[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
EXAMINING THE STATE OF ELECTRIC
TRANSMISSION INFRASTRUCTURE: INVESTMENT, PLANNING, CONSTRUCTION, AND
ALTERNATIVES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
MAY 10, 2018
__________
Serial No. 115-127
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Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
__________
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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
MICHAEL C. BURGESS, Texas ELIOT L. ENGEL, New York
MARSHA BLACKBURN, Tennessee GENE GREEN, Texas
STEVE SCALISE, Louisiana DIANA DeGETTE, Colorado
ROBERT E. LATTA, Ohio MICHAEL F. DOYLE, Pennsylvania
CATHY McMORRIS RODGERS, Washington JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey DORIS O. MATSUI, California
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
ADAM KINZINGER, Illinois PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia BEN RAY LUJAN, New Mexico
GUS M. BILIRAKIS, Florida PAUL TONKO, New York
BILL JOHNSON, Ohio YVETTE D. CLARKE, New York
BILLY LONG, Missouri DAVID LOEBSACK, Iowa
LARRY BUCSHON, Indiana KURT SCHRADER, Oregon
BILL FLORES, Texas JOSEPH P. KENNEDY, III,
SUSAN W. BROOKS, Indiana Massachusetts
MARKWAYNE MULLIN, Oklahoma TONY CARDENAS, California
RICHARD HUDSON, North Carolina RAUL RUIZ, California
CHRIS COLLINS, New York SCOTT H. PETERS, California
KEVIN CRAMER, North Dakota DEBBIE DINGELL, Michigan
TIM WALBERG, Michigan
MIMI WALTERS, California
RYAN A. COSTELLO, Pennsylvania
EARL L. ``BUDDY'' CARTER, Georgia
JEFF DUNCAN, South Carolina
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
ROBERT E. LATTA, Ohio GENE GREEN, Texas
GREGG HARPER, Mississippi MICHAEL F. DOYLE, Pennsylvania
DAVID B. McKINLEY, West Virginia KATHY CASTOR, Florida
ADAM KINZINGER, Illinois JOHN P. SARBANES, Maryland
H. MORGAN GRIFFITH, Virginia PETER WELCH, Vermont
BILL JOHNSON, Ohio PAUL TONKO, New York
BILLY LONG, Missouri DAVID LOEBSACK, Iowa
LARRY BUCSHON, Indiana KURT SCHRADER, Oregon
BILL FLORES, Texas JOSEPH P. KENNEDY, III,
MARKWAYNE MULLIN, Oklahoma Massachusetts
RICHARD HUDSON, North Carolina G.K. BUTTERFIELD, North Carolina
KEVIN CRAMER, North Dakota FRANK PALLONE, Jr., New Jersey (ex
TIM WALBERG, Michigan officio)
JEFF DUNCAN, South Carolina
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. Bobby L. Rush, a Representative in Congress from the State
of Illinois, opening statement................................. 4
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 5
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, prepared statement..................................... 112
Witnesses
Tony Clark, Senior Advisor, Wilkinson Barker Knauer, LLP......... 7
Prepared statement........................................... 10
Answers to submitted questions............................... 118
Edward Krapels, CEO, Anbaric Development Partners................ 32
Prepared statement........................................... 34
Answers to submitted questions............................... 124
Jennifer Curran, Vice President, System Planning, Midcontinent
ISO............................................................ 45
Prepared statement........................................... 47
Answers to submitted questions............................... 130
Ralph Izzo, CEO, Public Service Enterprise Group, Inc............ 60
Prepared statement........................................... 62
Answers to submitted questions............................... 137
John Twitty, Executive Director, Transmission Access Policy Study
Group.......................................................... 70
Prepared statement........................................... 72
Answers to submitted questions............................... 142
Rob Gramlich, President, Grid Strategies, LLC.................... 86
Prepared statement........................................... 88
Answers to submitted questions............................... 152
Submitted Material
Statement of GridLiance.......................................... 114
Statement of WIRES............................................... 116
EXAMINING THE STATE OF ELECTRIC TRANSMISSION INFRASTRUCTURE:
INVESTMENT, PLANNING, CONSTRUCTION, AND ALTERNATIVES
----------
THURSDAY, MAY 10, 2018
House of Representatives,
Subcommittee on Energy,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 9:46 a.m., in
room 2123, Rayburn House Office Building, Hon. Fred Upton
(chairman of the subcommittee) presiding.
Present: Representatives Upton, Olson, Latta, Griffith,
Johnson, Long, Bucshon, Flores, Hudson, Cramer, Walberg,
Duncan, Rush, McNerney, Peters, Green, Castor, Welch, Schrader,
Kennedy, and Pallone (ex officio).
Staff Present: Samantha Bopp, Staff Assistant; Daniel
Butler, Staff Assistant; Kelly Collins, Legislative Clerk,
Energy/Environment; Wyatt Ellertson, Professional Staff,
Energy/Environment; Margaret Tucker Fogarty, Staff Assistant;
Elena Hernandez, Press Secretary; Drew McDowell, Executive
Assistant; Brandon Mooney, Deputy Chief Counsel, Energy; Mark
Ratner, Policy Coordinator; Annelise Rickert, Counsel, Energy;
Jason Stanek, Senior Counsel, Energy; Austin Stonebraker, Press
Assistant; Jeff Carroll, Minority Staff Director; Jean Fruci,
Minority Energy and Environment Policy Advisor; Jourdan Lewis,
Minority Staff Assistant; John Marshall, Minority Policy
Coordinator; Tim Robinson, Minority Chief Counsel; C.J. Young,
Minority Press Secretary.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. We are going to get started on time. I just want
to let folks know that our committee has a pretty major bill on
the House floor this morning, a bill that passed out of
committee 49 to 4, on nuclear waste.
I know that debate there has started. A number of us have
been there already to speak. And our colleague, John Shimkus,
is helping to manage that bill. So I am not sure that he will
be back. But we are expecting votes about 10:45, so I am going
to try to be quick with the gavel. And we will continue after
that, but it will be a series of votes.
Good morning. Today we are continuing our Powering America
series by taking a closer look at a very important but often
underappreciated component of our power sector: the electric
transmission system. Ever since visionaries such as Edison,
Tesla, and Westinghouse argued the merits of using direct
current versus alternating current, the manner and means by
which electricity is delivered has been a complicated and, yes,
controversial topic.
We depend on our high voltage network of wires and cables
to transmit electricity long distances to power everything from
our iPhones to our economy. A stable and uninterrupted supply
of electricity is critical to ensure the public's health and
safety, as well as the quality of life that we have come to
expect. However, in many parts of our country our transmission
infrastructure, like our Nation's roads and bridges--
particularly if you are in Michigan--is aging, congested, and
in need of repair or replacement.
Joining us today is a distinguished panel of experts to
help us better understand the challenges that the electric
transmission sector is facing, as well as the opportunities
that may be within reach.
While much of this debate in the industry is currently
focused on generator resilience and fuel security, we cannot
ignore the vital role that the Nation's electric transmission
infrastructure plays in connecting the electricity producer to
the end-use consumer. And as such, I would argue that a
resilient and reliable transmission grid is no less important.
Transmission infrastructure, however, does not come cheap,
and the planning and construction of new lines often takes
years due to permitting and environmental reviews. Over the
past couple of years, public utilities and independent
transmission developers have committed over $20 billion
annually to upgrade or replace our existing transmission
infrastructure. And while that is good news, creating jobs, et
cetera, sustained investment at similar levels will be critical
to ensure that Americans have a modern electricity grid that
can deliver reliable power at a reasonable cost.
In addition, a predictable regulatory environment and
consistent policies regarding how transmission projects are
approved and paid for is essential to reduce financial risk and
attract new capital. After we passed the Energy Policy Act of
2005, FERC was directed to encourage investment in transmission
infrastructure projects that reduce the cost of delivered power
by reducing congestion on the grid. FERC responded by granting
financial incentives to transmission proposals that met certain
criteria. And in subsequent years FERC began to issue a series
of landmark rules to oversee and regulate the details of how
transmission projects are planned, paid for, and ultimately
developed.
Order 1000 is the agency's most recent attempt to regulate
regional and interregional transmission planning, while also
encouraging competition between transmission developers.
However, as we heard from witnesses in our earlier Powering
America hearings, while some regional transmission planning
processes have become more effective, Order 1000 has all but
failed to develop new lines between and among RTOs and other
planning regions. Moreover, FERC's rule allowing merchant
developers to now compete against traditional utilities to
build transmission projects has been criticized as ineffective
for a number of reasons. With the help of our witnesses, we
will explore these and other challenges associated with
transmission planning, cost allocation, and competition.
Finally, I hope that we can discuss how alternatives to
transmission lines factor into the conversation. While high-
voltage wires form the backbone of our smart-grid technologies,
demand response, energy storage, distributed generation, and
microgrids can also provide benefits similar to traditional
transmission. Since these alternatives may improve reliability
while reducing environmental impacts and cost to consumers, we
should explore whether any legal or regulatory barriers stand
in the way to prevent energy innovation from reaching its full
potential.
So we look forward to hearing from our witnesses.
I yield the balance of my time to my good friend and
colleague on the subcommittee, Mr. Long from Missouri.
[The prepared statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
Good morning. Today, we are continuing our Powering America
series by taking a closer look at a very important, but often
under-appreciated component of our power sector: the electric
transmission system. Ever since visionaries such as Edison,
Tesla, and Westinghouse argued the merits of using direct
current versus alternating current, the manner and means by
which electricity is delivered has been a complicated and
controversial topic.
We depend on our high voltage network of wires and cables
to transmit electricity long distances to power everything from
our iPhones to our economy. A stable and uninterrupted supply
of electricity is critical to ensure the public's health and
safety, as well as a quality-of-life that we have come to
expect. However, in some parts of the country, our transmission
infrastructure, like our nation's roads and bridges, is aging,
congested, and in need of repair or replacement. Joining us
today is a distinguished panel of experts to help us better
understand the challenges that the electric transmission sector
is facing, as well as the opportunities that may be within
reach.
While much of the debate in the industry is currently
focused on generator resilience and fuel security, we cannot
ignore the vital role that the nation's electric transmission
infrastructure plays in connecting the electricity producer to
the end- use consumer. As such, I would argue that a resilient
and reliable transmission grid is no less important.
Transmission infrastructure, however, does not come cheap,
and the planning and construction of new lines often takes
years due to permitting and environmental reviews. Over the
past few years, public utilities and independent transmission
developers have committed over $20 billion annually to upgrade
or replace our existing transmission infrastructure. While this
is good news, sustained investment at similar levels will be
critical to ensure that Americans have a modern electricity
grid that can deliver reliable power at a reasonable cost.
In addition, a predictable regulatory environment and
consistent policies regarding how transmission projects are
approved and paid for is essential to reduce financial risk and
attract new capital. After we passed the Energy Policy Act of
2005, FERC was directed to encourage investment in transmission
infrastructure projects that reduce the cost of delivered power
by reducing congestion on the grid. FERC responded by granting
financial incentives to transmission proposals that met certain
criteria. In subsequent years, FERC began to issue a series of
landmark rules to oversee and regulate the details of how
transmission projects are planned, paid for, and ultimately
developed.
Order 1000 is the agency's most recent attempt to regulate
regional and interregional transmission planning while also
encouraging competition between transmission developers.
However, as we heard from witnesses in our earlier Powering
America hearings, while some regional transmission planning
processes have become more effective, Order 1000 has all but
failed to develop new lines between and among RTOs and other
planning regions. Moreover, FERC's rule allowing merchant
developers to now compete against traditional utilities to
build transmission projects has been criticized as ineffective
for several reasons. With the help of our witnesses, we'll
explore these and other challenges associated with transmission
planning, cost allocation, and competition.
Finally, I hope that we can discuss how alternatives to
transmission lines factor into the conversation. While high-
voltage wires form the backbone of our grid--smart
technologies; demand response; energy storage; distributed
generation and microgrids can provide benefits similar to
traditional transmission. Since these alternatives may improve
reliability while reducing environmental impacts and costs to
consumers, we should explore whether any legal or regulatory
barriers stand in the way to prevent energy innovation from
reaching its full potential.
There's no question that as the nation's electric industry
changes, the demands placed upon our existing transmission
infrastructure will only increase with time. Today, our focus
will be on how the industry and government can plan for the
future to ensure that our power grid is ready to meet the needs
of the 21st century. Thank you to the witnesses for agreeing to
be with us today and I look forward toyour testimony.
Mr. Long. Thank you, Mr. Chairman.
I just want to take a few seconds here to personally
introduce one of the witnesses that is here today with us, a
fellow that I have known since grade school, and fraternity
brothers in college, and on through life. And that would be one
Mr. John Twitty.
John is the former CEO of City Utilities in Springfield, in
my home district, and he now serves as executive director of
the Transmission Access Policy Study Group, TAPS.
Welcome, John. And I want to thank you for lending your
expertise to this hearing. Welcome to D.C.
Mr. Upton. The gentleman yields back.
I recognize for an opening statement my friend and
colleague, the ranking member of the subcommittee, Mr. Rush
from Chicago, Illinois.
OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Rush. I want to thank you, Mr. Chairman.
And I want to welcome the witnesses to the hearing today.
Today we will be examining the state of electric
transmission infrastructure.
As you know, Mr. Chairman, there have been many
developments in the Nation's energy portfolio since FERC issued
Order No. 890 back in 2007 as a way to promote open-access
transmission services. This rule outlined a planning process
for transmission providers consisting of nine planning
principles, including coordination, openness, transparency,
information exchange, comparability, dispute resolution,
regional coordination, economic planning studies, and cost
allocation.
In 2011, Mr. Chairman, FERC issued Order No. 1000 as a way
to further improve the planning process within and among
geographic regions and also to determine how transmission costs
were distributed to customers. Order 1000 was also issued to
provide additional opportunity for non-incumbent transmission
developers to compete to build projects within the service
territory of incumbent utilities.
Mr. Chairman, in reviewing this policy it appears that the
results have been mixed in regards to how successful it has
been in achieving its goals. We are in the midst of a rapidly
changing energy landscape, reflected in part by the emergence
of renewable energy sources, low-cost natural gas, State-led
Renewable Portfolio Standard goals, as well as an increase in
energy-efficiency initiatives and overall reductions in energy
demand.
Mr. Chairman, shifting consumer behavior is driving many of
these changes as customers demand cleaner forms of energy along
with new tools to more responsibly use the energy they consume,
both as a way to save money and as a way to save the
environment.
Traditional methods of buying and selling energy are being
disrupted by demand response programs where emerging
technologies, such as energy storage and distributed-energy
systems, allow consumers to produce energy and sell it back to
the grid.
Mr. Chairman, based on the testimony that we will hear
today, it appears there are some real concerns with Order 1000,
and modifications may be needed to help meet its objectives. If
the goal was to provide a clear and collaborative inter- and
intraregional planning process, with transparent and fair cost
allocations, in order to spur additional competition and
increased investment in grid infrastructure projects, then it
is less clear if that objective had been achieved.
While most of the witnesses believe that changes should be
made, there is less consensus on what those changes should look
like.
So I look forward to engaging the panel today, Mr.
Chairman, regarding the opportunities and the challenges
surrounding Order 1000, as well as recommendations for
improving this policy.
With that, I yield back.
Mr. Olson [presiding]. Thank you.
The chairman of the full committee, Mr. Walden, is not
here. So the chair now calls upon the ranking member of the
full committee, Mr. Pallone, for a 5-minute opening statement.
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 welcome our excellent panel of witnesses.
In particular, I am pleased we have Ralph Izzo, the
President and CEO of PSE&G here today. Ralph and I have worked
together and known each other for many years, and I value his
opinion and appreciate the service that PSE&G provides to my
constituents and to our State of New Jersey.
The network of transmission lines are truly the backbone of
the power system, and these transmission lines are critical to
providing reliable electricity. But just like any large,
conspicuous infrastructure project, transmission projects are
rarely free from controversy. And in densely populated areas,
such as we have in the Northeast, allocating space for any new
infrastructure is often a challenge.
The electricity sector is undergoing tremendous change.
There are new technologies in growth and distributed
generation. At the same time, demand for power has remained
relatively flat. And there are new challenges of extreme
weather and cybersecurity threats, along with increasing demand
for the grid to be more flexible and responsive. And all these
things require us to evaluate the policy tools that FERC is
using to manage its evolution.
We will hear a variety of opinions today about the degree
to which FERC's orders are helping or hindering investments in
electric transmission. It is a challenge to get this balance
right, so it is no surprise that stakeholders in this arena
will have diverse opinions on how to improve these policies.
If we look at the map of existing transmission lines across
the country, it is hard for me to believe that we need a lot of
new transmission. This is a very mature network. But since much
of that network has been in place for decades, it is also a
good bet that it needs to be upgraded and modernized.
This is something that companies must consider when they
are pursuing a transmission project. And a project in my own
district, the Monmouth County Reliability Project proposed by
FirstEnergy, is one example where there was no serious
consideration given to nontransmission options that could make
the area's system more resilient and reliable.
It was only through the diligent efforts of a group of my
constituents called the Residents Against Giant Electric, or
RAGE, that this expensive, unnecessary project is not moving
forward. RAGE provided expert analysis demonstrating that
transmission alternatives could be accomplished or an upgrade
to the grid at a far lower cost to ratepayers and that these
alternatives were never seriously considered. The
administrative law judge who reviewed the case in Monmouth
County agreed with that assessment.
This project in my home district illustrates that there
remains a bias to building transmission rather than using new
tools. It is in the financial interest of transmission
companies to build, especially when there are clear rules that
allow them to recoup those investments.
Determining if new transmission is needed must involve all
stakeholders and be evaluated without bias. If, in fact, new
transmission lines are needed, and in some cases they will be,
then the project should go forward. But where new technology
can provide a cheaper solution that is less disruptive to other
businesses, existing infrastructure, and communities, we should
ensure that those options are used.
So, again, the rapidly changing environment we are in right
now is both exciting and challenging. FERC's efforts to address
transmission challenges have been admirable but far from
perfect. There have been and will continue to be missteps along
the way that require adjustment and correction, perhaps even
serious revision in some areas.
And so I am hoping, Mr. Chairman, that this series of
hearings is providing all of us with an opportunity to better
understand where the greatest challenges remain.
And, again, I want to thank all of our witnesses, including
Ralph Izzo, for appearing today. I look forward to your
testimony.
I would yield back the balance of my time to the gentleman
from California, Mr. McNerney.
Mr. McNerney. Well, I thank the ranking member for
yielding. And as a cochair of the Grid Innovation Caucus, I am
pleased to be part of this hearing.
I thank the witnesses for their testimony and look forward
to working with them to create what the Presidents of both
parties have called the 21st century electric grid.
Congress needs to address the requirements of an evolving
grid, including advances in technology, consumer adoption of
distributed generation, and increasing cyber threats to this
backbone of American industry.
Just yesterday two bills sponsored by Congressman Latta and
myself focused on cybersecurity passed the full committee. This
hearing is an important corollary to those efforts. What
investments should we be making? What regulatory regime should
we be reviewing within FERC or otherwise? And what more should
we be doing to modernize our grid?
I look forward to working with each of you to develop
practical, commonsense proposals to creating an advanced
transmission system.
And I yield back.
Mr. Olson. Thank you.
And there are no more opening statements by members, so now
it is the fun time. Our witnesses will have 5 minutes to give
their brief presentations. I will work this from your right to
your left. And make sure you hit the button and it comes on,
and speak into the mic.
We have a former commissioner of FERC, Mr. Tony Clark, who
is now a senior adviser at Wilkinson Barker Knauer.
You are up, Mr. Clark, for 5 minutes.
STATEMENTS OF TONY CLARK, SENIOR ADVISOR, WILKINSON BARKER
KNAUER, LLP; EDWARD KRAPELS, CEO, ANBARIC DEVELOPMENT PARTNERS;
JENNIFER CURRAN, VICE PRESIDENT, SYSTEM PLANNING, MIDCONTINENT
ISO; RALPH IZZO, CEO, PUBLIC SERVICE ENTERPRISE GROUP INC.;
JOHN TWITTY, EXECUTIVE DIRECTOR, TRANSMISSION ACCESS POLICY
STUDY GROUP; AND ROB GRAMLICH, PRESIDENT, GRID STRATEGIES LLC
STATEMENT OF TONY CLARK
Mr. Clark. Thank you, Mr. Chairman, members of the
committee, and Ranking Member Rush. My name is Tony Clark. I am
a Senior Advisor at the law firm of Wilkinson Barker Knauer,
which has offices here in D.C. and in Denver, Colorado.
From 2012 to 2016, I had the honor of serving on the
Federal Energy Regulatory Commission. Prior to that, I served
12 years as a commissioner and for part of the time as chairman
of the North Dakota Public Service Commission. It is a
particular honor to recognize my former colleague, Congressman
Cramer, and a good friend of many years.
My testimony today centers on a white paper that I recently
authored entitled ``Order 1000 at the Crossroads.'' It offers
my reflections on the order, the status of it, and where it
might go from there. I have attached a copy of the paper as an
appendix to my testimony.
As way of background, Order 1000 was promulgated before I
got on the Commission, not long before I got on the Commission,
so I didn't participate in that. But I did participate in the
many compliance filings that came forward in the wake of the
order.
The main thesis of my reflection is that, however well-
intentioned the order is, in practice it is falling short of
the lofty goals that it set. I suggest that with the passage of
a better part of a decade since its adoption, now is an
appropriate time for FERC and for Congress, through its
oversight authority, to engage in a meaningful assessment of
the order.
The paper concludes that one of the paradoxical results of
the rule has been that the major transmission projects that
many of us thought might come out of Order 1000 actually came
out of a pre-Order 1000 world. And in the time spent since
Order 1000 was promulgated, there really haven't been a lot of
tangible projects that have come through or empirical data to
support the success of the order. The paper concludes that if
FERC were to better tailor the rule, especially recognizing
significant regional differences across the utility industry,
it might have more efficacy. Put succinctly, we may today find
ourselves in the position of having a rule that ensures
significant compliance costs, but without a lot of demonstrable
benefits coming out the other side.
It is perhaps ironic that many of the most impactful
transmission projects that I mentioned, such as in my home
region the MISO Multi-Value Project, arose from that pre-Order
1000 world that I talked about. I suggest that the reason for
this is multifold. Some of it is that regions, particularly
those that were served by vertically integrated utilities, were
already doing a fair amount of planning within their regions
prior to the order. For those regions, Order 1000 replaced that
collaborative bottoms-up process with a Federal top-down
process where there is a fair amount of bureaucracy that is
involved with it. And the name of the game is making sure that
you are checking compliance checklists as opposed to actually
bringing projects to fruition.
Creating a Federal mandate on top of what was already
previously happening with many regions has added time and
complexity. And we have seen in some regions a lot of
litigation with respect to the transmission projects. The
electricity landscape has changed dramatically in terms of the
resources, technology, and State policies that drive
transmission decisions, both since EPAct 05 and Order 890,
which preceded Order No. 1000. And then finally, certain
implementation decisions, such as how cost allocation is
handled within regions, has altered transmission development
models that were previously broadly accepted within a number of
the regions.
In short, even among those who are broadly supportive of
Order 1000, there seems to a widespread sense that something is
amiss with it in terms of the underwhelming results that have
come out of it. In light of this, I would argue that it is
appropriate for policymakers to consider Order 1000's future
given its track record. My paper encourages industry
conversations about ways that Order 1000 could be streamlined
across the board.
While regional planning conversations may result in some
benefits--and I would add there may be some benefit especially
when talking about interregional projects where maybe not as
much conversation had happened in the past--there may be ways
to do it while repealing some of the more prescriptive aspects
of the order.
Briefly, moving beyond Order 1000, I would offer that I
think there are a number of regulatory policy calls coming up
that could have a significant impact on how transmission
infrastructure will be developed. FERC has significant
decisions ahead it, dealing with issues like rates of return on
transmission projects for jurisdictional rates, issues related
to transmission incentives that FERC builds into its rate
structure.
And, finally, one of the big elephants in the room on
transmission development is, as it is with pipeline
development, it is very difficult to get infrastructure
projects sited and brought through the construction phase
because of multiple levels of sometimes bureaucracy and red
tape that can block some of those permitting decisions.
With that, I conclude my testimony. Thank you. I look
forward to any questions you might have.
[The prepared statement of Mr. Clark follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Olson. Right on time. Thank you, Commissioner Clark.
Our next witness is Dr. Edward Krapels.
Mr. Krapels. Perfect. Thank you.
Mr. Olson. CEO of the Anbaric Development Partners.
Five minutes, Dr. Krapels.
STATEMENT OF EDWARD KRAPELS
Mr. Krapels. Thank you, Mr. Chairman and distinguished
members of the Energy Subcommittee.
My name is Ed Krapels, and I am the founder and CEO of
Anbaric, which is an independent transmission microgrid storage
and smart energy campus developer. We are funded by
institutional investors, so we are not your typical utility.
We like to think we build the electric businesses of the
future, and the future is very different from the past, as
other members have already indicated. We helped to spearhead
two high-voltage direct current buried transmission lines
between New Jersey and New York. The high-voltage direct
current technology is common worldwide, but not widely used yet
in the United States.
As a person who has actually developed interregional
transmission projects, I have taken the opportunity to write an
article that is part of my prepared testimony that was just
published in The Electricity Journal called ``Triple
Jeopardy.'' It reviews why, even though everyone agrees these
kinds of interregional transmission links are useful and that
more are needed, both existing and new interregional projects
are being choked off by well-intentioned but unproductive
regulations.
Some of these stem from Order 1000 and the inability to
implement Order 1000 in a way that is sufficiently prescriptive
to handle the many issues that arise when interregional
transmission projects are proposed.
I am here this morning, however, to discuss a really
important new opportunity in our power industry. Federal energy
and environmental policy can accelerate what promises to be a
once-in-a-generation chance to launch a new domestic industry,
and that is offshore wind, if we do it smartly and thoughtfully
from the start.
The key to success is to plan, design, and build shared
independent offshore transmission, OceanGrids, in a thoughtful
way in each of the participating coastal States. The Federal
Government obviously has a huge role in this through the BOEM
and FERC procedures that have to be implemented as part of this
plan.
Why are these planned and independent OceanGrids so
important? Because after years of development in Europe,
technology has pushed the price of offshore wind down to super-
competitive levels. With that, American offshore wind is now a
natural component in the administration's energy dominance
strategy. It is indeed fuel from heaven, and its time has come.
However, as with all large-scale energy resources, indeed with
any important new industry, the business, financial, and
physical platform on which it is built must be carefully
designed and developed.
Unfortunately, some ideas about offshore wind would
jeopardize the ability to realize its full potential. Early
policy proposals in Massachusetts, New York, and New Jersey
explicitly would give generators the exclusive ability to own
the transmission lines that take offshore wind to market. These
proposals have been promoted by giant, largely European wind
developers that would get America's offshore undertaking off on
an anti-competitive and wrong footing. It is obviously in their
interest to control as much of the access to the onshore grid
as possible. If we allow that to happen, we will lose the kind
of competition that will further lower offshore wind prices. We
will lose more fishing grounds because there are more subsea
cables than necessary. We will lose control over a substantial
portion of our own coast. A proliferation of cables would
displace and distress marine life during construction and
operations and make it hard to avoid estuaries and navigate
sensitive shoreline points of entry that will undermine an
industry in a vital period of its growth.
We are proposing in our OceanGrids a smaller number of
large collector stations that are placed at the edges of the
offshore wind farms, gathering the electricity from multiple
wind farms and bringing it to shore via the minimum number of
transmission cables buried in the seabed. These cables would be
buried under the ocean floor and sized for multiple wind
projects, and it could be either direct current or alternating
current, depending on the distance to shore.
If we do it right, we will create an industry and tens of
thousands of 21st century jobs. We will create competition
between generators. And it is that competition that will bring
the price of offshore wind down to market levels.
I will close by saying that in Europe today offshore wind
auctions are yielding prices of 4 to 5 cents per kilowatt hour,
which is pretty close to the market price.
Thank you very much.
[The prepared statement of Mr. Krapels follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Olson. Thank you, Mr. Krapels.
Our next witness is Jennifer Curran. Jennifer is the vice
president, system planning, at Midcontinent ISO. But most
importantly, she is a graduate of Rice University, my alma
mater.
Ms. Curran. Go, Owls.
Mr. Olson. Go, Owls.
Five minutes, ma'am.
STATEMENT OF JENNIFER CURRAN
Ms. Curran. Good morning, Vice Chairman Olson, Ranking
Member Rush, and members of the subcommittee.
As noted, I am Jennifer Curran, Vice President of System
Planning for the Midcontinent Independent System Operator, or
MISO, as we are more commonly known.
I appreciate the opportunity to be here with you today as
you examine the state of the Nation's electric transmission
system, and I hope the insight into how MISO plans transmission
are useful to you as you work to shape U.S. energy policy.
MISO is a 501(C)(4) not-for-profit social welfare
organization with responsibility for ensuring the reliability
of the high-voltage electric transmission system to deliver
low-cost power to customers. That mission is reflected in our
approach to transmission planning. We seek not to minimize the
cost of transmission, but rather to identify transmission,
which maximizes value to customers in the form of overall lower
total energy costs.
The system that MISO manages is geographically the largest
in North America. It spans from Manitoba in Canada down through
all or parts of 15 States to the Gulf of Mexico. As you might
imagine, a geography that wide presents a lot of diversity in
resource types, weather, State policies, and consumer
preferences as it relates to electric supply. Transmission is a
key tool to optimize that diversity for the benefits of
customers. That diversity also presents challenges as we seek
to design transmission plans and, probably most importantly,
determine who will pay for them. Even prior to Order 1000, MISO
was planning not just for reliability, but also for economics
and public policy.
Of the $30 billion of transmission investment that has been
enabled through the MISO planning process, approximately 20
percent of that is associated with a long-term regional
planning effort to address the changing resource mix, known as
the Multi-Value Projects.
The Multi-Value Project portfolio is a set of 17 projects
that are distributed widely across the north and central
regions of MISO. They provide benefits of two to three times
the cost, predominantly in the form of access to existing and
new low-cost energy resources, and reliably enable the
renewable portfolio standards in the Midwest.
Transmission like the Multi-Value Projects is a longer-term
view. We are about halfway through the implementation of the
Multi-Value Projects, with the final project scheduled to go
into service in 2023. In the meantime, as has been noted, we
continue to see a great deal of change in the electric
industry. So where do we go from here?
I think the challenge in front of us is probably best
described by the two questions I get most frequently about
transmission planning: MISO, why have you not developed the
next set of regional and even interregional transmission? And,
MISO, why are you thinking about additional transmission that
we clearly won't need?
So that dichotomy is clearly representative of the
diversity that I mentioned, and that diversity becomes even
broader as we expand beyond the regional boundaries and plan
with our neighbors. But it is also reflective of the
uncertainty of the future as it relates to electricity.
The MISO planning process uses a scenario-based approach.
We try to bound the potential outcomes of the future and then
look for transmission projects that will be valuable in all of
those futures.
If we can find transmission that is valuable across that
wide range of objectives, then we can feel comfortable that the
benefits will continue to accrue to customers and that we can
continue to recommend that transmission. We often refer to
these as no-regrets projects.
We have a lot of planning to do to determine whether there
is a future set of transmission that has benefits in excess of
costs and, probably most critically, to come to consensus on
who will pay for that transmission, who sees the benefits and
believes that the cost they will bear will be in line with
those benefits.
Nonetheless, I believe that regional and interregional
transmission will be a critical part of the overall solution
set as we seek to ensure the reliability, the efficiency, and
the resilience of the electric grid into the future.
Thank you.
[The prepared statement of Ms. Curran follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Olson. And thank you, Ms. Curran. We will talk about
Beer Bike and Baker 13 offline.
Our next witness is Dr. Ralph Izzo. He is the CEO of the
Public Service Enterprise Group.
Dr. Izzo, you have 5 minutes.
STATEMENT OF RALPH IZZO
Mr. Izzo. Good morning, Mr. Chairman, Ranking Member Rush,
members of the subcommittee, as well as full committee Ranking
Member Pallone, who has had a long and exemplary career serving
the people of my home State, New Jersey.
I am pleased to provide my point of view on the importance
of continuing to strengthen and modernize electric
infrastructure. Today I will highlight one Federal policy that
stands as an impediment to that goal and should be repealed,
that being FERC Order 1000.
I am here representing the Public Service Enterprise Group
and our subsidiary, PSE&G, a 114-year-old company that is New
Jersey's largest electric and gas utility. PSE&G owns around
1,600 circuit miles of transmission operated by PJM
Interconnection.
Despite the fact that PSE&G has been named the mid-
Atlantic's most reliable electric utility for 16 years in a
row, much of our electric infrastructure is old. While it has
helped power the industrial Northeast for nearly a century, in
recent years we have had to work to replace, upgrade,
modernize, and sometimes move parts of the grid in order to
ensure our system can withstand extreme weather events and
other threats, for even as our customers are using less
electricity, their reliance on it has never been greater.
Of course, we don't have a blank check. Our investments
must be prudent. Over the past 10 years we have made
improvements that have reduced unplanned transmission outages
by over 80 percent. So the customer benefit is clear.
Transmission investment has been helped by Federal policies
that have recognized the importance of transmission and the
risk in building large projects. However, Order 1000 stands out
as a policy that undermines these efforts.
Enacted by FERC in 2011, Order 1000 was touted as landmark
reform that would promote efficient and cost-efficient
transmission planning and remove barriers to development. But
in the 7 years that we have been living under Order 1000, the
promised efficiency looks more like confusion, controversy, and
chaos.
Regional grid operators have begun to voice their views.
PJM CEO Andy Ott last year called Order 1000, and I quote, ``a
solution in search of a problem that is creating more of a
challenge.'' Southwest Power Pool CEO Nick Brown said it
created, ``more overhead and more uncertainty.''
Our main experience with Order 1000 has been through a
competitive solicitation launched by PJM in 2013 for a project
to solve voltage issues in southern New Jersey. To call the
process a mess would be generous. PJM made an initial decision
and then reversed itself. Disputes cropped up between States
and stakeholders that the RTO had to mediate.
PJM found itself having to make judgments outside its
expertise, for example, on which alternatives might secure
environmental permits or how to interpret the fine print and
exclusions when a developer says it will cap construction
costs.
Five years into the planning process, we still do not have
a constructed project to address a major need on this part of
this grid. And across the country, other red flags continue to
appear. No region outside organized markets have even attempted
to administer an Order 1000 bid. The Southwest Power Pool spent
$5 million on a competitive process for an $8 million project
that was deemed unneeded and never built. The California ISO
awarded a project to a partnership between a foreign developer
and another entity, only to see the developer go bankrupt.
Mr. Chairman, after 7 years these can no longer be called
growing pains. But even beyond the chaotic implementation of
Order 1000, there lurks a more fundamental concern. Order 1000
tends to drive short-term, Band-Aid fixes for the grid.
Projects that solve multiple problems and provide long-term
value tend not to move forward because they are ruled out as
being too costly.
Competition is a positive force. But the goals must be set
to achieve the outcomes we want. People and businesses depend
on an efficient electric system that is resilient for the long-
term against an array of very real threats. Leaving Order 1000
in place risks our ability to achieve that end.
Thank you.
[The prepared statement of Mr. Izzo follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Olson. Thank you, Dr. Izzo.
The chair now calls upon John Twitty. As was mentioned by
my colleague from Missouri, he is Executive Director of the
Transmission Access Policy Study Group and a dear friend of Mr.
Long.
So offline, you probably have some stories that about him
that we would all like to hear. You have 5 minutes.
STATEMENT OF JOHN TWITTY
Mr. Twitty. Chairman, indeed, I do.
Well, good morning, Mr. Chairman and members of the
subcommittee. I am John Twitty, Executive Director of TAPS, the
Transmission Access Policy Study Group. Our association has
been active here in the Capitol and at FERC protecting the
interests of transmission-dependent utilities. We represent
municipal utilities, joint action agencies, a rural electric
cooperative, and an investor-owned utility, serving about 1,200
utilities with retail customers in 35 States.
As load-serving entities dependent upon the transmission
facilities of others, TAPS members recognize the importance of
a robust grid and have long advocated policies to get needed
transmission built, but are keenly aware that expansion must be
achieved at reasonable cost.
By enacting Section 217(b)(4) of the Federal Power Act of
2005, Congress gave FERC clear instructions on transmission
planning and expansion. FERC is directed to facilitate planning
to meet the reasonable needs of load-serving entities and
enable load-serving entities to secure long-term firm physical
or equivalent financial rights for long-term supply power
arrangements made, or planned, to meet their service
obligations.
These directives translate into steps FERC can and should
take regarding transmission planning and investment. But that
is not happening to the degree necessary to meet Congress'
mandate. First, the grid has to meet the needs of load-serving
entities. Although FERC has established rules for an open and
transparent transmission planning process, even FERC has
recognized that this is not happening consistently.
We are particularly concerned that transmission-dependent,
load-serving entities do not have a seat at the table the way
they would if they shared ownership in the grid. Joint
transmission ownership arrangements where all load-serving
entities share ownership of the grid, which have occurred in
many States, have a long history of ensuring that the
transmission needs of all load-serving entities are met
consistent with Section 217. They also facilitate the State
siting process and spread investment risk and responsibility
and provide an opportunity for small load-serving entities to
offset their increasing transmission rates against transmission
revenues, thus reducing cost to ultimate customers.
Second, we need to be sure our investment in new
transmission is appropriate, consistent with Section 217's
focus on the reasonable needs of load-serving entities. TAPS
members have experienced rapid increase in transmission cost.
While a portion of the increase is no doubt justified,
transmission has become an investment magnet. The potential for
guaranteed incentive-elevated returns on equity on low-risk
transmission assets may spur investment that is not necessary.
While we support FERC's ground-up consideration of grid
resilience, it should not become a blanket justification for
excessive investment.
Third, FERC has fallen short in fulfilling Section 217's
directives regarding long-term transmission rights,
particularly as to the capacity associated with long-term power
supply arrangements on which load-serving entities rely for
resource adequacy. This exposes load-serving entities to
increased cost, especially if the RTO choices of large
transmission owners have left them with loads and resources in
multiple RTOs. It also makes new investments riskier.
Fourth, above-cost incentives are not needed to attract
investment. There is no shortage of entities seeking to invest
in low-risk transmission assets at FERC's base equity return
that is intended to reflect the cost of attracting capital.
There is no need for incentive rates of return, much less to
expand their availability beyond opportunities provided under
current FERC policy. Those seeking transmission incentives
should not be permitted to turn away load-serving entities in
the footprint seeking to make their load ratio investment in
the grid.
Finally, the transmission planning process can also be a
more effective vehicle for inclusive transmission investment.
Non-incumbent transmission developers, especially those that
accommodate participation by small load-serving entities,
should have a fair opportunity to develop needed new
transmission.
Congress should encourage the Commission to reinvigorate
the Order 1000 competitive transmission development process in
a manner that will promote joint transmission ownership, as
well as to use competitive discipline to curb rising
transmission cost.
At TAPS, we want to be part of the solution so long as the
needs of our customers are met. And I look forward to this
discussion.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Twitty follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Olson. Thank you, Mr. Twitty.
Our final witness is Mr. Rob Gramlich.
Mr. Gramlich. That is right.
Mr. Olson. Rob is the President of Grid Strategies LLC.
You have 5 minutes for an opening statement, sir.
STATEMENT OF ROB GRAMLICH
Mr. Gramlich. Thank you very much, Vice Chairman Olson,
Ranking Member Rush, members of the subcommittee. I appreciate
the opportunity to be here today to talk about the important
issue of the state of transmission.
There is no infrastructure more important than
transmission, which is essential to the reliable and affordable
electricity service we depend on for almost every modern
commercial and individual activity.
Since this subcommittee was involved in passing the Energy
Policy Act of 2005, the industry has succeeded in building a
lot of transmission. Transmission benefits have exceeded the
cost by factors of 2 to 3.5 in the major investments in the
central region you have heard about in MISO and the Southwest
Power Pool.
Transmission investment has enabled over $100 billion of
generation investment in rural communities. Transmission
investment is needed for both a distributed future and a large
utility-scale generation future, either one or both.
We have learned a lot about what works. Regional planning
and cost allocation in particular have worked well. We should
build on that success. In my written testimony, I provide nine
ideas for expanding transmission and improving its performance.
However, none of these ideas matter if there is no
leadership at the Department of Energy or FERC. I think we are
waiting for that leadership. I fear the agencies are too
distracted by misguided proposals to provide life extensions to
old power plants. We are all wasting our time comparing
different dictionary definitions of reliability and resilience
when we should be updating policies for transmission. If
``resilience'' is a code word for propping up uneconomic
plants, that effort needs to sink on its own poor merits, as my
former boss, FERC Chairman and Texas PUC Chairman Pat Woods,
said recently.
Turning to transmission. To improve transmission, most of
my recommendations are for FERC, but I have some for DOE and
Congress as well. It doesn't matter if it is under the heading
of Order 1000, 890, 2000, or an entirely new vision they could
roll out called Order 2020. We need to update transmission
policy to create the grid we know we will need in the future.
I recommend that FERC and Congress preserve and build upon
the twin policies I mentioned of broad regional planning and
beneficiary-pays cost allocation. That is what worked in Texas,
that is what worked in SPP, that is what worked in MISO. That
is what Dr. Krapels described should be done in the Northeast.
Number one, FERC should align transmission owner incentives
for advanced transmission technologies. I didn't say more
incentives. I am not asking for a subsidiary. I said align the
incentives so that transmission owners have an incentive to
deploy cost-effective technologies.
Number two, FERC should incorporate advanced transmission
technologies into transmission planning. I don't like to call
it nonwires alternatives. I think they are just other
transmission options. They should all be considered, along with
new lines and other assets.
Number three, FERC should fix interregional planning and
cost allocation. Clearly, no improvements have been made since
Order 1000's attempt to improve that.
Number four, Congress, the Department of Energy, and FERC
should all improve Federal backstop siting. I think it is
important for the future grid that we need, and we should make
sure it works and is used where appropriate.
Number five, FERC should require proactive planning that
captures all of the values of transmission. Too often it gets
compartmentalized and not all of the benefits are included.
Number six, the administration should improve Federal
coordination and transmission permitting on Federal lands.
Number seven, the Department of Energy should harness the
authority and capabilities of power marketing administrations.
They can be involved in transmission, they can utilize Section
1222 of the Energy Policy Act of 2005, and help in other ways.
Number eight, the administration should couple the
Department of Energy's planning and support for planning and
corridor designation with the Department of Interior's efforts
to identify renewable energy zones and transmission corridors.
Finally, Congress should consider public financing to
right-size transmission. Too often we underbuild for the
resources that we know will be there when our children, their
children, and their children's children will benefit from it.
Those resources are there. We know they will be there even
in Texas where we built a lot of transmission. We have
essentially used up that capacity. And looking back, we would
have done better to build it the right size.
I will stop there and look forward to your questions. Thank
you.
[The prepared statement of Mr. Gramlich follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Olson. Thank you, Mr. Gramlich.
And for the panel, we are having votes called within the
next 10 to 15 minutes, floor votes. We will have to basically
go into recess. But until then, we will try to get through as
many member questions as possible. We have 5 minutes to ask
questions.
Being the chairman, I am first.
And you all know that I am a Texan. And you all know that
Texans love to brag about fellow Texans. We say they done
something good. They said that in Haskell, Texas. Haskell is
the home of our former Governor, our current Energy Secretary,
Rick Perry. He did something good with what is called
Competitive Renewable Energy Zones. He used those to fix a
problem he had in Texas, a big problem.
We have a lot of wind power, but we have most power out
west, rural Texas, where it is not needed. We need it in
eastern Texas, central Texas, Houston, Dallas-Fort Worth,
Austin, San Antonio.
But that CREZ initiative is part of why, as Dr. Krapels
said, Texas leads the Nation in wind power. In fact, one day a
couple years ago almost half our energy was provided by wind.
Offshore Corpus Christi, Texas, that wind whips almost 300 days
a year. We are making progress on that.
My question is for you, Mr. Gramlich. Can you talk about
how the CREZ model worked and whether that is something we
could do elsewhere?
Mr. Gramlich. Sure. And you are absolutely right,
Congressman, the Texas CREZ model, as well as the ERCOT market
structure overall, is a model for the country.
I think we would be doing a lot better in all of the FERC
jurisdictional areas if we essentially had the ERCOT market
model throughout the Northeast and the rest of the RTO-ISO
areas, as well as its proactive transmission planning model
that has access to all of that wind and gas resources and
others out in western Texas and the Panhandle.
So essentially it is a simple formula of identifying where
the generation resources are and proactively building to those
resource. The alternative that is too often used in many other
places is just to wait one by one for all the little projects
to connect, and no one of them are going to build the
transmission that are needed. So you need to proactively build
and right-size the lines to the resource area.
Mr. Olson. Thank you.
And, Doctor, would you like to add anything, Dr. Krapels,
you are the wind expert, about the CREZ model in Texas, how
that worked out?
Mr. Krapels. I totally agree. And in the Northeast, we are
looking at a wind resource offshore that could be 10,000 to
20,000 megawatts. Texas size, Mr. Chairman. Texas size.
Mr. Olson. That is very big.
Mr. Krapels. That is very big.
Mr. Olson. Huge.
Mr. Krapels. It represents a capital investment opportunity
of $30 billion, $40 billion, big even by Texas standards. And
yet our transmission policy in the Northeast is the opposite of
that of Texas. It is let the generators build and own the
transmission, which seems almost insane to me.
We should do what Texas did. We should learn from Texas and
build the transmission and plan the transmission first, and
then let the generators compete like hell to get access to that
transmission. That is what you did, and it works great.
Mr. Olson. This is a great hearing so far.
The last question is for you again, Mr. Gramlich.
You recently wrote a white paper about new technologies
that can optimize a transmission system in a much lower cost
than building new transmission lines.
Can you briefly describe how that will work and compare
that for the cost to the consumer, what the benefits are of
your white paper, your plan?
Mr. Gramlich. Yes. Thank you, Congressman, for the
question.
I formed a coalition called the WATT coalition, Working for
Advanced Transmission Technology. And we put out a white paper
where we were thinking, in part, about wholesale customers and
thinking we do need more transmission, but we should also make
sure that the existing grid is used as efficiently as possible.
And many of these new technologies actually weren't really
commercially available when the Energy Policy Act directed FERC
to promote them back in 2005. And so there is an unfinished
chapter in the implementation of Congress' act, and that is on
the operational side, the utilization of the existing wires. A
whole lot was done on incentives for new transmission, but
nothing was done on utilization.
And so, again, we are not asking for more incentives
necessarily, just alignment of incentives and inclusion into
the planning process.
Mr. Olson. Thank you. I am running out of time here.
One question for you, Mr. Clark. I would be curious to know
if you think regulators are doing a good job of keeping up with
emerging technologies in the transmission or distribution
space. Grade A, B, C, D, or something below that.
Mr. Clark. I would say it is incomplete, if that is an
answer.
Part of the challenge when we talk about regulators is you
are looking at multiple jurisdictions of regulatory authority.
So unlike the case of Texas where you have a wholesale
regulator that is both the retail regulator and the wholesale
regulator, for most of the rest of the country it is very
difficult to bridge some of those divides. It is just the way
the jurisdictional nature plays out.
FERC has wholesale authority and interstate transmission
authority. But many of those other decisions, regarding
resource adequacy, integrated resource planning, retail
decisions, are made at the State level.
So it is tough to give an overall grade because of the
natural jurisdictional divide that sometimes creates tension.
Mr. Olson. Thank you. My time has expired.
It is now time for Mr. Rush, the ranking member of the
subcommittee, to ask his 5 minutes of questions.
You are up, sir.
Mr. Rush. I want to thank you, Mr. Chairman.
Mr. Gramlich, as I mentioned in my opening statement, we
are moving into a new energy paradigm where advanced
technologies, such as distributed energy, microgrids, and
energy storage are increasingly being developed and coming
online.
In your opinion, is Order 1000, as constructed, the best
way to increase the deployment of these types of low-cost,
clean energy resources?
Mr. Gramlich. Sure. Thank you for the question.
We are, indeed, moving toward that future of a more
distributed network with many small, sometimes retail or State
jurisdictional resources. I think the planning processes need
to incorporate that.
I do not agree with those who say that means we are not
going to need as much of the bulk power grid. In fact,
resources are still often variable and remote, and we need to
move the power around geographically as well as over time,
which storage can do.
So we are going to need the big grid, so to speak, and we
are also going to need much more coordination at the local
level, which is really for State regulators to handle.
I think reliability and efficiency can improve, however, if
we bring those distributed resources into the wholesale
markets. There are going to be a lot more resources available.
And if there are any shortfalls, for example, if we give them
access to the wholesale markets, we will have a lot more
reliability.
Mr. Rush. Commissioner Clark, in your written testimony you
stated that regions that are still served by vertically
integrated utilities were already doing a fair amount of
regional planning before Order 1000. And you maintain that
Order 1000 actually replaced a collaborative, bottoms-up
approach to transmission planning with more bureaucracy and a
compliance checklist that may not necessarily result in
additional transmission developments.
Briefly, what recommendations would you suggest that would
help improve Order 1000 to better achieve the goals of better
process planning, better cost allocation, and increased
competition, including for non-incumbent transmission
developers?
Mr. Clark. Thank you for the question, Ranking Member Rush.
What I would do for those, especially those regions of the
country where--which is still the majority of the States--where
the States maintain vertically integrated utilities, I would
argue that Order 1000 should be put on a pretty severe diet so
that it is slimmed back in terms of trying to leverage those
things that were working in the past. And you had indicated or
referenced my testimony where I talk a little bit about this.
A lot of the compliance obligations with regard to things
like competitive bidding and the process that each of these
regions have to go through, through that, don't fit very well
in regions of the country that are still vertically integrated.
And the reason is because utilities working with their State
utility commissions had always done that sort of regional
planning in the past. And MISO's MVP suite of projects was
referenced earlier as a good example of how that worked well.
Those types of projects we are not seeing coming forward
anymore because now the name of the game is, well, we have to
comply with Order 1000, and so it really just becomes a
compliance exercise as opposed to the more organic process that
happened, bottoms-up.
I think there are some different issues maybe in parts of
the country that have restructured where you might have some
natural tension between generation and transition as it relates
to the marketplace. Even there I don't think Order 1000 is
working perfectly, as indicated by some of the examples that
Dr. Izzo talked about.
But at the very least in those vertically integrated
regions of the country, I think it could be slimmed down from a
compliance standpoint. Maybe focus more on some of the good
aspects of regional planning and collaboration, and maybe
especially on interregional projects where there may not have
been as much conversation going on as there was after Order
1000.
Mr. Rush. I yield back.
Mr. Olson. Thank you.
Mr. Long, 5 minutes for questions, sir.
Mr. Long. Thank you, Mr. Chairman, I appreciate you
yielding to me.
Mr. Twitty, FERC Order No. 1000 that is being discussed was
an effort to introduce market concepts to transmission
development. But the scope of transmission completion to date
has been severely limited during implementation, forcing
American businesses and households to overspend for
transmission projects.
Why is competition in this area so important?
Mr. Twitty. Well, I guess, Congressman--first, thank you
for the question. We all believe that competition brings lower
prices and better services. Whether that can happen in a
commodity like transmission or, for that matter, other aspects
of the electric business I think is still a question out for
debate.
I think it is clear that we have to pay more attention to
how transmission gets built, how its ownership share is divvied
up, what the rates of return are that are provided to the
people who are building it. And as I have suggested, there are
lots of folks out there who don't have the opportunity to
participate in the ownership and in some cases even the
planning for these projects.
I would suggest that if you really believe in competition,
you really believe in having a grid that is right-sized, that
everybody should be at the table. Whether we like Order 1000,
the way it was written or the way it has been implemented, is a
good question.
Mr. Long. You think it should be reexamined or----
Mr. Twitty. Well, yes. I don't think there is any----
Mr. Long [continuing]. Repealed altogether?
Mr. Twitty. Yes. No. No. I think there are some good
aspects to Order 1000, but I think it is not working the way it
was intended. And if more people were part of the planning
process, really a part of the planning process, really a part
of the ownership structure, I think we would have a better
outcome than we do today.
Mr. Long. According to your testimony, TAPS members in the
Southwest Power Pool have seen an average annual rate increase
of 17 percent for the last 5 years. That is annually.
A few weeks ago the FERC Commissioner sat at the same table
where you folks are sitting today, and I told him that your
former employer, City Utilities of Springfield, has studies
that show that costs are substantially higher than other
customers in the SPP.
What needs to be done, either by Congress or by FERC, to
fix this trend of such high annual rate increases for my
constituents in Springfield, where you live?
Mr. Twitty. Well, I mention in my testimony the rates of
return that are offered by FERC today are pretty attractive. I
think we would probably all agree that if we had our 401(k)s
and our IRAs invested at those guaranteed rates of return we
would be pretty happy.
So I think that needs to be addressed. As I suggested, I
don't think there is any need for incentives on top of those
guaranteed rate of return. So I think that is a big piece of
it.
And the bottom line, as you mentioned, real customers
paying real utility bills, like everybody in the room, pay
these increases. And I would suggest that if it wasn't for
abnormally low natural gas prices today that are masking lots
of these problems, people would be at your doorsteps wanting
solutions and they would want them pretty doggone quickly.
Mr. Long. Talking about transparency for a moment here. How
would greater transparency in the planning process of
transmission building impact the cost of those transmission
services?
Mr. Twitty. Well, I guess I think that by transparency we
are including a number of things. If we have more people at the
table who are actually using the transmission grid, I think it
is going to help the right size grid be built. I think it is
going to impact the siting process. I think Commissioner Clark
mentioned earlier, the siting process is probably the most
critical aspect of building any of these kinds of projects.
I have been somebody that has knocked on people's doors
asking for rights of way. And I can tell you that if you have
mayors, you have elected members of boards of public utilities,
for instance, that are part of that process, it is going to be
a better process, it is going to get the right thing built, it
is going to be done as quickly as possible, and all of that
translates into lower costs.
Mr. Long. You mention in your testimony that grid
resilience should not be justification for excessive
investment. In our recent hearings, the concept of grid
resilience has been described as a crucial characteristic our
energy system needs.
Can you explain what you mean by that?
Mr. Twitty. Well, resilience seems to be the word of the
day in our business. And there are so many risks, many of them
presented through cyber threats, where we need to think about
how the grid gets built and how the grid gets put back after an
outage.
We would probably all agree pretty easily on what
resilience is, particularly those people who have been, like
Dr. Izzo, running a utility today.
But we shouldn't let it be the end-all be-all to build
something that you can't cost justify. I used to say to our
customers, look, we can guarantee your availability 100 percent
of the time, but you couldn't afford the service. And then
later the engineers would say, well, we probably really can't
guarantee it 100 percent of the time.
So it needs not to be an effort to gold-plate the system in
the name of ``it will never go down.''
Mr. Long. OK. Thank you.
And it is good to see Chris here also today.
So I thank you all for being here. I yield back.
Mr. Olson. Thank you.
Mr. McNerney, 5 minutes for questions, sir.
Mr. McNerney. I thank the chair on this.
Mr. Krapels, your OceanGrid collector stations proposal for
offshore wind is pretty interesting. What types of proposals
have you seen outside of the New York-New Jersey area,
including the West Coast, where we have deep water out there?
Mr. Krapels. Thank you, Congressman.
I have seen and studied very carefully what the European
countries have done. So both Germany and the Netherlands are
the leaders in offshore wind deployment. And in both of those
countries, the idea of an OceanGrid that is separately owned
has been part of the policy for some time, and it works very,
very well.
In California, I think it would be wise to look at the
offshore in the same way that Texas looked at the upstate. It
is a region with unlimited wind energy potential.
Floating storage wind turbine technology is evolving so
quickly, I think it will be economic within the next few years.
And thinking about this from a grid standpoint, build a grid
that maximizes the benefits to consumers, would be the right
way to go.
Mr. McNerney. Thank you.
Do we in Congress need to do something such as pushing the
BLM's offshore Federal land leasing to be structured so that
neighboring wind farms can use the shared infrastructure?
Mr. Krapels. I think that would be extremely helpful. Right
now each wind generator can build its own transmission line to
shore, but once they do that, that place on shore is occupied
by that generator for the rest of time. So thinking it a little
bit more holistically would be very wise.
Mr. McNerney. Thank you.
Mr. Gramlich, you mentioned earlier that FERC does not need
to grant more incentives, but to better align the incentives
that we already have. What are your suggestions on how to go
about doing that?
Mr. Gramlich. Thank you, Congressman.
There are examples from other countries that we are
currently looking at and trying to work with a number of
transmission owners on, as well as FERC staff and others. In
the U.K., for example, when there is congestion, the
transmission owner has an incentive to reduce that congestion,
so thereby the savings are shared between customers and
shareholders.
So that concept, I believe, could be applied here in the
U.S. It is not an easy task to implement these forms of
performance-based regulation, but I am optimistic that with a
lot of the best minds from the transmission industry and
regulators we can figure it out.
Mr. McNerney. Well, I am kind of interested in the D.C.
overlay idea. What would be the next steps to get that to
happen?
Mr. Gramlich. Number one, having people like you say that
is an important thing to do. So thank you for that. Having FERC
and the Department of Energy take interest.
I do think there is a very interesting study that I cited
in my written testimony called the Seams Study that a number of
national labs are working on that has been partially released,
but not fully released.
That will be a great model. So when that comes out, I think
facilitating a dialogue on how do we get that type of grid
would be very worthwhile.
Mr. McNerney. Right. Well, you mentioned that there is a
lack of private market interest in financing high capacity
versions of the line, such as the Texas Competitive Renewable
Energy Zones. Public financing to the right size may be
appropriate. Can you discuss more about how such would be
structured so that we don't build excess capacity needlessly?
Mr. Gramlich. Thank you for that.
Yes, there is always a risk in regulated industries of
overbuilding, and you need to think about that. But in this
case we know where the resources are, right? The wind
resources, the solar resources, geothermal, you name it. These
are location-constrained resources that haven't moved over
generations and they are not going to move over generations.
I submit we shouldn't be that worried about overbuilding to
access those resource areas. Our great, great, great, great
grandkids are going to benefit from whatever we do to build out
that network.
Mr. McNerney. Interesting.
I am going to yield back in the interest of time, Mr.
Chairman.
Mr. Olson. Thank you.
As a reminder, votes are about to be called. My intention
is to alternate between Republican and Democrat until we have
to go vote. We will recess for maybe a half an hour or 45
minutes and come back.
The next member to ask questions is Mr. Griffith from
Virginia, 5 minutes.
Mr. Griffith. Thank you very much. And in the interest of
time, I am going to send some questions afterwards, as we are
allowed to do within the next 10 business days, and I will do
that.
But I am going to ask one question live, Mr. Twitty,
because I represent AEP country in southwest Virginia. And you
mentioned that AEP's zonal transmission rate has significantly
increased, about 15 percent per year over the past 6 years.
I am wondering if you can explain that to the folks back
home. And then answer the question: That is obviously a
significant increase for customers in my area. Are there
sufficient consumer protections in place to prevent unnecessary
investments in the future?
So first explain why it is going up so much, if you can do
it quickly, and then what do we need to protect folks.
Mr. Twitty. Well, I would answer it, Congressman, by
saying, as I did to Congressman Long, it is too rich an
investment for the people who own and build new transmission.
It is too rich. We need to reduce returns on equity. We need to
make sure we are not providing incentives on transmission
investment for a run-of-the-mill, standard transmission line.
That is certainly number one.
Number two, as I have said, I think we need more people at
the table from the very beginning. Owners of transmission need
to let those of us who need the transmission to get their
generation to load to be at that table and to own a load ratio
share.
These are the people who represent customers, real
customers, and if they are at the table, I think they are going
to do a lot of good work to make sure that there is no gold-
plating, there is not any overbuilding, that we build exactly
what it is we need to get generation to load.
It is a long process. It requires your influence on the
FERC. It requires lots of people talking about these issues. It
is easy to say we want somebody at the table.
If you are a transmission owner, you want to be a
transmission owner and do exactly what you want. If there are
other voices at that table, it gets a little bit messier. I
think you get a better product if that is what happens.
Mr. Griffith. Well, I appreciate that.
And with that, Mr. Chairman, I will yield back so somebody
else can get a question in.
Mr. Olson. Mr. Johnson, Mr. Long, Mr. Cramer, anybody want
to question, yield, take the time?
Mr. Johnson you are recognized.
Mr. Johnson. Thank you. Thank you, Mr. Chairman. I will
make these quick.
Mr. Clark, one of the primary objectives of Order 1000 was
to promote interregional transmission development. But there is
broad consensus that Order 1000 failed to achieve that goal.
So in your opinion, how could this objective be achieved?
Mr. Clark. Sure. I think part of it is, Congressman, and
thank you for the question, part of it is, as I said,
attempting to focus in on what you are actually trying to
accomplish in the rule. The rule itself is expansive, it ran
several hundred pages long, the compliance filings are probably
thousands of pages on top of that.
And I think part of the reason that you get that result is
the order tried to do a lot of things all at once. It was
partly competition policy. It was partly an investment policy.
It was partly a regional planning policy. It was partly a cost
allocation policy. Some of it dealt intraregional things, some
of it interregional things.
And when you push that much out in a rule and expect the
regions to do something with it, you end up with, in my
opinion, just a lot of bureaucracy and checking compliance
boxes. That is why I say I think putting the order on a diet
and trying to focus in on what you are really looking at doing
probably would be the most helpful thing. Some of it may be
reinforcing some of the planning conversations that happen, but
without the more prescriptive elements of it.
And I think part of it might be focusing more on the issue
of interregional projects as opposed to spending a lot of time
within these regions having to vet through and try to manage
the type of intraregional projects that were happening
organically prior to the order itself.
Mr. Johnson. OK. What would be the advantages of greater
interregional transmission?
Mr. Clark. Because you have an interconnected grid, both in
the West and in the Eastern Interconnect, there may be certain
projects that serve a broad regional benefit that have benefit
that accrues to many times over.
But if you are only looking within your region, you might
not see the value of the benefit of those particular lines.
Some of them could be reliability lines. Some could be market
efficiency lines.
But some sort of process to have a yardstick to compare the
interregional type of projects might be valuable, and that may
not have been captured in earlier FERC orders such as 890.
Mr. Johnson. All right. Thank you. I yield back.
Mr. Olson. Thank you, Mr. Johnson.
Ms. Castor, 5 minutes, ma'am.
Ms. Castor. Thank you, Mr. Chairman.
Thank you to all the witnesses who are here today.
We recently in the Oversight and Investigations
Subcommittee had an oversight hearing on the state of the grid
in Puerto Rico. I want to thank the committee for continuing to
focus on our neighbors in Puerto Rico.
Unfortunately, right after the Army Corps of Engineers and
DOE testified that they thought they had things on track, they
had a major outage again. So I would like to ask you all after
to supplement the record with any recommendations moving
forward there. Clearly, there is an issue on transmission and
the need for microgrids and more resiliency there.
But as we work to modernize the grid everywhere and deal
with the cost of the changing climate and building greater
resiliency, we need to make sure we are taking advantage of
nontransmission alternatives, such as microgrid, distributed
energy resources, and energy storage.
Nontransmission alternatives not only have significant
environmental benefits, but they can help prevent long-term
area-wide blackouts after natural disasters, like we saw in
Texas and Florida and Puerto Rico this summer.
We also need to be focusing on the needs of consumers and
be a lot smarter. These nontransmission alternatives can be a
great benefit to consumers. FERC Orders 890 and 1000 recognize
the benefits of nontransmission alternatives, requiring
regional transmission plans to consider whether nontransmission
alternatives can more efficiently, cost-effectively, meet the
needs of a region.
But despite all these benefits, these alternatives are not
being utilized to the extent they should be, especially given
how advanced the technologies have become.
So, Mr. Gramlich and Mr. Twitty, do you think that if there
was a stronger FERC order that required more than just
consideration of alternatives, we would see greater use? And
what are the barriers to broader deployment and utilization?
Mr. Gramlich. I do. Thank you for the question.
For reliability and resilience, you can improve both by
better monitoring and control of the infrastructure. It seems
obvious. We do it with just about every other form of
infrastructure with better monitoring and control systems and
computing power. All through our economy we have these
opportunities to monitor and control better, and that helps
with reliability as well as efficiency.
So transmission is no different. The only problem is, it is
a regulated industry, the incentives, as I said, are
misaligned, and the planning requirements are not up-to-date
with the new opportunities we have.
Ms. Castor. Mr. Twitty, short answer.
Mr. Twitty. Congresswoman, thank you for the opportunity to
respond to that. I would certainly agree with those comments.
And I would suggest, as somebody who used to have
responsibility for keeping lights on, at the end of the day
that is the most important thing that all of us are after.
Technology is a wonderful thing. It marches along. And yet
implementing it in the real world, getting the right kind of
investment at the right time, is always going to be critical,
and making sure it works as it relates to the total grid.
It is one of the challenges today of intermittent
resources. Wind and solar are wonderful, and we are all trying
to figure out ways to harness them properly. But when the wind
doesn't blow or the sun doesn't shine, it is a real challenge.
So you have to have a system designed that can take this
intermittent resource, and in the case of microgrids turn over
control of a part of your grid to others. And for people,
again, like Dr. Izzo, who have responsibility for keeping
lights on today, that is a pretty nervous thing, because if it
doesn't work properly, if the technology isn't fully baked,
lights go out and----
Ms. Castor. Highlights the importance of planning and
investments. Thank you so much.
Mr. Twitty. Exactly.
Mr. Olson. Thank you. And seeing there are no further
members wishing to ask questions, I would like to thank our
witnesses again for being here today. Thank you. Thank you.
Thank you. Much obliged.
Before we conclude, I would like to ask unanimous consent
to submit the following documents for the record: a letter from
GridLiance and a letter from WIRES. Without objection, so
ordered.
[The information appears at the conclusion of the hearing.]
Mr. Olson. And pursuant to committee rules, I remind
members that they have 10 business days to submit additional
questions for the record. I ask that the witnesses respond
within 10 business days upon receipt of the questions.
Without objection, this subcommittee is adjourned.
[Whereupon, at 11:04 a.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
Prepared statement of Hon. Greg Walden
Good morning and welcome to our witnesses. Today's hearing
on transmission infrastructure is another important topic in
the Energy Subcommittee's Powering America series. I want to
thank our witnesses for participating and I look forward to
hearing your perspectives on the state of our nation's electric
transmission infrastructure.
The United States' electricity system is one of our
nation's more impressive engineering feats--with its
interconnected network of power plants, poles, and wires that
delivers uninterrupted electricity from producers to consumers.
Transmission is an integral component of our electricity
system. Often called the bulk-power system, transmission
infrastructure enables the movement of electricity across
states, regions, and the country as a whole. However, as time
passes and transmission infrastructure ages, upgrades and
replacement of existing infrastructure, as well as capital
investments in new projects are necessary to ensure electricity
is delivered in a reliable, efficient, and cost-effective
manner.
Like many energy infrastructure projects, the construction
of new transmission infrastructure can face difficulties, in
part due to lengthy delays in permitting and siting processes.
Energy infrastructure projects such as natural gas pipelines
and LNG facilities are subject to Federal Energy Regulatory
Commission (FERC) permitting processes. On private lands,
utilities, grid operators, or states make the decision on
whether a new transmission line needs to be built and whether
to upgrade existing transmission infrastructure. However, when
it comes to siting and building transmission lines across
Federal lands, the Department of Energy is the lead agency in
coordinating all applicable Federal authorizations and related
environmental reviews of electric transmission facilities, with
some authorities delegated to FERC.
Consistent with the intent of the Administration's recently
announced MOU on implementing One Federal Decision, agencies
must work together to provide a more predictable, transparent,
and timely Federal review of infrastructure projects.
Through the Federal Power Act, Congress gave FERC the
authority to regulate the sale and transmission of electricity
in interstate commerce. Under this authority the FERC issued a
series of rules to oversee and regulate the regional and inter-
regional planning of transmission projects while at the same
time encouraging greater competition between transmission
developers. FERC's most recent rule on transmission was in
2011, with Order 1000. Today's hearing will explore these rules
and the related challenges of transmission planning.
This Committee has discussed at length the importance of
utilizing digital and information technologies for a more
dynamic and innovative electricity system. Through previous
Powering America hearings, we have focused on energy
technologies located at the distribution level of the electric
grid. However, new technologies have the potential to optimize
the Nation's electricity system at the bulk-power level.
Advanced grid technologies can modernize transmission
infrastructure to ease congestion, allow for increases in
demand, and provide greater security. These smart technologies
include sensors for measuring system conditions, electric power
equipment that regulates power flow, and computerized
monitoring equipment that enable system operators to view the
electric grid in real time and make necessary adjustments.
For example, these technologies can optimize the flow of
electricity by automatically routing power around overloaded or
congested lines--allowing for greater line capacity. High
voltage direct current transmission lines can be a less
expensive alternative and have less electrical losses compared
to traditional alternating current lines in transmitting
electricity over long distances. I look forward to hearing more
from our witnesses today on how these advanced technologies
have the potential to optimize transmission infrastructure at
the bulk-power level.
The Nation's transmission system is a vital component in
the safe, reliable, and affordable delivery of electricity to
consumers across the country. We must ensure that the electric
grid works in ways that integrate new technologies within
existing transmission infrastructure, and siting new
infrastructure when needed. Thank you to our witnesses for
joining us today and I look forward to your testimony.
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