so 
everybody competes to serve the business at the least cost to 
consumers. Number two, you have to have market rules to 
compensate the gas plants adequately, which is not happening 
today. States are behind. As the RPS standards, whether you 
like them or not, increase, as they will in the next 5 to 10 
years, the states aren't adequately paying for the backup 
generation that exists.
    Mr. Pompeo. Yes.
    Mr. Shelk. So that is what we focus on. And you have got to 
get the market rules to match up with the RPS standards, and 
that often doesn't happen.
    Mr. Pompeo. I appreciate that.
    My time is up, but there are national implications to the 
State rules as well.
    Mr. Shelk. Yep.
    Mr. Pompeo. It affects the national grid and imposes costs 
on States that are not the State that put the law in place.
    Thanks, Mr. Chairman.
    Mr. Whitfield. At this time I recognize the gentleman from 
Texas Mr. Green for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    I thank our panel for being here.
    The disconnect between incentives created by wholesale 
power market rules and the need for commitments that ensure the 
availability of pipeline capacity has been widely noted. What 
can Congress do to help this problem?
    Now, I admit one of the worst decisions Congress ever made 
was back in the 1970s saying we can't use natural gas. Of 
course, back then natural gas was a very precious resource, and 
even 8 years ago it was $12, $13 in MCF. But Congress does 
overreact like they did in the 1970s. What can we do to help 
that certainty?
    Mr. Shelk. A couple of thoughts there. One is, as the INGAA 
witness mentioned, and we would agree, there are wholesale 
market rules that need to be addressed. Where we disagree is 
you can't simply surgically say, well, if a gas-fired generator 
enters into a 20-year contract for firm gas transportation, we 
are just going to pass that along to consumers, because that 
could be a considerable expense.
    So what happens is under the watch of FERC, the regions 
work on this, and they are doing that now. They are looking at 
those issues. So I think by holding the hearings you held last 
month, by continuing to hold hearings and do oversight of FERC 
that oversees the wholesale market, that is, I think, what 
Congress can do. There is really no need for additional 
legislation.
    But what also needs to happen, and maybe there is a 
congressional role here, I am not sure, is it is not just the 
wholesale market, it is the retail market. And the retail 
market is under the jurisdiction of the states. And I will give 
you a specific example.
    If we were to have gas-fired generators in New England 
enter into long-term contracts for gas transportation, one, it 
is not necessary most of the time. But put that aside, there 
are states in the region, Connecticut in particular, that has a 
bill moving through the legislature very rapidly as we are 
meeting today that would hot-wire a pipeline and a long-term 
contract for Canadian hydro from Quebec from a crown 
corporation in Canada that is opposed by the Governor of New 
Hampshire, it is opposed by Massachusetts, but if it is passed 
by Connecticut, it will artificially suppress the market price 
and make it very difficult for anybody to arrange for long-term 
gas transportation. So I think Congress can maybe help shed 
some light on that, but ultimately it is the jurisdiction over 
FERC.
    Mr. Green. Well, I have to admit all my life I have heard 
about the Austin-to-Boston connection for natural gas, and I 
have always wondered why they still burned coal oil.
    But anyway, Mr. Sypolt, my next question is I want to talk 
about the reliability of the natural gas pipelines. Do you or 
Dominion have many outages in what is key to the reliability in 
the pipeline sector, and what is the fundamental changes in 
your market area that is causing you to change your pipeline 
operations?
    Mr. Sypolt. Thank you for the question, Mr. Congressman. I 
would tell you that the pipeline, natural gas interstate 
pipeline, grid has been extremely reliable to serve those 
customers who have signed up for primary firm transportation. 
The pipeline system was designed around those contracts, and as 
there is growth in given markets, and there is the market 
signal from the market by way of a long-term contract that says 
they need additional capacity, that capacity is built, and 
those markets are served extremely reliably.
    You asked about Dominion's experience with reliability. You 
know, we did go back and look at this for our primary firm 
contracts over a period of time, and our reliability has been 
absolutely phenomenal. We went back the last 3 years and had 
zero interruptions with regard to primary firm transportation. 
And I know there was one run we went 7 years where we had no 
impact on any primary firm contract. So the pipeline grid is 
extremely reliable for those who pay for that service.
    Many times there are folks who refer to reliability as--a 
pipeline as not being reliable are really looking at 
interruptible-type transportation contracts, and you can't talk 
about that as reliability. The pipeline system was not designed 
to meet those on a reliable basis. That is actually 
transportation capacity issues by markets that are paying for 
it that are not using it at any given time, and when those 
markets who are paying for that under primary firm actually 
need it, that is when it is pulled back.
    And that has really been much of the concern that INGAA has 
really talked about as you go forward, and more and more 
transportation is needed by growing markets. Whether that is 
power generation or industrial load or growing liquid 
distribution load, what it really says is there is going to be 
more and more demand on the pipeline system, and really 
counting on capacity that is not used by the current market 
that pays for that under primary firm is the real risk.
    Mr. Green. Thank you, Mr. Chairman. I know I am almost out 
of time, but I have a couple of other questions on cogen, and I 
would like to submit it to the panel.
    We went through that battle in the legislature in the 
1980s, and at that time my friends were on both sides, and I 
was with my friends. But it worked out in Texas somehow that--
and cogen--during cap and trade, I wanted cogeneration to be 
considered one of our energy savings, because it is such a 
benefit not only to the customers, but the industry.
    But again, thank you, Mr. Chairman, for the hearing.
    Mr. Whitfield. The gentleman's time has expired.
    At this time I recognize the gentleman from Virginia Mr. 
Griffith for 5 minutes.
    Mr. Griffith. Thank you, Mr. Chairman. I appreciate it very 
much that you are having this hearing.
    And also appreciate my friends from Dominion being here 
today. I know, Mr. Sypolt, that you are the gas guy, but do 
appreciate the fact that Dominion Energy has not abandoned 
coal, particularly central Appalachian coal, and was there at 
the ribbon cutting at the cleanest coal-burning plant that was 
opened up officially last September, and very proud of that 
facility. Unfortunately, of course, under new EPA regulations 
that have been proposed, that facility wouldn't be allowed to 
be constructed today, but we are awfully proud to have you all 
there in the Ninth District of Virginia creating jobs and 
bolstering our economy.
    Does it make you nervous, though, and have to ask, when you 
think back on quotes from the President that indicate that he 
might not be so hot on natural gas? Of course, it seems that a 
lot of folks who were not for natural gas a few years ago are 
now for it because it seems to be the answer to a lot of 
problems. But I would have to think it would make you nervous, 
and I want to ask you that, when you remember that quote from 
the President in January of 2008 when he said, quote, When I 
was asked earlier about the issue of coal, you know, under my 
plan of a cap-and-trade system, electricity rates would 
necessarily skyrocket, even regardless of what I say about 
whether coal is good or bad, because I am capping greenhouse 
gases. Coal power plants, you know, natural gas, you name it, 
whatever the plants were, whatever the industry was, uh, they 
would have to retrofit their operations. That will cost money. 
They will pass that money on to the consumers.
    Does that statement still make you nervous?
    Mr. Sypolt. Well, what I would say is, you know, Dominion 
certainly supports all forms of energy. And coal--you know, we 
have nuclear, we have coal, we have natural gas-driven power 
plants, we have wind generation, as well as building some solar 
and looking at some offshore wind as well, and have some hydro. 
So we certainly support all forms of energy, and we think our 
country needs all forms of energy.
    Mr. Griffith. And your company has always been diversified, 
and that has always been one of your market success stories is 
that you haven't put all your eggs in one basket. Nor should 
the United States of America put all of its eggs into one 
basket at any time, and we probably shouldn't eliminate that 
great black egg of coal from the basket of energy sources for 
the United States.
    Let me move on to another question, if I might. Mr. Cicio, 
I would have to say to you, we have heard a lot of testimony 
about natural gas being cheap, but we heard testimony earlier 
this year that when natural gas hits that $4 mark, that coal 
once again becomes very, very competitive. And, of course, when 
you are trying to have that system that is secure, you want to 
have a diversity. And isn't it true that natural gas is 
expected to hit $4 by the end of the year? And I think in March 
it was already at $3.81, so that coal is once again very 
competitive if you are just looking at costs? And what we are 
really facing here are regulations that are hurting coal, not 
marketplace competitiveness.
    Mr. Cicio. Well, that is right. It is critically important 
that coal--it is critically important for industrial 
competitiveness where small amounts of changes in the price of 
electricity makes a great deal. Coal needs to be in the mix. 
And $4 of gas bumps into very competitive coal prices.
    Mr. Griffith. And we are just about there, and probably----
    Mr. Cicio. Yes.
    Mr. Griffith [continuing]. We will be in that neighborhood 
for some time.
    Mr. Cicio. Yes.
    Mr. Griffith. Thank you very much.
    Dr. Lesser, am I to understand that your concerns are that 
in other places in the world where they have relied on 
intermittent sources, and we heard that Germany was doing a 
good job of moving in that direction, but isn't it, in fact, 
the case that Germany is having some significant problems with 
their intermittent sources, and that it is actually affecting 
industry there because they can't count on the reliability?
    And I am looking at an article from the Institute for 
Energy Research of January this year where they say, To 
illustrate the problem that renewable energy instability can 
cause, here is an example: electric grid weakened for just a 
millisecond at 3 a.m. The machines at Hydro Aluminum in Hamburg 
ground to a halt. Production stopped, and the aluminum belts 
snagged, hitting machines and destroying a piece of the mill 
with damages amounting to $12,300 to equipment. The voltage 
weakened two more times in the next 3 weeks, causing the 
company to purchase its own emergency system using batteries 
costing $185,000.
    Are those the kind of stories that cause you concern? Do 
you have similar stories that you have heard?
    Mr. Lesser. Those are certainly part of the issues that are 
of concern. For me, I think other issues are the, say--and 
especially in Europe, the cost of electricity is extremely 
high, which reduces economic growth. That is why they are 
cutting back on all their subsidies.
    So my concern is here we are going down that same path, 
that we are making it much more difficult to maintain 
reliability. I know that ERCOT, the grid operator in Texas, is 
quite concerned about potential rolling blackouts this summer 
because of very high demand. They have so much wind. Wind tends 
not to blow when the power is most needed. That is just the way 
it is that I have discovered in my own research. So those are 
significant problems, yes.
    Mr. Griffith. And that can affect jobs; can it not?
    Mr. Lesser. Absolutely.
    Mr. Whitfield. The gentleman's times has expired.
    Mr. Griffith. Thank you, Mr. Chairman. I yield back.
    Mr. Whitfield. At this time I recognize the gentlelady from 
California Mrs. Capps for 5 minutes.
    Mrs. Capps. Thank you, Mr. Chairman.
    And thank you to our witnesses, each of you, for your 
testimony.
    You know, we all know that America's power is generated by 
many different sources, to be sure, but we also know that 
fossil fuels make up the overwhelming majority of our Nation's 
energy supply. Today is the third subcommittee hearing held 
this year on the sources of fuel used for electricity 
generation in the United States, but we have yet to hold a 
hearing examining the consequences of our dependence on fossil 
fuels. This is more than an odd note, considering that we are 
already seeing the very real impacts from this dependence on 
fossil fuels: rising sea levels, severe droughts, extreme 
weather, and superstorms. Climate change is very real and is 
already causing serious problems that demand action. In 
addition to obvious environmental damage, these storms, 
droughts and wildfires are having a significant economic 
impact.
    And, Mr. Weiss, could you share with us briefly--I want to 
ask you a couple more questions, too--some of the documented 
research of how climate change is affecting our economy?
    Mr. Weiss. Thank you, Representative Capps.
    Yes. We analyzed the $25 billion in damages extreme weather 
events over the past 2 years, including the drought in Texas 
and the Southwest, and found that the total economic damages 
were $188 billion. In addition, the federal government spent 
$136 billion on disaster relief and recovery over those same 
periods, which is about $400 per household per year for 
disaster relief and recovery.
    Mrs. Capps. Thank you.
    In your testimony today, you stated, and it is a quote, 
Because the Federal Government pays for a major share of 
disaster recovery, investing in resiliency now will help 
protect taxpayers from more deficit spending in the future.
    This is actually rather counter to what we often hear about 
the value of investing in our country. Could you elaborate on 
this just briefly? How can predisaster mitigation spending 
actually save taxpayers money in the long run?
    Mr. Weiss. Well, the Federal Emergency Management Agency 
found that by investing $1 in disaster resilience, or what they 
call predisaster mitigation, that reduces damages by $4. And 
so, for example, your efforts to get more investments in 
disaster resilience will help save us money in the long run by 
a ratio of about 4 to 1, according to FEMA.
    Mrs. Capps. Thank you.
    One more question, if I--yes, I have time.
    Especially in these tough fiscal times, we certainly need 
to be allocating tax dollars more effectively at all levels of 
government. Many States and localities understand the long-term 
benefits you have discussed and are eager to implement 
mitigation projects. The problem is, however, they can't afford 
it.
    I believe the broad public benefit in cost savings alone 
create a compelling national interest for the Federal 
Government to help our local communities plan and implement 
predisaster mitigation efforts, and that is why I sent a letter 
to the President earlier this year with 39 of my colleagues, 
including several members on this committee, urging him to take 
action on this issue. And I was pleased to see the President's 
fiscal year 2014 budget include $200 million for climate 
mitigation projects, but this really only scratches the surface 
of what is needed.
    So, Mr. Weiss, again, there is an estimate of how much 
funding is needed for these projects nationwide. Would you 
share some information around that topic with us?
    Mr. Weiss. Well, the Congressional Research Service was 
looking at this for the utility industry, and they found that 
the American Society of Civil Engineers estimates we need to 
spend over $600 billion between now and 2020 to make our 
utility system more resistant to disruption from extreme 
weather. But they could not find another estimate besides the 
ASCE one about it, and so that is something we need to do, 
which, again, in your letter to the President you recommended.
    It is important when looking at the costs of natural gas 
and coal-generated electricity that those fuels include the 
external economic costs of their use, which includes climate 
change and extreme weather linked to climate change. Otherwise 
society is in effect subsidizing the use of coal and natural 
gas by paying these costs for damages from extreme weather and 
then the taxpayers paying, you know, $400 a household for 
disaster relief and recovery.
    Mrs. Capps. We need to shift our attitude. And I appreciate 
your comments. This is a major problem, I know. Our energy 
committee, Energy and Commerce Committee, I think, is tasked 
with something that can't be solved overnight, but we need to 
start moving in that right direction.
    So, Mr. Chairman, I hope this committee will begin to 
examine the realities of climate change, and what we can do, 
and what our obligations here in this committee are to minimize 
its impacts.
    I yield back.
    Mr. Whitfield. Thank you, Mrs. Capps.
    At this time I recognize the gentleman from Texas Mr. 
Barton for 5 minutes.
    Mr. Barton. Thank you, Mr. Chairman. And I appreciate you 
and Mr. Rush holding this hearing.
    At a previous hearing earlier this year, one of our 
witnesses Mr. Gramlich was here representing the wind 
association, and I asked him some question about production tax 
credit impacting negative prices into the grid and ERCOT, and 
to his credit, we asked some questions on the record, and he 
did answer. My staff was a little bit puzzled by the answers, 
because they don't conform with the information that we have at 
the staff level, but I do admit that you can look at data and 
interpret it different ways. So instead of revisiting those 
questions directly to Mr. Gramlich, I am going to ask Dr. 
Lesser, who is sitting next to him, to take a crack at it.
    So, Dr. Lesser, the issue is the production tax credit for 
wind, which I supported when it was initially proposed, because 
wind power was a startup, struggling sector of the energy 
economy, and I felt it was fair to help give it some production 
tax credits to get it off the ground. I think it is a more 
difficult proposition now, because wind power is firmly 
established and is a significant part of the generation system 
in States like Texas.
    So my question to you, Doctor, do you think the production 
tax credit impacts the way market prices are in ERCOT in Texas, 
and do you think that it should be allowed to use production 
tax credit to bid negative into the grid, which has happened, 
although it is disputable how often it has happened?
    Mr. Lesser. Thank you, Mr. Barton.
    No, I do not think that wind operators, anyone receiving 
the PTC, should be eligible to bid negatively. There is no 
reason for that. Studies by the Northridge Group show that 
negative prices are far more prevalent than have been 
indicated. Those negative prices are affecting the viability of 
conventional generators, which has an effect on reliability. As 
far as the PTC going on, you now have these direct subsidies 
and mandates for 35 years since PURPA was passed.
    One of the arguments you will often hear is that the wind 
industry requires additional subsidies to be cost competitive, 
yet earlier on we hear wind is competitive, that it is cheaper. 
The problem with that, well, if it is cheaper, why do you 
continue to need subsidies?
    The other issue I would raise is that if--the problem is 
what you are doing is you are distorting the market so much by 
having a subsidy that is, in fact, greater than the average 
market price in many areas--for example, the price in PJM that 
serves D.C. as well as much of the Upper Midwest and Atlantic 
States was less than the $35 value of the PTC last year. When 
you have a subsidy that is larger than the average market 
price, that introduces huge economic distortions. In the long 
run, that drives out investment of other resources. That means 
that consumers will end up paying higher prices. They will 
not--again, it is simply an economic fallacy to say that you 
can subsidize your way to greater economic growth, lower 
prices. It just cannot happen.
    Mr. Barton. Is there a way, absent eliminating the 
production tax credit, to change the rules to prevent using 
that subsidy to bid into a competitive market, or is the only 
way to prevent it is to eliminate the subsidy?
    Mr. Lesser. Well, I think the easier way to prevent it is 
to just eliminate the subsidy. There may be ways. FERC could 
oversee markets and change the way resources are allowed to bid 
that receive the subsidy, but my preference would be the 
simpler approach, which is just eliminate the subsidy, then you 
eliminate the problem entirely.
    Mr. Barton. I think in fairness I should give Mr. Gramlich 
an opportunity to counterpoint what Dr. Lesser just said.
    Mr. Gramlich. Thank you.
    I mean, the ability to occasionally bid negative is, of 
course, available to all resources on the grid, and there are 
conventional power plants that do so at times, and they also 
receive a variety of federal incentives. So if any such line of 
policy inquiry is pursued, we would urge that they not single 
out wind.
    Mr. Barton. Well, that is a true statement, but the problem 
is that with respect to wind power, you are using a Federal 
subsidy of the taxpayer. If somebody with private capital bids 
negative, they are risking shareholder equity, they are not 
using a Federal subsidy directly. With that----
    Mr. Whitfield. The gentleman's time has expired.
    At this time I will recognize the gentlelady Dr. 
Christensen for 5 minutes.
    Mrs. Christensen. Thank you, Mr. Chairman. And I thank you 
and the ranking member for holding this hearing. It has been 
very informative, as we in the Virgin Islands work to 
transition to cleaner, less expensive fuel.
    During the hearings the subcommittee has had on challenges 
to electric reliability, we haven't heard much about how 
climate change is already affecting electric utilities. We are 
beginning to hear some of that today. And, of course, with my 
district being in the path of hurricanes every year, it is a 
serious concern to me as we can expect stronger storms, I 
think, which will affect our utility. And our utility is 
already struggling to keep lights on. Just yesterday we had 
power outages, and that is an every-other-day occurrence in St. 
Thomas.
    We know that climate change, Mr. Weiss, will mean more heat 
waves, droughts and wildfires. Are there examples of these 
kinds of extreme weather events impairing the operation of 
power plants?
    Mr. Weiss. Thank you.
    Yes, there are. From last summer's drought, at least four 
states, California, New York, Illinois and, I believe, 
Colorado, but let me check on that, did experience disruption 
of their power plants because they couldn't get enough cooling 
water to make the plants run. I am sorry, it was Connecticut. 
California, Connecticut, Illinois and New York.
    And it is interesting that the draft National Climate 
Assessment predicts that future climate change is going to 
interfere with electricity generation. Let me just quote from 
them; quote, ``These infrastructure systems, including 
electricity, will be affected by various climate-related events 
and processes.''
    So what is past is prologue in terms of climate change 
disrupting the operation of power plants.
    Mrs. Christensen. And if we fail to act, and climate change 
continues unabated, extreme weather events would be expected to 
become more frequent and more disruptive?
    Mr. Weiss. Yes. The National Climate Assessment also 
predicts that there will be an increase in extreme weather 
events, droughts, floods, storms, heat waves and wildfires.
    Mrs. Christensen. All right. And, you know, in addition to 
the storms, I live on islands, and this was one of the articles 
from our newspaper yesterday.
    So both of my power plants are located near shorelines, so 
the rising sea level is another threat in addition to the 
storms. So if we are concerned about the reliability of our 
electric grid and government spending, we really need to 
address climate change.
    Mr. Weiss, has the National Academy of Sciences or any 
other scientific institution determined that we are currently 
on track to avoid dangerous climate change?
    Mr. Weiss. They have--I don't believe National Academy of 
Sciences has addressed that. However, if you look at how much 
emissions have gone down, the Environmental Protection Agency 
said we have had a 7 percent decline in overall greenhouse gas 
pollution since 2005. The President committed us to a 17 
percent reduction by 2020. So we are reducing our emissions; 
however, the Energy Information Administration predicts that, 
although emissions are going to go down between now and 2017, 
they will begin rising again in 2017. So, no, we do not appear 
to be on track to avoiding the worst impacts of climate change.
    Mrs. Christensen. Well, reducing our carbon pollution by 
the amount necessary to avoid dangerous climate change, I 
assume, will require the power sector, as we have been talking 
about, to transition to cleaner technologies. Is that 
transition happening fast enough? And why are we on track to 
start to go up again in 2017?
    Mr. Weiss. We are on track to go up again in 2017 because 
of the increase in electricity generation expected from fossil 
fuel sources, even though we are also going to be increasing 
our renewable generation between now and then.
    What we really need to do is to require the power plants, 
existing power plants, to reduce their carbon pollution either 
through legislation, which would be many people's preferred 
option, or, failing that, the Environmental Protection Agency 
setting standards to do that. That would get us close, but not 
reach the President's 17 percent reduction goal by 2020.
    Mrs. Christensen. And, you know, just in closing, and I say 
this all the time, but we talk about the costs of electricity. 
We are very concerned about costs, and so a lot of times the 
talk turns to coal or fossil fuels, but the costs in terms of 
public health is something that we never take into 
consideration, the longer-term costs. And so cost is more than 
just the cost of the fuel, it is the cost of the impact to our 
communities, to the health of our children.
    And with that, I will yield back my time.
    Mr. Whitfield. The gentlelady's time is expired.
    At this time I recognize the gentleman from West Virginia 
Mr. McKinley for 5 minutes.
    Mr. McKinley. Thank you, Mr. Chairman. In deference to the 
time, I am going to try to get a couple questions in; then I 
would like to yield some time to my colleague from Colorado.
    First, Mr. Sypolt, I want to thank you for your investment 
in the development of the Marcellus shale, shale gas, and what 
you are doing in West Virginia.
    What do you think--do you think that could lead to more gas 
turbine development, electric power generation in West Virginia 
or around the country?
    Mr. Sypolt. Well, absolutely I do, Congressman. The 
Marcellus shale is extremely real. Three years ago you hardly 
had any production; today it is 10.4 Bcf a day. I mean, so it 
is extremely real. And clearly when you have, you know, cheap 
energy, you have the opportunity to use that and, you know, to 
have turbines to develop or produce additional electricity. You 
know, those can certainly be set in West Virginia or in other 
surrounding states where they have good access to the Marcellus 
shale, so--and I think that asset----
    Mr. McKinley. Does that add to more----
    Mr. Sypolt [continuing]. Is going to continue to grow.
    Mr. McKinley. That will only strengthen more of the 
reliability of the grid if we could----
    Mr. Sypolt. Absolutely.
    Mr. McKinley. So secondly, and continuing this same line of 
questioning, if--and you have heard earlier from some of the 
comments made about the subsidies to the fossil fuel, coal, oil 
and gas. If we were to eliminate those subsidies, what effect 
would that have on the grid?
    Mr. Sypolt. You know, I don't know that I am really the 
best one to answer that, you know, but I would say that, you 
know, Dominion has all forms of energy, Congressman, as I 
mentioned earlier. You know, we are also looking at wind, you 
know.
    Mr. McKinley. Well, let us look if any others would like to 
add. If we were to eliminate the subsidies for all renewables 
and fossil fuels, what effect would that have on the grid 
reliability?
    Mr. Lesser. I would be happy to answer that----
    Mr. McKinley. Please.
    Mr. Lesser [continuing]. Sir. I don't think there would be 
any adverse impact on reliability. I think what you would see 
is much more efficient investment in generating resources for 
the long term, and it would be easier to integrate resources 
onto the grid. You would have less investment in subsidized 
intermittent generation. However, the subsidies--when you look 
at the subsidies in contrast to on a total-dollar basis, as Mr. 
Gramlich has done, but look at it on a per-megawatt-hour basis, 
the Energy Information Administration has issued reports saying 
that intermittent resource subsidies are far greater, you know, 
in combining both that PTC and our requirements to use through 
renewable portfolio standards. So I don't think there would be 
any adverse impacts. I think the grid would actually benefit.
    Mr. McKinley. Thank you.
    Mr. Chairman, I would like to yield back the balance of my 
time, then, to my friend from Colorado.
    Mr. Whitfield. OK. The gentlemen yields to the gentleman 
from Colorado.
    Mr. Gardner. I thank my colleague from West Virginia. I 
appreciate you yielding time.
    Mr. Gramlich, there was a question I think that you had 
received from Mr. Waxman that I wanted to clarify a little bit 
if I could. I have been a strong supporter of renewable energy 
and certainly wind resources where it makes sense, and I try to 
make sure that we are doing so from a--as market-based policies 
as we can. And I think the question was about whether or not 
there was backup baseload generation required for wind, and I 
believe your answer was there is not--there is no baseload 
backup required.
    Mr. Gramlich. There are reserves required for wind, and 
coal, and gas and all resources. All resources have the 
potential to go off at any moment. And ever since we have had a 
power grid, we have had backup across the grid that fills in in 
case any resource goes offline.
    Mr. Gardner. And thank you. I just want to restate some of 
the testimony in a committee hearing earlier this year with Mr. 
Moeller from the FERC, Chairman of the FERC Commission, talking 
about backup wind generation. He said that--I asked the 
question, so for every 5 megs, you need 4 megs of baseload in 
some instances. And he said that that is correct.
    So, I mean, certainly that was what Mr. Moeller at FERC had 
testified before this committee.
    Mr. Gramlich. I would love to have the opportunity to 
perhaps provide written testimony in response to that.
    Mr. Gardner. Sure. I mean, do you think he was wrong when 
he said that?
    Mr. Gramlich. Yes. There is a tiny incremental addition of 
reserves needed to bring on new wind, and it is, in fact, no 
greater than what is needed when new conventional sources are 
brought onto the grid.
    Mr. Gardner. Well, I would be interested in hearing if the 
commissioner was correct.
    Mr. Gramlich. I know him well. We will be happy to discuss, 
yes.
    Mr. Gardner. Mr. Weiss, do you think hydropower is a 
renewable energy?
    Mr. Weiss. Yes, it is.
    Mr. Gardner. One of the concerns I have, in Colorado they 
passed a Senate Bill 252 at the state legislature that requires 
rural cooperatives to increase their renewable energy standard 
to 25 percent. They get approximately 12 percent of its power 
needs from WAPA, which gets tremendous amount of its power from 
Federal Hydropower. That is where WAPA gets it power, Federal 
Hydropower, yet none of that power is counted under the 
Colorado Renewable Energy Standard because it is hydropower. It 
is not considered a renewable energy resource. Do you think we 
should change the law in Colorado to include Federal Hydropower 
since it is a renewable energy resource in your mind?
    Mr. Weiss. I would leave that to Coloradoans to decide.
    Mr. Gardner. But if you were there, you would say, yes, it 
is renewable?
    Mr. Weiss. If I was there, I would look at the whole 
panoply of resources. I think the reason----
    Mr. Gardner. You just said renewable, you thought Federal 
Hydropower is renewable.
    Mr. Weiss. Yes. I think the reason why some people do not 
consider it renewable is because there are upstream impacts 
from building dams. I think what we ought to be doing is 
retrofitting existing dams with much more effective turbines, 
and that ought to be included as renewable.
    Mr. Gardner. Thank you, Mr. Chairman.
    Mr. Whitfield. Gentleman's time is expired.
    At this time, I recognize the gentleman from California, 
Mr. NcNerney, for 5 minutes.
    Mr. McNerney. Thank you.
    Mr. Whitfield. Then we have a vote on the floor, so after 
his questions, we are going to terminate this rather quickly.
    Mr. McNerney. Thank you, Mr. Chairman.
    Wind energy comes on and off on it slowly because on a 
large scale windmill, you have hundreds or maybe thousands of 
large windmills over hundreds of square miles. If one or two 
comes on or shuts off, it has very little impact, so over time 
and over space, that impact of coming on and off is very slow 
and gradual, so it doesn't really affect the grid like shutting 
down a large power plant. I just wanted to make sure that I had 
an opportunity to say that.
    Mr. Cicio, I certainly enjoyed your testimony, but it was a 
little confusing in a sense, and let me explain why. I 
understand your concerns about lack of Federal oversight on 
natural gas pipeline reliability, but often we hear from 
industry, we hear from the other side that oversight, Federal 
oversight is a problem; we need to let the market straighten 
things out. So my question is, is this--do you propose the 
lawmakers create regulations to keep customers safe while also 
taking note of business considerations--is there a way we can 
do that here? Is that too big of a broad of a----
    Mr. Weiss. Remember who we are. We are consumers. We have a 
different perspective. We are the companies that rely upon 
reliability of that grid, and we see that there is an agency 
that is overseeing electric reliability nationwide, and that is 
NERC. We do not see an organization that is looking at pipeline 
reliability, for example, at peak demands.
    The pipelines in this country, and the regulations are very 
good. What has changed is the market. The market has changed. 
We have, over a 4-year period of time, significant changes to 
coal-fired power generation, new natural gas coming on. We have 
the industrial renaissance happening that is going to increase 
natural gas demand on those same pipelines.
    Mr. McNerney. So, it is from a customer's point of view, 
there is a need for----
    Mr. Weiss. Yes.
    Mr. McNerney [continuing]. Oversight. To make sure that 
these things are reliant.
    Mr. Weiss. Shame on us if we don't know if there is a 
pipeline reliability issue.
    Mr. McNerney. Thank you.
    Mr. Weiss, in your testimony, you mentioned that climate 
change causes increased instances of extreme weather events 
which in turn threatens electrical reliability. Do you think 
that that--we simply need to invest in better infrastructure, 
or how would we best move forward to improve reliability in 
face of these extreme events?
    Mr. Weiss. I think we need to do two things. First, we need 
to reduce the carbon pollution and other emissions that are 
responsible for climate change. As I mentioned earlier, we are 
making progress but not nearly fast enough to avert the worst 
impacts of climate change, but second, we do need to improve 
the resiliency of our infrastructure. Representative Capps has 
proposed creating a commission to do that that would look at 
how much money we need and identifying a dedicated source of 
revenue to pay for it, and I would support that proposal.
    Mr. McNerney. Thank you for your brief answer.
    Mr. Shelk, how much--just my own curiosity, how much of any 
do coal--of gas-powered power plants, how much gas do a typical 
plant keep on sight, if any?
    Mr. Shelk. Obviously, gas is different from storing other 
fuel.
    Mr. McNerney. Yes.
    Mr. Shelk. Some do actually have, in the northeast, LNG 
Storage, and one of reasons why New England has problems that 
the rest of the country does not have is because the geology of 
New England doesn't allow for gas storage. Gas is usually only 
stored underground. That is Mr. Sypolt's business. The plant 
itself would not store gas, per se, except in certain 
situations where there are LNG facilities nearby, but many of 
the plants that are gas fired are also dual fuel with oil and 
so that is one of the major sources of power at peak time in 
New England is the dual fuel plants.
    Mr. McNerney. Do you think we can create a broad policy on 
a Federal level that provides adequate flexibility to regional 
overseers?
    Mr. Shelk. I do. I think actually FERC is going about it 
the right way. They are approaching this, as you heard in the 
prior hearings, with regional hearings, technical conferences. 
They are holding all of us--our feet to the fire, and I think 
we do have that infrastructure.
    With all due respect to Mr. Cicio, he misunderstands NERC. 
NERC does not order the development of electric or gas assets, 
so I would argue that NERC actually is the natural gas 
reliability entity in the same way because they are drawing 
attention to these issues. Their Phase II report will be out 
very shortly. I think the committee can rest assured that you 
have the regulators and the grid operators and all of us in the 
market very, very in tune to these issues and we are going to 
solve them.
    Mr. McNerney. Thank you.
    I yield back, Mr. Chairman.
    Mr. Whitfield. Thanks very much.
    And that terminates today's hearing. Once we adjourn, Mr. 
Shelk and Mr. Cicio can get together and talk this out. But we 
appreciate the testimony that all of you gave, and we continue 
to look forward to working with you on grid reliability and 
integration cost.
    And with that, without objection, I will enter into the 
record a statement from the Natural Gas Council and the 
American Public Power Association.
    [The information appears at the conclusion of the hearing.]
    Mr. Whitfield. The record will remain open for 10 days, and 
some of you will be receiving some additional questions. We 
would appreciate your response, and so thank you, once again. 
The hearing is now concluded. Thank you.
    [Whereupon, at 11:05 a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
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