    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

             OVERSIGHT OF THE FEDERAL ENERGY REGULATORY COMMISSION

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

                                    HEARING

                                   BEFORE THE

                        SUBCOMMITTEE ON ENERGY AND POWER

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                DECEMBER 1, 2015

                                   __________

                               Serial No. 114-104

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

          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
    JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
      Chairman Emeritus                    Ranking Member
    ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
    JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
    JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
    GREG WALDEN, Oregon                  GENE GREEN, Texas
    TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
    MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
    MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
      Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
    STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
    ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
    CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
    GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
    LEONARD LANCE, New Jersey            JERRY McNERNEY, California
    BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
    PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
    DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
    MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
    ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
    H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
    GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
    BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III,
    BILLY LONG, Missouri                     Massachusetts
    RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
    LARRY BUCSHON, Indiana
    BILL FLORES, Texas
    SUSAN W. BROOKS, Indiana
    MARKWAYNE MULLIN, Oklahoma
    RICHARD HUDSON, North Carolina
    CHRIS COLLINS, New York
    KEVIN CRAMER, North Dakota
                        Subcommittee on Energy and Power

                             ED WHITFIELD, Kentucky
                                     Chairman
    PETE OLSON, Texas                    BOBBY L. RUSH, Illinois
      Vice Chairman                        Ranking Member
    JOHN SHIMKUS, Illinois               JERRY McNERNEY, California
    JOSEPH R. PITTS, Pennsylvania        PAUL TONKO, New York
    ROBERT E. LATTA, Ohio                ELIOT L. ENGEL, New York
    GREGG HARPER, Vice Chairman          GENE GREEN, Texas
    DAVID B. McKINLEY, West Virginia     LOIS CAPPS, California
    MIKE POMPEO, Kansas                  MICHAEL F. DOYLE, Pennsylvania
    ADAM KINZINGER, Illinois             KATHY CASTOR, Florida
    H. MORGAN GRIFFITH, Virginia         JOHN P. SARBANES, Maryland
    BILL JOHNSON, Ohio                   PETER WELCH, Vermont
    BILLY LONG, Missouri                 JOHN A. YARMUTH, Kentucky
    RENEE L. ELLMERS, North Carolina     DAVID LOEBSACK, Iowa
    BILL FLORES, Texas                   FRANK PALLONE, Jr., New Jersey (ex
    MARKWAYNE MULLIN, Oklahoma               officio)
    RICHARD HUDSON, North Carolina
    JOE BARTON, Texas
    FRED UPTON, Michigan (ex 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...........................................     2
    Hon. Jerry McNerney, a Representative in Congress from the State
      of California, opening statement...............................     3
    Hon. Fred Upton, a Representative in Congress from the State of
      Michigan, opening statement....................................     4
        Prepared statement...........................................     5
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, opening statement.........................     6
        Prepared statement...........................................     7

                                   Witnesses

    Norman C. Bay, Chairman, Federal Energy Regulatory Commission....     8
        Prepared statement...........................................    10
        Answers to submitted questions...............................    91
    Cheryl A. LaFleur, Commissioner, Federal Energy Regulatory
      Commission.....................................................    18
        Prepared statement...........................................    20
        Answers to submitted questions...............................   113
    Tony Clark, Commissioner, Federal Energy Regulatory Commission...    29
        Prepared statement...........................................    31
        Answers to submitted questions...............................   120
    Colette D. Honorable, Commissioner, Federal Energy Regulatory
      Commission.....................................................    39
        Prepared statement...........................................    41
        Answers to submitted questions...............................   124

                               Submitted Material

    Statement of the American Public Power Association...............    84

             OVERSIGHT OF THE FEDERAL ENERGY REGULATORY COMMISSION

                                  ----------

                           TUESDAY, DECEMBER 1, 2015

                      House of Representatives,
                      Subcommittee on Energy and Power,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 10:00 a.m., in
    room 2123, Rayburn House Office Building, Hon. Ed Whitfield
    (chairman of the subcommittee) presiding.
        Present: Representatives Whitfield, Olson, Shimkus, Pitts,
    Latta, Harper, McKinley, Pompeo, Kinzinger, Griffith, Johnson,
    Long, Ellmers, Flores, Mullin, Hudson, Upton (ex officio),
    McNerney, Tonko, Green, Capps, Doyle, Castor, Sarbanes, Welch,
    Yarmuth, Loebsack, and Pallone (ex officio).
        Also Present: Representative Kennedy.
        Staff Present: Nick Abraham, Legislative Associate, Energy
    and Power; Will Batson, Legislative Clerk, Energy and Power,
    Environment and the Economy; Leighton Brown, Press Assistant;
    Allison Busbee, Policy Coordinator, Energy & Power; Patrick
    Currier, Senior Counsel, Energy & Power; Tom Hassenboehler,
    Chief Counsel, Energy & Power; A.T. Johnston, Senior Policy
    Advisor; David McCarthy, Chief Counsel, Environment and the
    Economy; Tim Pataki, Professional Staff Member; Chris Sarley,
    Policy Coordinator, Environment and the Economy; Dan Schneider,
    Press Secretary; Christine Brennan, Minority Press Secretary;
    Jeff Carroll, Minority Staff Director; Timia Crisp, AAAS
    Fellow; Rick Kessler, Minority Senior Advisor and Staff
    Director, Energy and Environment; and Tim Robinson, Minority
    Chief Counsel.

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

        Mr. Whitfield. I would like to call the hearing to order
    this morning and welcome everyone. Today, we are going to have
    an oversight of the Federal Energy Regulatory Commission, and I
    want to welcome all the commissioners and chairmen. We
    appreciate the four of you being with us. We had one vacancy
    over there, but we appreciate your time. We look forward to the
    dialogue with you on some very important issues. At this time,
    I recognize myself for a 5-minute opening statement.
        America's energy policy is changing rapidly, changing not
    only from the dramatic increases in domestic energy supplies,
    but also from the unprecedented Federal regulatory burdens, and
    a number of other emerging threats. And FERC's responsibility
    places it right at the very center of these changes.
        The rapid rise in domestic natural gas production and the
    increased reliance on it for electricity generation has created
    many challenges for FERC. For one thing, it has increased the
    burden on FERC to make timely decisions on many new natural gas
    pipeline project applications. We see bottlenecks in regions
    like New England, where high natural gas prices and limited
    supplies are harming consumers, destroying jobs and threatening
    wintertime electric reliability, even though natural gas in
    nearby Pennsylvania is plentiful and affordable.
        FERC also plays a central role in the approval of LNG
    export facilities, which hold the potential to create jobs at
    home and help our allies abroad. In fact, on a regular basis,
    we have representatives of foreign European countries coming
    and asking for LNG exports. Both the substance and the timeline
    of FERC's review process for such projects have, justifiably,
    come under review. Challenges also come from the actions of
    other Federal agencies, and particularly, EPA. EPA's Clean
    Power Plan and other regulations pose a significant threat to
    fuel diversity and electric reliability.
        The loss of existing coal-fired capacity, as a consequence
    of new rules, is already a cause for concern, and the number of
    retirements will only grow in the years ahead. At the same
    time, EPA has all but banned the options of new coal-fired
    generation, despite its proven reliability, and it even places
    constraints on natural gas in favor of intermittent renewables
    like wind and solar.
        These and other actions by EPA and their impact on electric
    reliability and affordability, also raise questions about the
    working relationship between EPA and FERC. EPA has leap-frogged
    beyond FERC and granted itself authority over electricity well
    beyond anything set out in the Federal Power Act. There are
    valid concerns that FERC is allowing itself to become a
    bystander as EPA increasingly dominates the electricity sector,
    and does so in ways that serve to exacerbate the very problem
    FERC is supposed to protect consumers against.
        Grid security is another growing concern in FERC's
    jurisdiction. The electricity system faces all the traditional
    risk from severe weather and earthquakes and the like, but we
    also see emerging threats from things like cyber and EMP
    attacks. FERC's role in ensuring the security of the grid is
    more important than ever.
        So in some respects, the energy situation in America is
    better than it has been in decades. But nonetheless, there are
    challenges in the years ahead, and FERC must play a critical
    role and meet its responsibilities as we deal with these
    transitions that we face today.
        So I really look forward to this opportunity to have a
    dialogue with the commissioners, to get their views on these
    important issues, and let you hear some of the concerns that we
    have.
        [The prepared statement of Mr. Whitfield follows:]

                    Prepared statement of Hon. Ed Whitfield

        As we all know, America's energy picture is rapidly
    changing, not only from the dramatic increases in domestic
    energy supplies but also from the unprecedented federal
    regulatory burdens and a number of other emerging threats. The
    work that FERC does often places it at the center of this
    change.
        For example, the rapid rise in domestic natural gas
    production and the increased reliance on it for electricity
    generation has created many challenges for FERC. For one thing,
    it has increased the burden on FERC to make timely decisions on
    many new natural gas pipeline project applications. We see
    bottlenecks in regions like New England, where high natural gas
    prices and limited supplies are harming consumers, destroying
    jobs, and threatening wintertime electric reliability, even
    though natural gas in nearby Pennsylvania is plentiful and
    affordable. FERC also plays a central role in the approval of
    LNG export facilities, which hold the potential to create jobs
    at home and help our allies abroad. Both the substance and the
    timelines of FERC's review process for such projects has
    justifiably come under review.
        Challenges also come from the actions of other federal
    agencies, and particularly EPA. EPA's Clean Power Plan and
    other regulations pose a serious threat to fuel diversity and
    electric reliability. The loss of existing coal-fired capacity
    as a consequence of new rules is already cause for concern, and
    the number of retirements will only grow in the years ahead. At
    the same time, EPA has all but banned the option of new coal-
    fired generation, despite its proven reliability, and has even
    placed constraints on natural gas in favor of intermittent
    renewables like wind and solar.
        These and other actions by EPA and their impact on electric
    reliability and affordability also raises questions about the
    working relationship between EPA and FERC. EPA has leapfrogged
    beyond FERC and granted itself authority over electricity well
    beyond anything in the Federal Power Act. There are valid
    concerns that FERC is allowing itself to become a helpless
    bystander as EPA increasingly dominates the electricity sector
    and does so in ways that serve to exacerbate the very problems
    FERC is supposed to protect consumers against.
        Grid security is another growing concern in FERC's
    jurisdiction. The electricity system faces all the traditional
    risks from severe weather and earthquakes and the like, but we
    also see emerging threats from things like cyber and EMP
    attacks. FERC's role in ensuring the security of the grid is
    more important than ever.
        In some respects America's energy situation is better than
    it has been in decades, but nonetheless there are challenges in
    the years ahead and a critical role for FERC in dealing with
    them.

        Mr. Whitfield. At this time, I would like to recognize the
    gentleman from California, Mr. McNerney, for 5 minute opening
    statement.

     OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. McNerney. I thank the chairman. This is an important
    hearing and I am glad that we have all four of our
    commissioners available here this morning. Our Nation's
    electric grid touches all of our lives. FERC's jurisdiction,
    your jurisdiction, and the cooperation with the States and the
    stakeholders throughout the transmission and distribution
    system make it critically important.
        The grid, from both the technological and resource-mix
    standpoint, is evolving, and it is ours and your responsibility
    to ensure that the public and private sectors are prepared and
    working together while maintaining reliability, resiliency, and
    affordability.
        And this is happening at a time when some feel that our
    electrical grid is our Nation's most vulnerable section of
    infrastructure. So we have challenges in front of us. Preparing
    for our future will require significant investments in our
    energy industry infrastructure. Utilities are often the ones
    leading the way on these efforts, but it will require
    cooperation among all stakeholders to maintain and improve our
    current energy and electrical systems. The needs are clear:
    Reduce carbon emissions; increase efficiency; affordability,
    affordable prices for consumers; job creation, reliability; and
    resilience.
        So you know that when you flip on the lights, they will
    turn on. The shift to more natural gas, as well as renewables
    in places such as California, has forced utilities and
    consumers to rethink how they manage electricity. And
    electricity continues to shift to be consumer-driven with
    things like demand response, microgrids and the Internet of
    things. Well, these are positive developments, but ones that
    are still relatively new and will need continued oversight from
    FERC and Congress to analyze what works and what doesn't work.
    There is no shortage of challenges facing our Nation's energy
    system.
        We will hear from the commissioners today. FERC is facing a
    daunting task with a seemingly endless increase in the number
    of your requests. Nearly 2 dozen LNG export facility requests
    now are under FERC consideration; approximately 500 hydropower
    licenses in the coming years; the need for timely investments
    in infrastructure; and the impacts of these and the increased
    physical and cyber threats to the electric grid are tremendous.
    FERC will be at the forefront of each of these, reducing carbon
    emissions while protecting reliability, increasing physical and
    cyber resilience while managing cost for consumers; fostering
    development and implementation of policies and technology that
    supports all grid stakeholders.
        I look forward to your testimony, and I appreciate you
    taking time to be with us today. And with that, Mr. Chairman, I
    yield back.
        Mr. Whitfield. Thank you very much. At this time, I would
    like to recognize the chairman of the full committee, Mr. Upton
    of Michigan, for 5 minutes.

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

        Mr. Upton. Thank you, Mr. Chairman.
        Quite a few energy-related issues in the news today fall
    under FERC's jurisdiction. So it is important and very timely
    for this subcommittee to hold this oversight hearing.
        FERC plays a key role regulating the transmission,
    reliability and wholesale sale of electricity and interstate
    commerce, the transmission and sale of natural gas for resale
    in the interstate commerce, and the transportation of oil by
    pipeline in interstate commerce as well.
        FERC is responsible for the approval of interstate natural
    gas pipelines, LNG export facilities, and licensing of non-
    Federal hydropower projects. America's growing energy abundance
    and its growing role as a global energy superpower has led to
    more infrastructure projects being proposed.
        However, there are problems with the timeliness of FERC
    approvals. If left unaddressed, these delays may cost us lots
    of jobs, raise energy prices, and compromise reliability. H.R.
    8, the North American Energy Security and Infrastructure Act,
    which will be considered by the full House tonight and tomorrow
    and Thursday, contains provisions that help expedite the job-
    creating energy infrastructure projects. First, FERC also has
    the responsibility related to the security of the Nation's
    electric grid, including physical and cybersecurity threats,
    geomagnetic disturbances, electromagnetic pulse and severe
    weather. H.R. 8 also includes provisions that seek to
    strengthen our ability to prevent these risks, and minimize the
    impact, when, in fact, they occur.
        FERC and its predecessor agencies have addressed many
    issues since 1920. But over that span, it has never faced a
    rival Federal agency setting policy at odds with FERC's core
    mission. In recent years, the EPA has taken on such a role,
    especially related to electricity. In particular, EPA's so-
    called Clean Power Plan, which mirrors the regulatory cap and
    trade scheme that failed to pass in the Democratically-
    controlled Congress in 2010, places severe constraints on coal-
    fired generation in favor of renewables, jeopardizing
    reliability and giving priority to greenhouse gas reductions
    over cost considerations in setting the generation mix. Whether
    FERC can effectively fight back against EPA's agenda when it
    conflicts with FERC's responsibilities is a matter of
    considerable debate.
        There are serious implications for a State like mine,
    Michigan, where affordable and reliable electricity and
    sufficient supplies of natural gas are vital to making it
    through the long and severe winters. Michigan and other
    industrial States also need affordable and reliable energy for
    manufacturers to remain globally competitive.
        So I look forward to this important debate on FERC's
    current and future role. A better functioning FERC matters to
    jobs and affordable energy. And I yield back the balance of my
    time.
        [The prepared statement of Mr. Upton follows:]

                     Prepared statement of Hon. Fred Upton

        Quite a few energy-related issues in the news today fall
    under the Federal Energy Regulatory Commission's (FERC)
    jurisdiction, so it is important and very timely for the Energy
    and Power Subcommittee to hold this oversight hearing. FERC
    plays a key role regulating the transmission, reliability, and
    wholesale sale of electricity in interstate commerce, the
    transmission and sale of natural gas for resale in interstate
    commerce, and the transportation of oil by pipeline in
    interstate commerce.
        FERC is also responsible for the approval of interstate
    natural gas pipelines, LNG export facilities, and licensing of
    non-federal hydropower projects. America's growing energy
    abundance and its growing role as a global energy superpower
    has led to more infrastructure projects being proposed.
    However, there are problems with the timeliness of FERC
    approvals. If left unaddressed, these delays may cost jobs,
    raise energy prices, and compromise reliability. H.R. 8, the
    North American Energy Security and Infrastructure Act, which
    will be considered by the full House later this week, contains
    provisions to help expedite these job-creating energy
    infrastructure projects.
        FERC also has responsibilities related to the security of
    the nation's electric grid, including physical and
    cybersecurity threats, geomagnetic disturbances,
    electromagnetic pulse, and severe weather. H.R. 8 also includes
    provisions that seek to strengthen our ability to prevent these
    risks and minimize the impact when they do occur.
        FERC and its predecessor agencies have addressed many
    issues since 1920, but over that span it has never faced a
    rival federal agency setting policy at odds with FERC's core
    mission. But in recent years, the EPA has taken on such a role,
    especially related to electricity. In particular, EPA's so-
    called Clean Power Plan, which mirrors the regulatory cap-and-
    trade scheme that failed to pass a democratically-controlled
    Congress in 2010, places severe constraints on coal-fired
    generation in favor of renewables, jeopardizing reliability and
    giving priority to greenhouse gas reductions over cost
    considerations in setting the generation mix. Whether FERC can
    effectively fight back against EPA's agenda when it conflicts
    with FERC's responsibilities is a matter of considerable
    debate.
        There are serious implications for a state like my home
    state of Michigan, where affordable and reliable electricity
    and sufficient supplies of natural gas are vital to making it
    through the long and severe winters. Michigan and other
    industrial states also need affordable and reliable energy for
    our manufacturers to remain globally competitive. I look
    forward to this important debate on FERC's current and future
    role. A better functioning FERC matters to jobs and affordable
    energy.

        Mr. Whitfield. The gentleman yields back. At this time, the
    chair recognizes the gentleman from New Jersey, Mr. Pallone,
    for 5 minutes.

    OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
                IN CONGRESS FROM THE STATE OF NEW JERSEY

        Mr. Pallone. Thank you, Chairman Whitfield. I want to
    welcome the commissioners, particularly Chairman Bay and
    Commissioner Honorable, who are before us for the first time in
    their current roles. Frankly, this hearing is long overdue. I
    believe that we are in a time of great transition and
    uncertainty with regard to those aspects of our Nation's energy
    policy overseen by FERC.
        Ten years ago, we enacted the Energy Policy Act of 2005,
    and that was quickly followed by the Energy Independence and
    Security Act of 2007. Both of these laws made significant
    changes to our Nation's energy policies, particularly in the
    areas regulated by FERC.
        We continue to feel the reverberation of those changes
    today, and the commissioners are, in many ways, front and
    center in having to wrestle with the forces unleashed by those
    laws. In particular, we have seen tremendous expansion in the
    supply transmission and use of natural gas as prices have
    dropped. We have also seen a drop in electricity prices as a
    move towards market has spurred competition and innovation in
    many regions of the country.
        The change is never easy, and with it comes questions,
    problems and new needs. The rise of cheap gas, falling
    renewable energy prices, and tighter competition has really
    called into question old assumptions and boundary lines. It is
    getting close to the time when we will need to consider
    fundamental questions about what areas are best suited for the
    State to regulate and what should be handled by FERC.
        We also need to begin thinking about the diversity of our
    electricity regulations system and whether or not we need to
    have more certainty and conformity rather than the current
    patchwork of regulated and deregulated States and regional
    wholesale markets that might benefit from some common ground
    rules.
        Are these markets providing real benefits to residential
    and other consumers? Are they setting the right price signals
    to developers of generation resources? What is the role and
    efficiency and demand response in the wholesale market? How do
    we prevent bad actors from manipulating the market while
    ensuring the rules are not overly burdensome for those
    suppliers who play by the rules.
        These are but a few of the questions before us and before
    the Commission, and the Commission still has to grapple with
    similar questions regarding the gas and markets and pipeline
    siting, as well as dam safety, hydroelectric licensing, oil
    pipeline pricing, and so many other issues.
        I know that we will hear, we already have heard rhetoric
    about EPA's recent rules on carbon, and not just on the floor
    this afternoon. The truth is that the grid is reliable and no
    clean air regulation has ever resulted in the loss of
    reliability. The system is reliable and it is flexible and will
    adapt to the new carbon rules, just as it has to every previous
    action taken under the Clean Air Act.
        So I hope that today's hearing will move on from the tired
    topic and worn out rhetoric that we continue to hear from the
    other side of the aisle. It is time to start having a real
    dialogue about the areas FERC regulates, about the future of
    our energy markets, natural gas pipeline systems, and
    hydroelectric resources. If we fail to engage soon seriously
    and thoughtfully, we risk harming consumers, the economy and
    the environment.
        Thank you, Mr. Chairman, I yield back.
        [The prepared statement of Mr. Pallone follows:]

                 Prepared statement of Hon. Frank Pallone, Jr.

        I want to thank Chairman Whitfield for holding today's
    oversight hearing on the Federal Energy Regulatory Commission
    (FERC). I also want to welcome the Commissioners, particularly
    Chairman Bay and Commissioner Honorable who are before us for
    the first time in their current roles.
        Frankly, this hearing is long overdue. I believe that we
    are in a time of great transition and uncertainty with regard
    to those aspects of our nation's energy policy overseen by
    FERC.
        Ten years ago, we enacted the Energy Policy Act of 2005 and
    that was quickly followed by the Energy Independence and
    Security Act of 2007. Both of these laws made significant
    changes to our nation's energy policies, particularly in the
    areas regulated by FERC.
        We continue to feel the reverberation of those changes
    today and the Commissioners are, in many ways, front and center
    in having to wrestle with the forces unleashed by those laws.
        In particular, we have seen tremendous expansion in the
    supply, transmission and use of natural gas as prices have
    dropped. We've also seen a drop in electricity prices as the
    move toward markets has spurred competition and innovation in
    many regions of the country.
        But change is never easy and with it comes questions,
    problems and new needs. The rise of cheap gas, falling
    renewable energy prices and tighter competition has really
    called into question old assumptions and boundary lines. It is
    getting closer to the time when we will need to consider
    fundamental questions about what areas are best suited for the
    state to regulate and what should be handled by FERC. We also
    need to begin thinking about the diversity of our electricity
    regulation system and whether or not we need to have more
    certainty and conformity rather than the current patchwork of
    regulated and deregulated states and regional wholesale markets
    that might benefit from some common ground rules. Are these
    markets providing real benefits to residential and other
    consumers? Are they sending the right price signals to
    developers of generation resources? What is the role of
    efficiency and demand response in the wholesale market? How do
    we prevent bad actors from manipulating the market while
    ensuring the rules are not overly burdensome for those
    suppliers who play by the rules?
        These are but a few of the questions before us and before
    the Commission. And, the Commission still has to grapple with
    similar questions regarding the gas markets and pipeline
    siting, as well as dam safety, hydroelectric licensing, oil
    pipeline pricing and so many other issues.
        I know that we will hear rhetoric today about EPA's recent
    rules on carbon--and not just on the floor this afternoon. But
    the truth is that the grid is reliable and no Clean Air Act
    regulation has ever resulted in a loss of reliability. The
    system is reliable and it is flexible and it will adapt to the
    new carbon rules just as it has to every previous action taken
    under the Clean Air Act.
        I hope that today's hearing will move on from that tired
    topic and worn out rhetoric. It's time to start having a real
    dialogue about the areas FERC regulates, about the future of
    our energy markets, natural gas pipeline systems, and
    hydroelectric resources. If we fail to engage soon, seriously
    and thoughtfully, we risk harming consumers, the economy and
    the environment.
        Thank you.

        Mr. Whitfield. The gentleman yields back. And that
    concludes our opening statements, so we will get right to our
    panel. And I am going to introduce each one of you right before
    you give your opening statements.
        So we will start this morning with the Chairman, the
    Honorable Norman Bay, and thank you very much for being with us
    Mr. Bay. We look forward to your testimony. You are recognized
    for 5 minutes.

      STATEMENTS OF HON. NORMAN C. BAY, CHAIRMAN, FEDERAL ENERGY
     REGULATORY COMMISSION; HON. CHERYL A. LAFLEUR, COMMISSIONER,
        FEDERAL ENERGY REGULATORY COMMISSION; HON. TONY CLARK,
     COMMISSIONER, FEDERAL ENERGY REGULATORY COMMISSION; AND HON.
     COLETTE D. HONORABLE, COMMISSIONER, FEDERAL ENERGY REGULATORY
                              COMMISSION.

                    STATEMENT OF HON. NORMAN C. BAY

        Mr. Bay. Thank you. Good morning, Chairman Whitfield,
    Ranking Member McNerney and members of the committee. Thank you
    for the opportunity to appear before you to discuss the work of
    the Federal Energy Regulatory Commission. My testimony will
    discuss my priorities in light of the change that is happening
    in the energy space, a change a number of you have alluded to
    this morning.
        Underpinning each of these priorities is a belief that in
    approaching matters that come before the Commission, it is
    essential to be fair, balanced, and pragmatic to decide cases
    on the merits based on the facts and the law and to be
    consensus-oriented.
        My first priority is to focus on the fundamentals in the
    competitive markets, to continue to look for ways to improve
    the efficiency of the markets, and to deliver greater value to
    consumers. The Commission continues to work to promote greater
    efficiency, competition and transparency in the wholesale
    markets, including and reviewing the capacity markets and
    looking at price formation in the energy markets.
        Second, the reliability of the grid is a core
    responsibility for the Commission. This encompasses not only
    the everyday responsibility over reliability standards,
    including physical security and cybersecurity, but it also
    includes gas-electric coordination issues. While the
    Commission's reliability authority is limited, it will continue
    to use what authority it has in a conscientious manner. In my
    view, it is important for utilities to push beyond the
    requirements of the standards to implement best practices on
    cybersecurity.
        Third, I believe that infrastructure continues to be an
    important issue at the Commission. Right now, there is a need
    for more infrastructure in terms of both gas facilities and
    electric transmission, and FERC plays a critical role in
    permitting and incenting the development of that
    infrastructure.
        Finally, to accomplish my priorities, I will need to focus
    on the human capital at the Commission. The work of the
    Commission cannot be done without its outstanding staff. And it
    is important to me that the Commission focus on retaining our
    current highly qualified employees, ensure knowledge transfer
    from those employees who do retire, and recruit highly-skilled
    people to replace any departures while maintaining our status
    as one of the very best places to work in government.
        I am very proud of the fact that the recent Federal
    employee viewpoint survey ranked FERC one of the very best
    agencies in government. We were third overall for employee
    satisfaction among large government agencies. We were fourth in
    terms of employee engagement. The challenge is that in the next
    few years, 30 percent of our workforce is eligible to retire.
        To meet all of these priorities, it is essential to use the
    tools that Congress has given the Commission. I look forward to
    working with you in the future on my priorities, and would be
    happy to answer any questions that you have. Thank you.
        [The prepared statement of Mr. Bay follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you very much, Chairman Bay. Our next
    witness is the Honorable Cheryl LaFleur. We are delighted you
    are back with us, Ms. LaFleur, and look forward to your
    testimony. You are recognized for 5 minutes.

                  STATEMENT OF HON. CHERYL A. LAFLEUR

        Ms. LaFleur. Well, thank you very much, Chairman Whitfield,
    Congressman McNerney, and members of the subcommittee. I am
    Cheryl LaFleur, I have been on the Commission since 2010;
    appeared before this committee several times, and was also
    honored to be chairman from November 2013 to April 2015. I
    appreciate your holding this hearing and the opportunity to
    testify.
        Since joining the Commission, my top priority has been
    reliability, focused on the reliability of the Nation's
    electric grid. And I am going to devote my comments this
    morning to two aspects of our work on reliability, the
    reliability standards, and the competitive market.
        The Commission oversees the work of NERC, the North
    American Electric Reliability Corporation, in developing and
    implementing mandatory reliability standards for the bulk
    electric system. And I know the committee is aware this is one
    of the only pieces of critical infrastructure subject to
    mandatory standards, thanks to Congress' work in 2005. The
    standards range from nuts-and-bolts rule to keep the lights on,
    and more forward-looking standards on emerging issues. And on
    the emerging issues, in particular, we have worked hard to try
    to put in place meaningful cost-effective protections, even
    though things are changing and we know our knowledge is
    imperfect.
        In March of last year, the Commission directed NERC to
    develop physical security standards for critical facilities.
    Those done, approved in November and are now in place and being
    implemented.
        Since the beginning of our authority, we have worked on
    cybersecurity, a growing challenge that was recognized
    specifically by Congress in the Energy Policy Act. In late
    2013, we approved a fifth generation of cybersecurity that
    requires that all cyber assets on the bulk electric system
    receive a level of protection commensurate with their impact on
    the system.
        Also in 2013, we directed NERC to develop standards to
    address field magnetic disturbances caused by solar storms.
    This issue is one I have been very personally involved in,
    given--and I am concerned about given the potentially
    catastrophic effects that a GMD event could have on the Nation.
    The first set of standards is already in place, it calls for
    operating procedures: What happens if a storm happens? What
    kind of immediate steps do you take?
        What we are working on right now is a more comprehensive
    set of standards that would require transmission owners to put
    in place mitigation to prepare for, if a GMD event happened, to
    limit its effect on the bulk electric system, and those are
    pending right now.
        Secondly, I want to talk about wholesale electric markets,
    because they also relate to reliability because that is what
    they are for, to ensure reliability at just and reasonable
    rates. Two-thirds of the Nation are served by organized
    wholesale electric markets, although those markets differ in
    what kind of products they work on. The markets have been
    expanding. In recent years, we have seen huge additions to the
    mid-continent ISO, the Southwest Power Pool, and most recently,
    the California ISO with its Energy Imbalance Market.
        The market operators across the Nation are working to adapt
    market structures to big changes in the Nation's generation
    resource mix set, several of you have already referred to.
    These changes are being driven primarily by the increased use
    of domestic natural gas, the growth of renewable generation and
    demand side technologies, and new environmental requirements,
    especially the Mercury and Air Toxic Standards, and the Clean
    Power Plan.
        When so much is changing, and in many places we have a need
    for new investment, it is particularly important that markets
    send accurate price signals, both to existing resources, so
    they can stay in place if needed, and new resources where they
    are needed. We have been focused very hard on making sure the
    markets do just that. In the last year and a half, we approved
    capacity market changes in the eastern RTOs to help the markets
    identify and buy resources that will perform at the time when
    they are both most needed to keep the lights on, because the
    system is under stress, particularly baseload resources.
        We are also examining the energy markets, trying to make
    sure that the energy prices include all the things it takes to
    keep the lights on so they send accurate and transparent price
    signals, and we have been working on price formation and have
    several dockets started in that area.
        Finally, we are focused on gas-electric interdependence,
    due to the increased use the gas for generation. We have put
    out rules to better harmonize scheduling of the gas and
    electric markets, and promote communication between them, that
    are intended to help sustain reliability at a time when the gas
    system is stressed, both by generation and heating load in the
    winter.
        Finally, I know my colleagues are going to discuss it as
    well, but we have been engaged with the Environmental
    Protection Agency for the last several years on the Mercury and
    Air Toxic Standards, as it goes into place in different regions
    of the country, and really just starting our work, or we have
    been involved in it, but the implementing is just starting on
    the Clean Power Plan, which is something we will be very
    focused on in the next several years. Thank you and I look
    forward to your questions.
        [The prepared statement of Ms. LaFleur follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you very much. Our next witness is the
    Honorable Tony Clark. Mr. Clark, welcome back and we look
    forward to your testimony and you are recognized for 5 minutes.

                      STATEMENT OF HON. TONY CLARK

        Mr. Clark. Thank you, Mr. Chairman and members of the
    committee, Mr. Ranking Member, for the invitation to be with
    you here today. My name is Tony Clark, and I am honored to be a
    commissioner on the Federal Regulatory Agency since June of
    2012.
        I don't plan to re-read my testimony verbatim for you, but
    what I would like to draw your attention to a few points, and
    perhaps expand on a few ideas and comments that I made in my
    submitted testimony.
        The nature of my testimony is focused on those areas of
    Commission jurisdiction that relate to infrastructure
    development. The Commission has a lot of impact on
    infrastructure development of all kinds, be it generation,
    electric transmission. But most clearly where we have the
    greatest authority is over those areas where we have not only
    economic jurisdiction, but siting jurisdiction as well, which
    is the case of hydropower and interstate natural gas pipelines.
    So the bulk of my testimony focuses on that, and then
    transitions to the importance of infrastructure in regard to
    EPA's 111(d) regulation.
        On the hydropower side, the Commission has been active in
    implementing the Hydropower Regulatory Efficiency Act of 2013
    that you all passed, and that has been going well.
        I draw your attention to just a couple of things under that
    in the testimony. What I think is really important to folks in
    going forward is what Ranking Member McNerney pointed out,
    which is that we are entering a period in which there are going
    to be a lot of licenses that are coming up for renewal. As all
    of you who are members who have those hydropowered licenses in
    your district know, those can become contentious issues, the
    sorts of things that your constituents want to keep abreast of.
    So it is something that I know FERC will want to be working
    with all of you in terms of getting information out about how
    that process evolved and how it worked. It is going to be a
    great undertaking for the Commission.
        I spent the rest of the bulk of my testimony talking about
    the issue of interstate natural gas pipelines, one of the
    tables that I submitted in there indicates that as of up to
    this point, we are within the historical norm of the number of
    certificates that the Commission has been processing in terms
    of compression, throughput and the number of applications that
    we have been getting.
        Something that I really want to draw your attention to are
    the challenges that the Commission is going to face on a going-
    forward basis. This expands upon my testimony here. If you look
    at the number of pending applications that we have, as compared
    to the historical trend, we are truly seeing the impact of low-
    cost natural gas, and the environmental regulations which are
    shutting down coal and really requiring utilities to have some
    combination of natural gas and renewables.
        If you look at August of 2014, the Commission had pending
    pipeline projects of about 24 Bcf per day, and about 1,000
    miles of pipe. If you fast forward just about a year later to
    November of this year, the number of pending applications we
    have is 50 Bcf per day capacity, so over a doubling in just 1
    year, and 4,600 miles of pipe. The Commission is very proud
    that up to this point, we have been able to process in 92
    percent of all cases, pipeline applications. Within a year, I
    think it is going to be very difficult to maintain that high
    average when you have this volume of pipelines.
        And this is where I get into the 111(d) regulations, and I
    think it is important for the committee to understand the
    challenge that regulators at all levels are going to be facing,
    Federal level and state, which is, there are tremendous
    infrastructure needs in terms of pipeline development, in terms
    of generation on the state side of things, in terms of
    transmission. But all of this is being done in a time when we
    have heightened opposition to that very infrastructure itself.
    And it is very important to understand that in terms of where
    the 111(d) regulations are going in terms of timing. Although
    the EPA did extend timelines for compliance for states by up to
    2 years. If you remember the timelines on that, in many states,
    utilities won't be receiving the state implementation plans
    until about 2018, compliance timeline begins in 2022. And yet,
    it is quite clear, at least historically, that it takes, for
    major pipeline projects and certainly for interstate electric
    transmission projects, it is a 3 to 5 to 12 years or more
    timeline to develop that infrastructure.
        The concern is, if you make a rapid transition to a new
    electric generation fleet before you have the infrastructure in
    place to accommodate that change, there will be an impact on
    cost and that has been the case just about everywhere that that
    transition has been made, but you don't have the adequate
    infrastructure. So it is going to place a lot of pressure on
    agencies like FERC to ensure that as we go through our
    processes, that we do it right, but it is going to create a
    timeline challenge, I think, potentially a consumer challenge
    as well.
        I finally wrap up my testimony just indicating that where
    we stand on the CPP is often where you sit, and this plan does
    not burden all states equally. So there are certain parts of
    the country, certain states that shoulder a much greater burden
    under this, and will have a much more difficult time meeting it
    than other parts of the country.
        Mr. Chairman, with that, I will be happy to take any
    questions that----
        [The prepared statement of Ms. Clark follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Thank you very much. And our remaining
    witness is the Honorable Colette Honorable. And we appreciate
    your being with us today, and look forward to your testimony.
    You are recognized for 5 minutes.

                 STATEMENT OF HON. COLETTE D. HONORABLE

        Ms. Honorable. Thank you, Mr. Chairman, Ranking Member
    McNerney, and members of the subcommittee, good morning. My
    name is Colette Honorable. And as ranking member of the full
    committee, Mr. Pallone referenced, Congressman Pallone
    referenced, this is my first appearance before this
    subcommittee. I am grateful for the opportunity.
        Prior to joining the Federal Energy Regulatory Commission,
    I served as chairman and commissioner at the Arkansas Public
    Service Commission for 7 years, I also served as president of
    the National Association of Regulatory Utility Commissioners,
    and it gave me an opportunity to get to interact with a number
    of states that come from different places, different
    ideologies, and it gave me a great appreciation for the
    diversity in states and regions.
        It also allowed me to continue my focus here in my present
    role on reliability, on infrastructure development, a new focus
    for me, markets, and also continuing to work on workforce
    development issues.
        Our mission at FERC is to regulate the interstate
    transmission of electricity, natural gas and oil. This work is
    especially significant because our economy is increasingly
    dependent upon reliable and affordable energy.
        My written testimony goes into more detail regarding my
    thoughts about reliability and infrastructure development and
    markets, but this morning, I would like to focus on something
    you want to hear about, and that is our interaction with the
    EPA concerning the Clean Power Plan.
        Our focus on the EPA's Clean Power Plan finalized in August
    has involved engagement, collaboration and outreach with a
    diverse group of stakeholders. In early 2015, the Commission
    hosted four technical conferences on whether and how the plan
    would impact reliability of the bulk power system. We heard
    from state regulators, from utilities, from regional system
    operators, from environmental groups, and consumer
    organizations.
        These conferences raised a host of issues that informed the
    Commission's advice and counsel in a letter we sent to the EPA
    in May of 2015. In this unanimous document, we advised the EPA
    to consider revising its interim compliance timeline in the
    draft plan to ensure flexibility in the early years of
    compliance. We also encouraged the EPA to consider including
    both a reliability safety valve, which would allow the
    Commission to work with the EPA to address temporary unexpected
    impacts on reliability, and a forward-thinking process to
    provide for ongoing reliability, monitoring an assistance which
    would rely upon existing planning procedures in States and
    regions to initially review State plans for potential
    reliability concerns. The EPA accepted our recommendations in
    the final rule.
        Going forward, FERC stands ready to support the work of the
    states, the regions and NERC, and other reliability entities.
    The Commission has offered to review analyses or requests
    additional assessments as necessary. We continue holding
    technical conferences or other workshops as states and
    utilities will begin complying with the rule, and pursuant to a
    joint staff-working document that informs our interagency work,
    we will continue participating in future discussions with the
    EPA and the Department of Energy, and others as necessary.
        Since the issuance of the Clean Power Plan, I have
    continued my engagement with diverse groups. For instance, in
    October, I participated in a workshop hosted by the bipartisan
    policy center in the Great Plains Institute, which focused on
    compliance in the Midwest. Although most of these states are
    challenging the rule in court, many are also working on
    compliance plans should the plan be upheld.
        For example, agencies in my home State of Arkansas are
    evaluating compliance options, even though the State has joined
    the litigation. And 13 other states have reportedly indicated
    that they will follow a similar path. I mention this to say
    that many states are on a dual path.
        A number of studies indicate that if the rule is upheld,
    fully contemplated compliance plans will have considerable
    potential to reduce compliance costs, particularly those
    undertaken in regional efforts. In the Midwest, both the
    Southwest Power Pool and the Midcontinent Independent System
    Operator has released studies completing that regional
    compliance with the Clean Power Plan is more efficient, less
    costly, and, therefore, better for consumers. It is imperative
    that all effective stakeholders engage and work collaboratively
    to maintain reliability, while minimizing any potential cost
    impacts of plan implementation.
        I would like to take this opportunity to show my
    appreciation for our staff, which have worked very hard in this
    regard, and also to support the ongoing work in the sector by
    industry, regulators and other stakeholders, which is vital for
    a thriving economy. We take our job seriously, and I am proud
    to be a member of the Commission at this time. I am also
    appreciative and grateful for the important oversight work of
    the Energy and Power Subcommittee. I look forward to working
    with you throughout my tenure, and I stand ready to answer my
    questions you may have. Thank you.
        [The prepared statement of Ms. Honorable follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Mr. Whitfield. Well, thank you for your testimony. And we
    appreciate all of you for your opening comments. At this time,
    we will open it up for questions from the members of the
    subcommittee. And I would like to recognize myself for 5
    minutes to begin with.
        We all recognize we have different political philosophies
    in different regions of the country that we come from, and as a
    result of that, we have a lot of different views on a lot of
    these key issues. But the Federal Power Act was very explicit
    that interstate electricity transmission authority was given to
    FERC, wholesale prices issues were given to FERC. And the
    states maintain control over electricity generation in intra-
    state distribution, and yet the clean energy plan gives EPA a
    lot of authority, in fact, immense authority on what has
    traditionally been a state responsibility.
        And this was done without any legislation being involved;
    it was done by regulation. And we heard EPA talk a lot about
    how they worked extensively with the states; they want to give
    the states maximum flexibility. And yet, 27 states have filed
    lawsuits on this as well as a multitude of other entities. And
    then one of the surprising things for many of us, and Mr. Clark
    touched on this, was these timelines, in trying to make this
    transition with the infrastructure needs that we have, EPA
    frequently, on major regulations, to give states up to 3 years.
    And yet in this instance, they are giving them until September
    of 2016. So--and Ms. Honorable, you came from Arkansas, and you
    were on the public service commission there, I believe, and
    your state has filed a lawsuit as well.
        So it is one thing for EPA, as a regulatory body in order
    to implement the President's Clean Energy Plan, to come with
    this unprecedented regulation. And I understand people say, Oh,
    it is all the about politics, but it is more about politics; it
    is about existing laws; it is about customary ways that we do
    business in the country. And that is why I think you see so
    many lawsuits. But I would like for you, Mr. Clark, just to
    expand a little bit on this timeline issue that you touched on,
    and just give us some practical insight into that just from the
    standpoint of, say, North Dakota.
        Mr. Clark. Sure, thank for the question, Mr. Chairman. My
    concern about the timeline that, say, you have the 2016
    timeline, you have the possibility for states to push that out
    if they request from EPA to about 2018 for the State
    Implementation Plan, should they decide to go that route.
        The compliance targets begin in 2022, some of them are
    quite steep for certain states, will be challenging to me. For
    example, a State like North Dakota, whose target emissions
    reduction went from 11 percent in the draft to 45 percent in
    the final rule.
        Mr. Whitfield. Kentucky went from 18 to 41. And all of
    those caps were set by EPA.
        Mr. Clark. It is the math, every state is impacted
    differently by the math, and the manner in which the historical
    generation plate is operated. So for some states, it is a bit
    of a non event for some states, depending on the vintage and
    type of fleet that they have. It will be much more of an event.
        The concern with the timeline is, for a pipeline project,
    any sort of major pipeline project, 3 to 5 years is probably a
    conservative timeframe implement--from engineering and
    permitting to construction and in service states.
        Electric transmission lines typically are even more
    difficult than that. Five years to 10 might be a little bit
    more average. Heaven forbid, you cross any Federal land as
    happens out west. It could be 12, 15 years to get all the
    permits that you need to do for a major electric transmission
    line.
        And so that is the concern. If you are going to change
    dramatically the generation fleet and you need to have a lot
    more renewables, which really only work over a larger
    geographic area, and you will need a lot more natural gas to
    back up those renewables or to replace baseload coal that may
    be going off-line. It is going to require some major
    infrastructure projects. We are starting to see it on the gas
    transmission side, likely happen on the electric transmission
    side. These are not projects that are conceived of, permitted
    and built within a very short timeframe. And the concern is, if
    you change that generation fleet, it could end up costing
    consumers.
        Mr. Whitfield. Well, thank you very much. I had a couple of
    other questions, and my time has already expired. So, Mr.
    McNerney, you are recognized for 5 minutes.
        Mr. McNerney. Thank you, Mr. Chairman. Again, I thank the
    commissioners for coming today. I got a lot out of all of your
    testimony, so thank you for your work. And this is an area that
    I care a lot about. I spent 20 years in the energy industry
    before coming to Congress.
        Mr. Chairman, do you have a mission statement, or does the
    Commission have a mission statement? Could you sort of
    paraphrase what that statement is?
        Mr. Bay. Yes. FERC does have a mission statement. And it is
    to provide efficient, reliable, and sustainable energy to
    consumers. That has been our mission statement for some time
    now.
        Mr. McNerney. Sustainable, hmm, that is a whole different
    subject. Now, considering reliability, that is one of your
    primary missions is reliability. Do you feel, Mr. Chairman,
    that Clean Power Plan threatens the reliability of our
    electrical infrastructure or any of our energy infrastructure?
        Mr. Bay. So reliability is one of our core
    responsibilities, and Congress gave us that responsibility in
    the Energy Policy Act of 2005. As Commissioner Honorable noted,
    FERC held a series of technical conferences. On reliability and
    the Clean Power Plan, I am pleased to say that the EPA sent
    someone to each one of those technical conferences, and they
    had a high-level official appear before us and testify.
        We later sent a letter to the EPA with certain
    recommendations. I am pleased to say that all five members of
    the Commission at the time signed that letter. And then the EPA
    issued its final rule. And I think it is noteworthy to focus on
    certain aspects of the EPA's final rule. One thing it did was
    to push back the initial compliance date from 2020 to 2022. So
    it allowed industry to have, in the states, to have 2 more
    years. It implemented a reliability assurance mechanism in that
    it required state plans to be reviewed by reliability
    authority, whether it is NERC, a regional reliability
    authority, and RTO or ISO, or someone else.
        The EPA also recognized the reliability safety valve, which
    Commissioner Honorable noted as well. In addition, the EPA
    glide path towards compliance, so that the period 2022 to 2030
    is broken up into 3-year periods, where if a state fails to hit
    its target in one year, it underachieved in one year, it
    overachieved in the next, that can still help make its
    requirements, meet its requirements.
        Finally, of course, the EPA built in a lot of flexibility.
    One of the things that they did in the rule to ensure that
    reliability issues could be addressed was that they allowed
    states to consider using emissions credits as a means of
    achieving compliance.
        The other thing that we have done at FERC is we have
    entered into an agreement with the EPA and the Department of
    Energy to meet on a quarterly basis at the staff level to
    discuss any potential reliability issues. I am pleased to say
    that staff has held its first meeting with the EPA and DOE. So
    this is something we are going to be watching very closely.
        In my view, while it will take a lot of hard work,
    communication and collaboration between FERC, the EPA, DOE, the
    states, NERC, the RTOs, ISOs, and industry, I believe that any
    potential reliability challenges can be addressed.
        Mr. McNerney. Thank you. Honorable LaFleur, do you feel the
    cyber threats and geo threats are more significant threats to
    reliability than the Clean Power Plan?
        Ms. LaFleur. Well, there are different kinds of threats,
    but I would say they are more significant because they are
    systemic, where the Clean Power Plan could have, as several of
    my colleagues have referred to, different impacts in different
    areas. Solar storm could have an impact over a larger part of
    the United States. They are both things we need to obviously
    focus on.
        Mr. McNerney. Thank you. Mr. Clark, you mentioned the
    number of pending applications. What would help, how could
    Congress facilitate your response, the increasing number of
    applications?
        Mr. Clark. I think one of the things that Congress could
    help with would be to encourage other agencies that inform the
    FERC siting process, whether it be through LNG siting, whether
    it be through the LNG side of things, whether it be on the
    pipeline side of things. There are a lot of different agencies
    that inform our process to the degree that they can do their
    work in a timely manner, to inform our process. That would be
    helpful from a timing standpoint.
        Mr. McNerney. Thank you. Mr. Chairman.
        Mr. Whitfield. Yes, sir. At this time, I recognize the
    gentleman from Texas, Mr. Olson, for 5 minutes.
        Mr. Olson. I thank my friend from Kentucky. And welcome to
    our friends from FERC. You-all's good morning gets even better,
    because my own State of Texas, it is a fact that fellow Texans
    take care of our own grid for 90 percent of our State. So we
    don't get impacted but what you do in many cases, but, they are
    very important to our State. Critically important to our home
    State of Texas.
        My first question is for you, Mr. Chairman, and
    Commissioner Clark. Chairman Bay, you have talked about the
    importance of building gas-electric infrastructure for quite
    some time. It was one of the key things listed in your Senate
    confirmation hearing. Obviously, when it comes from an energy
    state like I do, I want to know how resources get to market.
    And Commissioner Clark, your comments about these supposed
    pipeline application in the future and your testimony talked
    about how much more dramatic opposition to energy projects is
    becoming. It is out of control. We are going from a ``not in my
    backyard,'' to a ``not in anybody's backyard.'' So my question
    to both of you all is, can we speak for a moment on the LNG
    energy infrastructure, and whether you see any trends on
    efforts to block development? The range is clear, fire at will,
    no agency is spared. Chairman Bay.
        Mr. Bay. Congressman Olson, I think at FERC, we have
    clearly seen increased opposition to infrastructure. One of the
    things that has happened at FERC over the last--at this point,
    it has probably been 15 months or so--is that our open meetings
    have been disrupted by protesters who will suddenly stand up
    during our meeting and try to interfere with our meeting.
        So we are clearly seeing that, and even in the field when
    we are holding scoping hearings, it is not uncommon for the
    staff who do those hearings to report back that there seems to
    be a great deal of opposition in many communities to the
    construction of more infrastructure.
        Mr. Olson. Commissioner Clark, your comments, sir, on a
    ``not in anybody's backyard'' attitude in America right now?
        Mr. Clark. Sure. Thank you, Congressman, for the question.
    I reference this in my testimony that, for years, the
    Commission has always taken testimony from, say, affected
    landowners, who might prefer that a particular pipeline go on
    this piece of their property as opposed to that piece of the
    property, or maybe on someone else's property, but it is very
    specific to the line itself. We have seen a bit of a
    transition, a type of intervention that has appeared before the
    Commission, which is--my testimony, I call it ``just say no''
    intervention, which is no infrastructure anywhere. The
    challenge is that that causes all kinds of reliability and cost
    impacts to consumers if all energy infrastructure is blocked.
        The Commission has a very important job in balancing the
    interest of all intervenors. The goal of our process is to
    ensure that the Natural Gas Act is faithfully implemented and
    that the orders that we get out are ultimately upheld by a
    judge who can review it and see if the Commission made a recent
    determination, and we have very a fairly good track record in
    that regard.
        Mr. Olson. Chairman Bay, as you know, the cost of carbon is
    being discussed in Paris right now at the U.N. Convention on
    Climate Change. And as a former naval aviator, it seems to me
    that some world leaders are writing, proposing checks that they
    can't cash. I want to dive down on the cost of carbon, the
    social cost of carbon. FERC has said recently that the cost of
    carbon ``calculator'' isn't appropriate for individual LNG
    projects. You said so in a past decision back in June.
        You gave me a long answer in writing. But very shortly, can
    you tell me why it isn't appropriate to use the cost of carbon
    for individual projects, why it doesn't work, sir?
        Mr. Bay. I would have to review that particular order,
    Congressman Olson. To my knowledge, FERC has not tried to
    calculate the social cost of carbon. It is true that when we
    are reviewing an infrastructure application, under NEPA, we
    were required to give a ``hard look'' at what the courts
    require of us, a hard look at environmental look at claims that
    have been raised. So it may be that someone who was protesting
    the construction of that facility raised a claim tying into the
    cost of carbon. I do know that at the end of the day, the
    Commission did end up permitting that facility, the certificate
    was granted, as you know.
        Mr. Olson. One final question for you, Chairman Bay. Former
    Chairman Wellinghoff made it his mission to clear a path for
    energy efficiency, he focused on things, like demand response.
    As you took over as the chairmanship, there were some people
    who said they didn't know what your number one priority would
    be. What is your number one priority as the chairman of FERC?
        Mr. Bay. I thank you for that question, Congressman Olson.
    I have tried to take a very balanced approach to my role as
    chairman. As many of the members have noted this morning, we
    are going through this period of tremendous change in energy
    space. So I think it is important for FERC to use the statutory
    authorities that Congress has given FERC to help the markets,
    market participants and industry adapt to that change while
    maintaining reliability and just reasonable rates.
        And so, I have been looking at what I have been calling the
    basic, the fundamentals, and that includes authority over
    wholesale markets, and thus, we have been engaged in this price
    formation of rulemaking proceeding. We have looked at
    reliability, and as Commissioner LaFluer noted, we have engaged
    in looking at GMD, and we are continuing to work on
    cybersecurity, gas-electric coordination issues. And then, of
    course, there is infrastructure. And that is always going to be
    an important part of what FERC does.
        Mr. Olson. Thank you. I yield back.
        Mr. Whitfield. This time the chair recognizes the gentleman
    from Texas, Mr. Green, for 5 minutes.
        Mr. Green. Thank you, chair and ranking member, for holding
    the hearings. And following up my colleague and neighbor from
    Texas, I would hope my concern is electricity and reliability,
    I hope your goal is to make sure that the lights can turn on,
    and in August in Texas, we can still have air conditioning. I
    know FERC's responsibility to maintain the reliability of the
    grid, but you also have a lot of other responsibilities with
    pipelines, LNG facilities, or pipeline rates to name a few.
        Chairman Bay, in your testimony, you cite the many
    responsibilities FERC is tasked with, including reliability,
    security and infrastructure.
        Can you provide additional details on FERC staffing and
    work products? Does FERC have the resources and personnel
    necessary to meet the increasing demands placed on the
    Commission? If you could just briefly, because we only have 5
    minutes.
        Mr. Bay. That is a very important question that you raise,
    Congressman Green, in light of the workload that Commissioner
    Clark alluded to, and that workload is real. One of ways that
    we responded to it administratively is that we have added
    resources to the Office of Energy Projects, and they are going
    to need more resources. At some point, we may update our budget
    to Congress; I hope you look favorably upon that. But we are
    trying to respond by adding resources to the offices that need
    them.
        Mr. Green. With the growth and natural and implementation
    of the Clean Power Plan, what types of resources does FERC
    anticipate needing in the future to ensure projects and plants
    can still stay on schedule? Is that being built into the
    request to the appropriations process?
        Mr. Bay. It certainly will be, and we are responding to
    that now, which is why we added resources to that particular
    office.
        Mr. Green. I still have this concern about permitting
    approval of LNG export facilities. We spent considerable time
    working on these issues, and want to ensure our country's
    benefits for the nearly 389 trillion cubic feet of gas reserves
    we possess. Can you provide an overview of the current
    permitting regimen, and have you encountered any delays that
    would slow these important projects?
        Mr. Bay. I think the main thing about those projects is
    that that they are complex projects, there has to be a review
    by staff. We worked closely with staff, and we work well as a
    Commission, to review those project applications. As
    Commissioner Clark noted, basically about 90 percent-plus of
    the projects that we receive are certificated within one year
    after the application is filed with FERC.
        So we understand the importance of these projects and doing
    a thorough and timely review, and we are certainly very
    committed to doing that. But clearly, there is a high volume of
    work now than in the past, which is why we are trying to
    address that by adding more resources.
        Mr. Green. I have one port in the State of Texas, actually
    had five pieces, tracks that were set aside for five different
    LNG export facilities. I think there is effort to do one in
    that particular port.
        Chairman Bay, as director of enforcement, your office is
    responsible for violations and inquiries in the market
    manipulation. Unlike other Federal agencies, FERC does not have
    an office of compliance or any other resources to regulate
    community to address questions or answers. This week, the House
    will take up H.R. 8 that contains provisions relating to the
    FERC transparency. Do you believe an office of compliance would
    be of benefit to the regulatory community?
        Mr. Bay. In my view, that office is not necessary.
    Certainly, if Congress creates that office, we will do
    everything that we can to implement congressional intent, but
    if I could, I would just like to explain, Congressman Green,
    the different avenues that an entity can pursue with FERC to
    get guidance. First, there is informal outreach where the
    company, or the entity, can seek a meeting with staff, or even
    with the Commission, at least if there is not an investigation.
        Second, there is a compliance help desk, so an entity can
    call staff to get guidance. Then there is the no-action letter
    process. So if they want something more than that, they can
    seek a no-action letter from the Commission. And then, of
    course, an entity has ability to seek a petition for
    declaratory order from the Commission if it seeks greater
    regulatory certainty. So no-action letter comes from staff, the
    petition from declaratory order comes from the Commission
    itself. My own view is that given that many avenues an entity
    can use, can pursue to seek guidance from FERC, that it would
    not be necessary to create that office. I would also add that
    years ago, Congress created an Office of Consumer Advocate at
    FERC, but has never sought to fund that office.
        Mr. Green. Well, I would hope that if we do create an
    Office of Compliance, we would fund it. It seems like some of
    things you are talking about would be rolled into an Office of
    Compliance. Mr. Chairman, I know I am out of time and thank you
    for your courtesies.
        Mr. Whitfield. Thank you. At this time the gentleman from
    Illinois, Mr. Shimkus, is recognized for 5 minutes.
        Mr. Shimkus. Thank you, Mr. Chairman, and welcome. I am
    going to get a little parochial. MISO released an issue
    statement acknowledging that no forward planning process exists
    to ensure long-term reliability in southern Illinois. And that
    reform to its capacity market process may be required to
    sustain existing investment and drive future investments and
    help ensure a reliable electricity supply for consumers. Of
    course, I am in southern Illinois, and we have talked about
    some of the concerns on the most recent auction. But so this is
    kind of a jump off for whoever wants it. How does the
    Commission plan to ensure sufficient existing and new
    generation resources are in place for MISO zone 4?
        Ms. LaFleur. Well, thank you, Congressman Shimkus. As you
    know, we can't specifically discuss zone 4, because there are
    several complaints, including from the state of Illinois,
    pending before us now----
        Mr. Shimkus. But you don't need to talk about the
    adjudication. This is just a generic question on the question.
        Ms. LaFleur. Yes. I think the primary thing we have been
    doing is looking very closely at the way the capacity markets
    actually define the product and what they call for to make sure
    that they properly pay for what it really takes to keep the
    lights on. In both PJM and ISO New England, they have set up
    structures where they create performance requirements and hold
    generators to them that are, in many cases, baseload generation
    are the ones that will be needed because they can be there at
    any time when they are needed. I think those are the sorts of
    things that have promised to make sure that I think there has
    been a concern whether there is something about baseload
    generation as being not properly valued, and we have to look
    closely at the market----
        Mr. Shimkus. This follows up on my question. MISO has
    conceded with your endorsement, the FERC endorsement, to
    largely leave control of resource adequacy to the states. Is
    that appropriate?
        Ms. LaFleur. That is different in different parts of the
    country. In the----
        Mr. Shimkus. I am worried about southern Illinois right
    now.
        Ms. LaFleur. Well, Illinois is in a somewhat unique
    situation because it deregulated generation, has merchant
    generation, like the Eastern markets do. Yet it is in the mid-
    continent ISO where the other states don't have that system. I
    think that there will be choices to make of both how MISO
    accommodates the states so different from the rest of them, and
    how Illinois does it.
        Mr. Shimkus. Well, please keep an eye on this. Similarly,
    Chairman Bay, because we know we have decommissioning of coal-
    fired power plants because of the war on coal, and that is
    accepted. You all have basically said that. We also are
    concerned about the decommissioning of nuclear power plants now
    in Illinois because of just what Commissioner LaFleur just
    mentioned. So the question is, should baseload generation be
    compensated for other benefits they provide, such as reliable
    power, providing essential reliable services, and fuel
    diversity that they bring to the market, including on-site fuel
    availability?
        Mr. Bay. One of the things that the Commission has done to
    try to address in a general way that particular concern,
    Congressman Shimkus, is to work on price formation in the
    energy market itself. And so for that reason, the Commission
    has held a series of technical conferences, and in September,
    issued a rulemaking that seeks to align the settlement periods
    and dispatch intervals in a real time market and then to allow
    a shortage pricing to be triggered when shortages occur. Those
    sound very complicated. The basic premise is simple, and that
    is, that resources should be compensated for the value they
    provide when they provide it. So that certainly will help
    baseload resources that can steadily produce power at many
    different times of the day. And so the hope is that with more
    effective price formation, that that can send better signals to
    different kinds of resources, including the kinds of baseload
    resources that you noted.
        In addition, the Commission is doing more than that. In
    November, we issued an order that seeks to gain greater
    transparency into the causes of uplift and uplift drivers in
    the RTO/ISO markets. And we have also signaled that we are
    going to look at the offer price caps in the organized markets
    as well as mitigation issues. So we are doing a whole host of
    things that are seeking to improve the efficiency of the
    wholesale markets.
        Mr. Shimkus. So should this occur in an organized wholesale
    capacity and energy markets subject to your jurisdiction?
        Ms. LaFleur. Well, in Midwest and the southern Illinois as
    part of the mid-continent ISO does not have a mandatory
    capacity market. Just 2 weeks ago, we denied rehearing on an
    order allowing MISO to continue to have a voluntary capacity
    market. That would be a major change if they went to a
    mandatory capacity market as the eastern states have. So right
    now, Illinois does have the resource adequacy control because
    they are not required to participate in the mandatory market.
        Mr. Shimkus. Thank you, Mr. Chairman.
        Mr. Whitfield. At this time, the chair recognizes the
    gentlelady from California, Mrs. Capps, for 5 minutes.
        Mrs. Capps. Thank you, Mr. Chairman, for holding this
    hearing. And I thank Chairman Bay and all the commissioners for
    your testimony today. You have covered the many and varied
    tasks that FERC is responsible for and how these activities
    directly impact the provision, the transport, and reliability
    of energy from a variety of sources.
        However, it is also clear that as we better understand the
    ramifications of our energy use, we have a greater
    responsibility to minimize the negative impacts that are
    associated with our actions. And part of this responsibility is
    to ensure that appropriate sources of energy are utilized to
    minimize harmful emissions through the integration of
    renewables. But we also must look at the impact of transporting
    these dirty fuels. And that is where I would like to focus my
    questions today.
        While this committee has recently been focused on the work
    of the Pipeline and Hazardous Material Safety Administration,
    or PHMSA, FERC also has jurisdiction over certain pipeline
    regulations. Pipelines are ubiquitous in this country. Whether
    transporting oil or natural gas, these pipelines crisscross the
    entire country, transporting fuels, both within and between
    states. And depending on the particulars of the pipelines, they
    are regulated by local, state, or Federal groups and agencies.
    It is also clear that transporting fuels and pipelines may have
    many risks associated with them. In my district, we witnessed
    this danger firsthand when the Plains pipeline ruptured and
    spilled full across the land and into the ocean this past May.
        My first question is for Commissioner Tony Clark. Several
    agencies are responsible for regulating both oil and gas
    pipelines in various stages of siting construction operations.
    Can you please explain and elaborate on the responsibility of
    FERC in regard to both oil and natural gas pipelines?
        Mr. Clark. Sure. Thank you for the question, Congresswoman.
    With regard to oil and liquid pipelines, the Commission's
    jurisdiction comes from the Interstate Commerce Act, and is
    primarily associated with economic regulation of the pipeline
    and nondiscriminatory access to the pipeline, common carrier-
    type regulations, but does not include safety or the siting of
    pipelines, things like that, which would be either under PHMSA
    or some combination of PHMSA and state and local government.
        In the case of interstate natural gas pipelines, the
    Commission has a much greater degree of oversight of the
    interstate natural gas pipeline. So in addition to the economic
    regulation, the Commission also oversees the physical siting of
    the project itself, again, with regard to safety, although some
    of those safety costs work their way into FERC jurisdictional
    tariffs and rates, the actual safety regulations themselves
    would not be FERC jurisdictional. It, again, would be----
        Mrs. Capps. As a follow-up, could you please describe how
    FERC ensures that sensitive environments like those in coastal
    regions of my district are not negatively impacted by the
    siting and construction of natural gas pipelines?
        Mr. Clark. Sure. Thank you, again, for the question. The
    way that FERC ensures environmental protection is through being
    the lead agency for NEPA reviews on any interstate natural gas
    pipeline. And so FERC basically plays a role ensuring that all
    of the other agencies that might wish to comment, public which
    might wish to comment, and are able to do so in a way that we
    have a fully-developed record in front of us to ensure that we
    are meeting the environmental standards that are set up, both
    in the Natural Gas Act, but also those requirements that are
    set forward through NEPA.
        Mrs. Capps. Thank you.
        For Chairman Bay, while FERC has jurisdiction over some
    aspects of pipelines, as Commissioner Clark has just outlined,
    FERC is just one of several agencies with pipeline
    jurisdiction. After the Plains oil spill in my district earlier
    this year, we dealt extensively with both the EPA and PHMSA.
    But it is clear that our communities are relying on many
    agencies and their cooperation, or lack of, to protect our
    local lands.
        So, Mr. Chairman, does FERC work with other agencies to
    ensure that the siting and operations of pipelines is done in a
    way to maximize safety and minimize risks? And how does this
    happen?
        Mr. Bay. Yes. Thank you for the question, Congresswoman
    Capps. During the application process in which a pipeline is
    seeking to receive a certificate from FERC, as Commissioner
    Clark noted, we have to do a NEPA review. And as part of that
    NEPA review, we have to work with many other agencies; state
    agencies, but Federal agencies as well. And the Federal
    agencies include EPA and PHMSA. And so we work with them. We
    also work with state authorities. And if there is an aspect
    about the proposed pipeline route that is problematic,
    certainly we have the authority to tell the pipeline to reroute
    the line. During the application process, pipelines will
    provide alternative routes as well for FERC to consider. And
    then we have to do an analysis about what which pipeline route
    seems to be more prudent.
        Mrs. Capps. Thank you. I am out of time, Mr. Chairman, but
    I had a follow-up question that I wish I could get a written
    reply to, and that is, the collaboration between FERC and
    agencies like EPA and PHMSA. Are they successful in working
    together to mitigate negative impacts? Or are there
    opportunities to improve the level of collaboration and
    communication? And, these pipelines make a very complex
    intersection around the country. So if we could get that back
    in writing, I would appreciate it.
        Mr. Whitfield. Absolutely. So we will note that. And we
    hope you can get back to us on that.
        At this time, the chair recognizes the gentleman from Ohio,
    Mr. Latta, for 5 minutes.
        Mr. Latta. Thank you, Mir. Chairman. And to the
    commissioners today, we greatly appreciate you being here for
    your testimony. I am going to kind of follow up on the
    gentlelady from California on questions that she has. It is
    FERC's responsibility to make information available and notify
    the public about a project's status and its schedule. FERC
    staff testified in support of bringing this information
    together in one location on FERC's Web site. And this is
    addressed to the chairman and Commissioner Clark. Do you
    support the concept of a project dashboard where the public can
    see the schedule established by FERC and the list of actions
    required by each applicable agency to complete permitting?
    Chairman?
        Mr. Bay. Thank you, Congressman Latta. I think that is an
    interesting idea. And certainly, I share the goal of providing
    transparency into the project applications that FERC is
    considering. Currently, that information is available through
    eLibrary, where all the filings relating to a project are
    placed and where they are accessible to the public. It can be
    harder, I think, for a member of the public, however, to find
    the right document.
        So the idea that you presented is an interesting one. And I
    would like to talk to staff some more, as well as my colleagues
    on the Commission, to get their views. Certainly, though, we
    support the idea providing transparency into the work that we
    do.
        Mr. Latta. Thank you. Commissioner Clark?
        Mr. Clark. Congressman Latta, I think it is an absolutely
    worthy goal. The issue of transparency into exactly how
    commission processes work is very important in terms of--
    especially a land owner who, for example, may be being
    contacted by an infrastructure development company, a pipeline
    company, and doesn't know where to turn to next. And for those
    of us who live and breathe the world of regulation every day,
    sometimes it can seem simple to maneuver our processes. To
    someone who has never seen the FERC Web page before, they might
    not be quite so simple. So a look at that with fresh eyes is
    probably something that makes a lot of sense.
        Mr. Latta. Thank you. And, again, both to Commissioner
    Clark but also to the chairman, based on hearing from my
    constituents' reviews of such as route planning and safety
    coordination would be important to include in this project
    dashboard to make the information more easily accessible to the
    public. Would these kinds of ideas be included? Chairman?
        Mr. Bay. I am certainly happy to consider those ideas,
    Congressman Latta. One thing I would note is that FERC actually
    has a toll free number for landowners who have questions or
    concerns. We receive hundreds of calls each year from
    landowners. The calls go to our dispute resolution service. And
    I am pleased to say that they oftentimes can provide helpful
    information and guidance to landowners who have some sort of
    concern.
        Mr. Clark. I would concur with the chairman's comments. I
    would also add that one of the things that I have talked about
    with FERC staff is, as we go out into the public and have
    scoping meetings and public meetings and things like that as we
    have talked about before, there is a lot more interest in these
    hearings than we have had in the past. Sometimes it is from
    interveners and folks who just simply don't want infrastructure
    at all. But what is, I think, very important is that we ensure,
    from a staff standpoint, that we continue to ensure that the
    actual landowner who is affected when they walk into that room
    has that opportunity to speak on the record so that they can
    have their views known about a particular infrastructure
    project that is directly affecting them. And it is getting to
    be more of a challenge because the hearings--there are a
    certain number of hours, and there is a lot of people that show
    up. But we need to make sure that we have those avenues for
    people who are directly impacted by the infrastructure.
        Mr. Latta. Thank you. And, Commissioner Clark, I understand
    that under the Clean Power Plan, municipal electrics and a
    rural electric cooperative that are not currently regulated by
    State public utility commissions would be required to come
    under State regulatory jurisdiction for purposes of the Clean
    Power Plan compliance. In your experience, is this a dramatic
    change? And how will this impact the ways munies and co-ops do
    business in the future?
        Mr. Clark. Congressman Latta, I think depending on the
    state, and how the state decides to go about an implementation
    plan, or a Federal implementation plan, it could be a big
    change. I know in my home State of North Dakota it would be.
    The issue is that you are effectively requiring a state to come
    up with a sort of carbon integrated resource plan for the state
    as a whole. Obviously municipals and co-ops are a big player in
    certain states, but traditionally have not been regulated in an
    integrated resource plan way that traditional utilities have
    been. So depending on the state, it could be a big change.
        Mr. Latta. Thank you very much.
        And, Mr. Chairman, my time is about to expire. And I yield
    back.
        Mr. Whitfield. Gentleman yields back.
        At this time, the Chair recognizes the gentleman from
    Pennsylvania, Mr. Doyle, for 5 minutes.
        Mr. Doyle. Thank you, Mr. Chairman. And Chairman Bay and
    members of the Commission, welcome. And thank you for appearing
    before the committee today.
        Commissioner Honorable, welcome to your first hearing. In
    your testimony, you mention reliability measures in the final
    rules of the Clean Power Plan. And one of the concerns that I
    have voiced repeatedly in these hearings is that the Clean
    Power Plan may jeopardize our fuel diversity. And in
    particular, that we could lose baseload power like coal and
    nuclear. Do you share these concerns? And if so, what do we do
    about that?
        Ms. Honorable. Thank you for the question, Congressman
    Doyle, and thank you for the welcome. I, indeed, share your
    concerns, even hearkening back to my days as a state regulator.
    I believe that fuel diversity is really key in ensuring
    reliability in going forward, even in these dynamic times. Even
    aside from the implementation of the Clean Power Plan, industry
    and states are already moving toward cleaner and more efficient
    energy portfolios. And so, it is imperative that we protect
    fuel diversity. I believe we need it all, and we especially
    will going forward.
        Mr. Doyle. Thank you. Commissioner LaFleur, in your
    testimony, you highlight the recent shift in resources used to
    generate power. And you go on to highlight FERC's oversight of
    capacity and where it could change to ensure reliability as
    properly valued and sustained. So given the pressure from
    markets and rules like the new Clean Power Plan that shift away
    from traditional baseload sources of power, what is FERC doing
    to ensure our constituents that we can turn on the lights when
    they are needed most?
        Ms. LaFleur. Well, thank you, Congressman Doyle. I think we
    are really working on several fronts. First of all, in the
    markets, we are trying to make sure that the markets properly
    and transparently value the reliability, including the
    reliability that baseload provides. And that has resulted in
    changes in the capacity market and ongoing work that may lead
    to changes in the energy market to make sure that those
    resources, especially the existing resources, are fairly paid
    for what they contribute. Secondly, the reliability standards
    have a role in making sure that essential reliability services,
    things like Black start and voltage support, that some of those
    big plans provide are properly accounted for and required. And
    there is a lot of work going on under the auspices of NERC to
    adapt the standards to changes in power supply.
        And finally, I think we need to work closely with the EPA
    as we did on MATS so that as implementation starts, we keep an
    eye on regions of the country that may have an issue and be
    there early enough to intervene if we need to.
        Mr. Doyle. I know in light of the polar vortex at PJM
    included additional capacity performance standards in their
    markets. Do you think that they properly value baseload power?
        Ms. LaFleur. Well, we do have a rehearing pending, but I
    voted for the order and strongly supported the early order
    because I thought that it was a fuel-neutral way to define what
    reliability meant in a way that, yes, it has an impact on
    baseload power, but it was defined in a neutral and fair way.
    So I supported that order. Now we are starting to see the
    results, and we will be looking very closely as it is
    implemented.
        Mr. Doyle. And since the adoption of those reforms, have
    you seen any adverse effect on renewables, demand response,
    energy efficiency, or any other non-baseload products in PJM?
        Ms. LaFleur. Well, there has only been one transitional
    auction run so far, but no.
        Mr. Doyle. I want to talk briefly, too, about
    cybersecurity, because I believe that is very important, too.
    And, Commissioner, you have mentioned the growing importance of
    that and how this presents a relatively new challenge for FERC.
    You said that these issues present different challenges and
    continue to say, in many cases, we don't have the benefit of
    decades of experience to draw upon. Well,
        I am proud to point out that we do have decades of
    experience in Western Pennsylvania, particularly at Carnegie
    Mellon University CyLab, which is a global leader in this
    field. And to what extent can FERC grow and develop
    relationships with institutions like CyLab to ensure our grid
    remains secure?
        Ms. LaFleur. Well, institutes like Carnegie Mellon are
    doing critically important work. And we do have an office of
    energy infrastructure security. They don't work on standards,
    but they work on collaborative relationships with universities,
    industry, and other agencies. And we would welcome more
    engagement with Carnegie Mellon. One of the things that is
    going on at the university level that I think is so critical
    right now is designing parts of the grid to build in more
    resilience on the front end. So we will get away from standards
    and retrofitting and really building the grid better. That is
    where the future lies.
        Mr. Doyle. Thank you, Mr. Chairman. I yield back.
        Mr. Whitfield. Gentleman yields back.
        At this time, the chair recognizes the gentleman from
    Mississippi, Mr. Harper, for 5 minutes.
        Mr. Harper. Thank you, Mr. Chairman. And thanks to each of
    you for being here and the work that you are doing. Chairman
    Bay, if I may ask you, many retail tariffs allow net metering
    of consumption of electric power by end use customers against
    on-site generating sources. In particular, we are seeing a
    proliferation of these on-site rooftop solar arrays by
    commercial and residential retail customers. The cost of
    distribution grid and transmission grid are interconnected, and
    both constitute the stream of interstate commerce. Should FERC
    exert jurisdiction over net metering arrangements in any
    respect?
        Mr. Bay. The Commission issued an order in 2009,
    Congressman Harper, called Sun Edison, in which the Commission
    ruled that rooftop solar was not subject to FERC's jurisdiction
    over wholesale markets as long as, during the relevant billing
    period, the person who owned the rooftop facility or unit was a
    net user, not a net seller of energy. And so that has been the
    line that FERC has drawn in its order. And I think it is
    important to note that that order, as a result, respects
    traditional state authority in this area. One concern that I
    think some would have were FERC to go further, would be a
    fairly dramatic preemption of state authority by FERC. And so,
    I think that poses some real questions about where you want to
    draw that line regarding the allocation of authority between a
    Federal Government and the states.
        Mr. Harper. Yes, sir. You know, of course, technically, you
    could argue that these net metering arrangements constitute a
    wholesale sale. And wholesale sales are expressly identified in
    the Federal Power Act as being FERC jurisdictional. So with
    that, why isn't FERC exerting jurisdiction over them?
        Mr. Bay. Well, as I said, there is that decision from 2009,
    Sun Edison, which is the controlling FERC precedent now.
        Mr. Harper. Right. Has there been any thought on revisiting
    that?
        Mr. Bay. Well, certainly, I have heard rumors that we may
    be receiving a complaint from different entities in industry
    regarding this very issue. But when you look at the Federal
    Power Act, the purpose of it, when Congress passed it decades
    ago, was to ensure competition in the markets, and to ensure
    that rates remain just and reasonable. And so, to my mind, it
    is not clear that when Congress passed this law, it intended
    some individual who has a rooftop solar unit to be viewed as a
    utility within the meaning of the Federal Power Act, and to be
    subject to Federal regulation.
        And I think the further argument can be made that those
    kinds of units, far from impeding competition, are actually
    furthering it. So I think that there are a number of arguments
    there, not only based on the language and the history of the
    Act, but also based on a traditional recognition of state
    sovereignty in the area.
        Mr. Harper. Chairman Bay, I appreciate your insight on
    that. But, while a companion memorandum of understanding to the
    final Clean Power Plan rule outlines conferencing powers
    between the EPA, FERC, and DOE, neither that Memorandum of
    Understanding nor the final rule provide for a formal role or
    process for the Commission to carry out its statutory duty to
    maintain reliability. As a practical matter, how will the
    Commission actually ensure reliability as the CPP is
    implemented? And what will the Commission's role be in the
    event reliability and environmental regulations conflict?
        Mr. Bay. Thank you for the question, Congressman Harper.
    One of our core responsibilities is reliability. And we are
    going to remain very engaged on reliability issues and any
    potential reliability issues relating to the Clean Power Plan.
    So we have already entered into this agreement with the DOE and
    EPA to have staff meet on a quarterly basis. As I indicated,
    staff has already met. And we are going to be monitoring what
    happens during the process. And also a potential resource, if
    States have questions of us, with respect to their plans. And
    as Commissioner Honorable noted, if necessary, we will hold
    technical conferences and do other follow-up. But I want to
    assure you that we are very engaged on this issue.
        Mr. Harper. Do you think reliability may become subject to
    litigated outcomes?
        Mr. Bay. Not clear to me since there is a reliability
    safety valve, and there is basically this glide path towards
    compliance. So we will have to see what happens.
        Mr. Harper. Thank you. And I appreciate that very much,
    Chairman Bay, and I yield back.
        Mr. Whitfield. The gentleman yields back. At this time, the
    chair recognizes the gentleman from New York, Mr. Tonko, for 5
    minutes.
        Mr. Tonko. Thank you, Mr. Chair. I know numerous Members of
    the House and Senate have expressed their concerns with the
    pipeline permitting process. And, Mr. Chair, your testimony
    states that there is a need for more natural gas pipeline
    infrastructure. I don't necessarily disagree, but I do know
    many communities to which these pipelines pass have legitimate
    concerns about safety, noise, and air and water pollution from
    construction and the operation of those associated facilities.
        And I know Commissioner Clark's testimony mentions a ``just
    say no'' attitude to any new project. That might be the case
    for some, but there are many, many people that have legitimate
    concerns and believe the public has been shut out of the
    process. So, Mr. Chair, can you explain FERC's public comment
    process for pipeline siting?
        Mr. Bay. Thank you for the question, Congressman Tonko.
    FERC tries to provide a tremendous amount of process to
    stakeholders who could have an interest in a pipeline project.
    And so, throughout the process, whether it is pre-filing when
    scoping meetings are being held, or even after a filing has
    been made by the project developer, we welcome comments from
    the public. And so, there are many ways that people can get
    those comments to us. They can get those comments to us at the
    meetings, the scoping meetings that are held. But they can also
    send us written comments as well. And those comments will be
    made part of the record.
        But it is very important for us to hear from members of the
    public who have an interest in the project, whether they are
    for it or against it, and for us to consider those comments
    when we evaluate the project.
        Mr. Tonko. And just specifically, how does FERC proactively
    conduct its outreach to affected communities?
        Mr. Bay. One thing that we do is to provide notice of the
    scoping meetings that we hold. And so those notices go out to
    communities along the path of the pipeline. They typically last
    for several hours. There is a court reporter there. The meeting
    can be transcribed. So that is one of the ways we get notice to
    the public. But certainly, throughout this process, staff tries
    to make clear to the public that their comments are welcomed,
    and that they can submit those comments to FERC for FERC's
    consideration.
        Mr. Tonko. And then how are comments from Federal, state,
    and local officials, as well as the general public considered,
    particularly concerning the request to extend those deadlines
    that are associated with the review process?
        Mr. Bay. So we certainly consider the requests of other
    officials as well, including state officials; and we then
    decide, when we get those requests, whether or not more time is
    warranted. I should note that even if a formal window has
    closed with respect to some stage of the processing of an
    application, if a member of the public submits a comment, that
    can still be made part of the record. So it is not like the
    door is slammed shut on someone.
        Mr. Tonko. And have you found engaging local stakeholders
    to be productive in determining the appropriateness of a
    project or its scope?
        Mr. Bay. I think it is critical that we engage with local
    stakeholders. And one of the things that we have also done is
    to publish a best practices manual for pipelines. And one of
    the things that we do in this manual is to encourage them to do
    the outreach to the communities along the path of the pipeline.
    That it is very important, in other words, for the pipeline to
    start to develop a relationship with the members of the public
    who could be impacted by the infrastructure.
        Mr. Tonko. And when a project is changed, such as being
    rerouted to pass through different communities, does FERC make
    an effort to extend the public comment period and engage newly
    impacted people?
        Mr. Bay. It probably depends upon the stage of the process
    when that change is occurring. Many changes can actually occur
    during a pre-filing process. And so there might be an
    opportunity there for the public to provide comment. I might
    have to talk to staff and get back to you on that one,
    Congressman Tonko, so that I can explain in a more specific way
    how the record can be developed. So I would be happy to do
    that. I can tell you, though, that even when we issue a
    certificate, there are dozens of conditions that are attached
    to the certificate. And these conditions are intended to
    remediate any potential impact from the pipeline.
        Mr. Tonko. And when any of that new information is released
    late in the scoping process, do you believe it warrants more
    time for public comments and analysis?
        Mr. Bay. I think it depends upon what the development is.
    But certainly, again, we welcome comments from affected
    stakeholders.
        Mr. Tonko. I thank you, Mr. Chair. I yield back, Mr. Chair.
        Mr. Whitfield. The chair, at this time, recognizes the
    gentleman from West Virginia, Mr. McKinley, for 5 minutes.
        Mr. McKinley. Thank you, Mr. Chairman. I guess to
    understand FERC, you have to understand how we got here, what
    are the issues that you have to face. And I am looking back on
    just globally with what has been said over the years, and
    certainly being said in Paris today and in the next few weeks.
    Because all of this sets the tone for the issues that you have
    to face. And I look back at some of the quotes that have been
    used over the years. People have said things like that the
    IPCC, one of the lead authors said, on energy, he said that, We
    must clearly, must redistribute, de facto, the world's wealth
    by climate policy. Then you have a former Canadian minister who
    said that, that no matter, this science of global warming is
    all phony. Climate change provides the greatest opportunity to
    bring about justice and equality in the world.
        Or then we go to, at the Earth Climate Summit down in Rio
    is that, we may get to a point where the only way of saving the
    world will be for the industrialized civilization to collapse.
        That sets the stage, then, for this administration and the
    EPA to be emboldened to enact a lot of regulations because they
    are drinking the Kool-Aid. So what we have here is they have
    moved on this. And as a result, I feel sorry for you at FERC
    because, I think primarily, you are just cleaning up after
    someone else. It doesn't come across to me as you have a seat
    at the table on our national energy policy. You are just having
    to implement what someone else has done, how they have been
    influenced by the global community. You remind me of Captain
    Smith on the Titanic, just managing a sinking ship. So I am
    wondering, given that that is the attitude all these
    regulations, and I can remember sitting here just a few years
    ago when Commissioner Moeller made the remark that if we don't
    do something to replace the coal-fired power plants that have
    been shut down across America, his quote was, ``The new Federal
    environmental regulations could lead to rolling blackouts in
    Midwest by the summer of 2016, unless action is taken to boost
    reserve generating capacity.''
        I don't think we are doing anything on that. And 2016 is
    just around the corner. And then I look at your own policy
    statement that says that you are to regulate reasonable cost,
    at reasonable cost. I live in a state that 98 percent of the
    power is generated from coal. And because of the regulations
    and the closure of seven power plants, and ultimately more
    gigawatts of power, we are already experiencing a 47 percent
    rate hike on utilities. How is that reasonable? I think you
    failed. But maybe you failed, because I don't know that you
    have a seat at the table.
        So I guess it would go back to, Commissioner Clark, how
    would you respond? Where are we building the coal-fired power
    plants? How are we going to reject this globalization that is
    going on and the attitude that has got us to the point that we
    are afraid to burn coal, we are afraid to burn gas?
        Mr. Clark.  Congressman, as I indicated in my testimony, I
    think the Clean Power Plan 111(d) regulations certainly put
    regulators at both the State and Federal level in a very
    precarious position, which is that while it is not being
    promulgated by FERC or by a state public utility commission,
    most of the potential negative outcomes that could be related
    to it, whether it is matter of affordability or reliability in
    that state, all directly fall on our shoulders because those
    are the areas that we have responsibility over. And we know if
    the lights go out, or if costs are to spiral out of control, it
    will be public utility commissions at the state level, and FERC
    at the Federal level that will be answering those questions. So
    certainly, it creates challenges for us.
        With regard to the concern about cost, I think in certain
    states, it is something that is a very real concern to have. It
    is one that I have as a North Dakotan. I indicated in my
    testimony that our state health department who is putting
    together our CIP estimates that if we were to enter a carbon
    credit trading program in North Dakota, it would be a $400 to
    $450 million annual tag. It is an estimate. It could be more;
    it could be less. But that is the figure that they are using in
    a state of about 750,000 people. That is, obviously, a huge
    impact. So these are all concerns that are legitimate.
        Mr. McKinley. OK. Mr. Chairman, in the time I have left,
    what are we doing? What is FERC doing about authorizing more
    power plants to be constructed or was Moeller wrong?
        Mr. Bay. Under the Federal Power Act, we don't have the
    authority to order the construction of new power plants. And
    under the Federal Power Act, FERC has always taken the position
    that it has to be resource neutral. But what we have tried to
    do is to improve the efficiency of the energy markets and the
    capacity markets so that they send the right signal to
    resources. And so that is where we have focused our attention,
    while also, always making reliability a priority. Mr.
    Whitfield. The gentleman's time has expired.
        At this time, we recognize the gentlelady from Florida, Ms.
    Castor, for 5 minutes.
        Ms. Castor. Thank you very much, Mr. Chairman. And good
    morning and thank you all for being here.
        The former FERC Chair, John Wellinghoff, recently raised a
    concern over the very significant investments in natural gas
    resources by utilities. He said that these huge investments are
    happening at a time when battery storage and renewable
    resources appear to be growing. And that such significant,
    maybe even unbalanced investments in gas resources could put
    customers at risk, the folks we represent back home, for
    future--our neighbors could be on the hook for these
    investments.
        You can't argue with the fact natural gas prices have
    remained very low. This has been a benefit. But Mr. Wellinghoff
    warned that the falling cost of renewable energy and energy
    storage could outpace cheap gas in the future. He called it
    very risky for consumers. And some utility leaders have echoed
    this concern. Chairman Bay, you just talked about how FERC has
    a responsibility to look at the energy markets. What is FERC's
    view, especially now with the incentives of the Clean Power
    Plan to reduce carbon pollution?
        Mr. Bay. FERC has relied upon economic signals from the
    market to determine whether or not additional gas
    infrastructure is needed. And one of the ways we evaluate that
    is when a project developer holds an open season, we look to
    see whether or not the capacity that would be provided by the
    pipeline is subscribed, whether there are precedent agreements.
        And so that can be a pretty clear signal as to whether or
    not the market thinks that that capacity is necessary. But it
    is important to note that it is the market that is driving
    these decisions. So it is not like ratepayers are necessarily
    on the hook for the contracts that might be entered into with
    the gas pipelines. And so that does, I think, provide some
    protection to consumers. And if the payoff time is quick enough
    on this pipeline, and the investment, I think that that
    investment in the pipeline can be a benefit to consumers. It
    really depends upon the capacity constraints in a given region
    in the country.
        Ms. Castor. And furthermore, on consumer protection and
    demand response, traditionally, demand response was viewed as
    applicable to retail electricity policies and, therefore,
    within the jurisdiction of the state public utility
    commissions. However, as electricity markets evolved in the
    wake of the Energy Policy Act of 2005, demand response began to
    evolve into a wholesale issue, and, accordingly, FERC issued
    Order 745 which attempted to deal with compensation for demand
    response offered at wholesale. If you are a consumer out there,
    the benefits are quite robust. And for states now under Clean
    Power Plan, reduced short-term electricity costs, avoid the
    need for more investments in generation transmission of very
    expensive plants, you have to build, and bring environmental
    benefits.
        Now, the order was challenged. It was argued before the
    U.S. Supreme Court. Chairman Bay, you have a very distinguished
    legal career. Did you attend the oral argument at the Supreme
    Court?
        Mr. Bay. Yes, I did, Congresswoman Castor. Actually, I
    think every member of the----
        Ms. Castor. Ah, everyone did. Isn't it interesting to--you
    should do that if you are ever here in Washington. Please go to
    an oral argument. It is fascinating. But can you read the tea
    leaves for us and give us what the outlook is? I know one
    Justice had to recuse himself. So what is your expert analysis
    of the Court?
        Mr. Bay. You are right. Justice Alito recused himself.
    Eight members of the court will be deciding the issue. If there
    is a tie, then the decision of the D.C. Circuit stands. I think
    it is really impossible to read the tea leaves. I have to
    confess----
        Ms. Castor. I knew you were going to say that.
        Mr. Bay. I have to confess to you, though, Congresswoman
    Castor, that every time I have ever tried to read the tea
    leaves, I get it wrong. So probably, if I ventured an opinion
    today, you would do well to bet on exactly----
        Ms. Castor. So could you go through--there are a couple of
    potential outcomes. Could you run through those quickly? I
    mean, the awful thing would be if FERC does not have--if we
    don't continue to promote demand response.
        Mr. Bay. I think there are a number of possible outcomes.
    The Court could say that FERC does have jurisdiction. And it
    could also affirm the compensation that Order 745 allowed for
    demand response. So that is at one end of the spectrum. At the
    other end of the spectrum, the Court could either deadlock,
    which means the decision of the D.C. Circuit stands. Or the
    Court, a majority of the court, could decide that FERC lacks
    jurisdiction, in which case it doesn't reach the compensation
    issue.
        Somewhere in between, the Court could say that FERC has
    jurisdiction but that its compensation scheme was not
    sufficiently explained and could remand on that particular
    issue. So there are a range of possible outcomes. My colleague,
    Commissioner LaFleur, likes to cite to Yogi Berra for that
    famous saying that the difficulty with predicting the future is
    that it hasn't yet happened, and I have to confess to sharing
    Yogi Berra's sentiment in that regard.
        Ms. Castor. Thank you very much.
        Mr. Whitfield. Gentlelady's time has expired. At this time,
    recognize the gentleman from Illinois, Mr. Kinzinger, for 5
    minutes.
        Mr. Kinzinger. Thank you, Mr. Chairman. And thank you all
    for being here today and spending your morning with us. I am
    sure it is exciting.
        Chairman Bay, as part of FERC's responsibility to oversee
    the reliability of the bulk power system, you recently approved
    new critical infrastructure protection standards to address
    physical threats and weaknesses of the grid. These standards
    are designed to enhance the grid's physical security, and
    reduce areas of vulnerability. In your mind, what more can and
    should be done to ensure the physical security and reliability
    of the grid?
        Mr. Bay. Thank you for the question, Congressman. I have to
    say that Commissioner LaFleur and Commissioner Clark deserve a
    lot of credit for the physical security standard because they
    were on the Commission at the time that the Commission adopted
    it. And under Commissioner LaFleur's leadership, that standard
    was adopted. So I think that is a very important start. In
    addition, there are critical infrastructure protection
    standards that have been in place for some time now. We are up
    to version 5. The Commission is considering version 6. One of
    the things that we are looking at with respect to the CIP
    standards is GMD, the second stage of that particular standard,
    which would create a benchmark event, require utilities to
    assess their system against that benchmark event, and then come
    up with strategies to deal with any potential problems. So that
    is certainly something that we are looking at.
        Another aspect of cybersecurity that we are looking at
    deals with the supply chain, and whether or not there should be
    a standard in that area. We had issued a notice of proposed
    rulemaking. And we have decided to do a technical conference on
    that issue. So we will be bringing in industry and we will be
    getting their views.
        Mr. Kinzinger. OK. I might have to cut you off because I
    have two more quick questions, if you don't mind.
        And in regards to the EPA's Clean Power Plan, what position
    would FERC take if it were asked to issue a declaratory order
    related to the reliability impacts of state plans and requests
    for the exercise of the reliability safety valve?
        Mr. Bay. I guess I would want to know what the specific
    details were with that particular proposal. Under MATS, the EPA
    can request a technical opinion from FERC relating to the
    reliability issue that would be posed if a unit closed down.
    Under the reliability safety valve currently contemplated by
    the EPA's Clean Power Plan, there is no mechanism, no formal
    mechanism, requiring FERC input, although certainly we are
    happy to provide it if the EPA requests our views.
        Mr. Kinzinger. So if you were asked to make a declaratory
    order, you would be willing to, or be open to working with them
    on that?
        Mr. Bay. Yeah. I don't know that I would call it a
    declaratory order, but certainly, we could provide them with
    our technical views.
        Mr. Kinzinger. OK. And then, Mr. Clark, recently you spoke
    on efforts at the state level to support nuclear power.
    Specifically, you pointed out that states that encourage the
    growth of nuclear power are going to end up with two different
    regulatory regimes that don't fit together very well. And that
    this is going to impact FERC and negatively impact how prices
    are formed in wholesale markets. If you want to expand on that,
    and also, doesn't a two-tier system basically already exist
    since all clean resources, other than nuclear, have out-of-
    market payment subsidies and everything that impact their bid
    price?
        Mr. Clark. Thank you for the question. It is an excellent
    one. It often comes into play with regard to nuclear power, and
    it especially becomes a question and an issue with regard to
    the Clean Power Plan being out there because remember, the grid
    operates on a regional basis in terms of market signals that
    are sent, but states, state by state, have to meet their in-
    state requirements or will should the Clean Power Plan be
    upheld. So they are managing their fleet in a way that is sort
    of agnostic of the market itself. The concern with nuclear
    power is right now if you present a scenario where you have a
    restructured state, so it is a merchant generation state, you
    have high state renewable portfolio mandates, you have low cost
    natural gas that is the marginal unit and you have big nuclear
    investments, it is very difficult for that plant to stay open
    in that regard. So what it will cause states to do that have
    restructured is to probably, in some way, if they want to keep
    that nuclear plant open to meet their Clean Power Plan goals,
    it will probably cause them to, in some way, soft re-regulate
    utilities that they had previously restructured.
        The concern is, if you end up in a market that, from a
    wholesale standpoint, has been set up to allow pure price
    signals to determine where investment dollars go and where
    investment decisions get made, you can reach a tipping point
    where there are so many out-of-market solutions that are being
    imposed on the market, that the market isn't creating the
    proper price signals that are needed.
        Mr. Kinzinger. OK. Thank you. And from my district with
    four nuclear power plants, it is very important. So I yield
    back, Mr. Chairman.
        Mr. Whitfield. The gentleman yields back. At this time the
    chair recognizes the gentleman from Iowa, Mr. Loebsack, for 5
    minutes.
        Mr. Loebsack. Thank you, Mr. Chair. This has been an
    enlightening hearing. I really appreciate all of you being here
    today. The poor folks who are still here, they get to hear me
    talk about Iowa all the time, and how much wind energy we have
    in the State of Iowa. The last report was 28 \1/2\ percent of
    our electricity comes from wind. It will probably be 30 or more
    by the end of this year. And we are pretty proud of that, I
    have to say.
        I really think we have to move not only toward wind but
    solar, and go as far in that direction as we possibly can,
    recognizing that it is going to take some time, obviously, to
    get to a portfolio that I think would be more sustainable, be
    cleaner, be better for our environment, no question about it,
    and also would provide a lot of jobs, and has, in my state, and
    other states. But I have a question about reliability. I know
    we have all been talking about that today. And that seems to be
    the big issue out there in moving from fossil fuels to more
    sustainable energy. What specifically can we do? What measures
    have been taken, can be taken, as we make that transition,
    assuming, you know, that the Clean Power Plan, it is now, in
    fact, there and that we do implement that? What specifically
    can we do, Chairman Bay, when it comes to reliability?
        And what specifically is being done at the present time?
    Mr. Bay. I think the main thing that we can do is to work
    closely, we at FERC, to work closely with the EPA, DOE, state
    regulators, NERC, the regional reliability entities, the RTOs,
    ISOs, industry. I think we just have to work very closely
    together, and to monitor the situation to see whether or not
    there are any potential reliability issues. And if so, what
    needs to be done to address them. I don't think that you
    necessarily need a new reliability standard or anything like
    that, but I think you take the standards that you do have and
    you make sure that they are being followed, and you make sure
    that you work well with others.
        Mr. Loebsack. Did you want to say something, ma'am? I do
    have a question for you, Ms. LaFleur. Yeah. When we were
    talking about the grid, I have a real concern about the
    physical protection of the grid. Cyber is one thing, but actual
    physical protection of the grid is another thing entirely.We
    are a big country. It is very, very difficult, obviously, to
    protect the grid from some kind of attacks from someone abroad,
    domestic, whatever the case may be. But can you address that
    question?
        Ms. LaFleur. Yes. I think the physical security of the grid
    is very important. I think the most frightening thing would be
    some kind of coordinated attack that was a physical attack or a
    systemic attack on different parts of the grid. I think that
    the standards that we have put in place, which require every
    transmission owner to identify the most critical facilities and
    then protect them are an important step. But I think beyond
    that, a lot of the protection has to come from how we build the
    grid. Building in more redundancy, so we kind of decriticalize
    those places so that a physical attack won't cause as much
    damage. And building in more standardization, so if something
    goes wrong, we can share transformers more rather than having
    to build a custom one in every place.
        Mr. Loebsack. You are kind of answering my next question,
    which was building the grid better, that is what you mentioned
    earlier, that, specifically, is the kinds of things that you
    are talking about when you say building the grid better?
        Ms. LaFleur. Yes. I think that is really the future, is to
    think about how do we build a more robust grid in a world where
    there are so many more security issues?
        Mr. Loebsack. Right. Does anybody else want to weigh in on
    that particular issue on the grid? Did you want to say
    anything, Mr. Clark?
        Mr. Clark. I would second everything that Chairman Bay and
    Commissioner LaFleur have indicated. One of the--it occurred to
    me during one of the questions, something that I think the
    Commission can do in terms of reliability and integrating the
    renewables that you talked about is something that the
    Commission recently had a series of presentations on at one of
    our recent meetings, which is the issue of energy storage. If
    renewables are to be brought on in a way that really makes
    sense and makes them even more valuable, energy storage as a
    means of compensating for their inherent intermittency, is
    something that could be very important. So the Commission has
    been studying that.
        Mr. Loebsack. I think that is a great idea. Thank you very
    much. Thank you, Mr. Chair. I yield back.
        Mr. Whitfield. The gentleman's time has expired. At this
    time recognize the gentleman from Missouri, Mr. Long, for 5
    minutes.
        Mr. Long. Thank you, Mr. Chairman. And I figured you were
    going to ask me where I am going after this hearing. And where
    I am going is down to the Rayburn Foyer to sign cards for our
    troops for the American Red Cross. And I would like to remind
    our other members of the committee that they can join me down
    there. So you just looked like you wanted to ask that question,
    Mr. Chairman.
        Mr. Whitfield. I really appreciate your letting us know
    about that. Thank you.
        Mr. Long. Commissioner Clark, in referring to the EPA's
    carbon regulations, you mention in your testimony that there is
    a potential tension between the 111(d) rules and
    infrastructure, especially in the timeline for compliance and
    in potential for a large generation resource shift away from
    coal in order to comply. In my State of Missouri, for instance,
    we rely on 83 percent coal for our energy generation. My
    question is: What is FERC doing to help ensure that the
    reliability resource adequacy is maintained during this period
    of transition given the length of time needed to develop and
    implement infrastructure projects?
        Mr. Clark. Sure, Congressman. Thank you for the question. I
    think it comes forward in a number of different ways. As I
    indicated, the infrastructure challenge is a key one. So FERC
    needs to continue to do its work in terms of how we process
    those applications that are in front of us. In terms of the
    Clean Power Plan, I think it is going to be critically
    important for FERC to be actively involved with other
    stakeholders. Sometimes it is with the markets in a region that
    is very market-oriented; sometimes it is going to be close
    collaboration with states since those states have chosen to
    remain fully vertically integrated. But collaboration with
    those stakeholders is going to be absolute key.
        I think we are going to need to do a lot of work with
    entities like NERC, who have technical expertise in terms of
    the operations of the grid. It needs to be under constant
    assessment, and we need to do that assessment as soon as we
    know what these those State Implementation plans look like,
    because until we know what the State Implementation plans and
    Federal Implementation Plans for those states that chose to go
    that route, until we know what they look like, we are kind of
    shooting in the dark here because we can't really model
    scenarios that are that open ended.
        So I think after we begin to see what those look like, we
    will be able to do more substantive work. But I think it is
    something that we absolutely have to have a voice in given our
    technical expertise in both markets and reliability at FERC.
        Mr. Long. OK. Thank you. I found something else real
    interesting in your testimony. You also state that intervention
    in regulatory proceedings is trending towards ``just say no,''
    which is designed to block entire classes of infrastructure
    projects through a strategy of outright denial, or defeat
    through delay. Can you expand on that?
        Mr. Clark. Sure, Congressman. What I was noting is
    something we have talked a little bit about here this morning,
    which is the trend towards intervention that we typically
    didn't have in the past, which is that certain resources, in
    and of themselves, you have intervenor groups that wish to
    block the entire development of that resource; not that they
    believe that there is a particular problem with a particular
    line, it is that they have a concern with all infrastructure
    and would like to see it blocked. But the challenge becomes in
    an era where it is quite clear, in my mind, that to meet
    environmental regulations, and where the market is going, in
    some cases, in an affordable, reliable manner, you are going to
    have to have the infrastructure. Dealing with that tension is
    going to be a challenge for Commissions at both the state and
    Federal level going forward. We want to ensure----
        Mr. Long. What kind of impact will it have on the
    Commissions?
        Mr. Clark. Well, from one standpoint, I think the
    Commissions, and we have seen this here at FERC, I think you
    probably have seen it at the state level as well, you have a
    lot more applications that are being put forward in terms of
    infrastructure needs. So you have more pending dockets. At the
    same time, you have more intervention and opposition to those
    dockets. It creates a challenge for commissions. Ultimately, if
    the infrastructure is blocked in total, it creates challenges
    for consumers because you don't have access to the otherwise
    affordable energy that you might have.
        Mr. Long. What type of projects are you talking about
    that----
        Mr. Clark. In the case, Congressman, of the electric
    sector, it can be transmission lines which are sited at the
    state level, although FERC has a lot of authority over
    interstate transmission, we don't site it. But the interstate
    transmission lines are often put up to accommodate renewables
    that have seen significant growth. In the case of interstate
    natural gas pipelines, it is because you have coal plants that
    are going off. And as of right now, the market signals indicate
    that in most cases you are building natural gas to replace the
    coal. So you need to hook up the new natural gas plant.
        Sometimes it is because you have to have peaker units that
    tend to be natural gas, because they pair well with renewables,
    because they have fast ramping resources. So everywhere where
    there has been a transition to higher intermittent resources
    and more natural gas units, but you don't have the electric
    transmission lines and pipelines in place at the time that that
    transition is made, you end up with very high costs for
    consumers. It has been the case across the world where that has
    happened. It has been the case in certain regions of the
    country, as the chairman noted in his opening statement.
        Mr. Long. OK. I see my time has expired, Mr. Chairman. I
    yield back.
        Mr. Whitfield. The gentleman yields back. At this time the
    chair recognizes the gentleman from Vermont, Mr. Welch, for 5
    minutes.
        Mr. Welch. Thank you very much, Mr. Chairman. I have got
    two questions, one relating to renewables, and then the other
    about how we pay for natural gas infrastructure. By the way,
    what you were just saying about the ``just say no,'' I mean, it
    really does sort of have an element of public participation,
    whether it is about coal plants or it is even about solar. So
    we in Vermont, have a lot of renewables. But the siting issues
    are oftentimes very, very controversial. So it is something
    that we have to wrestle with independent of what that power
    source is.
        And the chairman indicated in his opening statement that
    the whole array of power sources, from coal to renewables, is a
    big deal. And depending on what your State mixes, it really has
    a significant impact on what you think is the proper approach
    on infrastructure.
        In Vermont, we have had a long tradition of utility-
    supported renewables. In fact, Green Mountain Power, our major
    utility, has been the leader in this. Efficiency has played a
    major role, again, with the support of our major utilities, and
    demand response, obviously.
        So I will ask first, Mr. Bay and Mr. Clark, in respect to
    infrastructure planning, where does that fit in to your scheme?
    Because the decisions that are made about an infrastructure
    decision really do have an impact on the power that can be
    deployed with the benefit of that. I will start with you, Mr.
    Bay. And just quickly on it, because we don't have much time.
        Mr. Bay. Sure. I think that is an important question,
    Congressman Welch. States obviously engage in integrated
    resource planning. FERC itself does not. And FERC has always
    taken the position that it should be resource neutral under the
    Federal Power Act. So as a matter of choice, we have not tried
    to evaluate or to pick which resources should prevail in a
    market.
        Mr. Welch. Right. But there is a practical issue. This is
    something we are debating in Vermont. If you put in a major
    infrastructure item, it is going to then drive power decisions
    to that. So how do you find that balance? By the way, I want to
    say thank you to Member Honorable for coming to Vermont. We
    were delighted to have you up there. I mean, can you comment on
    that?
        Ms. Honorable. Certainly. And great to see you again,
    Congressman Welch. It goes back to our embracing fuel diversity
    while we recognize we need to move toward a cleaner and more
    efficient energy infrastructure, for all of the reasons that
    have been discussed, to ensure reliability, diversity, energy
    security.
        Mr. Welch. Go ahead. I only have a couple minutes. I didn't
    mean to interrupt, but thank you.
        Let me get to financing of natural gas infrastructure by
    electric ratepayers. We have had a lot of discussion in New
    England about natural gas supplies. Traditionally, it has been
    addressed and paid for by the merchant generators. Now there is
    a move among some to suggest that be spread out across all
    electric rate customers.
        Obviously that would have a significant impact on energy
    markets. What is FERC's view on this? I will ask you, Mr.
    Clark, first. And thank you all for your work and your
    testimony.
        Mr. Clark. Sure, Congressman. Thank you for the question. I
    understand this has undergone a great deal of debate in New
    England, as you have certain states especially that have a
    concern for getting more natural gas access to natural gas
    infrastructure. As I understand it, the New England states
    originally had through NEPKA or NESCOE, the State council, some
    thoughts about potentially building into ISO New England
    tariffs the cost of the buildout of natural gas. They came in
    and talked with each of us individually about that--well, I
    didn't prejudge any matter. I think that there are probably
    some challenges to that type of approach. I understand in
    recent months, New England governors have gone back, taken a
    relook at that, and are now not planning that particular
    approach, but are looking at potentially financing pipelines
    through the state authority that each of the states still
    retain over their load-serving entities.
        I am interested in seeing how that plays out, in addition
    to their authority that they have over the natural gas
    distribution companies. So it is a little bit different
    approach. It hasn't been presented to the Commission yet. I am
    interested in learning about it. I think that that stateside
    approach probably has more opportunity to be successful than
    what----
        Mr. Welch. Commissioner LaFleur, do you have anything to
    add? And then my time is up. So you get the last word.
        Ms. LaFleur. I agree with what Commissioner Clark said.
    This has arisen in New England, as you know, because there is
    tremendous pipeline constraints there. And the way the markets
    are structured, it is difficult for any merchant generator to
    commit to firm capacity. I believe the issue is raised
    indirectly in the Kinder Morgan pipeline that has been filed.
    And there is another one that is in pre-filing that will raise
    it more directly. While not prejudging it, I would seek to be
    as flexible as we can under our authority to try to find a way
    to accommodate something a region is trying to do, but it would
    have to be lawful. That is why the transmission solution has
    been turned away from.
        Mr. Whitfield. At this time, the chair recognizes the
    gentlelady from North Caroline, Mrs. Ellmers, for 5 minutes.
        Mrs. Ellmers. Thank you, Mr. Chairman and Ranking Member
    Rush, for holding this hearing today so that we can continue
    our oversight. And thank you, panel. Commissioners, thank you
    so much for being with us today. As co-chair of the Grid
    Innovation Caucus, I look forward to hearing from each of you
    regarding the threats that the Clean Power Plan poses to
    affordable and reliable electricity, as well as the path
    forward to securing our grid, as well as modernizing our
    Nation's infrastructure, energy infrastructure.
        Chairman Bay, I would like to start with you. I have a
    question regarding cybersecurity. Currently, the electric
    sector has mandatory cyber asset and incident reporting
    requirements through FERC, NRC, and DOE regulations. Chairman
    Bay, do you think FERC has sufficient authority over
    cybersecurity?
        Mr. Bay. I think we do at this time, while recognizing that
    there is always more work to be done. So we are up to CIP
    version 5, and we are considering CIP version 6. There are
    additional standards that we are examining right now. A lot of
    work has happened, but there will always be more work that we
    have to do given the nature of the threat.
        Mrs. Ellmers. Do you believe that FERC needs help with your
    statutory mandate to protect the bulk power system with cyber
    threats and harm?
        Mr. Bay. I should note one caveat. There should be
    emergency cyber authority. So thank you for that follow-up
    question. I understand that the House is addressing this very
    issue. That emergency authority does not need to reside with
    FERC. It could reside elsewhere in the Federal Government, but
    someone needs to have it.
        The other suggestion I would make, and again, the House
    legislation considers this issue, is whether or not FOIA rules
    should apply to information that is shared between industry and
    government and vice versa. I think a fix there could be very
    helpful as well.
        Mrs. Ellmers. Thank you very much, sir.
        Commissioner Honorable, I have a question for you. Last
    year, NARUC approved a resolution seeking to ``preserve states'
    authority to decide the type, amount, and timing of new or
    existing generation facilities that will be constructed or
    maintained within the state to achieve legitimate state policy
    objectives.'' Then it goes on to say ``to safeguard and
    guarantee states' continued right to operate programs to
    procure new generation or maintain existing generation for
    reliability, affordability, and environmental purposes.''
        Does the EPA's Clean Power Plan impact any of these areas
    which NARUC has expressly resolved to preserve?
        Ms. Honorable. Thank you for the question, Congresswoman. I
    certainly think this will play out. Clearly, the EPA endeavored
    to provide the states with flexibility. I served as NARUC
    president during that time that the resolution evolved, and
    that was very important and continues to be very important that
    the states maintain control, and I support that, even in my
    current role.
        I do believe that the states have the ability to plan their
    own resources. There is certainly a lot of opportunity to
    ensure fuel diversity and reliability as we move forward to a
    cleaner energy infrastructure.
        Mrs. Ellmers. Thank you so much. My last question is for
    Commissioner Clark, this has to do with some of the EPA
    rulemaking, and I am going to use an example. The reliability
    safety valve, though very well intended, is really only useful
    after the rule has gone into effect. Is this correct?
        Mr. Clark. Congresswoman, that is correct.
        Mrs. Ellmers. And that is wonderful, and we are happy that
    that safety net is there, except it is kind of after the fact,
    it is an afterthought. And these decisions are already being
    made by many of these companies in our states having to
    prepare. So in your opinion, do you believe that as far as the
    rulemaking for EPA goes, FERC should have a much earlier and
    much more formal role in the rulemaking process?
        Mr. Clark. Congresswoman, there is contemplated in what EPA
    issued, as a final rule, some sort of consultative process with
    regional planning authorities. I think FERC needs to ensure
    that we have a robust part in that particular project that will
    be undergone. So that would be answer number one. I think there
    is a second related part of your question that I might address
    which is this: There is a concern in states that will need to
    be moving forward potentially if this is upheld, that they get
    going on it rather soon. The problem is, I hope we don't end up
    with a MATS-type situation, a mercury and air toxic standard
    situation, where you may have certain States make enormous
    investments in meeting a rule that ultimately, 3 of 5 years
    down the line, is vacated by the Supreme Court. I would, either
    through legislation or through litigation, that there at least
    be a pause in this so it doesn't go into effect, and we don't
    start having some of these large investments being made and
    then have the states find out that the rule itself wasn't
    valid. I think that is a concern.
        Mrs. Ellmers. Thank you, sir, and I agree, and I have gone
    over my time. Thank you, Mr. Chairman, and thank you to our
    panel.
        Mr. Whitfield. Thank you. At this time, the chair
    recognizes the gentleman from Maryland, Mr. Sarbanes, for 5
    minutes.
        Mr. Sarbanes. Thank you, Mr. Chairman. I want to thank the
    commissioners for being here today. Your testimony has been
    very helpful. Commissioner Bay, it is a pretty straightforward
    question. There is, I think, bipartisan interest on this
    committee already reflected in some of the hearings we have
    held, and some of the markups on how to continue to increase
    the intelligence of our grid, if you will, kind of smart grid
    technologies, how we stimulate more thinking in that regard and
    advance those technologies.
        And there is a recognition, obviously, that there is a
    major role to play in that on the part of states, also
    ratepayers can become a part of the equation, the private
    sector for sure, and that that advances all of our goals in
    terms of dealing with resilience and cybersecurity and
    distributed energy resources, giving customers more choice in
    how they relate to the grid, obviously going forward.
        I am interested as well, and I know there are others on the
    committee; I think Congresswoman Ellmers and Congressman
    McNerney share this perspective in what, for example, the
    Department of Energy might be able to do by establishing some
    sort of grant opportunities, programs, collaborative
    initiatives that they could initiate with the states, and with
    other partners that come together.
        So for example, utilities partnering with entities such as
    National Labs and universities, state and local governments
    where they are developing some of these advanced smart grid
    technologies, and benefiting with some support from the
    Department of Energy. I want to ask you to speak to whether
    that would be helpful and useful in continuing to push forward
    that effort on the smart grid?
        Mr. Bay. Thank you for the question, Congressman Sarbanes.
    I think that is an important question that you are raising.Many
    of these developments, as you know, are very exciting and they
    are happening at the distribution level. And so I do think it
    is very important for Federal agencies, including the DOE and
    FERC, to work with state agencies and state authorities to see
    where we can be helpful.
        My sense is that DOE will be more helpful than FERC in the
    sense that DOE does a lot of research and development, but FERC
    certainly can be helpful in incenting some of those
    technologies as well, not at the distribution level, but at the
    transmission level because of incentives that we can offer
    under section 219 of the Federal Power Act. But as Commissioner
    Clark noted, we just did a panel recently on energy storage,
    and a lot of exciting things are happening there with some
    analysts predicting that costs will drop another 50 percent
    over the next 5 years from 2015 to 2019. So, I guess, that is
    actually 4 years. So a lot of things are happening, and
    ultimately, they will impact both the transmission network as
    well as the distribution system.
        Mr. Sarbanes. Thank you. Actually, President Obama this
    morning, at his press conference in Paris, spoke about how
    goals were set on where the cost of certain kinds of power
    generation would be. And 2, 3 years ago, we set these targets
    and we have already exceeded them. It shows what happens when
    you get these synergies in place, and I think you are right to
    point to the opportunity for a number of different Federal
    agencies, like the Department of Energy and like FERC and
    others to collaborate in helping to stimulate that in
    partnership with states, with ratepayers, with the private
    sectors, so I appreciate your answer. Thank you very much and I
    yield back.
        Mr. Whitfield. This time the chair recognizes the gentleman
    from Oklahoma, Mr. Mullin, for 5 minutes.
        Mr. Mullin. Thank you, Mr. Chairman. And commissioners,
    first of all, I want to thank you for your thorough review of
    the Grand Lake Dam Authority, GRDA, for granting the variance.
    It was very important to Oklahoma and to that area, so thank
    you. I really do appreciate that.
        I would like to first start with an issue going on with the
    nuclear plants. Several nuclear plants that operate in the
    wholesale competitive markets have recently announced premature
    retirements for economic reasons. These plants tend to be
    highly reliable. Is FERC concerned about potential impacts of
    reliability of the electrical grid due to these retirements?
    Commissioner Bay, I might start with you on that.
        Mr. Bay. So this is something that we are monitoring very
    closely. Certainly, we are aware of the news of some of the
    retirements of those plants, and, again, one of the things that
    we are doing is using our authority over the wholesale market
    to see whether or not more effective or efficient price signals
    can be sent, and that is both in the capacity market as well as
    in the energy market.
        So that has been where we have been focusing our efforts.
    We can't--as I said, we don't pick winners in the energy
    markets. We try very hard to be resource-neutral. I believe we
    have to be under the Federal Power Act. With that being said,
    improved price signals, improved transparency can be helpful to
    all efficient resources.
        Mr. Mullin. One of the things that is going on, obviously,
    is with the coal-fired power plants coming down too; now we
    have nuclear plants coming down. And one area that we are
    lacking in is the ability to build new gas pipelines, too, to
    get some of these plants. We find, through the industry, very
    difficult to get the permits that are needed. And so, I will
    stick with you, Chairman Bay, for a little bit. Does FERC have
    the needed resources to handle these permitting issues? I mean,
    considering the reliability, we can only take so much off the
    grid before reliability becomes an issue. And being that we are
    already concerned with the alarming amount of electricity
    leaving our grid, surely there is a way that we can speed up
    this process.
        Mr. Bay. So we are very much focusing on the issue of the
    resources that we have, that we devote to infrastructure
    project reviews. And one of the things that we have done in
    this past year is to increase the number of staff who are
    assigned to the division that does that particular work. So
    this is something that we are watching very carefully.
        Mr. Mullin. Watching, Chairman, no offense here, but
    watching isn't actually engaging. We are going to speed this
    process up of the amount of electricity hitting our grid going
    backwards at a very alarming rate. And so watching it is
    watching a crash happen. I would like to try to use the word of
    being proactive and not reactive. And if I am hearing you
    correctly, what you are going to end up being is reactive.
        Mr. Bay. I probably was not clear enough. We added more
    resources, so we created an additional branch of staff who are
    doing project reviews in the Office of Energy Projects. Having
    added those additional resources, we are continuing to monitor
    what happens, and as Commissioner Clark's testimony noted,
    actually more than 90 percent-plus of the projects that we
    receive are certificated within 1 year after receiving the
    application. So it is important for us not only to do our work
    in a thorough way, but also a timely way, and we are very much
    aware of that.
        Mr. Mullin. Is there a way that we can help you with this?
    Is there a resource that we can help you streamline? Is there a
    process that we can help engage in? I say ``we'' as those
    sitting up here on the committee.
        Mr. Bay. I certainly would be interested in hearing the
    views of my colleagues on that particular question. But one
    thing we may be coming to you with for our next budget request
    is a request for more resources.
        Mr. Mullin. Money?
        Mr. Bay. I think you could characterize it in that way in
    as far as the money results in our ability to hire more people.
        Mr. Mullin. I think all of that would come, too, with the
    idea of making sure we are being very responsible with the
    resources we have, that has already been given to FERC under
    the current circumstances. My time has run out, and Chairman,
    thank you so much for allowing me to ask these questions, and
    Chairman Bay, thank you for being very thoughtful with your
    answers.
        Mr. Whitfield. At this time, the chair recognizes the
    gentleman from Virginia, Mr. Griffith, for 5 minutes.
        Mr. Griffith. Thank you very much, Mr. Chairman. I
    appreciate what you all do. I know it is a tough job. I will
    say we have some natural gas pipelines coming through my area,
    and earlier, Commissioner Clark indicated, and I think some of
    you all have touched on it as well, that there are folks who
    are saying that they just want to slow everything down in order
    to stop gas pipelines and other things. But I have a situation
    where I have got folks who may feel that way, but I have got a
    lot of folks who just want answers to questions, and while, in
    regard to the Mountain Valley Pipeline, certainly some of those
    issues were raised by the Mountain Valley Pipeline not
    contacting folks like the Roanoke County Board of Supervisors
    before announcing they were coming into the community and
    starting to do work.
        But likewise, the Roanoke and New River Valley has a
    population of roughly 300,000, you have a pipeline coming
    through. West Virginia, they had four hearings; in Virginia, we
    had two. Only one was in the Roanoke Valley, New River Valley
    area directly. And so as a result of that, the Roanoke County
    Board of Supervisors requested an additional hearing.
        I am not saying it would have been fun for your folks, but
    it would have been helpful, and likewise, because both
    Congressman Goodlatte and I thought that it was appropriate. We
    sent a letter saying we agree with them, and we would ask you
    to hold additional hearing. You signed the letter,
    Commissioner, saying yes, we can't do that. I think that does,
    sometimes, makes the problem a little bit worse. I know it is
    not easy, I know, as you just said to my colleague, you may
    need more resources because of what is going on. But a lot of
    my folks are reasonable people, but when they feel like they
    are not getting answers, they become more aggressive, and as a
    result of that, both Craig County and Roanoke County, and I am
    sure there were other factors, but one of the factors they both
    intervened in the process because they felt like this a was the
    only way they could keep a finger on what was happening.
        So I don't know there is anything you can comment on in
    that specific case, I just pointed out as a note.
        I have got a lot to get over and not as much time as I
    would like, of course. The first regulations currently require
    the Agency to consider the use of existing right-of-ways,
    Commissioner Bay, Chairman Bay. What do you all do to make sure
    they actually look at existing right-of-ways, because we
    recently had a factory that brought in natural gas, and now,
    here we have another gas pipeline coming through generally the
    same area of Giles County, and then that is where the factory
    was.
        What do you all do to make sure that they actually did look
    at using co-location possibilities, particularly when you are
    looking at--we have--my district has a lot of natural forest
    and the Appalachian Trail. So what do you all do in that
    regard? And if you could be quick, I would appreciate it.
        Mr. Bay. Sure. During our review process, we examined the
    impact of the proposed route, but also alternatives. And so, if
    there is an existing right-of-way that is feasible, that can be
    very helpful, both to the company and to FERC in making a
    decision about whether or not to certificate the project. So it
    certainly is a factor we take into account.
        Mr. Griffith. So if folks in Roanoke County, Giles County,
    Craig County think that there is a better path that would be
    co-located, they should let you know, is that what you are
    telling us?
        Mr. Bay. I should say that that is an option to be
    considered. In some cases, it is not easy to co-locate two
    pipelines where they are side by side, that can present its own
    challenges.
        Mr. Griffith. And I recognize that and appreciate that. I
    am going to switch gears on you. I am concerned with grid
    reliability; I am concerned with the problems we had with MATS,
    when several facilities in my district were closed down just
    before the Supreme Court ruled that they didn't do it right at
    the EPA. I am concerned that you all don't get noticed under
    the Clean Power Plan for interaction about what is going to
    happen when the plants close down. These are great concerns.
    But I have one that may not seem as big, but a number of my
    colleagues have touched on the grid reliability issues, and
    that is the shore issues related to lakes where there are
    hydropower facilities and plants.
        And I am concerned about private property rights. And I
    can't speak for any other State, but I have several of these
    located in or near my district, and as many of the members of
    the committee know, I am a recovering attorney, I used to be a
    small-town country lawyer, and I have looked at the deeds. So
    one of things I have that I don't know that you all take into
    consideration, not only do I think folks ought to be able to
    use the lakes for recreational purposes, but I think there may
    actually be a taking that you all are unaware of, because in
    some of those deeds that I had occasion to look at over the
    course of 28 years of private practice, the power company
    didn't get the land under the water. They only got the right to
    flood. And in that case, under Virginia law, you extend those
    property lines out.
        So if you come in and you say somebody can't build a dock,
    you are actually telling them they can't build a dock on their
    property, which I would think is a taking. I don't know if you
    all are aware of that. I don't expect an answer today, but
    could you look into that for me and see if you all are aware of
    that issue, and whether or not--how that impacts your
    requirements on the shoreline, because that is where people are
    very, very concerned, and I am concerned that there may be some
    liability for the Federal Government there that people aren't
    really aware of. I have seen the deeds written three different
    ways, two of them you all are in control, one of them you
    aren't.
        So I just raise that for your attention. Let's go back to
    grid reliability now that I have raised that issue in regard to
    the shore, and I think it is very important people be able to
    access big money generator in our area where we are losing lots
    of jobs. I am already over. I thought I had 30 more seconds.
    Thank you, Mr. Chairman. I appreciate that and I yield back.
        Mr. Whitfield. Thank you, Mr. Griffith. At this time, we
    recognize the gentleman from Ohio, Mr. Johnson, for 5 minutes.
        Mr. Johnson. Thank you, Mr. Chairman. And I want to thank
    the members of the panel for being with us today. Chairman Bay,
    or Commissioner LaFleur, consumers in our economy need reliable
    power, but some feel that FERC-approved market constructs may
    not be adequately compensating baseload power plants for the
    reliability attributes they bring to the grid. Therefore, some
    States in competitive markets, Ohio, New York and Illinois, for
    example, have begun to look at ways to consider options to
    preserve those baseload plants. So the question is, why do you
    think that these states find it necessary to step in to try and
    prevent the loss of these resources? Mr. Chairman.
        Mr. Bay. States have the authority to engage in integrated
    resource planning, and as part of that planning, they often
    look at the generation next within the state. And if, in the
    competitive marketplace, certain resources are not doing well,
    then the state may feel a need to support certain kinds of
    units. One of the things that is happening right now is that
    gas is very, very cheap, in part, because of gas production in
    states like Ohio and Pennsylvania, and many other states around
    the United States. Last night I checked the futures contract
    price for natural gas on NYMEX, it is, like, $2.22 going into
    January, which is the heart of the heating season. It was at
    the $2.20 range throughout the rest of the winter. And so, I
    think that is putting a lot of pressure on different resources
    across the United States.
        The difficulty for FERC is that in markets, signals are
    being sent, right? And FERC does not view itself as having the
    authority under the FPA to pick the winners and losers for a
    marketplace.
        Mr. Johnson. OK. Commissioner LaFleur, do you have a
    response?
        Ms. LaFleur. I think that the biggest thing that we are
    doing is trying to work on the markets and make sure they
    compensate what it takes to keep light on for customers,
    including what baseload brings. And I believe the markets will
    protect reliability. It is difficult any time a power plant
    closes, and I used to work for a company that owned them, they
    had their huge economic drivers in their communities and all,
    and I think it is natural that a state would be concerned, but
    we are trying to do our job to make sure that where the power
    plants that are needed for reliability they don't close,
    because they are fairly paid.
        Mr. Johnson. OK. Well, if reliability attributes and
    essential reliability services are being adequately compensated
    under current market rules, why do we see units that are
    essential to maintaining reliability leaving the market?
        Ms. LaFleur. Well, it is a little bit of a circle, if they
    are essential to maintain reliability, and we still have
    reliability, they should not be closing. Some of the rules----
        Mr. Johnson. But they are.
        Ms. LaFleur. Well, some of the rules that we put in place
    are fairly new, and we just started to run the first couple of
    auctions, and I think we will see impacts. We did see baseload
    plants that previously didn't clear the auctions clear in new
    auctions under the new rules.
        Mr. Johnson. Uh-huh. Commissioner Clark, I understand that
    under the Clean Power Plan, traditional state-based, least-cost
    resource planning will need to be replaced with carbon resource
    planning. What are the implications of such a shift? Would this
    environmental dispatch be more expensive than traditional
    economic dispatch, and if so, how so?
        Mr. Clark. It depends on how each of those states decide to
    implement their plans, it could be through some sort of credit
    trading program. It could be through some sort of, perhaps,
    environmental dispatch, which really would conflict with the
    market. So we don't know exactly how they will all be proposing
    to meet their standards. It probably does mean, in certain
    states, significant increased cost. I would say another
    impact--a similar question of what you asked Chairman Bay and
    Commissioner LaFleur is, I think 111(d) regulation, the
    potential of that is having an impact on some of these states
    that have restructured their marketplaces. They see nuclear
    units closed, even if they may not be needed for
    ``reliability'' in order to meet the Clean Power Plan they may
    be needed because it is very difficult to replace a large
    baseload unit that emits no carbon.
        So, I think it is causing some of the states to go back to,
    as I said earlier, some form of soft reregulation of their
    marketplace, simply to keep that plan open in the state, not
    for market efficiencies or for reliability, but to meet the
    constricts of the Clean Power Plan.
        Mr. Johnson. OK. Well, thank you, Mr. Chairman. My time has
    expired.
        Mr. Whitfield. The gentleman's time has expired.
        That concludes the questions from the members. I want to
    thank the commissioners. Once again, we appreciate you being
    here with us, we look forward to continue to work with you.
        Just one follow-up question I had, Chairman Bay. How many
    people are in your legal department? Do you know that number?
        Mr. Bay. I believe there are about 180 people in the Office
    of General Counsel.
        Mr. Whitfield. Do you know how many pending lawsuits are
    against FERC in which FERC is a defendant?
        Mr. Bay. Do you mean in a regulatory context or----
        Mr. Whitfield. I mean, the regulatory context has been
    exhausted and now we are in Federal court or Court of Appeals
    or Supreme Court.
        Mr. Bay. I know that there are two matters pending before
    the Supreme Court. I can probably get this information for you.
    I don't know it off the top of my head. Certainly, every year
    there are commission orders that are appealed to the Court of
    Appeals.
        Mr. Whitfield. Right.
        Mr. Bay. And then there are some other matters that are
    being litigated at the district court level.
        Mr. Whitfield. Ms. LaFleur?
        Ms. LaFleur. Well, just to chime in, most of those 180
    lawyers work on generating commission orders that are outgoing
    for the 6,000 cases we do a year, including there are ones that
    work on projects and ones that work on regs. There may be 10 to
    20 people that work on our cases in the courts of appeal,
    something like a dozen. It is small group.
        Mr. Whitfield. And what is the total budget for FERC at
    this time?
        Mr. Bay. I believe FERC's total budget is a little over
    $300 million.
        Mr. Whitfield. OK, oK. Do you have anything else?
        Mr. McNerney. No.
        Mr. Whitfield. Thank you all so much. We look forward to
    working with you and the hearing is adjourned. The record will
    be kept open for 10 days for additional materials. And thank
    you all once again.
        [Whereupon, at 12:33 p.m., the subcommittee was adjourned.]
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