[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
POWERING AMERICA: CONSUMER-ORIENTED PERSPECTIVES ON IMPROVING THE
NATION'S ELECTRICITY MARKETS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
OCTOBER 5, 2017
__________
Serial No. 115-62
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
27-772 PDF WASHINGTON : 2017
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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, Michigan7
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)
(ii)
C O N T E N T S
----------
Page
Hon. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 2
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, prepared statement................................... 3
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 4
Prepared statement........................................... 5
Witnesses
Joseph Bowring, President, Monitoring Analytics, Independent
Market Monitor for PJM......................................... 7
Prepared statement........................................... 9
Answers to submitted questions............................... 84
Rebecca L. Tepper, Chairman, Consumer Liaison Group for the ISO-
New England Region............................................. 15
Prepared statement........................................... 17
Answers to submitted questions............................... 89
Mark Vanderhelm, Vice President of Energy, Walmart............... 27
Prepared statement........................................... 29
Answers to submitted questions............................... 93
John P. Hughes, President and Chief Executive Officer,
Electricity Consumers Resource Council......................... 34
Prepared statement........................................... 36
Answers to submitted questions............................... 98
Stefanie A. Brand, Director, New Jersey Division of Rate Counsel. 45
Prepared statement........................................... 47
Answers to submitted questions............................... 105
Tyson Slocum, Director, Public Citizen Energy Program............ 58
Prepared statement........................................... 60
Answers to submitted questions............................... 110
POWERING AMERICA: CONSUMER-ORIENTED PERSPECTIVES ON IMPROVING THE
NATION'S ELECTRICITY MARKETS
----------
THURSDAY, OCTOBER 5, 2017
House of Representatives,
Subcommittee on Energy,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:17 a.m., in
Room 2123, Rayburn House Office Building, Hon. Fred Upton
(chairman of the subcommittee) presiding.
Members present: Representatives Upton, Olson, Shimkus,
Latta, McKinley, Johnson, Long, Bucshon, Flores, Mullin,
Hudson, Walberg, Rush, McNerney, Green, Castor, Tonko,
Schrader, Kennedy, Butterfield, and Pallone (ex officio).
Staff present: Allie Bury, Legislative Clerk, Energy/
Environment; Kelly Collins, Staff Assistant; Zack 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; Drew McDowell, Executive Assistant;
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; Peter Spencer, Professional Staff Member,
Energy; Jason Stanek, Senior Counsel, Energy; Madeline Vey,
Policy Coordinator, DCCP; Priscilla Barbour, Minority Energy
Fellow; Jeff Carroll, Minority Staff Director; Rick Kessler,
Minority Senior Advisor and Staff Director, Energy/Environment;
John Marshall, Minority Policy Coordinator; Alexander Ratner,
Minority Policy Analyst; Andrew Souvall, Minority Director of
Communications, Member Services, and Outreach; Tuley Wright,
Minority Energy and Environment Policy Advisor; and C.J. Young,
Minority Press Secretary.
Mr. Olson. The committee will now come to order. And the
Chair at this time will not make an opening statement. I would
like to ask the ranking member, Mr. Rush or Mr. Pallone, would
you like to make opening statements?
The Chair calls upon our ranking member of the
subcommittee, Mr. Rush, for a 5-minute opening statement.
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Rush. Thank you, Mr. Chairman. I want to thank you for
holding this important hearing today regarding consumer-
oriented perspectives to improving the Nation's electricity
markets.
Mr. Chairman, throughout this Powering America series of
hearings, we are told repeatedly that the energy landscape is
changing significantly. And it is vital that we hear from
people who are being impacted the most, consumers and
retailers. With most of the testimony submitted, there seems to
be a consensus that consumers do not have the opportunity to
fairly participate of all the developments taking place within
the energy markets.
As we will soon hear, Mr. Chairman, many consumer advocacy
groups believe that the RTOs are too beholden to the utilities
than they are trying to administrate. And consumers do not have
a large enough seat at the table to make their voices heard.
Many of these advocates argue that the whole process for
reforming energy markets have become more and more complex,
while at the same time consumer voices have been diluted to the
point of being completely shut out. There also seems to be, a
new consensus, Mr. Chairman, among today's witnesses, that FERC
and DOE have become too tolerant of the RTOs' ability to shut
out public interests, and participation, and policymakers must
act to address this challenge.
Additionally, most, if not all of today's witnesses, take
extreme exception to the most recent DOE notice of proposed
rulemaking issued on September 29 on grid resiliency policy.
Many, many in this room, plus DOE, are in the difficult
position of unfairly and unjustly picking winners and losers,
and placing the interests of select industries above the public
interest.
While it is one thing for elected officials of individual
States to adopt policies to address the needs of their
constituencies, we must be careful of allowing unelected DOE
officials to try and mandate a one-size-fits-all approach to an
independent agency like FERC.
Mr. Chairman, whether through the creation of the legally
mandated FERC office of public participation or through some
other vehicle, we must ensure that the consumer voices are
being heard and public advocacy rules are able to receive
sustainable assistance and the financial compensation they need
to have them fully participate in the FERC and RTO proceeding.
So, Mr. Chairman, I really look forward to this engaging
panelon the best way to address some of these important issues.
And with that I yield the remainder of my time to my friend,
Mr. Kennedy.
Mr. Kennedy. Thank you very much, Mr. Rush, for yielding,
and many thanks to you and Chairman Upton for holding this
hearing, among others, in the Powering America series.
To all the witnesses, thank you for being here this
morning, and particularly to Ms. Tepper from our Commonwealth.
Thank you for your work and dedication, all that your office
continues to do for our Commonwealth. Grateful that you are
here today.
During my time as a Member of Congress, I have
unfortunately become all too aware of the complexities of the
electricity markets, particularly in New England. I have
learned quickly that the more complex a system becomes, the
more likely it is that somebody is getting short-changed. This
dynamic is all too real in the electricity sector, particularly
for consumers who are either unaware, shut out, or simply
unable to participate in the process, yet continue to bear the
increased cost.
While already paying the highest retail electricity rates
in the lower 48, our region is about to get hit with yet
another increase this winter. What has become clear to me is
that there is no simple fix to this challenge, which makes the
work that we all are trying to undertake all the more critical.
I look forward to your testimony and working with you to
increase transparency and to amplify consumers' voice in this
important debate. Thank you. And I yield back.
Mr. Upton. The time has expired. And Chair would indicate
that--sorry we started a little late, we had votes on the House
floor. And in order for us to listen to you, I am going to put
my statement into the record and yield back my time.
[The prepared statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
Good morning. After examining grid reliability issues
earlier this week, today's Powering America hearing turns our
focus to the people and organizations who advocate on behalf of
the Nation's electricity consumers. Whether the consumer is a
large purchaser of electricity, such as Walmart, or one of the
millions of households that take service from a local electric
company, there are individuals working behind the scenes to
advocate and represent the interests of utility consumers. We
have some of those fine folks with us today.
Today's witness panel includes ratepayer advocates, as well
as representatives for industrial, commercial, and residential
consumers. We also have with us the Independent Market Monitor
for the PJM Interconnection--the world's largest wholesale
electricity market. Since the Powering America series has
largely focused on the organized wholesale electricity markets,
we will spend much of our time examining the role of the
Nation's RTOs and ISOs and the processes they use to
incorporate feedback from various stakeholder interests,
including the views of end-use consumers.
Our hearing will also consider the role of the Federal
Energy Regulatory Commission, who is the Federal agency charged
with regulating the RTOs and ISOs. As an independent agency,
FERC's core mission is to provide ``Reliable, Efficient and
Sustainable Energy for Customers'' and they attempt to achieve
this goal by helping consumers obtain reliable and efficient
energy at a reasonable cost through regulatory and market
means. I should also mention that FERC is celebrating its 40th
anniversary this week, so congratulations to the Commissioners
and staff at the Commission.
In today's testimony, I hope that the witnesses will share
their perspectives on how individual consumers can participate
in the proceedings before the Commission. I'd also like to get
a better understanding of how the various RTOs and ISOs
incorporate consumer perspectives in their stakeholder
processes, and whether the witnesses believe any improvements
can be made. I should note that under Order No. 719, FERC
already requires that RTOs and ISOs be responsive to the needs
of the consumers who ultimately pay for electricity services.
I recognize that we're dealing with very complicated
markets and the average consumer is going to leave it to you
(the witnesses) to sort through the details and ramifications
of the various market design and rate proposals. That's all the
more reason why I want to make sure that yourviews and the
interests of consumers are adequately represented in the
electricity markets. If those views are represented, I am
confident that the markets will deliver benefits to all
consumers, large and small.
Mr. Upton. I know Mr. Pallone would like to say a few
things, so I will yield for an opening statement to the ranking
member of the full committee, Mr. Pallone.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. Thank you, Mr. Chairman. I want to commend you
and Mr. Rush for putting together today's hearing to examine
consumer perspectives and concerns with respect to electricity.
We have an outstanding set of witnesses, including the Director
of New Jersey's Division of Rate Council, Stefanie Brand, who
is here representing the National Association of State Utility
Consumer Advocates. I have had the pleasure of working with Ms.
Brand, who has served in her role in both Republican and
Democratic administrations. And I can tell you that she is a
fierce, thoughtful, and successful advocate for our State's
ratepayers. Thank you for being here.
This is an extremely important topic to delve into, and it
couldn't come at a more critical time, particularly given
Energy Secretary Perry's ill-conceived and wholly unjustified
effort to commandeer the Federal Energy Regulatory Commission's
rule making process, to provide unduly preferential and
discriminatory rates to coal and nuclear generators.
If adopted by FERC, it will certainly result in increased
cost to consumers with no significant benefit, and it will mark
the beginning of the end of competitive electricity markets. I
understand the concern around closure of non-economic coal and
nuclear power plants. Nuclear plants, in particular, not only
employ hundreds of thousands of people and provide financial
benefits to the communities that surround them, but they
provide large amounts of carbon-free energy that help make it
possible to meet our Nation's climate goals.
However, Secretary Perry's proposal represents an
unprecedented attempt to usurp policy making functions that
belong to Congress and the States. This proposal is not about
regulation and markets, which is what the Federal Power Act
tasked FERC with. It is about subsidizing certain players in
the electricity market at the expense of consumers and other
generators who compete against the fuel types favored by the
rule.
Regardless of whether you believe that it is a useful or
harmful proposition, it is clearly a policy change that is far
outside of FERC's purview. As former FERC Chairman Norman Bay
recently noted, in order to move forward on the Secretary's
proposal, FERC would have to find its own current rules to be
unjust and unreasonable, and then find that the new rules
favoring coal and nuclear generation are just and reasonable.
And that is the kind of back-flip that even the most flexible
olympic gymnast would have a hard time pulling off.
We are still--this is a proposal that is not supported by
the facts or even by the Secretary's own grid reliability
report. And that is a view shared by many on both sides of the
aisle. For instance, the R Street Institute rightly called the
proposal an arbitrary backdoor subsidy to coal and nuclear
plants that risks undermining electrical competition throughout
the United States. And going on to say, the consumers would
ultimately bear a hefty and unnecessary bill from any such
Draconian intervention.
Meanwhile, Gerry Cauley, president of the organization
tasked by law with overseeing the grid's reliability, recently
declared that the state of reliability in North America
remained strong and the trend line shows continuing improvement
year after year. Moreover, much of the Secretary's proposal
seems to be anchored to the idea that somehow renewables and
even national gas-fired generation are somehow a threat to a
reliable grid.
And I have certainly been a critic of national gas
overbuild and pipeline safety, but I have not expressed doubt
about the reliability of our Nation's natural gas system, the
way this administration has, in its efforts to justify
subsidies for coal and other favored fuels.
Not only has there been no empirical evidence to date to
support the Secretary's proposal, in the modern history of
electricity in this Nation there has not been a significant
blackout caused by a lack of generation adequacy. In fact,
according to a 2000 report by the Bush administration, the
largest blackout in U.S. history was caused not by a lack of
resources, but rather by management and programming failures by
a single Ohio utility, First Energy, which lead to actions that
turned--which should have been a localized situation into an
event affecting some 50 million people. That had nothing to do
with generation mix.
And it is critical to note that in that situation, nuclear-
based load power did not contribute to the stability of the
grid with nine nuclear power reactors shut down the result of
loss of backup power. So as I stated at our reliability
hearing, I firmly believe that it is time to start looking at
reliability in new and different ways. The technology has
transformed dramatically over the past 10 years or so, perhaps
faster than our policies and our rate making models have been
able to keep up with.
We should carefully reexamine the old approaches to
reliability, resiliency, and rate making, to seriously consider
whether our long term interests are better served by charting a
new course. But, unfortunately, the Secretary's proposal is a
power play, essentially, designed to move things in precisely
the opposite direction. He wants to move us away from a modern
balance fuel mix, lower consumer costs, and fewer environmental
externalities, and back towards a time when coal was king and
consumers had no control.
So I urge FERC to reject this proposal and I hope that all
my colleagues will join me in helping move our policies forward
towards a more resilience, reliable, and cost effective grid
that benefits consumers as well as protects the environment.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Pallone follows:]
Prepared statement of Hon. Frank Pallone, Jr.
Mr. Chairman, I want to commend you and Mr. Rush for
putting together today's hearing to examine consumer
perspectives and concerns with respect to electricity. We have
an outstanding set of witnesses, including the Director of New
Jersey's Division of Rate Counsel, Stefanie Brand, who is here
representing the National Association of State Utility Consumer
Advocates. I've had the pleasure of working with Ms. Brand, who
has served in her role in both Republican and Democratic
administrations, and I can tell you that she is a fierce,
thoughtful, and successful advocate for our State's ratepayers.
This is an extremely important topic to delve into and it
couldn't come at a more critical time, particularly given
Energy Secretary Perry's ill-conceived and wholly unjustified
effort to commandeer the Federal Energy Regulatory Commission's
(FERC's) rulemaking process to provide unduly preferential and
discriminatory rates to coal and nuclear generators. If adopted
by FERC, it will certainly result in increased costs to
consumers with no significant benefit and it will mark the
beginning of the end of competitive electricity markets.
I understand the concerns around closures of non-economic
coal and nuclear power plants. Nuclear plants, in particular,
not only employ hundreds or thousands of people and provide
financial benefits to the communities that surround them, but
they provide large amounts of carbon-free energy that help make
it possible to meet our Nation's climate goals.
However, Secretary Perry's proposal represents an
unprecedented attempt to usurp policy-making functions that
belong to Congress and the States. His proposal is not about
regulation and markets--which is what the Federal Power Act
tasks FERC with--it's about subsidizing certain players in the
electricity market at the expense of consumers and other
generators who compete against the fuel types favored by the
rule. Regardless of whether you believe that is a useful or
harmful proposition, it is clearly a policy change that is far
outside of FERC's purview. As former FERC Chairman Norman Bay
recently noted, in order to move forward on the Secretary's
proposal, FERC would have to find its own current rules to be
``unjust and unreasonable'' and then find that the new rules
favoring coal and nuclear generation are ``just and
reasonable.'' That's a kind of backflip that even the most
flexible Olympic gymnast would have a hard time pulling off.
Worse still, this is a proposal that is not supported by
the facts or even by the Secretary's own grid reliability
report -and that's a view shared by many on both sides of the
aisle. For instance, the R Street Institute rightly called the
proposal ``an arbitrary backdoor subsidy to coal and nuclear
plants that risks undermining electrical competition throughout
the United States'' and going on to say that ``consumers would
ultimately bear a hefty and unnecessary bill from any such
draconian intervention.'' Meanwhile, Gerry Cauley, president of
the organization tasked by law with overseeing the grid's
reliability, recently declared that ``the state of reliability
in North America remains strong, and the trend line shows
continuing improvement year over year.'' Moreover, much of the
Secretary's proposal seems to be anchored to the idea that
somehow renewables and even natural gas-fired generation are
somehow a threat to a reliable grid. I have certainly been a
critic of natural gas overbuild and pipeline safety, but even I
have not expressed doubt about the reliability of our Nation's
natural gas system the way this administration has in its
efforts to justify subsidies for coal and other favored fuels.
Not only has there been no empirical evidence to date to
support the Secretary's proposal, in the modern history of
electricity in this Nation, there has not been a significant
blackout caused by a lack of generation adequacy. In fact,
according to a 2004 report by the Bush administration, the
largest blackout in US history was caused not by a lack of
resources, but rather by management and programming failures by
a single Ohio utility, First Energy, which led to actions that
turned what should have been a localized situation into an
event affecting some 50 million people. That had nothing to do
with generation mix.
And, it is critical to note that in that situation, nuclear
baseload power did not contribute to the stability of the grid,
with nine nuclear power reactors shut down as a result of the
loss of backup power.
As I stated at our reliability hearing, I firmly believe
that it is time to start looking at reliability in new and
different ways. The technology has transformed dramatically
over the past 10 years or so, perhaps faster than our policies
and our rate-making models have been able to keep up with. We
should carefully reexamine the old approaches to reliability,
resiliency and ratemaking to seriously consider whether our
long-term interests are better served by charting a new course.
Unfortunately, the Secretary's proposal is a power play
designed to move things in precisely the opposite direction. He
wants to move us away from a modern, balanced fuel mix, lower
consumer costs and fewer environmental externalities and back
toward a time when coal was king and consumers had no control.
I urge FERC to reject this proposal and hope that all my
colleagues, on both sides of the aisle, will join me in helping
move our policies forward toward a more resilient, reliable,
and cost effective grid that benefits all consumer classes and
the environment.
Thank you, I yield back.
Mr. Upton. The gentleman's time has expired. We are going
to move to the testimony of our panel at this point.
I want to say, we appreciate you submitting your testimony
in advance, it is part of the record. If you are able to
actually go through your remarks maybe faster than 5 minutes,
that would be appreciated because we are expecting votes again
in about 30 minutes. So perhaps we can get to questions at that
point.
We are joined first by Joe Bowring, President, Monitoring
Analytics, Independent Monitor for PJM. Welcome.
STATEMENTS OF JOSEPH BOWRING, PRESIDENT, MONITORING ANALYTICS,
INDEPENDENT MARKET MONITOR FOR PJM; REBECCA L. TEPPER,
CHAIRMAN, CONSUMER LIAISON GROUP FOR THE ISO-NEW ENGLAND
REGION; MARK VANDERHELM, VICE PRESIDENT OF ENERGY, WALMART;
JOHN P. HUGHES, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
ELECTRICITY CONSUMERS RESOURCE COUNCIL; STEFANIE A. BRAND,
DIRECTOR, NEW JERSEY DIVISION OF RATE COUNSEL; AND TYSON
SLOCUM, DIRECTOR, PUBLIC CITIZEN ENERGY PROGRAM
STATEMENT OF JOSEPH BOWRING
Mr. Bowring. Thank you, Mr. Chairman, and members of the
subcommittee. And thank you for the opportunity to appear
before you today. My name, as you said, is Joe Bowring. I am
the Independent Market Monitor for the PJM wholesale power
markets. I do not speak for PJM. I speak for the market
monitor.
The role of the independent monitor, as defined by FERC,
and included in the tariff, is to help ensure that the PJM
markets are competitive by proposing market rules that incent
competition, by monitoring for market power and by reporting on
the markets. And while I am on a panel of consumer advocates,
the role of the market monitor is not to be consumer advocate.
I am an advocate for efficient, competitive wholesale power
markets, which bring clear benefits to customers, as well as to
suppliers of power.
PJM is the largest wholesale power market in the world. The
largest competitive wholesale power market in the world
covering 13 States and the District of Columbia. The goal of
competition in the wholesale power markets is to provide
customers wholesale power at the lowest possible price. The PJM
markets work. The PJM markets bring customers the benefits of
competition. But the PJM markets, as we have, heard, face new
challenges that threaten the viability of competitive markets.
One benefit of competitive power markets is they are
dynamic, flexible and resilient. The PJM market has resulted in
a reliable system despite significant changes in underlying
market forces. Technical innovation and lower gas costs have
been key market forces. The PJM, as we know, there have been
very significant unit retirements. They have also been
substantial new entry, all driven by market forces. The PJM
market design has worked flexibly to address both market exit
and entry without preferences for any technologies. The results
of new entry has been lower costs and increased reliability.
So, particularly, in times of stress on markets and on some
particular generating technologies, nonmarket solutions may
appear attractive. Top down, integrated resource planning
approaches are tempting because it is easy to think that
experts know exactly the right mix and location of generation
resources, and the appropriate definition of diversity, and the
appropriate definition of reliability, and therefore, which
technologies should be favored.
Subsidies are tempting because they maintain existing
resources and provide increased revenues to asset owners in
uncertain markets. Cost of service regulation is tempting
because guaranteed rates of return and fixed prices may look
attractive to asset owners in uncertain markets.
But once the decision is made that market outcomes must be
fundamentally modified, it will be virtually impossible to
return to markets. The subsidy model is inconsistent with the
PJM market design and constitutes a significant threat to PJM
markets.
The issue of external subsidies continued to evolve in
2017. Ohio subsidy proceedings and Illinois subsidy proceedings
originated from the fact that competitive markets resulted in
the retirements of specific uncompetitive generating units. And
regardless of the specific rationales offered, the proposed
solution for all those units was unit specific subsidies. The
subsidies were not to accomplish broader goals, they were to
save particular units.
The recent Department of Energy, NOPR, proposes a much
broader market intervention through cost of service regulation
for specific unit types that would have a correspondingly large
and negative impact on PJM's competitive wholesale power
markets.
The proposed subsidy solutions ignore the opportunity cost
of subsidizing uneconomic units. They suppress energy and
capacity market prices and suppress incentives for investment
in new, higher efficiency thermal plants, but also suppress
investment incentives for innovation in the next generation of
energy supply technologies and energy efficient technologies.
These impacts are large and long lasting.
Subsidies are contagious. If uneconomic resources are
artificially retained, this will suppress prices and create a
need for additional subsidies for the remaining units.
Competition in the markets will be replaced by competition to
receive subsidies.
There is no reason to intervene in the markets in order to
provide reliability and resilience. If PJM or FERC or DOE
identify a need for greater reliability, it can be addressed
using market mechanisms not out of market mechanisms.
Competitive markets were introduced as an alternative form of
regulation to ensure that the wholesale power is provided at
the lowest possible price.
The PJM markets are working. The PJM markets provide
competitive, reliable, and resilient outcomes. The PJM markets
should be permitted to continue to work. And I was 40 seconds
short of the 5 minutes. Sorry for not being shorter. Thank you.
[The prepared statement of Mr. Bowring follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Upton. Thank you. Next we are joined by Rebecca Tepper,
Chair of the Consumer Liaison Group for the ISO-New England
Region.
Welcome. Make sure you turn the switch on your mike there.
STATEMENT OF REBECCA L. TEPPER
Ms. Tepper. Thank you for having me, Mr. Chairman. And
thank you to the rest of the committee, and particularly,
thanks to Congressman Kennedy for the nice words, and for your
fierce advocacy on behalf of consumers in Massachusetts,
really, everyone appreciates that.
So my name is Rebecca Tepper and I am the Chief of the
Telecom and Energy Division of the Massachusetts Attorney
General's Office. But I also have the honor of being the Chair
of the Consumer Liaison Group for ISO-New England, and that is
why I am here today.
Thank you for holding this hearing and for recognizing the
importance of consumer participation in the decisionmaking
processes at our RTOs. I think sometimes we forget what meets
when RTOs make decisions, and what it means to sort of the
everyday consumer. You know, decisions about market operations,
they effect whether your grandma who lives on a fixed income is
going to be able to afford to keep her lights on. Decisions
about reliability, they affect whether that hospital is going
to be able to stay online 24 hours a day.
Decisions about electric reliability determine whether your
manufacturing facility is going to be able to stay in your town
and whether people are going to be able to continue working.
And decisions about transmission affect your State's ability to
get power from where it is to where the people are living.
So these are important decisions for every single person
that lives in an RTO, and I think we have to keep those in mind
when we think about consumer participation.
FERC and the RTOs have recognized that it is important to
give voice to the people in businesses who ultimately use and
pay for electricity. With FERC's guidance, many RTOs have
developed mechanisms to educate consumers and allow consumer
participation in the stakeholder process. In New England there
are currently two main avenues for customers to participate,
The Consumer Liaison Group or becoming a member of NEPOOL.
The Consumer Liaison Group was formed to meet the need for
heightened communication between RTOs and their stakeholders
pursuant to FERC Order 719. In my written testimony, I provided
a lot of information regarding the history and the governance,
so I will not go over all of that.
Today I will tell you about, just quickly, about our core
work, which is we have quarterly, meetings, which attract a
diverse group between 75 and 100 attendees at every meeting,
they are open to the public. They are held throughout New
England in the different States to allow broad participation.
We generally have a keynote speaker, and then we have ISO
available for updates and to answer questions. And then we
usually have a panel discussion to get differing views on
particular issues. Just to give you a sense, our recent
meetings have addressed solar, cybersecurity, clean energy
initiatives, and transmission development under FERC Order
1000.
But I want to be clear about what the CLG is and what the
CLG is not. So the CLG is primarily an educational entity, it
provides for a wide range of stakeholders, not just the State
consumer advocates, to gain a better understanding of the ISO
processes, and learn how ISO-New England actions impact
customers. I think the CLG has successfully provided consumers
with pricing data and information about their retail bills.
It has taken some of the mystery out of the ISO-New England
process and increased transparency. But what it is not is an
advocacy group that represents consumer's interests. As it
operates today, the CLG has no formal role in the ISO-New
England stakeholder decisionmaking process. It is simply not a
substitute for NEPOOL membership and participation in the ISO
stakeholder process.
My office is a member of NEPOOL. We devote a lot of
resources to it. We have saved consumers $60 million over the
last couple of years doing that. But not everybody can do that.
And it is--certainly not most consumers can do that, can devote
the resources necessary to be informed and productive
contributors to the stakeholder process. They are complicated.
They are expensive. And they are time consuming.
So very quick, I will give you four ideas about how I think
things could be improved. First, I think it is helpful to
establish a CLG, to have an educational component. I think it
would be most effective with their own executive director.
Second, I think we should establish a stable funding
mechanism that enables all State consumer advocates to fully
participate in the RTO stakeholder process. This could be done
either by providing funds to individual offices or through an
association of consumer advocates, like the CAPS program at
PJM.
Third, I think we should require all RTOs to consider cost
in their decisionmaking, and provide cost impact analysis,
including retail bill impacts on major proposals, and
reasonable alternatives offered by stakeholders.
And, finally, to increase communication between RTO boards
and consumers by having consumer representation on the board,
and having board members come to stakeholder meetings with
consumers. Thank you very much.
[The prepared statement of Ms. Tepper follows:]
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Mr. Upton. Thank you. Next we are joined by Mr. Mark
Vanderhelm, VP of Energy for Walmart. Thank you.
STATEMENT OF MARK VANDERHELM
Mr. Vanderhelm. Thank you, Chairman Upton, and thank you,
the members of the subcommittee, for the opportunity to provide
testimony.
My name is Mark Vanderhelm, I lead the energy procurement
for Walmart. Fundamentally, we are looking at using less. What
we do use, we would like to pay less for, and we focus on
paying less for, and we would like to turn that greener. That
is the focus for my role.
We operate in the 50 States, District of Columbia, and
Puerto Rico. As part of that role, I oversee Texas retail
energy, a wholly owned subsidy of Walmart, which participates
in the wholesale markets, and operates as a competitor electric
supplier directly serving our stores in 11 States. The Walmart
energy team works to deliver on Walmart's mission to save our
customers money, so they live better, and we pass those savings
on to our customers through cost management and through energy
efficiency.
We are market advocates and we are advocates of customer
sited electricity and increasing that stakeholder process.
Customer engagement in regulatory and stakeholder arenas is
critical, especially as the industry transitions to a business
model in which customers sited generation sources become as
important to the system as you utility-owned resources.
Competitive wholesale electricity markets and customer
choice and retail electricity markets are integral to our
success. When paired together, they create direct economic
benefits to our stores and our customers. Competitive wholesale
markets also provide the transparent and easily transactable
platform for the procurement of renewable energy. As an
example, in Texas, we are able to procure directly wind supply
that serves our stores without utility or regulatory
intervention, based on the wholesale construct that exists
there in Texas.
Customer choice gives us the freedom to choose a supplier
that best meets our business goals, with services offerings
that provide choices on price, reliability, and generation mix.
The contrast of monopoly utilities companies, they are
essentially guaranteed recovery for their costs from customers,
competitive suppliers must offer superior service, better
prices, and the investment is borne by their shareholders.
The benefits of competitive wholesale markets, this is an
interesting statistic, customer choice are clear. When we
compare our costs from 2006 to 2017, the reduction--and when we
have customer choice, there is a reduction of 7 percent on
average. In areas where we don't have customer choice, we have
seen an increase in prices like 14 percent. Extremely relevant
to understand the impact of having that customer choice.
States and utilities should be encouraged to develop new
competitive wholesale markets or expand existing markets. And
Walmart recommends that the subcommittee explore policy changes
that allow FERC to streamline those regular approvals. The
development of renewable energy associated infrastructure
creates a secure electric grid in the long term, and an
economic opportunity and jobs in the short term.
To that end, Walmart has established aggressive goals. We
have committed to 100 percent renewable over the longer term.
For 2025, we have committed to 18 percent reduction in our
greenhouse gas footprint aligning ourselves with science-based
targets. As a subset of that, that also includes energy
efficiency, but as a subset of that is the commitment to 50
percent renewable by 2025.
We have 480 offsite and onsite renewable energy projects in
operation and under development in seven countries and in 18
U.S. States and Puerto Rico. Walmart is deploying cutting-edge
customer-sighted technology. We have six large battery systems,
we have over 50 fuel cells, and we have 100 locations with
electric vehicle charges, 300 electric vehicle charges at those
100 locations. So we are active in that customer-sighted
sources of electricity, and use of electricity.
Customer choice should extend to customer activities behind
the meter. Whether those activities generate or save
electricity. A number of States limit the financing mechanism
through which a customer can procure on-site generation
technology, which ultimately limits the adoption of those
technologies. Walmart typically uses a PPA structure leveraging
capital from external parties and operations from external
parties.
However, the technology employed by customers is becoming
more responsive to grid--sorry. The discussion around PPAs and
other financing models has largely been focused on on-sight
installations. The technology deployed by customers is becoming
more responsive to grid conditions and transactive with
customers and market participants.
As it is the case with on-site solar, new technologies
could be construed as challenges to the business of the
incumbent utilities, and the response could be to limit their
financing structures, able to be used to deployment.
To unleash the potential benefit of customer-sighted
technology, the Federal Government should implement clear
policies that give customers the freedom to install the
technology on their homes and businesses that they want, and to
finance it however they choose.
I appreciate the comments and the opportunity to present
testimony.
[The prepared statement of Mr. Vanderhelm follows:]
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Mr. Upton. Thank you. Next, we are joined by John Hughes,
President and CEO of the Electricity Consumers Resource
Council. Welcome.
STATEMENT OF JOHN P. HUGHES
Mr. Hughes. Thank you, Chairman Upton, and other members of
the subcommittee. I represent large U.S. manufacturers, they
have facilities all over the United States, and especially
within the footprints of the Nation's ISOs and RTOs.
We were founded in 1976 in anticipation of the enactment of
the law called PURPA, and our initial focus was Title I of the
PURPA that included several Federal rate making standards.
ELCON played a key role in the implementation of those
standards at the State level to ensure that they would produce
economically efficient and non-discriminatory rates.
Beginning in the 1980s, our focus shifted to PURPA Title
II, many ELCON members had a steam requirement at their
manufacturing facilities. And PURPA Title II enabled them to
use a technology known as cogeneration or combined heat and
power for great economic advantage. This technology makes it
easier to produce both steam and electricity at this site, and
is quite cost effective. These members that we had in those
days were champions in the use of natural gas-fired and
combined cycle generation units.
Our basic principle of regulation is market-based solutions
are preferred over command and control. We were instrumental in
the early year--around the turn of the century in restructuring
the utility industry in this country and the creation of the
ISOs and RTOs. We have faith in those institutions to this day.
You have probably heard from Gerry Cauley's speech a couple
of weeks on a central reliability services. NERC has been
working for several years on defining these services as a means
for sustaining the highly reliable grid that we have. FERC has,
in the past, has been using these services and has created
markets for them. They have, however, backed off from creating
markets for one particular one, primary frequency response, and
we have been negotiating with that agency to try to make amends
on that.
Price formation is a big issue at FERC. They began a series
of rulemaking beginning the 2014 to try to improve the prices
that come out of the ISO and RTO markets. We believe that the
markets have gotten a little bit too complex and lack
transparency. A more simple market structure we believe makes
the market operate more efficient and transparent.
One of the problems with the existing FERC jurisdictional
markets is the overlay of capacity markets. We do not believe
that these markets are necessary. ERCOT, which is the non-
jurisdictional RTO in the State of Texas, is an energy-only
market, and they operate quite well without the need for this
capacity market.
Another problem that we have in the ISO and RTO markets is
the rules and market design keeps changing all the time. There
is no way for a large manufacturer to plan and forecast what
their costs might be going out several years because the market
rules are subject to change.
Now, I want to get to the DOE 403 proposal. We are dead set
against this proposal. We believe that it will destroy the ISO
and RTO markets, if not, destroy the competition in those
markets. What the attempt here is to create a big ATM machine
for uneconomic obsolete coal and nuclear plants. Estimates of
the costs to consumers of this proposal range from $800 million
to $3.8 billion a year. Roughly a third of that would get
passed on to the industrial infrastructure of this country.
We will strongly weigh-in at FERC in opposition to this.
What can Congress do? In H.R. 8, which you passed about a year
and a half ago, there was a proposal in there for a study by
the Government Accountability Office, GAO, to do an assessment
of the ISOs and RTOs in this country. We support such a study.
Hopefully it won't be an obituary for the ISO and RTOs as a
result of the 403 proposal.
We would urge another study to be formed by GAO on the need
for these capacity markets. A lot of money is being transferred
from consumer pockets through the ISOs to suppliers, as a
result of these capacity markets. We challenge the need for
them.
Finally, I want to thank the commission--or the
subcommittee for this opportunity. And I would like to take my
last seconds to urge you that if you tamper with the law of
PURPA, especially Title II, be careful, it works in most
applications in this country and at most States, and CHP is not
the problem.
[The prepared statement of Mr. Hughes follows:]
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Mr. Upton. Thank you. Votes have been called on the House
floor, so we will do one more. We will do Stefanie Brand,
Director of New Jersey Division of Rate Council, and then we
will adjourn and come back after the votes.
Ms. Brand.
STATEMENT OF STEFANIE A. BRAND
Ms. Brand. I will do my best to talk quickly. Good morning,
Chairman Upton, members of the subcommittee. Congressman
Pallone, thank you for your kind words and for everything you
do for New Jersey's consumers.
I am the Director of the New Jersey Division of Rate
Council, which is charged by statute with representing
consumers at both the State and the Federal level. I am also a
member of the executive committee of NASUCA, which is an
association of over 40 offices like mine throughout the
country. And our office and other members of NASUCA have been
actively involved in pressing for greater consideration of the
needs and interests of consumers, both the RTOs and FERC. And,
frankly, it has been a very long and uphill battle.
At PJM, the shear number of issues and meetings makes it
very difficult for consumers to participate. The stakeholder
process is very complex and requires attendance at many
meetings. In September alone there were 44 meetings over 22
days. And while a lot of them are accessible by phone or on the
web, most of the work occurs in the hallways or on the
sidelines. And so that makes physical presence a priority, if
not a necessity. And that can be a tremendous strain on offices
like ours.
The consumer advocates within PJM formed a group called
CAPS, Consumer Advocates of PJM States, that allows us to pool
our resources so that we speak together with a stronger voice.
We have an executive director who is present at the most
important meetings, and he represents us as a group. And
individual offices have stepped up efforts to vote and
participate. Even with this increased focus, our participation
is limited in less than the other sectors of PJM.
There are a few potential solutions to increase consumer
participation at the RTOs. The first would be to identify and
make available sources of funding for groups like CAPS. The
amount that would be needed is very small. CAPS funding amounts
to about a penny a year per residential customer.
Consumer participation in the RTOs could also be improved
if consideration of the interest of consumers was made a more
central part of the RTO's mission. Ensuring that rates are just
and reasonable is an essential goal of the Federal Power Act.
It should also be an essential goal of the RTOs.
While CAPS represents a significant step forward,
consideration of the interests of consumers remains inadequate.
PJM's primary function is to keep the lights on. And it freely
admits that it does not necessarily factor in the ultimate cost
when putting forth proposals or approving projects. While we
certainly share PJM's interest in keeping the lights on, we
believe that cost should be taken into account early in the
process so that customers get the service they need but at a
just and reasonable price.
The failure to adequately consider costs early enough is
something that needs to change to make the system work better
for consumers. With respect to the markets, competition should
keep prices at a reasonable level. Up until now, at least, the
competitive markets have worked for New Jersey rate payers and
that we have benefited from our participation in them. However,
as time has gone on, there have been more and more
administrative changes to the market rules so that it is hard
to even call them a market.
Since 2010, there have been 27 significant filings made to
modify the rules of the capacity markets, and they have changed
in just about every year since 2007. So what is the impact of
this for consumers? First, the system is so opaque and
confusing and constantly changes, that the average consumer
will never make sense of it.
In New Jersey, generation transmission costs, which flow
through PJM, account for nearly 60 percent of a customer's
bill. And there is really no way for customers to understand
how those numbers are derived.
Second, the complexity of the rules, I believe, leads to
higher prices. There are so many fixes each time a particular
problem or issues arise that consumers end up paying more. In
fact, as we are seeing now, even when the market does work,
favoring lower price generation sources and bringing overall
prices down, the generators faced with those lower prices then
seek changes to undo the market results.
Rather than leveling the playing field, these efforts raise
the entire playing field so that everyone pays more. We do have
a strong independent market monitory at PJM, and the access and
independence of the market monitor is essential, not only to
protect competition, but also to foster confidence in the
markets by regulated entities and the public.
At FERC, nearly all proceedings are conducted on paper with
limited opportunity for public input. There is generally no
opportunity for cross-examination on factual issues and no oral
argument on legal or policy issues. Consumers need real
representation at FERC to protect their due process rights.
Increase transparently and more opportunity for public
participation would advance that important directive.
There is a bill pending, H.R. 2656. There are also some
provisions existing in the Federal Power Act, to create an
office of consumer advocacy at FERC, and that would also
provide intervenor funding. This legislation should be
supported and it is supported by us, and I hope that you will
support it as well. Thank you for the opportunity.
[The prepared statement of Ms. Brand follows:]
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Mr. Upton. Thank you. We will now take a recess. It will
probably be 30 to 40 minutes long while we have the votes. So I
would tell Members we have 6 \1/2\ minutes left in the vote
series.
[Recess.]
Mr. Olson [presiding]. We will come to order. And as we go
through our statement by witnesses, we have one more to go. We
saved the best for last.
Mr. Slocum, you have 5 minutes, sir.
STATEMENT OF TYSON SLOCUM
Mr. Slocum. Absolutely. Thank you so much, Mr. Chairman.
So I am Tyson Slocum, and I am the energy program director
for Public Citizen. Public Citizen is a national, not-for-
profit, membership-based group. We have got over 400,000
members and supporters across the United States, many of whom
live in FERC jurisdictional markets and pay energy prices that
are set in those markets.
We see that consumers are facing three broad threats in
today's power markets. First is that there are political and
regulatory efforts by owners of what we see as mismanaged and
uneconomic generation assets seeking billions of dollars in
bailouts, whether that is through the Department of Energy's
cost of service proposal or whether it is through market tweaks
as was discussed before with the various RTO capacity markets.
This is a huge threat to consumers.
Second, the regional transmission organizations were really
designed to accommodate the interests of transmission owners
and generation owners. And they oversee a complex stakeholder
process where details of market rules are deliberated and
largely written. And this is a process that does not include
the public interest very well, and there needs to be
fundamental reforms to the way that those regional transmission
organizations administrate those stakeholder processes.
And, third, it has now been 577 days since the Federal
Energy Regulatory Commission has failed to respond to a
proposed rulemaking to create and fund the office of consumer
advocate that--the office of public participation that, among
other things, could provide intervener compensation to members
of the public who meaningfully contribute to FERC dockets. And
so addressing these three things is paramount in order to
ensure that consumers are being adequately protected in
markets.
So first I think it is important just to note that we are
in the midst of a remarkable transition in America's energy
markets that is really being driven by innovations in the
production, transmission, and consumption of electricity.
And there are three factors that are contributing to those
innovations. One is just the proliferation of inexpensive
renewables, especially utility scale. Second is continuing
flat-lining demand. And especially when you factor in economic
growth, demand is actually decreasing as a share of American
economic output. And second is cheap natural gas.
And those three innovations are providing lower costs, more
resiliency, and more sustainable energy systems and are
absolutely benefiting consumers. But with any sort of
disruptive transition, you are going to have economic losers.
And those economic losers right now are predominantly
mismanaged and not well run nuclear and coal base load units
that frankly cannot effectively compete against superior
competition.
And throughout history, we see decisions that are made by
industries. Either you improve efficiencies and compete with
your rivals, or you turn to Government institutions or
regulatory agencies and attempt to get bailouts for your
inefficient operations. And that is really what this Department
of Energy bizarre rulemaking before FERC is about. It is about
accommodating and prioritizing these inefficient base load
nuclear and coal generation units.
And you don't have to take my word for it that there's no
crisis of reliability from the retirement of nuclear and coal
plants. That is what the North American Electric Reliability
Corporation has concluded. That is what the Department of
Energy's own August staff report, that there is no reliability
crisis. That, in fact, we are seeing resiliency and reliability
benefits from the energy transition that we are seeing to
renewables and lower demand.
The thing on RTO reform that needs to happen in order to
protect consumers, I think that Congress and FERC needs to
contemplate whether or not we need to split the regional
transmission organizations in two, retain their function as the
physical operator of the bulk power market, but separate out
from the RTOs the job of administrating the stakeholder process
where tariffs and market rules are developed.
And the third thing that can be done to protect consumers
is for Congress to start weighing in and get FERC to support
the proposed rulemaking to create and fund the office of public
participation, including providing intervener funding to the
public.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Slocum follows:]
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Mr. Olson. Thank you, Mr. Slocum.
Now it is fun time where Members get to ask 5 minutes of
questions alternating between Republican and Democrat. And
since I have the gavel now, I give myself 5 minutes for
questions.
My first question is for you, Dr. Bowring. The DOE order
tip to FERC on electricity markets to how we value resources
has certainly sparked some conversations. It is something of a
scramble among power generators and even large consumers. The
most colorful descriptions I have heard came from our new FERC
commissioner, Robert Powelson. He said, regarding concerns, if
the rule does undue competitive markets, quote, ``when that
happens, we are done. I am done,'' end quote.
Wow. That is pretty strong.
Sir, I would like to share your thoughts on what is
happening with larger and older power plants and PGM. Do you
think the stress being faced by coal nuclear plants is a sign
by flaw in the market or just market force at work, or a
combination of the two?
Mr. Bowring. I think it is entirely market forces at work.
Despite some of the commentary, not all nuclear power plants
are uneconomic. Some are uneconomic. To the extent that they
are retained artificially in the market, they make other
nuclear power plants as well as other coal plants worse off. So
subsidies are counted on the market, they actually make the
market work less well. And if you extend it even further, they
will--as some have said, they will ultimately destroy the
market. So it is about market forces. It is uneconomic
resources being replaced by economic resources.
Mr. Olson. Thank you.
Question for you, Mr. Vanderhelm, from Walmart. In your
testimony, you gushed about my home State of Texas--I--
appreciate that--and that Walmart has the goal of going 100
percent renewable. You talked about the example that you are
contracted directly with winds farms in my home State. As you
know, Texas, it is the number one State in American for wind.
We are number one. Bigger, prouder, better.
Can you talk a little about your experience in choosing
your own generation sources and why it is important to Walmart?
Mr. Vanderhelm. It is important for Walmart, first and
foremost, because it is economic. The thing that I always make
sure that people understand is, while Walmart has these
aggressive renewable energy goals. I work for the part of the
organization that is part of operations. So we are executing on
that procurement based off of the economics associated with it.
That is the first and foremost one.
Obviously, we see our mission as an organization is broader
than just shareholder economics, and that enables us to also
show the benefits to our associates, the customers as well, in
terms of turning our portfolio greener.
Mr. Olson. Thank you.
How do you balance your cost through generation purposes?
How do you make that balance?
Mr. Vanderhelm. Sorry. How do we make the determination
to--
Mr. Olson. The balance between your cost--your generation
preference, for example, wind power. How do you balance that
here is our cost and just--any idea? Any insights on how you
guys look at that?
Mr. Vanderhelm. Yes. Absolutely. We would always
preferential--first of all, you know, something which is
cheaper before--you know, before something which is more
expensive. So, again, I think your question implies that
somehow renewables are more expensive. I just want to make sure
that, you know, that is a win-win. In other words, we are
identifying both the greener power and cheaper power, we go
down that path. We are moving as quick as we can in all parts
of the country. Thanks to Texas for providing the construct
that enables us to execute there quicker. But we are looking at
doing it across the country. And we are constantly looking at
green power which is more cost-effective than brown power.
Mr. Olson. Well, thank you. I want to close the challenge
for my friend from Massachusetts who is not here. So Ms.
Tepper, you are from Boston; is that correct?
Ms. Tepper. Yes, I am.
Mr. Olson. OK. As you know, my colleague, Mr. Kennedy,
knows, his Boston Red Sox, your Boston Red Sox, are in Houston,
Texas, right now. They are about to be destroyed by my Houston
Astros. The first pitch is at 4:08 Texas time. And you
remember, just last week, my Astros played four games in Fenway
Park. They were three Astro wins, one Red Sox win, outscored 24
to 13 over four games.
And so please pass on if you want participate in a little
bet, a little friendly wager. If the Red Sox win, very
unlikely, I will eat a big bowl of Massachusetts clam chowder
with the press there. Chowder. But if my Astros win, as
expected, you-all come down and have a big hot bowl of Texas
chili with the press there. Is that----
Ms. Tepper. Oh, we are on. That sounds great. Yes.
I look forward to you having some chowder.
Mr. Olson. Without objection, so ordered.
Chowder.
All right, my time has now expired. I now call upon the
gentleman from Illinois, the ranking member of the
subcommittee, Mr. Rush, for 5 minutes.
Mr. Rush. Is it chowder, chili service, or over?
Mr. Olson. Oh, no. Just going to start. We are playing a
five-game series with the Red Sox there. Houston Astros versus
the Boston Red Sox, as I mentioned. We just closed out the
regular season by going 3-1 in Fenway Park. It is bad news to
the Red Sox. The Redcoats are coming, the Redcoats are coming.
But you have got 5 minutes, my friend.
Mr. Rush. It is going to take me to 5 minutes to recover.
To all the panelists, I would like to quickly go down the
line and ask who takes issue with the recent DOE NOPR on grid
reliability pricing? Please give me a ``yes'' or ``no'' if you
have a problem with the NOPR. And if so, is it based on process
or on the substance or both?
Mr. Bowring. Yes. I have an issue with it on both process
and substance. The process is too fast. The substance is wrong.
It is inconsistent with markets. It will contribute to
destroying markets.
Ms. Tepper. We too have a problem with process and
substance.
Mr. Vanderhelm. Same. Issue with both process and
substance. Our concern about its impact on the competitiveness
of markets by putting that type of additional adder in their
revenues. Also, our concern about the process and the
accelerated review period that has been suggested.
Mr. Hughes. Ditto those remarks. I would also add that our
read of the DOE proposal is that DOE is saying that U.S.
manufacturing jobs are not as good as the jobs of economically
obsolete coal and nuclear plants.
Ms. Brand. I will add my voice to the chorus. We oppose it
both on substance and on procedure. I think it basically
illuminates the competitive markets, and I think that the
process shows exactly what we were talking about today about
how difficult it is to be heard. And so we oppose it on both
grounds.
Mr. Slocum. The Department of Energy's proposal is
terrible. And I don't think anyone likes it except for those
entities that have economic vested interests in the uneconomic
nuclear and coal-fired power plants. Public Citizen is on the
same side as this issue as the American Petroleum Institute,
which has been pointed out to me as probably the first time in
history that that has happened.
The process is always problematic. There was no reason for
FERC to fast track this rulemaking. So it is important for
Congress to get some answers from FERC as to why they did that.
And it just again shows how critically important the creation
of an office of public participation is at FERC, because all of
a sudden, we have got some huge issues of concern to consumers
that are moving very quickly through FERC. And Congress is on
record with creating the office of public participation that
the public interest needs more assistance in order to have an
equal seat at the table.
Mr. Rush. Thank you very much. Again, to all of the
panelists, and I wish you would keep your answers brief on this
question, do you believe the RTO stakeholder process serves the
interests of consumers, or do you believe these consumer
interests are consistently underrepresented in this process?
And what reforms will you recommend to the subcommittee?
Mr. Bowring?
Mr. Bowring. Yes. Thank you.
So consumers are represented. I don't think the
representation is effective as it could be, and I think it is
because of a lack of resources. So for the reasons that my
colleagues here on the panel have indicated, I think customers
need to be strongly represented in the RTO stakeholder process,
and it is not currently as strong as it could be.
Ms. Tepper. I would agree with that. And one of the
suggestions that I think would be helpful would be to provide a
stable funding mechanism for the State consumer advocates,
something maybe like what they are doing in New England. We
have a State process where--it is called NESCOE where the
States get money from--as a group, get money through the
tariff. And they are able to then participate. They have their
own staff, and they are able to go to all of those 100
meetings. And they are meaningfully participating with doing
their own studies. Right now the way it works is that consumer
advocates simply don't have that kind of resources to be able
to participate in that kind of way.
Mr. Vanderhelm. I would first say that, for the large
consumers, that we do have an opportunity to participate and
always welcome greater participation from all the stakeholders,
whether it be in the deregulated markets, ISOs and RTOs, or in
the regulated process that is also relevant throughout the U.S.
Mr. Hughes. ELCON exists to intervene where necessary at
FERC. And so we are generally pleased with our ability to
effect that agency. At the ISO and RTO level, we have some
serious problems there. There are just too many of them, too
many meetings. And we are just totally incapable of providing
that coverage on an effective basis.
Ms. Brand. We have gotten a stable source of funding in PJM
for consumer advocates, but I would say that it is still not
enough. We work a lot. We have stepped up our participation. We
are trying to be heard. But the way the process is set up, it
is just so difficult to have our voice heard among all of the
members of PJM that I still think that more needs to be done.
Mr. Slocum. Yes. I agree. The RTOs are just an
administrative nightmare. They are way too complicated. And the
issues that they are deliberating on a daily basis have
profound financial impacts on consumers. And consumers do not
have an equal seat at the table. And there need to be
fundamental reforms of the governance and transparency
structures of the RTOs to more properly reflect the
contributions of all the stakeholders, and particularly the
public interest.
Mr. Rush. Thank you, Mr. Chairman.
I yield back.
Mr. Olson. The gentleman yields back. Instead of using 5
minutes of my time for taunting the Red Sox fans like Ms.
Tepper, I will recognize the ranking member of the full
committee, Mr. Pallone, for 5 minutes.
Mr. Pallone. Thank you, Mr. Chairman.
I wanted to ask Ms. Brand some questions, if I could. And
thanks again for being here.
A recent report commissioned by American Municipal Power
states that more than half of the $24.3 billion in transmission
projects in PJM in 2012 were unneeded to comply with the RTO or
Federal reliability requirements and were not subject to
rigorous review. So three questions. First, what can be done to
ensure that reliability requirements are thoroughly evaluated
in a transparent manner with active involvement from impacted
stakeholders?
Ms. Brand. Well, I think that process could be reformed as
well. There are some transmission projects that are needed for
reliability. NERC will identify a problem and ask PJM or the
RTO to solve it. But then there are a whole bunch of other
projects that are proposed by the transmission owners because
they are incredibly lucrative for the transmission owners. The
returns on transmission are huge, so everyone wants to build
whatever they can.
And what happens is that the need--both for the RTEP
projects and for the supplemental projects, the need for the
projects is not adequately reviewed at PJM. On an RTEP project,
once they say it is needed, you don't go back and revisit that,
even if things change and there is no longer a need for that
particular line.
So I think greater scrutiny needs to be made, and they need
to go revisit their prior decisions on a regular basis to make
sure that we are only building the transmission that is
actually needed, because it represents a huge part of the
customer's bill, and there is just no point in building
transmission that is not needed.
Mr. Pallone. All right. Thanks.
Then in your opinion, how can we build transmission
projects more cost-effectively while minimizing impacts to
local communities and their environment?
Ms. Brand. Well, cost-effectively I would argue that the
returns that are granted by FERC for transmission are
completely off the charts. Some utilities are getting close to
12 percent return on these projects, which, in this economy, is
a bit crazy. You know, there is some pain always when you are
building a transmission project in any community that it goes
through. But if it is needed, then people, I think, are more
willing to accept it. The problem really comes in when you have
these huge transmission lines that are just gashing a hole
through a community, and then it turns out they are not needed.
And that is what really needs to stop.
Mr. Pallone. Because, obviously, project costs get passed
along to the rate payers, can there be specific criteria that
have to be met by States before utilities or transmission
operators are allowed to move forward with planning these
large-scale infrastructure projects?
Ms. Brand. Well, in terms of the cost, it is a pass-
through. The States don't really have a role in determining how
they get charged for it. The States will have a role in
specific siting of a transmission project. But, again, it is a
difficult process.
We are going through a situation in New Jersey right now
where there is a trial that has been going on for months to try
to figure out whether or not it is being put in the right
place. And the utility's goal is to get it built and to start
earning on it, whereas the people who are in the path of that
line are often--they don't have a significant voice or they are
just in the way.
Mr. Pallone. Well, you know, that is in my district, so I
appreciate your commenting on it.
The last thing. I worry that drastically overestimating
load forecasts on a regular basis can lead to unnecessary
buildup and must be paid for by rate payers. Are there any
checks and balances in place to encourage PJM not to
overexaggerate forecasts? And then, in your opinion, what can
PGM do to minimize transmission projects that are approved or
built and then underutilized resulting in high-stranded cost?
Ms. Brand. Well, PJM has traditionally overpredicted its
load. There is no question that we come in at a lower level.
There is a lot of advances in technology, and people are
actually conserving. So their load forecasts have been high for
a very long time.
They did change the rules a little while back so that they
don't revisit projects once they have been approved as
necessary to resolve reliability violations. And they did that
because they were trying to avoid the disruption that occurs
when you approve a project, then you take it out, and then you
approve a project, and then you take it out. But the end result
is that we are now building transmission that is no longer
needed based on the load profile. So I think they need to go
back and have some form of regular review of these projects to
make sure they are still needed, especially if they haven't
started.
Mr. Pallone. All right. Thanks so much.
That you, Mr. Chairman.
Mr. Olson. The gentleman yields back. The Chair now calls
upon the gentleman from Texas, another Houston Astros fan, Mr.
Green, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman, and thank our
committee, because we have held a number of these hearings over
the last few weeks and months looking at the reliability issue.
And Mr. Vanderhelm, in your testimony, you talk about the
integral competitive wholesale markets--or contribute to
Walmart's success. But before you answer, I want to thank
Walmart, because I have a district in the Houston area. And I
had a number of Walmart trucks coming to churches in our
district who were--facilities to get food, and you-all are
great corporate citizens, both in North and East and Southeast
Harrison County.
Mr. Vanderhelm. Thank you for your comments.
Mr. Green. But the competitive electricity market that was
created in Texas, and it has been very successful, is that an
integral part of Walmart's success?
Mr. Vanderhelm. It certainly has enabled us to both
continue to be able to procure electricity at lower prices year
upon year by having that competitive market there just for all
the stores. And as I mentioned in my testimony, enables us to
directly contract with renewable energy or any other type of
energy where it is delivered directly at the hub where we would
be buying our retail energy.
Mr. Green. When your customers see the lights go out, what
are the most prevalent reasons? Is it lack of generation?
Mr. Vanderhelm. No, sir.
Mr. Green. OK. A recent study, released this week, showed
that, from 2012 to 2016, showed 96.2 percent of all sources of
energy disturbance came from severe weather events, not
generation and capacity, or fuel supply emergencies which
account for less than 0.008, less than a hundredth of single
percent. 2014, NERC released a report reviewing the polar
vortex. In this report, NERC found that the extreme cold froze
many coal piles rendering them useless for power generation.
Can the witnesses talk about issues from the polar vortex
and how that affected customers like the one I mentioned? Is
there any--is that true?
I am from Texas. We don't get snow but about every 10
years. I am sorry we get hurricanes and tropical storms every 7
or 8 years.
Mr. Bowring. It was cold during the polar vortex. One of
the things it illustrated was that the performance incentives
were not in place in the capacity market. That has since been
addressed. The forced outage rate for combustion turbines and
other units is very high, but it was not a result of absence of
fuel. It was the result of primarily mechanical problems at the
units.
Mr. Green. Any other witness?
Ms. Brand. Well, after the polar vortex, PJM did make some
rule changes and did take steps to try to make sure that we
won't get that close again to not having enough generation. And
we haven't even tested it yet. And already there are people
saying that it wasn't enough. So I would definitely advocate
for let's see if the solution we came up with works before
deciding that it didn't.
Mr. Green. In a number of these hearings, we have heard--
and, of course, it doesn't take a Texan too much to brag, but
that we have some really good success in our competitive market
in witness after witness in different panels. That is why I was
skeptical this last week of Secretary Perry's recent DOE
rulemaking announcement that would fundamentally change the
structure of free energy markets.
We created that when he was the Governor of the State. We
have heard multiple times how competitive free markets for
energy benefit consumers in a variety of ways. In this proposed
and, I think, rushed rulemaking, the Secretary is suggesting it
is in the national interest to subsidize industry like coal who
can keep 90-day fuel supply on-site moving that number up from
the existing 71 to 74 days.
Can anyone on the panel comment on how 90 days of frozen,
soggy coal is better than 71 to 74 days? Do you see this
rulemaking is making your grid reliable?
Mr. Bowring. Sir, it is our view that subsidizing
particular technologies on economic technologies is not
necessary to make the grid more reliable. The grid has been
reliable and resilient, and continues to be that way as a
result of competitive markets.
Ms. Tepper. I think you could look at New England as a good
example of how one can make a change in the markets and adjust.
You know, we now have the lowest prices, wholesale prices, in
New England than we have had since 2003. We don't have a
reliability problem. Many studies have shown we have no
reliability problem. And we have reduced our air emissions by--
SO2 by 96 percent.
So we are doing that while we are reducing emissions, and
we are reducing our load. Last year we reduced our load by 2
percent. So that is from our energy efficiency programs and
from solar. So you can make a change. And the markets are
flexible enough to accommodate those changes. I think our
markets are trying hard right now to accommodate those changes.
And it is not a reliability issue.
Mr. Green. What is the base load for the New England
market?
Ms. Tepper. You mean what is the major----
Mr. Green. What is your power----
Ms. Tepper. Gas.
Mr. Green. Gas?
Ms. Tepper. Uh-huh.
Mr. Green. OK. Obviously we would like to sell you more
natural gas.
Recently, Hurricane Harvey dumped so much water on Texas
that the Electric Reliability Council of Texas had to switch to
units from coal to natural gas. Natural gas is by far the
largest provider during the storm, although I can also say our
nuclear power plant in Southeast Texas continued to function
very well.
At the San Jacinto plant site which uses natural gas, the
storm dumped 47 inches of the rain and yet it remained in
operation. It is frankly just not the case that increasing
natural gas-fired plants is threatening reliability of the
grid, because we also found out that coal gets soaked with
water, and it doesn't work whereas natural gas doesn't.
Mr. Chairman, I want to thank you, thank our witnesses.
And, again, I appreciate this series of hearings we are having,
because it really gets us all up to speed on electrics in
generation.
Thank you.
Mr. Olson. The gentleman's time has expired. The Chair now
calls upon the pride of Clarkson University, Mr. Tonko, for 5
minutes.
Mr. Tonko. Thank you, Mr. Chair. Thank you for your
enthusiasm. And thank you for organizing this very informative
bipartisan powering America's series.
I certainly have learned a lot. And I thank our witnesses
for appearing here. And not just here testifying but also for
the significant work you do in a very important arena.
We expect a lot out of our grid. We want it to be clean,
reliable, flexible, resilient, and, yes, affordable. We have
been holding these hearings, and many witnesses have made great
points about the present and future of our electricity systems.
But we have to remember: If we want utilities to invest in
resiliency or RTOs to require greater reliability, the costs
ultimately gets passed down to consumers, and that will hurt
affordability.
Developing a modernized grid is about balancing all of
these qualities. And members and stakeholders may have
different ideas on how to do that best and how to value
individual grid attributes. I think this is best done through
dialogue which must include transparency and participation in
FERC, in RTO proceedings.
So I want to highlight very important points made by a
number of witnesses this morning. Participation in FERC and RTO
proceedings is incredibly difficult for consumers. The process
can be technically complex, costly, and time-consuming which
creates, in its own, a high barrier to participation.
So if I might ask Mr. Slocum: If consumers don't have a
seat at the table, does affordability get pushed aside in favor
of other grid attributes?
Mr. Slocum. Absolutely. The stakeholder meetings at the
various RTOs, that is really where the heavy lifting of market
rules and tariff writing occurs. And as has been very well
articulated by some of the State consumer advocates in RTOs
here, the consumer advocates do not have the resources from a
financial standpoint, a staff standpoint to adequately
participate in those proceedings. And so as a result, those
stakeholder meetings are shaped by those entities that have the
resources to contribute.
And that increasingly are the transmission owners, the
generation owners. And so as a result, you are seeing a bias
coming out of that stakeholder process. And so we have got to
recognize that the RTOs are staffed by good, honest,
hardworking people. But the structure of the way that they
administrate these stakeholder processes, it is fundamentally
broken. And we have got to have total reforms to the way that
those are conducted or a total separation of that stakeholder
function from the RTOs into an entity that is more accountable
to the public interests.
Mr. Tonko. Thank you.
Ms. Tepper and Ms. Brand, Do you agree with those
sentiments?
Ms. Tepper. Yes. I would add that I think that we have had
some successes at ISO New England in being more cost conscious.
One of the things that consumer advocates really fought for was
having more competition in the transmission--building of
transmission. I think that is slowly happening. I think we have
done a good job in integrating energy efficiency into our load
forecast price so that we are not buying too much and we are
estimating how much energy efficiency is going to be going in
the future.
But we have a lot of work to do. ISO and the other RTOs
need to have that part of their mission. Part of their mission
needs to be also worrying not just about reliability but how
much what they do costs.
Mr. Tonko. And Ms. Brand?
Ms. Brand. I would also agree. But I would also say that
part of the problem is when they consider costs. A lot of times
costs don't even enter into the discussion until we are so far
along that everybody has already made up their mind. And we
have made some progress. We certainly have. We have the CAPS
organization in PJM, and we try to be there on day one to bring
costs to the forefront. But it is a very difficult task.
Mr. Tonko. And a number of witnesses described the
significant costs and barriers to participate. Ms. Tepper and
Ms. Brand, your testimonies describe how multiple entities have
pooled their resources in order to have consumer advocates more
fully participate. It seems that funding of full-time voice for
consumers can be difficult. Are there other ways or
compensation structures that would enable more robust
participation?
Ms. Brand. Well, we have a tariff provision, so we do have
funding. More funding, I think, would make the difference. But
also funding of more entities. CAPS does a terrific job of
representing the consumer advocates. But, for example, you
know, I am sure Mr. Slocum would love to participate in the RTO
proceedings. But there is no resources to do it.
So, you know--and we end up as one voice among many. Even
though we are pooling our voices and speaking more strongly, it
still cannot--we are completely drowned out by the transmission
owners and generation owners.
Mr. Tonko. And Ms. Tepper.
Ms. Tepper. I definitely would say that the consumer
liaison group that I run, the people on the coordinating
committee, I think, would universally say that to have a
broader participation, not just to the consumer advocates but
of businesses, of universities, that requires additional work.
Mr. Tonko. Thank you.
Mr. Chair, if you will indulge me for just 10 seconds.
Mr. Olson. Twenty seconds. How about that?
Mr. Tonko. I want to associate myself with the witnesses'
comments about DOE's proposed rulemaking to FERC. Subsidizing
noncompetitive generation for a small, if any, grid benefit at
massive expense to consumers is wrong. It is bad for
individuals. It is bad for businesses. It is bad for
manufacturers. And it definitely should not be done through a
rushed process.
We need more discussion on proceedings and their merits and
not less. And I would say to DOE, please, please keep consumers
in mind. This is a bad move.
With that, Mr. Chair, I yield back.
Mr. Olson. The gentleman yields back.
And seeing no further witnesses to ask questions, I would
like to thank all the witnesses for your patience during votes
and, again, for being here today.
Also, special thanks to you, Mrs. Tepper, for accepting my
challenge on behalf of Mr. Kennedy and all Boston Red Sox fans
around the world. We are going to take you down.
Ms. Tepper. I will warm up the chowder for you.
Mr. Olson. Got a big hot bowl of steaming chili waiting for
you with lots of jalapenos on it. Very hot.
There being no documents for the record and pursuant to
committee rules, I remind Members that they have 10 business
days to submit additional questions for the record and ask the
witnesses to submit their responses within 10 business days
upon receipt of those questions.
Without objection, this subcommittee is adjourned.
[Whereupon, at 12:19 p.m., the subcommittee was adjourned.]
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