[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
_____________
U.S. GOVERNMENT PUBLISHING OFFICE
99-742 WASHINGTON : 2016
_______________________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Publishing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center,
U.S. Government Publishing Office. Phone 202-512-1800, or 866-512-1800 (toll-free).
E-mail, gpo@custhelp.com.
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.]
[Material submitted for inclusion in the record follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[all]