[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]





 
 POWERING AMERICA: REEVALUATING PURPA'S OBJECTIVES AND ITS EFFECTS ON 
                           TODAY'S CONSUMERS

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON ENERGY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 6, 2017

                               __________

                           Serial No. 115-51
                           
                           
                           
                           
                           
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]       


                           


      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

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

                          FRED UPTON, Michigan
                                 Chairman
PETE OLSON, Texas                    BOBBY L. RUSH, Illinois
  Vice Chairman                        Ranking Member
JOE BARTON, Texas                    JERRY McNERNEY, California
JOHN SHIMKUS, Illinois               SCOTT H. PETERS, California
TIM MURPHY, Pennsylvania             GENE GREEN, Texas
ROBERT E. LATTA, Ohio                MICHAEL F. DOYLE, Pennsylvania
GREGG HARPER, Mississippi            KATHY CASTOR, Florida
DAVID B. McKINLEY, West Virginia     JOHN P. SARBANES, Maryland
ADAM KINZINGER, Illinois             PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
BILL JOHNSON, Ohio                   DAVID LOEBSACK, Iowa
BILLY LONG, Missouri                 KURT SCHRADER, Oregon
LARRY BUCSHON, Indiana               JOSEPH P. KENNEDY, III, 
BILL FLORES, Texas                       Massachusetts
MARKWAYNE MULLIN, Oklahoma           G.K. BUTTERFIELD, North Carolina
RICHARD HUDSON, North Carolina       FRANK PALLONE, Jr., New Jersey (ex 
KEVIN CRAMER, North Dakota               officio)
TIM WALBERG, Michigan
GREG WALDEN, Oregon (ex officio)
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     1
    Prepared statement...........................................     3
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     4
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     5
    Prepared statement...........................................     6

                               Witnesses

Frank Prager, Vice President, Policy and Federal Affairs, Xcel 
  Energy.........................................................     7
    Prepared statement...........................................    10
    Answers to submitted questions...............................   134
Todd Glass, Counsel, Solar Energy Industries Association.........    25
    Prepared statement...........................................    27
    Answers to submitted questions...............................   139
Kristine Raper, Commissioner, Idaho Public Utilities Commission..    48
    Prepared statement...........................................    50
    Answers to submitted questions...............................   149
Stephen Thomas, Senior Manager, Energy Contracts, Domtar Paper 
  Company........................................................    59
    Prepared statement...........................................    61
    Answers to submitted questions...............................   156
Terry Kouba, Vice President, Iowa Operations, Alliant Energy.....    78
    Prepared statement...........................................    80
    Answers to submitted questions...............................   161
Darwin Baas, Department of Public Works for Kent County, Michigan    92
    Prepared statement...........................................    94
    Answers to submitted questions...............................   165

                           Submitted Material

Statement of Cypress Creek Renewables, submitted by Mr. Walberg..   129
Statement of the Northwest & Intermountain Power Producers 
  Coalition, submitted by Mr. Walberg............................   133


 POWERING AMERICA: REEVALUATING PURPA'S OBJECTIVES AND ITS EFFECTS ON 
                           TODAY'S CONSUMERS

                              ----------                              


                      WEDNESDAY, SEPTEMBER 6, 2017

                  House of Representatives,
                            Subcommittee on Energy,
                          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. Fred Upton 
(chairman of the subcommittee) presiding.
    Members present: Representatives Upton, Barton, Shimkus, 
Latta, Harper, McKinley, Kinzinger, Griffith, Johnson, Long, 
Bucshon, Flores, Mullin, Hudson, Walberg, Walden (ex officio), 
Rush, McNerney, Peters, Green, Castor, Sarbanes, Tonko, 
Loebsack, Schrader, Kennedy, and Pallone (ex officio).
    Staff present: Ray Baum, Staff Director; Elena Brennan, 
Legislative Clerk, Energy/Environment; Jerry Couri, Chief 
Environmental Advisor; Zachary Dareshori, Staff Assistant; 
Wyatt Ellertson, Research Associate, Energy/Environment; Adam 
Fromm, Director of Outreach and Coalitions; Tom Hassenboehler, 
Chief Counsel, Energy/Environment; Jordan Haverly, Policy 
Coordinator, Environment; A.T. Johnston, Senior Policy Advisor, 
Energy; Ben Lieberman, Senior Counsel, Energy; Mary Martin, 
Deputy Chief Counsel, Energy & Environment; Alex Miller, Video 
Production Aide and Press Assistant; Brandon Mooney, Deputy 
Chief Energy Advisor; Mark Ratner, Policy Coordinator; Annelise 
Rickert, Counsel, Energy; Dan Schneider, Press Secretary; 
Madeline Vey, Policy Coordinator, Digital Commerce & Consumer 
Protection; Jeff Carroll, Minority Staff Director; Jean Fruci, 
Minority Energy and Environment Policy Advisor; Rick Kessler, 
Minority Senior Advisor and Staff Director, Energy and 
Environment; Alexander Ratner, Minority Policy Analyst; Andrew 
Souvall, Minority Director of Communications, Outreach and 
Member Services; Tuley Wright, Minority Energy and Environment 
Policy Advisor; and C.J. Young, Minority Press Secretary.

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

    Mr. Upton. Good morning, everyone.
    Today, we are going to continue our Powering America series 
by examining the statute that has played an important role in 
supporting certain electric generating resources over the past 
40 years.
    Under the law, PURPA provides preferential rate and 
regulatory treatment to resources known as qualifying 
facilities, or better known as QFs. These resources include co-
generation facilities such as industrial plants and certain 
small power producers that use renewable resources such as wind 
and solar. And today's panel witnesses include folks 
representing various types of QFs including solar developers, 
an industrial paper manufacturer, and a municipal waste 
facility in Grand Rapids, Michigan, that can generate 18 
megawatts of electricity by burning solid waste.
    Under PURPA, the FERC is tasked with implementing the law 
in coordination with state regulatory authorities. This 
framework of cooperative federalism allows for each state to 
enact and administer its own program within limits established 
by the federal standards. And, not surprisingly, since each 
state has different energy needs, resources, and policy 
objectives, the terms and conditions of each state's QF 
policies, indeed, vary. On that point, I would like to welcome 
the commissioner from Idaho for appearing here today to share 
her thoughts and perspectives as a state regulator.
    The Energy Policy Act of '05 did make some modest revisions 
to PURPA. However, the law has largely remained unchanged since 
1978. During the intervening decades, tremendous changes have 
occurred in the electricity industry, a point that is 
underscored by the DOE staff report that was released last 
week. The evolution of the industry has occurred in many ways 
including the development of the electricity markets in the RTO 
and bilateral regions, the advent of open access transmission 
policies, and the influence of new lower cost technologies. All 
of these factors have changed how electricity is generated, 
transmitted, and used by consumers.
    Additionally, it is important to note that renewable 
sources of energy, particularly wind and solar, have 
experienced exponential growth in recent years. Last year 
alone, capacity additions from utility scale renewable 
resources surpassed the net additions of all other fuel sources 
combined. There is no question that renewable resources now 
play a significant role in the nation's fuel mix and are a 
major contributor in decreasing U.S. greenhouse gas emissions.
    Considering these changed circumstances, this subcommittee 
must review whether revisions to PURPA are necessary or 
appropriate. This examination will continue the arguments both 
in support and opposition to making reforms to PURPA. Among 
them, certain utilities contend that the PURPA provision 
requiring utilities to purchase QF energy is outdated and 
should be modified or repealed. Conversely, QFs argue that 
PURPA's mandatory purchase obligation remains a necessary 
backstop to support renewable energy in parts of the country 
that are not receptive to such development.
    This oversight hearing will be the first step in 
reevaluating whether the intent and purpose of PURPA is still 
being met or if it has already been fulfilled. Additionally, 
today we are going to be looking at what effect the law is 
having on consumers and repairs in 2017 and beyond.
    With that, I want to thank the panel for being here and I 
will yield to the ranking member of the full committee, Mr. 
Pallone, for an opening statement.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Good morning. Today we continue our Powering America series 
by examining a statute that has played an important role in 
supporting certain electric generating resources over the past 
40 years. The Public Utilities Regulatory Policies Act (or 
``PURPA'') was enacted in 1978 in response to the energy crisis 
during the Carter Administration, and this law was intended to 
promote energy conversation and support the use of domestic 
energy, including renewable resources.
    Under the law, PURPA provides preferential rate and 
regulatory treatment to resources known as ``Qualifying 
Facilities'' or better known as ``QFs''. These resources 
include cogeneration facilities, such as industrial plants, and 
certain small power producers that use renewable resources such 
as wind and solar. Today's panel includes witnesses 
representing various types of QFs, including solar developers, 
an industrial paper manufacturer, and a municipal waste 
facility in Grand Rapids, Michigan that can generate 18 
megawatts of electricity by burning solid waste.
    Under PURPA, the Federal Energy Regulatory Commission is 
tasked with implementing the law in coordination with state 
regulatory authorities. This framework of ``cooperative 
federalism'' allows for each state to enact and administer its 
own program within limits established by the federal standards. 
Not surprisingly, since each state has different energy needs, 
resources, and policy objectives, the terms and conditions of 
each states' QF policies vary. On that point, I'd like to 
welcome the commissioner from Idaho for appearing here today to 
share her thoughts and perspectives as a state regulator.
    The Energy Policy Act of 2005 did make some modest 
revisions to PURPA, however, the law has largely remained 
unchanged since 1978. During the intervening decades, 
tremendous changes have occurred in the electricity industry--a 
point that is underscored by the DOE Staff Report that was 
released last week. The evolution of the industry has occurred 
in many ways, including the development of the electricity 
markets in the RTO and bilateral regions, the advent of open 
access transmission policies, and the influence of new, lower-
cost technologies. All of these factors have changed how 
electricity is generated, transmitted, and used by consumers.
    Additionally, it is important to note that renewable 
sources of energy, particularly wind and solar, have 
experienced exponential growth in recent years. Last year 
alone, capacity additions from utility-scale renewable 
resources surpassed the net additions of all other fuel sources 
combined. There is no question that renewable resources now 
play a significant role in the nation's fuel mix and are a 
major contributor in decreasing U.S. greenhouse gas emissions.
    Considering these changed circumstances, this Subcommittee 
must review whether revisions to PURPA are necessary or 
appropriate. This examination will consider the arguments both 
in support and opposition to making reforms to PURPA. Among 
them, certain utilities contend that the PURPA provision 
requiring utilities to purchase QF energy is outdated and 
should be modified or repealed. Conversely, QF's argue that 
PURPA's mandatory purchase obligation remains a necessary 
backstop to support renewable energy in parts of the country 
that are not receptive to such development.
    Today's oversight hearing will be the first step in 
reevaluating whether the intent and purpose of PURPA is still 
being met or if it has already been fulfilled. Additionally, 
today we will be looking at what effect the law is having on 
consumers and ratepayers in 2017. With that, I'd like to thank 
this panel of distinguished witnesses for appearing today and I 
look forward to your testimony.

    Mr. Pallone. What happened to the green? They got rid of 
it.
    [Laughter.]
    I am sorry.
    Mr. Upton. Maize and blue.
    Mr. Pallone. Oh, OK.
    Mr. Upton. The block M will be over that.

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

    Mr. Pallone. All right.
    Mr. Chairman, a lot has changed in the electricity sector 
since Congress passed Section 210 of the Public Utilities 
Regulatory Policies Act in 1978 and more changes are still to 
come.
    However, a number of the goals of PURPA are still valid 
today, in particular, the goals of increasing competition, 
encouraging development and deployment of more clean and 
efficient electricity generation, and ensuring equitable 
affordable rates for consumers are still important.
    PURPA has been successful in encouraging competition, 
fostering electricity market development, and in bringing new 
generation and efficiency technologies onto the grid, and as a 
result, we now have a more competitive and diversified 
electricity sector.
    Of course, PURPA alone is not the only driver of change in 
the electricity sector. State policies on renewable energy and 
energy efficiency expanded wholesale markets, connected 
technological change, growth of natural gas supplies, and 
changes in consumer expectations and demand are all reshaping 
this sector. And I expect we will hear a variety of opinions 
today about the need for further PURPA reform and the direction 
that any administrative or legislative reform should take.
    The Federal Energy Regulatory Commission recently examined 
these issues at a technical conference and I believe a number 
of our witnesses participated and even a few members weighed in 
on that conference, including myself and Ranking Member Rush. 
And I realize that some of our members believe that the statute 
needs to be revised, particularly on issues like estimation of 
avoided costs, the mandatory purchase requirement, and FERC's 
definition of a qualifying facility as it relates to the 
distance between facilities.
    However, the Energy Policy Act of 2005 as passed by this 
committee under Chairman Barton and signed into law by 
President Bush provided significant changes to Section 210. 
Those changes allow utilities in competitive areas to avoid the 
mandatory purchase obligations. The law also provided greater 
discretion for state utility commissions to establish methods 
for determining avoided costs and the duration of power 
purchase agreements. This change allowed states even greater 
flexibility to address their individual situations. For 
example, the state of Idaho, which we will hear from today, 
made radical changes to its standard contract and avoided cost 
calculation. These are changes that I do not support but they 
reinforce the fact that many different outcomes are possible 
under the current PURPA structure.
    We will likely hear about the fact that some markets today 
are saturated with electricity generation. This is due 
principally or primarily to reduce costs of new generation 
technologies and the fact that electricity demand is flat in 
many markets. There is also a real issue in some regions today 
where competition now exists among different generation assets 
that are all trying to earn sufficient revenue within markets 
where rates are stable or falling due to flat demand.
    In some areas I suspect there is a reluctance to add new, 
more efficient cleaner energy resources into areas where 
existing fossil and nuclear generation assets are struggling 
financially. But when Congress made the decision to encourage 
more competition in the development of wholesale markets, there 
were bound to be winners and losers in those markets to the 
larger benefit of the consumer.
    Consumer preferences, state policies, technological change, 
and economic trends are favoring renewable resources over 
traditional fossil and nuclear generation, and this transition 
is bringing us a clean and more efficient grid and these are 
positive developments and I would not want to see this 
committee reversing course on competitive market development 
without a much more serious and longer consideration of the 
impacts of such a move away from competition.
    FERC has authority to make some changes in the 
implementation of PURPA. The recent technical conference 
provided the commission with information to evaluate the 
effectiveness of its implementation and enforcement of PURPA.
    So we have an excellent panel of witnesses here this 
morning. I look forward to hearing their testimony. Thank you 
again, Mr. Chairman, for holding this important hearing and for 
working with us on this series of bipartisan hearings on the 
current status of the electricity sector.
    And I did like the green better. Sorry. Well, actually, you 
liked the green better.
    Mr. Upton. So Oregon green is gone.
    [Laughter.]
    The chair would recognize the----
    Mr. Pallone. Just trying to go blue here.
    Mr. Upton. It was a nice win over Florida. Sorry they are 
not here today. The chair would recognize the chair of the full 
committee, gentleman from Oregon, Mr. Walden.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. I thank the gentleman.
    Nearly 40 years ago, as we have all heard, Congress passed 
the Public Utilities Regulatory Policies Act, commonly known as 
PURPA. As many of you are aware, this law was passed during the 
time when the country was overly dependent on foreign supplies 
of energy, resulting in national energy shortages and economic 
instability. And in response to these challenging 
circumstances, Congress passed PURPA with the goal of promoting 
energy conservation, and increasing domestic energy supplies.
    Now that PURPA has been in place for multiple decades, we 
can see how it has helped transform the U.S. energy sector, 
bolstered renewable energy, and reduced greenhouse gas 
emissions. Gone are the days of Americans relying heavily on 
overseas sources of energy and unstable global markets to meet 
energy needs. Instead, the country now has access to many forms 
of abundant domestic energy which has been spurred by 
innovative technologies and competitive energy markets.
    In passing PURPA, Congress took the first steps toward 
competition within the electricity markets by allowing 
electricity generation to be independent of regulated 
monopolies for the first time. Since then, Congress and FERC 
have continued to take actions to increase competition, 
resulting in tremendous benefits for consumers across the 
country. We on the committee want to continue down the same 
path of increased competition and innovation. Our aim is to 
strengthen energy markets and encourage innovation throughout 
the electricity sector, giving consumers more choice and 
greater control over their energy decisions while also 
benefitting the environment.
    Today's hearing gives us the opportunity to look at PURPA 
with fresh eyes and evaluate what effect it is having on 
evolving electricity markets and the modern-day consumer. Given 
the fact that PURPA was written nearly 40 years ago and the 
U.S. electricity system is undergoing significant 
transformation, now is the time for the committee to review 
PURPA and its associated impacts. This review includes 
discussing the original intent of specific PURPA provisions and 
determining if these provisions are still working successfully 
today. For example, in today's hearing we will review the 
requirements connected to the mandatory purchase obligation, 
the effectiveness of the 1-mile rule when designating 
qualifying facilities and the various methods states are using 
to calculate avoided costs.
    The committee understands that many stakeholders in the 
electricity sector are closely following potential PURPA 
reforms. In fact, I know this is true for my constituents in 
eastern Oregon where we have more than 100 qualifying 
facilities operating as a direct result of PURPA. So in 
addressing this topic, we want to make sure that all 
stakeholders, all of them, have an opportunity to be heard, 
which is why we are holding the hearing today and why we will 
continue to engage proactively with all stakeholders, moving 
forward.
    In all that we do on the Energy and Commerce Committee, we 
strive to focus on the needs and interests of American 
consumers. When we are successful in this pursuit, I am 
confident that everything else will find its proper place.
    With that, I look forward to the remainder of the hearing 
and better understanding how PURPA is affecting consumers 
across the country.
    And with apologies, I know we have a couple of hearings 
going on so I've got to go to another one and be back and 
forth. But thank you for your testimony. It is most 
enlightening and helpful in our work, and I yield back.
    [The prepared statement of Mr. Walden follows:]

                 Prepared statement of Hon. Greg Walden

    Nearly 40 years ago, Congress passed the Public Utilities 
Regulatory Policies Act, now commonly referred to as PURPA. As 
many of you are aware, this law was passed during a time when 
the country was overly dependent on foreign supplies of energy, 
resulting in national energy shortages and economic 
instability. In response to these challenging circumstances, 
Congress passed PURPA with the goal of promoting energy 
conservation and increasing domestic energy supplies.
    Now that PURPA has been in place for multiple decades, we 
can see how it has helped transform the U.S. energy sector, 
bolstered renewable energy, and reduced greenhouse gas 
emissions. Gone are the days of Americans relying heavily on 
overseas sources of energy and unstable global markets to meet 
their energy needs. Instead, the country now has access to many 
forms of abundant domestic energy, which has been spurred by 
innovative technologies and competitive energy markets.
    In passing PURPA, Congress took the first step towards 
competition within the electricity sector by allowing 
electricity generation to be independent of regulated 
monopolies for the first time. Since then, Congress and FERC 
have continued to take actions to increase competition, 
resulting in tremendous benefits for consumers across the 
nation. We on the committee want to continue down this same 
path of increased competition and innovation. Our aim is to 
strengthen energy markets and encourage innovation throughout 
the electricity sector, giving consumers more choice and 
greater control over their energy decisions, while also 
benefiting the environment.
    Today's hearing gives us the opportunity to look at PURPA 
with fresh eyes and evaluate what effect it is having on 
evolving electricity markets and the modern day consumer. Given 
the fact that PURPA was written nearly 40 years ago and that 
the U.S. electricity system is undergoing significant 
transformation, now is the time for the committee to review 
PURPA and its associated impacts. This review includes 
discussing the original intent of specific PURPA provisions and 
determining if these provisions are still working successfully 
today. For example, in today's hearing we will review the 
requirements connected to the mandatory purchase obligation, 
the effectiveness of the 1-mile rule when designating 
qualifying facilities, and the various methods states are using 
to calculate avoided costs.
    This committee understands that many stakeholders in the 
electricity sector are closely following potential PURPA 
reforms. In fact, I know that this is true for my constituents 
in Eastern Oregon, where we have more than 100 qualifying 
facilities operating as a direct result of PURPA. In addressing 
this topic, we want to make sure that all stakeholders have an 
opportunity to be heard, which is why we are holding this 
hearing today, and why we will continue to engage proactively 
with all stakeholders going forward.
    In all that we do on the Energy and Commerce Committee we 
strive to focus on the needs and interests of American 
consumers. When we are successful in this pursuit, I am 
confident that everything else will find in its proper place. 
With that, I look forward to the remainder of this hearing and 
to better understanding how PURPA is affecting consumers across 
the nation.

    Mr. Upton. And we have a bill on the floor.
    Mr. Walden. And we have a bill on the floor and a Korean 
briefing and oh, lots going on.
    Mr. Upton. Gentleman's time is expired. Any on the minority 
side wishing at this time? Seeing none, we will go right then 
to the testimony by our witnesses.
    We are joined first by Mr. Frank Prager, Vice President of 
Policy and Federal Affairs for Xcel Energy. Welcome. All of 
your testimonies are made part of the record and if you would 
take no more than 5 minutes to give a summary of that, that 
would be great and we will start with you.
    Thank you. Welcome.

STATEMENTS OF FRANK PRAGER, VICE PRESIDENT, POLICY AND FEDERAL 
    AFFAIRS, XCEL ENERGY; TODD GLASS, COUNSEL, SOLAR ENERGY 
  INDUSTRIES ASSOCIATION; KRISTINE RAPER, COMMISSIONER, IDAHO 
 PUBLIC UTILITIES COMMISSION; STEPHEN THOMAS, SENIOR MANAGER, 
   ENERGY CONTRACTS, DOMTAR PAPER COMPANY; TERRY KOUBA, VICE 
   PRESIDENT, IOWA OPERATIONS, ALLIANT ENERGY; DARWIN BAAS, 
      DEPARTMENT OF PUBLIC WORKS FOR KENT COUNTY, MICHIGAN

                   STATEMENT OF FRANK PRAGER

    Mr. Prager. Thank you very much, Mr. Chairman.
    Members of the committee, my name is Frank Prager. I am 
vice president of policy and federal affairs at Xcel Energy. I 
am pleased to be here today to talk to you about PURPA and 
PURPA reform.
    Xcel Energy is a public utility holding company 
headquartered in Minneapolis, Minnesota. We serve parts of 
eight Western and Midwestern states including Denver, where I 
am from.
    We are the nation's number-one utility provider of wind 
energy. We have held that distinction for a dozen years. Xcel 
Energy currently has over 6,700 megawatts of wind on its system 
and is currently in the process of adding an additional 3,400 
megawatts of wind.
    Renewable energy is a big part of our energy portfolio. We 
are also in the process of decarbonizing our electric grid. 
Xcel Energy has already reduced its CO2 emissions by 
30 percent from 2005 levels and are on a path, if we continue 
to see technological advancement in the renewable energy area, 
to achieve a 60 percent reduction by 2030.
    Our customers like renewable energy. They like the fact 
that we are decarbonizing our electric grid. But they love the 
fact that we are able to do it at a low price. We actually are 
now in the process of implementing a strategy we call steel for 
fuel under which we are actually reducing our carbon dioxide 
emissions while at the same time reducing our customers' energy 
rates. And as I say, our customers are very fond of that 
strategy.
    As strong proponents of cost-effective renewable energy, 
Xcel Energy believes it is time for Congress to reform the 
outdated PURPA statute. As described in my written testimony, 
the energy market fundamentals that led to the adoption of 
PURPA no longer exist. Today, we live in an era of relative 
energy abundance rather than the energy crisis that existed at 
the time PURPA was first adopted. Customer energy use is flat. 
Renewable energy is no longer a niche technology but a growing 
part of our energy portfolio. Robust wholesale energy markets 
and least-cost resource planning have facilitated market-based 
acquisition of energy.
    PURPA was designed to address energy challenges of the 
1970s that no longer exist and are inconsistent with the modern 
energy marketplace. Under PURPA's must take provisions, QFs can 
displace energy from existing more efficient power plants, 
thereby raising costs for our customers. QFs can force 
utilities to take power outside of the state utility planning 
processes. Those are the processes that states use to assure a 
reliable and cost-effective energy system. For example, in 
Colorado, a QF developer informed Xcel Energy that it had 
intended to develop 19 separate QF facilities, each of 80 
megawatts.
    Although Colorado PUC regulations are clear that those QFs 
must participate in the resource planning process, this QF 
developer declined to do so. It demanded that we enter into a 
long-term contract for its contemplated 1,520 megawatts of QF 
energy. Litigation with that developer is ongoing. However, its 
claims demonstrate one of the key problems associated with 
PURPA. QFs can operate outside state resource planning and thus 
force electricity consumers to pay for energy they do not need.
    PURPA can also interfere with transmission planning. That 
same QF developer has proposed to put 480 megawatts, almost a 
half a gigawatt, of its power in a remote location far from our 
load centers in an area where we do not have adequate 
transmission capacity and an area where the existing 
transmission capacity is subscribed by existing solar 
facilities that are under contract to Xcel Energy.
    If this QF is successful in putting its power to Xcel 
Energy, we will be required to spend millions of dollars in 
transmission of upgrades and will have to work in order to make 
sure that our existing solar facilities have access to the 
electricity marketplace. The other problem with PURPA, which is 
one the chairman identified, is the ability of some QFs to game 
the PURPA regulations in particular with regard to the 1-mile 
rule. Under its terms, the QFs are limited to 80 megawatts and 
PURPA--and FERC has implemented that 80 megawatt limit through 
the 1-mile which requires the two QFs be separated by at least 
a mile.
    Unfortunately, FERC has allowed some developers to 
circumvent this rule. In our Texas service territory, FERC 
found two separate segments of a larger wind project with a 
single owner and a single interconnection--literally, one 
project considered to be two separate QF projects because the 
developer had made certain that no two wind turbines from that 
project were located within a mile of one another. Thus, a 
project that greatly exceeded PURPA's 80 megawatt limit was 
able to force Xcel Energy to buy power from it at the avoided 
cost rate.
    We encourage Congress to consider legislation that would 
help address these and other problems with PURPA. Even without 
PURPA, the renewable energy market has never been stronger and 
QFs would have the opportunity to compete for a growing piece 
of the renewable energy pie.
    Thank you again. I would be happy to answer any questions 
that you have.
    [The prepared statement of Mr. Prager follows:]
    
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    Mr. Upton. Thank you.
    We are joined next by Todd Glass, counsel to the Solar 
Energy Industries Association. Welcome.

                    STATEMENT OF TODD GLASS

    Mr. Glass. Thank you.
    Mr. Chairman, distinguished members of the subcommittee, 
good morning. My name is Todd Glass. I am an energy lawyer who 
represents developers and financiers of independent solar-
powered projects and the solar industry in energy regulatory 
matters. I am delighted to appear on behalf of the Solar Energy 
Industries Association with regard to PURPA, its original 
objectives and its relevance to customers today.
    SEIA is the national trade organization for the solar 
industry in the United States, representing more than a 
thousand organizations that promote manufacture, install, and 
support the development of solar energy around the United 
States. SEIA seeks to expand markets, remove market barriers, 
strengthen the industry and educate the public on the benefits 
of solar energy.
    PURPA's original objectives were to do two primary things: 
to increase the diversity of supply by type fuel source, size, 
and ownership, to strengthen national energy security in the 
nation's electric supply. Fuel diversity remains essential to 
our national energy security and PURPA continues to provide the 
means to ensure the increased diversity of supply, particularly 
with regard to fuel-less generation resources.
    PURPA's second major contribution was to create competition 
that forces prices down, that benefits consumers by eliminating 
utilities' anti-competitive actions against competitive 
generation. Independent generation puts downward competitive 
pressure on prices and benefits consumers by reducing the cost 
of electricity. As new technology such as solar are deployed, 
the price of delivering power to consumers will continue to 
decrease. Those two objectives have yet to be fully achieved. 
PURPA remains an essential federal legislation underpinning 
both diversity as well as competition in the electric power 
industry.
    The U.S. solar industry can compete. As outlined in my 
testimony, solar energy has experienced a rapid decline in cost 
over the past decade to become a true economic alternative and 
competitor to traditionally-owned utility generation. Solar 
prices have become competitive with wind and natural gas fuel 
generation. Solar installations, however, are principally owned 
by independent power producers who, through innovation and 
persistence, have been able to withstand the competitive 
pressures today to build and finance their project.
    With only a fraction of those installations actually 
contracted for under PURPA's must purchase obligation, PURPA as 
a whole remains an essential backstop against anti-competitive 
conduct for all independent power and a backstop for financing 
these independent power projects.
    Electric utilities in the United States are among the most 
enduring long-lived monopolies in the United States. As 
Congress recognized in 1935, electric utilities must be 
regulated in order to protect the public interest.
    In 1978, Congress created PURPA. PURPA is not an 
environmental law. Rather, its provisions provide for energy 
conservation in a unique federalism system that eliminates 
discrimination against co-generators and small power producers, 
which you correctly called QFs, by requiring interconnection, 
wielding of their power, and purchasing their power at a price 
no greater than the incremental cost of buying that electric 
power from alternative sources.
    With its passage, PURPA became the bedrock federal law 
ensuring competition in wholesale power markets. Soon after 
FERC promulgated the regulations, utilities started fighting 
PURPA and its mandates. Indeed, 40 years later, they are still 
fighting its mandates. Why? Utilities would simply prefer not 
to have to buy generation from small diverse QFs that don't fit 
neatly within their plans. They would rather build and rate 
base larger generation facilities and maintain a controlled 
vertically-integrated monopoly or buy through power purchase 
agreements through our RFPs. They have never liked PURPA and 
they still don't like PURPA today. Solar power PURPA projects 
are not a real problem.
    As shown in my testimony, in 44 states solar energy in the 
last year totaled less than 5 percent of the total energy used 
and in a vast majority of states it is less than 1 percent. Of 
that amount of total installed solar capacity, only 20 percent 
is actually based upon a PURPA must-purchase obligation. Due to 
land usage and power density, solar power is not an industry 
that is abusing FERC's 1-mile rule. Notwithstanding the 
penetration, our industry is putting competitive pressures on 
energy prices and benefitting those consumers by forcing the 
utilities to look at lower cost power.
    So PURPA is about diversity: fuel size, type, and ownership 
and competition. U.S. solar industry is here to compete, to 
create jobs, and investment and create tax base in both urban 
and rural America and to make the electric grid more diverse 
and secure. SEIA strongly encourages Congress to continue 
supporting competition by ensuring independent generators like 
solar can compete.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Glass follows:]
    
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    Mr. Upton. We will next hear from Kristine Raper, 
commissioner for the Idaho Public Utilities Commission.

                  STATEMENT OF KRISTINE RAPER

    Ms. Raper. Thank you, Chairman Upton.
    Distinguished representatives, my name is Kristine Raper. I 
am a commissioner with the Idaho Public Utilities Commission 
and I want to thank you for the opportunity to come and 
participate in this panel today and I look forward to any 
questions that will be asked after the presentations.
    A couple of initial matters that I feel like I need to 
address, issues that often get conflated within this PURPA 
discussion but are truly separate and distinct. One is 
promoting renewable generation and maintaining PURPA are not 
interchangeable concepts. They are not the same thing. One can 
exist without the other. And number two, there is a 
misconception that anyone who seeks changes to PURPA is somehow 
anti-renewable or opposes a diverse resource portfolio, which 
is not true. Arguing that renewables are beneficial 
alternatives to fossil fuels and touting the value of a diverse 
resource portfolio misses the point. This is about a law which 
is being manipulated to the detriment of ratepayers and state 
commissions are struggling to balance the requirements of the 
act with reliability of the grid and ratepayer indifference, 
all of which the act requires.
    PURPA is not the only way to develop renewables but too 
much PURPA on the grid does stifle the development of non-PURPA 
renewables. PURPA developers want to make it look like this is 
an attack on renewables as a whole. It is not. This is not an 
apples to apples comparison. The must-purchase obligation makes 
a QF project very different from other renewable projects. 
Utilities must absorb energy whether it needs the energy or 
not.
    It is not dispatchable energy that the utility can pull 
onto the grid when it needs it. QF projects are gaming the 
parameters of PURPA to maximize profit without any regard to 
the effect on ratepayers and there are no realistic curtailment 
allowances that the states or utilities have been able to 
utilize. These things do not apply to non-PURPA non-QF 
renewable resources.
    Mr. Glass' reference to falling costs actually proves my 
point. If the price of solar has dropped dramatically from 2009 
until now, well, we have multiple dozens of contracts where in 
2009 they signed onto a 20-year agreement at the prices in 
2009. If prices have dramatically reduced since 2009 and we are 
only eight years out, imagine over the 20-year life of that 
contract how much those prices inflate each year with the 
reduction of true costs of solar, and the longer the contract 
the greater the discrepancy.
    If PURPA is to remain, then there need to be some changes. 
I urge you to consider some of the following solutions. 
Lowering the 80 megawatt qualifying threshold for small 
renewable projects--Congress' Energy Policy Act of 2005 changed 
a threshold for QFs within organized markets to a 20 megawatt 
threshold for a presumption that they could be competitive 
within the market. Well, that is a huge difference. Is 80 
megawatts small or is 20 megawatt competitive? So I would urge 
you to look at that 80 megawatt threshold that exists.
    If a QF is within a balancing authority of an energy 
imbalance market like we have in the West, I also urge you to 
consider applying that threshold under the Energy Policy Act to 
QFs within an energy imbalance market. I recognize that there 
are none in it now and that perhaps is because they wouldn't 
get the prices that they can otherwise get under QF contracts 
within the states. But that doesn't mean that they are not 
meeting the requirements of the Public Utility Regulatory 
Policies Act. It means that the QF isn't making as much money. 
But it doesn't mean that QFs aren't competitive within that 
environment.
    Please allow states the discretion to address gaming. It 
violates the intent of the act and it is harmful to ratepayers. 
I ask that you modify the must-purchase to consider need and 
allow for reasonable curtailment. Consider what battery storage 
is and whether it meets the parameters of the act. And finally, 
implement a statute of limitations on how long a QF can file a 
complaint with FERC.
    I have 13 seconds and I know this wasn't in my written 
testimony but there is currently no existing statute of 
limitations for when a QF can take a state decision and file 
with FERC for alternative treatment.
    I look forward to answering any questions that you have.
    [The prepared statement of Ms. Raper follows:]
    
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    Mr. Upton. Thank you.
    Stephen Thomas, senior manager energy contracts, Domtar 
Corporation. Welcome.

                  STATEMENT OF STEPHEN THOMAS

    Mr. Thomas. Thank you, Chairman Upton, members of the 
committee.
    My name is Steve Thomas. I have worked for Domtar and I am 
here representing IECA, or I-E-C-A, which is the Industrial 
Energy Consumers of America. They are a member-led nonpartisan 
organization that is made up of leading manufacturers. Domtar 
itself has 23 manufacturing facilities across the U.S. The 
largest eight or nine of these are our PURPA-qualifying 
facilities. As such, we believe that PURPA has done its job and 
in its current form is doing what it is supposed to.
    If there are issues that need to be addressed, we filed, I 
think, 12 recommendations either through new legislation or 
through guidance from the FERC to state commissions that we 
think work for us. But one thing that is important is I want to 
really make a distinction between QFs that are co-generators, 
like ourselves, and QFs that are small power generators. And 
co-generators, what we do is we take either heat before it is 
used in a process or heat that is a by-product of a process and 
create electricity, and PURPA allows us to do that. And that is 
really important as manufacturers because it helps reduce our 
costs, makes us more competitive in global markets.
    By doing this, there's something else that happens. We are 
more efficient than generation from a utility because we not 
only use that heat to create electricity, we use that heat to 
create products. And another important distinction, from co-
generating manufacturing facilities is we have a very large 
permanent job base.
    So from an economic development standpoint, once the 
facility is built, we support a huge number of sustainable jobs 
going forward. We are not against renewables. We use renewable 
energy in our own generation. More than 70 percent of the 
energy we create at our mills is from renewable sources. So the 
important thing is, again, that distinction between the co-
generators and small QFs. So all of our recommendations that we 
have offered are based on that clear distinction, a lot of 
which we have already talked about.
    So what are some of those avoided costs is a major issue 
for us because as co-generators there's something that doesn't 
get realized. As an industry, we still buy 85 percent of our 
power so we are net consumers, and things that affect the price 
of electricity, the reliability of electricity hurt us. So our 
interests align squarely with consumers. We want affordable 
power that is reliable.
    So the avoided cost issue is a really big deal. I think 
four or five of our points are around avoided costs. We don't 
think utilities should be forced to buy capacity when they are 
flush with capacity and have adequate reserve margins because 
that hurts us as consumers, whether we are consuming at home or 
at our place of business.
    The 1-mile rule--our footprints are large. Industries like 
ourselves have a very large footprint a lot of times in rural 
areas of the country, and that large footprint--the 1-mile rule 
is small.
    We think that should be larger. Again, so we are not forced 
to pay for capacity that is not needed on the system and the--
another one that is critical to us is curtailment. When the 
grid is surplus generation, we want to be lower in the stacking 
order than renewables because we are supporting jobs, because 
we are creating products that are important to the communities 
that we serve.
    So with that, I will look forward to taking any questions 
you have.
    [The prepared statement of Mr. Thomas follows:]
    
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    Mr. Upton. Thank you.
    Next, Terry Kouba, Vice President of Iowa Operations of 
Alliant Energy. Welcome.

                    STATEMENT OF TERRY KOUBA

    Mr. Kouba. Good morning, Chairman Upton, and members of the 
subcommittee.
    My name is Terry Kouba and I am the Vice President of Iowa 
Operations for Alliant Energy, which is a Midwest utility 
serving 1.4 million electric and gas customers throughout 1,300 
communities in Iowa and Wisconsin.
    First, let me thank the subcommittee for holding this 
timely oversight hearing. The main focus of my testimony today 
is to re-evaluate PURPA in light of the law's negative effect 
on increasing wind energy costs for our customers in Iowa.
    Iowa is a national leader in wind energy deployment, 
deriving 36 percent of the state's electricity from wind, a 
statistic to which Alliant Energy is a very proud contributor.
    Currently, we have more than a thousand megawatts of owned 
and operated wind plus purchase power agreements from 
independent power producers and we are in the cusp of executing 
a plan to add an additional gigawatt of wind energy, a $1.8 
billion investment in Iowa to help serve our customers. We are 
a long way from 1978 when PURPA was enacted and I was a 
sophomore in college. Forty years ago, the country endured an 
energy crisis while renewable energy was in its infancy as a 
cost-effective generation resource. Now, two-thirds of the U.S. 
is served by wholesale region electricity markets like the 
Midcontinent Independent System Operator, or MISO, in Iowa.
    States across the country in organized and unorganized 
markets are able to competit`ively solicit renewable energy. 
Despite the market-driven deployment of renewable energy in 
Iowa and across the nation, we are still subject to PURPA's 
outdated mandatory purchase obligation which has increased 
electricity cost for our Iowa customers.
    Let me explain. Under the law, we are required to purchase 
power from PURPA-designed qualified facilities. These QF 
resources are not procured through a competitive bid process 
despite having access to the MISO market. We cannot negotiate 
on the price paid for this energy and project locations are 
chosen for the benefit of the QF investor, not for the benefit 
of our customers. These QFs that violate the intent of PURPA by 
structuring their projects into separate LLCs to get around 
FERC's 20 megawatt size cap in organized markets.
    If my company went to the Iowa Utility Board to obtain 
regulatory approval for one of those projects under a purchase 
power agreement with an independent power producer like that, I 
am confident we would be rejected because the cost premiums 
associated with that power would be too high. The IUB would 
likely question the need for this expensive renewable power 
when it is possible to obtain cheaper renewable electricity, 
especially in Iowa through other means, and the IUB would have 
an excellent point.
    The real losers in this situation are not utilities, 
rather, customers who are forced to pay higher costs for 
renewable generation that can otherwise be procured at 
competitive prices. And when a quarter of our customers' income 
is under $25,000 per year, that is a real concern for our 
company and our customers.
    We believe that these larger QFs should be treated like any 
other independent power producer and be required to sell energy 
directly into the organized markets like MISO or negotiate for 
PPA contracts with a utility like any other independent power 
producer. Doing so would reduce cost to customers and minimize 
system impacts that might impair reliability. Congress can take 
steps to improve implementation, mitigate negative impacts on 
customers in the grid, and better reflect current market 
conditions by modernizing this law.
    We are encouraged by legislative interest to reform the law 
in several key areas and we encourage FERC to implement several 
recommendations found in my written testimony on an 
administrative basis.
    Thank you for the opportunity to appear before the 
subcommittee today and I look forward to the discussion and any 
questions you may have.
    [The prepared statement of Mr. Kouba follows:]
    
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    Mr. Upton. Thank you.
    Mr. Baas, good to see you. Director of the Public Works for 
Kent County, Michigan.

                    STATEMENT OF DARWIN BAAS

    Mr. Baas. Good morning.
    Mr. Upton. Sorry about the color change, but welcome.
    Mr. Baas. Go blue.
    Mr. Upton. Go blue is right.
    Mr. Baas. Thank you, Chairman Upton, for providing an 
opportunity for me to testify this morning. I am the director 
of the Kent County Department of Public Works in Michigan. I 
want to discuss this morning how PURPA relates to our waste 
energy facility.
    I would also like to express support for the mandatory 
purchase obligation under PURPA and encourage Congress to 
consider modifications that could enhance PURPA in its 
application and effectiveness for waste energy qualified 
facilities. PURPA has been a critical part of Kent County's 
waste energy facility for the last 27 years. Kent County DPW 
allocates funds for municipal infrastructure for five public 
services. The waste energy facility is critical in that 
mission. We provide a sustainable and integrated solid waste 
management system. We provide base load renewable electricity. 
We offer grid support and reduce the need for long-term or long 
distance transmission.
    Energy from 76 waste energy facilities nationwide account 
for more than 2,500 megawatts of renewable energy, 14 billion 
kilowatts of electrical generation, and avoids 13 million tons 
of greenhouse gas generation. Our facility in Kent County 
provides an alternative to land filling that many local 
residents, businesses, and industry desire. Facilities like 
ours are a municipal infrastructure and we must remain 
competitive in the energy markets. Unfortunately, many have 
closed and more are at risk of failure, which will strand these 
local government assets. A significant contributing factor is 
the outdated and inadequate elements of PURPA policy that fails 
to value local government and the role that these power plants 
have.
    I have submitted detailed documentation of these challenges 
so I will just highlight a few. Mandatory purchase contract 
lengths are unrealistically short and the avoided cost pricing 
has eroded. It is no longer reflecting the intent of PURPA and 
the value of our system. Even the facilities between 20 and 80 
megawatts are experiencing the same challenges. In Michigan, we 
are engaged with the Public Service Commission to fight for 
fair, reasonable, and stable ablated cost.
    While the utility we work with has received $759 million in 
rate increases since 2008 and has another $172 million pending 
before the PSC, the PSC is attempting to devalue the value of 
our electrical generation by 24 percent. By doing that, they 
would take us back to rates that were paid to us 20 years ago. 
The utility is also attempting to unilaterally cancel our 
contract with one year's notice, which is very difficult for 
us.
    Local governments also own assets where electricity 
regulations hinder using our power. For example, we have 
airports, wastewater treatment plants, and courthouses and many 
other facilities that require electricity. But it is very 
difficult to move that electricity to those facilities. That's 
why it is so critical that when we receive realistic pricing 
that we are in such a better place.
    Kent County uses a 10-year planning horizon for capital 
refurbishment as does any utility that invests in plan 
reliability. Should we face a situation where we would have a 
contract cancelled with one year's notice it could very well 
lead us to early closure. Without certainty in energy revenue 
and contract length, we face a lot of uncertainty in how to 
make investments, how to invest in maintenance and in our 
operations.
    Modifications to PURPA are necessary to ensure long-term 
viability of this municipal infrastructure. I would welcome 
opportunity to work with staff on modifications to address 
these issues.
    Again, thank you for the opportunity to appear before you 
today. I will be pleased to answer any questions you might 
have.
    [The prepared statement of Mr. Baas follows:]
    
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    Mr. Upton. Well, thank you all, and we are going to now 
move to questions from members here and we will limit our 
questions and answers to 5 minutes.
    I guess the first question that I have for each of you is 
we, first of all, appreciate your testimony. Let us talk just a 
little bit about the statutory and regulatory changes to 
eliminate the abuse or gaming, as Ms. Raper talked about the 1-
mile rule. Would you oppose or support regulatory changes to 
eliminate such and what might that look like?
    Ms. Raper, since you raised it we'll start with you and 
we'll go in reverse. What should we do about the 1-year rule?
    Ms. Raper. Thank you, Chairman.
    Mr. Upton. Or the one--I am sorry, the 1-mile rule. Sorry.
    Ms. Raper. Sure, Representatives. I think the 1-mile rule 
alone it is neither here nor there. I think changing the 1-mile 
rule to a 5-mile rule doesn't eliminate the problem.
    The issues with the 1-mile rule that allow things like wind 
and solar to overbuild, in my opinion, are that if there's only 
1 mile between projects they have the same interconnection. 
They are financed by the same thing. Just because they are 
named alpha bravo charlie delta echo doesn't make them 
different projects. And so changing the 1-mile rule only 
without changing some of the considerations for what truly 
makes it a separate entity it wouldn't solve the problem.
    There need to be other considerations taken into account 
because my understanding of the 1-mile rule is that it was 
intended to make sure that they were separate entities that 
were doing these builds and it hasn't worked to that effect.
    Mr. Upton. Mr. Thomas.
    Mr. Thomas. Thank you. Again, as a manufacturer our 
footprints are so much larger than that 1-mile. Our concern, 
again, goes back to reliability.
    A lot of times the 1-mile or 3-mile circle, the generation 
is all the same type. If it is all solar, it is all going to go 
down when the sun is not shining. If it is all wind, it is 
going to go down when the wind is not blowing. Or it is going 
to over produce when the wind is blowing.
    So, the generation type comes into effect there, too, and, 
again, a much larger footprint would not affect manufacturing.
    Mr. Upton. Mr. Kouba.
    Mr. Kouba. Yes. As I answer that question, let me make it 
clear that I am here today advocating on behalf of our 
customer. I, along with my company, am also an advocate for 
renewable energy.
    As I said in my opening statement and my written statement, 
we have significant renewable energy resources, primarily wind, 
and we are adding a significant amount more. We are also about 
to energize the most powerful solar facility in the state of 
Iowa so we are definitely advocates of renewable energy. With 
respect to this issue, what we have is sophisticated foreign-
owned companies that are planning, proposing, and investing in 
projects in Iowa that in total exceed the 20 megawatt PURPA 
cap.
    Because they evidently do not want to compete with the 
generation market in Iowa and MISO, and make no mistake about 
it, the generation market in Iowa with all our wind is 
extremely competitive, they disaggregate these facilities into 
much smaller projects, organize under separate LLCs but 
ultimately through the same ownership. They then take those 
smaller facilities that get below the 20 megawatt cap. They 
spread them apart so they are a mile apart and then they can 
qualify for PURPA plus we can't challenge that.
    So we would propose to eliminate that 1-mile rule so we can 
challenge these projects that are, clearly, disaggregation that 
ultimately end up costing our company, in one case, 20 percent 
more than what we could get with other projects.
    Mr. Upton. I know that I am running out of time. Mr. Baas, 
it doesn't really impact your folks all that much.
    Let me go to Mr. Prager and Mr. Glass and my time will have 
expired.
    Mr. Prager. Thank you, Mr. Chairman.
    We actually have an actual experience, which I mentioned in 
my oral testimony, in Texas where we had someone come in and 
actually game the system in order to use the 1-mile rule to 
separate a much larger wind project into two different QFs and 
be able to force the avoided cost pricing.
    I think Commissioner Raper really hit it on the head. We 
need to have a process in place at FERC where FERC looks at the 
reality of what's happening. It doesn't elevate the form of its 
1-mile over the substance of what's actually happening on the 
ground. If you have one project subject to common control, 
subject to common interconnection, treated in every respect as 
one project, even if particular segments of that are a mile 
apart, they should be treated as one project and therefore not 
subject to the PURPA requirements.
    Mr. Upton. And Mr. Glass, quickly.
    Mr. Glass. We don't think the 1-mile rule is really an 
issue for the solar power industry. We use the land more 
intensively on, like, for instance, a wind farm our average 
project sizes are such that it just doesn't make sense. We 
think it works and we have no problem with actually FERC taking 
a look at the 1-mile rule. However, the one thing that should 
happen is that the rule needs to be clear and easily determined 
without an administrative review or result because there's no 
way to invest capital if the utility or the utility commission 
is going to gotcha after you've tried to finance a project. It 
is just not going to happen.
    Mr. Upton. Thank you.
    Mr. Peters.
    Mr. Peters. Thank you, Mr. Chairman.
    I want to say, first of all, I grew up in a Wolverine 
household, not a Spartan household. So I am OK with the color.
    So one of the themes of this testimony has been that since 
1978 the renewables markets have matured in a way that what was 
originally conceived under PURPA is probably less important now 
or maybe less needed now.
    Mr. Thomas, you raised the issue I wanted to explore about 
co-generation. Is it your contention that the nature of that 
particular energy is something that still PURPA needs to rely 
on? Can you explain a little bit more about how you were 
distinguishing cogen from other kinds of renewable energy 
generation?
    Mr. Thomas. Sure, and thank you for the opportunity to, you 
know, further emphasize. The idea of co-generation is that 
generation is co-located with load.
    So we use what is steam or heat that would otherwise go to 
waste to create electricity that we use on site. So that part 
of it is all about the economics of producing our products 
cheaper.
    It has side benefits for the grid. If we were just a load 
on the grid, the utilities would supply us from a distance. I 
think 7 percent line losses is not uncommon. So by providing a 
lot of our energy ourselves we reduce that need.
    Mr. Peters. Right. So you are doing co-generation because 
it supports your facility's operations. It lowers your costs. 
You are not trying to produce energy offsite--you are using it 
on site?
    Mr. Thomas. Right. We sell----
    Mr. Peters. So you are really not incentivized by PURPA to 
do co-generation?
    Mr. Thomas. Not at all.
    Mr. Peters. OK.
    Mr. Thomas. We are consumers. We don't want high prices. We 
want----
    Mr. Peters. I got it.
    Mr. Thomas [continuing]. Because we don't sell power back 
to the grid except for just rare short periods. None of our 
facilities are net generators month to month. They might, from 
one hour to another, generate a little bit. But for the most 
part----
    Mr. Peters. I see. Does anyone have a reason why there's 
not a statute of limitations on these challenges? Does anyone 
understand or think that that is a good policy? Some heartburn 
about changing that? No?
    Mr. Glass, I would just like you to maybe respond to this--
with lower renewables costs maybe the role for PURPA has 
changed.
    Can you tell us what kind of easing could happen and what's 
the role of PURPA, going forward, and encouraging renewables?
    Mr. Glass. Well, and one of the fine testimonies that was 
submitted talked about disco balls and shag carpeting, and I 
commend you for that. I grew up in Spokane, Washington, in the 
'70s. It was a great time.
    But competition is not out of style and it didn't go away 
with the '70s. I think that if you look at the renewable energy 
industry, we are up but really natural gas has taken the 
position of coal and a little bit of nuclear and taken over for 
petroleum-based generation for that.
    But overall, we have not yet achieved the diversity that we 
need. The more important point is that this idea that somehow 
or another avoided costs are too high, that is just wrong. And 
I would like to think that the committee needs to look into 
that. The subcommittee needs to look into that because the 
utilities and the utility commissions control avoided cost. 
There are a number of methodologies by which they do that. 
We've been in a declining cost system and in some cases some 
utilities and state commissions haven't got to avoided costs 
that reflect the true market price. That is not a reason to do 
away with legislation itself. It is a reason to fix the avoided 
costs if that is what needs to happen.
    Mr. Peters. OK. Would someone like to respond--maybe Ms. 
Raper or Mr. Kouba--on that issue, the avoided cost issue?
    Ms. Raper. I would be happy to. Thank you.
    Congressman, regarding the avoided cost issue, could we 
change our avoided cost in Idaho to be more reflective of a 
market price? Yes, we could.
    Would we damage things like the co-generation that is 
really not manipulating the system, not attempting to take 
advantage at the harm of rate payers? They're just using a by-
product of what their normal market is.
    We would rather be able to have an avoided cost that truly 
supports what PURPA intended it to be--to be able to bring on 
those small power producers--renewable power producers and if 
we reduced it to a market price then we would see probably 
complete elimination of any of those PURPA projects. Maybe that 
is the answer.
    Mr. Peters. Mr. Kouba.
    Mr. Kouba. I will make one quick comment. We did recently 
change our avoided costs and one of those foreign developers 
working on a new project then complained that it was too low 
and is in with the Iowa Utility Board wanting us to basically 
double the avoided costs.
    So I think there are some things that all of us can do to 
make the avoided costs more realistic. But we still have to 
agree that no matter how you offset we have a very volatile 
market out there that changes often. So we are going to have to 
make sure that we are constantly updating the avoided costs.
    Mr. Peters. Thanks for the testimony. My time has expired.
    Mr. Walberg [presiding]. I thank the gentleman.
    Now I recognize the gentleman from West Virginia, Mr. 
McKinley.
    Mr. McKinley. Thank you, Mr. Chairman.
    Mr. Glass, I think we are all familiar with the fact that 
the electric consumption in this country has been growing about 
the last 8 years. So there has been this ongoing conflict in 
the producers of electricity to maintain their market share and 
I support the idea of the renewables in a big way. I am 
delighted, but as a result of that, someone's losing.
    There are coal producers, coal generating, gas generated, 
at the expense that seemingly the federal government is trying 
to support through PURPA and others and tax credits--the use of 
more solar, wind. We are currently around 15 percent of 
renewables, I believe, creating power in America. If we 
continue this, what is the magic number?
    And we are subsidizing it at a pretty good clip. I think it 
is $28 per megawatt hour. Wind has $28 per megawatt hour. I 
don't know what solar is with that. What's the right level?
    Should we continue to be providing subsidies and where did 
we reach a point that we stopped the subsidies? Is it do we 
want to get to 50 percent renewables in this country?
    Were we trying to get to 100 percent? When do we stop the 
subsidies?
    Mr. Glass. Thank you for the question.
    The first thing I would say is that I think the DOE staff 
report that came out made very clear that it is not renewables 
causing the issues that you are talking about.
    Rather, it is the low cost of gas, which is a great 
domestic source of energy in this country and all of that. So--
--
    Mr. McKinley. No, no, no. I want to stop you on that, 
please. Five of the last 8 years there has been a rather--I am 
not arguing over the price of gas. Renewables are continuing to 
expand, and I applaud that. But it is at a cost. Somebody is 
losing out market share as a result of that, and it could be 
gas. It could be coal. It could be nuclear. Somebody is being 
affected. Where do we go?
    If it is 15 percent, should we still be subsidizing 
companies when they represent 50 percent of the market share?
    Mr. Glass. Well, I----
    Mr. McKinley. Could you answer that, please? It is a yes or 
no.
    Mr. Glass. Sure. Sure.
    I don't have a particular goal. I don't have a federal RPS 
goal, renewable portfolio standard goal, and I am at least not 
prepared to speak on behalf of SEIA as to what that might be.
    The one thing I would say is that solar right now is less 
than 1 percent or just about 1 percent of the total, and I 
think it could grow more, because the reason is I am not so 
much worried about who is winning and losing market share. I am 
more interested in reducing the cost of power for consumers and 
if----
    Mr. McKinley. Well, I am interested in keeping jobs for the 
people that are in the producer----
    Mr. Glass. I would love to talk about it. The solar 
industry----
    Mr. McKinley. So, Mr. Thomas, if I could reclaim my time to 
Mr. Thomas under Domtar, you made a remark in your statement.
    The renewable energy QFs should not, in your opinion, be 
allowed to include production tax credits or the value of 
renewable energy credits in their calculation when they bid 
into the system. Could you explain that a little bit?
    Mr. Thomas. Sure, and thank you for the opportunity.
    Basically, what we are saying is, we know renewables are 
subsidized. We don't object to that. It has done a good job of 
creating a renewable market.
    But when we start bidding into cost-base market systems, 
those subsidies should not be allowed to be bid in, and that 
just keeps it on a competitive process because at face value it 
looks like bidding in, including your subsidies, lowers the 
price and it does in the immediate.
    But in the future, it causes generation assets that are 
built by utilities to have to be shut down because they can't 
compete. They're not subsidized.
    Once they are shut down for any length of time, then they 
end up getting mothballed. Their customers are stuck with 
capital payment on a resource that is not being used.
    Mr. McKinley. This may be a fundamental question. My time 
is almost up. If a utility is required to purchase from a QF 
facility and yet they have not been successful in bidding into 
the PJM for that market for that day, are they still required 
to purchase?
    Mr. Thomas. I don't know that I understand the question 
entirely.
    Mr. McKinley. If a utility company is not providing power 
into the grid but yet are they still required--they are not 
providing power to the grid that day or that week but yet are 
they still required to purchase power from a QF?
    Mr. Thomas. And PJM is a competitive market. I don't know 
the answer----
    Mr. McKinley. OK.
    Mr. Thomas [continuing]. How a utility would react to that. 
I know in our situation at PJM where we might sell generation, 
if we don't make the bid we don't generate into the grid.
    Mr. McKinley. Yes. I just wondered whether you are 
required, though, to still purchase power under QF. Thank you. 
I yield back my time.
    Mr. Walberg. Gentleman's time has expired. I now recognize 
the gentleman from the state in all of our thoughts and 
prayers, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman, and I would like to 
thank you and our Ranking Member Rush for having the hearing 
today.
    PURPA is an interesting program borne of unique 
circumstances in the '70s and I look forward to hearing a 
variety of perspectives on its modernization from witnesses.
    Mr. Prager, in your testimony you talk about PURPA's must-
take provisions and how they affect state resource planning. 
Can you elaborate on how the right of a qualifying facility 
under PURPA can interact with local state procurement processes 
for independent power producers?
    Of course, you have to realize I come from Texas and we 
have ERCOT. So it is different from the rest of the country.
    Mr. Prager. We actually operate in the Texas Panhandle, 
just outside of ERCOT. So our Texas facilities are actually a 
little bit different than the ERCOT facilities. But the 
fundamental issue with PURPA and state resource planning is 
PURPA is a must-take requirement. It is a must contract 
requirement that happens independent of the state resource 
planning processes. So you can see in that that what happens is 
you end up with a independent power producer that comes in as a 
qualifying facility and it puts the power to the utility 
outside of the resource planning process. Because for the 
renewable energy component of PURPA, those facilities are 
intermittent. It is very difficult for a state which is 
responsible for maintaining a reliable and a cost-effective 
power supply to ensure that those facilities are integrated 
appropriately into the system. That is why we think it is so 
important that we begin to find a way to integrate the 
renewable energy requirements that are coming out of states, 
which are really significant right now and are driving a lot of 
the renewable energy growth we see on our system with the PURPA 
must-purchase requirements.
    Mr. Green. OK. And your area you serve in Texas I know in 
west Texas windmills--do you have any of that alternative 
rather than solar?
    Mr. Prager. We do have some solar and we are adding more in 
Texas. Solar is a tremendous growing resource and Mr. Glass 
quoted my disco ball quote from my testimony.
    I will say that we are excited about the potential for 
solar, especially in west Texas and in New Mexico. But, again, 
it is important to do it the right way, because if you do it 
the right way you can bring a lot of renewable energy to your 
customers and do it in a way that is extraordinarily cost 
effective and reliable. The best way to do that is through the 
state planning processes.
    Mr. Green. Well, obviously, from Texas I would love to see 
us do with solar what we have done with wind power, and for my 
California friends I am always bragging about how we produce 
more wind power in Texas than California. So and we like to do 
solar----
    Mr. Peters. There is a lot of hot air.
    [Laughter.]
    Mr. Green. Well, I offered to send you a whole lot of water 
last week.
    [Laughter.]
    Mr. Green. Mr. Glass, in your testimony you talk about how 
SEIA's members are driving down the price of solar to compete 
favorably with all the other forms of power generation.
    Can you elaborate on how current technological innovations 
and efficiencies of scale have changed PURPA contracts from 
high-cost contracts of the past to today?
    Mr. Glass. Well, thank you for the question.
    I've been developing and financing solar projects for about 
12 years now and the price of the installed capacity has come 
down to about one-sixth of where it actually began when I 
started practising. And this has been done through 
technological innovation, massive investment in capacity 
manufacturing as well as a lot of technological and business 
model innovation that has driven down these costs to the point 
where, we have PPAs that are now less than $20 per megawatt 
hour that are being executed in various places.
    We are able and look forward to installing and selling to 
utilities at those prices.
    But the avoided costs we don't control that at all. We are 
a price taker under the avoided cost methodology that the 
utility and the utility commission set.
    So I would like to encourage to the extent that there are 
problems with avoided costs that they review those costs and if 
solar is the best and cheapest alternative, let us set on that 
and let us get more solar installed because we have 260,000 
jobs that have been built over the last 12 years and we'd love 
to add more.
    Mr. Green. Well, the original intent of PURPA was to push 
for alternative sources of power during an energy crisis in the 
1970s.
    Alternatives today are a booming market, and from your 
testimony I get the sense that you see the primary purpose of 
PURPA is increasing competition and putting downward pressure 
on utility companies to reducing prices for consumers. Is that 
an accurate characterization?
    Mr. Glass. Yes.
    Mr. Green. OK. Mr. Chairman, I thank you for holding the 
hearing. because, again, in the 1970s we also had an embargo on 
exporting crude oil and we changed that. So maybe we need to 
look at PURPA and bring it up to date. Thank you.
    Mr. Walberg. I thank the gentleman.
    I recognize now the gentleman from Ohio, Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman. I appreciate it.
    And I want to thank all of our panellists for being here 
today. I appreciate it. Important topic.
    Commissioner Raper, in your testimony you state utilities 
prepare detailed integrated resource plans and make investments 
based on perceived need. When discussing PURPA, I think it is 
important to get a better understanding of this process, 
especially, as you state, when a QF steps in it changes many of 
the factors that led to the utility's original conclusions. New 
QF resources are not contemplated by integrated resource plans 
because they are not known or measurable by the utility.
    So can you describe that process? In other words, how does 
a utility prepare their integrated resource plans and make 
investments based on their needs? What is that process?
    Ms. Raper. Thank you, Congressman, and it actually goes a 
little bit to Congressman Green's question about the renewable 
portfolio standards and perceived need.
    A utility, every 2 years, does a 20-year plan of what their 
resource needs might be based on growth and customers and 
anticipating, based on history, what it is going to look like 
into the future.
    But when a QF comes on, it just puts in a contract, it is a 
must-purchase. They say, here you go, we want to build. So when 
rates are favorable to a QF they just come in. There's no way 
for the utility during that integrated resource planning 
process to say OK, we are going to have six new QFs that we are 
going to bring on. They're not allowed to limit that. They're 
not allowed to say we are going to have five new wind resources 
and six new solar resources and that is all we are going to 
take and so we can plan for that, and we have enough caseload 
in order to cover the intermittency of those resources. They 
don't have the ability to plan for that. So what our utilities 
have been forced to do, and we have watched it with the 
integrated resource planning process, is it's one step forward, 
two steps back.
    They make their plan. But then they have to adjust. It's a 
good thing they file a 20-year plan every 2 years because they 
are having to adjust each time they come to anticipate 
different base load resources to guess at where rates are at 
right now and what QFs may come online.
    Mr. Green. I was going to ask you, and maybe you answered 
this, how long it takes to develop those plans. So if they do 
it every 2 years for a 20-year out cycle, does it take the full 
2 years? Are they working on that for 2 years?
    Ms. Raper. Well, Mr. Kouba may be able to answer that more 
directly as a utility. But it is my understanding that they are 
constantly planning. They are constantly modifying and 
anticipating and doing studies on what they may need.
    Mr. Green. OK. Continuing on then, can you explain the 
changes that might need to be made to a utility's resource plan 
when integrating a small power production facility?
    Ms. Raper. Well, if it's a true small power production 
facility, if it's a 5-megawatt, a 10-megawatt geothermal plant, 
then there are incremental modifications that have to be made 
in order to balance out those resources. But when you get 100 
megawatts that is disaggregated into five 20-megawatt projects, 
then for our utilities, it's different in the east than it is 
in the west.
    Idaho Power, during a shoulder month when the wind is 
blowing, their peak load can be as low as 1,100 megawatts. 
Well, they have more QF resources online than their peak load 
on those days.
    So the ability for them to try to balance that is enormous.
    Mr. Green. OK. So how do these changes compare when a 
utility is required to accommodate generation for multiple QFs?
    Ms. Raper. How do the utilities compare?
    Mr. Green. Yes. Does the process change when a utility is 
required to accommodate generation for multiple QFs? Does it 
make it more complicated?
    Ms. Raper. Absolutely. Yes, because you are bringing on a 
hundred megawatts of resources that are, one, intermittent, 
that are, two, must take and they are not necessarily being 
provided at an hour--at a time of year and time of day when the 
utility needs those resources, and the base load resources of 
the utilities can only be backed off so far.
    Hydro can't be shut off. Coal plants can't be shut off. 
There's a minimum, you know, must run on those base load 
facilities.
    Mr. Green. OK. All right. Well, thank you very much. Mr. 
Chairman, I yield back.
    Mr. Walberg. I thank the gentleman.
    Now I recognize my friend from Illinois, the ranking 
member, Mr. Rush.
    Mr. Rush. I want to thank you, Mr. Chairman.
    I had a question for Mr. Glass and Mr. Baas. The question 
might have been asked and answered but I really want to know, 
one of the most contentious issues that critics have cited 
PURPA's mandatory purchase obligation. Critics argue that the 
purchase obligation under Section 210 requires them to purchase 
power that they may not need from small QFs and above market 
rates.
    They claim that this misplaces lower cost resources and 
unnecessarily increases rates to consumers. And I'd like to get 
your response, Mr. Glass and Mr. Baas.
    Mr. Glass. Glass before Baas?
    Mr. Rush. Any way you want to do it.
    Mr. Glass. Thank you for the question.
    I have already spoken to the fact that if avoided costs are 
being created and approved by a regulatory agency, there should 
not be a situation in which the utility is buying at greater 
than its incremental cost of buying energy. If PURPA and its 
implementing regulations are being administered correctly, that 
is not a situation you'll find it in.
    I actually think that--and thank you for the question 
because I think there are a lot of other issues that we haven't 
really talked about yet that are being created in the PURPA 
environment. I think that there are some states that are taking 
particular steps to eliminate QF projects altogether. They are, 
for instance, reducing the term to something that is not 
financeable. They are introducing other requirements such as 
RFPs and other things that need to be satisfied before a QF can 
locate.
    But the ultimate thing that you have to understand if you 
are going to have a competitive independent generation capacity 
in this country, you need to have the ability to have a long-
term stream of revenues to be able to finance these facilities. 
Utilities have the ability to put costs onto their customers 
over a 20-, 30-year period. A utility, when it's planning to 
build generation, does not do it on a 2-year basis, it does it 
on a longer term.
    Well, independent power is looking for the same type of 
thing. If we are going to put money to work we need to have 
that long-term stream of revenues and certainty.
    Mr. Rush. Mr. Baas, you want to charge at this?
    Mr. Baas. Yes. Thank you for the opportunity to comment.
    In Michigan, the utilities receive full cost recovery and 
so when the Public Service Commission does rate reviews they 
are ensuring that the utilities are being paid their full cost 
of operation. Our facility is a base load facility. It's been 
providing electricity for 27 years. We certainly are in the 
planning of the utility and have been there for a long time.
    When we look at what the Public Service Commission is doing 
in terms of determining avoided cost versus what the utilities 
are being paid, there is a significant difference. And so we 
believe we are very competitive and we are seeing utilities 
actually attempt to build new generation capacity at our 
expense.
    When they want to move us to a 1-year notification on a 
contract it's difficult for us to invest millions of dollars in 
refurbishment. It's difficult for us to take our 10-year 
planning horizon to determine what are we going to pay for in 
the future when it's set up like that.
    Mr. Rush. I want to ask and want to quickly go down the 
line and simply ask one question. We can start with you, Mr. 
Baas.
    Give me a yes or no if Congress should make tweaks to PURPA 
or leave it as it is. Yes or no.
    Mr. Baas. Yes.
    Mr. Kouba. Yes, we should modify PURPA.
    Mr. Thomas. No, we prefer it in the current form.
    Ms. Raper. Yes, update, Congressman.
    Mr. Glass. No, leave it as it is.
    Mr. Prager. Yes, we believe it should be modified.
    Mr. Rush. Thank you. Mr. Chairman, I yield back.
    Mr. Walberg. I thank the gentleman, and I recognize the 
gentleman from Missouri, Mr. Long.
    Mr. Long. I might have to watch that on replay. That 
reminded me of ``What's My Line?'' when they are yes, no, leave 
it as it is.
    I think I stepped out of the room for just a minute and I 
believe Mr. Johnson stole my notes so this might sound like 
familiar territory to what he was asking but I am going to ask 
these questions of Mr. Prager. Under PURPA's mandatory purchase 
obligation, a host utility is required to purchase a qualified 
facility's output even if the utility has no need for 
additional power.
    How does the utility respond to these types of situations?
    Mr. Prager. Well, I provided the congressman an example of 
what we are going through in Colorado right now with the 
particular QF developer that is trying to put to us 1,520 
megawatts of power. It presents a very big problem to us. It 
really does. It means that we can't be certain about what our 
generation capacity is going to be. It raises costs for 
customers. We had some discussion earlier about avoided costs.
    Reality with avoided costs is that the avoided costs 
calculations that are done under PURPA are supposed to make the 
customer indifferent to whether or not the project is financed 
or not. That is not the case when a PURPA cost comes in above 
what would have to be bid into a competitive process. That's 
one of the concerns we have about it. It also, when you have a 
PURPA facility coming on to the system, it locks the ability of 
other independent power producers to be able to access the 
marketplace.
    I mentioned we have a lot of wind on our system. Sixty-five 
percent of that is not owned by our company. It's owned by 
independent power producers. If a QF comes in and it occupies 
that field, it will be impossible for those IPPs to come in and 
take their position. And finally, it also presents for our 
state and our system some significant challenges in terms of 
the reliability and protecting the reliability and cost 
effectiveness of the system.
    Intermittent renewables are a technical challenge from an 
electric system standpoint. You can make it work. We have made 
it work. We are very optimistic about the future. But you've 
got to do it in the right way.
    The problem with PURPA is these projects show up at a time 
and location of their choosing and it's very difficult for us 
to plan around those projects.
    Mr. Long. And what impact does this have on cost to the 
consumer?
    Mr. Prager. We believe that PURPA has the potential to 
raise consumer costs because we have got to accommodate these 
higher cost resources and we have to do it in a way that will 
result in additional investment in our system to accommodate 
the location in which they would be built.
    Mr. Long. And you talked specifically about how it affects 
the utility's output?
    Mr. Prager. Utility output.
    Mr. Long. The utility output, how it affects the QFs?
    Mr. Prager. We believe it's very important that the utility 
have the ability to plan around the system as it's currently 
designed and so we think it's extremely important that the 
state have the leadership role in terms of setting the strategy 
that the utility must follow in order to achieve not only a 
reliable and low cost electric system, which are both critical, 
but also achieve those public policy goals whether it's 
emission reduction or renewable energy.
    We found that our states do an extraordinarily good job of 
that. They do an extraordinarily good job of it and in fact the 
renewable----
    Mr. Long. So you think they can anticipate and plan for 
integration?
    Mr. Prager. It's hard for them to do it when these projects 
just show up whenever they want to. It's very difficult.
    Mr. Long. OK. And so should the state commissions be able 
to suspend the mandatory purchase requirement if it determines 
the utility does not need the additional power----
    Mr. Prager. We believe they should.
    Mr. Long [continuing]. In your opinion?
    Mr. Prager. We believe they should. Yes, sir.
    Mr. Long. OK. Thank you.
    And with that, Mr. Chairman, I yield back.
    Mr. Walberg. I thank the gentleman. And I recognize the 
gentleman from Iowa, Mr. Loebsack.
    Mr. Loebsack. Thank you, Mr. Chair. It's always great to 
have these hearings so we can hear from a lot of different 
perspectives.
    For me, being from Iowa and particularly proud, obviously, 
of what we do with wind, Mr. Kouba, you and the other principal 
utility in the state of Iowa, very, very important when it 
comes to that.
    I do have one quick question. Is there any way we can get 
to 40 percent of electricity by the end of the year or is that 
a pipe dream?
    Mr. Kouba. I wouldn't say it's a pipe dream and we are 
working hard to get there.
    Mr. Loebsack. Yes. It's going to be hard, because to get 
there we're 36 percent now. I do want to say, though, first, I 
want to mention solar because there is more and more solar in 
Iowa all the time as well.
    A lot of people don't think of Iowa as having a lot of 
solar. But it really does, and I really want to thank Alliant 
for doing what it is doing. We have a lot of RACs that are 
working on this.
    SIPCO is providing solar to five and maybe even more now. I 
know they are planning to do even more. And we have got a lot 
of folks, ranging from schools to farms to hog farmers who are 
installing solar panels.
    The ITC, I think, has been very, very good for that. I know 
there are many concerned about these particular programs and 
subsidies. But the ITC, I think, has served its purpose and the 
PTC for wind. There is no question about that. So I am very 
proud of what I was doing at this point. We have a great story 
to tell when it comes to wind, and we may be behind Texas when 
it comes to wind power but we are still ahead of California, 
nonetheless, and it's great.
    But I am pleased to hear, obviously, the $1 billion 
commitment to build more wind in Iowa too on the part of 
Alliant Energy. 4It's great news, and as for PURPA 
modernization, I want to ensure, I guess, that wind energy is 
deployed in the most cost effective manner for my constituents, 
for all of Iowa, for the entire country, while ensuring that 
the federal government continues to promote renewable growth 
energy in my state.
    And I think there is a story to tell there. You can 
elaborate a little bit more. I guess the question that I would 
have at the outset is has PURPA actually served to drive 
extensive renewable energy development in the past and where 
are we to go from there?
    You have some policy recommendations. You mentioned the 1-
mile rule. But, did it work in the past but now we are just 
having some difficulty with it at the moment and reforms are 
necessary? Is that fair to say, Mr. Kouba?
    Mr. Kouba. I would agree it has worked in the past. In some 
respects, it's still working. I think for us specifically what 
we see in Iowa is foreign companies abusing the intent and 
spirit of PURPA when they disaggregate these projects, move 
them down to the distribution system which causes all sorts of 
reliability problems in and of itself.
    So it's those companies we think that are abusing that. 
Just instead of competing in Iowa in the renewable market, 
disaggregating the systems, moving down to the distribution 
system, claiming they are PURPA facilities, spread them 1 mile 
apart so we can't even challenge that.
    The IUB can't challenge that. So that is our main concern 
with what's going on right now with respect to abuses of PURPA.
    Mr. Loebsack. Do you have other policy recommendations 
beyond the 1-mile rule issue?
    Mr. Kouba. We do have policy recommendations. The 1-mile 
rule is one of them. The other one is to be able to challenge 
this disaggregation of larger projects.
    Also, for the states to be able to say that utilities do 
not need to buy that capacity and energy when it is not needed 
and, really, a number of the panellists have talked about how 
you get that integrated resource planning process in itself and 
just make that more of a competitive process instead of just 
those QFs that are disaggregate on those projects and putting 
it on the utilities.
    Mr. Loebsack. Right.
    Mr. Kouba. We're looking for competitive resources for our 
customers.
    Mr. Loebsack. Right. And then, ultimately, obviously, it is 
to make sure that we have competition so that the cost to the 
consumer is driven down as well.
    And so that is really important and I know Mr. McKinley 
mentioned jobs. In the state of Iowa wind has created thousands 
of jobs. Solar is creating more jobs every day. Wind certainly 
has.
    In my district alone, I often mention in these hearings 
that I have a number of wind energy plants in my congressional 
district alone, two of them in Newton, Iowa, where we once had 
Maytag, Whirlpool. No longer.
    But the wind energy industry has come in and really created 
a lot of great new jobs, and so I want to continue to do that 
as best I can.
    But thinking also our consumers of energy and making sure 
that the regulatory framework we have in place, going forward, 
whatever that may be is going to serve those energy consumers 
as well.
    So with that, I yield back. Thank you, Mr. Chair. I thank 
the panel.
    Mr. Walberg. I thank the gentleman.
    I now recognize the gentleman from Illinois, Mr. Kinzinger.
    Mr. Kinzinger. Well, thank you, Mr. Chair, and thank you 
all for being here. A lot of the questions I wanted to ask have 
been asked so I will just hit a couple.
    Ms. Raper, the driving factor behind PURPA was national 
security through field diversity after the oil embargo. We have 
seen great success in energy efficiency in the development of 
domestic renewables since the '70s.
    Today, however, energy security means more than just 
security of supply. It's reliability, particularly during and 
after extreme weather. It's grid resiliency. It's mitigating 
cyber attacks and some other concerns.
    As a state regulator, do you see circumstances where PURPA 
may impact grid reliability or not allow you the most efficient 
plan for energy security in your state?
    Ms. Raper. Thank you, Congressman. I do see circumstances 
where PURPA could impact grid reliability because as a must-
take resource we are forced to approve contracts and the 
utility is forced to accept that energy onto their system and 
they need to find a way to balance that energy.
    I don't know about national security risks so much, 
although I do appreciate you bringing that up because that is 
becoming a greater and greater concern for the state regulatory 
commissions.
    But it absolutely affects and impacts reliability of the 
grid when you have more megawatts entering onto distribution 
and transmission systems than what's being taken off because of 
flat load and reduced load by energy efficiency measures.
    Mr. Kinzinger. Thank you. And to the rest of the panel, 
does anyone else want to comment on the role of PURPA in light 
of the much broader definition of energy security?
    Mr. Baas. Thank you, Congressman.
    Mr. Kinzinger. We'll go over here and then over here. I am 
sorry. So we'll start with Mr. Glass.
    Mr. Glass. Thank you.
    Actually, I think it's a great question. It's something 
that all utility commissioners, and Congress and FERC should 
all be paying attention to.
    I think that we are looking at new types of risks. Not just 
weather risks, but national security risks of all different 
types.
    I think that there has been a recognition within the 
utility industry in the last 10 years that with a greater 
diversity of resources on the system located at different 
places on the grids, while it might be more complicated, it 
certainly is a lot more robust in a variety of situations.
    And sure, the utility commissions need to know how to use 
these resources but solar resources in particular and, more 
broadly, distributed smaller resources throughout the system 
actually adds a great deal of energy security to the extent 
that it can be managed better. So I think greater diversity 
helps with security.
    Mr. Baas. My comment was going to be not to forget existing 
base load renewable energy such as waste energy. The utilities 
in Michigan are looking to build and construct new capacity 
when they are really beginning to frown on existing renewable 
under PURPA. And so I would ask that you consider that.
    Mr. Kinzinger. Thank you.
    Mr. Prager. In terms of the security of the grid, 
especially when you think about cyber security, it's never 
completely clear that you actually are making the grid more 
secure with more distributed resources.
    There is some real value in having greater diversity on the 
grid to help protect from having one massive failure. The 
problem is is that with a lot of different facilities on the 
grid they represent doors into the system where cybersecurity 
threats can enter in.
    We spend a lot of time thinking about this and it is one of 
the growing concerns as you add more distributed resources to 
the system and that is true for a lot of these QFs as well.
    Mr. Kinzinger. Thank you.
    To the panel, you all provided the areas that PURPA could 
be modernized and improved. With energy technology almost 
constantly evolving and rapid changes to the kinds of energy 
security threats we face, what, if anything, should this 
committee consider in order to make it effective for the next 
40 years? And I guess those that participated maybe can answer 
that question.
    Mr. Prager. As the energy markets evolve, the best thing to 
do is let them evolve and to no longer have these kind of 
forced mandates over the top of the energy markets.
    States do a great job in terms of protecting the 
reliability of the grid. They do a great job in terms of 
protecting the cost effectiveness of it. There's lots of market 
opportunities out there right now. There's lots of least cost 
resource planning. The best thing that could happen would be 
for PURPA to get out of the way and that is really the ultimate 
advocacy that we are supporting.
    Mr. Kinzinger. Thank you.
    And Ms. Raper, do you have anything to say on that at all, 
in terms of what we should consider?
    Ms. Raper. Although I don't want to disagree with Mr. 
Prager but I don't think PURPA is the worst thing on the 
planet.
    I think it's being abused. And so I think that if we 
removed the abuse--Idaho's been implementing PURPA since the 
early '80s and there was not a problem until the last decade 
when the large generators coming in and gaming the system, were 
manipulating the loopholes in the act, complying with the 
letter but not the intent of the act.
    And I do agree that there is a balance of what Mr. Glass 
and Mr. Prager said and that is that you put too many 
renewables and QFs on the system and you actually create a 
worse environment for them. We believe in distributed 
generation and the value of distributed generation and keeping 
the grid consistent and reliable as well.
    Mr. Kinzinger. Thank you. Thanks to all of you. I yield 
back.
    Mr. Walberg. Thank you. Gentleman's time has expired.
    Now I recognize the gentleman from California, Mr. 
McNerney.
    Mr. McNerney. I thank the chairman. I thank the witnesses 
for coming here today. Interesting testimony and informative.
    I got a couple of things out of your testimonies, some ways 
to improve PURPA. One is to improve the 1-mile rule and to 
allow states to address gaming. I think that was Ms. Raper and 
Mr. Thomas. Thank you.
    Subsidies are not included in contract negotiations. Mr. 
Thomas. Large gifts should sell power more competitively--Mr. 
Kouba--and the need to add QFs to integrated resource planning. 
Am I mistaken or am I misinterpreting what anyone said on those 
comments? No?
    I think PURPA can be revised to encourage low-emission or 
zero-emission--carbon emission without increasing cost to 
consumers. Does anyone disagree with that?
    Sure. Go ahead.
    Ms. Raper. If I can just qualify that. I think that that is 
possible. But I know that Idaho has taken a lot of criticism 
for their two-year contracts and part of what Mr. Glass is 
talking about about a correct avoided cost it may be a correct 
avoided cost right now based on the factors that you use to 
predict what that avoided cost ought to be. But the longer the 
term of the contract because we are in a volatile energy market 
and it is always volatile, the longer the contract the more 
disparity there will be between actual avoided cost and what 
the utility is paying those.
    So 20-year contracts, in our opinion, are never going to be 
representative in the end of what the incremental cost to the 
utility is.
    Mr. McNerney. Well, that may be true. But as a small power 
producer, it is almost impossible to get financing without some 
sort of long-term guarantee or contract.
    Ms. Raper. May I address that, Congressman?
    Mr. McNerney. Yes.
    Ms. Raper. It's our opinion that as long as PURPA exists 
and there is a must-purchase obligation there that the utility 
has to take that energy, then there is something reliable to go 
and get financing based on you show them the federal act that 
says that the utility has to take this energy on an ongoing 
basis or the modification that can be made.
    As we read PURPA now, it says that the cost of that power 
is either determined at the time that the contract is entered 
into or upon delivery of the energy.
    So to us, if you have a 20-year contract, you determine at 
the time the contract is entered into what that avoided cost 
would be. All we tried to do with----
    Mr. McNerney. But that is a risk to you and also just a 
kind of a risk to the power producer because costs may go up, 
in which case the power producer is stuck at a lower cost.
    That is just futures gaming. Whether it's the utility or 
the producer, you are both taking a risk. Yes?
    Mr. Kouba. Yes, could I comment on that?
    Mr. McNerney. Sure.
    Mr. Kouba. When we go to add resources at our utility and 
we walk into the Iowa Utility Board to get those approved for 
20 years, 25 years, 30 years, we come in there with a whole 
study for that time period with various scenarios on what 
happens if gas prices change, what happens if an environment 
rule changes, carbon taxes change.
    So we have the whole gamut of scenarios for 20, 25, 30 
years that then they can look at and say yes, this is still a 
good decision to add this resource over all those scenarios for 
20, 25, years.
    That's not the case with these folks gaming the system. 
They come in with no 20-year plan showing that is going to be 
beneficial to customers.
    Mr. McNerney. Right. Well, that is one of the improvements 
that I think could be made is giving states some ability to 
fight gaming. Mr. Glass.
    Mr. Glass. Congressman, I would say if they are doing that 
analysis and they know what the long-term costs are, use that 
to set your avoided costs. It's very simple.
    There's no reason why when you are entering into a 20-year 
PPA as utility that you would use a different set of data than 
your avoided cost. In order to develop and finance a solo 
project or any independent power contract you need a long-term 
stream of revenues.
    You cannot depend upon the market price in any part of this 
country. Merchant generation in this country is dwindling. 
There's very little of it actually happening, especially 
outside organized markets where you can't effectively hedge 
against such things.
    To allow only 2-year contracts or to require these people 
to ride the market means the end of PURPA QF contracts and it 
means the end of independent power.
    Mr. McNerney. Right. No, I understand and I agree with 
that.
    How does storage affect PURPA's viability as a long-term 
requirement as a regulation?
    Mr. Glass. Right now storage is not specifically 
contemplated in PURPA or in the implementing regulations, to my 
knowledge. I would say this. The implementing regulations were 
very sensitive to the difference between energy and capacity 
and also the other ancillary services that these types of 
resources can build. I would simply put it this way. Get more 
sophisticated about the avoided costs. Get sophisticated about 
the energy, the capacity, and if it makes sense to build in a 
financing way, to build and install battery we'll build it and 
there's greater capabilities that will come with getting 
compensated with that.
    Mr. Walberg. Thank you. The gentleman's time has expired.
    Mr. McNerney. I was about to say that.
    Mr. Walberg. We have got votes coming. We are trying to 
move it on a little bit, and so now I recognize the gentleman 
from the inspiring state of Texas, Mr. Barton.
    Mr. Barton. Thank you, Mr. Chairman. I will be, I think, 
relatively brief.
    I didn't hear the opening statements of the panel. But in 
answer to Mr. Kinzinger's questions, Mr. Prager, does your 
company support repeal of PURPA?
    Mr. Prager. We provided several different options in the 
end of my written testimony. But one of them is yes, we would 
support the repeal of the Section 210 requirements under PURPA 
for a forced purchase.
    Mr. Barton. I am open to that, and I wasn't here in '78, 
believe it or not, but I got here in '84, and we thought about 
repealing it in the Energy Policy Act of 2005. We did add or 
change it, which the FERC implemented in Order 688.
    Mr. Glass, could you tell me what the average size a solar 
plant is today?
    Mr. Glass. The average size of a PURPA----
    Mr. Barton. New construction.
    Mr. Glass. Yes. The average size of a PURPA solar project 
is 8 to 10 megawatts in total. There are some larger and there 
are, obviously, smaller as well. But for PURPA projects it's 
usually in that range.
    Mr. Barton. Well, I appreciate that. But if it is not 
PURPA, what does the economics of solar today indicate the 
optimum size is? I would think it would be larger than that. 
But maybe not.
    Mr. Glass. Yes. I think for a utility scale solar, I would 
say the average is now north of 50 megawatts. I think for 
commercial and industrial when you are on a flat rooftop 
there's a different optimization for, obviously, residential. 
You're talking, like----
    Mr. Barton. Right.
    Mr. Glass [continuing]. Five or six kW.
    Mr. Barton. Ms. Raper, you may be the best person on this, 
since you are a public utilities commissioner. Texas has an 
open access market system in ERCOT. We deregulated our power 
generation.
    Do you believe, and you may not know this, but nationally 
is there a problem for these so-called facilities getting 
access to the grid? There was a concern in the '70s that since 
everything was regulated and integrated that there might be.
    But in today's market is that still a problem?
    Ms. Raper. Thank you, Congressman, for the question. I 
think that there is not a problem for large QFs to have access.
    I do believe that there are still co-generation facilities 
and other small--we have run-of-river hydro that come in under 
as a QF resource and I believe that those are entitled to those 
published standard rates that PURPA talks about.
    But no, I think that you get to 10 megawatt, 20 megawatt 
and I think it is insincere for Mr. Glass to represent that the 
average size is 10 megawatts for a QF.
    The average size is 10 megawatts for a QF because the 100 
megawatt disaggregated in order to become 10 of those. So yes, 
I think it's proven through the Energy Policy Act of 2005 and 
the modifications that Congress made that there is access in a 
competitive market for those larger QF facilities.
    Mr. Barton. I haven't talked to the chairman or the ranking 
member so I don't know where the will of this subcommittee is 
on this issue.
    But if you assume that we're not going to repeal PURPA 
which, again I would be open to, but you wanted to reform it, 
is the 80 megawatts standard for a QF and then the 20-watt 
megawatts standard under FERC's 688, are those still valid or 
should those be changed? And I will let anybody take a pop at 
that.
    Mr. Kouba. We are advocating to lower that 20-megawatt 
limit down to 2 megawatts.
    Mr. Barton. Two. OK.
    Mr. Baas. And I would disagree. I believe that facilities 
like ours have a very difficult time moving electricity to the 
grid competitively. Twenty megawatts at a minimum and for waste 
energy facilities 20 to 80 would be very helpful.
    Mr. Prager. And, Congressman, we would support reducing the 
80-megawatt limit down and make it consistent with the limit 
that is associated with competitive markets across the country, 
especially for states that have competitive least-cost resource 
planning.
    Mr. Barton. Thank you, Mr. Chairman.
    Mr. Walberg. I thank the gentleman.
    I now recognize another proud Texas member, Mr. Flores.
    Mr. Flores. OK. I want to thank the chairman for hosting 
this informative hearing and also thank you, panel, for your 
excellent testimony.
    Three quick questions, if we can. It seems to me like state 
policies are driving the growth and renewable generation. 
They've got renewable portfolio standards--tax credits, 
competitive procurement requirements, net metering are just a 
few of those policies.
    So two questions out of that statement. The first one is 
can we even determine if PURPA's mandatory purchase 
requirements under Section 210 are still a factor in driving 
renewable generation as opposed to the state renewable policy?
    So Mr. Baas, I will start with you.
    Mr. Baas. The state policies certainly help, but the 
federal PURPA requirements I think really enhance and provide 
that umbrella framework for the states to operate.
    Mr. Flores. Which do you think is having a greater impact 
today?
    Mr. Baas. PURPA.
    Mr. Flores. OK. Mr. Kouba.
    Mr. Kouba. In Iowa, there is no doubt that PURPA facilities 
aren't driving renewable growth. It is the utilities driving 
renewable growth and many other independent power producers 
driving renewable growth, and we can take advantage of those 
independent power producers through very competitive RFPs and 
PPAs and certainly with our own facilities.
    We go through RFP processes that make very competitive 
prices for those projects. So definitely being driven by 
utilities right now and independent power producers.
    Mr. Flores. Mr. Thomas.
    Mr. Thomas. Thank you. We believe PURPA has had a great 
impact on us. We would not be nearly as competitive in 
manufacturing without their ability. I can't think of an 
example where PURPA was used with a hammer for us to be able to 
do this.
    Most of the time, we work through with the state or with 
the utilities and come up with a negotiated contract. But 
PURPA's presence is important and it enables that.
    Mr. Flores. OK. Ms. Raper.
    Ms. Raper. Thank you, Congressman.
    I think initially PURPA drove some of the renewables that 
came onto the market. It assisted in people wanting to invest 
in things like wind and solar and geothermal. But I don't think 
that it's the driving force anymore for getting renewables on 
the system.
    Mr. Flores. Mr. Glass.
    Mr. Glass. I detailed in my testimony roughly 20 percent of 
all the solar installation that was installed in the U.S. last 
year was based upon PURPA-developed contracts.
    So it was significant. And I would say for the other 80 
percent, PURPA is a very important backstop in case the other 
end of the offtake contract goes away. Financiers depend upon 
PURPA as that backstop as Plan B.
    Mr. Flores. Mr. Prager.
    Mr. Prager. The vast majority, over 95 percent, of the 
renewable energy on our system, which is, again, the largest 
renewable wind energy provider in the country, comes as a 
result of state policies, low costs, and market forces. It's 
not because of PURPA.
    Mr. Flores. OK. Thank you.
    Did I really get 5 minutes at the beginning?
    Mr. Walberg. You sure did.
    Mr. Flores. Somebody cheated me on the clock.
    Anyway, I yield back the balance of my time.
    Mr. Walberg. We took care of the cheat and gave you, in 
fact, a little bit more in the end. So----
    Mr. Flores. So can I keep going?
    Mr. Walberg. No, no, no. You're----
    [Laughter.]
    It's always worth a try, though. I appreciate very much the 
hearing today and I appreciated the fact that four out of six 
of the panellists also indicated that they were open to 
tweaking, reforming, altering, or amending the process and over 
the last few months I've been drafting the PURPA Modernization 
Act of 2017.
    I believe that PURPA is ripe for reform and, if done 
correctly, it will increase competition, lower utility bills 
for our constituents, and ultimately promote grid reliability. 
I am excited to work with this committee to bring about nearly 
40 years of law into a change for the 21st century, if we can 
do that.
    I want to thank the witnesses for being here and great to 
have a Michigander here as well, Mr. Baas.
    Mr. Prager, in your testimony, you mentioned that PURPA's 
mandatory purchase obligation is hindering Xcel's ability to 
properly undertake critical resource planning.
    Can you please elaborate on this and how it's negatively 
impacting your customers, and additionally, do you think that 
it would be beneficial if states were given mandatory purchase 
obligation waiver authority?
    Mr. Prager. I do think it would be beneficial. States are 
doing an excellent job right now in making sure that they 
manage their resource plans, do it cost effectively and achieve 
these energy policy goals, including some unbelievably 
aggressive goals for renewable energy development.
    My testimony does talk in some detail about some of our 
experiences, especially the experience that I indicated in 
Colorado where we are actually being asked to add in a gigawatt 
and a half of renewable energy that we haven't planned for, 
that we haven't sited, that we haven't put through the process.
    That gigawatt and a half of QF facilities, if they come in, 
will completely disrupt our resource planning and will raise 
customer costs and it threatens the reliability of our system.
    Mr. Walberg. OK. Ms. Raper, would you care to add anything?
    Ms. Raper. Amen. I----
    Mr. Walberg. That's fine.
    Ms. Raper. Thank you, Congressman. I agree. Without being 
able to plan for the resources for QFs when they come on, then 
it adversely impacts the utility's ability to plan, going 
forward. And we have seen that in our state with the way the 
integrated resource plans are submitted every 2 years. There 
are swings now instead of tweaks to those integrated resource 
plans and that is a problem. It impacts investment.
    Mr. Walberg. It's a challenge. Yes.
    Mr. Prager, you noted that Xcel is the number-one utility 
provider for wind. You've also touched on the fact that QFs do 
not face the market competition other IPPs are subject to.
    Do you believe that PURPA is counterproductive to renewable 
electricity competition and is keeping your customers from 
enjoying the technological advancements made in renewable 
generation such as wind?
    Mr. Prager. We think it's very important when you bring any 
resource onto the system including renewable energy, you do it 
cost effectively. You do it in a way that results in low-cost 
reliable power for your customers. We have been able to do that 
outside of the PURPA process. PURPA is not consistent with the 
way that states are currently doing the resource planning that 
allows us to bring in that power on a cost-effective and 
reliable basis. So yes, I would agree with that statement.
    Mr. Walberg. OK. Mr. Kouba, in your testimony there was 
some mention of reliability impacts to the system due to the 
integration of these larger QFs on the distribution system.
    How does a utility plan for or mitigate these issues and, 
secondarily, who is ultimately responsible for grid reliability 
issues--the utility or the QF?
    Mr. Kouba. As a matter of fact, we can't plan for them 
because these QF facilities now that are being disaggregated 
and located on our distribution system come in at any given 
time and we have absolutely no warning. So there is no planning 
for the future in those cases. It's basically reacting and 
doing the best we possibly can to ensure that the rest of our 
customers on that distribution system aren't adversely 
impacted, and in many cases so far they have been adversely 
impacted.
    It's just if you don't take these into the resource 
planning process, you end up having potentially transmission 
system impacts. We are seeing that now in the distribution 
system because there's no adequate planning to add those 
facilities. They come in at a location. They may not actually 
be needed there, and they do end up causing problems for our 
customers--those distribution systems.
    Mr. Walberg. OK. Mr. Kouba, you mentioned that there are 
opportunities for these QFs to integrate into the transmission 
system. How do they integrate and are some QF developers 
bypassing these established processes in MISO?
    Mr. Kouba. How they would integrate in the transmission 
system is very similar to how we integrate a new resource, 
whether it is wind or combined cycle natural gas in the 
transmission system. There is a process in place in MISO to do 
that. They could walk through that process just like we do and 
that process helps ensure that as we or QFs or independent 
power producers are placing generation on the system, we are 
actually improving the reliability system, not having a 
detrimental impact on the transmission system.
    So they could follow that process just as we do. I think 
what they are finding is it is a bit of a cumbersome process. 
It takes some time.
    There may be transmission system additions that are needed 
that are more expensive so they disaggregate--in our case, in 
Iowa--and put them down in the distribution system where they 
don't have to deal with that and don't have to deal with the 
cost of transmission system upgrades.
    Mr. Walberg. Well, thank you. My time is expired.
    I guess I am not the last one. And now I recognize my 
friend from New York that somehow got behind me. Mr. Tonko.
    Mr. Tonko. Thank you, and if you want to represent me too 
you can do that.
    Mr. Walberg. I'd be delighted to. Couldn't work well, 
though.
    Mr. Tonko. All right. Thank you. Thank you.
    Let me thank the witnesses for joining us this morning 
because it's such an important bit of discussion.
    Mr. Thomas, I am a big supporter of CHP. With the recent 
devastation of Hurricane Harvey and other massive storms that 
are predicted to happen more and more if we don't address 
climate change, I am concerned about how we come back from 
these storms.
    I think back to my home State of New York and the damage 
caused by Superstorm Sandy. During Sandy, we saw, in that whole 
experience the resiliency of the CHP facilities. In some 
places, electricity was down for days but CHP kept working.
    So has PURPA been successful in bringing more CHP 
facilities online?
    Mr. Thomas. Yes. I think the easy answer is absolutely. The 
difference with the CHP facility and just the straight 
manufacturing is you make additional and large capital 
investment in the generation.
    So knowing that you can recoup that over the length of the 
period--20 years or so--gives us the confidence to install that 
generation and make that a CHP facility versus just a straight 
load manufacturing facility.
    Mr. Tonko. And can you discuss whether there might be a 
need to address some definitional or threshold issues with the 
law? For example, your testimony mentions that many CHP 
facilities export very little electricity to the grid.
    Does it make sense to reclassify the size of a CHP 
installation based on the amount that is generally exported to 
the grid rather than what its overall capacity might be ranked?
    Mr. Thomas. Yes, and thank you for your question. A lot of 
times we talk about megawatts when we talk about the PURPA 
numbers--20 or 80--and for us it's more about the amount of 
energy, not the megawatts because our facilities may look like 
they can net export 20 megawatts, let us say, but we seldom do 
that because we match the steam load with what we need from 
manufacturing.
    So, we think an energy number is a better way to do that. 
But leave it in place. Just change it from measuring absolute 
capacity to measuring the amount of power that is put on the 
grid.
    Mr. Tonko. Thank you.
    Mr. Glass, can you explain the relationship between smaller 
solar projects, those residential or community projects, and 
those of utilities and the need for standard and expedient 
interconnection processes?
    Mr. Glass. Great question. All three levels--utility scale, 
commercial and industrial, as well as residential all need very 
clear straightforward paths to interconnection and where that 
interconnection creates costs on the interconnecting utility, 
those costs ought to be worked out and be dealt with so that 
the cost cause are at pace for those types of things.
    SEIA is completely supportive of that type of thing. 
However, the one thing I would say is that we need to make sure 
that these smaller types of facilities can efficiently plug in.
    It would seem that the panel is most enamoured of the 
centrally-planned utility model that we had back in the '60s 
where there would be no small scruffy co-generator or small 
energy producer of solar or anything like that that would come 
interconnected and mess with their plans.
    Unfortunately, that very competition I think has been very 
successful in helping to bring down costs over time and I would 
encourage--whether it be interconnection I would request that 
the utility still be required to have that competitive 
disruptiveness of smaller generation facilities such as solar.
    Mr. Tonko. Now, does PURPA play a role in ensuring that 
there are nondiscriminatory interconnection processes?
    Mr. Glass. Absolutely. It's the bedrock. If there was no 
PURPA there wouldn't have been an EP Act 1992 and an Order 888 
and all of the things leading to the New York rev process that 
is going on right now. We've been increasing competition since 
1978 and we ought to continue to do so.
    Mr. Tonko. And I would ask that, and so is it important to 
the future of the solar industry that we move forward with 
these sort of opportunities with interconnection?
    Mr. Glass. Absolutely.
    Mr. Tonko. And I understand a number of witnesses represent 
utilities or facilities in deregulated electric markets.
    But you have member companies selling and installing solar 
projects all across the country. Is PURPA still important to 
bring competition and generation diversity to areas that have 
retained the vertically stacked integrated utilities?
    Mr. Glass. Yes. It's vital in both markets. I would say 
that a third of the load of the country is still in what we 
call vertically integrated monopoly utility systems and then 
the other two-thirds are in the New England--it is ERCOT and 
California to a lesser extent.
    There are different systems that apply and there is solar 
going in in both. I would say that PURPA is important across 
all of them for the market access, the transmission, the 
interconnection that you were just mentioning but also as the 
financial backstop so that people can get the financial 
certainty of the stream of revenues over time to be able to 
finance these projects. So it is vital.
    Mr. Tonko. Thank you, and thank you again to all of our 
witnesses.
    Mr. Chair, I yield back.
    Mr. Walberg. Thank you, Mr. Tonko, and again, apologies for 
looking right past you. Sorry about that.
    Making sure I am looking around, I see no other further 
members wishing to ask questions. I would like to thank all of 
the witnesses again for being here today.
    We appreciate this and I certainly hope that we will 
continue these discussions. It is an important topic and it is 
important for energy.
    Before we conclude, I'd like to ask for unanimous consent 
to submit two documents--two letters dated September 5th, the 
first from Cypress Creek Renewables, the second from Northwest 
and Intermountain Power Producers coalition--for the record.
    Hearing no objection, they will be submitted for the 
record.
    [The information appears at the conclusion of the hearing.]
    Mr. Walberg. Pursuant to committee rules, I remind members 
that they have 10 business days to submit additional questions 
for the record and I ask that the witnesses submit their 
response within 10 business days upon receipt of the questions.
    So without objection, the subcommittee is adjourned.
    [Whereupon, at 12:02 p.m., the meeting was adjourned.]
    [Material submitted for inclusion in the record follows:]
    
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